Unpublished Disposition, 907 F.2d 155 (9th Cir. 1990)Annotate this Case
Geoffrey UKWUOMA; Evelyn June Ukwuoma, Plaintiffs-Appellees,v.Barry C. MARINE; United Financial Services, Inc.; UnitedFinancial Investments, Defendants-Appellants.
United States Court of Appeals, Ninth Circuit.
Argued and Submitted Oct. 4, 1989.Decided July 11, 1990.
Before DAVID A. NELSON, TROTT and RYMER, Circuit Judges.
Appellants were found liable in a jury trial for violation of civil RICO, 18 U.S.C. § 1962(c) ("RICO"), fraud, slander of title, and breach of contract, and assessed compensatory damages under these theories in the amounts of, respectively, $15,000 (trebled to $45,000), $150,000, $250,000, and $110,000, plus punitive damages of $550,000. They appeal from denial of post-trial motions: (1) under Fed. R. Civ. P. Rule 50 for JNOV or, alternatively, new trial as to RICO liability; (2) under Rule 59 for new trial or remittitur on the ground of excessive damages; and (3) under Rule 59(e) to alter or amend the judgment by subtracting from the award the $210,000 settlement paid to appellees by two joint tortfeasors not party to this appeal. Sufficient evidence supports the finding of RICO liability and amount of compensatory and punitive damages. However, the trial court abused its discretion in denying the Rule 59(e) motion for offset. Accordingly, we affirm the verdict as to RICO liability and the punitive damages award. We reverse as to the offset motion and reduce compensatory damages to $315,000 (not including the $30,000 added by trebling the RICO verdict).
STANDARD OF REVIEW
Appellants adequately moved for directed verdict as to RICO liability. See Cabrales v. County of Los Angeles, 864 F.2d 1454, 1459 (9th Cir. 1988) (an inartful directed verdict motion that adequately challenges the sufficiency of the evidence satisfies the directed verdict requirement for JNOV motion review), vacated on other grounds, 109 S. Ct. 2425, reinstated, 886 F.2d 235 (9th Cir. 1989), cert. denied, 110 S. Ct. 1838 (1990). Accordingly, we review de novo their motion for JNOV as to RICO liability. Garter-Bare Co. v. Munsingwear, Inc., 723 F.2d 707, 709 (9th Cir.), cert. denied, 469 U.S. 980 (1984). We grant JNOV only if the evidence, viewed in a light most favorable to the nonmoving party, permits only one reasonable conclusion as to the verdict. Id. We affirm denial of JNOV if substantial evidence supports the verdict. Landes Constr. Co. v. Royal Bank of Canada, 833 F.2d 1365, 1370-71 (9th Cir. 1987). "Substantial evidence is such relevant evidence as reasonable minds might accept as adequate to support a conclusion even if it is possible to draw two inconsistent conclusions from the evidence." Id. at 1371. We may neither weigh the evidence nor assess witnesses' credibility in determining whether substantial evidence exists. Id.
We review a district court's denial of a motion for new trial for an abuse of discretion. Robins v. Harum, 773 F.2d 1004, 1006 (9th Cir. 1985). Under the abuse of discretion standard, we cannot reverse unless we have a definite and firm conviction that the court below committed a clear error of judgment in the conclusion it reached upon a weighing of the relevant factors. Abatti v. Comm'r of IRS, 859 F.2d 115, 117 (9th Cir. 1988).
We also review denial of a Rule 59(e) motion for amendment of the judgment for an abuse of discretion. 6A J. Moore, J. Lucas, and G. Grotheer, Jr., Moore's Federal Practice p 59.15 n. 9 (2d ed. 1987) (citing Walker v. Bank of Am. Nat'l Trust & Sav. Ass'n, 268 F.2d 16 (9th Cir.), cert. denied, 361 U.S. 903 (1959), disapproved in part on other grounds, Cohen v. Norris, 300 F.2d 24 (9th Cir. 1962)).
* RICO Liability
18 U.S.C. § 1962(c) provides:
It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt.
Appellees contend first that the evidence was insufficient to establish the nexus between the joint venture and interstate commerce required for liability under RICO. They argue that although the lending activities of United Financial Services ("UFS") affected commerce, these activities cannot supply the nexus without destroying the required distinction between the RICO "enterprise" (joint venture) and "person [s]" associated with it (joint venturers).
