Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-14-01601/USCOURTS-ca8-14-01601-0/pdf.json

Parties Involved:
Glenna Carmichael
Appellant
Keith Carmichael
Appellant
Cutting-Edge USA, LLC
Appellant
Steven Massey
Appellant
John Mark Taylor
Appellant
Taylormade Unlimited, LLC
Appellant
The Stonebridge Collection, Inc.
Appellee

Document Text:

United States Court of Appeals

For the Eighth Circuit

___________________________

No. 14-1514

___________________________

The Stonebridge Collection, Inc.

lllllllllllllllllllll Plaintiff - Appellant

v.

Keith Carmichael; Glenna Carmichael; Steven Massey; John Mark Taylor;

Cutting-Edge USA, LLC; Taylormade Unlimited, LLC

lllllllllllllllllllll Defendants - Appellees

___________________________

No. 14-1601

___________________________

The Stonebridge Collection, Inc.

lllllllllllllllllllll Plaintiff - Appellee

v.

Keith Carmichael; Glenna Carmichael; Steven Massey; John Mark Taylor;

Cutting-Edge USA, LLC; Taylormade Unlimited, LLC

lllllllllllllllllllll Defendants - Appellants

____________

Appeals from United States District Court 

for the Western District of Arkansas - Hot Springs

____________

Appellate Case: 14-1601 Page: 1 Date Filed: 06/26/2015 Entry ID: 4289044 
 Submitted: February 12, 2015

 Filed: June 26, 2015

____________

Before RILEY, Chief Judge, LOKEN and SMITH, Circuit Judges.

____________

RILEY, Chief Judge.

The Stonebridge Collection, Inc., an engraver of promotional pocket knives,

sued (1) former distributor Cutting-Edge USA, LLC and its members, Keith and

Glenna Carmichael; (2) competitor knife engraver Taylormade Unlimited, LLC

(TaylorMade) and its sole member and manager John Mark Taylor, a former

Stonebridge employee; and (3) Steven Massey, a TaylorMade employee and former

Stonebridge employee (collectively, defendants), on ten counts arising from Massey’s

copying Stonebridge’s computer files. Relevant to this appeal, Stonebridge brought

claims under the Racketeer Influenced and Corrupt Organizations Act (RICO),

18 U.S.C. §§ 1961-1968; the Arkansas Deceptive Trade Practices Act (ADTPA), Ark.

Code Ann. §§ 4-88-101 et seq.; and Arkansas common law. After a four-day bench

trial, the district court1

 partially found for Stonebridge on its fraud and conversion

claims, dismissed the remaining eight claims, and denied the parties’ motions for

attorney fees. Having appellate jurisdiction under 28 U.S.C. § 1291, we affirm in part

and remand for further proceedings.

1

The Honorable Robert T. Dawson, United States District Judge for the Western

District of Arkansas.

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I. BACKGROUND

A. Facts

Stonebridge2

 engraves and sells personalized pocket knives, both directly to

end-use customers and to distributors. End-use customers who order directly from

Stonebridge are referred to as “inside” customers—over 50% of Stonebridge’s insidecustomer orders are reorders. End-use customers who order knives from a distributor

like Cutting-Edge are “outside” customers. 

From late 2004 through January 2011, Cutting-Edge distributed Stonebridge’s

engraved knives to outside customers, who paid Cutting-Edge directly. From late

2004 through March 2010, Stonebridge provided Cutting-Edge free engraved knife

samples. Stonebridge delivered over 125,000 sample knives to Cutting-Edge and over

8,000 sample knives to Cutting-Edge’s distributors. Stonebridge delivered 6,476 of

these sample knives after July 2009. 

Once Cutting-Edge represented to Stonebridge it had received an order,

Stonebridge provided Cutting-Edge free “proofs,” which included the customer’s

logos and computer generated art depicting the customer’s logo to be placed on the

customer’s knives. Stonebridge sent to Cutting-Edge the proofs, contained on “proof

selection forms,” and “final proof pages,” used for final proof approval and ordering.

