Raymond Heck v. Kenneth Buhler , 775 F.3d 265 ( 2014 )

Case: 14-30146 Document: 00512880807 Page: 1 Date Filed: 12/23/2014
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
December 23, 2014
No. 14-30146
Lyle W. Cayce
Clerk
RAYMOND E. HECK; DOUG HAMLEY; CHARLES MOORE; JOSEPH
MCKEARN; ALLEN RICHARDSON,
Plaintiffs - Appellees
v.
WAYNE TRICHE,
Defendant - Appellant
Appeal from the United States District Court
for the Middle District of Louisiana
Before HIGGINBOTHAM, CLEMENT, and HIGGINSON, Circuit Judges.
EDITH BROWN CLEMENT, Circuit Judge:
Following a jury trial, the district court entered judgment imposing
liability on Defendant-Appellant Wayne Triche for violations of the Louisiana
Securities Law, La. Rev. Stat. Ann. § 51.701 et seq. Triche appealed the
judgment to this court and, for the reasons to be explained, we AFFIRM.
FACTS AND PROCEEDINGS
I. Evidence Adduced at Trial
The facts developed at trial, consistent with the jury’s verdict, are as
follows. Defendant Ken Buhler was an auctioneer specializing in antique
furniture. Buhler met co-defendant Triche, a certified public accountant, in
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1990, and shortly thereafter hired Triche’s then accounting firm, Triche and
Associates. In the late 1990s, with the help of Triche and Associates, Buhler
launched “Go Antiques,” an internet antique furniture business. Triche and
Associates helped Buhler draft prospectuses for Go Antiques, raising
approximately eight and a half million dollars.
Buhler was fired from his dual roles as president and CEO of Go
Antiques on December 20, 2002. Prior to his termination, Buhler took out a
number of loans in connection with Go Antiques that left him personally
indebted to First Bank for just over one million dollars. Buhler also had a
number of outstanding claims and judgments against him totaling over half a
million dollars. Triche was aware of these debts. Buhler considered Triche his
“business advisor” and close friend and went to Triche for advice after his
termination from Go Antiques. Triche advised him to get back into the auction
business.
Buhler set out to form a new antique company in the fall of 2003, which
ultimately took the name of Antique Investment Group, LLC (“AIG”). With
the help of Triche and a partner in Triche’s consulting firm, Daryl DeArmond,
Buhler created a prospectus (or “AIG pool document”) to raise money for AIG
from private investors. The AIG pool document explained that “[t]he investors
will make loans to [AIG], the proceeds of which will be used to buy inventory
pool items.” The inventory would then be sold through auctions, showrooms
and warehouses, and over the internet. Investors were entitled to a percentage
of AIG’s “gross profits,” 1 determined by the amount of money they advanced to
AIG. The AIG pool document assured investors that “[a]ll investments are
secured by inventory purchased on the behalf of AIG,” and that “[t]he inventory
1Gross profits were defined “as the actual cost of goods plus a five (5) percent shipping
and handling fee . . . the total of which is then subtracted from the actual selling price less
any sales commissions.”
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pool will fully collateralize the loans.” Triche did not draft any of the
prospectus himself, but contributed to portions of the document related to
payout structure, loan terms and conditions, and securitization.
Buhler used the AIG pool document to solicit investments from Raymond
Heck, Doug Hamley, Charles Moore, Joseph McKearn, and Allen Richardson
(collectively “plaintiffs”). Between September 12, 2003, and May 5, 2004,
plaintiffs advanced Buhler $324,949.00. Buhler reported to Triche each time
he obtained money from an investor. Triche, however, did not have direct
contact with any of the investors except for Heck. Buhler told Heck that
Triche’s firm would provide accounting services for AIG, and when Heck called
Triche to inquire about the company’s legitimacy, Triche assured him it was
the “real deal.”
During the time Buhler was soliciting investments for AIG, Buhler and
Triche had multiple meetings with representatives of First Bank to address
his debt obligations. On November 25, 2003, Buhler and Triche had a meeting
with Andy Adler, Buhler’s loan officer, and Rick Holland, the president of First
Bank. Triche was a shareholder in First Bank and had a personal relationship
with Adler and Holland. During this meeting, or around this time period, First
Bank asked Buhler for “more collateral” for his outstanding loans because his
“debt to inventory ratio . . . [was] upside down.” The only assets he had to
pledge were the inventory of AIG, which had been purchased with plaintiffs’
funds. On December 17, 2003, Buhler and Triche again met with
representatives of First Bank regarding his debt and borrowing capacity. An
invoice from Triche and Associates billed for Triche’s time as “meeting with
client and bankers regarding loan package and restructure of present debt.”
The bank demanded additional security from Buhler and, consequently,
Buhler “ended up having to pledge assets belonging to [AIG] to the bank in
order to get [his] loans restructured.”
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Triche instructed Buhler to pledge AIG’s inventory to First Bank. Triche
knew that the AIG pool document promised that the investors’ loans would be
secured by this inventory, and had specifically discussed this fact at the
December 17, 2003 meeting with First Bank. On May 3, 2004, Buhler wrote a
letter to First Bank, addressed to Andy Adler, titled “Re: In Reference to Loan
Restructuring Proposal.” In this letter, Buhler agreed to pledge AIG’s
inventory to “secure” his existing debt and open up a line of credit for AIG.
Buhler wrote that he had “spent a significant amount of time” meeting with
Triche “to come up with the best possible financial structure of [Buhler’s]
indebtedness with First Bank and the integration of that relationship with
[his] new investor groups.” Buhler proposed that the “balance of [his] current
inventory loan would be converted to a working line of credit at a favorable
interest rate for [him] personally and secured by first position in 100% of all
inventory (including all inventory purchased with investor funds).” Buhler
continued that pledging his AIG inventory would “secure this portion of the
converted debt making your loan to value ratio favorable.”
On August 20, 2004, Buhler, on behalf of AIG, executed a promissory
note with First Bank in the amount of $350,000 evidencing a line of credit
advanced by First Bank to Buhler and AIG. On that same day, Buhler signed
a “Commercial Security Agreement,” which offered as collateral “all inventory,
accounts, equipment, general intangibles and fixtures” of AIG. A few days
before August 20, 2004, Triche went to Buhler’s office to assist him in putting
together the AIG inventory to present to First Bank. Buhler’s then accountant,
Charlotte Glaspie, asked Triche whether it was legal to pledge the AIG
inventory twice. Triche responded that the inventory did not belong to the
investors, and that all Buhler owed them was a return on their investment.
Buhler told Glaspie that if “Wayne [Triche] said it was okay[,] I guess it’s okay.”
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Buhler subsequently defaulted on his line of credit from First Bank. On
July 13, 2005, First Bank’s successor, State Bank & Trust, foreclosed on
Buhler’s AIG inventory. Plaintiffs sued Buhler and Triche 2 for violations of
state and federal securities laws, La. Rev. Stat. Ann. § 51:712 and §10(b) of the
Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and Rule 10b-5
promulgated thereunder. Plaintiffs alleged that the omission of Buhler’s dire
financial condition and lack of notice that Buhler could pledge the collateral
promised to investors to First Bank constituted fraud. 3 In exchange for
plaintiffs’ agreement not to pursue any judgment against him, Buhler—
although nominally a defendant—cooperated with plaintiffs.
II. Jury Instructions and Verdict
The district court denied Triche’s motions for judgment as a matter of
law after plaintiffs rested and at the close of evidence. Over plaintiffs’
objections, the district court refused to instruct the jury on the Louisiana
Securities Law, La. Rev. Stat. Ann. § 51:712. The court agreed with Triche’s
counsel that the elements of the state claim were identical to those under
federal law, and concluded that the state law claim was “assumed” in plaintiffs’
claim under Rule 10b-5.
The verdict form—in “yes or no” format—asked the jury whether each of
the five elements of a Rule 10b-5 claim were met for each plaintiff as to both
Buhler and Triche. The first element asked whether the individual defendant
“used an ‘instrumentality of interstate commerce’ in connection with the
advance of funds . . . to [AIG]” for at least one of the plaintiffs. The verdict slip
then instructed the jury to consider each of the remaining four elements
2 Plaintiffs brought the same claims against a third defendant, Daryl DeArmond, a
partner in Triche’s consulting firm. The district court granted DeArmond’s motion for
judgment as a matter of law at the close of evidence and dismissed all claims against him.
