RFT Management Company LLC v. John Powell , 607 F. App'x 238 ( 2015 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 14-1488
RFT MANAGEMENT COMPANY LLC,
Plaintiff - Appellant,
v.
JOHN D. POWELL; PROFESSIONAL APPRAISAL SERVICE INCORPORATED;
TINSLEY & ADAMS LLP; WELBORN D. ADAMS,
Defendants – Appellees,
and
LAKE GREENWOOD DEVELOPERS LLC; WILLIAM E. GILBERT; STEPHEN
GILBERT; JAN BRADSHAW; COURTNEY R. FURMAN; FURMAN PROPERTIES
LLC,
Defendants.
Appeal from the United States District Court for the District of
South Carolina, at Anderson. Mary G. Lewis, District Judge.
(8:10-cv-02503-MGL)
Submitted: January 29, 2015 Decided: April 9, 2015
Before DUNCAN, WYNN, and DIAZ, Circuit Judges.
Affirmed in part, reversed in part, and remanded by unpublished
per curiam opinion.
Harry A. Swagart, III, HARRY A. SWAGART, III, P.C., Columbia,
South Carolina, for Appellant. William A. Coates, Carroll H.
Roe, Jr., ROE CASSIDY COATES & PRICE, PA, Greenville, South
Carolina; Matthew H. Henrickson, HENRICKSON LAW FIRM, LLC,
Greenville, South Carolina; Amy M. Snyder, CLARKSON, WALSH,
TERRELL & COULTER, P.A., Greenville, South Carolina, for
Appellees.
Unpublished opinions are not binding precedent in this circuit.
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PER CURIAM:
RFT Management Company, LLC, (“RFT”), through its
manager, David Roatch, purchased two lots from a real estate
developer in a residential subdivision, hoping that the lots’
value would appreciate upon completion of the subdivision’s
development. Due to the economic downturn, development stalled,
and the lots’ value plummeted. With the real estate developer
no longer in business, RFT filed suit against the appraiser,
John Powell, and the appraisal company, Professional Appraisal
Service, Incorporated (collectively with Powell, “PAS”), as well
as the lawyer, Welborn Adams, and his law firm, Tinsley & Adams
LLP (collectively with Adams, “T&A”), that had facilitated the
purchase of the lots. A jury found in favor of Defendants on
all claims that remained following dismissal of a number of
claims during the pretrial stage. This appeal followed.
On appeal, RFT asserts that the district court erred
by (1) dismissing its South Carolina Unfair Trade Practices Act
(“UTPA”), 1 South Carolina Uniform Securities Act (“SCUSA”), 2 and
civil conspiracy claims against T&A based on res judicata;
(2) dismissing its claims under the Interstate Land Sales Full
1
S.C. Code Ann. §§ 39–5–10 to –560 (1985 & Supp. 2014).
2
S.C. Code Ann. §§ 35–1–101 to –703 (1987 & Supp. 2014).
3
Disclosure Act (“ILSFDA”) 3 and § 10(b) of the Securities Exchange
Act of 1934 4 and Securities and Exchange Commission Rule 10b-5
implementing it 5 (together, “federal securities claim”) against
T&A and PAS; (3) denying its motion for leave to amend its
complaint in order to cure deficiencies identified by the
district court; (4) denying its Fed. R. Civ. P. 50(b) motion for
judgment as a matter of law on its UTPA claim against PAS; and
(5) denying its motion for a new trial on its UTPA and
professional negligence claims against PAS. Reviewing these
decisions in turn, we affirm the first four, affirm in part and
reverse in part the last, and remand to the district court.
I. Claims dismissed on the basis of res judicata
We review de novo a Fed. R. Civ. P. 12(b)(6) dismissal
based on principles of res judicata. Brooks v. Arthur, 626 F.3d
194, 200 (4th Cir. 2010). Federal courts are bound by 28 U.S.C.