Both the proof selection forms and the final proof pages generally included an order

number, customer contact information, and, if applicable, a note indicating the order

was a reorder. Stonebridge also sent proof selection forms and final proof pages

directly to inside customers. Stonebridge created the art in Corel Draw (CDR) file

format and converted it to Adobe PDF file format for customer approval. Defendants

claim Stonebridge’s proof selection forms and final proof pages usually were sent to

customers in PDF format and rarely in CDR format. 

2

Stonebridge’s only shareholders are Mickey and Susan Gates.

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From 2005 until he quit on July 23, 2009, Taylor was Stonebridge’s general

manager. Five days after quitting his job with Stonebridge, Taylor formed

TaylorMade, a knife engraver. Around this time, the Carmichaels purchased two laser

engraving machines for TaylorMade and loaned TaylorMade $25,000. Like

Stonebridge’s machines, TaylorMade’s machines used computer generated art stored

in CDR files. Around September 2009, Cutting-Edge started placing some of its

engraved knife orders with TaylorMade. After that time, Cutting-Edge continued to

place orders with Stonebridge, paying Stonebridge over $165,000. Cutting-Edge

placed its last order with Stonebridge in January 2011. 

From 2005 through September 14, 2009, Massey was Stonebridge’s graphic

artist, creating art for the engraving machines. Around September 9, 2009,

unbeknownst to Stonebridge, Massey downloaded from Stonebridge’s computer

system, onto a flashdrive, (1) forms and templates; (2) more than 20,000 CDRs and

PDFs with proof selection forms, final proof pages, and art for Cutting-Edge outside

customers; and (3) more than 2,000 CDRs and PDFs with proof selection forms, final

proof pages, and art for other customers, including inside customers. 

By September 18, 2009, four days after Massey quit Stonebridge, Massey

started working for TaylorMade. Massey uploaded the Stonebridge files from the

flashdrive to his home computer and his TaylorMade work computer. TaylorMade

and Cutting-Edge consulted these files to solicit Stonebridge customers. From

November 2010 through March 2011, Massey sent Carmichael emails with attached

images of Stonebridge proof pages for Stonebridge customers who were not yet

Cutting-Edge’s or TaylorMade’s customers. TaylorMade modeled its proof selection,

final proof approval, and ordering forms on Stonebridge’s. 

The parties stipulated neither Stonebridge’s documents used to send proposed

art to end-use customers nor its sales invoices were trademarked or copyrighted.

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Stonebridge claims it had an unwritten policy—communicated to Taylor and

Massey—that “no artwork, no files [were] ever to leave Stonebridge property.” But

Stonebridge admits it had no agreement with any defendant prohibiting them from

using Stonebridge’s art or forms. 

Cutting-Edge’s knife shipments for outside customers identified only CuttingEdge as the shipper—Cutting Edge’s customers did not know the identity of the

engraver. Around September 18, 2009, four engraving orders originally placed with

Stonebridge—for which Stonebridge developed art free of charge at Keith

Carmichael’s request—were instead engraved by TaylorMade. In early 2010,

Stonebridge discovered Cutting-Edge was filling engraving orders with another

engraver, so Stonebridge stopped sending free sample knives to Cutting-Edge. 

In early 2011, Keith Carmichael used the information Massey downloaded

about Stonebridge’s inside customers to create a mailing list. Carmichael transferred

the list to a marketing company, who sent advertising postcards to the inside

customers in May 2011, November 2011, and April 2012, which resulted in sales to

Cutting-Edge. 

B. Procedural History

Stonebridge filed a complaint asserting both federal and Arkansas state law

claims, invoking federal question and supplemental jurisdiction, see 28 U.S.C.