3 Plaintiffs’ additional claims for negligent misrepresentation, conversion, and breach
of contract were dismissed prior to trial.
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sequentially for each plaintiff, continuing on to the next element only if it
answered “yes” to the previous one. If all elements were satisfied, the jury had
the option to award damages to that plaintiff.
In determining Buhler’s liability, the jury answered in the affirmative
for every element as to every plaintiff. With regard to Triche, however, the
jury answered “yes” to the interstate commerce element for Heck only, and
answered “no” as to the other plaintiffs. Because the verdict form instructed
that the interstate commerce element needed only be satisfied in connection
with one plaintiff, the jury then moved on to consider the remaining four
elements sequentially for each plaintiff and answered “yes” as to all. The jury
awarded damages for all plaintiffs against Buhler and Triche totaling
$301,949.00. The jury apportioned 60% of the liability to Buhler and 40% to
Triche.
When the verdict was returned, the district court informed the parties
that “the jury did not follow the instructions” because it had awarded damages
for each plaintiff against Triche even though it did not find that he used an
instrumentality of interstate commerce in connection with four of the
plaintiffs. The court announced that it planned to disregard the damage award
against Triche for all plaintiffs except Heck. Plaintiffs objected on the ground
that liability could be imposed on both defendants so long as one of the
defendants was found to have used an instrumentality of commerce. The
district court stated that it would withhold its ruling until briefing by the
parties.
Plaintiffs subsequently submitted a “Motion to Enter Judgment in
Accordance with Verdict Form” and argued that the verdict should be upheld
because the jury found that Buhler used an instrumentality of interstate
commerce as to all defendants, or, in the alternative, because their securities
claim under Louisiana law did not require that an instrumentality of interstate
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commerce be used at all. Without explanation, the district court entered
judgment on June 22, 2011, in the amounts recorded on the verdict form.
III. Postjudgment Motions and Rulings
Plaintiffs first moved for attorney’s fees on June 21, 2011, one day before
the district court entered judgment. The district court dismissed plaintiffs’
motion for attorney’s fees with instructions to refile after it ruled on
postjudgment motions.
On June 29, 2011, plaintiffs moved to amend the judgment pursuant to
Federal Rule of Civil Procedure (or “Rule”) 59(e) to include prejudgment
interest and provide for joint and several liability among Triche and Buhler.
On July 20, 2011, Triche timely filed his renewed motion for judgment as a
matter of law under Rule 50(b) as to plaintiffs’ claims under Rule 10b-5 and
the Louisiana Securities Law. 4 On August 19, 2011, Triche filed a motion to
amend the judgment and for a new trial based on the district court’s statement
upon reading the verdict that the jury had not found the required elements to
hold Triche liable to four of the plaintiffs. 5
The district court denied Triche’s motions for judgment as a matter of
law and for a new trial on September 28, 2012. In its ruling, the district court
stated that “the verdict form sets forth all necessary elements for a finding of
liability against [Triche]” and explained that its initial comment that the jury
4 Triche’s Rule 50(b) motion stated that “Plaintiffs’ state Blue Sky Law claims are
considered subsumed within the federal law claims for purposes of this motion.” Triche’s
contention on appeal that he did not have the opportunity to contest his liability under
Louisiana law in front of the district court is therefore disingenuous. His Rule 50(b) motion
clearly sought to dispose of both the state and federal claims at issue during the trial. His
failure to adequately brief the district court on the Louisiana Securities Law was a
consequence of his own misunderstanding of the elements of a claim under that statute.
5 The district court purportedly granted Triche an extension of time beyond the
twenty-eight day deadline to file his Rule 59 motion, but that deadline is jurisdictional and
cannot be extended by the court. See Fed. R. Civ. P. 6(b)(2); Gribble v. Harris, 625 F.2d 1173,
1174 (5th Cir. 1980).
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did not find the requisite elements to impose liability was “in error as there
were sufficient elements to hold [Triche] liable under state law, not federal
law.” (emphasis in original). The court further elucidated that “[t]his is
because the missing element concerned activity in interstate commerce, which
is not required for a finding of liability under state law.”
On September 30, 2012, plaintiffs filed their second motion for attorney’s
fees. On July 2, 2013, in a document titled “Ruling and Order,” the district
court granted plaintiffs’ Rule 59(e) motion with respect to prejudgment
interest, but denied the motion’s request to declare Triche and Buhler jointly
and severally liable. The court again stated that “only the elements for liability
under state law were found by the jury,” and concluded that defendants could
not be held jointly and severally liable under Louisiana law. The court ordered
plaintiffs “to file a motion and proposed order within 14 days of this Ruling
specifying the amounts owed by each defendant to each plaintiff, including
interest.”
The July 2, 2013 Order also denied plaintiffs’ second motion for
attorney’s fees for failure to submit time sheets in compliance with Local Rule
54.2, but invited them to refile the motion in accordance with the rule. On July
12, 2013, Triche moved to toll the appeal deadline until the court ruled on
plaintiffs’ refiled motion for attorney’s fees pursuant to Rule 58 and Federal
Rule of Appellate Procedure (or “FRAP”) 4(a)(4)(A)(iii). The district court
granted the motion the same day and stayed the running of the appeals
deadline until the court ruled on any refiled motion in an “Amended Final
Judgment.”
On August 5, 2013, plaintiffs filed a “Motion for Reconsideration.” In
this motion, plaintiffs renewed their request for attorney’s fees, argued that
the district court erred in denying their Rule 59(e) motion for joint and several
liability, and provided a proposed judgment for each plaintiff that included the
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damages assessed against Triche in the jury verdict “plus legal interest from
[the date the promissory note was issued] until paid.” On February 4, 2014,
the district court issued a “Ruling, Order and Judgment.” The district court
denied plaintiffs’ fee motion for again failing to comply with Local Rule 54.2
and denied plaintiffs’ request for reconsideration—treating it as a motion
under Rule 60(b)—of the court’s refusal to impose joint and several liability.
The ruling also included judgments for each of the plaintiffs against Buhler
and Triche. The judgments, for the first time, specified that that prejudgment
interest would be paid at the statutorily-prescribed state rate from the date of
the issuance of the promissory note until June 22, 2011—the date of the initial
judgment—and thereafter at the federal postjudgment rate, “until paid.”
Triche filed a notice of appeal on February 14, 2014. On appeal, Triche
argues that the district court erred by denying his motions for judgment as a
matter of law and giving incomplete jury instructions. Triche also claims that
there was insufficient evidence for the jury to find him liable under the state
or federal securities laws. Plaintiffs moved to dismiss Triche’s appeal as
untimely and argue that the jury’s verdict on the federal claim should be
reinstated.
STANDARD OF REVIEW
“We review de novo the district court’s denial of a motion for judgment
as a matter of law, applying the same standard as the district court.” Foradori
v. Harris, 523 F.3d 477, 485 (5th Cir. 2008) (internal quotation marks omitted).
A motion for judgment as a matter of law in a case tried by a jury, however, “is
a challenge to the legal sufficiency of the evidence supporting the jury’s
verdict.” Hiltgen v. Sumrall, 47 F.3d 695, 699 (5th Cir. 1995). “Although our
review is de novo, we recognize that our standard of review with respect to a
jury verdict is especially deferential.” Flowers v. S. Reg’l Physician Servs. Inc.,
247 F.3d 229, 235 (5th Cir. 2001) (internal quotation marks omitted). “In
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resolving such challenges, we draw all reasonable inferences and resolve all
credibility determinations in the light most favorable to the nonmoving party,”
and will reverse the denial of a motion or renewed motion for judgment as a
matter of law “only if the evidence points so strongly and so overwhelmingly in
favor of the nonmoving party that no reasonable jury could return a contrary
verdict.” Foradori, 523 F.3d at 485 & n.8. “A jury verdict must be upheld
unless there is no legally sufficient evidentiary basis for a reasonable jury to
find as the jury did.” Id. at 485 (internal quotation marks omitted).
