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Here, we have a situation in which the jury award, which was not
reversed by the court because of its amount, but rather because of an improper
jury instruction as to burden of proof, gave five times as much in punitive
damages to petitioner as in compensatory damages, and an award of two and one-
half times as much in punitive as compensatory damages that would be
reinstated on the claim for tortious interference with future employment if
the libel case of petitioner were unsuccessful. Also, there existed the
possibility that an additional $1.5 million of punitive damages might be
reinstated on the invasion of privacy claim. Based on these facts, we
conclude that some of the $1.5 million is properly allocable to punitive
damages. However, we do not agree with the amount respondent allocated. The
parties were negotiating for an amount in lieu of the overall amount
petitioner might recover if the case went to trial. They were considering the
risk of trial, as well as items unrelated to the money that petitioner might
recover, such as the return of the Bagley documents and the confidentiality of
the settlement. All of these factors were important to IBP. Also, it is
clear that there would have been, in any event, a $350,000 payment to
petitioner for the tortious interference with future employment award, of
which $250,000 were punitive damages if petitioner was unsuccessful in the
libel suit. Probably there would have been interest on that award. However,
clearly IBP did not want to acknowledge a payment of punitive damages. Under
these circumstances, it is reasonable to assume that IBP would have paid in
settlement to petitioner the entire $1 million that the jury had found he was
due as compensatory damages. However, in our view, the remaining $500,000 was
in settlement of possible punitive damages petitioner might have recovered.
We, therefore, hold that of the $1.5 million settlement amount, $1 million was
for compensatory damages and $500,000 was for punitive damages.
Petitioner argues that the amounts received by petitioner as punitive
damages, which we have found total $1 million, are properly excludable from
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