§ 1738 (2012) to apply the law of the rendering state to
determine the extent to which a state court judgment should have
preclusive effect in a federal action. Exxon Mobil Corp. v.
Saudi Basic Indus. Corp., 544 U.S. 280, 293 (2005); Brooks, 626
F.3d at 200. In South Carolina, the doctrine of res judicata
3
15 U.S.C. §§ 1701-1720 (2012).
4
15 U.S.C. § 78(j) (2012).
5
17 C.F.R. § 240.10b-5 (2014)
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will bar a claim when “(1) the identities of the parties are the
same as in the prior litigation, (2) the subject matter is the
same as in the prior litigation, and (3) there was a prior
adjudication of the issue by a court of competent jurisdiction.”
Catawba Indian Nation v. State, 756 S.E.2d 900, 907 (S.C. 2014).
Moreover, res judicata “bars plaintiffs from pursuing [a claim
in] a later suit where the claim . . . could have been
litigated” in a prior suit, and “the claim[] arise[s] out of the
same transaction or occurrence that was the subject of [the]
prior action between [the same] parties.” Id. at 906. 6
Having reviewed the record, we conclude that RFT’s
civil conspiracy, UTPA, and SCUSA claims meet the requirements
under South Carolina law for res judicata preclusion. 7
Accordingly, we affirm the district court’s order dismissing
these claims.
6
We note that the law of South Carolina distinguishes
between preclusion based on res judicata and preclusion based on
collateral estoppel. See Lowe v. Clayton, 212 S.E.2d 582 (S.C.
1975); S.C. Pub. Interest Found. v. Greenville Cnty., 737 S.E.2d
502, 507 (S.C. Ct. App. 2013). To the extent that RFT’s appeal
relies on principles of collateral estoppel, we find its
arguments inapposite.
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The district court’s order dismissing the claims relied on
the judgment of a state trial court that was subsequently
affirmed on other grounds by the South Carolina Supreme Court.
To the extent RFT asserts error in the district court’s reliance
on a state court judgment later affirmed on other grounds, such
error was harmless. See United States v. Olano, 507 U.S. 725,
734 (1993).
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II. Claims dismissed for failure to state a claim
We review de novo a district court’s dismissal for
failure to state a claim under Rule 12(b)(6). Summers v.
Altarum Inst., Corp., 740 F.3d 325, 328 (4th Cir. 2014). “To
survive a motion to dismiss, a complaint must present factual
allegations that ‘state a claim to relief that is plausible on
its face.’” Id. (quoting Ashcroft v. Iqbal, 556 U.S. 662(2009)). In applying that standard, we take all facts pleaded
as true, and draw all reasonable inferences in RFT’s favor. Id.Relevant to this appeal, Fed. R. Civ. P. 8 requires that a
complaint “give the defendant fair notice of what the claim is.”
Erickson v. Pardus, 551 U.S. 89, 93 (2007) (internal quotation
marks and ellipsis omitted).
RFT does not challenge the district court’s
determination that aider and abettor liability is not available
for private actions under ILSFDA or the federal securities law
at issue. Accordingly, we do not review that determination. We
conclude that RFT’s complaint alleged only that Appellees were
liable for aiding and abetting violations of ILSFDA and the
federal securities law and did not provide fair notice of any
claim of primary liability against Appellees. We therefore
affirm the district court’s order dismissing RFT’s ILSFDA and
federal securities claims.
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III. Denial of motion for leave to amend complaint
We review for abuse of discretion the district court’s
denial of a motion to amend the pleadings under Fed. R. Civ. P.
15(a). Drager v. PLIVA USA, Inc., 741 F.3d 470, 474 (4th Cir.
2014). Although leave to amend a complaint should be “freely
give[n] . . . when justice so requires,” Fed. R. Civ. P.
15(a)(2), “after the deadlines provided by a scheduling order
have passed, the good cause standard [of Fed. R. Civ. P. 16]
must be satisfied to justify leave to amend the pleadings”
Nourison Rug Co. v. Parvizian, 535 F.3d 295, 298 (4th Cir.
