CamSoft Data Systems, Inc. VS Southern Electronics Supply, Inc. and Active Solutions, LLC

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NOT DESIGNATED FOR PUBLICATION STATE OF LOUISIANA COURT OF APPEAL FIRST CIRCUIT 2019 CA 0745 2019 CW 0502 CAMSOFT DATA SYSTEMS, INC. VERSUS SOUTHERN ELECTRONICS SUPPLY, INC. AND ACTIVE SOLUTIONS, LLC Judgment Rendered: QUE 0 2 204 Appealed from the Nineteenth Judicial District Court Parish of East Baton Rouge State of Louisiana Case No. 582, 741 The Honorable Janice Clark, Judge Presiding Michael T. Beckers Counsel for Defendants/ Appellants Brent P. Frederick MMR Constructors, Inc., Danielle N. Goren Inc. & MMR Offshore Services, Inc. MMR Group, Tiffany T. Kopfinger Baton Rouge, Louisiana Jason L. Melancon Counsel for Plaintiff/Appellee Robert C. Rimes CamSoft Data Systems, Inc. R. Lee Daquanno, Jr. Frank Tomeny, III Baton Rouge, Louisiana and Marx D. Sterbcow New Orleans, Louisiana and Mark D. Plaisance Marcus J. Plaisance Prairieville, Louisiana Karli Glascock Johnson Vance A. Gibbs Counsel for Defendants/ Appellees Dell, Inc. & Dell Marketing, L.P. Tara M. Madison Baton Rouge, Louisiana and James C. Grant Christopher A. Riley Elizabeth Helmer Michael P. Kenny Atlanta, Georgia Gus A. Fritchie, III Counsel for Defendant/Appellee New Orleans, Louisiana Continental Casualty Company Christine Lipsey Counsel for Defendant/Appellee Amanda Stout Ciber, Inc. Baton Rouge, Louisiana and Mark J. Chaney New Orleans, Louisiana and Christopher H. Toll Pro Hac Vice Greenwood Village, Colorado BEFORE: CRAIN, THERIOT, and HOLDRIDGE, JJ. 2 THERIOT, J. In this appeal, MMR Constructors, Inc., Offshore MMR Group, Inc., and MMR Services, Inc. ( sometimes referred to collectively as " MMR") seek review of the trial court' s judgment, denying their Motion for Partial Summary Judgment Regarding RICO Claims and thereby allowing CamSoft Data Systems, Inc. (" CamSoft") to continue to pursue its claims against MMR under the Louisiana Racketeering Act, La, R.S. 15: 1351, et seq. For the following reasons, we reverse the trial court' s judgment and deny the companion writ application, referred to this panel, as moot. FACTS AND PROCEDURAL HISTORY The facts and procedural history are laid out in more detail in this court' s opinion in CamSoft Data Systems, Inc. v. Southern Electronics Supply, Inc., 2019- 0730 ( La. App. 1 st Cir. 7/ 2/ 19) ( unpublished), which is also being issued this date. Relevant hereto, CamSoft filed a Master Petition for Declaratory Judgment, Supplemental Relief, Damages, and Attorney' s Fees, alleging that MMR Group, Inc. and/ or MMR Constructors, Inc. is liable to CamSoft for ongoing and independent violations of the Louisiana Racketeering Act (" the 15: 1351, et seq. LRA"), La. R. S. CamSoft asserted that former NetMethods, LLC (" NetMethods") employees, who became employees of MMR Constructors, Inc., payments NetMethods made to Donald Evans (" Evans"), knew of bribery then acting Chief Technology Officer for the City of Baton Rouge, which lasted over one year' s time; nevertheless, MMR Constructors, Inc. continued to accept contract payments from the City of Baton Rouge for crime camera work made possible through initial bribery payments, and therefore knowingly violated La. R.S. 15: 1353. CamSoft argued that the public bribery and corrupt influencing of a public official constitute predicate acts, under La. R. S. 15: 1352( A)( 30) & ( 31). 3 CamSoft contended that NetMethods, MMR Group, Inc., and MMR Constructors, Inc. constitute an ongoing, successor enterprise that continues to profit and to receive payments from a pattern of racketeering activity involving the public bribery and corrupt influence of Baton Rouge' s public officials. MMR filed a motion for partial summary judgment regarding RICO claims, arguing that CamSoft is not entitled to recover under the LRA. CamSoft opposed the motion. Following the October 19, 2018 hearing on MMR' s motion, the trial court signed a judgment on April 2, 2019, denying MMR' s motion for partial summary judgment regarding RICO claims. From this judgment, MMR appeals pursuant to La. R.S. 51- 135.' SUMMARY JUDGMENT AND THE STANDARD OF REVIEW A motion for summary judgment is a procedural device used to avoid a full scale trial when there is no genuine issue of material fact. MN Resources LLC v. Louisiana Hardwood Products LLC, 2016- 0758, p. 8 ( La. App. I st Cir. 7126117), 225 So. 3d 1104, 1109, writ denied, 2017- 1. 