Lester Ammondson v. Northwestern Co , 2009 MT 331 ( 2009 )

October 13 2009
DA 07-0243
IN THE SUPREME COURT OF THE STATE OF MONTANA
2009 MT 331LESTER E. AMMONDSON, CATHERINE COUTURE
(as surviving spouse of James W. Couture),
SHERWOOD CHRISTENSEN, W. STEPHEN DEE,
CHARLES GUILDER, JOHN A. LAHR, EDMOND
MAGONE, ELMER MELDAHL, JOHN S. MILLER,
ROGER L. RAWLS, C. DANIEL REGAN, ALLEN T.
SMITH, GEORGE A. THORSON, JOHN B. VAN GELDER,
and WILHELMUS C. VERBAEL,
Plaintiffs and Appellees,
v.
NORTHWESTERN CORPORATION, and GARY G.
DROOK, MICHAEL J. HANSON, ROGER P. SCHRUM,
KEITH KOVASH, and KENDALL G. KLIEWER, all as
individuals and as corporate officers of Northwestern Corporation,
Defendants and Appellants.
APPEAL FROM: District Court of the Second Judicial District,
In and For the County of Silver Bow, Cause No. DV 2005-097
Honorable Brad Newman, Presiding Judge
COUNSEL OF RECORD:
For Appellants:
John Alke, Elizabeth S. Baker, Hughes, Kellner, Sullivan & Alke, PLLP,
Helena, Montana
W. Wayne Harper, Attorney at Law, Butte, Montana
For Appellees:
A. Clifford Edwards, Triel D. Culver, Edwards, Frickle, Anner-Hughes
& Culver, Billings, Montana
Submitted on Briefs: July 15, 2009
Decided: October 13, 2009
Filed:
__________________________________________
Clerk
2
Justice Patricia O. Cotter delivered the Opinion of the Court.
¶1 Defendants Northwestern Corporation (Northwestern), Gary G. Drook (Drook),
Michael J. Hanson (Hanson), Roger P. Schrum (Schrum), Keith Kovash (Kovash), and
Kendall G. Kliewer (Kliewer) (collectively Defendants), appeal from a jury verdict
rendered against them in the Second Judicial District Court, Silver Bow County. The
jury awarded the plaintiffs approximately $17.5 million dollars in compensatory
damages, and $4 million dollars in punitive damages based on a claim for breach of
contract, and the torts of breach of the covenant of good faith and fair dealing, abuse of
process, and malicious prosecution. We affirm the jury’s verdict.
PROCEDURAL AND FACTUAL BACKGROUD
¶2 Lester E. Ammondson (Ammondson), Sherwood Christensen (Christensen),
W. Stephen Dee (Dee), Charles Gilder (Gilder), John A. Lahr (Lahr), Edmond Magone
(Magone), Elmer Meldahl (Meldahl), John S. Miller (Miller), Roger L. Rawls (Rawls),
C. Daniel Regan (Regan), Allen T. Smith (Smith), George A. Thorson (Thorson), John B.
Van Gelder (Van Gelder), Wilhelmus C. Verbael (Verbael), and James Couture
(Couture)1 (collectively Retirees), were all former employees of the Montana Power
Company (MPC), a Montana-based public utility company. These individuals had been
employed with MPC for periods ranging from 3 to 40 years. Each of these plaintiffs left
MPC after entering into separate agreements with MPC which provided them monthly
payments to supplement their regular retirement plans. The agreements were known as
“Top Hat Contracts,” a term derived from the Employee Retirement Income Security Act.
1
Catherine Couture, the surviving spouse of James Couture, represented him in this suit.
3
The combined value of these individual Top Hat Contracts was approximately $2.9
million dollars.
¶3 Northwestern is a Delaware corporation that currently operates as a public utility
in Montana. In 2002, Northwestern purchased MPC’s transmission and distribution
assets. Northwestern hired the law firm of Paul, Hastings, Janofsky & Walker, LLP (Paul
Hastings) to facilitate the purchase. In the course of its purchase of MPC, Northwestern
assumed responsibility for the Top Hat Contracts in a unit purchase agreement (UPA),
which specifically stated that Northwestern would maintain and be responsible for all
current and future obligations of MPC as they related to any supplemental pension
benefit or benefit replacement restoration plan, program, or individual agreement which
had been maintained by MPC.
¶4 In September 2003, Northwestern filed for Chapter 11 reorganization in United
States Bankruptcy Court in the Federal District of Delaware. The Paul Hastings law firm
continued to provide Northwestern with legal representation during this time. When it
filed for bankruptcy, Northwestern had several thousand potential creditors. In
bankruptcy proceedings, Northwestern reviewed the contracts held by these creditors to
determine if it would assume or reject them. If the contracts were assumed, their terms
would be honored; if they were rejected, then the holders of those contracts would
become general unsecured creditors and likely receive general, unsecured stock in the
reorganized Northwestern. Northwestern did not provide notice to the holders of the Top
Hat Contracts that it would reject their contracts during bankruptcy and seek to treat them
as general, unsecured creditors. Instead, Northwestern continued to pay the Retirees
4
under the terms of the Top Hat Contracts throughout bankruptcy proceedings in
Delaware.
¶5 On October 19, 2004, the bankruptcy court confirmed Northwestern’s Chapter 11
bankruptcy reorganization plan (Plan). The effective date of the Plan was November 1,
2004, at which time Northwestern officially emerged from bankruptcy as a reorganized
entity. On December 30, 2004, Northwestern filed a notice of substantial confirmation of
the Plan in Federal District Court in Delaware.
¶6 On January 1, 2005, Northwestern, without giving any prior notice to any of the
Retirees, ceased making payments to them under the Top Hat Contracts.2 Although some
of the Retirees immediately contacted Northwestern in an attempt to discover why their
payments had stopped, Northwestern failed to provide them with any answers. On
January 26, 2005, Kovash, who was Northwestern’s director of benefits, informed the
Retirees in writing that it had discontinued payment under their Top Hat Contracts in
connection with its plan of reorganization. Furthermore, Northwestern advised the
Retirees that it anticipated filing a motion in bankruptcy court to terminate the Top Hat
Contracts and that upon receipt of the motion, the Retirees should contact a legal advisor.
¶7 On January 31, 2005, Northwestern filed a motion to terminate the Top Hat
Contracts in bankruptcy court in the Federal District of Delaware. After the filing of the
motion in bankruptcy court, the Retirees were able to obtain Montana counsel, the
Edwards Law Firm of Billings, to represent them in this matter. The Edwards Law Firm
2
Of all the plaintiffs in this case, only Van Gelder was listed in bankruptcy proceedings as a
party to an executory contract. However, Van Gelder, like all the other plaintiffs, was never
given any notice that Northwestern intended to terminate his Top Hat Contract.
5
in turn hired local counsel in Delaware to represent the Retirees in federal bankruptcy
court. On March 31, 2005, the Retirees filed an objection and response to
Northwestern’s motion to terminate the Top Hat Contracts. The Retirees sought to have
Northwestern’s motion dismissed on the grounds that the bankruptcy court did not have
jurisdiction to entertain the motion since none of the Retirees had been listed as secured
or unsecured creditors prior to Northwestern’s reorganization during bankruptcy
proceedings. Additionally, the Retirees counterclaimed against Northwestern for breach
of contract, breach of the covenant of good faith and fair dealing, and abuse of process.
¶8 On March 31, 2005, the Retirees also filed a claim for compensatory and punitive
damages against Northwestern, Drook, Hanson, Schrum, Kovash, and Kliewer in the
Second Judicial District Court, Silver Bow County. This state complaint was later
amended to add Paul Hastings as a defendant based on its actions in advising
Northwestern in federal bankruptcy court proceedings against the Retirees. In the state
complaint, the Retirees alleged that these defendants had committed breach of contract,
breach of the covenant of good faith and fair dealing, tortious interference with contracts,
abuse of process, and fraudulent conduct, by virtue of their actions in stopping payment
under the Top Hat Contracts without notice, and then filing a motion to terminate those
contracts in bankruptcy court after Northwestern had already finalized its reorganization
under Chapter 11. The day prior to filing the state complaint, counsel for the Retirees
notified Northwestern’s counsel in writing as to the contents of the complaint and its
intent to file suit in Montana, but also stated that he would hold off on serving the
6
complaint on Northwestern until the bankruptcy court in Delaware had an opportunity to
rule on the Retirees’ response to Northwestern’s motion to terminate.
¶9 On April 25, 2005, Northwestern filed a complaint against the Retirees in federal
bankruptcy court in Delaware. In the complaint, Northwestern named itself as a plaintiff,
and each of the Retirees as defendants. Contemporaneously, Northwestern also filed a
motion for an order to show cause against the Retirees, and sought a preliminary
injunction against their action in state court in Montana. Pursuant to Northwestern’s
motion, the Delaware federal bankruptcy court, Hon. John L. Peterson presiding, issued
an order to show cause against the Retirees, and stayed all state court proceedings until
the bankruptcy court could rule on the matter.
