Ducote Jax Holdings v. Bank One Corp ( 2009 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
June 19, 2009
No. 08-30037 Charles R. Fulbruge III
Clerk
DUCOTE JAX HOLDINGS LLC; DAVID L. DUCOTE, Trustee; STEVEN O.
MEDO, JR., Trustee; POYDRAS PARTNERS
Plaintiffs-Appellees
v.
WILLIAM E. BRADLEY
Defendant-Appellant
Appeal from the United States District Court
for the Eastern District of Louisiana, New Orleans
USDC No. 04-1943
Before HIGGINBOTHAM, BENAVIDES, and STEWART, Circuit Judges.
PER CURIAM:*
This is an appeal from a civil RICO judgment with damages awarded in
the amount of $6,432,600, and $74,156.25 in attorneys’ fees. We AFFIRM the
judgment as to liability. Finding that the district court clearly erred in awarding
damages, we REVERSE and RENDER the damages award. We AFFIRM the
award of attorneys’ fees.
*
Pursuant to 5TH CIR . R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR .
R. 47.5.4.
No. 08-30037
I. BACKGROUND
On July 8, 2004, the plaintiff, Ducote Jax Holdings, L.L.C., filed a
complaint alleging, inter alia, violations of the Racketeer Influenced and Corrupt
Organization Act (RICO). 18 U.S.C. §§ 1961–1968. The original complaint
asserted claims against Bank One, J.P. Morgan Chase, and three Bank One
executives: John B. Ohle, III; Scott D. Deichmann; and Jeffrey T. Conrad. The
complaint alleged that the defendants had induced the plaintiff to participate in
a tax strategy that the IRS subsequently found to be fraudulent.
Plaintiff alleged that Bank One’s documents and communications
contained false and/or misleading representations, including representations
that no interest or penalties would be assessed by the IRS. The complaint
further alleged that the purportedly independent third parties that reviewed and
advised the plaintiff with respect to the legitimacy of the tax strategies were
solicited and paid by Bank One and were thus substantially compromised and
did not fulfill their fiduciary and good faith obligations to the plaintiff. The
complaint alleged that the defendants failed to advise that the tax shelter was
unregistered and that hundreds of other clients were using this tax strategy.
The complaint also alleged predicate acts of mail and wire fraud in connection
with the RICO claim. In addition to the RICO claims, the complaint asserted
claims for breach of fiduciary duty, fraud, negligent misrepresentation, breach
of contract, civil conspiracy, and unfair trade practices.
With respect to the alleged injury incurred from the defendants’ scheme,
the RICO statement provided that the “Plaintiff has paid exorbitant fees and
commissions on tax strategies for which the Defendants completely
misrepresented the risk and potential return.” The RICO statement further
provided that “Plaintiff has suffered extensive monetary damages consisting of
unexpected tax liability, fees and commissions paid to the Bank One Enterprise,
as well as interest and penalties which the [IRS] will likely seek.”
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No. 08-30037
Subsequent to filing suit, the plaintiff became aware of Defendant-
Appellant William E. Bradley’s involvement with the named defendants through
documents received pursuant to the IRS’s investigation. Plaintiff then filed a
first amended and supplemental complaint adding Bradley as a named
defendant. Plaintiff subsequently filed another amended and supplemental
complaint adding the following three plaintiffs: Poydras Partners, David L.
Ducote (Ducote), trustee of the Ducote Class trust, and Steven O. Medo, Jr.,
trustee of The Chapman Charles Ducote Trust, and the Suzette A. Ducote Trust.
The plaintiffs alleged that Paul Daugerdas, a partner in the Chicago office of the
law firm Jenkens & Gilchrist, devised a tax strategy in which foreign exchange
digital options (“FX Contracts”) were purchased and sold. The purpose of the tax
strategy was to create losses to lessen other tax liability. The plaintiffs alleged
that Defendant John Ohle (Ohle), a Bank One executive, induced them to engage
in this tax strategy by representing that the tax strategies had been vetted by
Jenkens & Gilchrist. The plaintiffs further alleged that the defendants did not
explain that the Jenkens & Gilchrist attorneys who drafted the favorable opinion
letter regarding the tax strategy were approving its own tax strategy. The
plaintiffs alleged that the amount of fees the defendants billed was not based on
the time expended working on the transaction but simply on the amount of the
transaction.
