Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-86-01493/USCOURTS-ca10-86-01493-0/pdf.json

Nature of Suit Code: 850
Nature of Suit: Securities, Commodities, Exchange
Cause of Action: 

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FI LED 

Uoited States Court of Appeals 

UNITED STATES COURT OF APPEALS Tenth Circuit 

TENTH CIRCUIT SEP 2 2 1989 

MERIDIAN RESERVE OF OKLAHOMA, 

INC., a corporation, 

Appellant, 

v. 

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LIBERTY EXPLORATION COMPANY, INC., } 

BOB MILLS, and JOHN H. COLE, } 

Appellees. 

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ROBERT L. HOECKER 

Clerk 

No. 86-1493 

(D.C. No. CIV-84-2218-E} 

( W. D. Ok la. } 

ORDER AND JUDGMENT1 

Before McKAY an9 BALDOCK, Circuit Judges, and O'CONNOR, Chief 

District Judge. 

Meridian Reserve appeals the trial court's denial of its 

motion for new trial on the following grounds: (1) the trial 

court erred in failing to order an accounting by the appellees; 

(2) the trial court erred in dismissing appellant's case due to 

the temporary absence of a witness from the courtroom; (3) the 

trial court erred in not submitting appellant's damages for common 

1 This order and judgment has no precedential value and shall 

not be cited, or used by any court within the Tenth Circuit, 

except for purposes of establishing the doctrines of the law of 

the case, res judicata, or collateral estoppel. 10th Cir. R. 

36.3. 

2 Honorable Earl E. O'Connor, Chief Judge, United States 

District Court for the District of Kansas, sitting by designation. 

Appellate Case: 86-1493 Document: 01019973989 Date Filed: 09/22/1989 Page: 1 
law fraud and misrepresentation to the jury; (4) the trial court 

erred in not submitting appellant's damages for conversion to the 

jury; (5) the trial court erred in not submitting appellant's 

damages for violations of the Oklahoma Securities Act to the jury; 

(6) the trial court erred in not submitting appellant's damages 

for RICO violations to the jury; and (7) the trial court erred in 

not submitting appellant's damages for violations of the 

Securities Act of 1933 and the Securities Exchange Act of 1934 to 

the jury. 

We review the trial court's denial of a motion for new trial 

under an abuse of discretion standard. See Patty Precision Prods. 

v. Brown & Sharpe Mfg., 846 F.2d 1247, 1251 (10th Cir. 1988). 

Under this standard, we will not disturb a trial court's decision 

unless we have ''a definite and firm conviction that the lower 

court made a clear error of judgment or exceeded the bounds of 

permissible choice in the circumstances." United States v. Ortiz, 

804 F.2d 1161, 1164 n.2 (10th Cir. 1986). 

With respect to plaintiff's state common law claims for 

fraud, misrepresentation, conversion of well equipment and money, 

and an accounting, defendants contend that the state claims were 

properly dismissed because plaintiff did not plead them in its 

Amended Complaint or the Final Pretrial order. The trial court's 

conduct of trial proceedings, including, we believe, determining 

which issues are properly before the Court, "will not be disturbed 

on appeal unless it affirmatively appears from the record that the 

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Appellate Case: 86-1493 Document: 01019973989 Date Filed: 09/22/1989 Page: 2 
trial court abused its discretion." Brown v. Reardon, 770 F.2d 

896, 907 (10th Cir. 1985). See also Fed. R. Civ. P. 16(e) (final 

pretrial order controls subsequent course of action and may be 

modified only to prevent manifest injustice). 

Based on our careful review of the Amended Complaint and the 

Final Pretrial Order, we conclude that plaintiff only stated 

claims for federal and state securities fraud and RICO violations. 

Plaintiff did not properly plead common law fraud, 

misrepresentation, conversion of well equipment and money, or seek 

an accounting on that basis. In addition, plaintiff never moved 

to conform its pleadings to the proof. See Fed. R. Civ. P. 15(b). 

Because these claims were not properly before the trial court and 

evidence relating to those claims also related directly to the 

claims which were properly pled, we hold that the trial court did 

not abuse its discretion in dismissing plaintiff's state common 

law claims and refusing to order an accounting. 3 Therefore, the 

trial court did not abuse its discretion in denying plaintiff's 

motion for new trial on these grounds. 

3 In any event, because we hold that the federal securities and 

RICO claims were properly dismissed, see infra, the trial court 

could have properly dismissed plaintiff's state claims for lack of 

pendent jurisdiction. See United Mine Workers v. Gibbs, 383 U.S. 

715, 725 (1966) (subject matter jurisdiction over federal claim 

prerequisite to trial court's exercise of pendent jurisdiction 

over state claims}. 

In addition, plaintiffs' failure to prove damages, see infra, 

is fatal to its common law fraud and misrepresentation claims. 

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Appellate Case: 86-1493 Document: 01019973989 Date Filed: 09/22/1989 Page: 3 
We conclude, however, that plaintiff did properly plead 

conversion of the oil and gas interests which were the subject 

matter of the litigation. However, during the hearing on 

defendant's motion for directed verdict, the trial court found as 

a matter of law that plaintiff had sold these oil and gas 

interests. 4 Under that finding, plaintiff's conversion claim 

necessarily fails. Therefore, the trial court did not abuse its 

discretion in denying plaintiff's motion for new trial on this 

ground. 