¶10 On May 3, 2005, Judge Peterson held a hearing on the pending motions and
complaint before the bankruptcy court. Both Northwestern and the Retirees were
represented by counsel, with some of the Retirees flying from Montana to attend the
proceedings. The next day, Judge Peterson issued his ruling, dismissing Northwestern’s
motion to terminate and concluding that the bankruptcy court was without jurisdiction to
entertain Northwestern’s motion. In his written order, Judge Peterson noted that on
December 30, 2004, Northwestern had filed a notice with the bankruptcy court of
“substantial consummation of the Plan, meaning all matters required to be done under the
Plan, and pursuant to the Plan, had been accomplished. Nowhere are the claims of the
[Retirees] recognized as affecting consummation or implementation of the Plan.” Judge
Peterson further observed that specific language in the confirmed Plan contemplated that
any disputes relating to issues concerning contractual and fiduciary duties owed by
7
Northwestern to other parties (such as the Top Hat Contracts and corresponding duties
owed to the Retirees by Northwestern) would be resolved in a forum outside of federal
bankruptcy court. Third, Judge Peterson noted that under the Plan Northwestern was
required to make appropriate filings in bankruptcy court if it wished to reject any
executory contracts during bankruptcy proceedings—a provision with which
Northwestern obviously failed to comply since it did not give any notice to the Retirees
until after it emerged from Chapter 11 as a reorganized entity. Reflecting on this fact,
Judge Peterson then held as follows:
The single fact of the matter is quite significant. None of the
[Retirees] were afforded due process, in that none were served with
rejection notices of their executory contracts in accordance with
[Northwestern’s] Plan, even though, alarmingly, [Northwestern], in its
Motion to terminate the pension benefits, acknowledged the MPC purchase
agreement . . . as to the pension agreements “constitutes a legal, valid and
binding agreement, enforceable in accordance with its terms of MPC” that
[Northwestern] “shall maintain and shall be responsible for . . . all current
and future obligations of MPC . . . under any supplemental pension benefit
or benefit replacement or restoration plan, program or individual
agreement maintained by MPC . . . .” The Motion then correctly asserts
that “no individual who is a party to an MPC agreement has filed a proof
of claim against the Debtor.” Yet, [Northwestern] now wants to reject
each individual agreement that it assumed and became liable to pay, at this
late date, beyond the bar date [Northwestern] established in the Plan, as an
executory contract, where, absolutely no notice or pleading was ever
served upon any of the [Retirees] prior to confirmation. . . .
Simply stated, these [Retirees] have not been afforded due process,
by notice, or any other form in the [Northwestern] Plan reorganization
effort. To now cast upon each of the [Retirees] a jurisdictional premise
before this Court in light of the above is simply beyond any standard of
timely fairness and notice, which this Court cannot tolerate or condone.
¶11 Taking notice of the fact that the Retirees had filed a complaint in state District
Court, Judge Peterson held there was no jurisdiction over the Top Hat Contracts in
8
federal bankruptcy court, and deemed that in the interests of justice the bankruptcy court
would abstain in favor of the state court action in Montana. Northwestern subsequently
filed an appeal from Judge Peterson’s ruling, but then voluntarily dismissed that appeal at
a later date.
¶12 Once the matter was returned to the Second Judicial District Court, the Retirees
sought a jury trial on their claims and the parties went through an extensive motion
practice prior to trial. In November 2005, Northwestern resumed paying the Retirees
pursuant to their Top Hat Contracts, and paid them back payments due with interest.
Prior to trial, Paul Hastings settled with the Retirees for an undisclosed amount and was
subsequently dismissed from the suit.
¶13 Prior to and during trial, the District Court issued rulings related to the availability
of certain defenses to Northwestern, the admissibility of evidence, Northwestern’s
motions for judgment as a matter of law on some of the Retirees’ claims, and the jury
instructions. As necessary, we will discuss the District Court’s rulings on these issues
below. The jury trial began on February 12, 2007, and concluded with a jury verdict in
the Retirees’ favor on February 22, 2007. During the course of the trial, the jury heard
from the Retirees, as well as Catherine Couture, testifying about their involvement in
these events and how they were emotionally and mentally impacted by the actions of the
Defendants. The jury also heard, either through live testimony or deposition, from the
individually named defendants, Paul Hastings’ attorneys, Ford Elsaesser (Elsaesser), a
qualified expert on bankruptcy law, Wade Dahood (Dahood), a Montana attorney who
9
was qualified to render an expert opinion on the Defendants’ and Paul Hastings’ conduct,
and an economist presented by the Retirees in support of their claims for damages.
¶14 Through the testimony of these various witnesses and numerous documents
(including many of the internal communications among Northwestern, Paul Hastings, and
their agents, employees, and officers), the jury was presented with two different versions
of the events surrounding the termination of the Top Hat Contracts and the initiation of
proceedings against the Retirees in federal bankruptcy court. The Retirees portrayed the
Defendants’ actions as a course of illegal and malicious conduct directed against them.
They asserted that Northwestern’s general counsel, Thomas Knapp (Knapp), ordered the
termination of the contracts and filings in bankruptcy court against the legal advice of
Paul Hastings, whose attorneys had opined that this course of action was not legally
supportable. The Retirees claimed that Northwestern and its counsel knew that the Top
Hat Contracts were valid and binding, yet went on to represent to the federal bankruptcy
court the opposite. Furthermore, the Retirees argued that the economic cost of the Top
Hat Contracts was to be borne by the rate payers, and not Northwestern directly, and that
it was disingenuous for Northwestern to represent to the bankruptcy court that
terminating the contracts was in the best interests of the corporation; yet, in the face of
this evidence, Knapp, Northwestern, and its officers and agents, moved to terminate the
Top Hat Contracts and initiate proceedings against the Retirees in federal bankruptcy
court.
¶15 In this connection, the Retirees presented testimony from Dahood and Elsaesser to
support their argument that the bankruptcy proceedings and related actions were without
10
legal basis. Dahood also testified about the costs incurred by the Retirees in defending
against the Defendants’ claims. Elsaesser opined that an affidavit signed by Kovash,
wherein he represented to the bankruptcy court that the Top Hat Contracts were not valid,
legal, or binding agreements, was a false and misleading statement made to the
bankruptcy court. Additionally, Elsaesser testified that a sworn declaration filed by
Kliewer, Northwestern’s controller, wherein he claimed that the Retirees were unsecured
creditors, was an absolutely false statement and another misrepresentation to the
bankruptcy court.
¶16 As to the corporate decision to terminate the Top Hat Contracts and commence
litigation in bankruptcy court, the Retirees presented evidence and argument to support
their claims that these actions were tortious in nature as well. They argued that the
bankruptcy court filings and other actions taken by Northwestern against the Retirees,
were done with the intent to make them accept a settlement more favorable to
Northwestern. The Retirees argued that Northwestern sought to leverage them into
giving up their legitimate claims under their contracts and instead accept shares of stock
in the newly reorganized Northwestern corporation—an action which none of the
Retirees wished to take. In this connection, the Retirees presented evidence concerning
the participation of Drook, Hanson and Schrum in the corporate decisions to terminate
the Top Hat Contracts and initiate what the Retirees term Northwestern’s “malicious
lawsuit” in bankruptcy court. The Retirees claim that these decisions, and the acts of the
individual defendants in performing them, constituted tortious conduct for which both
Northwestern, and the individual defendants, could be held liable.
11
¶17 The Defendants, by contrast, painted these events as actions taken in the best
interests of Northwestern without any malice or tortious intent towards the Retirees.
Northwestern claimed that the Top Hat Contracts were among many other non-qualified
benefit plans that its financial and legal advisors reviewed during bankruptcy in order to
evaluate their administrative costs and value to the corporation. Northwestern admits that
it terminated the Top Hat Contracts without timely notice to the Retirees, but asserted
that this action, and the subsequent related proceedings in bankruptcy court, did not
amount to tortious conduct against the Retirees. Instead, it basically argued that its
mistake was in the timing of its decision to terminate the contracts, and its failure to
provide proper notice. Northwestern further pointed out that it resumed payments to the
Retirees in November 2005, and paid them back payments with interest. Through the
testimony of Judge Peterson, counsel for Paul Hastings, Knapp, Kovash, and Kliewer, the
Defendants presented this defense against the Retirees’ claims.
¶18 In its verdict rendered on February 22, 2007, the jury found Northwestern liable
for breach of contract, the tort of bad faith breach of contract, abuse of process, and
malicious prosecution. It also found Northwestern liable for punitive damages. With
respect to the individual defendants Drook, Hanson, Schrum, Kovash, and Kliewer, the
jury found them liable only for abuse of process and malicious prosecution, and not liable
for punitive damages. The jury further found the Defendants collectively not liable on
the tortious interference of contract claims. As a result of the verdict, the jury awarded
the Retirees as a whole approximately $17.5 million dollars in compensatory damages,
with individual amounts apportioned to each individual Retiree. The following day the
12
punitive damages phase of the trial was held, and the same jury returned a verdict of
$4 million dollars in punitive damages against Northwestern.
¶19 Judgment was entered by the District Court on March 5, 2007. After the
judgment, the Defendants filed various post-trial motions seeking to offset the damages
against the pre-trial settlement entered into by Paul Hastings, and also seeking to reduce
the judgment by the amount of the ongoing payments Northwestern was still making to
the Retirees. These motions were denied by the District Court.
¶20 The Defendants now appeal the jury’s verdict, as well as various rulings of the
District Court before, during, and after trial. We state the issues presented by their appeal
as follows:
¶21 Issue One: Were the Retirees’ claims completely preempted by federal
bankruptcy law and did the District Court lack subject matter jurisdiction to consider
those claims?
¶22 Issue Two: Did the District Court err by denying the Defendants the opportunity
to present an advice-of-counsel defense to the Retirees’ claims?
¶23 Issue Three: Did the District Court err in denying the Defendants’ motion for
judgment as a matter of law on the Retirees’ abuse of process claim?
¶24 Issue Four: Should the judgment on the Retirees’ bad faith claim be reversed?
¶25 Issue Five: Did the District Court commit reversible error in allowing the jury to
consider the Retirees’ claims for emotional distress and instructing them on those
claims?