748 ( La. 1215117), 231 So. 3d 624. A motion for summary judgment is properly granted if, after an opportunity for adequate discovery, the motion, memorandum, and supporting documents show that there is no genuine issue as to material fact and that the mover is entitled to judgment as a matter of law. La. Code Civ. P. art. 966( A)( 3). rests with the mover. La. Code Civ. P. art. 966( D)( 1). The burden of proof Nevertheless, if the mover will not bear the burden of proof at trial on the issue that is before the court on the motion for summary judgment, the mover' s burden on the motion does not require him to negate all essential elements of the adverse party' s claim, action, or defense, but rather to point out to the court the absence of factual support for one or more elements essential to the adverse party' s claim, action, or defense. The burden is on the adverse party to produce factual support sufficient to establish the existence 4 of a genuine issue of material fact or that the mover is not entitled to judgment as a matter of law. Id. In determining whether summary judgment is appropriate, appellate courts review evidence de novo under the same criteria that govern the trial court' s determination of whether summary judgment is appropriate. M/V Resources LLC, 2016- 0758 at p. 9, 225 So. 3d at 1109. A fact is material if it potentially ensures or precludes recovery, affects a litigant' s ultimate success, or determines the outcome of the legal dispute. A genuine issue of material fact is one to which reasonable persons could disagree. If reasonable persons could reach only one conclusion, there is no need for trial on that issue and Development, 7/ 18118), is appropriate. Doyle Limited Liability Company, 2017- 0787, p. 6( v. Lonesome La. App. 1st Cir. 254 So. 3d 714, 718- 19, writ denied, 2018- 1369 ( La. 11114118), So. 3d 291, 1128/ 14), summary judgment 256 u oting Jackson v. City of New Orleans, 2012- 2742, pp. 5- 6 ( La. 1. 44 So. 3d 876, 882, L.Ed. 2d 130 ( 2014). cert. denied, U. S. , 135 S. Ct. 197, 190 Because it is the applicable substantive law that determines materiality, whether a particular fact in dispute is material can be seen only in light of the substantive law applicable to the case. Succession of Hickman v. State Through Board of Supervisors of Louisiana State University Agricultural and Mechanical College, 2016- 1069, p. 5 ( La. App. 1 st Cir. 4/ 12/ 17), 217 So. 3d 1240, 1244, Although summary judgments are now favored, factual inferences reasonably drawn from the evidence must be construed in favor of the party opposing the motion, and all doubt must be resolved in the opponent' s favor. Quality Environmental Processes, Inc. v. Energy Development Corporation, 2016- 0171, p. 14 ( La. App. 1st Cir. 4/ 12/ 17), 218 So. 3d 1045, 1. 059. As set forth in La. R.S. 51: 135, all interlocutory judgments in cases involving antitrust claims shall be appealable within five days and shall be heard and determined within twenty days after the appeal is lodged. 5 DISCUSSION As set forth above, in its motion for partial summary judgment regarding RICO claims, MMR asserted that the basis of CamSoft' s RICO claims is alleged bribery payments made to Evans by NetMethods employees, which somehow resulted in MMR obtaining a contract with the City of Baton Rouge related to video surveillance work. MMR pointed out that CamSoft is unable to establish a pattern of racketeering activity, where the alleged bribery was conducted by NetMethods' employees, and the alleged racketeering activity was not conducted by any MMR employee and did not occur after MMR hired some of NetMethods' employees. MMR argued that CamSoft' s attempt to recover from MMR, company that was wholly uninvolved with any criminal activity, through a the racketeering statute, is improper where MMR did not engage in public bribery or a pattern of racketeering. Thus, MMR argued that CamSoft' s racketeering claims against MMR fail, as a matter of law. Additionally, MMR asserted that CamSoft has no standing to pursue a civil