Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca9-13-16917/USCOURTS-ca9-13-16917-0/pdf.json

Parties Involved:
Aetrium, Inc.
Appellee
Harry Allen
Appellee
UTHE Technology Corporation
Appellant

Document Text:

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

UTHE TECHNOLOGY

CORPORATION,

Plaintiff-Appellant,

v.

AETRIUM, INC.; HARRY ALLEN,

Defendants-Appellees.

No. 13-16917

D.C. No.

3:95-cv-02377-WHA

OPINION

Appeal from the United States District Court

for the Northern District of California

William Alsup, District Judge, Presiding

Argued and Submitted

November 19, 2015—San Francisco, California

Filed December 11, 2015

Before: FERDINAND F. FERNANDEZ and MILAN D.

SMITH, JR., Circuit Judges, and SHIRA A.

SCHEINDLIN,* Senior District Judge.

Opinion by Judge Milan D. Smith, Jr.

* The Honorable Shira Ann Scheindlin, Senior District Judge for the

U.S. District Court for the Southern District of New York, sitting by

designation.

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2 UTHE TECH. CORP. V. AETRIUM, INC.

SUMMARY**

RICO

Reversing the district court’s summary judgment, the

panel held that the plaintiff was entitled to seek treble

damages under the Racketeer Influenced and Corrupt

Organizations Act against the remaining defendantsfollowing

an arbitration proceeding and award against the defendants in

Singapore.

The panel held that an additional award of damages under

RICO would not violate the “one satisfaction” rule, an

equitable principle designed to prevent double recovery of

damages arising from the same injury, because the arbitral

award did not constitute full satisfaction of the plaintiff’s preexisting RICO claim. The panel remanded the case for

further proceedings.

COUNSEL

Myron Moskovitz (argued), Piedmont, California, for

Plaintiff-Appellant.

Archana Nath (argued) and David B. Potter, Oppenheimer

Wolf & Donnelly LLP, Minneapolis, Minnesota; Ann E.

Johnston, Coblentz, Patch, Duffy&Bass LLP, San Francisco,

California, for Defendants-Appellees.

** This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

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UTHE TECH. CORP. V. AETRIUM, INC. 3

OPINION

M. SMITH, Circuit Judge:

Approximately two decades ago, Plaintiff UTHE

Technology Corporation (Uthe), a manufacturer and

distributor of semiconductor products, brought suit against

Harry Allen and Aetrium Incorporated (collectively, the

Defendants) and a number of individuals in Singapore (the

Foreign Defendants), alleging a conspiracyto unlawfullytake

over one of Uthe’s overseas subsidiaries. In its original

federal court action, Uthe brought claims for, inter alia,

violations of the Racketeer Influenced and Corrupt

Organizations Act (RICO), 18 U.S.C. §§ 1961–68, against

both the Defendants and the Foreign Defendants. The action

against the Foreign Defendants was dismissed on the basis of

forum non conviens because an arbitration clause in a relevant

agreement required that Uthe arbitrate its claims against the

Foreign Defendants in a proceeding governed by Singapore

law (the Singapore arbitration). Uthe’s suit against the

Defendants was stayed by the district court pending the

resolution of the Singapore arbitration against the Foreign

Defendants.

The Singapore arbitration, which lasted nearly two

decades, resulted in an award of over 12 million Singapore

dollars (approximately $9 million USD) against the Foreign

Defendants to compensate Uthe for actual losses stemming

from the conspiracy. That award has now been paid in full.

Following the conclusion of the Singapore arbitration, Uthe

reinstated the present action against the Defendants,

requesting relief under RICO’s treble damages provision. The

district court granted summary judgment in favor of the

Defendants, holding that an award of additional damages

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4 UTHE TECH. CORP. V. AETRIUM, INC.

under RICO would violate the “one satisfaction” rule (one

satisfaction rule), an equitable principle designed to prevent

double recovery of damages arising from the same injury.

