Unpublished Disposition, 902 F.2d 1579 (9th Cir. 1990)

MEMORANDUM^** 

Dale Moore appeals the district court's denial of his request for a jury instruction regarding possible partnership or joint venture liability on claims brought under federal and state securities law and RICO.

Moore originally brought this action against a number of defendants, including Donald Yenko.¹  Moore's claims were brought under federal and state securities laws, RICO (Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C Secs. 1961-68), and for common law fraud, negligent misrepresentation, and various conspiracy claims. The claims arose from advances made by Moore to one-time co-defendant Oliver Pedersen in connection with a scheme to develop and market a carburetion device purportedly invented by co-defendant Joseph Plannerer. Yenko's connection arises from his signing two agreements with Pedersen, Plannerer and others to form a corporation at a future time which would purchase the rights to the device. Yenko filed cross-claims against both co-defendants Plannerer and Reif.

The Estate of Yenko ("Yenko") was the only defendant present at the trial. Moore had voluntarily dismissed two previous co-defendants; Pedersen had commenced bankruptcy proceedings; Reif and Plannerer, European residents, were not present.

The judge instructed the jury on the elements of all the claims. They could also find liability for the defendants on the basis of partnership; this instruction, however, was limited to the common-law claims. Moore objected, seeking a partnership instruction on all claims. According to the partnership instruction 23(a), the jury was to find liability only after finding an existing partnership, and then only if a liable defendant was acting within the scope of the partnership or joint venture.

The jury found defendants Plannerer and Reif liable to Moore on all the claims brought under securities law, RICO, common law fraud, and conspiracy. No liability was found against Yenko. The jury also found Plannerer and Reif liable to Yenko on his cross-claims, with the exception of seller liability under Sec. 12(2) of the Securities Act. As the prevailing party, Yenko was awarded taxable costs against Moore. Moore appeals from the amended judgment, alleging error in the judge's limiting partnership instruction 23(a) to the common law claims.

We review the district court's jury instructions for abuse of discretion. United States v. Kessi, 868 F.2d 1097, 1101 (9th Cir. 1989). "To require reversal, error in [failure to give requested jury instructions] must more probably than not have affected the verdict." Patrick v. Burget, 800 F.2d 1498, 1508 (9th Cir. 1986).

Moore contends that a legal basis exists for the proffered jury charge and, furthermore, that the jury might have found liability against Yenko had the instruction been given as requested. We find that the legal argument is tenuous, and also, more important, that the outcome would likely have been unaffected.

The district court limited the partnership liability instruction to the common-law claims on the basis that federal securities law supplants common-law agency principles, state securities laws are consistent with federal laws, and the RICO claim is dependent on a securities law violation. The "controlling person" provision of section 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. § 78t, "supplants common-law agency doctrines." Buhler v. Audio Leasing Corp., 807 F.2d 833, 835 n. 4 (9th Cir. 1987); see also Christoffel v. E.F. Hutton & Co., Inc., 588 F.2d 665, 667 (9th Cir. 1978); Zweig v. Hearst, 521 F.2d 1129, 1132-33 (9th Cir. 1975), cert. den. 423 U.S. 1025 (1975). In Buhler, we interpreted the intent of Congress in the securities laws to be to impose liability only on culpable parties with enforcement control, 807 F.2d at 836 n. 4, a concept at odds with imposing broad liability for the acts of a partner.

Moore seeks to distinguish respondeat superior cases such as Buhler from partnership liability, which our cases have not explicitly foreclosed. In the context of this case, however, this distinction is unimportant, since instructing the jury as to partnership liability on all claims would probably not have affected the outcome.

The special verdicts leave little doubt that the jury found that Yenko was simply not liable as a partner for the acts committed. Instruction 23(a) forecloses liability if either no partnership is found or, if a partnership existed, the acts committed were not within its scope.²  The jury was completely consistent in its verdicts on the claims to which the partnership charge was extended, finding Plannerer and Reif liable on all claims and Yenko not liable on any claim.

Either the jury found Yenko was not a partner or they found the acts were not committed within the scope of the partnership. The identical acts and transactions were involved in the securities law claims. The difference in elements of the claim is not significant if he had no partnership liability. Finding no partnership liability on Yenko's part for the acts committed which constituted common-law fraud and conspiracy, the jury almost certainly would have found no liability on the remaining claims, even if they had received the requested instruction.

Yenko's estate requests that double costs and attorney's fees be awarded pursuant to Fed. R. Civ. P. 38 and 28 U.S.C. § 1912. An appeal is frivolous "when the result is obvious and the arguments on appeal wholly lack merit." Partington v. Gedan, 880 F.2d 116, 130 (9th Cir. 1989); McCarthy v. Mayo, 827 F.2d 1310, 1318 (9th Cir. 1987). However, an appeal that is ultimately found to be meritless is not necessarily frivolous. McCarthy, 827 F.2d at 1318. We do not find awarding costs appropriate in this appeal. The request is denied.

AFFIRMED.