Mitsui O.S.K. Lines, Ltd. v. Seamaster Logistics, Inc. , 618 F. App'x 304 ( 2015 )

FILED
NOT FOR PUBLICATION JUL 06 2015
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
MITSUI O.S.K. LINES, LTD., No. 13-15848
Plaintiff - Appellee, D.C. Nos. 3:10-cv-00591-SC
3:11-cv-02861-SC
v.
SEAMASTER LOGISTICS, INC. And MEMORANDUM*
SUMMIT LOGISTICS
INTERNATIONAL, INC.,
Defendants - Appellants,
And
AMERICAN GLOBAL LOGISTICS,
LLC; et al.,
Defendants.
MITSUI O.S.K. LINES, LTD., No. 13-15941
Plaintiff - Appellant, D.C. Nos. 3:10-cv-05591-SC
3:11-cv-02861-SC
v.
SEAMASTER LOGISTICS, INC. And
SUMMIT LOGISTICS
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
INTERNATIONAL, INC.,
Defendants - Appellees,
And
AMERICAN GLOBAL LOGISTICS,
LLC; et al.,
Defendants.
MITSUI O.S.K. LINES, LTD., No. 13-16395
Plaintiff - Appellee, D.C. Nos. 3:10-cv-05591-SC
3:11-cv-02861-SC
v.
SEAMASTER LOGISTICS, INC. And
SUMMIT LOGISTICS
INTERNATIONAL, INC.,
Defendants - Appellants,
And
AMERICAN GLOBAL LOGISTICS,
LLC; et al.,
Defendants.
Appeal from the United States District Court
for the Northern District of California
Samuel Conti, Senior District Judge, Presiding
Argued and Submitted May 12, 2015
San Francisco, California
Before: O’SCANNLAIN and IKUTA, Circuit Judges and TEILBORG,** Senior
District Judge.
Appellants SeaMaster Logistics, Inc. and Toll Global Forwarding
(Americas) Inc. (“Summit US”) appeal the district court’s findings that Appellants
are liable for fraud and civil conspiracy and award of attorney’s fees to Appellee
Mitsui O.S.K Lines, Ltd. (“MOL”). MOL cross-appeals the district court’s
dismissal of MOL’s claim under the Racketeer Influenced and Corrupt
Organizations Act (“RICO”) and finding that Summit US is not liable for damages
MOL sustained before Summit US joined the conspiracy. We have jurisdiction
under 28 U.S.C. § 1291.
I
Appellants first appeal the district court’s conclusion that MOL justifiably
relied on the misrepresentations of Appellants. Findings of fraud and justifiable
reliance are questions of fact subject to clearly erroneous review. In re Jogert, Inc.,
950 F.2d 1498, 1504–05 (9th Cir. 1991).
**
The Honorable James A. Teilborg, Senior District Judge for the U.S.
District Court for the District of Arizona, sitting by designation.
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MOL’s reliance was justified because Appellants’ misrepresentations were
not “preposterous,” or “so patently and obviously false that [MOL] must have
closed [its] eyes to avoid discovery of the truth.” Broberg v. Guardian Life Ins. Co.
of Am., 90 Cal. Rptr. 3d 225, 232 (Ct. App. 2009) (quoting OCM Principal
Opportunities Fund v. CIBC World Markets Corp. 68 Cal. Rptr. 3d 828, 865 (Ct.
App. 2007)); see also Bishop Creek Lodge v. Scira, 54 Cal. Rptr. 2d 745, 752–53
(Ct. App. 1996) (“[A] fraud plaintiff does not have the ‘duty of inquiry’ that a
purchaser of real property does. The fraud plaintiff need only demonstrate
justifiable reliance; this is a different, and far lower, standard.”). Indeed,
Appellants went to great lengths to conceal their misrepresentations. We therefore
affirm the district court’s conclusion that MOL justifiably relied on Appellants’
misrepresentations.
II
Next, Appellants challenge the legal standard applied by the district court in
awarding damages. We review de novo. Ambassador Hotel Co. v. Wei-Chuan Inv.,
189 F.3d 1017, 1024 (9th Cir. 1999).
The district court erred by awarding MOL, in the district court’s words,
“more than it lost as a result of the Shenzhen door arrangement” and failing to use
a reasonable basis of computation to calculate the actual damages incurred by
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MOL for reimbursed trucking costs, origin receiving charge differentials, and lost
space protection premiums. Ward v. Taggart, 336 P.2d 534, 537 (Cal. 1959) (“In
the absence of a fiduciary relationship, recovery in a tort action for fraud is limited
to the actual damages suffered by the plaintiff.”); Allen v. Gardner, 272 P.2d 99,
102 (Cal. Ct. App. 1954) (“The law . . . requires that some reasonable basis of
computation be used.”).
The reasons given by the district court to support this overcompensation are
not supported by California law. First, the district court reasoned that “it would be
inequitable to credit Defendants for payments made to cover up their fraud,” citing
only Federal Deposit Insurance Corporation v. Bank of America National Trust &
Savings Association, 701 F.2d 831 (9th Cir. 1983). In that case, this Court applied
Puerto Rico’s banking laws to conclude that public policy prohibited a creditor
bank from applying a set-off to an insolvent debtor bank. FDIC, 701 F.2d at
839–40. Here, there is no such public policy concern in Appellants’ request to limit
their liability to the actual damages MOL sustained from Appellants’
misrepresentation. Thus, FDIC is inapposite.