2008). “Rule 16(b)’s good cause standard emphasizes the
diligence of the party seeking amendment.” O’Connell v. Hyatt
Hotels of P.R., 357 F.3d 152, 155 (1st Cir. 2004). We conclude
that RFT did not demonstrate the diligence required by Rule
16(b), and, therefore, the district court acted well within its
discretion in denying RFT leave to amend.
IV. Denial of motion for judgment as a matter of law
“We review the denial of a Rule 50(b) motion de novo,
viewing the evidence in the light most favorable to the
prevailing party, and will affirm the denial of such a motion
unless the jury lacked a legally sufficient evidentiary basis
for its verdict.” Bunn v. Oldendorff Carriers GmbH & Co. KG,
723 F.3d 454, 460 n.4 (4th Cir. 2013) (internal quotation marks
omitted). RFT contends that the district court erred in not
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granting its Rule 50(b) motion on its UTPA claim against PAS
because it presented undisputed evidence proving all three
elements of UTPA.
“To recover in an action under [South Carolina’s]
UTPA, the plaintiff must show: (1) the defendant engaged in an
unfair or deceptive act in the conduct of trade or commerce;
(2) the unfair or deceptive act affected public interest; and
(3) the plaintiff suffered monetary or property loss as a result
of the defendant’s unfair or deceptive act.” Health Promotion
Specialists, LLC v. S.C. Bd. of Dentistry, 743 S.E.2d 808, 816
(S.C. 2013). Under UTPA, to establish proximate cause, the
alleged injury must be the natural and probable consequence of
the complained of conduct. Collins Holding Corp. v. Defibaugh,
646 S.E.2d 147, 149-50 (S.C. Ct. App. 2007). More traditionally
stated, proximate cause requires proof of causation-in-fact, or
but-for causation, and legal causation, or foreseeability.
Baggerly v. CSX Transp., Inc., 635 S.E.2d 97, 101 (S.C. 2006).
Viewing the evidence in the light most favorable to
PAS, we conclude that PAS presented sufficient evidence from
which a reasonable jury could conclude that PAS’s appraisals of
the two lots, even if unfair or deceptive, did not proximately
cause RFT’s loss. Thus, because a reasonable jury could have
found against RFT on the proximate cause element of UTPA, we
affirm the district court’s denial of RFT’s Rule 50(b) motion.
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V. Denial of motion for a new trial
“A district court’s denial of a motion for a new trial
is reviewed for abuse of discretion[] and will not be reversed
save in the most exceptional circumstances.” Minter v. Wells
Fargo Bank, N.A., 762 F.3d 339, 346 (4th Cir. 2014). After a
jury trial, a district court may grant a motion for a new trial
“for any reasons for which new trials have heretofore been
granted in actions at law in federal court,” Fed. R. Civ. P.
59(a)(1), including for “substantial errors in admission or
rejection of evidence or instructions to the jury,” Montgomery
Ward & Co. v. Duncan, 311 U.S. 243, 251 (1940).
RFT contends that the district court erred by not
granting its motion for a new trial on its UTPA and professional
negligence claims against PAS citing asserted errors in the
court’s evidentiary rulings and jury instructions. We address
RFT’s assertions of error in turn, applying the appropriate
standard of review to each issue raised. See Buckley v.
Mukasey, 538 F.3d 306, 317-21 (4th Cir. 2008).
A. Evidentiary rulings. “We review a trial
court’s rulings on the admissibility of evidence for abuse of
discretion, and we will only overturn an evidentiary ruling that
is arbitrary and irrational.” Minter, 762 F.3d at 349 (internal
quotation marks omitted). Furthermore, we will not “set aside
or reverse a judgment on the grounds that evidence was
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erroneously admitted unless justice so requires or a party’s
substantial rights are affected.” Creekmore v. Maryview Hosp.,
662 F.3d 686, 693 (4th Cir. 2011).
Preliminarily, we find that several of the claims of
error advanced by RFT do not comply with Fed. R. App. P.