13
¶26 Issue Six: Was the jury’s verdict awarding tort damages supported by substantial
credible evidence?
¶27 Issue Seven: Did the District Court err in denying the Defendants’ motions for
dismissal and judgment as a matter of law as to defendants Drook, Hanson, Schrum,
Kovash, and Kliewer?
¶28 Issue Eight: Did the District Court err in denying the Defendants’ post-trial
motion to offset the judgment against the amount of the Retirees’ pre-trial settlement with
Paul Hastings?
STANDARD OF REVIEW
¶29 We review a district court’s conclusions on questions of law to determine if those
conclusions are correct. Sunburst Sch. Dist. No. 2 v. Texaco, Inc., 2007 MT 183, ¶ 28,
338 Mont. 259, 165 P.3d 1079.
¶30 We review jury instructions for an abuse of discretion to determine whether, as a
whole, they fully and fairly instruct a jury on the law applicable to the case. State v.
English, 2006 MT 177, ¶ 39, 333 Mont. 23, 140 P.3d 454. We review a district court’s
grant or denial of a motion in limine for an abuse of discretion as well. State v. Dunning,
2008 MT 427, ¶ 21, 347 Mont. 443, 198 P.3d 828. A district court abuses its discretion if
it acts arbitrarily without conscientious judgment or exceeds the bounds of reason
resulting in substantial injustice. Dunning, ¶ 21.
¶31 We review a jury’s decision to determine if substantial credible evidence in the
record supports it. Upky v. Marshall Mountain, LLC, 2008 MT 90, ¶ 22, 342 Mont. 273,
180 P.3d 651. “Substantial evidence is ‘evidence that a reasonable mind might accept as
14
adequate to support a conclusion’ and may be less than a preponderance of the evidence
but must be more than a ‘mere scintilla.’ ” Upky, ¶ 22 (quoting Campbell v. Canty, 1998
MT 278, ¶ 18, 291 Mont. 398, 969 P.2d 268).
¶32 We review de novo a district court’s decision to deny a motion for judgment as a
matter of law. Vader v. Fleetwood Enterprises, Inc., 2009 MT 6, ¶ 20, 348 Mont. 344,
201 P.3d 139. Judgment as a matter of law is appropriate only when there is a complete
absence of any evidence which would justify submitting an issue to a jury. Vader, ¶ 20.
DISCUSSION
¶33 Issue One: Were the Retirees’ claims completely preempted by federal
bankruptcy law and did the District Court lack subject matter jurisdiction to
consider those claims?
¶34 The Defendants raise a novel issue for the first time on appeal, arguing that the
District Court proceedings in this case were completely preempted by federal law, and
that the District Court lacked subject matter jurisdiction to entertain them. Although this
issue has not been previously raised or pled as an affirmative defense during the course of
these proceedings, the Defendants nonetheless argue that it merits consideration because
challenges to subject matter jurisdiction may be raised at any time, including for the first
time on appeal.
¶35 While we agree with the Defendants that challenges to subject matter jurisdiction
may be considered for the first time on appeal, see Stanley v. Lemire, 2006 MT 304,
¶¶ 29-32, 334 Mont. 489, 148 P.3d 643, given the procedural posture of this case and the
previous rulings by the federal bankruptcy court, we find this argument wholly devoid of
merit. Judge Peterson specifically found that the federal bankruptcy court lacked
15
jurisdiction under federal bankruptcy laws over Northwestern’s motion to terminate since
Northwestern’s bankruptcy plan had already been consummated. In fact, Judge Peterson
went so far as to characterize Northwestern’s attempt to invoke the federal jurisdiction of
the bankruptcy court as “simply beyond any standard of timely fairness and notice, which
this Court cannot tolerate or condone.”
¶36 Northwestern initially appealed this ruling, but then apparently dismissed its
appeal of its own accord. Now, several years later, the Defendants ask this Court to
return jurisdiction to the very federal court which has already determined that it lacked
jurisdiction, thus leaving the Retirees’ claims in a legal limbo with federal and state
courts both refusing to exercise jurisdiction over these claims. The implications of this
argument defy common sense and logic, and are nothing short of Kafkaesque.
¶37 Additionally, it is patently obvious that Northwestern is collaterally estopped from
asserting a federal jurisdiction argument at this stage in the proceedings since the issue of
federal jurisdiction was already decided by Judge Peterson, and Northwestern was party
to this prior, final adjudication. See Auto Parts of Bozeman v. Employment Relations Div.
Underinsured Employers’ Fund, 2001 MT 72, ¶¶ 29-30, 305 Mont. 40, 23 P.3d 193.
Thus, we reject this argument.
¶38 Issue Two: Did the District Court err by denying the Defendants the opportunity
to present an advice-of-counsel defense to the Retirees’ claims?
¶39 Throughout bankruptcy proceedings and the decision-making process on whether
to file a motion to terminate the Top Hat Contracts in bankruptcy court, Northwestern
was represented by the law firm of Paul Hastings. In the Retirees’ complaint, they
16
alleged that Defendants’ actions were done with the assent and assistance of
Northwestern’s agent Paul Hastings, and resulted in the commission of various torts
against the Retirees.
¶40 In its response to these claims, the Defendants presented a general denial, but did
not plead advice of counsel as an affirmative defense. Prior to trial, the Defendants
proposed the following jury instruction:
Montana law provides that reliance upon the advice of counsel,
provided in good faith and based upon a full and fair statement of the facts
by the client, is a complete affirmative defense to an action for malicious
prosecution.
¶41 On the morning of trial, the Retirees orally presented to the District Court a
motion in limine seeking to preclude Northwestern from presenting the affirmative
defense of reliance on advice of counsel at trial.3 The Retirees argued that the
Defendants could not present such a defense since they did not affirmatively plead it in
their responsive pleadings. The Defendants argued against the Retirees’ motion. The
District Court did not make a definitive ruling on the motion at that time.
¶42 On February 16, 2007, during the Retirees’ case-in-chief, but before the
Defendants presented their defense, the District Court entertained further argument on the
Retirees’ motion. The Retirees argued that the Defendants could not present this defense
3
In a previous motion for summary judgment, the Retirees had sought to preclude the
Defendants from raising any affirmative defenses based on the propriety of Paul Hastings’
conduct in federal bankruptcy court. The Retirees asserted that Judge Peterson had essentially
ruled on the propriety of Paul Hastings’ conduct in the bankruptcy action when it dismissed that
action and returned jurisdiction over the Retirees’ claims to state court in Montana. The District
Court denied the motion at the time, holding that there remained genuine issues of material fact
on Paul Hastings’ conduct in bankruptcy proceedings as it related to the Retirees’ claims.
However, the District Court had not previously ruled on the extent to which the Defendants
could rely upon Paul Hastings’ conduct as an affirmative defense to the claims against them.
17
due to their failure to plead it, and because they had already conceded that they would not
be able to assert an “empty chair” defense against Paul Hastings. The Retirees noted that
the Defendants had never filed a cross-claim against Paul Hastings at any point in the
proceedings. In response, the Defendants asserted that they had not waived the
affirmative defense of advice of counsel under the authority of McGuire v. Armitage, 184
Mont. 407, 603 P.2d 253 (1979). They asserted that under McGuire, the affirmative
defense of advice of counsel does not need to be affirmatively pleaded, but instead can be
raised in a general denial. The Defendants further asserted that that their reliance on the
advice of Paul Hastings was relevant to the issue of causation and intent.
¶43 The District Court issued a ruling that same day, denying in part and granting in
part the Retirees’ motion. In its written order, the District Court held that the Defendants
could not argue to the jury that their reliance on the advice of counsel constituted a valid
defense to the Retirees’ causes of action, but allowed the Defendants to present evidence
as to the substance of Paul Hastings’ legal advice. The District Court advanced two
grounds for its decision. First, it concluded that the Defendants had failed to raise advice
of counsel as an affirmative defense in their response to the complaint as required by the
Montana Rules of Civil Procedure. Second, it concluded that Northwestern, as a
corporate entity, is held vicariously liable through the acts of its directors, officers,
employees and agents, and that it simply could not, as a matter of law, rely on advice of
counsel as an affirmative defense, given it is ultimately responsible for the actions of its
counsel as an agent of the corporation.
18
¶44 The District Court did conclude that the presentation of evidence as to the
substance of Paul Hastings’ communication and advice would be permitted as it would
go to the heart of the causation and intent elements involved in the tort claims raised by
the Retirees. As an example, the District Court noted that claims for punitive damages
and malicious prosecution require a showing from the plaintiff that the defendant acted
with either actual malice or actual fraud (in the case of punitive damages claims), or that
the defendant was motivated by malice (in the case of malicious prosecution). The
substance and advice of Paul Hastings’ legal counsel would be relevant in helping the
jury to assess whether Northwestern or its agents met these mental state requirements.
As stated by the District Court,
The Court concludes that the substance of counsel’s
communications and advice to the Northwestern Defendants concerning
their legal relationship with the Plaintiffs is relevant to the issue of whether
the Defendants acted with actual malice or actual fraud in causing harm to
the Plaintiffs. The Court also notes that the Plaintiffs’ bankruptcy expert
witness [Elsaesser] already has testified that he could not find any evidence
in the corporate communications where any of the bankruptcy attorneys
advised the Northwestern Defendants to stop the supplemental benefit
payments to the Plaintiffs. Should communications or advice to the
contrary exist, such evidence would go to the credibility of witnesses.
¶45 Furthermore, the District Court noted that it would ultimately instruct the jury that
a corporation acts through, and is responsible for, the conduct of its officers, employees,
and agents, and that evidence as to the advice of counsel under these circumstances
would go towards evaluating Defendants’ intent in engaging in the conduct at issue when
they acted against the Retirees.