DISCUSSION
I. Motion to Dismiss
Plaintiffs first move to dismiss Triche’s appeal for lack of jurisdiction on
the grounds that it was untimely. See Freudensprung v. Offshore Technical
Servs., Inc., 379 F.3d 327, 334 (5th Cir. 2004) (“A timely filed notice of appeal
is a jurisdictional prerequisite to appellate review.” (alteration omitted)). The
district court entered its initial judgment on June 22, 2011. In civil cases
between private parties, the litigants have thirty days from the entry of
judgment to file a notice of appeal unless certain postjudgment motions are
filed before that time period has lapsed. See FRAP 4(a)(1)(A), (4)(A). As
relevant here, timely filed postjudgment motions under Rules 50(b) and 59 will
toll the thirty-day period for filing a notice of appeal until the last such
remaining motion is decided. FRAP 4(a)(4)(A)(i) & (iv)–(v). A motion for
attorney’s fees under Rule 54 will also extend the time to appeal if, before a
notice of appeal has been filed, the court orders that the motion will have the
same tolling effect as one under Rule 59. FRAP 4(a)(4)(A)(iii); Rule 58(e).
Triche’s February 14, 2014 appeal was timely if (1) any of plaintiffs’
motions for attorney’s fees tolled the time period for appeal until that date or
(2) the district court’s February 4, 2014 Order finally disposed of plaintiffs’
Rule 59 motion for prejudgment interest.
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Plaintiffs argue that the district court’s disposition of their Rule 59(e)
motion on July 2, 2013 disposed of the final postjudgment motion capable of
tolling the appeal deadline and therefore started the thirty-day clock.
Plaintiffs reason that the only extant issues after the July 2, 2013 Order were
a ministerial calculation of legal interest and a decision on attorney’s fees,
which they contend do not affect the finality of a judgment.
A. Attorney’s Fees
Relying on Budinich v. Becton Dickinson and Co., 486 U.S. 196, 199–203
(1988), plaintiffs argue that an outstanding issue of attorney’s fees does not
prevent a judgment from becoming final. Triche responds that the district
court’s order tolling the appeal deadline until it disposed of plaintiffs’ motion
for attorney’s fees prevented the deadline from running until the court denied
the motion on February 4, 2014.
Plaintiffs correctly state the holding of Budinich, but misunderstand its
import here. In 1993, Congress amended FRAP 4(a)(4) to conform to Budinich.
See FRAP 4, Advisory Committee Notes, 1993 Amendments. The Rule now
provides that a timely filed motion for attorney’s fees under Rule 54 will delay
the time for an appeal “if the district court extends the time to appeal under
Rule 58.” FRAP 4(a)(4)(A)(iii) (emphasis added). Congress “exclude[d] motions
for attorney’s fees from the class of motions that extend the filing time unless
a district court, acting under Rule 58, enters an order extending the time for
appeal.” FRAP 4, Advisory Committee Notes, 1993 Amendments; see also Ray
Haluch Gravel Co. v. Cent. Pension Fund of Int’l Union of Operating Eng’rs &
Participating Emps., 134 S. Ct. 773, 781 (2014) (explaining that Rule 58(e)
“confirms the general practice of treating fees and costs as collateral for finality
purposes” in accordance with Budinich, but permits a district court to delay
the time to appeal “to avoid a piecemeal approach in the ordinary run of cases
where circumstances warrant delaying the time to appeal”). The dispositive
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question, then, is whether the district court’s July 12, 2013 Order tolling the
appeals deadline was valid under Rule 58, and thus extended the time for
appeal under FRAP 4(a)(4)(A)(iii).
Rule 58(e) provides that “if a timely motion for attorney’s fees is made
under Rule 54(d)(2), the court may act before a notice of appeal has been filed
and become effective to order that the motion have the same effect under
[FRAP] 4(a)(4) as a timely motion under Rule 59.” The first issue is whether
plaintiffs’ fee motion was timely. 6 After the court dismissed plaintiffs’ first
motion for attorney’s fees with an order to refile the motion after the court
ruled on postjudgment motions, plaintiffs filed a second fee motion on
September 30, 2012. On July 2, 2013, the district court denied this motion
without prejudice and ordered plaintiffs to refile the motion within 14 days in
compliance with the Local Rules. Plaintiffs requested an extension of time to
file their third fee motion on July 12, 2013 and were granted a new deadline of
August 5, 2013. Plaintiffs filed their third fee motion on August 5, 2013. The
court denied the motion (again, without prejudice) on February 4, 2014.
Rule 54(d)(2)(B)(i) provides, in relevant part, that “[u]nless a statute or
a court order provides otherwise, the motion [for attorney’s fees] must . . . be
filed no later than 14 days after the entry of judgment.” (emphasis added). 7
6 Plaintiffs argue that the district court’s order did not toll the time for appeal because
Triche’s Rule 58(e) motion was untimely as measured from plaintiffs’ initial motion for
attorney’s fees and the initial entry of judgment. This argument is premised on a misreading
of Rule 58(e). Rule 58(e) permits tolling if a “timely motion for attorney’s fees is made under
Rule 54(d)(2).” (emphasis added). Rule 58 does not set out a timeliness requirement for the
tolling motion—it is the fee motion that must be timely. The rule requires only that the
district court’s tolling order—and therefore any motion for such order—treating the fee
motion as a Rule 59 motion be entered “before a notice of appeal has been filed and become
effective.” Plaintiffs’ contention that Triche was required to file a tolling motion under Rule
58(e) within twenty-eight days of the judgment is meritless. Indeed, the operative fee motion
here, as discussed infra, was not filed until more than two years after the initial judgment.
7 Local Rule 54.2 governing the award of attorney’s fees does not substitute a filing
deadline for the fourteen day period listed in the federal rules.
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Plaintiffs complied with each of the district court’s orders for filing their
attorney fee motions. Accordingly, under Rule 54(d)(2)(B), all of plaintiffs’ fee
motions made before Triche noticed his appeal were timely. 8 But Rule 58(e)
specifies that if a timely fee motion is made, the district court may “order that
the motion” have the same effect as a Rule 59 motion. (emphasis added).
Triche requested in his Rule 58(e) motion that the district court treat plaintiffs’
prospective third fee motion as one under Rule 59. Granting Triche’s motion,
the district court entered its Rule 58(e) Order on July 12, 2013, “stay[ing] the
running of appeal deadlines until the Court issues an Amended Final
Judgment” including an award (or not) of attorney’s fees and prejudgment
interest. Plaintiffs’ first two fee motions—filed on June 21, 2011 and
September 30, 2012—were already dismissed by the time the court entered its
order, and thus could not have tolled the appeals deadline until February 14,
2014. Plaintiffs’ August 5, 2013 fee motion, however, was not denied until
February 4, 2014. Thus, if the district court had the authority to issue its Rule
58(e) Order treating the yet-to-be-filed August 5, 2013 fee motion as one under
Rule 59, the court’s Order reset the time to file an appeal when the motion was
disposed of on February 4, 2014, and Triche’s notice of appeal was timely.
There is nothing in the text of Rule 58(e) that prevents a district court
from ordering that a prospective timely fee motion will toll the deadline for
appeal. The rule simply states that “if a timely motion for attorney’s fees is
made,” the court may order that the motion has the same tolling effect as one
under Rule 59, provided that the order is entered “before a notice of appeal has
been filed and become effective.” The only temporal limitation on the court’s
8The 1993 Advisory Committee Notes to the Rule also state that “the granting of a
motion under Rule 59” automatically begins a new period for filing. So, even if plaintiffs’ first
two requests had not been timely, their August 5, 2013 motion would have been timely
because the district court partially granted plaintiffs’ Rule 59 motion on July 2, 2013 and
then extended plaintiffs’ time to file another fee motion until August 5.
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authority to treat a Rule 54 motion for attorney’s fees as a motion under Rule
59 is that the order must be issued before a party has filed a notice of appeal
and before the time to notice an appeal has expired. See Bunley v. City of San
Antonio, 470 F.3d 189, 200 (5th Cir. 2006) (holding that even if no appeal is
taken, the district court cannot “revive and retroactively delay [a party’s] time
to appeal from the judgment on the merits after that judgment ha[s] become
final and unappealable”). Thus, a district court may order that a motion for
attorney’s fees has the same tolling effect as a motion filed under Rule 59 even
if the order is entered before a fee motion is filed, so long as: the fee motion is
timely, no appeal has been noticed, and the time for appeal has not expired.
