Free Reply to Response to Motion - District Court of Arizona - Arizona

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40 North Central Avenue Phoenix, Arizona 85004-4429 Telephone: (602) 262-5311 Stephen M. Bressler, State Bar No. 09032 Direct Dial: (602) 262-5376 Direct Fax: (602) 734-3742 E-Mail: [email protected] Ann-Martha Andrews, State Bar No. 012616 Direct Dial: (602) 262-5707 Direct Fax: (602) 734-3764 E-Mail: [email protected] Scott Bennett, State Bar No. 022350 Direct Dial: (602) 262-5338 Direct Fax: (602) 734-3816 E-Mail: [email protected] Attorneys for Defendants Provident Life and Accident Insurance Company and UnumProvident Corporation

UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA ) ) Plaintiff, ) ) vs. ) ) UNUMProvident Corporation and Provident ) Life and Accident Insurance Company, ) ) Defendants. ) ) 1. Brett D. Leavey, No. CIV-02-2281-PHX-SMM REPLY IN SUPPORT OF RENEWED MOTION FOR JUDGMENT AS A MATTER OF LAW OR, IN THE ALTERNATIVE, MOTION FOR A NEW TRIAL AND/OR REMITTITUR

Rule 50(B) Motion For Judgment As A Matter Of Law. A. Leavey Failed To Produce Clear And Convincing Evidence Of The "Evil Mind" Necessary For An Award Of Punitive Damages.

Leavey's theme of "evil mind" is that the defendants sent the December 4, 2001 letter even though they knew that it "would likely cause a relapse." See, e.g., Resp. 6, 11. But if Leavey relapsed, he would be disabled and would be entitled to benefits. It would make no sense for them to send Leavey a letter that they believed would exacerbate his condition. On its face, the letter reveals an intent to motivate additional medical treatment, and potentially a recovery and return to work. Tr. Ex. 1 at PLACL1028-30. The defendants' concern that Leavey was not motivated to get care appropriate to restore his functionality was valid, as Leavey had dropped out of the abstinence-based programs
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recommended by Chandler Valley Hope and the Arizona Dental Board, and enrolled in a methadone program without his physicians' knowledge and against their advice. Even if the December 4 letter was an inappropriate means of addressing their concern, there is no evidence that the defendants had any goal other than to return Leavey to health. To suppose they sent the letter with any knowledge or desire to harm Leavey would be to presume that they were acting against their own financial interests. Not only is Leavey's theory illogical, it is based on a series of mischaracterizations. For example, Leavey implies that the defendants targeted his claim because it was "a potentially `severe' situation" for them financially. Resp. 5, 14. The document that he quotes does not use the word "severe" to describe the defendants' financial stake in Leavey's claim. It is a 1999 nurse review in which the nurse used that adjective to characterize Leavey's disability. Tr. Ex. 1 at PLACL271. Similarly, Leavey argues that a company employee (who was not handling the claim but reviewed the file) recommended accusing Leavey of leaving dentistry by choice "even though Provident knew that was untrue." Resp. 5. The memo merely states: "If his license is reinstated and he does not [return to work]" then it "could" be argued that he was choosing to leave dentistry. Tr. Ex. 1 at PLACL348 (emphasis added). The statement is accurate. The dental board would not reinstate Leavey's license unless he could practice dentistry safely. If he did not return to dentistry despite being able to do so safely, then he arguably would be making a choice not to practice and might not qualify for benefits. In any case, Leavey chose not to pursue reinstatement of his license and the claims handlers did not act upon this memo. Leavey also stretches the evidence when he argues that the defendants' IME was biased because the referral was "slanted" in favor of the evidence supporting their concerns about Leavey's claim. Resp. 5. The IME physician (Dr. Stonnington) testified that she found nothing improper with the referral ­ it appropriately drew her attention to the areas of the defendants' concern, and she understood that her opinion was to be based on a neutral review of all the evidence. Tr. 1916-17.
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Equally misguided is Leavey's argument that the December 4, 2001 letter was unjustified because the IME doctors found that he was "under appropriate care" and that they were then "pressured" to generate reports supporting a claim closure. Resp. 5-6. Although the doctors' reports said that Leavey was receiving "appropriate care" for his "anxiety depressive disorder" (see PLACL977), both went on to express very serious concerns about the adequacy of Leavey's treatment. See Tr. Ex. 1 at PLACL967, 977; see also PLACL562. Dr. Stonnington testified that by "appropriate care" she simply meant that the treating physicians were not falling below the medical standard. Tr. at 1211-12. And both doctors testified that there was nothing improper about Dr. Brown's subsequent follow-up and specifically, that they never felt pressured to express any particular conclusion. It was the IME doctors' assessment of Leavey's treatment (or lack of it) ­ and their recommendation of appropriate care ­ that led to the December 4, 2001 letter. Finally, Leavey characterizes as "mere wishful thinking" our position that the claim handlers had no reason to believe that Leavey was psychologically fragile when they sent the December 4, 2001 letter. Resp. 13. Again, Leavey's theory that they sent the letter knowing it could cause him to relapse requires a presumption of economic irrationality. Beyond that, there is simply no evidence that the defendants knew that Leavey was psychologically vulnerable in December 2001. Indeed, although Leavey identifies documents reflecting that he was anxious and, like any addict, had a risk of relapse (Resp. 6), he also emphasizes that he "had made great improvements" in 2001. (Resp. 7) Certainly the IME doctors gave no indication that his current mental status was particularly delicate. See PLACL985-76, 974-65. B. The Supposed Institutional Practices Evidence Does Not Show That The Defendants Acted With An "Evil Mind" In Handling His Claim.