"A minimal effect on interstate commerce satisfies this jurisdictional element." United States v. Bagnariol, 665 F.2d 877, 892 (9th Cir. 1981), cert. denied, 456 U.S. 962 (1982). A joint venturer's acts in furtherance of a joint venture "enterprise" can supply the latter's nexus with commerce. Predicate acts that constitute activities of the "enterprise" may supply this nexus. Id. at 893; see also United States v. Rone, 598 F.2d 564 (9th Cir. 1979), cert. denied, 445 U.S. 946 (1980). A joint venture can act only through its constituent joint venturers, but this fact does not destroy the distinction between the joint venturers and the joint venture enterprise for section 1962(c) purposes. Medallion TV Enters., Inc. v. SelecTV of California, Inc., 627 F. Supp. 1290, 1295 (C.D. Cal. 1986), aff'd, 833 F.2d 1360 (9th Cir. 1987), cert. denied, 109 S. Ct. 3241 (1989).
The joint venture's activities--maintenance of a bank account into which UFS deposited loan proceeds as a reserve fund for the joint venture, and receipt of direct loan commissions--adequately support the finding of an effect on commerce. Further, UFS's activities in furtherance of the joint venture--use of federal loan documents that originated in Washington, D.C., and receipt of loan commissions--support this finding.
Appellants also contended that the evidence of RICO liability was insufficient on the grounds that the special verdict did not indicate whether the jury relied on the "pattern of racketeering" or "unlawful debt" theory and insufficient evidence supported the latter. Appellants cannot urge this ground on appeal because the trial court modeled the verdict form on that proposed by appellant Marine, which made no provision (unlike that of appellees) for differential findings under the two theories. See Vuckson v. United States, 354 F.2d 918, 922 (9th Cir.), cert. denied, 384 U.S. 991 (1966).
Evidence of damages must be unspeculative and show " 'with reasonable certainty both their occurrence and the extent thereof.' " Sanchez-Corea v. Bank of America, 38 Cal. 3d 892, 701 P.2d 826, 215 Cal. Rptr. 679, 689 (1985). For evidence to support an award, " 'there must be some reasonable basis for computation which will enable the jury to arrive at an approximate estimate thereof.' " National Farmers Organization v. Kinsley Bank, 731 F.2d 1464, 1472 (10th Cir. 1984) (citation omitted). "Although absolute certainty is not required, there must be sufficient proof so that the jury is guided by some rational standard." Id. Although the fact of tort damage must be certain, the amount may rest upon reasonable approximation or inference. 6 B.E. Witkin, Summary of California Law Sec. 1325 (9th ed. 1988). " ' [T]he wrongdoer cannot complain if his own condition creates a situation in which the court must estimate rather than compute.' " Sanchez-Corea, 215 Cal. Rptr. at 690 (quoting Guntert v. City of Stockton, 55 Cal. App. 3d 131, 143, 126 Cal. Rptr. 690 (1976)).
With respect to assessing prospective damage from tortious conduct, California courts do not strictly apply the certainty requirement because "probabilities are ... the basis for the award." 6 B.E. Witkin, supra Sec. 1326. Future " [d]amages which are remote, contingent, or merely possible cannot serve as a legal basis for recovery [for breach of contract]." California Shoppers, Inc. v. Royal Globe Ins. Co., 175 Cal. App. 3d 1, 221 Cal. Rptr. 171, 205 (1985). Still, where the fact of prospective contract-based damage is certain, only " [r]easonable, not mathematical, certainty, is required for an award of damages; ... it is no objection to recovery that the amount cannot be exactly determined, or is subject to contingencies." 1 B.E. Witkin, supra Sec. 823 (citing Noble v. Tweedy, 90 Cal. App. 2d 738, 203 P.2d 778 (1949)).
With respect to emotional distress damages, the amount "is not easily quantifiable and is best left to the sound discretion of the jury." Young v. Bank of Am., 141 Cal. App. 3d 108, 190 Cal. Rptr. 122 (1983).
California Civil Code sections 3333 and 1709 govern the measure of damages for fraud. Section 3333, regarding torts in general, provides:
For the breach of an obligation not arising in contract, the measure of damages, except where otherwise expressly provided by this code, is the amount which will compensate for all the detriment proximately caused thereby, whether it could have been anticipated or not.
Section 1709, regarding fraud, provides:
One who willfully deceives another with intent to induce him to alter his position to his injury or risk, is liable for any damage which he thereby suffers.
Section 3300, governing breach of contract, provides for:
damages [in] ... the amount which will compensate the party aggrieved for all the detriment proximately caused ... by [the contract breach], or which, in the ordinary course of things, would be likely to result therefrom.