In dicta, the Second Circuit has endorsed a contrary interpretation. In
holding that a Rule 58(e) order can only toll the time for appeal while the
possibility of an appeal exists, the Second Circuit—interpreting an iteration of
the rule prior to the 2007 amendments 9—stated that the phrase “‘when a
timely motion for attorneys’ fees is made,’ . . ., indicates that a Rule 58[e] order
cannot properly be entered prior to the filing of a fee motion.” Mendes Junior
Int'l Co. v. Banco do Brasil, S.A., 215 F.3d 306, 312–13 (2d Cir. 2000). But
Rule 58 does not, by its text, prohibit a district court from entering a tolling
order in anticipation of a forthcoming motion for attorney’s fees. A better
reading of the Rule, especially considering the permissive gloss of the 2007
Amendments, is that it prevents a tolling order from taking effect until, and
unless, a timely fee motion pursuant to Rule 54 is filed. This interpretation is
9 Rule 58(c)(2), as amended in 1993, stated that: “When a timely motion for attorney’s
fees is made under Rule 54(d)(2), the court may act before a notice of appeal has been filed
and has become effective to order that the motion have the same effect under [FRAP] 4(a)(4)
as a timely motion under Rule 59.” As part of the 2007 Amendments to the Rules, this
provision was relocated to Rule 58(e) and “[w]hen a timely motion for attorney’s fees is made”
was replaced with “[b]ut if a timely motion for attorney’s fees is made.” The 2007
amendments are “stylistic only.” Advisory Committee Notes, 2007 Amendments.
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faithful both to the amendment’s goal of efficiency, and the rule that “[a]
district court has inherent power ‘to control the disposition of the causes on its
docket with economy of time and effort for itself, for counsel, and for litigants.’”
United States v. Colomb, 419 F.3d 292, 299 (5th Cir. 2005) (quoting Landis v.
N. Am. Co., 299 U.S. 248, 254 (1936)).
This conclusion is strengthened when one considers the “intertwined
provisions” of FRAP 4(a)(4), Rule 58, and Rule 54. Mendes Junior, 215 F.3d at
311. FRAP 4(a)(4)(iii) provides that a timely fee motion under Rule 54 will
extend the time for appeal if the district court designates that it will have such
effect under Rule 58(e). Rule 54, in turn, permits a district court, by court
order, to determine the timeliness of a fee motion. It follows that a court, in
setting a deadline for the filing of a fee motion consistent with its power under
Rule 54, may also order that a complying motion will toll the time for appeal
under Rule 58(e). If Rule 58(e) is read to prevent a district court from treating
an anticipated fee motion as one under Rule 59, the district court will be forced
to file two orders: one permitting an extension of time; and, once the fee motion
that was the subject of the court’s first order is filed, a separate order declaring
that it will toll the time for appeal. 10 Accordingly, both the text and purpose of
Rule 58 support finding that a district court may enter a Rule 58(e) motion to
take effect upon the filing of a timely fee motion. Because the district court’s
July 12, 2013 Order granting Triche’s request to stay the appeal deadline until
plaintiffs’ third fee motion was decided had the effect of treating plaintiffs’
10Moreover, in the not uncommon instance where a district court orders that a fee
motion be refiled, the opposing party will have to request, and the court will have to enter, a
separate 58(e) order upon each iteration if such an order cannot address a prospective fee
motion. It is easy to imagine the confusion this burdensome procedure would create among
courts and litigants alike, potentially resulting in a party’s forfeiture of the right to appeal
the underlying judgment (as is threatened in the instant case).
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August 5, 2013 fee motion as a timely motion under Rule 59, Triche’s February
14, 2014 appeal was timely.
B. Prejudgment Interest
Even assuming that the district court’s Rule 58(e) Order was ineffective,
Triche’s appeal would still be timely. Triche argues that the district court’s
July 2, 2013 Order did not completely dispose of plaintiffs’ Rule 59 motion for
prejudgment interest, and that this disposition was not accomplished until the
court’s February 4, 2014 Order and Judgment. Plaintiffs respond that the
June 22, 2011 Judgment was a final judgment even though it made no mention
of interest because prejudgment and postjudgment interest were both
statutorily mandated and thus all that remained was a ministerial calculation.
Plaintiffs’ argument ignores the Supreme Court’s admonition that
“prejudgment interest is an element of [a] plaintiff’s complete compensation”
and a district court, in deciding whether to award prejudgment interest (and
how much), must examine “matters encompassed within the merits of the
underlying action.” Osterneck v. Ernst & Whinney, 489 U.S. 169, 175–76 (1989)
(alterations omitted). For this reason, the Supreme Court has held that a
postjudgment motion for discretionary or mandatory prejudgment interest is a
Rule 59(e) motion that tolls the time for appeal. Id. at 176 & n.3; see also,
Crowe v. Bolduc, 365 F.3d 86, 92–93 (1st Cir. 2004) (holding that Osterneck
requires that postjudgment motions “seeking an initial award of mandatory
prejudgment interest” must be brought pursuant to Rule 59(e) and citing
cases). Thus, contrary to plaintiffs’ contention that their motion for
prejudgment interest did not require an amendment to the June 22, 2011
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Judgment, the court’s award was a substantive alteration to the judgment and
thus had precisely that effect. 11
The question remains whether the district court’s July 2, 2013 Order
completely disposed of plaintiffs’ Rule 59(e) motion for prejudgment interest
seven months before Triche’s appeal. In that Order, the district court
announced that it would award prejudgment interest at the Louisiana
statutory rate and specified the date from which the interest would run. This
Order could be interpreted to contain the requisite amount of information
pertaining to the award of prejudgment interest to constitute a final amended
judgment. See, e.g., SEC v. Carrillo, 325 F.3d 1268, 1272 (11th Cir. 2003)
(holding that “if the judgment amount, the prejudgment interest rate, and the
date from which prejudgment interest accrues have been established . . . the
court’s failure to calculate the precise amount of prejudgment interest does not
prevent the court’s order from constituting a final judgment.”).
It is apparent, however, that the district court did not intend for its July
2, 2013 Order to be final. Rule 58(a) requires that “[e]very judgment and
amended judgment must be set out in a separate document.” 12 The district
court’s July 2, 2013 “Ruling and Order” provided that interest “will be
calculated” from the date of the issuance of the promissory notes and ordered
11 Plaintiffs’ citations to cases in which the district court’s final judgment awarded
prejudgment interest and left nothing more than a calculation to be completed are inapposite.
The district court’s June 22, 2011 Judgment made no mention of prejudgment interest and
therefore required an amendment to include such interest. See Osterneck, 489 U.S. at 176 &
n.3.
12 Rule 58(a) also states that a separate document is not required for an order
“disposing of” a postjudgment motion that tolls the time for appeal under FRAP 4(a)(4), such
as a Rule 59 motion. As the Seventh Circuit has explained, “[t]he only way to reconcile the
requirement that an amended judgment be set forth in a separate document with the
exception to that requirement for an order disposing of a Rule 59(e) motion is by reading
‘disposing of a motion’ as ‘denying a motion.’” Emp’rs Ins. of Wasau v. Titan Int’l, Inc., 400
F.3d 486, 489 (7th Cir. 2005). This interpretation is supported by the Advisory Committee
Notes, which clarify that “if disposition of the [Rule 59] motion results in an amended
judgment, the amended judgment must be set forth on a separate document.”
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plaintiffs to file a proposed order specifying the amounts owed to each
defendant. Less than two weeks after that Order, the district court granted
Triche’s motion to stay the appeals deadline until it “issue[d] an Amended
Final Judgment.” On February 4, 2014, the court issued a “Ruling, Order and
Judgment” that, for the first time, specified that prejudgment interest at the
state rate would run until June 22, 2011, and from the federal rate thereafter
until paid, and entered judgment for plaintiffs. 13
It is clear that the district court intended to dispose of plaintiffs’ Rule
59(e) motion completely in the February 4, 2014 “Judgment” and not its July
2, 2013 “Order.” Accordingly, the February 4, 2014 document is the final
judgment starting the appellate clock. See Creaghe v. Albermarle Corp., 98 F.
