A San Diego Superior Court judge on Tuesday reduced the record $130.9 million in damages awarded last month by a jury to a Rancho Santa Fe couple who were allegedly defrauded by Southmark Corp. of Dallas.
San Diego County Superior Court Judge Richard D. Huffman reduced the award to about $23 million after approving Southmark’s motion for a new trial. The initial award, which followed a two-month trial, was believed to be the largest ever in a San Diego County civil trial.
The couple, John and Lynne Riddle, now have until Nov. 1 to either accept the reduced sum or enter into another trial according to Huffman’s ruling, their attorney Brian Monaghan said. Even if the Riddles accept the reduced award, however, Southmark may still appeal the original verdict, he said.
In a prepared statement, Southmark Chairman Gene E. Phillips said Southmark is considering an appeal of the reduced sum if the Riddles accept it. “While we are gratified that the judge reduced the jury’s original award, we continue to consider the judgment excessive,” Phillips said.
In a lawsuit filed in 1984, the Riddles accused Southmark and two subsidiaries of fraud, breach of contract, intentional infliction of emotional distress and interference with business relationships. The charges stemmed from Southmark’s August, 1983, purchase of the Riddles’ Exchange Network, a resort time-share exchange agency.
Terms of Southmark’s purchase called for the Riddles to receive $2 million, most of it paid out of the Exchange Network’s profits. But Southmark subsequently used Exchange Network as a “septic tank” for bad debts, reducing the agency’s profit and the Riddles’ “earn-out.” As a result, they received only $290,000 for their company.
Six months after selling the company, James Riddle was fired as the company’s chief executive despite having received a 5-year employment contract, Monaghan said.
In September, the Riddles received $85 million in punitive damages and $45.9 million in compensatory damages. On Tuesday, Huffman reduced the punitive damages to $17 million and compensatory damages to $1.5 million, among other reductions. The couple also received more than $1.5 million in interest costs and attorneys’ fees.
Southmark is a publicly held investment company that specializes in annuities, investor syndications and real estate management. For the 9-month period ended March 31, the company reported a loss of $15.9 million on revenue of $618.7 million. Southmark stock closed down $.125 a share at $2.75 in New York Stock Exchange trading Tuesday.