In 2006, the plaintiffs received $2,850,000 pursuant to a settlement
agreement involving all the defendants except Bradley. With respect to Bradley,
the plaintiffs alleged that he was a member of the conspiracy and that he
accepted $255,000 from the monies plaintiffs paid the defendants. The plaintiffs
claimed that Bradley invested some of the money back in the illegal enterprise
when he wired $46,000 to Ohle and mailed a check for $184,000 to JDC Group,
Inc., an unknown co-conspirator. Bradley kept the remaining $25,000.
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No. 08-30037
During the proceedings below, Bradley failed to respond to the plaintiffs’
request for admissions. As a result, the magistrate judge ruled that all the
matters set forth in plaintiffs’ request for admissions were deemed admitted.
The district court affirmed that ruling.
On May 21, 2007, at the bench trial before the district court, the plaintiffs’
only two witnesses were Ducote and Bradley. Ducote is a named plaintiff in the
capacity of the trustee of the Ducote Class Trust. Ducote testified that Ohle
approached him regarding the tax strategy at issue. Ducote knew that Ohle was
with Bank One. Ducote was told that the tax strategy was “bullet-proof.”
Ducote was the “point person [in the family] responsible for kind of marshaling
this tax strategy.” During the time of the transaction Ducote was not aware that
Bradley had represented to Jenkens & Gilchrist that he was working on this tax
strategy. During the discovery proceedings in this case, Ducote was surprised
to see an invoice for over $30,000 worth of services rendered by Bradley
purporting to be for Wayne Ducote. Wayne Ducote is Ducote’s father and
manager of Ducote Jax Holding, L.L.C. Ducote was also surprised to discover
two other invoices from Bradley purporting to be for services rendered by
Bradley for Ducote and his sister Suzette Ducote.
Ducote testified that the use of the instant tax strategy resulted in
millions of dollars in losses by the “various family entities.” He testified that the
tax assessment was approximately $3,150,000, and the penalty was
approximately $315,000 (10% of the taxes), and the interest was approximately
$500,000. The fees paid to Jenkens & Gilchrist and Bank One were $1,033,500.
Attorneys’ fees associated with the current litigation totaled $648,181.50.
Ducote testified that the tax assessment had been paid to the IRS, that the
accountants computed a “loss of investment” of $1,500,000, and that he had
received $2,850,000 from the settlement with the other defendants. Ducote
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No. 08-30037
testified that, excluding the “subjective” figure for loss of investment, his family
entities had lost a little more than $3.9 million.
The plaintiffs called Bradley to testify. Bradley testified that he had a
personal injury practice in Hammond, Louisiana. Bradley met Ohle at a bar
review course shortly after graduating from law school in 1993. They studied for
the bar together, became close friends, and would see each other periodically.
Bradley remained in contact with Ohle even after Ohle moved from Louisiana
to D.C., and then later to Chicago. Bradley considered Ohle to be a good friend;
however, Bradley testified that they had not talked as much since the start of
this litigation. Although Bradley did not have specific recollection of a
conversation, he believed that Ohle contacted him and told him that an opinion
would be provided and Bradley was to fax it to Jenkens & Gilchrist. Pursuant
to Ohle’s instructions, Bradley sent to Jenkens & Gilchrist three invoices
totaling $112,500, purporting to be services he performed for matters related to
David, Wayne, and Suzette Ducote. Subsequently, Jenkens & Gilchrist wired
$255,000 to Bradley’s bank account. Bradley believed that he called either Ohle
or Paul Daugerdas regarding the $255,000, and was instructed to wire $46,000
to Ohle and write a check for $184,000 to an unknown entity called JDC.
Bradley paid himself the remaining $25,000. Bradley testified he worked less
than ten hours on this matter, could not find a file in his office regarding this
matter, and had “numerous conversations” with Daugerdas and Ohle regarding
this matter.