Leavey suggests that punitive damages are proper here because they have been awarded in other cases in which the plaintiffs introduced the same type of "bad company"

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evidence.1 See, e.g., Resp. 11-12. But even if Leavey's "bad company" evidence had merit, it would not automatically prove that the defendants handled his claim with the "evil mind" required for punitive damages. See, e.g., Linthicum v. Nationwide Life Ins. Co., 723 P.2d 675, 680-81 (Ariz. 1986). Otherwise, they would be proper in every claim handled by the defendants. That is why Leavey must prove a nexus. Each claim must be judged on its own facts, and the facts here do not demonstrate "evil" intentions or actions rising to the level of quasi-criminal conduct required for punitive damages. Id. at 679. The most that can be taken from the record is that the defendants were over-aggressive in their effort to motivate Leavey to seek appropriate treatment so that he could return to work (an outcome that would have been in everyone's best interest). Leavey also asks the Court to infer that the defendants sent the December 4 letter pursuant to an evil "scheme" because his claim "fit Defendants' profile." Resp. 13-14. Even assuming one could find evidence of such a "profile" (which would be a stretch) this inference of evil mind in this case from a generalized "profile" cannot satisfy the "clear and convincing evidence" standard that is required for punitive damages.2 C. The Claim Representatives' Alleged Attempts To Conceal That The Claim Was Temporarily Closed Did Not Cause Leavey Any Harm.

This argument is, and always has been, all sound and fury, lacking substance. Despite being challenged to do so in our opening memorandum (at 7-8), Leavey has failed to point to evidence that clearly and convincingly shows that the claim handlers lied. He does not dispute that Conrad, Johnson, and Breter consistently testified that, regardless of the PACE coding and consistent with the claim file documentation, Leavey's claim was always being actively managed. Leavey argues, rather, that they must have lied about "the detailed process of closing [his] claim and releasing the reserve" on the PACE computer system and then
1