We have stated:
[G]eneral damages ... for breach of contract are ordinarily confined to those which would naturally arise from the breach or which might have been reasonably contemplated or foreseen by the parties, at the time they contracted, as the probable result of the breach.
999 v. C.I.T. Corp., 776 F.2d 866, 872 (9th Cir. 1985). These include plaintiff's lost profits and other consequential damages if defendant knew of the risk of such damage when the parties contracted. Id. Damage to credit in this case is recoverable because it was reasonably foreseeable at the time of contracting. We need not decide whether emotional distress from the breach was reasonably foreseeable such that contract damages encompass emotional distress in this case because fraud supports an emotional distress claim and harm to credit alone fully justifies the contract award.
Slander of title damages cover: (1) any pecuniary loss from impaired vendability of the encumbered property; (2) litigation expenses reasonably necessary to remove the cloud on title; and (3) damages for inconvenience and time spent in removing the title cloud. Seeley v. Seymour, 190 Cal. App. 3d 844, 865, 237 Cal. Rptr. 282 (1987); Wright v. Rogers, 172 Cal. App. 2d 349, 342 P.2d 447, 458 (1959). Damages for emotional distress are not recoverable under this cause of action. Seeley, 190 Cal. App. 3d at 865.2
A RICO recovery is limited to injury to business and property caused by the RICO violation. Callan v. State Chemical Mfg. Co., 584 F. Supp. 619 (E.D. Pa. 1984).
Mr. Ukwuoma's testimony--that his inability to borrow against his properties forced the restaurant from a credit to a cash basis and the restaurant ceased to function as it had previously--does not adequately support either the fact or amount of lost profits. See California Shoppers, 221 Cal. Rptr. at 205-06 (stating evidence establishing existence of lost profits must not be uncertain or speculative; finding existence of lost profits uncertain where plaintiff insured offered no "mathematical" or other evidence explaining how defendant insurer's breach of contract would generate lost profits, no financial documents reflecting its profit history, and no expert analysis of its future profit potential).
The evidence of injury to credit (inter alia, Mr. Thompson's testimony that, conservatively estimated, the bankruptcy precipitated by the conduct at bar would cost the Ukwuomas $144,000 in additional home loan costs alone during the following 10 years) amply justifies the contract and RICO awards. Because harm to credit is compensated almost fully by these two awards, the Ukwuomas' testimony as to the anxiety, frustration, and family problems they have experienced as a result of the events at issue justifies the fraud award as compensation primarily for emotional distress. With respect to emotional distress damages, see Sanchez-Corea, 38 Cal. 3d 892, 701 P.2d 826, 215 Cal. Rptr. 679; Young, 141 Cal. App. 3d 108, 190 Cal. Rptr. 122; see also Pintor v. Ong, 211 Cal. App. 3d 837, 259 Cal. Rptr. 577 (1989).
The evidence was not sufficient to support slander of title damages based on pecuniary loss or litigation expenses related to removing a cloud on the Ukwuomas' title. But evidence of the time and inconvenience spent by the Ukwuomas in settling this matter supports the slander of title award.
Appellants' contention that the awards are duplicative is meritless as harm to credit justifies the contract and RICO awards and a small part of the fraud award; emotional distress justifies the rest of the fraud award; and the Ukwuomas' time and inconvenience justify the slander of title award. Fraud and contract recoveries are both available in an action so long as the awards are not duplicative. Walker v. Signal Cos., 84 Cal. App. 3d 982, 995-96, 149 Cal. Rptr. 119 (1978).
The California Supreme Court has identified the following as factors in assessment of punitive damages:
One factor is the particular nature of the defendant's acts in light of the whole record; clearly, different acts may be of varying degrees of reprehensibility, and the more reprehensible the act, the greater the appropriate punishment, assuming all other factors are equal.... Another relevant yardstick is the amount of compensatory damages awarded; in general, even an act of considerable reprehensibility will not be seen to justify a proportionally high amount of punitive damages if the actual harm suffered thereby is small.... Also to be considered is the wealth of the particular defendant; obviously, the function of deterrence ... will not be served if the wealth of the defendant allows him to absorb the award with little or no discomfort.... By the same token, of course, the function of punitive damages is not served by an award which, in light of the defendant's wealth and the gravity of the particular act, exceeds the level necessary to properly punish and deter.