racketeering claim against MMR, because CamSoft' s alleged injury is too speculative and because CamSoft cannot establish that the alleged injury was proximately caused by MMR. CamSoft filed a Memorandum in Opposition to MMR Constructors, Inc.' s Motion for Partial Summary Judgment on RICO Claim, asking the trial court to deny the motion. CamSoft did not address the motion for partial summary judgment regarding RICO claims as to MMR Group, Services, Inc. Inc. or MMR Offshore Rather, CamSoft argued that genuine issues of material fact exist with respect to NetMethods'/ MMR Constructors, Inc.' s violations of La. R. S. 15: 1353( A) & ( C); CamSoft' s injury -in -fact to its business operations; and causation of CamSoft' s injuries related to claims under La. R.S. 15: 1353( A) & ( C). Thus, CamSoft argued that summary judgment was not appropriate. R In particular, 15: 1353( A), CamSoft argued that it stated a claim where former New Orleans Mayor C. Ray Nagin (" under La. R. S. Nagin") and the Mayor' s Office of Technology' s Chief Technology Officer Gregory Meffert Meffert") Dell") allegedly used their influence to purchase technology from Dell, Inc. and Ciber, Inc. (" Ciber"), which in exchange agreed to contract with NetMethods for business outside of New Orleans. CamSoft asserted that Mark St. Pierre, through NetMethods, directed a portion of revenues generated from Dell and Ciber to the public officials who made the revenues possible. CamSoft argued these " quid pro quo' agreements violated Louisiana' s corrupt influencing statute, La. R.S. 14: 120, and constituted racketeering activity, and the revenue generated by Dell and Ciber from the City of New Orleans became proceeds derived from a pattern of racketeering activity. CamSoft further alleged the racketeering activity included direct bribery payments to Nagin and Meffert, and that NetMethods expanded the enterprise with a continued pattern of racketeering activities lasting from 2004 to at least 2008, whereby NetMethods paid bribes and gratuities to Evans and Lafayette' s Thibodeaux"), CamSoft Chief Technology Officer Keith Thibodeaux in exchange for lucrative wireless Security Canopy contracts. argued that NetMethods took the money from the alleged racketeering activity and invested it into the creation of MMR Communications, transferring its employees, contracts, revenue, and assets, including governmental contracts to MMR allegedly in order to continue the RICO enterprise. CamSoft contended it has standing because its injuries were proximately caused by NetMethods' and MMR Constructors, Inc.' s violation of La. R. S. 15: 1353( A). As to its claims under La. R.S. 15: 1353( C), CamSoft asserted that " MMR has materially and continually benefitted from NetMethods' pattern of racketeering activity," where NetMethods employees with knowledge of and direct participation in the racketeering activities transferred their employment from NetMethods to 7 MMR with the express and intended purpose of starting up an entirely new division, MMR Communications, and MMR Communications continued making money off of government contracts assigned to it from NetMethods, NetMethods stopped operations. by after CamSoft argued that it has standing to pursue a claim under La. R. S. 15: 1353( C), caused even NetMethods'/ MMR where its financial injuries were proximately Constructors, Inc.' s violations of La. R. S. 15: 1353( C). The LRA is modeled after the federal Racketeer Influenced and Corrupt Organizations (" RICO") Act. Meadaa v. K.A.P. Enterprises, 09- 1211 ( W.D. La. 12/ 1/ 14), 2014 WL 6801636, at * 6( unpublished opinion). Therefore, federal decisions regarding RICO are persuasive when interpreting the LRA. State v. Touchet, 99- 1416, p. 4 ( La. App. 3d Cir. 415/ 00), The LRA states that "[ of the provisions of R. S. 759 So. 2d 194, 197, a] ny person who is injured by reason of any violation 15: 1353 shall have a cause of action against any person engaged in racketeering activity who violates a provision of R.S. R. S. 15: 1356( E). Id. citing 15: 1353." La. In this regard, La. R.S. 15: 1353, similar to 18 U. S. C. A. § 1962, makes four categories of conduct illegal. First, under the LRA, "[ i] t is unlawful for any person who has knowingly received