§§ 1331, 1367(a). After a four-day bench trial, the district court issued findings of fact

and conclusions of law, dismissing eight of the ten claims and partially ruling in favor

of Stonebridge on its fraud and conversion claims. The district court then denied the

parties’ motions for attorney fees. Stonebridge appeals the partial dismissal of and

damages award on the conversion claim, the dismissal of its RICO, ADTPA, and

tortious interference claims, and the denial of attorney fees. Defendants cross-appeal

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Appellate Case: 14-1601 Page: 5 Date Filed: 06/26/2015 Entry ID: 4289044 
the fraud and conversion judgments on the merits, each damages award, and the

district court’s attorney fee order.

II. DISCUSSION

“‘In reviewing a judgment after a bench trial, this court reviews the court’s

factual findings for clear error and its legal conclusions de novo.’” Tussey v. ABB,

Inc., 746 F.3d 327, 333 (8th Cir. 2014) (quoting Outdoor Cent., Inc. v.

GreatLodge.com, Inc., 688 F.3d 938, 941 (8th Cir. 2012)). 

A. Conversion

 In Arkansas, “[t]o establish liability for the tort of conversion, a plaintiff must

prove that the defendant wrongfully committed a distinct act of dominion over the

property of another, which is a denial of or is inconsistent with the owner’s rights.” 

Hatchell v. Wren, 211 S.W.3d 516, 521 (Ark. 2005). We review this factual question,

see, e.g., Ford Motor Credit Co. v. Herring, 589 S.W.2d 584, 586 (Ark. 1979), for

clear error.

1. Inside Customers

a. Merits

Defendants contend the district court erred by “[s]pecifically” finding

defendants converted Stonebridge’s inside customer files.3

 Looking primarily to

copyright law from other jurisdictions, defendants argue Stonebridge had no

possessory interest in copies of the art it created for its customers. We need not

venture outside Arkansas tort law to resolve this issue. In Godwin v. Churchman, 810

S.W.2d 34 (Ark. 1991), a solo accountant, Godwin, joined three other accountants to

form their own firm. See id. at 35. After the business relationship turned sour and

3

Despite maintaining their innocence as to conversion, at oral argument, counsel

for defendants acknowledged Massey’s act was “theft” and Massey “wrongfully took”

the files.

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Godwin rejected the others’ effort to buy him out, the other three accountants

resigned. See id. Over a weekend, the three “took furniture, client files in progress,

computer diskettes with client information, and financial data including accounts

receivable from the office, without giving prior notice.” Id.

The Arkansas Supreme Court held Godwin sufficiently alleged a claim of

conversion. See id. at 38. The court reasoned Godwin had alleged the other three

accountants had “exercised dominion over property in violation of the rights of the

owners” where the complaint stated, “the Defendants removed the files, including

those originally brought into the practice by Plaintiff Godwin, copied the computer

diskettes which were the property of Plaintiffs, took the furniture which was the

property of Plaintiffs and took over the Plaintiffs’ accounting practice which he had

brought into the group.” Id.

Defendants contend the Arkansas Supreme Court might have considered only

the taking of files and furniture, not the copying of the computer diskettes, to

constitute an allegation of conversion. But the court did not single out the diskette

copying as any less a conversion than the physical removal of the files and furniture,

and we have no reason to assume otherwise. See Holland v. Walls, 621 S.W.2d 496,

497-98 (Ark. Ct. App. 1981) (finding appellee converted appellant’s tract books when

she made microfilm copies of the books, “exercis[ing] dominion over the property in

violation of appellant’s right to possession”). Following Godwin and Holland, the

district court did not err in concluding defendants converted the copies of insidecustomer files created by Stonebridge.

b. Damages

Stonebridge alleges the district court erred in assessing damages for defendants’

inside-customer files conversion. “[T]he amount of damages in a nonjury case is

within the discretion of the trial court and cannot be overturned unless clearly

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Appellate Case: 14-1601 Page: 7 Date Filed: 06/26/2015 Entry ID: 4289044 
erroneous.” Taylor v. Pre-Fab Transit Co., 616 F.2d 374, 375 (8th Cir. 1980). The

district court awarded Stonebridge recovery based on defendants’ unjust enrichment. 