The remaining grounds of appeal challenge the trial court's 

dismissal for plaintiff's failure to prove damages related to its 

securities claims. During the trial court's hearing on 

defendant's motion for directed verdict, plaintiff acknowledged 

that its evidence failed to prove damages. Plaintiff moved the 

court to reopen so it could recall a witness to testify to the 

amount of damages. 5 Although the trial court initially decided to 

reopen, it denied plaintiff's motion when it discovered that the 

witness was not present in the courtroom at the time and did not 

4 Whatever plaintiff's points of appeal may be, we believe that 

they do not directly or clearly challenge the trial court's finding that the plaintiff resold the oil and gas interests at issue. 

5 Plaintiff sought to recall the corporate secretary-treasurer 

and CPA in charge of all accounting records. Through this witness, plaintiff had introduced company checks showing its purchase 

of working interests in defendants' wells and evidence of the 

costs and royalties associated with the wells. 

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Appellate Case: 86-1493 Document: 01019973989 Date Filed: 09/22/1989 Page: 4 
have the relevant documents and records with her in any e vent. At 

that point, the trial court dismissed plaintiff's case. 

Contrary to plaintiff's assertion, the trial court did not 

dismiss plaintiff's case because this witness was temporarily 

absent from the courtroom; the trial court dismissed this case 

because plaintiff failed to prove pecuniary loss, i.e., damages, 

an element of its securities claims. Based on that view, we merge 

plaintiff's temporary absence ground of appeal into the damages 

issue. However, to the extent that this ground of appeal 

challenges the trial court's denial of plaintiff's motion to 

reopen, we address that point now. 

The decision whether to reopen a case for additional evidence 

is within the discretion of the trial court. Delano v. Kitch, 663 

F.2d 990, 1003 (10th Cir. 1981), cert. denied, 456 U.S. 946 

(1982). Plaintiff's evidence established that plaintiff paid 

$309,000 for oil and gas interests in several wells, resold those 

interests at a profit, and subsequently made some refunds on 

interests in one of the wells. Plaintiff did not offer any 

evidence of the amount of the refunds. Therefore, there was no 

evidence which could establish a net pecuniary loss, that is, 

whether the amount of the refunds exceeded the amount of 

plaintiff's profit from resale. 6 Furthermore, as we see it, 

6 Plaintiff argues it did not offer evidence of pecuniary loss 

because, under its theory of the case, recission was the appropriate remedy. That plaintiff chose to present only one theory of 

recovery to the court is not an error we may, or chose to, correct. 

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Appellate Case: 86-1493 Document: 01019973989 Date Filed: 09/22/1989 Page: 5 
plaintiff had ample opportunity to offer this evidence during its 

case in chief through the very witness it sought to recall. We 

hold that the trial court did not abuse its discretion in refusing 

to reopen the case for additional evidence on damages. 

We now address whether the trial court properly directed a 

verdict for defendants on plaintiff's securities claim. When 

reviewing a directed verdict, we apply the same standard applied 

by the trial court. Guilfoyle v. Missouri, Kansas and Texas R.R. 

Co., 812 F.2d 1290, 1292 (10th Cir. 1987). A directed verdict is 

proper if "viewing the evidence in the light most favorable to the 

nonmoving party, the evidence and the inferences to be drawn from 

it are so clear that reasonable minds could not differ on the 

conclusion." Id. Plaintiff offered no evidence which could 

establish damages, an element of this cause of action. See text 

supra. Thus, based on the evidence, or lack of it, reasonable 

minds could not differ on the conclusion that plaintiff failed to 

make a prima facie case of securities fraud. We conclude that the 

trial court properly directed a verdict for defendants on this 

issue. Because the court properly directed a verdict for 

defendants and did not abuse its discretion in denying plaintiff's 

motion to reopen, we hold that the trial court did not abuse its 

discretion in denying plaintiff's motion for new trial on this 

ground. 

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Appellate Case: 86-1493 Document: 01019973989 Date Filed: 09/22/1989 Page: 6 
We also hold that the trial court did not err in directing a 

verdict for defendant on plaintiff's RICO claim. The trial court 

dismissed the RICO claim because it found that plaintiff had not 

pled an enterprise with sufficient particularity. The court also 

found that plaintiff had not adequately proved an enterprise, and 

that plaintiff's RICO proof was too vague to determine which RICO 

provisions to apply. We need not address whether the RICO claim 

was properly dismissed for those reasons because the trial court 

could have properly dismissed it on another ground: no predicate 

offenses for RICO liability remained after the trial court 

properly dismissed the federal securities claims. Therefore, the 

trial court properly directed a verdict for the defendant on the 

RICO claim and did not abuse its discretion in denying plaintiff's 

motion for new trial on this ground. 

Because we hold that the trial court did not abuse its 

discretion in denying plaintiff's motion for new trial on all 

grounds raised by the plaintiff, we affirm the trial court's order 

dismissing plaintiff's case. 

AFFIRMED. 

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Entered for the Court 

Monroe G. McKay 

Circuit Judge 

Appellate Case: 86-1493 Document: 01019973989 Date Filed: 09/22/1989 Page: 7