App’x 972, 974 (5th Cir. 2004) (finding that where an order “contemplated that
a separate final judgment would later issue,” and the district court did not
intend the order to be a final decision, the order was not a final judgment);
Oliver v. Home Indem. Co., 470 F.2d 329, 331 (5th Cir. 1972) (holding that
where the district court entered orders responsive to postjudgment motions
stating that an “Amended Final Judgment” would be issued, orders were not
final and an appeal could not be taken until the amended judgment was
issued); see also Goodwin v. United States, 67 F.3d 149, 151 (8th Cir. 1995) (“To
be a final order or judgment, there must be ‘some clear and unequivocal
manifestation by the trial court of its belief that the decision made, so far as
[the court] is concerned, is the end of the case.’” (quoting Fiataruolo v. United
13 In addition to the amended final judgment, the February 4, 2014 “Ruling, Order,
and Judgment” also included an opinion denying plaintiffs’ motion for reconsideration of the
court’s refusal to impose joint and several liability and plaintiffs’ motion for attorney’s fees.
As Triche timely appealed from this amended judgment, he had no incentive to argue that it
violated the separate document rule and thus did not constitute a final judgment. Because
this requirement is not jurisdictional and neither party has mentioned it, it is waived. See
Simmons v. Willcox, 911 F.2d 1077, 1080 (5th Cir. 1990).
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States, 8 F.3d 930, 937 (2d Cir. 1993)). Because Triche filed his notice of appeal
well within this thirty-day window, plaintiffs’ jurisdictional argument also
fails for this reason.
Plaintiffs’ motion to dismiss Triche’s appeal for lack of jurisdiction is
DENIED.
II. Jury Instructions
A. Federal Law
Triche argues that the district court’s judgment must be reversed
because the court gave “incomplete” jury instructions under federal law and no
instructions at all under state law. Because of the confusing procedural
posture, both parties misunderstand the district court’s final judgment and the
issues on appeal. The district court did not hold Triche liable under federal
law. As detailed above, after the district court announced its intention to
disregard much of the damages award against Triche, plaintiffs argued that
the verdict was proper under both the federal and state securities statutes.
The district court subsequently entered a judgment against Buhler and Triche
consistent with the jury’s award of damages, without explanation as to
whether Triche’s liability rested on Rule 10b-5, the Louisiana Securities Law,
or both statutes. In its orders denying Triche’s Rule 50(b) motion and granting-
in-part plaintiffs’ Rule 59(e) motion, the district court stated that the jury’s
verdict against Triche satisfied the elements of plaintiffs’ state law claim, but
not their federal law claim.
Whether this “clarification” is viewed as the court’s fixing of a clerical
error in its June 22, 2011 judgment—i.e. a “failure to memorialize part of its
decision,” Garamendi v. Henin, 683 F.3d 1069, 1079 (9th Cir. 2012)—or as the
court’s exercise of its authority to substantively amend its initial judgment in
response to the parties’ postjudgment motions, the final disposition in district
court was that Triche’s liability is predicated entirely on La. Rev. Stat. Ann.
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§§ 51:712 & 714. See In re Galiardi, 745 F.2d 335, 337 (5th Cir. 1984) (Rule
60(a) permits a court, at any time, “to correct omissions in a judgment that had
been intended at the time of its entry,” but “does not grant a district court carte
blanche to supplement by amendment an earlier order by what is subsequently
claimed to be an oversight or omission.”); Rivera v. PNS Stores, Inc., 647 F.3d
188, 198–99 (5th Cir. 2011) (“[A] change to a judgment that affects the
substantive rights of the parties is beyond the scope of Rule 60(a)” and must
be corrected by a motion under Rule 59(e) (internal quotation marks and
alterations omitted)). Accordingly, Triche’s arguments directed towards the
court’s jury instructions and sufficiency of the evidence related to federal law
are inapposite. Likewise, as discussed infra, plaintiffs’ arguments that Triche
should be held liable under federal law are not properly before us because they
failed to file a cross-appeal.
B. State Law
Triche also challenges the district court’s failure to instruct the jury on
the elements of a claim under La. Rev. Stat. Ann. §§ 51:712(A) & 714(B), and
failure to require the jury to make a factual finding as to whether or not Triche
was a “seller” or “control person” under the Louisiana Securities Law. Triche,
however, has forfeited his right to raise these claims here. Under the invited
error doctrine, “[a] party cannot complain on appeal of errors which he himself
induced the district court to commit.” United States v. Lopez-Escobar, 920 F.2d
1241, 1246 (5th Cir. 1991). “This Court has made clear that the invited error
doctrine applies to jury instructions as well as evidentiary rulings.” United
States v. Baytank (Houston), Inc., 934 F.2d 599, 606–07 (5th Cir. 1991).
The district court refused to instruct the jury on plaintiffs’ state law
claim because it concluded that the elements of the claim were identical to a
claim under Rule 10b-5. This determination was clearly erroneous. To
establish a claim under Rule 10b-5, a plaintiff must prove “1) a misstatement
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or omission 2) of material fact 3) occurring in connection with the purchase or
sale of a security, that 4) was made with scienter and 5) upon which the
plaintiff justifiably relied, 6) and that proximately caused injury to the
plaintiff.” Brunig v. Clark, 560 F.3d 292, 295–96 (5th Cir. 2009) (internal
quotation marks omitted). Section 712 of the Louisiana Securities Law, La.
Rev. Stat. Ann. § 51:712, is not based on Section 10(b) of the Securities and
Exchange Act of 1934, but is “[m]odeled after Section 12(2) of the Securities
Act of 1933.” State v. Powdrill, 95-2307 (La. 11/25/96), 684 So. 2d 350, 354.
The Louisiana statute provides:
A. It shall be unlawful for any person:
...
(2) To offer to sell or to sell a security by means of any oral or
written untrue statement of a material fact or any omission to
state a material fact necessary in order to make the statements
made, in the light of the circumstances under which they are made,
not misleading, the buyer not knowing of the untruth or omission,
if such person in the exercise of reasonable care could not have
known of the untruth or omission.
La. Rev. Stat. Ann. § 51:712.
It must first be noted that the statute contains a scrivener’s error that
inverts its purpose. As currently written the statute imposes liability on “any
person” who makes a material misstatement or omission “if such person in the
exercise of reasonable care could not have known of the untruth or omission.”
That is, the statute penalizes a seller that did not know, and, acting with
reasonable care, still could not have known, of the falsity of the statement or
the misleading nature of the omission.
The origin of this mistake is clear. Unlike Section 12(2) of the Securities
Act of 1933, the Louisiana Securities Law was also intended to serve as a
criminal statute. The previous version of the statute was identical to the
current version except for the last clause. That iteration made it “unlawful for
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any person” to make a material misstatement or omission “if such person shall
not sustain the burden of proof that he did not know, and in the exercise of
reasonable care could not have known, of the untruth or omission.” In State v.
Powdrill, the Louisiana Supreme Court held that the predecessor of the
current version of Section 712(A)(2) was unconstitutional as applied in
criminal cases because “it impermissibly shift[ed] the burden of proof of an
essential element of the crime to defendants.” 684 So. 2d at 356. Responding
to Powdrill, the Louisiana legislature deleted the burden shifting language
emphasized above. See 1999 La. Bill Digest, Engrossed, 1999 Reg. Sess. H.B.
445. This deletion turned what was previously conduct that allowed a
defendant to avoid liability—i.e. exercising reasonable care—into an element
of the offense. It is evident that the legislature simply intended to remove the
burden of proof of demonstrating the exercise of reasonable care from the
defendant and require the plaintiff, or state in a criminal proceeding, to prove
the defendant’s knowledge or negligence. 14 Indeed, it appears that Louisiana
courts have implicitly assumed the statute to impose the intended negligence
standard. See, e.g., George v. White, 12-101 (La. App. 5 Cir. 10/30/12), 101 So.
3d 1036, 1045–46 (concluding that defendant was not liable under Section 712
because plaintiff offered no evidence that defendant “knew or ‘in the exercise
of reasonable care’ could have known” that the statements were false).
La. Rev. Stat. Ann. § 51:712(A)(2) thus requires the plaintiff to show
that:
(1) the defendant made a false or misleading statement of a
material fact or failed to state a material fact necessary in order to
make the statement not misleading; (2) the plaintiff did not know
of the untruth or omission; (3) the defendant knew, or in the
14A criminal conviction under the Louisiana Securities Law requires the state to prove
that the defendant acted willfully. La. Rev. Stat. Ann. § 51:723; Powdrill, 684 So. 2d at 355.