After Bradley testified, the defense called David Lukinovich. Lukinovich
was a certified tax attorney who had performed a substantial amount of work
over the past ten years for the Ducote family entities. Lukinovich set up a
number of trusts for the Ducotes. Lukinovich first heard about the instant tax
strategy from John Ohle, but he did not become involved in the marketing and
facilitating of the strategy. Lukinovich received calls from various clients that
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No. 08-30037
Ohle was meeting with them to talk about various strategies. Lukinovich met
with clients and was paid money from Bank One for work related to those
meetings. He estimated that he made “in the 50,000 dollar range.” Although
Lukinovich did not have a specific memory, he was sure he advised Ducote
regarding the risks involved with the strategy because there was not an “IRS
code section on it or some other type of IRS guidance.” In other words, the IRS
had not approved the strategy. In Lukinovich’s opinion, the strategy was not
fraudulent. Lukinovich had no idea that Bradley was involved.1
After post-trial briefing, the district court issued its findings of fact and
conclusions of law. Relying on the deemed admissions and evidence from the
bench trial, the district court found that Bradley is liable to the plaintiffs for
violations of the civil RICO statute, 18 U.S.C. §1962(a),(c) & (d), and, under
Louisiana law, breach of fiduciary duty; negligent misrepresentation; fraud; and
civil conspiracy. The court presented alternative damage awards under either
federal or state law: $6,432,600 plus costs and reasonable attorney fees for the
RICO violations; or in the alternative, $2,144,200 for the state claims of breach
of fiduciary duty, negligent misrepresentation, fraud, and civil conspiracy.
Pursuant to the civil RICO statute, the plaintiffs filed an application for
an award of attorneys’ fees and court costs. The district court ordered that
plaintiffs were entitled to $74,145.25 in attorneys’ fees from Bradley. Bradley
now appeals both the judgment and the attorneys’ fees.
II. ANALYSIS
A. SUFFICIENCY OF EVIDENCE
Bradley contends that the district court clearly erred in finding that the
named plaintiffs suffered all the damages awarded.2 “When a judgment after a
1
However, Bradley testified that he “had some [conversations] with Lukinovich.”
2
This challenge is raised with respect to all the theories of liability found by the
district court: RICO, breach of fiduciary duty, negligent misrepresentation, fraud and civil
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No. 08-30037
bench trial is on appeal, we review the findings of fact for clear error and the
legal issues de novo. Canal Barge Co. v. Torco Oil Co., 220 F.3d 370, 375 (5th
Cir. 2000). Under the clearly erroneous standard, we will reverse only if we
have a definite and firm conviction that a mistake has been committed.” Id. The
district court’s determination of damages is an issue of fact and thus reviewed
for clear error. Id. at 379. If the credibility of a witness is a factor in the district
court's decision, “[t]he burden of showing that the findings of the district court
are clearly erroneous is heavier” because “due regard shall be given to the
opportunity of the trial court to judge of the credibility of the witnesses.” Id. at
375 (quotations omitted).
Bradley argues that the plaintiffs did not show that the losses were only
incurred by the named plaintiffs—as opposed to other Ducote family members
or entities not named as plaintiffs. We agree that the testimony and documents
presented by the plaintiffs at the very brief bench trial did not demonstrate that
the damages alleged were suffered by the named plaintiffs. Nonetheless, the
deemed admissions, which Bradley does not expressly challenge on appeal, are
sufficient to demonstrate that the named plaintiffs were injured by Bradley’s
conduct.3 Without setting forth all the deemed admissions, we quote request for
admission numbers 2, 6, 8, and 12 as follows:
[No. 2] Please admit that you have conducted substantial
business in this Eastern District of Louisiana, that the violations
complained of by Plaintiffs occurred in this District, that you
transact or have transacted your affairs in this District, and that
your conduct, upon which this action is founded, was directed at and
intended to injure Plaintiffs in this, the Eastern District of
Louisiana.
conspiracy.
3
The amount of damages shown by the plaintiffs is discussed infra at II. D.
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No. 08-30037
[No. 6] Please admit that you entered into various
arrangements with other defendants named in this lawsuit to
market, promote and opine regarding certain tax strategies to high
net-worth individuals and business entities, such as and including
the Plaintiffs herein in order to generate exorbitant fees by
misrepresentations and advice that you and the other Defendants
knew or should have known were improper and illegal.
[No. 8] Please admit that you knew that the tax strategy that
was marketed to the Plaintiffs herein was similar to prior strategies
found abusive by the IRS and that, as a result, it would be intensely
scrutinized and likely regarded as a sham by the tax authorities.