For example, Leavey argues the defendants set arbitrary claim closure goals, developed top ten lists (many years earlier), did not keep documents at roundtable, and tried to keep documents privileged by copying in-house counsel on them. 2 In response to the claim representatives' testimony that they were never pressured to deny claims, Leavey now submits substantive information, in the form of a learned treatise. (Resp. 13, n.4) This is outside the trial record and the Court must strike it.
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covered it up. Resp. 8. In fact, the only testimony on this was that opening or closing a claim on the PACE system involves typing in a date and a code. Tr. 707; see also Tr. 344-45. Conrad, who was responsible for making the PACE entry, was handling 80-90 claims at that time. Tr. 759. It is not surprising that a claim representative who makes these entries with such frequency did not recall this particular entry at a deposition two years later. Shortly before his deposition, Breter checked the PACE screen to see if it showed a "reopen" code. It did not. Thus, Breter, who was overseeing 2,000-3,000 claims (Tr. 1669), assumed it had not been closed. This was an incorrect assumption; it was not a "lie." Breter and the others incorrectly assumed that when a claim was closed and then reopened, the "latest reopen date" field would automatically populate. That field is only used, however, when the claim is closed, benefits are not paid for at least one month, and then the claim is reopened. In a situation such as this where there is no break in benefit payments, PACE will not show a reopen date. See, e.g., Tr.675; 1651-53. Even if there were evidence that the claim handlers "lied" about the PACE closure in their depositions, this caused Leavey no compensable harm. At the time of the depositions, this litigation was well under way and Leavey had been receiving his ongoing monthly benefits for over a year. Leavey's counsel had long ago advised him in June 2001 that benefits would continue to be paid with "no strings attached." Tr. 124041. Leavey's statement (Resp. 9) that the "cover-up" caused him "additional anxiety and several relapses" is unsupported anywhere in the trial record. There is no testimony, by Leavey or his physician, establishing any causal link between any claimed damages and the claim representatives' deposition testimony, or any litigation conduct for that matter. 2. Rule 59(A) Motion For A New Trial And/Or Remittitur. This Court is familiar with the record and is now "entitled to interpret the evidence and judge the credibility of witnesses for itself." Simco v. Ellis, 303 F.3d 929, 932 (8th Cir. 2002). The Court "need not view [the evidence] in the light most favorable to the verdict winner." Song v. Ives Labs., Inc., 957 F.2d 1041, 1047 (2d Cir. 1992). When
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viewed independently, the clear weight of the evidence is against the jury's verdict on bad faith and punitive damages. A. The $4 Million Award For Leavey's Emotional Distress Shocks The Conscience And Is So Grossly Excessive As To Violate Due Process. 1. The Defendants' Claim Handling Caused Only Modest Emotional Distress, If Any.

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Faced with the task of defending a patently excessive award ­ five times greater than he requested ­ Leavey recounts everything bad that has happened to him since December 4, 2001. But Leavey can receive compensation only for those harms that were caused by the defendants' handling of his claim. See, e.g., Barrett v. Harris, 207 Ariz. 374, 378-79, 86 P.3d 954, 958-59 (Ct. App. 2004). Thus, his invocation of the "eggshell plaintiff" rule (Resp. 24-25) misses the mark: Leavey cannot receive compensation for his underlying depression and opiate addiction because those are preexisting conditions, not something that the defendants caused. The defendants are not automatically responsible for every harm Leavey suffered after the December 4 letter. Causation is key. There is no evidence of causation here, merely argument. Leavey's relapses and his decision to break his own hand do not provide a basis for the compensatory award because there is no evidence that the defendants caused this harm. Leavey never testified that the defendants caused any of this. (Note that he admitted having hurt his hand to obtain drugs even before the December 4 letter. Tr. 1100-01.) Leavey's physician, Dr. Curtin, never said Leavey's relapses were caused by the defendants' conduct. He said that relapses are part of the disease of addiction, and that Leavey has had several relapses over the years. Tr. 535.3 Leavey also implies that the defendants are responsible for his stress during this litigation. Resp. 8-9, 23 n.11. First, "litigation stress" is not a compensable injury. See,
3

The only time causation came up with Leavey, he also seemed to accept it as part of addiction; he certainly did not indicate that anything the defendants did had contributed to his relapses. Tr. 1216. Even if Leavey had testified that the defendants caused him to deliberately break his hand and relapse, such an assertion likely would not withstand scrutiny. The Palsgrafian causal chain that would be required to get from the defendants' letter to Leavey's decision to drop a weight on his hand is simply too tenuous--at least without very compelling, corroborating evidence, which is noticeably lacking here.
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e.g., Ortega v. Pajaro Valley Unified Sch. Dist., 64 Cal. App. 4th 1023, 1060-61 (1998). Even if it were, there is no evidence in this record that being "forced to publicly litigate this case [caused Leavey] further anguish, strain, and embarrassment." (Resp. 9) The proffered record citations do not support this statement.4 In any event, because Leavey never missed a benefit payment ­ and knew as early as June 2002 that he would receive monthly benefits with "no strings attached" (Tr. 1240-41) ­ it is self-evident that he pursued this suit hoping for a windfall award of punitive damages. If his quest for punitive damages was stressful, that is not an injury that the defendants caused. The only harm for which Leavey has demonstrated the requisite causal connection is the temporary "devastat[ion] and confus[ion]" he claimed to have experienced after receiving the December 4 letter, and the anxiety he claimed to have experienced about his finances until June 10, 2002, when the defendants told him that they would be continuing his monthly benefits. Resp. 23. Not only did Leavey's psychiatric treatment not intensify after the letter, he only saw Dr. Curtin twice during the following six months. (Tr. 545) And Leavey's emotional reaction was never significant enough to be recorded in his doctors' medical records. To the contrary, Dr. Curtin continually recorded that he was "stable." E.g., Tr. Ex. 1 at PLACL01056, Tr. Ex. 2 at PLACL01066. While Leavey may have felt disappointed and uncertain under the circumstances, the record does not show emotional suffering out of the modest range that an average person experiences from the ups and downs of life.5 2. Even If Leavey Were Entitled To Compensation For Every Harm He Has Identified, $4,000,000 Would Still Be Grossly Excessive.