We reverse and remand. Because the arbitral award did

not constitute full satisfaction of Uthe’s pre-existing RICO

claim, we hold that Uthe is entitled to seek treble damages

under RICO against the Defendants.1

FACTUAL AND PROCEDURAL BACKGROUND

A. The Conspiracy

Uthe alleges that the Defendants, in conjunction with the

Foreign Defendants working inside its foreign subsidiary

Uthe Technology Singapore Private Limited (Uthe

Singapore), engaged in a campaign to poach customers and

divert business from Uthe Singapore to a secret corporation

they had formed for this purpose. Uthe Singapore distributed

semi-conductor equipment manufactured by Uthe and other

suppliers throughout Asia. During this time, Uthe Singapore

was a party to a long-term distribution agreement to sell

Aetrium Incorporated’s (Aetrium) products to customers in

Asia. Aetrium was one of Uthe Singapore’s largest suppliers,

and HarryAllen served as Aetrium’s officer in charge of sales

in Asia.

1 The Defendants also argue that summary judgment should be affirmed

on the alternate ground that the alleged conspiracy failed to show the

requisite “continuity” under RICO. See H.J. Inc. v. Nw. Bell Tel. Co.,

492 U.S. 229, 241 (1989). Because the district court declined to reach this

issue when it granted summary judgment based on the one satisfaction

rule alone, we remand to the district court to decide the “continuity” issue

in the first instance. See New Mexico State Inv. Council v. Ernst & Young

LLP, 641 F.3d 1089, 1092 n.1 (9th Cir. 2011).

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UTHE TECH. CORP. V. AETRIUM, INC. 5

Around July 1992, the Foreign Defendants solicited the

assistance of the Defendants in the conspiracy. During a

conference call, the Defendants allegedly agreed that they

would withhold payments from Uthe Singapore arising from

its distribution agreement with Aetrium, encourage customers

to transact business with Aetrium directly rather than through

Uthe Singapore, and covertly amend the terms of the

distribution agreement, so that Aetrium could terminate the

contract on short notice and transfer its business from Uthe

Singapore to the secret corporation. Uthe contends that the

Defendants engaged in predicate acts of mail and wire fraud

during the months of July through September to effectuate

their scheme.

In October 1992, after being severely damaged by the

efforts of the conspiracy, Uthe agreed in a stock purchase

agreement (the Purchase Agreement) to sell its shares in Uthe

Singapore to the Foreign Defendants at a significantly

depressed price. The Purchase Agreement contained an

arbitration clause, which provided for binding arbitration of

any disputes arising from the agreement. It also contained a

choice of law clause that selected Singapore law as the

governing law for any arbitration proceedings.

B. The Original District Court Proceedings

In July 1993, Uthe filed suit against the Defendants and

the Foreign Defendants in California state court, seeking

damages arising from the conspiracy. After the case was

removed to federal court in the Northern District of

California, Uthe filed an amended complaint alleging RICO

violations, among other causes of action.

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6 UTHE TECH. CORP. V. AETRIUM, INC.

The ForeignDefendants then moved to compel arbitration

of Uthe’s claims against them pursuant to the arbitration

clause contained in the Purchase Agreement. Unlike the

Foreign Defendants, the Defendants were not signatories to

the Purchase Agreement or otherwise bound to arbitrate

Uthe’s claims against them.

Over Uthe’s vigorous objections, the district court

dismissed the Foreign Defendants from the case on the basis

of forum non conviens and stayed its proceedings with respect

to the Defendants pending the outcome of the Singapore

arbitration, noting that “the arbitration may narrow or limit

the issues raised by the claims alleged against Aetrium and

Allen.”

In so ruling, the district court acknowledged that the

Singapore arbitration could conclusively resolve Plaintiff’s

claims against the Foreign Defendants. It concluded that

Singapore would serve as an “adequate alternative forum in

which to adjudicate Plaintiff’s claims against [the Foreign

Defendants],” noting that “Plaintiff’s federal securities claims

are trumped by the choice of law provision specifying the

application of Singapore law.” In contrast, Uthe’s right to

eventually pursue its own claims against the Defendants in

federal court remained unaffected by the district court’s

order.

C. The Singapore Arbitration

The Singapore arbitration spanned almost two decades.

The arbitration commenced in August 1994, but the arbitral

proceedings were interrupted several times by legal

challenges brought by the parties in Singapore courts, and by

the appointment of a replacement arbitrator.

