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There are no guarantees when you file a lawsuit. SunCor Development Co. of Phoenix knew there were risks as its trial date approached in February. Yet the company’s management felt good about its chances. SunCor had hired an experienced and successful trial attorney. It had a letter of agreement that it believed would prove the car dealership that it was suing had reneged on its promises. Based on the advice he was receiving, Steve Gervais, the company’s general counsel, says, “We felt confident in our case. This should have been a two-day jury trial at most.” It didn’t work out that way. Gervais’ two-day trial ballooned to three weeks. The company’s key witnesses were not well received by the jury. And on March 15, when the seven-person jury rendered its verdict in SunCor Development Co. v. Bergstrom Corp., No. CV 98-11473, Gervais says he felt “total shock.” It wasn’t just that SunCor lost. It was the way it lost. The jury dismissed SunCor’s claim and then, after considering the counterclaim filed by the car dealership, turned around and awarded the dealership $28.6 million, including a whopping $25.8 million in punitive damages. The kicker, according to Michael Manning, the car dealership’s attorney, is that SunCor could have settled in midtrial, when cracks in its case had already appeared, for $4 million, including legal fees. Instead, it never budged from its own demand of $1 million, says Manning of Phoenix’s Morrison & Hecker. Gervais would not comment on settlement negotiations or the trial, other than to say he strongly disagrees with the verdict. Likewise, Daryl M. Williams of Phoenix’s Baird, Williams & Greer, who was SunCor’s lead lawyer, declines to discuss the case as the company prepares a motion to set aside the verdict and, should it fail, an appeal. But the picture that emerges from interviews with several participants, including two jurors, is of a company that was used to having its way and was under pressure to increase revenues. When told of Manning’s settlement offer, the Rev. Steve Johnson, the jury foreman, says that, based on “the arrogance” of SunCor’s executives and the way they responded to questions in court, he’s not surprised SunCor refused. Of the case SunCor presented at trial, Johnson says, “They did in no way present a case I could believe.” What continues to puzzle Manning is why the company sued in the first place. “Why bring this lawsuit when you know you don’t just have smoking guns in your credenza, you’ve got smoking howitzers?” he asks. THE UNDERLYING FACTS The dispute began in 1996, when John Bergstrom, a 54-year-old businessman who owns 20 car dealerships in his native Wisconsin, decided to open a used-car facility in Tempe, Ariz., where SunCor was planning to build a used-car mall. The idea behind this open-air “autoplex” was to provide one-stop shopping for buyers, who would motor through a quiet loop far from the tailgating hordes. It sounded good to Bergstrom, and in December 1996, he paid $1.5 million for the first three lots, which he incorporated as a subsidiary of Driver’s Mart, a national chain of used-car megastores. Problems for the fatally troubled autoplex began soon afterward. As early as January 1997, SunCor, a subsidiary of the publicly traded Pinnacle West Capital Corp., advised Bergstrom that some lots might be sold to businesses other than used-car dealers. In court last month, SunCor asserted that it had always held open this possibility, but when Bergstrom protested that such a sale would destroy the concept, SunCor agreed to compensate him for damage his business might suffer. Bergstrom and John Ogden, SunCor’s president and CEO, signed a letter of agreement in May 1997. Bergstrom agreed not to contest the sale of 22 acres for an office complex, and he promised to advertise the car mall. In exchange, SunCor would pay Bergstrom $1 million in two installments. Although SunCor tried to add a general release to the agreement, Bergstrom refused to accept one. SunCor paid the first $500,000 without incident. But when the second installment was nearly due, SunCor complained that Bergstrom had reneged on his promise to advertise. Bergstrom, however, was protected by the agreement, which said that if SunCor defaulted, it would pay far more in damages — an amount “equal to all costs Bergstrom shall have expended on Driver’s Mart of Arizona prior to the date of the default.” So after some grumbling, the developer paid the other $500,000. For SunCor, the final straw came three months later, when Bergstrom sold Driver’s Mart to another used-car superstore. SunCor sued, claiming Driver’s Mart had fraudulently induced it to sign the agreement only to breach it. SunCor sought the $1 million it had paid the auto dealer, additional lost revenues that Driver’s Mart would have generated and punitive damages. In its counterclaim, the dealership argued