any proceeds derived, directly or indirectly, from a pattern of racketeering activity to use or invest, whether directly or indirectly, any part of such proceeds, or the proceeds derived from the investment or use thereof, in the acquisition of any title to, or any right, interest, or equity in immovable property or in the establishment or operation of any enterprise." La. R. S. 15: 1353( A). pattern of racketeering activity, It is also unlawful " for any person, through a knowingly to acquire or maintain, directly or indirectly, any interest in or control of any enterprise or immovable property." R.S. 15: 1353( B). Third, the LRA makes it unlawful " La. for any person employed by, or associated with, any enterprise knowingly to conduct or participate in, directly 8 or indirectly, such enterprise through a pattern of racketeering activity." 15: 1353( 0). La. R. S. Lastly, it is unlawful " for any person to conspire or attempt to violate any of the provisions of Subsections A, B, or C of this Section." 15: 1353( D). La. R.S. 1962. 2 RICO contains similar provisions in 18 U. S. C. A. § As outlined, CamSoft has alleged that MMR violated La. R.S. 15: 1353( A) & ( C). The three required elements of a RICO claim are: 1) in 2) a pattern establishment, of racketeering conduct, or control activity of an 3) a person who engages connected enterprise. to See St. the acquisition, Paul Mercury Insurance Co. v. Williamson, 224 F. 3d 425, 439 ( 5th Cir. 2000) u oting Delta Truck & Tractor, Inc, v. J.I. Case Co., 855 F. 2d 241, 242 ( 5th Cir. 1988), cert. denied, 489 U.S. 1079, 109 S. Ct. 1531, 103 L.Ed. 2d 836 ( 1989); see also Edvisors Network, Inc., 2014 WL 3853457, at * 2. The RICO person in a civil or criminal RICO action is the defendant. Crowe v. Henry, 43 F. 3d 198, 204 ( 5th Cir. 1995) citing Landry v. Air Line Pilots Association International AFL- CIO, 901 F.2d 4041 425 ( 1990). 5th Cir.), certs. denied, 498 U. S. 895, 111 S. Ct. 244, 112 L.Ed. 2d 203 Once the three elements of a RICO person, a pattern of racketeering activity, and a RICO enterprise are met, then the court will continue to the substantive requirements of each subsection. See St. Paul Mercury Insurance Co., 224 F. 3d at 439. The plain language of the LRA similarly establishes that one element of civil liability under the LRA is that the defendant must have engaged in " racketeering activity." See La. R. S. 15: 1356( E); see also Alack v. Jaybar, Inc., 11- 143 ( E. D. La. 8/ 21/ 12), 2012 WL 13005346, at * 6 ( citin« La. R.S. 15: 1. 356); De la Cruz v. I] n plain English, the [ four] subsections [ of 18 U. S. C. A. § 19621 state: a) a person who has received income from a pattern of racketeering cannot invest that income in an enterprise, b) a person cannot acquire or maintain an interest in an enterprise through a pattern of racketeering_ c) a person who is employed by or associated with an enterprise cannot conduct the enterprise' s affairs through a pattern of racketeering. d) a person cannot conspire to violate subsections ( a). ( b), or ( c)." Edvisors Network, Inc. v. Husser. 14- 062 M. D. La. 8/ 5114), 2014 Wt, 3853457, at * 3 ( citing In re Burzyuski, 989 F. 2d 733, 741 ( 5th Cir, 1993)), 0 Edwards, 14- 1729 ( E. D. La. 11113115), 2015 WL 6696427, at * 6 (" Section 1353 of the [ LRA] sets forth the ` prohibited activities' under the statute, all of which are premised on the existence of a pattern of racketeering activity."). The LRA defines racketeering commit, activity" as committing, or soliciting, coercing, attempting to commit, conspiring to or intimidating another person to commit any crime which is punishable under one of the listed criminal provisions, including La. R.S. 14: 118 ( Public bribery) and La. R.S. 14: 120 ( Corrupt influencing). La. R.S. 15: 1352( A). A defendant is not civilly liable under the LRA unless that defendant has engaged in fraud or other criminal conduct. Alack, 2012 WL 13005346, citing Thomas v. North 40 Land Development, Inc., at * 5 2004- 0610, pp. 24- 29 ( La. App. 4th Cir. 1126105), 894 So. 2d 1160, 1175- 78 ( granting the defendants' motion for summary judgment because the plaintiff did not provide proof of any criminal conduct on the part of the defendants as required to state a racketeering