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UTHE TECH. CORP. V. AETRIUM, INC. 7

On June 30, 2005, the arbitrator found that the Foreign

Defendants were liable to Uthe. The arbitrator also ordered:

[T]here shall be no further or other actions or

proceedings . . . by [Uthe] against [the

Foreign Defendants] . . . without prejudice to

[Uthe’s] rights in the U.S. action against [the

Foreign Defendants] and the other defendants

in the U.S. Action . . . .2

Subsequently, on March 23, 2012, the arbitrator issued a

damages award against the Foreign Defendants and in favor

of Uthe amounting to 12,286,350 Singapore dollars (the

equivalent of approximately $9,180,771 USD) with yearly

interest of 1.5%. The arbitrator determined that the damages

figure reflected the difference between the depressed sale

price of Uthe Singapore’s stock and the projected value of the

stock absent the effects of the conspiracy. The arbitrator also

found that Uthe had suffered losses of approximately 500,000

Singapore dollars as a result of diverted business

opportunities. However, he chose to award Uthe the greater

amount of 12,286,350 Singapore dollars in damages,

reasoning that an award for both the depressed stock price

and diverted business opportunities would be duplicative. The

2 Notwithstanding this statement, the existence of a final and binding

arbitral judgment against the ForeignDefendants appears to preclude Uthe

from now pursuing its original federal claims against the Foreign

Defendants. The district court found that the Singapore arbitration would

serve as an adequate forum for the resolution of such claims when it

dismissed the Foreign Defendants from the action. Moreover, as the

arbitrator noted,“it appears that the proper forum is and always was

Singapore,” given the nature of the mandatory and binding arbitration

clause between Uthe and the Foreign Defendants.

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8 UTHE TECH. CORP. V. AETRIUM, INC.

Foreign Defendants have since paid Uthe the full amount of

the arbitration award.

D. The Current District Court Proceedings

Upon the conclusion of the Singapore arbitration, Uthe

filed a motion in May 2012 to reopen its original suit against

the Defendants in federal district court and to lift the stay.

The district court granted Uthe’s motion and permitted it to

file an amended complaint. Following the conclusion of

discovery, the Defendants filed a motion for summary

judgment. On September 9, 2013, the district court granted

the Defendants’ motion for summary judgment, holding that

the full satisfaction of the arbitration damages award

extinguished Uthe’s claim against the Defendants for treble

damages under RICO. This timely appeal followed.

JURISDICTION AND STANDARD OF REVIEW

We have jurisdiction pursuant to 28 U.S.C. § 1291. We

review the district court’s decision to grant summary

judgment de novo by “viewing the evidence in the light most

favorable to the nonmoving party to determine whether any

genuine issues of material fact exist and whether the district

court correctly applied the relevant substantive law.” Trs. of

Const. Indus. &Laborers Health &Welfare Trust v. Hartford

Fire Ins. Co., 578 F.3d 1126, 1129 (9th Cir. 2009). Summary

judgment is appropriate when the facts and pleadings “show

that there is no genuine issue as to any material fact and that

the moving party is entitled to a judgment as a matter of law.”

Rosenbaum v. Washoe Cty., 663 F.3d 1071, 1075 (9th Cir.

2011) (citing Celotex Corp v. Caltrett, 477 U.S. 317, 322

(1986)).

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UTHE TECH. CORP. V. AETRIUM, INC. 9

DISCUSSION

RICO provides the statutory remedy of treble damages for

any individual “injured in his business or property by reason

of a violation” of the statute. 18 U.S.C. § 1964(c). The

statutory remedy of treble damages reflects Congress’s intent

to remedy the injuries caused by organized crime as well as

to “bring to bear the pressure of ‘private attorneys general’ on

a serious national problem.” Agency Holding Corp. v.

Malley-Duff & Assocs., Inc., 483 U.S. 143, 151 (1987). As

the Supreme Court has held, “RICO was an aggressive

initiative to supplement old remedies and develop new

methods for fighting crime.” Sedima, S.P.R.L. v. Imrex Co.,

473 U.S. 479, 498 (1985). RICO’s provisions must therefore

be construed “liberally” in keeping with the broad remedial

purposes of the statute.Id. NotwithstandingRICO’s provision

of treble damages, the one satisfaction rule also applies.3See

Seymour v. Summa Vista Cinema, Inc., 809 F.2d 1385,

1389–90 (9th Cir. 1987). The one satisfaction rule reflects the

equitable principle that a plaintiff who has received full

satisfaction of its claims from one tortfeasor generally cannot

3 The district court and the parties refer to California state cases

concerning the application of the one satisfaction rule. In contrast, we rely

on federal authorities for the same legal principle. Although this

distinction is not dispositive, it stands to reason that the measure of

damages corresponding to a federal cause of action such as RICO should

be governed by the federal law of damages rather than by state law. See

Singer v. Olympia Brewing Co., 878 F.2d 596, 599–600 (2d Cir. 1989)