28(a)(8)(A), and, therefore RFT has forfeited review of those
claims. See Belk, Inc. v. Meyer Corp., U.S., 679 F.3d 146, 153
n.6 (4th Cir. 2012). Those claims that are properly presented
for appellate review, in our determination, do not demonstrate
that the district court abused its discretion in its evidentiary
rulings. Accordingly, we conclude that the district court did
not abuse its discretion in denying RFT’s motion for a new trial
based on assertions of erroneous evidentiary rulings.
B. Jury instructions. “[W]e review a trial court’s
jury instructions for abuse of discretion, keeping in mind that
a trial court has broad discretion in framing its instructions
to a jury.” Bunn, 723 F.3d at 468 (internal quotation marks
omitted). “Instructions will be considered adequate if
construed as a whole, and in light of the whole record, they
adequately informed the jury of the controlling legal principles
without misleading or confusing the jury to the prejudice of the
existing party.” Id. (internal quotation marks omitted). “Even
if a jury was erroneously instructed, however, we will not set
aside a resulting verdict unless the erroneous instruction
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seriously prejudiced the challenging party’s case.” Id.
(internal quotation marks omitted).
As an initial matter, we address whether RFT’s
asserted errors have been properly preserved. “A party who
objects to an instruction or the failure to give an instruction
must do so on the record, stating distinctly the matter objected
to and the grounds for the objection.” Fed. R. Civ. P.
51(c)(1). “When challenging instructions on appeal, a party
must furnish the court of appeals with so much of the record of
the proceedings below as is necessary to enable informed
appellate review.” Bunn, 723 F.3d at 468 (internal quotation
marks omitted). However, “a formal exception to a ruling or
order is unnecessary. . . . [A] party need only state the action
that it wants the court to take or objects to, along with the
grounds for the request or objection.” Fed. R. Civ. P. 46.
Consequently, Rule 51 generally will not preclude appellate
review “where the district court was fully aware of [a party’s]
position and . . . obviously considered and rejected [it].”
City of Richmond v. Madison Mgmt. Grp., Inc., 918 F.2d 438, 453
(4th Cir. 1990) (internal quotation marks omitted).
Under these principles and the facts in the record, we
find that RFT’s challenges to the jury instructions during the
charge conference constitute objections for Rule 51 purposes.
Nevertheless, we find that RFT failed to preserve a number of
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the errors it asserts on appeal because either the district
court’s ruling or RFT’s objection thereto is absent from the
record. With one exception, we conclude that the assertions
properly preserved and presented for appellate review either are
meritless or assert only harmless error.
With respect to the remaining asserted error, RFT
contends that the district court erred by instructing the jury
that conduct affecting only the parties involved cannot satisfy
UTPA’s public interest requirement. We agree. Under South
Carolina law, a plaintiff satisfies the public interest element
of UTPA by proving that the conduct at issue had the potential
for repetition; no further proof is required. See Crary v.
Djebelli, 496 S.E.2d 21, 23 (S.C. 1998); Daisy Outdoor Adver.
Co. v. Abbott, 473 S.E.2d 47, 50 (S.C. 1996). The court’s
instruction placed an additional requirement of proof on RFT.
This erroneous instruction constituted an abuse of discretion
and seriously prejudiced RFT’s case. See Coll. Loan Corp. v.
SLM Corp., 396 F.3d 588, 600 (4th Cir. 2005). Consequently, the
court’s order denying RFT’s motion for a new trial on the UTPA
claim constitutes an abuse of discretion. We therefore affirm
the order denying a new trial as to the professional negligence
claim, reverse as to the UTPA claim, and remand to the district
court for further proceedings consistent with this opinion.
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We dispense with oral argument because the facts and
legal contentions are adequately presented in the materials
before this court and argument would not aid the decisional
process.
AFFIRMED IN PART,
REVERSED IN PART,
AND REMANDED
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