W. Steve Seltzer v. Steve Morton, et al., 154 P.3d 561 (Mt. Sup. Ct. 2007)

Brief Summary
Despite having very strong, credible grounds to believe that the signature of Charles M. Russell on a painting he owned was a forgery, Steve Morton and the international law firm that represented him filed suit against W. Steve Seltzer, an art authenticator, because Mr. Seltzer refused to recant his professional opinion that the painting was not an authentic painting by Russell. After the underlying case was dismissed for lack of expert support for Mr. Morton’s position, and an acknowledgement by Mr. Morton that he could not prevail, and in the wake of discovery abuses by Mr. Morton’s law firm’s withholding of key evidence, Mr. Seltzer sued Mr. Morton and his law firm for malicious prosecution. On appeal, the Montana Supreme Court upheld the trial court judgment for $1.1 million in compensatory damages and $9.9 million in punitive damages against the firm.

Complete Summary
Charles M. Russell was a noted Western artist. His friend and protégé, O.C. Seltzer, was a Western artist whose work was valued and recognized, although to a lesser extent than that of C.M. Russell. Steve Morton (“Mr. Morton”) purchased a painting called “Lassoing a Longhorn” for $38,000 from the Kennedy Galleries in 1972. The painting bore the signature of Russell. Before placing the painting for auction in 1998, Mr. Morton contacted Steve Seltzer (“Mr. Seltzer”), a Montana artist and professional art authenticator, recognized as an expert in the works of both his grandfather O.C. Seltzer as well as C.M. Russell. Id. at 571. Mr. Seltzer expressed the opinion that the painting was not a genuine Russell, but rather he recognized even from a photo of the painting that it was actually the work of his grandfather, O.C. Seltzer. In Mr. Seltzer’s report to the gallery, he provided multiple detailed bases for his opinion. The gallery then contacted Ginger Renner, also a renowned expert on the works of O.C. Seltzer. She agreed that the painting was actually done by O.C. Seltzer and not Russell and the signature had been altered.

In January 2001, the auctioneer advised Mr. Morton it would not handle the sale of the painting because it did not appear to be an authentic Russell. Id. at 573. Mr. Morton subsequently called Mr. Seltzer to discuss his opinion, and Mr. Seltzer further explained his findings and offered to be of any further help required. Mr. Morton then took the painting to Ginger Renner for examination. She stated it was “unquestionably” the work of O.C. Seltzer. Mr. Morton wrote Ms. Renner a letter thanking her for her efforts and expressed his “state of shock” on learning her opinion. He also requested a letter from her formalizing her opinion, which she provided. Id. at 573. In March 2001, Mr. Morton’s prior attorney sent a letter to the Kennedy Galleries stating that the Mortons were shocked to learn the painting was not a work by Russell and stating that they intended to hold the Gallery responsible. Id. at 574.

Mr. Morton then approached Dennis Gladwell who was “of counsel” with Gibson, Dunn & Crutcher, LLP, a large international law firm, to represent him regarding the painting. Mr. Gladwell sent a letter to Ms. Renner and Mr. Seltzer in April 2002 demanding that they provide a written recanting of their prior opinions and agree to compensate Mr. Morton for the cloud on the authenticity of the painting, as well as $50,000 in damages for expense, embarrassment and anxiety over their actions. Id. at 576. When Mr. Seltzer refused to respond to the demand, suit was filed against him in July 2002. The complaint contained a number of allegations based on defamation regarding the authenticity of the painting. Punitive damages were requested. During the suit, however, discovery sanctions were ordered against Gibson, Dunn for failing to produce the non-privileged letter from Ms. Renner that paralleled the opinions of Mr. Seltzer, as well as the letters expressing “shock” that the painting was not an authentic Russell.

When it became clear that Mr. Morton could not produce an expert who would verify the authenticity of the painting, the suit against Mr. Seltzer was dismissed in February 2003 by a stipulation of the parties, accompanied by an acknowledgement by Mr. Morton and Mr. Gladwell of Gibson, Dunn that they could not prevail on the merits. Id. at 587. At this point, Mr. Seltzer had incurred over $45,000 in fees.