Second, the district court explained that part of the reason it did not award
punitive damages was that it had already awarded MOL “more than it lost,”
implying that the damages award was at least partially punitive, rather than
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compensatory, in nature. By definition, punitive damages do not compensate for
actual damage, but rather “punish and deter.” Adams v. Murakami, 813 P.2d 1348,
1350 (Cal. 1991) (internal quotations marks omitted). The district court cites no
case—and we can find none—that justifies conflating compensatory and punitive
damages in this way.
Therefore, we reverse the district court’s damages award and remand for
recalculation in accordance with California law.
III
Next, Appellants challenge the district court’s award of MOL’s attorney’s
fees. Because this issue turns on legal questions involving the interpretation of the
parties’ agreements, we review the district court’s grant of attorney’s fees de novo.
Childress v. Darby Lumber, Inc., 357 F.3d 1000, 1011 (9th Cir. 2004).
The district court erred when it held that the service contracts, which
provided that Appellants shall be liable for legal fees and expenses “incurred in
collecting monies due,” allow MOL to collect attorney’s fees in the current action.
Under California law, when, as here, “the language of the [fee] agreement does not
encompass noncontractual claims or is ambiguous,” recovery of noncontractual tort
claim fees turns on whether success in “the noncontractual claim is necessary to
succeed on [a] contractual claim.” Siligo v. Castellucci, 26 Cal. Rptr. 2d 439, 443
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(Ct. App. 1994). Yet here no contractual claim has been brought, and thus recovery
of noncontractual claim fees is unavailable. See Gil v. Mansano, 17 Cal. Rptr. 3d
420, 425 n.3 (Ct. App. 2004), as modified (Aug. 24, 2004).
The cases cited by the district court and MOL do not control because they
involve contracts with language not analogous to the contracts at issue in this case.
E.g., Marsu, B.V. v. Walt Disney Co., 185 F.3d 932, 939 (9th Cir. 1999) (“arising
out of or in connection with this agreement” (emphasis omitted)); 3250 Wilshire
Blvd. Bldg. v. W.R. Grace & Co., 990 F.2d 487, 489 (9th Cir. 1993) (“any suit or
other proceeding with respect to the subject matter or enforcement of this
Agreement”).
Therefore, we reverse the district court’s award of MOL’s attorney’s fees.
IV
On cross-appeal, MOL first challenges the district court’s conclusion that
application of RICO in this case would be extraterritorial. See generally Morrison
v. Nat’l Austl. Bank Ltd., 561 U.S. 247, 255 (2010) (“When a statute gives no clear
indication of an extraterritorial application, it has none.”). Whether a RICO
application is extraterritorial is a question of law that we review de novo. United
States v. Chao Fan Xu, 706 F.3d 965, 974 (9th Cir. 2013).
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The district court applied a “nerve center” test when it dismissed MOL’s
RICO claim. However, in a case decided after the trial but before the district court
issued its Findings of Fact and Conclusions of Law, this Court explicitly rejected
that test, explaining that the test to determine whether a RICO application is
extraterritorial is to look “not upon the place where the deception originated,” but
“at the pattern of Defendants’ racketeering activity taken as a whole.”Id. at
977–79. (quoting Morrison, 561 U.S. at 266). Thus, even if racketeering activity is
“conceived and planned overseas,” it may still fall within the ambit of the statute if
“it was executed and perpetuated in the United States.” Id. at 979. The district
court therefore erred when it applied the nerve center test.1
Having made its findings under the erroneous nerve center test, the district
court made no specific findings regarding Appellants’ pattern of racketeering
activity. “When an appellate court discerns that a district court has failed to make a
finding because of an erroneous view of the law, the usual rule is that there should
be a remand for further proceedings to permit the trial court to make the missing
findings.” Pullmani-Standard v. Swint, 456 U.S. 273, 291 (1982). Accordingly, we
1
The invited error doctrine does not bar MOL from bringing this appeal
because there is no evidence that the district court applied or continued to apply the
erroneous standard upon MOL’s invitation. See Sovak v. Chugai Pharm. Co., 280
F.3d 1266, 1270 (9th Cir. 2002); Deland v. Old Republic Life Ins. Co., 758 F.2d
1331, 1336–37 (9th Cir. 1985).
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reverse the district court’s dismissal of MOL’s RICO claim and remand for further
proceedings, with instructions for the district court to apply the test set forth in
Chao Fan Xu.
V
Next, MOL argues that the district court applied the wrong legal standard in
holding that Summit US is not liable for damages MOL sustained before Summit
US joined the conspiracy in 2008. We review this issue of law de novo. United
States v. Lang, 149 F.3d 1044, 1046 (9th Cir. 1998).
We conclude that the district court applied the correct legal standard. Under
California law, co-conspirators do not assume liability for torts which are
“completed and actionable” before the conspirator joins the conspiracy. Kidron v.
Movie Acquisition Corp., 47 Cal. Rptr. 2d 752, 767 (Ct. App. 1995); de Vries v.
Brumback, 349 P.2d 532, 535 (Cal. 1960) (defendant who took possession of
stolen jewelry from those who had stolen it was liable for civil conspiracy because
he had joined “the continuing conspiracy to convert” (emphasis added)). Here,
each shipment completed under the Shenzhen door arrangement before Summit US
joined the arrangement met all the elements of fraud and therefore constituted a
completed, actionable tort. Indeed, MOL conceded as much at oral argument. We
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therefore affirm the district court’s conclusion that Summit US cannot be held
liable for the fraud committed before Summit US joined the conspiracy.
Each party shall bear its own costs on appeal.
AFFIRMED in part, REVERSED in part, and REMANDED.
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