Although Leavey contends that the defendants are "unwilling[] to recognize" all of the harms that he now claims they caused (Resp. 23), he makes no effort to explain why, at trial, he valued those harms at $800,000. Tr. 2049. If $800,000 is the most that
4

This argument is not only unsupported in the evidence, it is disingenuous considering that Leavey had the opportunity to settle his lawsuit for an amount substantially in excess of the policy benefits. 5 For instance, Leavey testified that even before the December letter, he was "mentally and physically frustrated" and "worried" by his financial problems (Tr. 1161), and was experiencing confusion, fear, and even "shame." (Tr. 1189-90, 1203)
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Leavey thought he could convince the jury to award, his post hoc claim that the evidence supports a windfall five times that amount must ring hollow. Underneath his rhetoric, the harms that Leavey describes ­ including those that the defendants did not cause ­ are not extraordinarily grievous. First, although he now claims that the defendants caused him to relapse, Leavey had relapsed before. Tr. 1104, 1177, 1183-84. For three to five years before June 2001, he was unable to go more than a "month or two without ingesting narcotics." Tr. Ex. 1 at PLACL967. And his relapse after the December 4 letter lasted less than two months. Tr. 1125. Second, Leavey complains that the defendants' conduct caused physical pain and suffering. Resp. 23-24. But the only physical injury he identifies is his broken hand. See Resp. 7-9. A broken hand does not merit anything close to $4,000,000.6 Finally, while Leavey's temporary distress upon receiving the December 4 letter and his financial anxiety over the next fiveto-six months (including the decision to move into a smaller apartment) may merit some compensation, it does not support anything in the same ballpark as $4,000,000. 3. $4,000,000 Is Out Of All Proportion To Awards In Other Arizona Bad-Faith Cases.