[No. 12] Please admit that you did no work for the $112,500.00
fee you billed to Jenkins & Gilchrist with regard to any matters
relating to Ducote Jax Holdings, LLC, Wayne C. Ducote, David L.
Ducote, and/or Suzette A. Ducote.
Although the requests for admissions could have been drafted more
precisely, we are persuaded that the deemed admissions encompass conduct
rendering Bradley liable to the named plaintiffs. The district court’s finding
does not leave us with a definite and firm conviction that a mistake has been
made. Bradley thus has failed to demonstrate clear error.
B. FRAUD
Bradley next argues that the district court erred in finding that the
plaintiffs were the victims of fraud. Bradley asserts that the evidence shows
that Ducote was not induced by fraudulent claims but instead by the fact that
Bank One, a fiscally conservative institution, and the national prestigious law
firm of Jenkens & Gilchrist were endorsing the tax strategy. Bradley points to
testimony from Ducote that tends to support this assertion. However, Ducote
also testified, among other things, that he relied on misrepresentations that the
strategy was “bullet proof.” The district court, however, was free to credit
Ducote’s testimony as to what induced him to agree to use this tax strategy.
Bradley has not shown this finding clearly erroneous.
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No. 08-30037
C. RICO CLAIMS
Bradley next contends that the district court erred in finding that the
requirements to establish a civil RICO violation were met. “RICO creates a civil
cause of action for ‘[a]ny person injured in his business or property by reason of
a violation of section 1962.’” Brown v. Protective Life Ins. Co., 353 F.3d 405, 407
(5th Cir. 2003) (quoting 18 U.S.C. § 1964(c)). “To state a RICO claim under §
1962, there must be: (1) a person who engages in (2) a pattern of racketeering
activity (3) connected to the acquisition, establishment, conduct, or control of an
enterprise.” Id. (internal quotation marks and citation omitted). “A pattern of
racketeering activity requires two or more predicate acts and a demonstration
that the racketeering predicates are related and amount to or pose a threat of
continued criminal activity.” Id.
We are persuaded that Bradley’s deemed admissions and the trial
testimony support those three elements. The district court found that Bradley
was a person and the enterprise was an association-in-fact with the other named
defendants. The district court found that Bradley entered into various
arrangements with other defendants to market, promote, and opine on certain
tax strategies to high net-worth individuals and business entities, including the
instant plaintiffs, to generate exorbitant fees by giving false and misleading
advice that Bradley knew or should have know were improper and illegal. The
deemed admission numbers 6 and 7 support the district court’s findings.4
The district court also found that Bradley engaged in a pattern of wrongful
conduct through numerous predicate acts of mail and wire fraud. The district
4
Request for admission number 6 is quoted supra at II. A. Request for admission
number 7 provided as follows: “Please admit that you colluded with other of the defendants
named in the instant lawsuit in order to assist in inducing Plaintiffs to engage in tax
strategies.”
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No. 08-30037
court relied on deemed admission number 5 and trial testimony. 5 At trial,
Bradley testified that he used the telephone to make a call to determine what he
was supposed to do with the $255,000 that had been wired to his bank account.
Bradley admitted to wiring $46,000 to Ohle and to using the fax machine to send
a tax opinion to the law firm. Bradley also admitted to writing $25,000 worth
of checks to himself for less than 10 hours of billable work.
With respect to the substantive element of § 1962, the district court found
that Bradley violated § 1962(a), (c), and (d). This Court has:
reduced those subsections to their simplest terms to mean that: (a)
a person who has received income from a pattern of racketeering
activity cannot invest that income in an enterprise; . . . (c) a person
who is employed by or associated with an enterprise cannot conduct
the affairs of the enterprise through a pattern of racketeering
activity; and (d) a person cannot conspire to violate subsections (a),
(b), or (c).
St. Paul Mercury Ins. Co. v. Williamson, 224 F.3d 425, 439 (5th Cir. 2000).
