Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-05-01855/USCOURTS-ca8-05-01855-0/pdf.json

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

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United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 05-1855

___________

Kenneth S. Rotskoff; Judith A * 

Rotskoff, *

*

Plaintiffs - Appellees, * 

* 

 * 

Elise Bernier; Emanuel Escher; * 

Neil Berson; Michelle Berson, * 

* Appeal from the United States

Plaintiffs, * District Court for the Eastern

* District of Missouri.

Peter Crump; Stan Dveris; *

Donald Gordon, *

*

Plaintiffs - Appellees, *

*

Gerald Grewe; Barry Goldenberg; *

Susan Goldenberg, *

*

Plaintiffs, *

*

James Hirshfield, *

*

Plaintiff - Appellee, *

*

Thomas Matthes; Edwardo Phillips, *

*

Plaintiffs, *

*

James Robbins; Linda Rotskoff; *

Appellate Case: 05-1855 Page: 1 Date Filed: 02/17/2006 Entry ID: 2011155
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Morris Rotskoff; Sylvia Rotskoff, *

*

Plaintiffs - Appellees, *

*

Gary S. Traub; Phyllis Traub, *

*

Plaintiffs, *

*

Michael Pruett, *

*

Plaintiff - Appellee, *

*

Albert Finkelstein, *

*

Plaintiff, *

* 

v. * 

* 

Wester S. Cooley, *

* 

Defendant, *

*

George Tannous, *

*

Defendant - Appellant, *

*

Bidbay.Com, also known as *

Auctioneer.com, Inc., Inc.; *

Bidbayeurope.com, Inc.; George *

Tannous & Affilliates, Inc.; *

Askgt.com, Inc.; DeElroy Beeler, Jr., *

*

Defendants. *

___________

Submitted: January 12, 2006

Filed: February 17, 2006

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The Honorable Henry E. Autry, United States District Judge for the Eastern

District of Missouri.

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___________

Before BYE, HEANEY, and COLLOTON, Circuit Judges.

___________

BYE, Circuit Judge.

George Tannous appeals the jury verdict against him on the claims of

conspiracy to defraud and violations of the Securities Act. He argues the evidence

was insufficient to support the verdict, the district court1

 erred in instructing the jury,

and the district court erred in denying his motion for directed verdict. We affirm.

I

Between 1990 and 1993, Tannous, a California resident, was an agent for the

Internal Revenue Service. He then started his own business representing taxpayers.

By 1999, Tannous's work load vastly diminished, so he bought the intellectual

property to "Bidbay.com," a company he hoped would compete with eBay.com. He

also created the search engine "AskGt" to be used with Bidbay.com. He enlisted the

help of clients Wester Cooley, a former Oregon Congressmen, and Don Dayer, a felon

convicted of tax fraud, to raise needed capital. Dayer, in turn, recruited John

Montgomery, also a felon whose real name was DeElroy Beeler. Cooley, Dayer, and

Montgomery are all California residents. 

By 2000, Tannous was orchestrating an initial public offering (IPO) for

Bidbay.com. Kenneth Rotskoff, a St. Louis oral surgeon, learned of the investment

opportunity from a patient who referred Rotskoff to Montgomery. Montgomery told

Rotskoff Bidbay.com stock would be offered in the IPO at $20 per share, but

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Rotskoff could buy stock early by paying $2 per share. Rotskoff asked for, but never

received, either an offering circular or a prospectus. Montgomery sent Rotskoff two

documents appearing to be a registration statement filed with the Securities and

Exchange Commission (SEC) and an SEC order declaring the registration to be

"effective." Relying on this information, Rotskoff and his wife invested. In exhange,

Rotskoff received stock certificates in the companies BidbayEurope.com and George

Tannous & Affilliates. When asked why he did not receive Bidbay.com stock,

Montgomery explained he could exchange these shares for Bidbay.com shares after

the completion of the IPO.

In February 2002, Montgomery called Rotskoff from California and told him

eBay.com was interested in purchasing Bidbay.com and AskGT.com. He also

represented eBay would pay upwards of $20 per share for Bidbay.com and

AskGT.com stock. Rotskoff, acting on this information, invested in AskGT.com. At

the time, Montgomery represented the IPO was about to be launched, yet in reality,

Bidbay.com's IPO registration statement had already been withdrawn from further

regulatory review and approval by the SEC. 

Shortly thereafter, Rotskoff became concerned and asked for his money back.

To ease Rotskoff's concerns, Montgomery and Tannous called Rotskoff, and Tannous

mentioned eBay.com was interested in buying Bidbay.com. Montgomery interrupted,

stating Tannous could not talk about the subject, and the conversation came to a halt

shortly thereafter. Montgomery immediately called Rotskoff to assure him the

eBay.com acquisition would take place, but he stated Tannous, as an officer of the

company, could not speak on the issue. Rotskoff also called Cooley, who also

assured him the sale would take place. Ebay.com never did buy Bidbay.com;

however, Rotskoff convinced others to invest in Bidbay.com on the basis of this

information. These investors were residents of Missouri, Texas, Pennsylvania,

Michigan, Wyoming, and Canada.