Leavey fails to identify any injuries that would differentiate his case from similar bad-faith cases in which emotional distress awards have been limited to generous but reasonable amounts in the low six figures. See, e.g., Filasky v. Preferred Risk Mut. Ins. Co., 152 Ariz. 591, 597-98, 734 P.2d 76, 82-83 (1987) ($100,000); Pershing Park Villas Homeowners Ass'n v. United Pac. Ins. Co., 219 F.3d 895, 904 (9th Cir. 2000) ($200,000). Rather, Leavey complains that comparing his case to other Arizona bad-faith cases "casts too narrow a net" (Resp. 24 n.12) ­ while the net he casts catches only the very highest emotional distress awards ever awarded by any court in any situation. The cases Leavey cites (Resp. 24) actually prove the outrageousness of the award here. For example, one of his two Arizona cases involved an award of $1,500,000
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See, e.g., Moorer v. Clayton Mfg. Corp., 128 Ariz. 565, 570-71, 627 P.2d 716, 720-21 (Ct. App. 1981) ($35,000 in pain and suffering for plaintiff whose "arm was crushed" and "permanently scarred by surgery" and whose "little finger is deformed" and "arm is limited in its range of motion").
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(38 percent of the award here) for a plaintiff who was subjected to a medically unnecessary radiation treatment that increased his risk of leukemia from one out of 16,000 to one out of 33. That experience resulted in a permanent post-traumatic stress disorder that manifested itself in "long-term . . . mental disturbance," including fear of death, nightmares, cold sweats, sleeplessness, and impatience with his children and grandchildren, and required him to seek psychological counseling for anger and anxiety. Monaco v. Healthpartners of S. Ariz., 196 Ariz. 299, 303, 995 P.2d 735, 739 (Ct. App. 1999). In another of Leavey's cases, a doctor and his wife each were awarded $1,120,000 (28 percent of Leavey's award) for harassment by abortion protestors that "turned [the plaintiffs'] lives into a hellish, torturous experience," caused them to "liv[e] in genuine fear for their lives for an extended period of time," and "permanently affected their lifestyle, their professional lives, their enjoyment of life, their personalities, their economic well-being, and their general emotional well-being." Tompkins v. Cyr, 202 F.3d 770, 783 (5th Cir. 2000); see also Southwestern Bell Tel. Co. v. Wilson, 768 S.W.2d 755, 759-60, 763 (Tex. Ct. App. 1988) ($1,500,000 for mental anguish caused by a bill collector's harassment, including fear of death while being threatened with a gun). The stunning difference between the genuine emotional devastation apparent in those cases (corroborated by family members and medical professionals) and Leavey's modest, selfdescribed distress and financial anxiety confirms that the award here is inordinately excessive. Finally, Leavey's reliance on Ceimo v. General American Life Insurance Company, 2003 U.S. Dist. Lexis 26699, at *2-*3 (D. Ariz. Sept. 16, 2003) is unavailing. First, Ceimo's theory was that the defendants' failure to pay her benefits caused her to be unable to get the treatment she needed in order to salvage her practice and that the emotional distress from the loss of her practice equated to the value of her policy ($5.47 million). See Appellee's Answering Brief, Ceimo v. Gen. Am. Life Ins. Co., 2004 WL 2466205, at 22-24, 82-84 (9th Cir. 2004). Nothing equivalent to that happened here.
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Second, one or two outlier awards in the history of American jurisprudence (see also Ricci v. Key Bancshares of Me., Inc., 662 F. Supp. 1132, 1140 (D. Me. 1987)) do not automatically insulate every otherwise-outrageous award from challenge. Creating such a one-way ratchet would set a dangerous precedent. See, e.g., Consorti v. Armstrong World Indus., Inc., 72 F.3d 1003, 1010 (2d Cir. 1995), vacated and remanded on other grounds sub nom., Consorti v. Owens-Corning Fiberglas Corp., 518 U.S. 1031 (1996).7 If the inquiry is opened up to unpublished decisions, the better comparison is McKendry v. General American Life Insurance Co., No. CIV 96-0754 PHX PGR (D. Ariz. Mar. 31, 2000) (attached as Ex. 1). There, Judge Rosenblatt held that a $200,000 award for stress and anger caused by the denial of disability benefits was "outrageous." Slip op. at 8. B. The $15 Million Punitive Award Is Unsustainably Excessive. 1. The Punitive Award Is Grossly Excessive And Therefore Violates Defendants' Due-Process Rights.

Leavey has been awarded his full benefits for life ($809,028). If he returns to dentistry next year, or in ten years, the remaining portion of that award is pure windfall. He also has been awarded an astonishing $4,000,000 for emotional distress. Considering that this is five times what Leavey asked for, this award is patently punitive. From the defendants' point-of-view, these awards (even if the emotional distress award is substantially reduced) have a strongly punitive effect. Nevertheless, Leavey complains that reducing his punitive award to a "mere" 1:1 multiple of his sizable compensatory damages would "effectively eliminate the punitive and deterrent effect the jury intended to achieve." Resp. 15. There is no support for Leavey's claim that an award of "only" approximately $1,000,000 would be inadequate to punish the defendants. More importantly, regardless of the jury's intent, a punitive award must be
7

Leavey's other cases are unhelpful either because they have been vacated (Hunio v. Tishman Constr. Corp., 18 Cal. Rptr. 2d 253 (Cal. Ct. App.) vacated by 34 Cal. Rptr. 2d 557 (Cal. 1994)) or because they provide no information about the extent of the plaintiff's injuries and thus no basis for comparison with Leavey's award (Prozeralik v. Capital Cities Commc'ns, Inc., 635 N.Y.S.2d 913, 915 (App. Div. 1995); Weathers v. American Family Mut. Ins. Co., 793 F. Supp. 1002, 1012 (D. Kan. 1992)).
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reduced if it does not comply with due process, and "[w]hen compensatory damages are substantial, then a lesser ratio, perhaps only equal to compensatory damages, can reach the outermost limit of the due process guarantee." Bains LLC v. Arco Prods. Co., 405 F.3d 764, 776 (9th Cir. 2005) (quoting State Farm v. Campbell, 538 U.S. 408, 410 (2003)). That holding should guide the Court here, should it allow the punitive award to stand at all. a. Reprehensibility.

