"Abusive conduct toward an individual which causes the type of harm at issue here merits considerable punishment regardless of the setting in which it takes place," the Supreme Court said. "However, the fact that [the firm] utilized the judicial system as a tool to accomplish intimidation and oppression makes this behavior uniquely egregious."
The expert, W. Steve Seltzer, is a professional art valuation expert and authenticator of Western American artwork. In late 2000, an art auction house retained him to render his opinion on the authenticity of a watercolor painting owned by Steve Morton.
Morton’s painting, Lassoing a Longhorn, bore a signature indicating that it was the work of noted Western artist Charles M. Russell. Seltzer, however, concluded the painting was actually the work of his grandfather, Olaf Carl Seltzer, also a well-known Western artist.
Russell and O.C. Seltzer were contemporaries and friends in Montana in the late 1890s. O.C. Seltzer was a protégé of Russell and both painted similar types of cowboy scenes. Over time, however, Russell's paintings had come to be more highly valued than those of O.C. Seltzer.
When Morton contacted the auction house about selling the painting, he was told it would likely "fetch a record price" and that its value could be $650,000. A partner in the auction house, however, suspected the painting was not by Russell but by O.C. Seltzer. He brought in the expert Seltzer to give his opinion.
Seltzer, who the court described as the world's foremost expert on the works of O.C. Seltzer and also an expert on the works of Russell, immediately concluded that the work was clearly not Russell's but was, in fact, painted by O.C. Seltzer.
In light of Seltzer's opinion, the auction house consulted with a second expert, the premier authority on the works of Russell and also an authority on O.C. Seltzer. Her opinion confirmed Seltzer's that the painting was plainly the work of O.C. Seltzer.
With these expert opinions in hand, the auction house notified Morton it could not sell the painting as an authentic Russell.
Threats, Then Litigation
Morton responded by hiring Dennis A. Gladwell. In April 2002, Gladwell sent Seltzer a letter demanding that he recant his opinion about the authenticity of the painting. The letter further demanded that Seltzer agree to compensate Morton for the painting's loss in value due to Seltzer's "defamatory remarks" and pay him an additional $50,000 for his "time, expense, embarrassment, grief and anxiety."
"We expect immediate cooperation," Gladwell wrote, "or litigation will be filed without any further discussion. And, given the opportunity afforded you to rectify this wrong, and your refusal to do so, punitive damages will be requested."
When Seltzer did not respond to that letter or to a second one a month later, Gladwell filed a lawsuit against him in Montana federal court. The suit, filed in the names of Morton and his brother Frank, alleged defamation, intentional interference with business relations and other grounds. It sought damages and injunctive and declaratory relief.
Seltzer moved for summary judgment, submitting the affidavits of 10 art experts that the painting was not an authentic Russell. Morton, with no expert witness who could testify to the contrary, acknowledged that he could not prevail in the case. Seven months after filing the complaint, Morton agreed to dismiss it with prejudice.
Seltzer then filed his own suit against the Mortons alleging malicious prosecution and abuse of process. In the course of discovery, it was learned that Frank Morton had never authorized adding his name to the original lawsuit against Seltzer, so he was dismissed. Discovery also revealed that Morton's lawyers had withheld key documents from discovery in the first lawsuit, ones which tended to show Morton's acceptance that the painting was not by Russell.
At trial, the jury found in favor of Seltzer, awarding $1.1 million in compensatory damages and punitive damages in the amount of $100,000 against Morton, $150,000 against Gladwell, and $20 million against his law firm. The trial court reduced the punitive damages award to $9.9 million. Both sides appealed.
'Instrument of Coercion'
On these facts, the Montana Supreme Court had little difficulty concluding that Morton and his lawyers had abused the legal process in bringing their lawsuit against Seltzer. The defendants used the suit, the court said, "as an instrument of coercion, rather than a legitimate means to resolve a genuine dispute." On top of that, the court said, the defendants further abused the legal process by intentionally withholding relevant documents during discovery.
The court also affirmed the awards of compensatory and punitive damages in the case. Regarding the compensatory damage award of $1.1 million, the court rejected defendants' assertion that the award was solely for emotional distress or was intended as punishment. "Seltzer not only presented evidence of emotional distress resulting from Defendants' acts," the court noted, "he also presented evidence that his personal and professional reputation was harmed and that he incurred substantial expense in defending himself."
As to the award of punitive damages, the Supreme Court concluded that the defendants' conduct was "highly reprehensible," explaining, "This conduct evinced an indifference to and a reckless disregard of Seltzer’s financial, psychological and physical well-being, as well as his personal and professional reputation."
The decision is Seltzer v. Morton, 2007 MT 62 (March 12, 2007).