that it had been the one fraudulently induced to sign the agreement and that SunCor had, from the beginning, misrepresented its plans for the autoplex. On March 15, the jury took all of five minutes to dismiss SunCor’s claim. And after a mere 2-1/2 hours, the jurors bestowed on the car dealer everything that its lawyer had requested. THE JURY’S VIEW The question the jury was left to ponder echoes Manning’s: Why did SunCor sue in the first place? “They didn’t have much of a case,” says juror Elizabeth Rehm, a customer service rep at American Express. “They had nothing to back up what they said.” If SunCor had a problem, she says, the logical time to raise it was before the company paid the final installment under the letter of agreement. Yet in the end, the developer paid without registering a complaint. SunCor’s two main witnesses were Ogden and his vice president, Margaret Kirch. Kirch was particularly important because she was involved in every aspect of the project, jurors say. And she was the executive who had discussed selling to unrelated businesses while Bergstrom was sold one-stop shopping. Rehm remembers Kirch as an extremely competent businesswoman who sat at the plaintiff’s table and explained documents and charts to the lawyers. On cross-examination, however, she couldn’t recall documents and danced around questions. “Manning would ask her a question,” Rehm recounts, “and she would say, ‘You should know that, since we spent so many hours in depositions.’ ” Both jurors say the performance damaged her credibility and, ultimately, her company’s case. SunCor’s credibility problem was not limited to Kirch and was particularly damaging because the company argued that the agreement letter had been augmented by oral agreements. Yet, the jury’s misgivings about the testimony forced it to rely on documents. When in doubt, Rehm says, “we relied on what was written.” The jurors did not fault SunCor’s lawyer, Williams, for the problems he inherited. Johnson remembers thinking, “The guy’s doing the best job that he can with the case that he’s got.” On the other hand, although his partner played only a small role that the jurors say had no bearing on the verdict, jurors were not impressed with Robert Greer, who at times appeared to nod off, while at others played solitaire on his laptop during trial. “My appearing to nod off,” Greer responds, “was a reflection of the tedium of the evidence and the fact that I didn’t think it was important.” This also explained the solitaire, he says. A key witness for Bergstrom, and one whom the jurors found completely credible, was Bill Olson, the autoplex project manager, who no longer works for SunCor. Both jurors recounted a revealing moment when Manning handed him three sets of development guidelines for the autoplex site. The third set, which clearly surprised Olson, the jurors say, had car businesses and office buildings cohabiting on the same loop. “He did not have a clue what was going on behind the scenes,” Johnson says. Having worked on many church-related projects, the Rev. Johnson finds this “incredibly strange.” He can only infer that SunCor doubted the autoplex’s viability and was exploring alternatives. At the same time, he adds, the company had no intention of telling Bergstrom. Both jurors felt SunCor’s focus never strayed far from its bottom line. Ogden, the CEO, acknowledged as much in his testimony. “He was very frank about the fact that SunCor was looking out for SunCor’s interests,” Rehm recalls. The company had been coming off several lean years during which it bought land high “and needed to get rid of it.” SunCor needed cash flow — “that was his bottom line.” In Rehm’s view, Ogden’s testimony “sealed the case.” Neither Ogden, nor Kirch, nor any other SunCor executive would comment. When they finally got to the jury room, the jurors had no trouble dismissing SunCor’s claim, 7-0. One juror announced that he could not support Bergstrom’s claim either, but the other six were more than comfortable with it, resulting in a 6-1 verdict. The jurors were helped by the fact that the previous weekend they each had been allowed to take home a white vinyl binder containing the trial’s key exhibits. From that, Johnson put together a timeline that helped jurors sort out the facts. Jurors based the $28.6 million verdict on what Bergstrom had paid for the lots, the profits they calculated the company had lost and punitive damages of 8 percent of SunCor’s net worth. Why 8 percent? It was the amount that company executives testified they had “upstreamed” to the parent company in 1996. In his closing argument, Manning suggested that the jury balance the books by “downstreaming” to his client a comparable sum. “We didn’t want to bankrupt the company,” says Rehm. But they did want to make the developer “think twice before playing both sides against the middle.”

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