Leavey incorrectly states that, when conducting its excessiveness review, the Court "is bound by the jury's findings of fact" (Resp. 16) and then assumes (repeatedly) that the evidence must be "viewed in Dr. Leavey's favor." (Resp. 16-17) The jury made no findings of fact with respect to the punitive award; it simply found the defendants liable for punitive damages. See Verdict. Had Leavey asked for and obtained specific findings, those findings would be entitled to deference. See Cooper Indus., Inc. v. Leatherman Tool Group, Inc., 532 U.S. 424, 439 n.12 (2001). But because there were no specific findings, there is nothing to which the Court may defer and hence no occasion for viewing the evidence in the light most favorable to Leavey. See Simon v. San Paolo U.S. Holding Co., 113 P.3d 63, 70, 72 (Cal. 2005) (when the jury has made "no . . . express finding" on a particular issue bearing on the BMW guideposts, "to infer one from the size of the award would be inconsistent with de novo review, for the award's size would thereby indirectly justify itself"; instead, the court "must independently decide" whether the fact has been proved). Even if the evidence is viewed in the light most favorable to Leavey, the defendants' conduct ­ sending Leavey a letter improperly denying his benefits and then reinstating his benefits before he missed a payment ­ falls on the far low end of the reprehensibility spectrum. Leavey has not shown that the defendants' conduct demonstrated "the high degree of culpability that warrants a substantial punitive damages award" (BMW of N. Am., Inc. v. Gore, 517 U.S. 559, 580 (1996)), let alone an award higher than the 1:1 ratio that, according to Bains, "can reach the outermost limit of the
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due process guarantee" in cases such as this. 405 F.3d at 776. Whether the harm was physical as opposed to economic. Leavey says that this factor applies because there was "evidence of severe physical and emotional harms." Resp. 17. As shown above (at 6-7), the only harms Leavey proved were distress upon receiving the December 4 letter and his financial anxiety over the next few months. The Supreme Court has said that this is not what it had in mind when it placed conduct that causes bodily injury higher on the reprehensibility spectrum than conduct in the economic realm. See State Farm, 538 U.S. at 426 (stating, in an insurance bad-faith case, that "[t]he harm arose from a transaction in the economic realm, not from some physical assault or trauma"); see also Bach v. First Union Nat'l Bank, 2005 WL 2009272, at *9 (6th Cir. Aug. 22, 2005) ("[a]lthough Bach attempts to argue that the harm caused in this case was both physical and economic because of the resulting emotional distress, this is not the sort of physical injury the State Farm case contemplates, and thus, the first factor is not present"). State Farm is dispositive on this point. Whether defendants evinced an indifference to or a reckless disregard of health or safety. Leavey claims that the defendants were indifferent to the risk that their letter could cause him to relapse or commit suicide. Resp. 17. Even if a jury reasonably could find that it was improper to send the letter which we dispute, the letter inarguably was an attempt to get Leavey to follow proper treatment protocols, such as those recommended by his doctors, the purpose of which was to reduce his risk of relapse. Far from being indifferent to Leavey's risk of relapse, the defendants were actively trying to eliminate that risk so that Leavey could return to work.8 Whether the target of the conduct was financially vulnerable. The defendants have acknowledged that Leavey was financially vulnerable. But contrary to Leavey's response (at 17), the defendants do not concede that this reprehensibility factor applies. This factor does not ask whether the plaintiff happened to be financially vulnerable, but
8