19
¶46 During the settling of jury instructions, the District Court refused the Defendants’
instruction on advice of counsel as an affirmative defense on the grounds in its ruling on
the Retirees’ motion in limine.
¶47 The Defendants now argue that these rulings from the District Court were in error
and should be reversed. Relying primarily upon McGuire, and Stephens v. Conley, 48
Mont. 352, 138 P. 189 (1914), as well as the Montana Rules of Civil Procedure, the
Defendants assert that advice of counsel may be raised by a general denial, as was done
in this case, and then later be asserted as a complete and affirmative defense. The
Defendants argue that the District Court’s failure to allow this affirmative defense
substantially prejudiced them at trial. When combined with the jury instruction that
Northwestern was responsible for the acts of its legal counsel, the Defendants argue that
the District Court’s rulings effectively amounted to a directed verdict for the Retirees.
Furthermore, Northwestern asserts that the evidence it presented supports the argument
that it acted in good faith and reliance upon Paul Hastings’ advice in filing its motions in
bankruptcy court. For these reasons, the Defendants argue that the judgment against
them must be reversed and a new trial ordered since the jury was denied the opportunity
to consider this defense.
¶48 In response, the Retirees begin by asserting that Northwestern waived the right to
present this affirmative defense. They also argue that at the hearing on the motion in
limine as well as during the trial, Northwestern basically conceded to the District Court
that, under principles of agency law, it would be responsible for the actions of Paul
Hastings. In the final pretrial order, Northwestern in fact conceded it could not assert an
20
“empty chair” defense against Paul Hastings, and that Paul Hastings’ actions would be
probative on the issue of causation for the Retirees’ damages. The Retirees also maintain
that Northwestern’s failure to object to the District Court’s jury instruction that it is
“responsible for the actions of its directors, officers, employees and agents” further
precludes Northwestern from arguing advice of counsel as an affirmative defense under
the facts of this case. Finally, the Retirees assert that Northwestern’s advice-of-counsel
defense was simply not supported by the record, and that Northwestern and the individual
defendants in fact disregarded Paul Hastings’ legal advice when they took action against
the Retirees.
¶49 The Defendants’ appeal of this issue presents two separate questions: first,
whether the District Court abused its discretion in its order on the Retirees’ motion in
limine; and second, whether the District Court abused its discretion in denying the
proposed jury instruction on the advice-of-counsel defense.
¶50 In McGuire, the case relied upon by the Defendants, we stated the following
concerning the advice-of-counsel defense:
Reliance upon the advice of counsel, provided it is given in good
faith and is based upon a full and fair statement of the facts by the client,
may afford the latter a complete defense to an action for malicious
prosecution. But it is an affirmative defense. It may be shown under a
general denial in the answer, but the burden of establishing it is upon the
defendant.
McGuire, 184 Mont. at 412-13, 603 P.2d at 256 (emphasis in original, quotation and
alterations omitted). Contrary to the Defendants’ characterization of McGuire, this case
did not state unequivocally that advice of counsel is an absolute defense to a claim of
21
malicious prosecution. Instead, McGuire recognized that advice of counsel may afford a
complete defense, provided the defendant satisfies its burden of establishing it.
¶51 In its ruling on the motion in limine, the District Court held that Northwestern was
unable to present advice of counsel as an affirmative defense due to its failure to raise it
as such in its responsive pleadings as required under M. R. Civ. P. 8(c). See e.g. Winslow
v. Mont. Rail Link, Inc., 2005 MT 217, ¶ 38, 328 Mont. 260, 121 P.3d 506. There is
simply no question that reliance upon advice of counsel is a matter of avoidance, and this
being so, it clearly falls under the clear provisions of M. R. Civ. P. 8(c) (“In pleading to a
preceding pleading, a party shall set forth affirmatively . . . any other matter constituting
an avoidance or affirmative defense.”).
¶52 In this case, the Defendants did not concede at any point in the litigation that the
Retirees may have an otherwise viable cause of action for malicious prosecution—to be
averted by the affirmative defense of advice of counsel—as is typical of the classic
affirmative defense situation. Rather, they responded in their answer and throughout the
litigation with an assertion that they had acted in good faith at all times. Thus, in
prohibiting advice of counsel as an affirmative defense, the District Court did not gut the
Defendants’ case at all, as it permitted the Defendants to fully argue that they acted in
good faith and without malice. In other words, the District Court’s ruling allowed the
Defendants to refute the malicious prosecution claim consistent with the response in their
answer—i.e., their general denial of the allegations of malice. See Stephens, 48 Mont. at
369-71, 138 P. at 193-94 (discussing the ability of a defendant to rebut a claim of
malicious prosecution via general denial); see also McGuire, 184 Mont. at 412-13, 603
22
P.2d at 256. Because the Defendants were permitted to present all available evidence
showing that they had acted in good faith without malice, including evidence of the
substance of Paul Hastings’ advice and their actions in relying (or not relying) upon it,
they were not at all powerless to defend themselves. Moreover, we agree with the
Retirees that the Defendants’ concession that they could not assert an “empty chair”
defense against Paul Hastings, further undermines their ability to turn around and assert
advice-of-counsel as an affirmative defense at trial. Under these circumstances, we
therefore conclude that the District Court did not abuse its discretion in its ruling on the
motion in limine.
¶53 In the settling of jury instructions, the District Court rejected the advice-of-counsel
jury instruction on the same grounds expressed in its ruling on the motion in limine. The
denial of this jury instruction did not constitute an abuse of discretion, both in light of the
analysis above and because the jury instructions as a whole fairly and full apprised the
jury of the applicable law. English, ¶ 39. The jury was instructed that in order to prove
malicious prosecution, the Retirees had to show, among other things, that the Defendants
acted with malice, and that there was no probable cause for their actions. The jury heard
the Defendants’ evidence and argument that they acted in good faith, but apparently did
not find this evidence and argument credible, and concluded that the Retirees had in fact
established their claims for malicious prosecution.4
4
In this regard, it is worth noting that the Defendants were not prohibited from seeking a jury
instruction to expressly inform the jury that a showing of good faith by the Defendants would
defeat a claim for malicious prosecution. The Defendants presented evidence and argument that
their conduct was in good faith, but did not seek a corresponding jury instruction. Instead, they
23
¶54 Given the circumstances here presented, we conclude that the District Court did
not abuse its discretion in denying the Defendants’ proposed instruction on its advice-of-
counsel defense, or in its pre-trial and trial rulings related to this defense in the context of
the Retirees’ claims.
¶55 Additionally, we take this opportunity to prospectively declare that advice-of-
counsel, when used as an affirmative defense at trial, must be pled as such under the
requirements of M. R. Civ. P. 8(c). In its order, the District Court, citing to Brown v.
Ehlert, 255 Mont. 140, 841 P.2d 510 (1992), noted that the essence of an affirmative
defense is the concession by the defendant that while a plaintiff may have a viable cause
of action, liability may be nonetheless avoided by the defendant based on some statute or
rule. See Brown, 255 Mont. at 146, 841 P.2d at 514. As the Court stated in Brown,
The rationale for requiring that these defenses be affirmatively pleaded is
simple: the same principles of fairness and notice which require a plaintiff
to set forth the basis of the claim require a defendant to shoulder a
corresponding duty to set out not merely general denials as appropriate,
but also those specific defenses not raised by general denials by which a
defendant seeks to avoid liability, rather than merely to controvert
plaintiff’s factual allegations.
Brown, 255 Mont. at 146, 841 P.2d at 514; accord, Burns v. A Cash Const. Lien Bond,
2000 MT 233, ¶ 29, 301 Mont. 304, 8 P.3d 795.
¶56 In challenging the District Court’s decision, the Defendants argue that an advice-
of-counsel defense can be invoked to positively avoid a claim for malicious prosecution,
even if it is not affirmatively pled as required under M. R. Civ. P. 8(c). The legal basis
sought only a blanket jury instruction on advice-of-counsel as a complete, affirmative defense
that would apply equally both to Northwestern and the individually-named defendants.
24
for this argument obviously derives from the language in McGuire cited above. Opinion,
¶ 50. While a surface reading of this language would suggest that the normal
requirements of affirmative defenses under M. R. Civ. P. 8(c) are somehow suspended in
the context of malicious prosecution claims, an examination of the authority from which
this language in McGuire derives demonstrates that this statement is actually a vestige
from the days of code pleading, and simply does not trump the well-settled requirements
of M. R. Civ. P. 8(c) and controlling case law. McGuire relies upon a 1958 case from
California, Masterson v. Pig’n Whistle Corp., 326 P.2d 918, 929 (Cal. 1958). The
authority for this proposition in Masterson finds its ultimate origin in the 1870 case of
Levy v. Brannan, 39 Cal. 485 (Cal. 1870) as well as Stephens, which was decided in
1914.5 Rule 8(c), and the requirement to affirmatively plead avoidance defenses were
adopted in Montana in 1964. Of necessity, M. R. Civ. P. 8(c) would supersede any
previous rule of practice from an earlier era which would allow a defendant to invoke a
matter of avoidance such as advice-of-counsel as an affirmative defense without pleading
it as such.
¶57 We therefore hold that advice-of-counsel, when used as an affirmative defense,
must be pled in accordance with M. R. Civ. P 8(c). We therefore expressly overrule
McGuire to the extent it can be read to the contrary. This rule will apply prospectively to
all situations in which a party wishes to rely upon this defense.
¶58 Issue Three: Did the District Court err in denying the Defendants’ motion for
judgment as a matter of law on the Retirees’ abuse of process claim?