It is unclear whether the current statute would pass constitutional muster as a criminal law.
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exercise of reasonable diligence, could have known, of the untruth
or omission.
Ponthier v. Manalla, 06-632 (La. App. 5 Cir. 1/30/07); 951 So. 2d 1242, 1255
(quoting Taylor v. First Jersey Securities, Inc., 533 So. 2d 1383, 1386 (La. App.
4 Cir. 1988)). 15
There are obvious differences between the elements required to establish
liability under Rule 10b-5 and Louisiana’s Section 712. As the district court
acknowledged in recognizing the error in its verdict form, Section 712 does not
require a connection to interstate commerce. Next, Section 712 does not
require a plaintiff to establish scienter, but, like Section 12(2) of the Securities
Act of 1933, requires only a showing that the defendant was negligent. See
Landry v. Thibaut, 523 So. 2d 1370, 1380 (La. Ct. App. 5 Cir. 1988); Dupuy v.
Dupuy, 551 F.2d 1005, 1023 n.31 (5th Cir. 1977) (Section 712 “measures the
conduct of defendants against a negligence standard of care.”). Also like its
federal analog Section 12(2), Section 712 does not require a plaintiff to prove
that he relied on the defendant’s misrepresentation or omission. Cf. Junker v.
Crory, 650 F.2d 1349, 1359 (5th Cir. 1981) (holding that to recover under
Section 12(2) “plaintiff need not establish that the defendant acted with
scienter or that he relied in any way on the defendant’s misrepresentations or
omissions.”). But, in contrast to Rule 10b-5’s less restrictive “in connection
with” requirement, Section 712 specifies that it is “the defendant” himself that
must have made the misstatement or omission. See Powdrill, 684 So. 2d at
15One Louisiana appellate court has held that loss causation is an element of a claim
under Section 712. See Williams v. Edward D. Jones & Co., 556 So. 2d 914, 917 (La. Ct. App.
3 Cir. 1990). Subsequent recitations of the rule have not included this element and, as this
court recently noted, the state of the law on this issue is uncertain. See Fishman v. Morgan
Keegan & Co., 574 Fed. App’x 449, 454 (5th Cir. 2014) (“[T]he question whether the Louisiana
Securities Law requires proof of loss causation does not have a straightforward answer.”).
Because Triche makes no argument related to loss causation and, in any case, is precluded
from raising his state law jury instruction claim, we need not take up the question here.
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354 (“Analogous to the Securities Act of 1933, [Section] 712(A)(2) also creates
the liability of sellers of securities who make material misstatements or
omissions in prospectuses.”); Dupuy, 551 F.2d at 1023 n.31 (Section 712
“prohibits only misrepresentations by sellers”); cf. Cyrak v. Lemon, 919 F.2d
320, 324 (5th Cir. 1990) (“[T]he Section 12(2) definition of seller does not apply
to either Section 10(b) or Rule 10b–5.”).
Thus, the district court erred in requiring the jury to find the elements
of a Rule 10b-5 claim to impose liability under Section 712 of the Louisiana
Securities Law. But this error was committed at Triche’s insistence. In his
proposed jury instructions, Triche represented that the provisions of the
Louisiana Securities Law are analogous to Rule 10b-5, and thus that his
suggested federal jury charges also covered plaintiffs’ claims under Section
712. At the charging conference, it was plaintiffs’ counsel that requested a
separate instruction for the state claim. In fact, plaintiffs’ counsel specifically
requested an instruction on Louisiana’s control person statute—the omission
of which Triche now alleges prejudiced him. Triche’s counsel, on the other
hand, not only failed to object to the omission of a state law instruction, but
encouraged the district court to reject plaintiffs’ proposed instruction and
erroneously argued that Louisiana law is “replete” with jurisprudence that the
state statute contains the same elements as a claim under Rule 10b-5. Because
Triche invited the error he now complains of, he is foreclosed from seeking
relief from this court. See United States v. Gray, 626 F.2d 494, 501 n.2 (5th
Cir. 1980) (“The invited error doctrine bars reversal even if the instruction
constituted plain error.”). 16
16Triche makes a corollary argument that the jury’s answers were inconsistent with
each other and the verdict, and that the district court erred by not requiring the jury to
reconsider its verdict under Rule 49. As an initial matter, this claim relates only to plaintiffs’
Rule 10b-5 claim, which is not properly at issue on appeal. As discussed, Triche cannot raise
any argument related to the court’s error in state law instruction. But Triche’s argument
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III. Sufficiency of the Evidence
Triche next argues that there was insufficient evidence from which a
properly instructed jury could find that he was a “seller” of the AIG securities
or a “control person” of AIG under Louisiana law. Because these questions
were not submitted to the jury and the district court did not make a factual
finding on the issues, the court “is considered to have made a finding consistent
with its judgment on the special verdict.” Fed. R. Civ. P. 49(a)(3). The district
court’s final judgment imposed liability on Triche for violations of the
Louisiana Securities Law and the court is thus deemed to have made the
required finding that Triche was either a seller or control person of a seller
under the statute. See id. The court’s imputed factual findings under Rule 49
are reviewed for clear error. See Taherzadeh v. Clements, 781 F.2d 1093, 1100
(5th Cir. 1986); J.C. Motor Lines, Inc. v. Trailways Bus Sys., Inc., 689 F.2d 599,
602 (5th Cir. 1982).
Section 712(A) makes it unlawful for a seller to make a material
misstatement or omission in a prospectus. See Powdrill, 684 So. 2d at 353;
Dupuy, 551 F.2d at 1024. Section 714(A) imposes liability on “[a]ny person
who violates [Section] 712(A).” La. Rev. Stat. Ann. § 51:714(A). Because there
is a dearth of law interpreting the definition of a seller under the state statute,
we look to federal law interpreting the Louisiana law’s model, Section 12(2) of
also fails as a factual matter. His contention is predicated on the jury’s answers to the
interstate commerce question. The jury answered “no” as to four of the five plaintiffs on the
question of whether Triche used an instrumentality of interstate commerce in connection
with the advance of funds to AIG, but proceeded to find that the other elements of the Rule
10b-5 claim were satisfied as to each plaintiff and awarded damages for all plaintiffs. The
jury’s answers were not inconsistent. The jury instructions required that plaintiffs must
show “that one or both of the defendants used an instrumentality of interstate commerce in
connection with the securities transaction involved in this case.” Likewise, the verdict form
directed that the jury should stop at the first element (instrumentality of interstate
commerce) only if it answered “no” for every plaintiff on the interstate commerce question.
Although the district court believed that the jury did not follow the instructions, it was the
court that misread the verdict form, not the jury.
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the Securities Act of 1933. Powdrill, 684 So. 2d at 353. Section 12(2) requires
a two-step inquiry to determine if a defendant is a “seller” within the meaning
of the statute: “(1) who passed title to the purchaser or solicited the title-
passing transaction; and (2) from whom did the plaintiff buy the security?” Ins.
Co. of N. Am. v. Dealy, 911 F.2d 1096, 1101 (5th Cir. 1990) (applying the rule
articulated in Pinter v. Dahl, 486 U.S. 622 (1988), for determining who is a
seller under Section 12(1) of the Securities Act of 1933 to the same inquiry
under Section 12(2)).
It is clear that Triche was not a “seller” of the AIG securities under
Section 712. Triche did not solicit any of the plaintiffs, nor did any of the
plaintiffs purchase AIG securities from him. On the other hand, it is equally
clear that Buhler was a “seller” of the AIG securities under Section 712 (Triche
does not argue to the contrary) and, as such, is liable to plaintiffs under Section
714(A).
Section 714(B) of the Louisiana Securities Law provides that:
Every person who directly or indirectly controls a person liable
under Subsection [714]A of this Section, every general partner,
executive officer, or director of such person liable under Subsection
A of this Section, every person occupying a similar status or
performing similar functions, and every dealer or salesman who
participates in any material way in the sale is liable jointly and
severally with and to the same extent as the person liable under
Subsection A of this Section unless the person whose liability arises
under this Subsection sustains the burden of proof that he did not
know and in the exercise of reasonable care could not have known
of the existence of the facts by reason of which liability is alleged to
exist. There is contribution as in the case of contract among several
persons so liable.