(holding that “federal law should determine whether a defendant in a

federal securities action is entitled to a credit . . . for the settlement by

another party,” particularly as the question of damages is a substantive

rather than procedural matter). See also Seymour, 809 F.2d at 1389 n.5

(“[I]t is unclear whether federal or state lawapplies to the settlement offset

issue . . . [but] state law appears to be consistent with federal law on this

issue and we consider California precedent persuasive authority.”).

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10 UTHE TECH. CORP. V. AETRIUM, INC.

sue to recover additional damages corresponding to the same

injury from the remaining tortfeasors:

It is settled that . . . a plaintiff who has

recovered any item of damage from one

coconspirator may not again recover the same

item from another conspirator; the law, that is,

does not permit a plaintiff to recover double

payment.

Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321,

348 (1971). A corollary principle of the one satisfaction rule

is that “payment made by a joint tortfeasor diminishes the

claim against the remaining tortfeasors.” Seymour, 809 F.2d

at 1389.

The key question posed in this appeal is how the one

satisfaction rule interacts with RICO’s treble damages

provision. Specifically, to what extent does the one

satisfaction rule operate to diminish the amount of damages

claimed against the Defendants? Depending upon the order in

which the two rules are applied, the one satisfaction rule

could either offset part of Uthe’s treble RICO damages, or it

could fully extinguish Uthe’s claim to those damages.

The district court held that the one satisfaction rule

extinguished Uthe’s claim to treble RICO damages, reasoning

that Uthe had already received full compensation for its

damages from the Singapore arbitration. The $9 million

arbitral award roughly corresponded to Uthe’s losses caused

by the conspiracy. The district court further reasoned that,

given the full satisfaction of the arbitral award, “there are no

items remaining to be compensated by reason of any RICO

violation, and zero multiplied by three is still zero.”

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UTHE TECH. CORP. V. AETRIUM, INC. 11

However, the full measure of Uthe’s claims against the

Defendants was not satisfied by the Singapore arbitration

award, such that no additional recovery is permissible under

RICO. The Singapore arbitration was limited in scope to

those claims against the Foreign Defendants arising under

Singapore law, and could not fully resolve Uthe’s legal

claims against the Defendants, which were pending in the

federal court action. Specifically, Singapore law could not

provide for the resolution of Plaintiff’s RICO claims, which

were asserted in the original federal lawsuit. As Uthe’s legal

expert noted, “the concept of treble damages is not

recognized under Singapore law.” Accordingly, as more fully

explained below, the one satisfaction rule does not operate to

extinguish the Plaintiff’s claim to RICO damages.

In order for a court to find complete satisfaction under the

one satisfaction rule, there must be such an identity between

the injuries alleged and the remedies available that any

additional recovery would unjustly enrich the plaintiff. The

Restatement (Third) of Torts § 25 cmt. b (2000) is instructive

on this point:

In some instances, the injuries for which the

plaintiff brings a second suit may not be

entirely congruent with the injuries for which

the plaintiff recovered in the first suit.

Similarly, in some instances, the remedies

available for the claims made by the plaintiff

in a second suit may be broader than the

remedies available for the claims asserted in

the first suit. Satisfaction of a claim cannot

occur unless the injuries sued upon are

identical and the remedies available for the

claims are the same.

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12 UTHE TECH. CORP. V. AETRIUM, INC.