See, e.g., Holland, 621 S.W.2d at 499 (remanding to the trial court to calculate

damages based on unjust enrichment to the conversion tortfeasor). 

Cutting-Edge took inside-customer contact information from the files Massey

copied and arranged for solicitation postcards to be sent to Stonebridge’s inside

customers. The parties stipulated these postcard solicitations resulted in at least

$27,300 in sales for Cutting-Edge. Stonebridge argues the number should be

increased by about $10,000 for ostensible sales by Cutting-Edge to inside customers

before the postcard solicitations. The district court did not include Stonebridge’s

additional $10,000 because there was “no reliable evidence . . . to support [it].” The

district court found Cutting-Edge “earned a 61% net profit of the price of the main

knife sold to their end use customers.” The district court awarded damages of 61%,

which it calculated as $16,380,4

 representing Cutting-Edge’s unjust enrichment. 

Stonebridge claims the district court clearly erred by not crediting “Exhibit D”

to its post-trial brief, which Stonebridge claims supports a higher award. Stonebridge

admits it did not introduce Exhibit D at trial, but claims Exhibit D “extracted data

from defendants’ trial Exhibit 15.” Considering our deferential standard of review of

damages, see Taylor, 616 F.2d at 375, we hold the district court did not clearly err by

discounting evidence compiled in a post trial brief exhibit and thereby holding

Stonebridge to the lower stipulated figure.

Defendants assert Stonebridge is not entitled to damages because it did not

present sufficient evidence that it had been profitable. But a lost-profit analysis is

4

The district court clearly erred here, because 61% of $27,300 is $16,653. On

remand, the conversion award must be adjusted accordingly.

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Appellate Case: 14-1601 Page: 8 Date Filed: 06/26/2015 Entry ID: 4289044 
irrelevant here to the district court’s calculation of unjust enrichment damages, which

may be calculated solely from defendants’ gain. See, e.g., Hatchell, 211 S.W.3d at

522. The district court did not clearly err in awarding damages based upon

defendants’ unjust enrichment.

2. Outside Customers

The district court found Massey also downloaded outside-customer files, but

the district court did not “[s]pecifically” find defendants converted the outsidecustomer files and did not award any remedy for these alleged losses. Stonebridge

claims this was error. Although a close question, we conclude the district court did

not clearly err in not awarding judgment to Stonebridge on the outside-customer

conversion claim. See Spirtas Co. v. Nautilus Ins. Co., 715 F.3d 667, 670-71 (8th Cir.

2013) (“This court can affirm on any basis supported in the record.”). 

“‘Conversion is the exercise of dominion over property in violation of the rights

of the owner or person entitled to possession.’” Grayson v. Bank of Little Rock, 971

S.W.2d 788, 792 (Ark. 1998) (quoting City Nat’l Bank of Fort Smith v. Goodwin,

783 S.W.2d 335, 337 (Ark. 1990)). The dispositive inquiry is whether defendants,

like Stonebridge, were “entitled to possess” the outside-customer files. See id. The

outside customers placed orders with Cutting-Edge, paid Cutting-Edge, received

knives shipped by Cutting-Edge, and, the district court found, “had no knowledge of

who performed the engraving work.”5

 The district court further found “[t]he art, proof

pages and other items produced in connection [with Stonebridge’s] ‘outside’

customers . . . were shared and disclosed with distributors (including Cutting Edge)

and end use customers.” Stonebridge sent Cutting-Edge outside-customer art (“free

mock-ups”) with no restriction. Because Stonebridge freely gave Cutting-Edge the

5

Stonebridge stated at oral argument it was “not challenging the district court’s

factual findings.”

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Appellate Case: 14-1601 Page: 9 Date Filed: 06/26/2015 Entry ID: 4289044 
outside-customer art, at least in PDF format,6

 defendants’ use of the outside-customer

files was not “inconsistent with [Stonebridge’s] rights.” Hatchell, 211 S.W.3d at 521. 