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Rotskoff and other investors sued Cooley, Tannous, Montgomery, and the

corporate entities involved. After the close of the plaintiffs' evidence, the district

court denied Tannous's motion for a directed verdict, which was not renewed at the

close of all evidence. The jury returned a verdict against Tannous, finding him

personally liable for approximately $987,000.00 in compensatory damages and

$11.00 in punitive damages. Only Tannous appeals.

 

 II

A

As an initial matter, Tannous waived his argument regarding sufficiency of the

evidence because the issue was not developed in his briefs as required by Federal

Rule of Appellate Procedure 28(a)(9)(A). It is thus considered abandoned for failure

"to provide any reasons or arguments" for his contentions. United States v. Zavala,

427 F.3d 562, 564 n.1 (8th Cir. 2005).

Additionally, this argument is without merit because if "a party does not move

for judgment as a matter of law at the close of all the evidence, [he] normally cannot

later argue that there was insufficient evidence to support the verdict." BE & K

Constr. Co. v. United Bros. of Carpenters & Joiners of Am., AFL-CIO, 90 F.3d 1318,

1325 (8th Cir. 1996). There are two exceptions to this rule: (1) if the Rule 50 motion

is made close to the end of the presentation of all evidence and the district court

indicates the party need not renew the motion at the appropriate subsequent time, or

(2) if the failure to allow such a claim would "constitute plain error resulting in a

manifest miscarriage of justice." Id. (citations omitted). Because neither of these

exceptions is applicable, sufficient evidence exists supporting the verdict. 

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B

With respect to the jury instructions, Tannous claims the district court erred in

instructing the jury on the burden of proof required for each count. Because he failed

to object to the instructions at trial, we review for plain error. Lighting & Power

Servs., Inc. v. Roberts, 354 F.3d 817, 820 (8th Cir. 2004). We have previously

recognized plain error review in the civil context is a "stringently limited standard of

review." Wilson v. Brinker Intern., Inc., 382 F.3d 765, 771 (8th Cir. 2004) (citation

omitted). To establish plain error, Tannous must show an error which is plain "likely

altered the outcome[] and . . . was sufficiently fundamental to threaten the fairness or

integrity or public reputation of the judicial proceeding." Id. (quoting Gray v.

Genlyte Group, Inc., 289 F.3d 128, 134 (1st Cir. 2002)).

The instructions required the jury to apply the "preponderance of the evidence"

standard on both the civil conspiracy claim and the availability of punitive damages.

Tannous claims the court should have instructed the jury to make these

determinations based on clear and convincing evidence as required by Missouri law.

See Krysa v. Payne, 176 S.W.3d 150, 158 n.3 (Mo. Ct. App. 2005) (punitive

damages); Mika v. Central Bank of Kan. City, 112 S.W.3d 82, 93 (Mo. App. Ct.

2003) (civil conspiracy). The plaintiffs allege California law applies, and under

California law, punitive damages must be awarded on the "clear and convincing"

standard, but civil conspiracy may be found based on a preponderance of the

evidence. Johnson v. Ford Motor Co., 113 P.3d 82, 88 (Cal. 2005) (punitive

damages); Sprague v. Equifax, Inc., 166 Cal. App. 3d 1012, 1055 (Cal. Ct. App.

1985) (civil conspiracy). 

With respect to the instructions regarding punitive damages, the district court

did clearly err; however, no miscarriage of justice would result if this $11.00 error

were left uncorrected. See Cross v. Cleaver, 142 F.3d 1059, 1068 (8th Cir. 1998)

(requiring a finding of a miscarriage of justice under plain error review). With

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The following factors should be examined to determine which state has the

most significant relationship to the tort action and the parties involved: 

(a) the place where the injury occurred,

(b) the place where the conduct causing the injury occurred,

(c) the domicile, residence, nationality, place of incorporation and

place of the business of the parties, and

(d) the place where the relationship, if any, between the parties is

centered.

Restatement (Second) of Conflicts of Laws § 145(2).

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respect to the instructions regarding civil conspiracy, the parties did not specify which

law should apply, and the district court apparently relied on the California law.

Under Missouri law, the law of the state with the "most significant relationship" as

defined by the Restatement (Second) of Conflicts of Laws should be applied. See

Alumbaugh v. Union Pacific R.R. Co., 322 F.3d 520, 523 (8th Cir. 2003).2 These

factors do not clearly point in favor of either California or Missouri law. Although

the defendants are California residents and made their misrepresentations over the

telephone while in California, the plaintiffs are Missouri residents who decided to

invest while living in Missouri. Because the choice-of-law question is close, the

district court did not clearly err in instructing the jury on California law.

C

Finally, Tannous claims the district court erred by not granting a directed

verdict in his favor on his in pari delicto defense. Because Tannous did not renew his

motion for a directed verdict at the close of all evidence and because the two

exceptions noted above are inapplicable, he cannot show the district court erred. 

Accordingly, we affirm. 

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