Bradley contends that the district court erred in finding that he violated
§ 1962(a) because there was no evidence at trial that any of the money he
distributed was invested into any enterprise. The district court found that
plaintiffs were injured by Bradley’s use or investment of racketeering proceeds
into the RICO enterprise by Bradley’s wiring of the money ($46,000 to Ohle and
$184,000 to JDC Group), which permitted the defendants to fraudulently obtain
money from the plaintiffs for work they did not do. Bradley does not dispute
that he sent these monies. “[T]his Circuit’s precedent dictates that a plaintiff
need prove only that illegally derived funds flowed into the enterprise.” St. Paul
Mercury Ins., 224 F.3d at 442 (internal quotation marks and citation omitted).
5
Request for admission number 5 provided as follows: “Please admit that your acts
and conduct described in Plaintiff’s Third Amended and Supplemental Complaint directly or
indirectly used the means of interstate commerce, including the mails and telephones.”
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No. 08-30037
Bradley’s act of sending money to at least one person (Ohle) in the enterprise
meets that requirement.
Bradley also claims that “[t]here is no evidence that he acquired or
maintained an interest in anything.” However, acquiring or maintaining an
interest in the enterprise is an element of § 1962(b). The district court expressly
found that Bradley violated § 1962(a), (c), & (d), but not § 1962(b). This
contention is meritless.6
D. AMOUNT OF DAMAGES
Bradley contends that the district court erred by finding that Bradley’s
violations of § 1962(c) & (d) caused the plaintiffs’ tax assessment of $3,146,300.
Thus, he argues that the court erred in including that amount in the damages
award. Absent an error of law, we review the district court’s determination of
damages, a factual finding, for clear error. Cleere Drilling Co. v. Dominion
Exploration & Production, Inc., 351 F.3d 642, 645 (5th Cir. 2003). As we have
explained, clear error exists when, “the reviewing court upon examination of the
entire evidence is left with the definite and firm conviction that a mistake has
been committed.” Justiss Oil Co. v. Kerr-McGee Refining Corp. 75 F.3d 1057,
1062 (5th Cir. 1996).
Based on the findings that Bradley violated § 1962(c) & (d), the district
court awarded the following damages: $3,146,300, the amount assessed as
income tax; $314,630, the tax penalty; $499,770, the interest on the tax
assessment; and $1,033,500, the fees of the attorneys, accountants and advisors.
These damages totalled $4,994,200. After deducting $2,850,000, the amount
6
Without argument or citation, Bradley alleges that “[t]here was no showing that a
criminal enterprise existed separate and apart from any alleged acts of racketeering.” Having
failed to sufficiently brief this claim, Bradley has abandoned it. Yohey v. Collins, 985 F.2d 222,
224–25 (5th Cir. 1993). Nonetheless, it appears that the separate-and-apart requirement is
met because Bradley, as the RICO “person” who committed the predicate acts, is distinct from
the enterprise. See St. Paul Mercury Ins., 224 F.3d at 446–47.
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No. 08-30037
that the plaintiffs received in exchange for settling their claims against all the
other defendants, the damages totalled $2,144,200.7 Pursuant to the RICO
statute, the district court then trebled the damages for a total of $6,432,600.
See 18 U.S.C. § 1964(c).
Bradley concedes that the tax strategy could have caused the tax penalty
and interest. Nonetheless, he argues that there is no evidence that the strategy
caused the assessment of income taxes and thus the taxes should not be included
as damages. In response, the plaintiffs rely on Ducote’s testimony during the
bench trial. The plaintiffs contend that Ducote testified that, had he not
participated in the instant tax strategy, he would have employed another tax
management or deferral strategy and therefore would not have incurred a tax
liability of over three million dollars. More specifically, in his testimony, Ducote
referred to a “103 exchange, which is a deferral [in] the Internal Revenue Code,
or ways to accelerate depreciation or other things of that nature.” However,
Ducote never explained how it would lessen, much less how it would eliminate
all tax liability. This is not surprising in light of Ducote’s admission that he
“frankly . . . did not fully and completely understand all aspects” of the tax
strategy that was actually implemented. When questioned with respect to his
capacity as a trustee, he answered that he was “not exactly clear” with respect
to the roles of the various entities and trust “other than the trust mixture was
a component of the Jenkens’ transaction.” Additionally, during oral argument
before this Court, the plaintiffs’ counsel first appeared to admit that the
plaintiffs would have had to pay at least some taxes. Counsel subsequently
admitted that they did not address this issue in the district court and that she
did not “understand the tax sheltering aspect of it.” When further pressed as to
what alternative strategy or shelter the plaintiffs would have utilized and how
7
We note that the plaintiffs-appellees do not challenge on appeal the district court’s
calculations of damages.