The outside-customer art was accessible by Cutting-Edge without restriction, and

while Stonebridge complains the Carmichaels “developed” an outside-customer list

to “servic[e] Stonebridge’s repeat customers,” the outside-customer list was merely

a list of Cutting-Edge’s own customers. Given the absence of an agreement that the

defendants could not use the proofs, we affirm the district court on Stonebridge’s

outside-customer conversion claim.7

B. Tortious Interference

Stonebridge argues the district court erred by dismissing Stonebridge’s tortious

interference claim reasoning that “[t]he individuals appearing on [Stonebridge’s]

customer list were potential customers and the expectation to profit from yet-to-be

secured reorders does not constitute a valid business expectancy.” We review this

question of fact for clear error. See, e.g., Stewart Title Guar. Co. v. Am. Abstract &

Title Co., 215 S.W.3d 596, 605 (Ark. 2005) (“[T]he question of whether a valid

business expectancy existed was a question for the jury to determine.”). 

“Some precise business expectancy or contractual relationship must be

obstructed in order to commit the tort of interference with a business expectancy.” 

Skalla v. Canepari, 430 S.W.3d 72, 81 (Ark. 2013) (emphasis added); see also Stewart

Title, 215 S.W.3d at 611 (Brown, J., concurring) (stating the “prospective relationship

must be ‘certain, concrete and definite’”) (quoting Shank v. William R. Hague, Inc.,

6

After observing a demonstration of the PDF-to-CDR conversion process at

trial, the district court found this reverse process was “easily” done. We find no clear

error in this factual finding.

7

Arguably, Massey’s copying of the outside-customer files was also a

conversion, or “theft,” as the defendants’ counsel bluntly declared.

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Appellate Case: 14-1601 Page: 10 Date Filed: 06/26/2015 Entry ID: 4289044 
192 F.3d 675, 689 (7th Cir. 1999)); cf. Stewart Title, 215 S.W.3d at 603

(“Conclusions without the necessary factual underpinnings to support them are not

enough to state a cause of action.”). 

Stonebridge claimed it had a “valid business expectancy” that over half its

inside customers, statistically, would place reorders, and that the defendants were

aware of this fact. Other than the statistical evidence, Stonebridge does not provide

us with “the necessary factual underpinnings to support,” id., its claim and does not

describe a precise, certain, concrete, or definite business expectancy.8

 See, e.g., id. at

604 (explaining there was “substantial evidence . . . regarding the existence of a valid

business expectancy based on the numerous witnesses who testified at trial”); cf.

Baptist Health v. Murphy, 373 S.W.3d 269, 282-83 (Ark. 2010) (affirming the trial

judge’s “specific findings, based on witness testimony, that there were contractual

relationships between the appellee physicians and their patients and that these

relationships were long term”). For example, Stonebridge does not state how many

reorders a customer typically would place, nor whether its relationship with the

reordering customers was long-term. Given our deferential standard of review, we

find the district court did not clearly err in finding Stonebridge did not establish the

existence of a business expectancy under Arkansas law.

8

See Johnson v. City of Shorewood, Minn., 360 F.3d 810, 817-18 (8th Cir.

2004) (“It is not a court’s obligation to search the record for specific facts that might

support a litigant’s claim, and we are not disposed to undertake such a task in this

case.” (internal citation omitted)).

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C. Fraud

The Carmichaels and Cutting-Edge argue the district court erred in finding they

fraudulently induced Stonebridge to continue sending sample knives after they started

filling some of their engraving orders with TaylorMade.

The tort of fraud or deceit consists of five elements that the plaintiff must

prove by a preponderance of the evidence: (1) a false representation of

a material fact; (2) knowledge that the representation is false or that there

is insufficient evidence upon which to make the representation; (3) intent

to induce action or inaction in reliance upon the representation; (4)

justifiable reliance on the representation; and (5) damage suffered as a

result of the reliance.