5
Masterson relies upon Walker v. Jensen, 212 P.2d 569 (Cal. App. 3 Dist 1949), which relies on
Levy and a few other cases, all of which ultimately derive their authority from Levy.
25
¶59 During trial, the Defendants moved for judgment as a matter of law on the
Retirees’ abuse of process claims, arguing that the Retirees failed to satisfy the elements
of this tort insofar as they presented no evidence that the Defendants used legal process to
accomplish some collateral goal. As the Defendants correctly observe, abuse of process
requires the plaintiff show both “(1) an ulterior purpose and (2) a willful act in the use of
process not proper in the regular conduct of the proceeding.” Hughes v. Lynch, 2007 MT
177, ¶ 21, 338 Mont. 214, 164 P.3d 913 (quotation omitted). Furthermore, in order to
support an abuse of process claim, the plaintiff must show that there was “an attempt by
the plaintiff to use process to coerce the defendant to do some collateral thing which he
could not be legally and regularly compelled to do.” Lynch, ¶ 21 (quotation omitted).
Here, the Defendants claim that such evidence was wholly lacking, and that there was no
evidence presented showing that the bankruptcy proceedings were used for any purpose
other than to adjudicate the resolution of the Retirees’ Top Hat Contracts in bankruptcy
court. Accordingly, the Defendants argue there was insufficient evidence to submit this
claim to the jury and that their motion for judgment as a matter of law on this claim
should have been granted.
¶60 Additionally, the Defendants maintain that the District Court erred in giving the
following jury instruction relative to the abuse of process claim: “The filing of a lawsuit
in a forum which the party knows to be wrong constitutes an abuse of process.” The
Defendants assert that this jury instruction is a misstatement of the law, and that it
prejudiced them, practically amounting to a directed verdict, by allowing the jury to find
26
them liable based solely on the fact that the bankruptcy court decided to transfer the
Retirees’ claims back to Montana.
¶61 The Retirees maintain that the District Court did not err in denying this motion or
in giving its jury instruction on this claim. With respect to the jury instruction, the
Retirees maintain that it was adopted verbatim from Leasing, Inc. v. Discovery Ski Corp.,
235 Mont. 133, 765 P.2d 176 (1988), and that it has not been disturbed by subsequent
decisions. With respect to the evidence on this claim in general, the Retirees maintain
that they provided sufficient evidence to support it. First, they point to evidence
presented at trial that Paul Hastings had advised Northwestern that the bankruptcy
motions were “legally weak,” and that the Top Hat Contracts should have been honored.
Second, they assert that Northwestern did in fact use the bankruptcy proceedings in an
effort to obtain a collateral advantage against them. In this connection they point to
internal communications among Northwestern, its agents, and Paul Hastings obtained
during discovery indicating that the bankruptcy motions were devised by Northwestern to
gain a tactical advantage over the Retirees, compelling them to be more willing to give up
their claims against Northwestern. The Retirees also point out that Judge Peterson found
Northwestern’s various filings to be wholly without merit, and questioned their
legitimacy.
¶62 In order to prevail on a motion for judgment as a matter of law on the abuse of
process claim, the Defendants must show “a complete absence of any evidence which
would justify submitting an issue to a jury.” Vader, ¶ 20. The Defendants have failed to
carry this burden. The jury was presented with more than sufficient evidence, including
27
internal emails and corporate communications, as well as the testimony of Paul Hastings’
attorneys, Northwestern’s corporate executive agents, and Judge Peterson himself, upon
which to decide the abuse of process claims. While the jury was certainly not required to
believe such evidence and testimony, the quantum and quality of such evidence was more
than sufficient to survive a motion for judgment as a matter of law.
¶63 Turning to the challenged jury instruction, we conclude that the District Court did
not abuse its discretion in giving it. First, we agree with the Retirees that this instruction
was an accurate statement of the law under Leasing, Inc., wherein we held that filing a
complaint in a forum which a party knows to be improper constitutes an abuse of process.
See Leasing, Inc., 235 Mont. at 136, 765 P.2d at 177-78. In that case, one party to a
contract dispute filed suit in Granite County which was clearly improper under the plain
terms of the contract which required that any contract disputes be handled in Lewis and
Clark County. Leasing, Inc., 235 Mont. at 135-36, 765 P.2d at 177-78. Under those
circumstances, attempting to resolve the dispute in Granite County constituted an abuse
of process.
¶64 In subsequent decisions such as Lynch and Seltzer v. Morton, 2007 MT 62, 336
Mont. 225, 154 P.3d 561, we have discussed in greater detail the elements and
requirements for an abuse of process claim. However, we have never explicitly overruled
or abrogated our decision in Leasing, Inc. More importantly, both Seltzer and Lynch
were decided after the jury proceedings had concluded in this case. Thus, we cannot say
it was an abuse of discretion for the District Court to rely upon Leasing, Inc. at the time it
28
settled jury instructions in this case. Thus, we affirm the District Court on this issue as
well.
¶65 Issue Four: Should the judgment on the Retirees’ bad faith claim be reversed?
¶66 The jury found that Northwestern breached the Retirees’ contracts in bad faith. As
we stated in Story v. City of Bozeman, 242 Mont. 436, 791 P.2d 767 (1990), the tort of
bad faith breach of contract applies in “exceptional circumstances.” In order to state a
claim for bad faith breach of contract in the absence of specific statutory provisions, the
plaintiff must show that the parties are in a “special relationship” to one another. To
delineate those special relationships, courts are to consider the following elements:
(1) the contract must be such that the parties are in inherently
unequal bargaining positions; [and] (2) the motivation for entering the
contract must be a non-profit motivation, i.e., to secure peace of mind,
security, future protection; [and] (3) ordinary contract damages are not
adequate because (a) they do not require the party in the superior position
to account for its actions, and (b) they do not make the inferior party
“whole”; [and] (4) one party is especially vulnerable because of the type of
harm it may suffer and of necessity places trust in the other party to
perform; and (5) the other party is aware of this vulnerability.
Story, 242 Mont. at 451, 719 P.2d at 776 (quotation omitted, alterations in original).
¶67 Prior to trial, Northwestern filed a motion to dismiss this claim, arguing that the
Retirees had failed to establish a “special relationship” between themselves and
Northwestern. The District Court denied the motion, and ultimately instructed the jury
on the required elements under Story. Northwestern did not object to this jury
instruction, move for judgment as a matter of law on this claim, or otherwise seek a new
trial based on a failure of evidence to support this claim. Nonetheless, on appeal
Northwestern relies upon Federated Mut. Ins. Co. v. Anderson, 1999 MT 288, 297 Mont.
2933, 991 P.2d 915, and asks this Court to exercise de novo review and conclude that the
Retirees presented insufficient evidence to support the finding of a special relationship in
this case.
¶68 The Retirees urge us not to consider this argument, since other than filing a
pretrial motion to dismiss this claim, Northwestern failed to preserve this issue in the
District Court, either during or after trial. We generally refuse to address issues raised for
the first time on appeal because it is fundamentally unfair to fault the trial court for
failing to rule correctly on an issue it was never given an opportunity to consider. See In
re A.C., 2004 MT 320, ¶ 16, 324 Mont. 58, 101 P.3d 761. Moreover, we have repeatedly
held that failure to object to jury instructions or a verdict form results in a waiver of the
right to challenge them on appeal. Vader, ¶ 16 (citing Turk v. Turk, 2008 MT 45, ¶ 16,
341 Mont. 386, 177 P.3d 1013). Since Northwestern failed to object to jury instructions
on the bad faith claim, and did not challenge the sufficiency of the evidence for this claim
at the trial level or in post-trial proceedings, we decline to consider this issue now on
appeal.
¶69 Issue Five: Did the District Court commit reversible error in allowing the jury to
consider the Retirees’ claims for emotional distress and instructing them on those
claims?
¶70 In their complaint, the Retirees sought damages based on emotional distress
caused by the Defendants’ actions. The Defendants responded by moving for summary
judgment on those claims. The Defendants argued under Sacco v. High Country
Independent Press, Inc., 271 Mont. 209, 896 P.2d 411 (1995), that the Retirees were
required to make a showing of “serious or severe emotional distress” in order to recover
30
for emotional distress, and that they had failed to do so. The District Court ultimately
denied the motion, holding that the Defendants’ reliance on Sacco was misplaced because
the Sacco standard applied only to independent, stand-alone causes of action for
negligent/intentional infliction of emotional distress. In this case, the Retirees presented
several tort claims and sought recovery for emotional distress as an element of damages
arising from those claims. Accordingly, instead of relying on Sacco, the District Court
relied upon Johnson v. Supersave Markets, Inc., 211 Mont. 465, 686 P.2d 209 (1984) and
the 2003 edition of the Montana Pattern Jury Instructions (MPJI) to hold that the proper
standard for the emotional distress claims was whether Northwestern’s conduct resulted
in a substantial invasion of a legally protected interest and caused a significant impact
upon the person of the plaintiffs. The District Court therefore denied Northwestern’s
motion for summary judgment on the emotional distress claims.
¶71 During trial, Northwestern also moved for judgment as a matter of law on the
Retirees’ emotional distress claims, advancing arguments nearly identical to those set
forth in its summary judgment motion. The District Court denied this motion as well.
¶72 During the settling of jury instructions, the District Court rejected several
proposed jury instructions which would have required the Retirees to show “serious” or
“severe” emotional distress pursuant to Sacco in order to prevail on their claims for
emotional distress. Instead the District Court gave the following instruction:
Your award should include reasonable compensation for any mental
and emotional suffering and distress experienced by plaintiff and
reasonably probable to be experienced in the future.