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No. 08-30037
much tax relief it would have provided, counsel never specifically answered the
question except to point to Ducote’s above testimony, which we conclude falls far
short of demonstrating that their tax assessment (in excess of $3 million) would
have been alleviated or entirely eliminated.
In a somewhat analogous case, this Court affirmed an award of damages
that “represented the difference between the amount of money the [plaintiffs]
would have paid the IRS had the attorneys advised them correctly and the
amount they eventually had to pay.” Streber v. Hunter, 221 F.3d 701, 717 (5th
Cir. 2000). In that case, two sisters, Tracy and Terry Streber, brought suit
against lawyers who had given them advice that ultimately resulted in a tax
penalties and interest.8 The jury found that the lawyers committed legal
malpractice, breached the plaintiffs’ fiduciary duties, and violated the Texas
Deceptive Trade Practices Act. The jury awarded over $2 million in actual
damages, and the “most significant award of actual damages by the jury was in
the form of ‘interest differential.’” Streber, 221 F.3d at 734.9 Interest differential
is “the difference between the interest earned by Terry from the [money
constituting the eventual tax assessment] while she had it and the interest
charged by the IRS.” Id. Pursuant to state law, the damages had to be proven
with reasonable certainty. We noted that Terry testified to the “exact amount
of interest she earned on her investments, and to the exact amount charged by
the IRS.” Id. Also, two other witnesses, a certified public account and Terry’s
investment advisor, testified regarding the interest differential. We found that
Terry had proven her damages with reasonable certainty because “the testimony
told the jury exactly how much interest Terry had earned on the [tax
8
The sisters did not appeal the tax assessment. See Streber v. C.I.R., 138 F.3d 216,
217 n.3 (5th Cir. 1998). They did appeal the penalties for negligence and substantial
understatement, but this Court reversed the penalties. Id. at 219–23.
9
After the verdict, Tracy agreed to a settlement.
13
No. 08-30037
assessment] and exactly how much interest the IRS charged her for holding on
to it.” Id.
Although Streber involved state law, it informs our decision. Here, like
Streber, the damages “represented the difference between the amount of money
the [plaintiffs] would have paid the IRS had the attorneys advised them correctly
and the amount they eventually had to pay.” Streber, 221 F.3d at 717. In
contrast, as previously set forth, the plaintiffs failed to explain which alternative
tax strategy they would have used, much less precisely how such an alternative
vehicle would have eliminated or alleviated their tax assessment. In view of the
plaintiffs’ complete failure to prove an alternative tax strategy and calculate how
it would relieve them of their entire tax assessment, we are left with the definite
and firm conviction that a mistake has been made. Cf. Rogers v. McDorman, 521
F.3d 381, 395–97 (5th Cir. 2008) (affirming a take-nothing RICO judgment based
on failure to prove damages). After the tax assessment is subtracted from the
amount of damages, the net liability is zero because the district court credited
the $2,850,000 the plaintiffs received from the other defendants’ settlement
agreement. More specifically, the district court found that Bradley was liable to
the plaintiffs for $2,144,200, after crediting the amount of money the plaintiffs
received from the other defendants’ settlement agreement.10 Thus, once the
amount of the tax assessment, $3,146,300, is subtracted from the $2,144,200
damage award, the plaintiffs are left with no damages flowing from the § 1962(c)
& (d) violations. The plaintiffs “had a full opportunity to establish [their] claim
for . . . damages; however, having failed to do so, [they] may not retry [their]
10
The district court also awarded the same amount of damages ($2,144,200) to the
plaintiffs based on its findings that Bradley was liable for breach of fiduciary duty, negligent
misrepresentation, fraud and civil conspiracy under Louisiana state law. However, the district
court presented the federal RICO damages and the Louisiana state law damages as alternative
awards. The plaintiffs elected the RICO damages. In any event, the plaintiffs would not be
entitled to the damages under Louisiana law because the district court calculated the two
damage awards in identical fashion except that the RICO damages were trebled.
