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Dejonghe v. Hutton9/24/1991
n v. Greenbank, 856 F.2d 1392, 1398 (9th Cir.1988). Accordingly, we conclude that scienter was not a requirement for recovery.
While admitting that actual damages can be recovered without a showing of scienter, defendants claim treble damages cannot because they are "punitive in nature." Wyatt v. Wehmueller, 167 Ariz. 281, 286, 806 P.2d 870, 875 (1991). Under Rawlings v. Apodaca, 151 Ariz. 149, 726 P.2d 565 (1986), such damages are appropriate only where there is an intent to injure or a conscious course of conduct with knowledge that it creates a significant risk of harm to others. We have been cited no cases imposing the rule on the court-created remedy of punitive damages to a legislatively created remedy of treble damages, which by its terms has no such requirement. A.R.S. § 13-2314(N) characterizes the civil remedy as "remedial and not punitive." We view this as akin to the antitrust remedy of treble damages, which is intended not only to compensate for losses and to deter from misconduct but also to encourage private litigants to supplement official enforcement of important criminal laws by providing an inducement for such action. See Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 89 S.Ct. 1562, 23 L.Ed.2d 129 (1969). This important public policy should not be undercut by engrafting on a legislative enactment court rules created for another purpose.
Even, however, if some level of scienter is required before damages may be trebled under A.R.S. § 13-2314(A), we believe that issue has not been preserved for appeal. The thrust of the argument below, now apparently abandoned, is that scienter is required even to recover actual damages. Moreover, the case was tried on the theory that the defendants engaged in their course of conduct without making clear to plaintiffs the risky nature of the new investments. From this evidence, a jury, if asked, could infer that defendants knew or were extraordinarily reckless in not knowing that their elderly clients did not realize the nature of the risks they were taking. That level of scienter would permit trebling. But that inquiry was not presented to the jury either by way of instruction or special interrogatory to be acted upon by the court for purposes of trebling actual damages. Defendants cannot seek a retrial on an issue that could have been but was not raised and resolved at trial.
NEGLIGENT SUPERVISION
Defendant E.F. Hutton argues that it should not be held liable on a theory of negligent supervision for the actions of its brokers. It maintains that a fatal absence of proof regarding the breach of its standard of care exists. Plaintiffs counter, and we agree, that the record amply shows that E.F. Hutton participated in its brokers'
acts because an E.F. Hutton supervisor approved (1) plaintiffs' accounts buying on margin and selling puts, (2) the acquisition of high-risk, non-dividend paying stock, (3) the disposal of conservative, high-yield investments, and (4) other transactions and arrangements resulting in depletion of plaintiffs' accounts. This evidence also supports a finding of racketeering. Expert testimony is not necessary when the "negligence is so grossly apparent that a lay person would have no difficulty recognizing it." Asphalt Engineers, Inc. v. Galusha, 160 Ariz. 134, 135-36, 770 P.2d 1180, 1181-82 (App.1989). Plaintiffs presented sufficient evidence to establish E.F. Hutton's negligent supervision of its brokers.
ADMISSION OF TESTIMONY FROM DR. DYL
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