Mental and emotional suffering and distress passes under various
names, such as mental anguish, nervous shock, or the like. It includes all
31
highly unpleasant mental reactions, such as fright, horror, grief, shame,
humiliation, embarrassment, anger, chagrin, disappointment, worry, and
nausea.
The law does not set a definite standard by which to calculate
compensation for mental and emotional suffering and distress. Neither is
there any requirement that any witness express an opinion about the amount
of compensation that is appropriate for this kind of loss. The law does
require, however, that when making an award for mental and emotional
suffering and distress, you shall exercise calm and reasonable judgment.
The compensation must be just and reasonable.
¶73 The Defendants argue the District Court erred in denying its various motions and
instructing the jury on the Retirees’ claims for mental and emotional suffering. The
Defendants assert that under Sacco, the Retirees were required to prove that their
emotional distress was “serious” or “severe” in order to present these claims to the jury.
Northwestern further argues that under First Bank (N.A.)—Billings v. Clark, 236 Mont.
195, 771 P.2d 84 (1989), even derivative emotional distress claims must be severe, and
that the Retirees failed to meet this threshold. Northwestern argues that this “severe”
standard as articulated in First Bank remains relevant, and has been recently affirmed in
Maloney v. Home and Inv. Ctr., Inc., 2000 MT 34, 298 Mont. 213, 994 P.2d 1124. The
Defendants then recite the evidence relative to each of the Retirees adduced at trial, to
demonstrate that the evidence did not meet this threshold. With the exception of
Christensen and Van Gelder, the Defendants argue that the remaining Retirees mainly
presented evidence of transient and trivial distress typical in the world of business
transactions, insufficient to support a claim for mental or emotional distress.
¶74 The Retirees argue that they did in fact meet their evidentiary burden to present
these claims to the jury. First, they argue that the Sacco standard applies only to
32
independent negligent/intentional infliction of emotional distress claims, and not to the
derivative claims presented in their complaint, and that the District Court gave the correct
MPJI on this issue. Additionally, the Retirees argue that under Seltzer, this Court
addressed the identical issue and held that the Sacco standard applies only to independent
claims of negligent/intentional infliction of emotional distress, and not to the derivative
claims they have presented. Further, the Retirees maintain that they did present evidence
of emotional distress suffered by each of them sufficient to support their claims.
¶75 In reply, Northwestern argues that the Retirees’ reliance on Seltzer is misplaced,
that the MPJIs are not themselves the law, and that proper legal authority compels the
conclusion that the jury was wrongly instructed.
¶76 We recently addressed this very issue in Jacobsen v. Allstate Ins. Co, 2009 MT
248, 351 Mont. 464, ___ P.3d ___, in which we held that the MPJI properly state the
threshold required for derivative or parasitic (as opposed to stand-alone) emotional
distress claims. Jacobsen, ¶ 66. We stated that “the ‘serious or severe’ standard
announced in Sacco applies only to independent claims of negligent or intentional
infliction of emotional distress.” Jacobsen, ¶ 66. Furthermore, we explicitly adopted the
standards set forth in the MPJIs at issue in the instant case for emotional distress claims
as an element of damage of an underlying tort claim (i.e., parasitic emotional distress
damages). Jacobsen, ¶ 66.
33
¶77 Pursuant to our holding in Jacobsen,6 we conclude that the Retirees did present
sufficient evidence to send their emotional distress claims to the jury and that the District
Court did not err in giving its instruction on these claims. While it is true that the
Retirees suffered varying degrees of emotional distress as a result of the Defendants’
actions, the quantum of proof as set forth under the MPJI on this claim was satisfied by
the evidence they presented. Therefore, we affirm on this issue.
¶78 Issue Six: Was the jury’s verdict awarding tort damages supported by substantial
credible evidence?’
¶79 As noted above, the jury awarded the Retirees approximately $17.5 million dollars
in compensatory damages for the Defendants’ tortious conduct. When the jury retired for
deliberations, it was given separate verdict forms for each individual plaintiff. Each
verdict form had seven questions. Question 1 asked if Northwestern breached the
particular retiree’s contract. Question 2 inquired whether Northwestern breached that
contract in bad faith. Question 3 asked whether any of the individual defendants
tortiously interfered with that particular retiree’s contract. Question 4 inquired whether
any of the Defendants committed an abuse of process against that particular retiree.
Question 5 asked whether any of the Defendants committed malicious prosecution
against that particular retiree. If the jury answered yes to questions 1, 2, 3, 4, or 5, it was
to determine an amount of money to award that particular retiree for damages caused by
the Defendants in Question 6. Question 7 then asked if any of the Defendants were liable
for punitive damages to that particular retiree. In other words, the verdict form did not
6
Jacobson overruled both First Bank and Johnson regarding this issue.
34
segregate damages based on each of the individual claims against the individual
defendants and Northwestern.
¶80 Notably, the Defendants did not object to the verdict form, nor did they seek to
have damages apportioned by the jury based on each cause of action or claim. Given that
the Retirees presented claims for breach of contract, the tort of bad faith breach of
contract, tortious interference with contract, abuse of process, and malicious prosecution,
it is simply impossible in retrospect for the Court to determine how or if the jury
apportioned damages among those various claims.
¶81 As the Retirees note, we faced a nearly identical situation in Seltzer. In that case,
a plaintiff brought claims for the torts of malicious prosecution and abuse of process
against an out-of-state law firm and other individuals. Seltzer, ¶ 1. During trial, the
plaintiff presented evidence of emotional distress, harm to his personal and professional
reputation, and damages for the expenses he incurred in defending himself. Seltzer, ¶ 97.
The jury ultimately rendered a multi-million dollar award in his favor. Like the
Defendants here, the defendants in Seltzer did not request a verdict form which
specifically apportioned damages based on the various claims. Nonetheless, on appeal
the Seltzer defendants challenged whether the jury’s award of compensatory damages
was supported by substantial credible evidence, and urged the Court to conclude that the
jury’s award simply represented compensation for emotional distress. Seltzer, ¶ 97. In
considering this claim, we stated the following:
The jury’s verdict did not designate a separate amount of compensation
awarded for each of these three elements of damage; it merely listed one
amount rendered for all compensatory damages. Thus, it is impossible to
35
know how the jury apportioned the compensatory award with respect to
the three elements of damage, and we certainly will not speculate in this
regard. Accordingly, we reject the Defendants’ assertion that the
compensatory award represents compensation solely for emotional
distress.
Seltzer, ¶ 97 (footnote omitted).
¶82 In the case at bar, we similarly refuse to engage in speculation concerning how the
jury apportioned damages, and conclude that the jury’s award of compensatory damages
was supported by substantial credible evidence.
¶83 Issue Seven: Did the District Court err in denying the Defendants’ motions for
dismissal and judgment as a matter of law as to defendants Drook, Hanson, Schrum,
Kovash, and Kliewer?
¶84 Prior to trial, the Defendants moved to dismiss Drook, Schrum, Hanson, Kovash,
and Kliewer, arguing that the individual defendants, acting as employees and officers of
Northwestern, could not be held personally liable for the acts of Northwestern
Corporation. Citing to § 28-10-702(3), MCA, the Defendants asserted that personal
liability for these defendants would lie only if they were found personally negligent or the
jury concluded that their actions were tortious in nature. The Defendants asserted that the
Retirees failed to produce any evidence that the actions of the individual defendants met
this standard. Furthermore, the Defendants argued that the individual employees were
acting within the course and scope of their employment and could not be held personally
liable. The District Court denied the motion.
¶85 During trial, the Defendants moved for judgment as a matter of law with respect to
these defendants. The Defendants argued that the Retirees failed to produce any evidence
that Drook or Hanson took any action with respect to the Retirees or was involved in the
36
filing of any motions against them. Additionally, the Defendants asserted that while
Schrum, Kliewer, and Kovash were involved in the corporate decision-making process
with respect to the Top Hat Contracts and bankruptcy litigation, they did nothing outside
the course and scope of their employment and did nothing malicious or untoward to any
of the Retirees.
¶86 After hearing a response and summary of the evidence from the Retirees, the
District Court denied the motion. Viewing the evidence in a light most favorable to the
Retirees, the District Court concluded that judgment as a matter of law would be
improper because the District Court did hear evidence concerning the presence of three of
the defendants at board meetings where issues related to the termination of the Top Hat
Contracts were discussed, and also heard evidence with respect to declarations that were
filed by the two other individually-named defendants. See Opinion, ¶ 15.
¶87 The Defendants now appeal the denial of their motion for judgment as a matter of
law. Relying upon Kuhns v. Scott, 259 Mont. 68, 853 P.2d 1200 (1993), and Bottrell v.
American Bank, 237 Mont. 1, 773 P.2d 694 (1989), the Defendants assert that in order to
sustain individual liability against the defendants, there must be substantial credible
evidence that each acted for his own pecuniary benefit and against the best interests of
the corporation, or that each acted outside the scope of his employment. Here, the
Defendants assert that the Retirees failed to meet this burden.
¶88 Northwestern argues that the key piece of evidence presented against Drook,
Hanson, and Schrum, was that the three of them attended a March 2004 meeting when
Northwestern’s board of directors voted to recommend rejection of all but one of the
37
non-qualified benefit plans. Northwestern asserts that the District Court relied on their
presence at this meeting in denying the Defendants’ motion for judgment as a matter of
law. However, the individual defendants assert that their attendance at this meeting could
not have given rise to personal liability, because their participation in that meeting was
done in the best interest of the company and was not tortious in nature. Additionally, the
Defendants argue that Drook and Hanson both testified that they were not actively
involved in terminating the Top Hat Contracts. Similarly, the Defendants assert that
Schrum was acting consistent with the interests of the corporation when he concurred in
the decision not to notify the Retirees about the board’s decision to terminate the Top Hat
Contracts until after the Plan had been filed in bankruptcy court, and that he relied on the
legal advice of Paul Hastings in agreeing to this decision.