claim)); see also De la Cruz, 2015 WL 6696427, at * 6. For example, in Alack, supra, the U.S. District Court for the Eastern District of Louisiana, applying Louisiana law, found that plaintiffs asserting a claim under the LRA were required to establish that defendants had engaged in racketeering activity, as defined by the LRA. Alack, 2012 WL 13005346, at * 6. conclusory allegations, The court found that, despite the plaintiffs' they had failed to point specifically to any facts that established illegal conduct attributable to the defendants. Id. After reviewing the evidence presented on summary judgment, the court found no evidence of racketeering activity on behalf of the moving defendants and dismissed the plaintiffs' claims under the LRA. Id. Therefore, as a prerequisite to determining whether MMR violated La. R.S. 15: 1353( A) or ( C), it must be determined whether MMR engaged in a pattern of racketeering activity. See La. R.S. 15: 1353( E). 10 The facts regarding the alleged racketeering activity are not in dispute. this regard, In MMR points out that CamSoft is unable to establish that MMR engaged in a pattern of racketeering activity -- an under both La. R.S. 15: 1353( A) & ( C) -- by NetMethods' employees, and the essential element of its claims where the alleged bribery was conducted alleged racketeering activity was not conducted by any MMR employee and did not occur after MMR hired some of NetMethods' employees, making summary judgment proper as a matter of law. In our de novo review of the documents filed with the motion for partial summary judgment regarding RICO claims and the opposition thereto, the summary judgment evidence solely outlines the alleged racketeering activity of NetMethods and its employees. No evidence has been presented to show that MMR engaged in public bribery, corrupt influencing, or other racketeering activity; furthermore, no evidence has been presented to show that former NetMethods employees continued their alleged racketeering activity after they transferred their employment to MMR Constructors, Inc. Nevertheless, CamSoft contended that MMR Constructors' argument that it cannot be held liable for NetMethods' transition of NetMethods' matter of law, because " LRA violations occurring before the employees, contracts, and assets to MMR fails, as a MMR has materially and continually benefitted from NetMethods' pattern of racketeering activity." In support of this position, CamSoft relies on Liquid Air Corp. v, Rogers, 834 F. 2d 1297 ( 7th Cir. 1987), cert. denied, 492 U. S. 917, 109 S. Ct. 3241, 106 L.Ed. 2d 588 ( 1989). In Liquid Air, D& R, whose shareholders were Jack R. Rogers and George Michlik, leased both compressed gas and compressed gas cylinders from Liquid Air. Due to price increases, D& R gave notice that it would terminate its distributorship with Liquid Air. Under the Distributor Agreement, D& R. was required to return leased gas cylinders to Liquid Air, pay rent on outstanding cylinders, and pay the replacement value for any cylinders not returned or accounted for. D& R was slow in returning the cylinders; by August 1982, D& R had returned only 1, 570 of 5, 000 outstanding cylinders, and Liquid Air began to charge D& R its higher, nondistributor rental rate. Rogers and Michlik enlisted the aid of Ray Bridges (" Bridges"), an employee of Liquid Air responsible for handling all paperwork at Liquid Air' s Peoria Distribution Center. Under the scheme, Bridges would falsify documents to make it appear that D& R had returned all outstanding cylinders. D& R would save the rental and replacement fees, while retaining the cylinders for its own use. The scheme was accomplished through nineteen separate falsified shipping orders documenting returns that were never made. Each shipping order involved using the mail twice and one wire transfer. In return for Bridges' work, Michlik and Rogers arranged to set Bridges up in his own welding business, Bridges Welding Supply Bridges Welding"), and supplied personnel, capital, and welding products. Liquid Air discovered the scheme and filed a complaint against Michlik, Rogers, D& R, Bridges, and Bridges Welding, charging separate RICO violations of 18 U.S. C. A. § 1962( a), ( b), ( c) & ( were mail fraud and