Tyson Foods, Inc. v. Davis, 66 S.W.3d 568, 577 (Ark. 2002).

 The parties stipulated Stonebridge and Cutting-Edge had no agreement “as to

how many or when sample knives would be delivered [or that the sample knives]

should be returned.” But Mickey Gates testified he and Keith Carmichael had a

“mutual agreement” that Stonebridge would provide free samples to Carmichael as an

“investment” to secure customer orders for Stonebridge. Stonebridge alleges—and

Cutting-Edge disputes—Stonebridge had an “agreement” with Cutting-Edge that

“amounted to a ‘requirement contract’ relationship.” But Cutting-Edge stipulates

Stonebridge provided the sample knives “for the purpose of solicitation of sales of

personalized knives etched by Stonebridge.” (Emphasis added). The district court

found “[t]he Carmichaels and Cutting Edge induced [Stonebridge] to send sample

knives to them from the period following July 2009 and did so with little to no

intention of using [Stonebridge] as its primary engraver but rather with the intention

to switch to using Taylor Made exclusively,” and that amounted to fraudulent

inducement. Cutting-Edge states the district court erred in its factual finding

regarding Cutting-Edge’s intent, which we review for clear error. 

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Although another close question, we conclude the district court did not clearly

err. Cutting-Edge made substantial investments in TaylorMade, “fund[ing] the startup of TaylorMade,” suggesting Cutting-Edge would want to ensure itself of a return

on its investment by sending as much business as possible to TaylorMade. After

September 2009 when TaylorMade started engraving knives, Cutting-Edge’s orders

placed with Stonebridge rapidly decreased. Mickey Gates testified, “Every year was

an increase until 2008. 2008 it started going down, 2009 it took a sharp nosedive, and

2010 it was even to non-existent, to the last order being in December of 2010.” Gates

further testified, “[T]he problem is Mr. Carmichael never informed us that he had

ended the agreement. He just started – he was asking for more samples and then

started diverting those samples away.” Keith Carmichael responded at trial his “intent

was to have two possible suppliers.” But Stonebridge emphasizes in its brief, citing

the testimony, “Cutting-Edge inadvertently sent proof pages to Stonebridge that were

intended for TaylorMade, but when Gates asked about the knives, Carmichael assured

Stonebridge repeatedly that the forms in question were for different knives that

Stonebridge did not handle. Those assurances were lies, as Gates later figured out.” 

At trial, Gates explained, “[W]e had an investment and expected return on those

investment knives. At that point, I knew that [Keith Carmichael] was no longer

turning those orders in to us that our samples were providing.” 

The district court must have given greater credence to Mickey Gates’s

testimony than to Keith Carmichael’s on this issue, and we will not usurp the factfinder’s superior ability to make such assessments. See Tadlock v. Powell, 291 F.3d

541, 546 (8th Cir. 2002) (“We give due regard to the opportunity of the district court

to judge the credibility of the witnesses.”) The district court did not clearly err by

finding Cutting-Edge fraudulently induced Stonebridge to send sample knives while

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intending to employ TaylorMade as its engraver on the orders outside-customers

placed as a result of seeing the samples.9

D. ADTPA

The district court held defendants did not violate ADTPA § 4-88-107(a)(1), (2),

or (10). Stonebridge appeals the district court’s conclusion as to subsection (10) only,

which prohibits “[e]ngaging in any . . . unconscionable, false, or deceptive act or

practice in business, commerce, or trade.” Ark. Code Ann. § 4-88-107(a)(10). 

Addressing Stonebridge’s ADTPA claim, the district court stated,

Massey, Taylor, and Taylor Made did not make any representation to the

public concerning the goods and services of [Stonebridge] and therefore

[Stonebridge]’s claim brought pursuant to [ADTPA] as to these

defendants is dismissed.

In view of the Court’s finding that [Stonebridge’s] “main” knife is the

same as the ones offered by the Carmichaels and Cutting Edge, these

defendants’ advertisements do not constitute false representation and,

therefore, do not constitute a violation of ADTPA. . . . Accordingly,

[Stonebridge’s] state deceptive trade practices claim against these

defendants is dismissed.