¶89 The Defendants also assert that Kovash and Kliewer were only named in the
lawsuit because of documents they signed on behalf of Northwestern in the bankruptcy
proceedings. The Defendants argue that this level of participation alone was insufficient
to give rise to personal liability since they were acting upon legal advice consistent with
the best interests of Northwestern. Accordingly, the Defendants argue there was no
evidence showing that any of these individual defendants acted for their own benefit, at
odds with Northwestern’s interests, or with an intent to harm the Retirees.
¶90 The Retirees assert that the motion for judgment as a matter of law was properly
denied by the District Court. Citing to Poulsen v. Treasure State Industries, Inc., 192
Mont. 69, 626 P.2d 822 (1981), and Crystal Springs Trout Co. v. First State Bank of
Froid, 225 Mont. 122, 732 P.2d 819 (1987), the Retirees maintain that the proper
38
question in this case is not whether the individual defendants were acting within the
course of their agency, but whether they personally participated in tortious conduct.
Because the jury found all the individual defendants liable for both malicious prosecution
and abuse of process, the Retirees argue that the District Court did not err in denying
their motion for judgment as a matter of law on this claim.
¶91 Contrary to the Defendants’ characterization of the record, the Retirees assert that
Drook, Hanson, and Schrum all personally oversaw the efforts to illegally terminate the
Top Hat Contracts and pursue litigation against the Retirees in bankruptcy court. The
Retirees argue that the malicious intent of these individuals was established based on
their participation in Northwestern’s decision to terminate the Top Hat Contracts without
giving them notice. Additionally, the Retirees argue that Kliewer and Kovash committed
perjury by signing false declarations in bankruptcy court, with Kliewer specifically
verifying the bankruptcy court complaint. Finally, the Retirees maintain that these
defendants received “bonuses” for their misconduct from Northwestern. The Defendants
reply by disputing the applicability of Poulsen, and arguing that under Phillips v. Mont.
Educ. Assn., 187 Mont. 419, 610 P.2d 154 (1980), these individuals were shielded from
liability if they were acting in good faith and in the best interests of the corporation.
¶92 As we stated in Phillips,
Corporate officers or directors are privileged to interfere with or
induce breach of the corporation’s contracts or business relations with
others as long as their actions are in good faith and for the best interests of
the corporation. Where an officer or director acts against the best interests
of the corporation, acts for his own pecuniary benefit, or with the intent to
harm the plaintiff, he is personally liable.
39
Phillips, 187 Mont. at 425, 610 P.2d at 158 (citations omitted); accord Bottrell, 237
Mont. at 25, 773 P.2d at 708-09. Similarly, in Crystal Springs Trout Co., we held that
corporate agents could be held personally liable if they were personally negligent or their
actions were tortious in nature. Crystal Springs Trout Co., 225 Mont. at 129, 732 P.2d at
823. “The personal nature of the agent’s actions forms the narrow exception to the
general policy that officers and agents of a corporation must be shielded from personal
liability for acts taken on behalf of the corporation.” Crystal Springs Trout Co., 225
Mont. at 129, 732 P.2d at 823 (citing Little v. Grizzly Mfg., 195 Mont. 419, 636 P.2d 839,
842 (1981)).
¶93 Because this is an appeal from the District Court’s denial of judgment as a matter
of law, our inquiry is whether there was a complete absence of any evidence which would
justify submitting this issue to a jury. Vader, ¶ 20. Our role is not to pass judgment on
which side’s evidence was more persuasive, or to otherwise place ourselves in the role of
the fact finder, as that is the province of the jury. Here, our review of the record
demonstrates that there was sufficient evidence to submit the Retirees’ tortious
interference with contract, abuse of process, and malicious prosecution claims against the
individual defendants to the jury. The jury was presented with testimony and evidence
arguably supporting the Retirees’ claims that the acts of the individual defendants were in
bad faith or tortious in nature. The Retirees argued to the jury that the individually-
named defendants were personally involved in the termination of the Top Hat Contracts
and argued this conduct was tortious based on: (1) the fact the individual defendants
ratified a decision to wait until after bankruptcy proceedings had been initiated to inform
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the Retirees of their intention to terminate the Top Hat Contracts; (2) the assertions that
this decision was not based on a cost-benefit analysis with respect to Northwestern; (3)
the manner in which those proceedings were initiated in bankruptcy court; and (4) the
allegations that the termination of these Top Hat Contracts was clearly contrary to the
terms of the UPA just negotiated by Northwestern and therefore contrary to law and
without probable cause. Furthermore, the Retirees argued that the individually-named
defendants were “rewarded” for their actions by receiving large bonuses after
reorganization, while the Top Hat Contracts were terminated.
¶94 We conclude that the evidence before the court was sufficient to sustain the claims
against the individually-named defendants, and that the District Court did not err in
denying the Defendants’ motion for judgment as a matter of law. From this evidence, the
jury could have concluded that the individual defendants conduct was tortious in nature
and directed at the Retirees, or it could have concluded that this evidence did not support
such a conclusion. In any event, this evidence was sufficient to survive a motion for
judgment as a matter of law. Moreover, the fact that the jury found these individual
defendants not liable for tortious interference with contracts or punitive damages, but did
find them liable for malicious prosecution and abuse of process, demonstrates that the
jury did not simply lump these individual defendants in with the acts of the corporate
defendant Northwestern, but instead individually considered their actions in relation to
each claim based on the evidence before it.
¶95 In his dissent, Justice Rice is critical of our resolution of this issue, which he
argues “extensively broadens our law regarding the personal liability of corporate
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employees in order to affirm the imposition of personal liability here.” Dissent, ¶ 105.
Justice Rice’s dissent raises valid concerns on the issue of when an agent is shielded from
personal liability for acts done in an official capacity and taken on behalf of a
corporation. Our caselaw does not draw a bright line between tortious conduct
committed by a corporate agent which subjects him to personal liability, and conduct
which may cause another party damage, but is nonetheless not actionable in a personal
sense due to the corporate presence. It is not our intent to broaden the law in this area in
any regard. Instead, our holding here is simply based on the quantum of evidence
presented to the jury and whether it was sufficient for the jury to infer tortious conduct on
behalf of the individual defendants. In this regard, we note that the Defendants never
requested a jury instruction to clarify for the jury the difference between conduct which is
tortious in nature and gives rise to personal liability, and that which is taken on behalf of
a corporation and exempted from such liability. We leave any final pronouncements
regarding this issue to a case in which these issues are fully and squarely before the
district court.
¶96 Issue Eight: Did the District Court err in denying the Defendants’ post-trial
motion to offset the judgment against the amount of the Retirees’ pre-trial
settlement with Paul Hastings?
¶97 After judgment was entered in this case, the Defendants moved to offset the award
of compensatory damages based on Paul Hastings’ pre-trial settlement with the Retirees.
The District Court denied both a motion to reveal the confidential settlement and to grant
the offset. In its order, the District Court explained that an offset was unavailable under
Montana law because Northwestern and the individual defendants were found liable for
42
intentional torts, and offsets are available under Montana law only in cases of
comparative negligence. Moreover, the District Court noted that the Defendants had
agreed to a verdict form which did not lend itself to a precise comparison of the injuries
the jury found were apportioned among the Defendants and Paul Hastings, thus leaving
unanswered whether the concerted action of the Defendants and Paul Hastings caused a
single, indivisible harm to each of the Retirees.
¶98 The Defendants now appeal the denial of their post-trial motion to offset the award
of compensatory damages. They argue that they are entitled to a pro tanto offset against
the amount of the pre-trial settlement with Paul Hastings under Montana law. We
disagree. As a practical matter, it is virtually impossible for this Court to determine the
extent to which Paul Hastings bears any liability for the tortious conduct which the jury
found was committed by the Defendants. As noted by the District Court, the verdict form
does not apportion liability among the Defendants and Paul Hastings, or provide any
guidance as to whether the conduct of Paul Hastings resulted in any harm to the Retirees,
much less a single, indivisible harm. Yet, as the Defendants themselves note, a pro tanto
offset such as they are now seeking is permitted only if they can show that Paul Hastings,
as a concurrent or joint tortfeasor, caused the Retirees a single “indivisible harm” in
concert with the Defendants. See Schuff v. A.T. Klemens & Son, 2000 MT 357, ¶ 104,
303 Mont. 274, 16 P.3d 1002.
¶99 Even further, the verdict form gives no indication as to how or if the jury
apportioned damages among the claims for breach of contract, and the torts of bad faith
breach of contract, malicious prosecution, and abuse of process; thus, we would have to
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engage in gross speculation were we to assess how the award of damages corresponds to
the jury’s finding of liability on each of the Retiree’s claims, and what percentage of
those damages should be theoretically attributed to the actions of Paul Hastings. In short,
the Defendants ask this Court to untangle and dissect the jury’s verdict without any
factual basis upon which to do so. Because the verdict form was used without objection,
we cannot and will not now second guess the jury’s allocation of damages.
¶100 Finally, we note that in Cartwright v. Equitable Life Assur. Soc. of the United
States, 276 Mont. 1, 914 P.2d 976 (1996), we held that there is no statutory basis in
Montana for an offset of damages arising from the commission of intentional torts. See
Cartwright, 276 Mont. at 36, 914 P.2d at 998. Therefore, we decline to disturb the
District Court’s denial of the post-trial motion.