Several courts have adopted this principle by applying the

one satisfaction rule to offset the amount of a judgment only

when two defendants are responsible for “common damages”

stemming from the same injury. See, e.g., Chisholm v. UHP

Projects, Inc., 205 F.3d 731, 737 (4th Cir. 2000) (“The

essential requirement for the ‘one satisfaction rule’ is that the

amounts recovered by settlement and the judgment must

represent common damages arising from a single, indivisible

harm.”); City of San Jose v. Price Waterhouse, No. 91-16489,

1993 WL 83495, at *1 (9th Cir. Mar. 23, 1993) (“An offset is

available where the settlement and the jury verdict represent

common damages.”); Singer v. Olympia Brewing Co.,

878 F.2d 596, 599–600 (2d Cir. 1989) (same).

In this case, the remedies available to Uthe in the

Singapore arbitration diverge significantly from the remedies

available to it under RICO in the present action. See

Pennsylvania v. Cianfrani, 600 F. Supp. 1364, 1368 (E.D. Pa.

1985) (prior payments only served to partially offset RICO

damages due to “the possibility that federal law would

provide a remedy greater than was available under state

law”). Although future cases may address whether full

satisfaction can still be achieved if the remedies or injuries

are substantially equivalent, rather than “identical,” we need

not resolve those questions to decide the present case. The

disparity between the remedy of treble RICO damages and

actual damages is simply too great. No remedy equivalent to

RICO treble damages was available to Uthe under Singapore

law, so it was not possible for Uthe to obtain full satisfaction

of its RICO claims in the Singapore arbitration.

Moreover, the animating purpose of the one satisfaction

rule is to prevent double recovery and unjust enrichment. See

Seymour, 809 F.2d at 1389–90 (“The foremost of these

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UTHE TECH. CORP. V. AETRIUM, INC. 13

[policy goals] is assuring the tort victim one complete

satisfaction of [its] claim, neither more nor less.”). The

maximum amount that Uthe could have been awarded in a

single lawsuit arising from the same injury was treble the

amount of actual damages under RICO. Uthe would have

been entitled to pursue this treble damages claim had the

federal court action not been stayed pending the Singapore

arbitration. Uthe vigorously contested the stay of the district

court action, particularly as it would postpone the pursuit of

its RICO claim against the Defendants, which it had not

agreed to arbitrate.

Because the Singapore-based arbitral tribunal had no

jurisdiction over the Defendants, who were not parties to the

Purchase Agreement or to its arbitration clause, it could not

circumscribe Uthe’s rights to pursue the full measure of its

legal remedies against the Defendants in federal court.

Accordingly, the arbitration award states that it is made

“without prejudice to [Uthe’s] rights in the U.S. Action.”

Thus, neither the arbitration award nor the one satisfaction

rule forecloses Uthe’s ability to pursue a treble damage award

against the Defendants; it does not amount to double

recovery, nor does it permit Uthe to obtain any damages 

beyond which it could have otherwise been entitled in the

federal district court lawsuit.

In reaching this conclusion, we also acknowledge the

persuasive reasoning of our colleague, A. Wallace Tashima,

then a district judge, in In re National Mortgage. See In re

Nat’l Mortg. Equity Corp. Mortg. Pool, 636 F. Supp. 1138

(C.D. Cal. 1986). As in this appeal, the court in In re National

Mortgage examined the question of “[w]hat constitutes ‘full

satisfaction’ of a treble damages claim.” Id. at 1151. There,

a plaintiff claiming treble RICO damages had received

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14 UTHE TECH. CORP. V. AETRIUM, INC.

settlement payments constituting the full measure of actual

damages from one of the defendants. Id. The district court

held that “the ‘full satisfaction’ to which treble damages

claimants are entitled is ‘three times the proven actual

damages’ – any award less than that amount constitutes an

incomplete recovery.” Id. at 1152.

The Defendants attempt to limit the reasoning of In re

National Mortgage to those situations where plaintiffs

received partial satisfaction of an adjudicated damage award

or satisfaction of a non-adjudicated damage award (such as a

settlement, release, or covenant not to sue). However,

whether such payments result from a settlement or a prior

judgment, they constitute partial credits toward the full

measure of damages for which a defendant may be liable

under RICO, and would not operate to unjustly permit double

recovery.

CONCLUSION

We hold that Uthe is not barred by the one satisfaction

rule from pursuing treble damages under RICO against the

Defendants, provided there is an offset for the sums paid to

Uthe by the Foreign Defendants as a result of the arbitral

award.

Accordingly, we REVERSE the district court’s grant of

summary judgment and REMAND for further proceedings.

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