La. Rev. Stat. Ann. § 51:714(B) (emphases added). Thus, Triche is liable for
Buhler’s primary violations of Section 712 if he “directly or indirectly
control[led]” him, unless Triche “sustains the burden of proof that he did not
know and in the exercise of reasonable care could not have known” of the
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material omissions in the AIG pool document giving rise to Buhler’s liability. 17
Control is defined as “the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of a person.” La. Rev.
Stat. Ann. § 51:702(4). Here again, Louisiana precedent is thin on when a
defendant “controls” a primary violator of Section 712, and we look to federal
law for instruction.
In determining who is a “control person,” the Fifth Circuit similarly
construes the control person provisions in Section 15 of the Securities Act of
1933, 15 U.S.C. § 77o, and Section 20(a) of the Securities Exchange Act of 1934,
15 U.S.C. § 78t(a). See e.g., Paul F. Newton & Co. v. Tex. Commerce Bank, 630
F.2d 1111, 1115 (5th Cir. 1980). Control person liability does not require
participation in the fraudulent transaction. G.A. Thompson & Co. v. Partridge,
636 F.2d 945, 958 (5th Cir. 1981). But a plaintiff “must at least show that the
defendant had an ability to control the specific transaction or activity upon
which the primary violation is based.” Meek v. Howard, Weil, Labouisse,
Friedrichs, Inc., 95 F.3d 45, 1996 WL 405436, at *3 (5th Cir. June 25, 1996)
(unpublished decision) (citing Abbott v. Equity Group, Inc., 2 F.3d 613, 619–20
(5th Cir. 1993)). 18
The alleged fraudulent conduct is the omission of Buhler’s financial
condition and a proviso from the prospectus explaining that, despite the
prospectus’s statement that plaintiffs’ loans would be secured by the AIG
inventory purchased with the money, Buhler could pledge the promised
17 The Louisiana legislature has evidently elected to leave the burden-shifting
language in place for control person liability under Section 714(B), but not primary liability
under Sections 712 and 714(A).
18 This Circuit has not yet decided whether a plaintiff must show that the alleged
controlling person had “effective day-to-day control” or actually exercised his power over the
controlled person. Abbott, 2 F.3d at 619–20. Even assuming these elements are required, the
district court’s findings would not be clear error for the reasons discussed infra.
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collateral to another entity with a priority lien. Buhler’s testimony evinced
that he was completely dependent on Triche after he was fired from Go
Antiques. Buhler went to Triche for guidance after his termination and Triche
advised Buhler to get back into the antique business, precipitating the
formation of AIG. Triche contributed to the AIG pool document, including the
portion that stated that the investors’ loans would be collateralized with AIG
inventory. Triche was the “financial guy,” and approved the language in the
prospectus. Charlotte Glaspie, Buhler’s former secretary (whom Buhler fired
and had not spoken to until questioning her at trial), testified that upon
completing the AIG pool document, Triche remarked that it was “a good
document” and said “we’re going to raise some money and we’re going to get
Ken and them back flush.” Heck testified that he called Triche to determine if
he should invest in AIG and Triche told him it was the “real deal.”
AIG was created as an entity to pool investor funds, and during the time
Buhler was soliciting investments, AIG’s main purpose was capital acquisition.
Buhler testified that he reported to Triche “every single time” he obtained
money from an investor. Buhler also testified that he would not do anything
substantial without Triche’s “blessing.” He would consult with Triche about
all decisions except for “day-to-day small things in the operation.”
During the time Buhler was soliciting investments, Triche and Buhler
met with Buhler’s loan officer and the president of First Bank to discuss the
“restructuring of his debt.” Buhler owed over a million dollars to First Bank,
and although his debt apparently was not yet delinquent, he had no plan other
than AIG to come up with the money. Triche was a shareholder in First Bank
and had a personal relationship with its president. When First Bank
demanded more collateral from Buhler, Triche instructed Buhler to pledge the
AIG inventory purchased with the investors’ funds to First Bank to “secure”
his debt. Triche knew that the investors were promised a first lien on the
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inventory and discussed the issue in meetings with First Bank. Triche came
to Buhler’s office to help prepare the AIG inventory for presentation to First
Bank. Glaspie questioned Triche as to whether re-pledging the inventory to
First Bank was legal and Triche said that the inventory didn’t belong to the
investors and that this was done all the time. Buhler told Glaspie that if
“Wayne [Triche] said it was okay. I guess it’s okay.” On May 3, 2004, two days
before Buhler received the final AIG investment, he wrote to First Bank
agreeing to pledge AIG’s inventory as collateral for his existing debt and in
return for a line of credit for AIG. He pledged AIG’s inventory to First Bank
on August 20, 2004 and First Bank’s successor foreclosed on the inventory one
year later.
The district court’s (implied) determination that Triche controlled
Buhler was not clearly erroneous. Buhler testified, in sum, that: he was
dependent on Triche to get him out of debt; Triche advised him to get back into
the auction business; Triche contributed and approved the financial concepts
detailed in the prospectus; Buhler checked in with Triche after every
investment; during the time Buhler was soliciting investments, Triche
conducted meetings with his friends at First Bank to find a solution to satisfy
Buhler’s million dollar debt; Triche discussed the AIG inventory that was
promised to the investors with First Bank; Triche instructed Buhler to pledge
AIG’s inventory to First Bank; and Buhler, relying on Triche, obliged. The
evidence permits a finding that Triche effectively controlled Buhler in the
creation of AIG, drafting of the relevant portions of the AIG pool document,
soliciting of loans from investors, and pledging of AIG’s inventory to First
Bank.
To be sure, there is also evidence suggesting that Triche was only
peripherally involved, at least in the formation of the prospectus and at the
fundraising stage. Buhler testified that AIG was his business and that Triche
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was an “advisor.” Out of the “twenty or thirty” meetings between Buhler and
DeArmond relating to the AIG pool document, Triche attended only “three or
four.” Triche knew the prospectus would be used to raise money, but never
explicitly directed Buhler to collect funds. And, although Buhler testified that
he notified Triche every time he obtained a loan from an investor, Buhler did
not say that Triche offered anything more than “great job” in response.
Whatever we would have made of these potentially conflicting inferences
in the first instance, the clear error standard “plainly does not entitle a
reviewing court to reverse the finding of the trier of fact simply because it is
convinced that it would have decided the case differently.” Anderson v.
Bessemer City, 470 U.S. 564, 573 (1985). When “the district court is faced with
testimony that may lead to more than one conclusion, its factual
determinations will stand so long as they are plausible—even if we would have
weighed the evidence otherwise.” Nielsen v. United States, 976 F.2d 951, 956
(5th Cir. 1992). In other words, “[w]here there are two permissible views of
the evidence, the factfinder’s choice between them cannot be clearly
erroneous.” Anderson, 470 U.S. at 574. Because the district court’s
interpretation of the evidence was certainly plausible, Triche’s sufficiency
argument fails.
Triche’s reliance on Solow v. Heard McElroy & Vestal, L.L.P., 44,042 (La.
App. 2 Cir. 4/8/09); 7 So. 3d 1269, is misplaced. In Solow, the Louisiana Court
of Appeals held that a CPA firm that served as a seller’s auditor did not
exercise control over the seller. The court found that the auditor’s power “to
authorize the release of its [audit] opinion on [seller’s] financial statements”
and “failure to ensure that its draft [audit] opinion was withdrawn from the . .
. 10-K filings” did not endow the CPA firm with the requisite “power to direct
the management and policies” of the seller. Id. at 1281 (citing La. Rev. Stat.
Ann. § 51:702(4)). While this is surely a correct interpretation of the control
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person statute, plaintiffs did not allege that Triche controlled Buhler in his
capacity as the CPA for AIG. Solow has no bearing on the factual scenario
presented at trial. Under any interpretation of the evidence, Triche’s
relationship with Buhler and involvement with AIG went far beyond the
auditing services at issue in Solow. As detailed above, the court could
reasonably have found that Triche was extensively involved with Buhler and
AIG, and that Buhler would not have created AIG, solicited investments, or
pledged the inventory promised to the investors to First Bank without Triche’s
instruction or approval.
