Ex-Arizona utility regulator off the hook after court ruling - East Valley Tribune: Arizona

Ex-Arizona utility regulator off the hook after court ruling

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Posted: Friday, October 21, 2011 5:26 pm

Former state utility regulator Jim Irvin is apparently off the financial hook for the multimillion-dollar judgment against him.

Without comment, the Arizona Supreme Court upheld a lower court ruling that concluded Irvin was entitled to coverage from Lexington Insurance Co., a private firm that had a contract with the state to protect public officials.

The ruling also means that Lexington needs to pay not only the judgment against Irvin and his legal fees his appeal of that case, but also what he had to pay lawyers to fight Lexington as well as more than $500,000 he said he had to pay in capital gains taxes when, faced with no coverage from Lexington, he had to post an appellate bond.

Attorney Paul Ulrich, who represented Lexington, said the high court ruling ends the legal fight, as there are no grounds to take the issue into federal court.

It also ends a chapter in Arizona politics that dates back more than a decade to 1999, when Southern Union Co. attempted to purchase Southwest Gas. But the Southwest board accepted a bid for the company from Tulsa-based Oneok, even though that bid was for $100 million less.

That deal never went through. But Southern Union alleged — and federal court jurors agreed — that Irvin used his position to undermine its bid, imposing nearly $400,000 in compensatory damages and $60 million in a punitive award.

A federal appeals court eventually slashed the punitive damages to less than $1.2 million.

Irvin appealed the ruling.

In 2003, while Irvin was appealing the original decision, then-Gov. Janet Napolitano directed the state to stop paying his legal fees. She concluded that whatever Irvin did was outside the ``course and scope’’ of his employment, making him ineligible for state-provided coverage.

At that time, Arizona was self-insured for the first $4 million of any claim.

There was a separate ``umbrella’’ policy with Lexington for any costs in excess of that. Lexington officials subsequently reached the same conclusion as Napolitano and also refused to pay for the award, which had not yet been reduced, or his legal fees.

The state subsequently agreed to settle with Irvin, paying him $150,000. That left only Lexington.

A jury ruled against the insurance company, awarding Irvin not only the cost of the compensatory and punitive damages he had to pay to Southwest Gas but also more than $1.2 million in legal fees for both that case and this plus another $537,511 for his costs in paying those capital gains taxes.

Ulrich, representing Lexington, said his client had no requirement to provide coverage. He said what Irvin was doing in interfering in the bid for Southwest Gas was not part of his duties as a utility regulator.

But Judge Philip Hall, writing the opinion for the Court of Appeals that the Supreme Court just upheld, said the jurors had sufficient evidence to the contrary.

``Irvin undertook his investigation, meetings, and communications concerning the merger not in a personal capacity, but rather in his capacity as (Corporation) Commission chair conducting its business,’’ Hall wrote. In fact, the judge said, Irvin could only have done anything in regard to the proposed merger as a utility regulator.

And Hall said it is legally irrelevant that the federal court jury — the one that imposed that $60 million punitive award — apparently concluded he was acting beyond his legal authority as chairman of the commission.

The court also rejected arguments that the Lexington policy covered only accidents and not things done intentionally. Hall pointed out that the policy covered misfeasance and malfeasance, both of which are intentional acts.

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