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No. 08-30037
claim[s] for these damages.” Great Pines Water Co., v. Liqui-Box Corp., 203 F.3d
920, 925 (5th Cir. 2000). The damages award of $6,432,600 is therefore
reversed.
E. ATTORNEYS’ FEES
Finally, Bradley requests this Court to reduce or eliminate the award of
attorneys’ fees “if the net damages for Civil RICO violations is reduced to
nothing.” Because Bradley offers no argument or precedent in support of his
request, he has effectively abandoned this claim. Yohey, 985 F.2d at 224–25.
Nonetheless, even if we considered the claim properly before us, we would affirm
the award of attorneys’ fees. This Court has rejected a rule that the award of
attorneys’ fees should be proportional to the damage award in a civil RICO case.
R.M. Perez & Assoc., Inc. v. Welch, 960 F.2d 534, 542 (5th Cir. 1992).11 Further,
we recognize that the instant attorneys’ fees provision, 18 U.S.C. § 1964(c),12
tracks the attorneys’ fee provision of the Clayton Act, 15 U.S.C. § 15(a),13 which
involves antitrust actions. Thus, this Court’s precedent interpreting the
essentially identical provision in the Clayton Act is instructive, if not controlling.
While interpreting the antitrust attorneys’ fee provision, we explained that “the
actual recovery of compensatory damages [is] irrelevant to the recoverability of
attorneys’ fees.” Sciambra v. Graham News Co., 892 F.2d 411, 415-16 (5th Cir.
1990). We held that to recover attorneys’ fees, a plaintiff must demonstrate
11
Accord Northeast Women’s Center v. McMonage, 889 F.2d 466, 471-75 (3d Cir. 1989)
(holding that it is not permissible for a trial court to make a reduction in the attorneys’ fees
based solely on the amount of damages obtained in a civil RICO case).
12
Section 1964(c) provides that “[a]ny person injured in his business or property by reason
of a violation of section 1962 of this chapter . . . shall recover threefold the damages he sustains and
the cost of the suit, including a reasonable attorney’s fee . . . .”
13
The Clayton Act provides that “any person who shall be injured in his business or
property by reason of anything forbidden in the antitrust laws may sue therefor . . . and shall
recover threefold the damages by him sustained, and the cost of suit, including a reasonable
attorney’s fee.” 15 U.S.C. § 15(a).
15
No. 08-30037
proof of a violation of antitrust laws and proof of injury. Id. at 415. Although
the plaintiff was awarded $0 in compensatory damages, because this Court
found an antitrust violation and the fact of damage, we affirmed the reasonable
award of attorneys’ fees. Id. at 414–16.
Here, the district court awarded the plaintiffs $74,156.25 in attorney’s
fees. Bradley does not (and cannot credibly) dispute that the RICO violations
caused the tax interest and penalty, resulting in damages to the plaintiffs in the
amount of $814,400. Also, Bradley’s admitted actions in faxing the fraudulent
invoice regarding the amount of work he had done for the plaintiffs certainly
caused the plaintiffs monetary damages. However, after the other defendants’
settlement ($2,850,000) is credited against the unchallenged damages found by
the district court, there is nothing left to award. In other words, the plaintiffs
did prove that they suffered damages—it is just that the other defendants’
settlement precludes a double recovery from Bradley under the district court’s
calculations. Bradley has failed to show that the attorneys’ fee award was
unreasonable. We are persuaded that because the plaintiffs have established
RICO violations and proof of injury, they are entitled to the amount of attorneys’
fees in the amount of $74,156.25.
III. CONCLUSION
For the above reasons, the portion of the district court’s judgment finding
Bradley violated § 1962(a), (c) & (d) of the civil RICO statute and also finding
Bradley liable for breach of fiduciary duty, negligent misrepresentation, fraud
and civil conspiracy under Louisiana state law is AFFIRMED. Nonetheless, we
REVERSE the portion of the district court’s judgment awarding the plaintiffs
$6,432,600 in civil RICO damages, and, in light of the rule against double
recovery, RENDER judgment that the plaintiffs take nothing with respect to
damages under the RICO claim. Additionally, the award of attorneys’ fees in the
amount of $74,156.25 is AFFIRMED.
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No. 08-30037
AFFIRMED in part; REVERSED in part.
17