On appeal, Triche does not challenge or brief the insufficiency of the
evidence as to any of the other elements of plaintiffs’ state law claim under
Section 712. Triche does assert that there is insufficient evidence to find that
he had scienter under Rule 10b-5, but, as discussed above, the district court
did not find him liable under the federal statute. 19 To the extent that Triche
intended to make the same challenge to his liability under the Louisiana
Securities Law, it is waived. See United States v. Scroggins, 599 F.3d 433, 446
(5th Cir. 2010) (“A party that asserts an argument on appeal, but fails to
adequately brief it, is deemed to have waived it.” (citation omitted)).
Notwithstanding this waiver, the jury could have reasonably concluded,
as it did, that Buhler and Triche acted with scienter. Plaintiffs’ theory of the
case was that Triche oversaw Buhler’s creation of AIG and solicitation of funds
with the intent to convince Buhler to pledge those funds to First Bank, in which
19 Because Triche’s liability under the federal statute is not properly before the court,
Triche’s sufficiency-of-the-evidence challenges relating to reliance and “temporal connexity”
under Rule 10b-5 are also inapposite. As discussed supra, reliance is not an element of a
claim under the Louisiana Securities Law. Triche’s insistence that the prospectus’s lack of
an explicit attribution of the false statements or omissions to him defeats any claim of
reliance is thus a consequence of his continued misunderstanding of the elements of the state
law claim.
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he had a substantial financial interest. 20 Given the close proximity in time
between the beginning of Buhler’s solicitation of investors, meetings with First
Bank, and subsequent pledge of collateral, and Buhler and Glaspie’s testimony
that the AIG inventory was assigned to First Bank at Triche’s insistence, we
cannot say that no reasonable jury could have found that Triche planned to
pledge the inventory to First Bank and intentionally withheld this information
from the prospectus.
Moreover, plaintiffs were not required to prove Triche’s intent to commit
fraud to find Triche liable under Section 714(B). Plaintiffs needed only to show
that Buhler, in the exercise of reasonable care, could have discovered the
material omissions in the AIG pool document, and that Triche, as a control
person, did not sustain his burden of proving that, in the exercise of reasonable
care, he could not have known of the omissions or the facts rendering the
omissions materially misleading. See La. Rev. Stat. Ann. §§ 51:712 & 714. In
other words, although the burden is flipped, the showing needed to impose
20 Triche also challenges as irrelevant the district court’s admission of evidence related
to his ownership of stock in First Bank and Buhler’s pledge of inventory to the bank. But
this information was of course relevant to Triche’s alleged motive in helping Buhler start
AIG, solicit investments, and direct the pledge of collateral to the bank. The district court did
not abuse its discretion in admitting evidence probative of whether Triche intended to
mislead prospective investors. Likewise, Triche’s contention that the trial judge’s comment
to plaintiffs’ counsel that “I’ve given you an opportunity to provide evidence of perhaps a
motive, and I think you’ve done that,” was prejudicial because it “inferred” to the jury that
plaintiffs had established scienter is meritless. As an initial matter, Triche did not object to
the comment or request a curative instruction. In any case, the statement does not indicate
that plaintiffs successfully established a motive; the court stated only that plaintiffs had
taken the opportunity—i.e., attempted—to do so. Insofar as Triche claims that he was
prejudiced because the district court inferred that the pledge of inventory was “relevant” to
his scienter, this is a mere iteration of his challenge to the court’s evidentiary ruling and is
also denied. Finally, these challenges again relate only to the Rule 10b-5 claim and therefore
there is no relief to be provided. The only issue that Triche has properly presented to this
court related to his liability under Louisiana law is whether there was sufficient evidence
from which the district court could conclude that he controlled Buhler.
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primary liability on a seller and secondary liability on a control person under
the Louisiana Securities Law is only negligence. The court could have
concluded, consistent with its judgment, that Buhler and Triche did not act
with reasonable care in soliciting hundreds of thousands of dollars of loans and
promising that the loans would be secured by inventory purchased with the
money, while failing to disclose that Buhler was bankrupt, heavily indebted,
and, at the very least, contemplating pledging the promised inventory to First
Bank. Indeed, Triche does not even argue that the omissions were not
negligent. Accordingly, Triche’s claim that the evidence does not support the
district court’s judgment of liability under the Louisiana Securities Law fails.
IV. Judgment on Rule 10b-5 Claim
Finally, plaintiffs dedicate almost their entire brief to arguing that
Triche is liable under Rule 10b-5 and, accordingly, that the “verdict of the jury
on the Rule 10b-5 claim must be reinstated.” Plaintiffs contend that the
district court erred in holding that the verdict supported liability solely under
the state statute because only one use of an instrumentality of interstate
commerce is required in connection with a scheme to defraud in a Rule 10b-5
action.
The district court denied plaintiffs’ motion for joint and several liability
on the grounds that they failed to “establish the requisite conspiracy” for its
application under state law. Thus, as the judgment stands, plaintiffs can
collect only 40% of the damage award—the portion of liability the jury assigned
to Triche. But because the jury found that Triche acted “knowingly and with
intent to deceive, manipulate, or defraud,” if Triche is held liable for securities
violations under Section 10(b) and Rule 10b-5, plaintiffs will be entitled to the
imposition of joint and several liability, and will thus be able to enforce the
judgment against Triche for the full damage award. See 15 U.S.C. § 78u-
4(f)(2)(A) (“Any covered person against whom a final judgment is entered in a
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private action shall be liable for damages jointly and severally only if the trier
of fact specifically determines that such covered person knowingly committed
a violation of the securities laws.”).
Whether or not plaintiffs are correct that the jury found the requisite
elements to hold Triche liable under Rule 10b-5, this argument is not properly
before us. “[A]n appellate court may not alter a judgment to benefit a
nonappealing party.” Greenlaw v. United States, 554 U.S. 237, 244 (2008).
Rather, “it takes a cross-appeal to justify a remedy in favor of an appellee.” Id.at 244–45; see also Art Midwest Inc. v. Atlantic Limited Partnership XII, 742
F.3d 206, 211 (5th Cir. 2014) (“This circuit follows the general rule that, in the
absence of a cross-appeal, an appellate court has no jurisdiction to modify a
judgment so as to enlarge the rights of the appellee or diminish the rights of
the appellant.” (internal quotation marks and alteration omitted)). It is true,
of course, that an appellee, without filing a cross-appeal, may defend a
judgment on any ground, including one rejected by the district court. See
United States v. Am. Ry. Express Co., 265 U.S. 425, 435 (1924); Hoyt R. Matise
Co. v. Zurn, 754 F.2d 560, 565 n.5 (5th Cir. 1985). But here the district court
entered a final judgment against Triche only on plaintiffs’ state law claim, not
their federal claim under Rule 10b-5. Thus, plaintiffs do not merely seek to
uphold the judgment on the Louisiana Securities Law claim, but to hold Triche
liable under a separate federal statute. To amend the judgment in this way,
plaintiffs were required to file a cross-appeal. See Nw. Airlines, Inc. v. Cnty. of
Kent, Mich., 510 U.S. 355, 364 (1994) (“A cross-petition is required . . . when
the respondent seeks to alter the judgment below.”); Worthen v. Fidelity Nat.
Prop. & Cas. Ins. Co., 463 F. App’x 422, 428 n.4 (5th Cir. 2012) (holding that
where the district court granted summary judgment for plaintiff on his federal
claim but dismissed his state-law claims, plaintiff needed to file a cross-appeal
for consideration of his state-law claims).
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Likewise, it is obvious that the district court erred in rejecting plaintiffs’
motion for joint and several liability under Louisiana law for lack of evidence
of a conspiracy. Section 714(B) provides, right in the middle of the control
person definition, that such a person “is liable jointly and severally with and
to the same extent as the person liable under [Section 714(A)].” La. Rev. Stat.
Ann. § 51:714(B). As Buhler was liable to plaintiffs as a seller of securities
under Section 714(A), Triche should have been held jointly and severally liable
for the total damage award under Section 714(B). But, because plaintiffs have
not cross-appealed (or even mentioned this issue in their brief), we are without
jurisdiction to correct this error as well.
CONCLUSION
For the foregoing reasons, we AFFIRM the judgment of the district court.
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