Stonebridge generally argues that the district court ignored the catchall provision,

§ 4-88-107(a)(10), and, without citation to supporting legal authority, Stonebridge

alleges defendants’ acts of conversion and fraud amount to “deceptive act[s] . . . in

business.” Defendants counter they did not violate § 4-88-107(a)(10) because “there

9

We also reject the defendants’ arguments suggesting the district court erred in

awarding Stonebridge $849.60 in damages for four fraudulently diverted engraving

orders. 

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was no deception, fraud or false pretense concerning the knives being sold.”10 We

review the district court’s interpretation of the ADTPA de novo. See Tussey, 746

F.3d at 333; see also Baptist Health, 373 S.W.3d at 288 (“Our review of this point on

appeal requires interpretation of the ADTPA; accordingly, the standard of review is

de novo.”). 

“The elements of . . . a cause of action [under § 4-88-107(a)(10)] are (1) a

deceptive consumer-oriented act or practice which is misleading in a material respect,

and (2) injury resulting from such act.” Skalla, 430 S.W.3d at 82 (emphasis added); 

see also Forever Green Athletic Fields, Inc. v. Lasiter Constr., Inc., 384 S.W.3d 540,

552 (Ark. Ct. App. 2011) (concluding a party’s counterclaim under § 4-88-107(a)(10)

“fail[ed] to assert that [defendant] engaged in any type of consumer-oriented act or

practice”); cf. Wallis v. Ford Motor Co., 208 S.W.3d 153, 161 (Ark. 2005) (explaining

that the ADTPA provided the Arkansas Attorney General remedial powers “in order

to protect consumers”). Stonebridge has failed to establish that defendants’ acts of

conversion and fraud were consumer-oriented or impacted consumers in any way. 

The ADTPA, as interpreted by the Arkansas courts, does not apply to deception and

fraud claims regarding business between a manufacturer and its distributor when

consumers are not deceived or defrauded. Stonebridge does not show or argue a

“consumer-oriented,” Skalla, 430 S.W.3d at 82, “unconscionable, false, or deceptive

act or practice,” § 4-88-107(a)(10). Accordingly, the district court did not err in

dismissing Stonebridge’s ADTPA claim.

10In a letter filed pursuant to Federal Rule of Appellate Procedure 28(j),

defendants suggest Stonebridge did not plead a claim under § 4-88-107(a)(10). 

Although Stonebridge did not cite the statute by number in its complaint, after making

its factual allegations, Stonebridge asserted defendants “engaged in an

unconscionable, false, or deceptive act or practice in business, commerce, or trade,”

reciting the standard in § 4-88-107(a)(10). 

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E. RICO

RICO states, “It shall be unlawful for any person employed by or associated

with any enterprise engaged in . . . interstate . . . commerce, to conduct or participate,

directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of

racketeering activity.” 18 U.S.C. § 1962(c). “Racketeering activity” includes “a host

of so-called predicate acts,” Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639, 647

(2008), including those “indictable under [18 U.S.C.] section 1341 (relating to mail

fraud) [and] section 1343 (relating to wire fraud),” 18 U.S.C. § 1961(1)(B). RICO

allows a person victimized by a racketeering scheme to bring a civil action, see id. §

1964(c), and “provides for drastic remedies”—“a person found in a private civil action

to have violated RICO is liable for treble damages, costs, and attorney’s fees.” H.J.

Inc. v. Nw. Bell Tel. Co., 492 U.S. 229, 233 (1989).