As detailed in the opening Memorandum (p. 6), there is no evidence in the record that Leavey was ever actually suicidal. At best, the evidence shows that Leavey had passive thoughts of death at times. Physicians consider these feelings relatively common and do not equate them with a risk of suicide. Tr. 1598, 1722.
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whether the defendants targeted him because he was vulnerable. See, e.g., BMW, 517 U.S. at 576 ("when the target is financially vulnerable" the conduct "can warrant a substantial penalty") (emphasis added). There is no evidence that Leavey's financial condition played a role in the defendants' claim handling. Whether the conduct involved repeated actions or was an isolated incident. Leavey devotes only half of a sentence to this factor, conclusively stating that the "[d]efendants' conduct involved repeated actions." Resp. 17. He does not identify any evidence of "`specific instances of similar conduct by [the defendants] in relation to other parties.'" Bach, 2005 WL 2009272, at *10 (quoting Willow Inn, Inc. v. Public Serv. Mut. Ins. Co., 399 F.3d 224, 232 (3d Cir. 2005)). This reprehensibility factor is thus absent. Whether the harm was the result of intentional malice, trickery, or deceit. Leavey says the defendants "tried to deceive" him in an effort to wrongfully deny him benefits. Resp. 17. The defendants' goal was to motivate Leavey to obtain appropriate treatment so that he might return to work and thus no longer need, or qualify for, disability benefits. That outcome would have benefited both Leavey and the defendants. At trial, Leavey's theory was that the December 4 letter explicitly closed his claim. So at most, it might be said that the defendants were overly aggressive in their effort to achieve their goal. But there is no evidence that the defendants were deceitful or malicious. In sum, the defendants' conduct, if it deserves punishment at all, clearly is on the low end of the reprehensibility spectrum. Moreover, Leavey does not dispute that the defendants' "[r]eprehensibility should be discounted" because they "act[ed] promptly and comprehensively to ameliorate any harm they cause[ed]" (In re Exxon Valdez, 270 F.3d 1215, 1242-43 (9th Cir. 2001)) by reinstituting monthly payments before he missed even a single month of benefits. Finally, Leavey makes no effort to rationalize the obvious injustice of imposing $15,000,000 for the defendants' alleged over-aggressive attempts to motivate him to seek medical care, when due process allows only $450,000 for unprovoked racial harassment (Bains LLC v. Arco Products Co., 405 F.3d 764 (9th Cir.
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2005)) and a total of only $4,700,000 for multiple death threats by multiple defendants (Planned Parenthood of the Columbia/Willamette Inc. v. Am. Coal. of Life Activists, 422 F.3d 949 (9th Cir. 2005)). b. Ratio.

Leavey says we have "ignore[d] the Ninth Circuit's post-State Farm framework" by arguing that due process permits only a 1:1 ratio in this case. Resp. 19. But in Bains, the Ninth Circuit recognized that "State Farm emphasizes and supplements the BMW limitation by holding that `[w]hen compensatory damages are substantial, then a lesser ratio, perhaps only equal to compensatory damages, can reach the outermost limit of the due process guarantee.'" 405 F.3d at 776 (quoting State Farm, 538 U.S. at 425). And in Planned Parenthood, the Ninth Circuit cited State Farm for the proposition that "acts of bad faith and fraud warranted something closer to a 1 to 1 ratio." 422 F.3d at 962. Leavey also argues that this Court should not apply a 1:1 ratio because "the Ninth Circuit specifically rejected that exact argument in Hangarter." Resp. 19. The Hangarter court upheld a 2.6:1 ratio, rather than reducing the ratio to 1:1, in large part because "Hangarter's damages for emotional distress were only one third of her pecuniary damages, suggesting that State Farm's concern over a duplicative award is not as strongly present here." 373 F.3d at 1014 n.11. Leavey's damages for emotional distress are almost five times his "pecuniary damages." Thus "State Farm's concern over a duplicative award" strongly militates in favor of a 1:1 ratio here. c. Legislatively established penalties for comparable conduct.

The maximum civil penalty is $5,000. See Ariz. Rev. Stat. § 20-456(B). So Leavey asserts that Arizona's Director of Insurance could have revoked the defendants' licenses, "costing Defendants hundreds of millions of dollars." Resp. 20. He makes this assertion without citing a single instance in which the Director has revoked a license over the handling of a claim. And he overlooks the fact that this precise argument was made and rejected in State Farm. See 538 U.S. at 428 (holding that relevant comparison was with $10,000 fine for violation of Utah's Unfair Claims Practices Act and that Utah
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Supreme Court's "speculat[ion] about the loss of State Farm's business license" "was insufficient to justify the award"). Leavey gets no further in contending that Hawkins v. Allstate Insurance Company, 733 P.2d 1073 (Ariz. 1987), gave the defendants fair notice that "their ill-gotten gains may be disgorged for bad faith conduct." Resp. 20. For one thing, Hawkins pre-dated State Farm, which held in no uncertain terms that it is improper to use an individual case to punish a defendant for injuries to non-parties. See 538 U.S. at 423 ("Punishment on these bases creates the possibility of multiple punitive damages awards for the same conduct; for in the usual case nonparties are not bound by the judgment some other plaintiff obtains."). In other words, under State Farm, an individual policyholder may "disgorge" only those "ill-gotten gains" resulting from the handling of his or her claim. Here, because Leavey's benefits were never discontinued, there were no ill-gotten gains to "disgorge." In any event, Hawkins involved a uniform $35 deduction from claim payments made to thousands of Arizona insureds. Here, there is no evidence of any similarly uniform practice resulting in a uniform injury. 2. The Defendants Have Been Punished Multiple Times For The Same Alleged Conduct In Violation Of The Due Process Clause.