CONCLUSION
¶101 We affirm the jury’s verdict and the various rulings of the District Court before,
during and after trial. However, we grant the request made by the Defendants to remand
the judgment in this case to the District Court so that it can be reduced by the amount of
payments Northwestern has been making to the Retirees under the terms of their Top Hat
Contracts since the judgment in this matter was originally entered. Affirmed and
remanded.
/S/ PATRICIA O. COTTER
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We concur:
/S/ KATHERINE M. IRIGOIN
District Court Judge Katherine M. Irigoin
sitting for Chief Justice Mike McGrath
/S/ W. WILLIAM LEAPHART
/S/ JAMES C. NELSON
/S/ JULIE MACEK
District Court Judge Julie Macek
sitting for Justice Brian Morris
Justice Jim Rice, dissenting.
¶102 I dissent from the Court’s resolution of Issues 2 and 7, and would remand for a
new trial.
¶103 Under Issue 2, the Court announces a new rule—that “advice-of-counsel, when
used as an affirmative defense at trial, must be pled as such under the requirements of M.
R. Civ. P. 8(c).” Opinion, ¶ 54. Thus, the Court has overruled McGuire’s holding that
the advice-of-counsel defense “may be shown under a general denial in the answer.”
McGuire, 184 Mont. at 413, 603 P.2d at 256 (quoting Materson v. Pig’n Whistle Corp.,
326 P.2d 918, 929 (Cal. App. 1958)). While I concur with this conclusion, I believe it is
unfair to Northwestern to change a previously clear rule which was in effect and upon
which it relied during the litigation. Under McGuire, the District Court incorrectly ruled
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that Northwestern had waived the defense and was not entitled to so instruct the jury. I
believe Northwestern was prejudiced thereby. The Court reasons that Northwestern was
not harmed because the District Court allowed Northwestern to present evidence
concerning its reliance upon its counsel’s advice to defend against the allegation it acted
in bad faith. However, such evidence must be admitted in any event in support of a
general denial of the claim. The definition of probable cause we have adopted from the
Restatement (Second) of Torts § 675 (1977) for malicious prosecution cases is satisfied
when a defendant reasonably believes that the claim he pursued was valid under
applicable law “in reliance upon the advice of counsel.” Hughes v. Lynch, 2007 MT 177,
¶ 16, 338 Mont. 214, 164 P.3d 913. Thus, such evidence must be admitted in the course
of proving or denying the proof of a malicious prosecution claim.
¶104 Northwestern wanted, and I believe was entitled to, more—an instruction that
reliance upon advice of counsel could be a complete defense to the claim. Indeed, the
Retirees used the counsel defense as a basis to both request that Hastings be added as a
defendant and to seek discovery of privileged documents. As a result, the District Court
granted Retirees’ motion to amend the complaint and also granted their motion to compel
discovery of materials that would otherwise be protected by the attorney-client and work-
product privileges. The privileged documents sought by Retirees were certainly relevant
to their malicious prosecution claim, as they had to prove that Northwestern lacked
probable cause to file the bankruptcy action. However, after permitting the additional
claim and the discovery to support the additional claim, the District Court barred
Northwestern from raising the actual defense—which Northwestern was not required to
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affirmatively plead under McGuire. I believe Northwestern was unfairly constrained in
the ability to defend itself and would order a new trial.
¶105 I also dissent with the Court’s resolution of Issue 7, which I believe extensively
broadens our law regarding the personal liability of corporate employees in order to
affirm the imposition of personal liability here. Our cases illustrate, and we have
instructed, that “[t]he personal nature of the agent’s actions forms the narrow exception
to the general policy that officers and agents of a corporation must be shielded from
personal liability for acts taken on behalf of the corporation.” Crystal Springs Trout Co.
v. First St. Bank, 225 Mont. 122, 129, 732 P.2d 819, 823 (1987) (emphasis added) (citing
Little v. Grizzly Mfg., 195 Mont. 419, 636 P.2d 839 (1981)). The corporate officers’
actions in this case did not exceed the scope of their employment, and did not trigger this
narrow exception.
¶106 In Bottrell v. Am. Bank, 237 Mont. 1, 12-14, 773 P.2d 694, 701-02 (1989), the
bank, under the direction of its officers, wrongfully exercised its right to setoff of a note
not yet due and payable, before making any demand of the borrower for payment, as
required under the terms of the note. The plaintiffs suffered lost profits as a result of the
bank’s actions. Bottrell, 273 Mont. at 22, 773 P.2d at 707. We held the officers could
not be held personally liable for these obvious errors, explaining:
[T]he actions of officers Beaton and Derrig were not on behalf of
themselves as individuals or for their own pecuniary benefit, nor were their
actions against the best interests of the corporation for which they were
employed. They acted within the scope of their employment, and in
furtherance of corporate interest. As such, they are entitled to the
protection of the corporate shield from personal liability.
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Bottrell, 237 Mont. at 25, 773 P.2d at 708.
¶107 Likewise, in Kuhns v. Scott, 259 Mont. 68, 74, 853 P.2d 1200, 1204 (1993), the
plaintiffs contended the CEO of First Interstate Bancsystem of Montana, Inc., (FIBM)
maliciously caused FIBM to breach its duties under the stock purchase agreement
between the parties. We rejected plaintiffs’ assertions that the CEO had failed to increase
FIBM’s capital and obtain the FIBM Board’s approval of the stock purchase for the
reason that his personal interest in the bank’s ownership would have been diluted by
doing so. Kuhns, 237 Mont. at 74, 853 P.2d at 1204. We held that in order to establish a
claim against the CEO, the plaintiffs “would have to show that [the CEO] had acted for
his own pecuniary benefit and against the best interests of the corporation (FIBM); or that
he had acted outside the scope of his employment.” Kuhns, 259 Mont. at 74-75, 853 P.2d
at 1204 (citing Bottrell, 237 Mont. at 25, 773 P.2d at 708). We reasoned that plaintiffs’
assertions about the CEO’s ownership interest were speculative and the lack of evidence
about a personal benefit or that he had acted against FIBM’s best interests warranted the
entry of summary judgment. Kuhns, 259 Mont. at 75, 853 P.2d at 1204-05.
¶108 In cases where we have reached the opposite result, our decisions turned on
substantial evidence demonstrating the employees had knowingly made false and
misleading statements or taken fraudulent actions. As the Court notes, it is the “personal
nature” of these agents’ actions that permitted the agents to be held personally liable for
the actions they took on behalf of the corporation. Opinion, ¶ 91. In Crystal Springs
Trout Co., 225 Mont. at 128, 732 P.2d at 822, 823, the president and primary shareholder
of the First State Bank repeatedly lied about filing a loan application with the FmHA,
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about banks he had contacted, and about the status of plaintiffs’ financing. We described
the officer’s conduct as “intentional and very personal,” citing the conclusion of the trial
court:
The conduct of defendant [bank president], acting at all times as agent of
the First State Bank of Froid and with the acquiescence and tacit approval
of the directors of the bank, constituted willful and wanton misconduct
consisting of conscious breach of trust and fiduciary duty, intentional
deception, flagrant breach of the ethical cannons [sic] of both the legal and
banking profession, a studied and extended course of fraudulent
misrepresentation and knowing betrayal of a lifetime friendship, all with
reckless disregard for the rights and interest of the plaintiffs herein,
unjustified by any circumstance and “malicious” and “oppressive” within
the meaning of those terms as applied in the law of torts.
Crystal Springs Trout Co., 225 Mont. at 129, 732 P.2d at 823.
¶109 In Poulsen v. Treasure St. Indus., 192 Mont. 69, 72, 75, 626 P.2d 822, 824-25
(1981), the president of Treasure State Industries, Inc., made clearly untruthful statements
about the company’s compliance with health regulations to plaintiffs, who were looking
to purchase the concrete block plant operated by the company, and thereby induced
plaintiffs to purchase the plant. We held that the president was personally liable because
his individual acts were fraudulent, meeting all of the elements of actual fraud. Poulsen,
192 Mont. at 79, 82, 626 P.2d at 828-29.
¶110 The Retirees’ allegations that the individual defendants tortiously a participated in
the termination of the Top Hat Contracts during the bankruptcy court process are directed
to actions clearly within the scope of the defendant’s employment. There is no
substantial evidence, as in Crystal Springs and Poulsen, that these corporate officers
made false statements, acted fraudulently, or acted in pursuit of personal gain. The jury
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found that the officers were not liable for tortious interference with the contracts.
Further, there is no evidence that the bonuses, which the Retirees assert is proof of the
officers’ personal pecuniary gain, were linked to the decision to terminate the contracts.
The bonuses were provided to the officers for their role in guiding Northwestern through
its reorganization and emergence as a new entity, in accordance with common business
practices. Perhaps in the times we now live such common corporate practices are
popularly thought to be inappropriate. Nonetheless, without more, these bonuses do not
constitute a basis for personal liability under our precedent. The evidence is that these
rewards were given for the officers’ actions on behalf of the company. Thus, Retirees’
theory that the officers personally benefitted directly from the Top Hat situation requires
the same sort of speculation we rejected as insufficient in Kuhns. The evidence does not
demonstrate that Retirees’ claims fit within the “narrow exception” to the general rule
against personal liability. Crystal Springs Trout Co., 225 Mont. at 129, 732 P.2d at 823.
Nothing close to what we condemned at length in Crystal Springs Trout Co. occurred
here.
¶111 I would enter judgment in favor of the individual defendants on the claim of
personal liability and remand for a new trial.
/S/ JIM RICE
Justice John Warner joins the dissent of Justice Jim Rice.
/S/ JOHN WARNER
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