wire fraud. d). The predicate acts for the RICO counts A jury found against all the defendants on the RICO counts. On appeal, the defendants asserted numerous bases for overturning the jury verdicts, including whether Bridges Welding was properly found vicariously liable for conversion or RICO violations. Bridges Welding argued that it could not be liable for any RICO violation or for conversion since it did not have a corporate existence during the scheme. The court found that Bridges incorporated in April 1983, and defendants' end of May 1983, Welding was scheme was not completed until the Liquid Air, 834 F. 2d at 1306. Bridges was a principal employee and president of Bridges Welding while still employed at Liquid Air. 12 Id. In falsifying returns, Bridges acted as president of Bridges Welding, and his acts redounded to the benefit of Bridges Welding shareholders. Welding accepted the benefits of Bridges' wrongdoing. Id. Id. Bridges The court found that respondeat superior was entirely appropriate under 18 U.S. C. A. § so long as Bridges Welding derived a benefit from the violations. 1962( a) & ( b), Id. at 1307. The court found substantial evidence that Bridges Welding benefitted from the RICO violation. Id. president, D& R In exchange for the " work" of Bridges Welding' s supplied Bridges Welding with the labor of defendant Rogers' son and defendant Michlik' s nephew. Id. A supplier of Bridges Welding, Welding, billed D& R for supplies furnished to Bridges Welding. Id. was evidence of various " loans" from D& There also R to Bridges Welding on which D& R was, at best, not actively pursuing collection. 1962 ( a) & ( b), Gano Id. Therefore, under 18 U. S. C. A. § Bridges Welding was properly found liable.3 Id. Liquid Air was decided on the principles of vicarious liability. In Louisiana, the premise of vicarious liability is codified in La. Civ. Code art. 2320, which provides an employer is liable for the tortious acts of its " overseers in the exercise of the functions in which they are employed." Hall, 2003- 1488, p. S ( La. 4123104), 874 So. 2d 131, 137. servants and Richard v. However, in the instant case, no summary judgment evidence reflects that MMR or its employees, during the time of their employment racketeering activity. with MMR, engaged in any of the alleged Liquid Air is factually distinguishable from the instant case, in that Bridges was a principal employee and president of Bridges Welding while he was still employed at Liquid Air and conducting the racketeering activities because Bridges Welding was incorporated in April 1983 and defendants' scheme 3 The Liquid Air cowl noted that, since addressing the propriety of the finding of vicarious liability under subsections ( c) ( under which respondeat superior may not apply) or ( d) ( conspiracy to violate ( a), ( b), or ( c)), would not affect the arnount of Liquid Air' s award, it declined to consider defendants' challenges to these findings. Liquid Air, $34 F. 2d at 1306_ 13 was not completed until the end of May 1983); thus, Bridges Welding was found vicariously liable for Bridges' RICO violations. Because we find no evidence that MMR or its employees engaged in racketeering activity, summary judgment is proper, as a matter of law.' CONCLUSION For the above and foregoing reasons, the April 2, 2019 judgment denying MMR' s Motion for Partial Summary Judgment Regarding RICO Claims is reversed. The Motion for Partial Summary Judgment Regarding RICO Claims filed by MMR Constructors, Inc., MMR Group, Inc., and MMR Offshore Services, Inc, is granted, and the claims of Cam.Soft Data Systems, Inc. against MMR Constructors, Inc., MMR Group, Inc., and MMR Offshore Services, Inc., under the Louisiana Racketeering Act, are dismissed in their entirety, with prejudice. deny the companion writ application referred to this panel, as moot. We Costs of this appeal are assessed against CamSoft Data Systems, Inc. REVERSED AND RENDERED; WRIT DENIED AS MOOT. a Because this court finds no evidence of racketeering activity under the LRA on behalf of MMR, it pretermits discussion of CamSoft' s claims that MMR violated La. R. S. 15J353( A) & ( C) and CamSoft' s standing to pursue those claims. 14

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