Leavey now claims that the punitive award punishes the defendants only for "what [the defendants] did to Dr. Leavey." Resp. 21. But he does not deny telling the jury (falsely) that it was the first jury to hear all of the "bad company" evidence, thus implying that it had a unique responsibility to account for all of the insureds whose claims supposedly have been wrongly denied over the years. It is clear from the enormous size of the award that that is exactly what the jury did. Leavey mischaracterizes our argument as requesting a new trial based on the jury instructions. Resp. 21-22. Our argument is that the Court should order a new trial because the defendants have been required to pay "multiple punitive damages awards for the same conduct" in violation of the due process clause (State Farm, 538 U.S. at 423) not because of any flaws in the jury instructions. Leavey does not deny that several other plaintiffs have obtained substantial punitive awards that were intended to punish the
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defendants for the same "bad company" evidence he presented ­ and that were motivated by the same argument about the jury's unique role as the first jury to hear the evidence. Mem. 21. A punitive award that violates due process cannot stand, regardless of whether the defendants objected to the arguments and instructions leading up to it. See, e.g., Whitehead v. Food Max of Miss., Inc., 163 F.3d 265, 276 (5th Cir. 1998). C. The Jury's Verdict Was The Product Of Passion And Prejudice.

Leavey does not deny that, if the verdict was infected with passion and prejudice, the appropriate remedy is a new trial. The outrageous size of the emotional distress award ­ especially considering that it is five times more than Leavey asked the jury to award ­ is sufficient evidence of passion and prejudice. And the outrage that Leavey tried to incite in his closing remarks is obvious from the transcript. Tr. 2005-2044. Leavey contends that, because the Court determined that his "bad company" evidence was admissible, that evidence cannot be a source of passion and prejudice. Resp. 25. The law is to the contrary. See, e.g., Jeanneret v. Vichey, 693 F.2d 259, 265 (2d Cir. 1982). Here, Leavey used the "bad company" evidence to incite the jury to return a verdict that reflected passion and prejudice rather than an impartial analysis of the defendants' claim handling. Accordingly, a new trial is required. D. The Court Should Grant A New Trial In The Interests Of Justice.

Without any legal support, Leavey says that granting a new trial in the interests of justice would be "clear error." Resp. 26. But this Court undisputedly "ha[s] the right, and indeed the duty" to prevent what is "in the sound discretion of the trial judge, a miscarriage of justice." Murphy v. City of Long Beach, 914 F.2d 183, 187 (9th Cir. 1990). That remedy is appropriate here even if the Court finds that the arguments raised by the defendants do not individually warrant a new trial.

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DATED this 3rd day of February, 2006. LEWIS AND ROCA LLP

s/Stephen M. Bressler Stephen M. Bressler Ann-Martha Andrews Scott Bennett Attorneys for Defendants Provident Life and Accident Insurance Company and UnumProvident Corporation

By

CERTIFICATE OF SERVICE I hereby certify that on February 3, 2006, I electronically transmitted the attached document to the Clerk's Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to the following CM/ECF registrants: Steven C. Dawson Anita Rosenthal Dawson & Rosenthal 6586 Highway 179 Suite B-2 Sedona, Arizona 86351 Attorneys for Plaintiff Gregg H. Temple Gregg H. Temple, P.C. 4835 East Cactus Road Suite 225 Phoenix, Arizona 85254-4196 Attorneys for Plaintiff Thomas L. Hudson Danielle D. Janitch Osborn Maledon, P.A. 2929 North Central Avenue Suite 2100 Phoenix, Arizona 85012-2794 Attorneys for Plaintiff

s/Roxann Draper 25 26 27 28
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