Neal v. Farmers Ins. Exch., 21 Cal. 3d 910, 582 P.2d 980, 990, 148 Cal. Rptr. 389 (1978) (citations omitted). No fixed maximum ratio of punitive to compensatory damages exists. Downey Sav. & Loan Ass'n v. Ohio Cas. Ins., 189 Cal. App. 3d 1072, 234 Cal. Rptr. 835 (1987), cert. denied, 486 U.S. 1036 (1988).
The calculation of punitive damages involves, instead, "a fluid process of adding or subtracting depending on the nature of the acts and the effect on the parties and the worth of the defendants," and in this regard juries have a wide discretion in determining what is proper.
Id. (234 Cal.Rptr.) at 849. Indeed, courts have upheld awards where the ratio of punitive to compensatory damages was 2,000 to one (Finney v. Lockhart, 35 Cal. 2d 161, 217 P.2d 19 (1950)), 78 to one (Neal), and 40 to one (Chodos v. Ins. Co. of No. Am., 126 Cal. App. 3d 86, 178 Cal. Rptr. 831 (1981)). Attention to the ratio should not thwart the punitive and deterrent functions of exemplary damages. 234 Cal. Rptr. at 850. The reviewing court should give the trial court's determination on this issue great weight because the trial court has greater familiarity with the evidence. Id. at 851.
The determination of punitive damages is "a fluid process." Adams v. Murakami, 219 Cal. App. 3d 647, 658, 268 Cal. Rptr. 467, modified, 219 Cal. App. 3d 1151g (1990). Thus, while punitive damage awards rarely exceed ten percent of a defendant's net worth, People ex rel. Dep't of Transp. v. Grocers Wholesale Co., 214 Cal. App. 3d 498, 262 Cal. Rptr. 689, 700 (1989), factors such as the defendant's wealth "take [ ] on different significance, depending on the underlying circumstances." Adams, 219 Cal. App. 3d at 658. The reprehensibility of the defendant's conduct is one such circumstance. Grocers Wholesale, 262 Cal. Rptr. at 700.
Here, substantial evidence supports the punitive damages award. Evidence existed--that appellants acted fraudulently in persuading Mr. Ukwuoma to accept the short-term loan by promising to replace it with a long-term loan, in failing to provide the long-term loan, and in aggressively seeking to foreclose on the Ukwuomas' property at a time when Marine and UFS were fiduciaries and knew of the Ukwuomas' financial vulnerability--as to the reprehensibility of appellants' conduct. Also, testimony indicated that UFS's operations continue, which could lead a jury to set a high award to deter similar conduct in the future. The fact that punitive and compensatory damages stand in about a one-to-one ratio rebuts any presumption that the punitives award resulted from passion and prejudice.
We cannot say we have a definite and firm conviction that the district court committed a clear error of judgment in denying appellants' motion for new trial or remittitur based on excessive compensatory and punitive damages.
A trial court should offset compensatory damages by the amount of a settlement with a joint tortfeasor. See Seymour v. Summa Vista Cinema, Inc., 809 F.2d 1385, 1389 (9th Cir.) (affirming a setoff from a securities fraud verdict as an application of "the fundamental principle that a payment made by a joint tortfeasor diminishes the claim against the remaining tortfeasors"), modified, 817 F.2d 609 (9th Cir. 1987); Husky Refining Co. v. Barnes, 119 F.2d 715, 716 (9th Cir. 1941) (noting the general rule that consideration received from one tortfeasor, whether joint or independent, diminishes the amount recoverable from other tortfeasors). Accordingly, the district court abused its discretion by denying defendants' motion to amend the judgment by the $210,000 settlement amount. We reverse this denial and reduce the award as specified in the Summary section.
Accordingly, the judgment is
AFFIRMED in part and REVERSED in part.
The parties are to bear their own costs on appeal.
This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by 9th Cir.Rule 36-3
Appellants' contention that emotional distress damages were unavailable because appellees incurred no monetary loss is meritless for two reasons. First, appellees incurred significant monetary loss through injury to their credit. Second, it appears that California courts permit recovery of damages for serious emotional distress even absent financial loss. See Molien v. Kaiser Foundation Hospitals, 27 Cal. 3d 916, 616 P.2d 813, 167 Cal. Rptr. 831 (1980)
Marine argues that general damages for time and inconvenience are only recoverable if coupled with proof of actual pecuniary damage. However, California courts have specifically held that general damages for time and inconvenience are recoverable in a slander of title action. See Seeley, 190 Cal. App. 3d 844. Nowhere have courts conditioned such recovery on proof of other loss