Mr. Seltzer then filed suit against the Mortons, Mr. Gladwell, Gibson, Dunn and two of its associates alleging malicious prosecution and abuse of process. The jury found in favor of Mr. Seltzer and awarded $1.1 million in compensatory damages, and punitive damages of $100,000 against Mr. Morton; $150,000 against Mr. Gladwell; and $20 million against Gibson, Dunn. The trial court reviewed the punitive damages award and reduced it to $9.9 million to ensure that the size of the verdict comported with due process. The Montana Supreme Court affirmed.

The court rejected the defendants’ argument that Mr. Seltzer did not properly establish abuse of process. The court noted “essential to proof of abuse of process is 1) an ulterior purpose and 2) a willful act in the use of the process not proper in the regular conduct of the proceeding.” Brault v. Smith, 679 P.2d 236, 240 (Mt. 1984). Mr. Seltzer based his claim not only on the filing of the suit, but the ulterior purpose the suit served--to get Mr. Seltzer to recant his opinion so that Mr. Morton could sell the painting at a much higher price as a work by Russell. Seltzer at 580. The court stated that “Gibson, Dunn literally demanded that Mr. Seltzer lie, under oath, about his true conviction by drafting a ‘letter to our specifications completely recanting and withdrawing’ his statements under penalty of perjury. Further, this demand was made under threat of an immediate lawsuit in which Gibson, Dunn stated it would seek punitive damages.” In addition, the defendants knew there was significant credible evidence to cast doubt on the authenticity of the painting. Id. at 584.

In reviewing the appropriateness of the punitive damage award, the court reviewed the requirement under the Montana statute governing the award of punitive damages (§27-1-2221(7)(c) MCA) and the Supreme Court’s due process standards. The court stated that reprehensibility was the most important factor as to the reasonableness of the punitive damages here. The court concluded that the district court’s detailed post-verdict findings provided clear and convincing evidence that the defendants knew that “1) a reasonable and legitimate question existed as to the authenticity of the subject painting; 2) it was highly probable that Mr. Seltzer was correct in his opinion that the subject painting was not an authentic work of C.M. Russell;” and that Mr. Seltzer had not acted wrongfully in any respect. Id at 605-06. Matters were made even worse because of the abuse of discovery by Gibson, Dunn in failing to turn over the non-privileged correspondence that concealed key evidence and damaging admissions by Mr. Morton.

The court concluded that “Gibson, Dunn’s conduct was highly reprehensible. This conduct evinced an indifference to and a reckless disregard of Mr. Seltzer’s financial, psychological and physical wellbeing, as well as his personal and professional reputation. None of the conduct at issue was accidental; Gibson, Dunn acted with actual malice…” Id. at 607. The court further stated that “the fact that Gibson, Dunn utilized the judicial system as a tool to accomplish intimidation and oppression makes this behavior uniquely egregious.” Id. at 608. The court noted the essence of the judicial system was the resolution of legitimate disputes, not merely disputes. “Baseless lawsuits prosecuted in furtherance of ulterior motives have no place in our courts.” Id. at 609. Gibson, Dunn’s conduct was described as “legal thuggery.”

Significance of Case
The significance of this case is not so much in the law as in the underlying messages to be gleaned from the ultimate results. Firms need to be vigilant about bending to the sometimes unreasonable or unsupportable wishes of powerful clients. The work of “of counsel” attorneys can produce liability for the firm just the same as the work of partners or associate attorneys. Discovery abuses can lead not only to sanctions in the underlying case but may support independent actions for damages or punitive damages in future cases against a law firm. And courts can be expected to maintain a pretty high degree of sanctimony about the purity of the legal system and can treat abusive or oppressive lawsuits and litigation as “highly reprehensible” when considering just how far due process will permit an award of punitive damages to stretch, here to the general maximum single-digit ratio of 9:1 compared to the award of compensatory damages.

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