“[I]nherent in the statute as written” is the fact civil actions under § 1964(c) are

typically brought against “respected and legitimate enterprises” “rather than against

the archetypal, intimidating mobster.” Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479,

499 (1985) (quotation and marks omitted). But “RICO ‘does not cover all instances

of wrongdoing. Rather, it is a unique cause of action that is concerned with

eradicating organized, long-term, habitual criminal activity.’” Crest Constr. II, Inc.

v. Doe, 660 F.3d 346, 353 (8th Cir. 2011) (quoting Gamboa v. Velez, 457 F.3d 703,

705 (7th Cir. 2006)). “We have in the past rejected attempts to convert ordinary civil

disputes into RICO cases. . . . RICO was not intended to apply to ‘ordinary

commercial fraud.’” Craig Outdoor Adver., Inc. v. Viacom Outdoor, Inc., 528 F.3d

1001, 1029 (8th Cir. 2008) (quoting Terry A. Lambert Plumbing, Inc. v. W. Sec.

Bank, 934 F.2d 976, 981 (8th Cir. 1991)). 

“A violation of § 1962(c) requires appellants to show ‘(1) conduct (2) of an

enterprise (3) through a pattern (4) of racketeering activity.’” Nitro Distrib., Inc. v.

Alticor, Inc., 565 F.3d 417, 428 (8th Cir. 2009) (quoting Sedima, 473 U.S. at 496). 

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[T]he definition of a “pattern of racketeering activity” differs from the

other provisions in § 1961 in that it states that a pattern “requires at least

two acts of racketeering activity,” not that it “means” two such acts. The

implication is that while two acts are necessary, they may not be

sufficient. Indeed, in common parlance two of anything do not generally

form a “pattern.” 

Sedima, 473 U.S. at 496 n.14 (quoting § 1961(5)). “[T]o prove a pattern of

racketeering activity a plaintiff . . . must show that the racketeering predicates are

related, and that they amount to or pose a threat of continued criminal activity.” 

H.J. Inc., 492 U.S. at 239 (second emphasis added). “A party alleging a RICO

violation may demonstrate continuity over a closed period by proving a series of

related predicates extending over a substantial period of time. Predicate acts

extending over a few weeks or months and threatening no future criminal conduct do

not satisfy this requirement.” Id. at 242. “Continuity can be shown by related acts

continuing over a period of time lasting at least one year (closed ended continuity),

or by acts which by their very nature threaten repetition (open ended continuity).” 

United States v. Hively, 437 F.3d 752, 761 (8th Cir. 2006) (internal citation omitted).

“‘The determination of a pattern of racketeering activity is a factual

determination,’” Handeen v. Lemaire, 112 F.3d 1339, 1353 (8th Cir. 1997) (quoting

Lambert Plumbing, 934 F.2d at 980), which we review for clear error. The district

court did not clearly err in finding Stonebridge failed to prove the RICO continuity

element. 

Stonebridge alleges defendants committed three sets of predicate acts that

violated RICO. We address each in turn. First, Stonebridge claimed defendants “used

the mails to cause advertisements and promotional materials to be sent to Plaintiff’s

customers, which contained deliberately misleading statements concerning the source

or origin of the knives they sold to such customers.” The district court found no false

representation in the defendants’ advertisements—a finding Stonebridge does not

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appeal. Because the advertisements “did not contain or constitute false

representations,” the district court concluded, based on Dahlgren v. First Nat’l Bank

of Holdrege, 533 F.3d 681, 689 (8th Cir. 2008) (“‘Though mail fraud can be a

predicate act, mailings are insufficient to establish the continuity factor unless they

contain misrepresentations themselves.’” (emphasis added) (quoting Wisdom v. First

Midwest Bank of Poplar Bluff, 167 F.3d 402, 407 (8th Cir. 1999))), Stonebridge did

not establish the RICO continuity factor.

Stonebridge claims the district court made an error of law, quoting Bridge,

553 U.S. at 647 (“The gravamen of the [mail fraud] offense is the scheme to defraud,

and any mailing that is incident to an essential part of the scheme satisfies the mailing

element, even if the mailing itself contains no false information.” (emphasis added)

(internal citation and marks omitted)). But the quotation from Bridge is inapposite in

this context, because it addressed “the mailing element,” while the district court

addressed “the continuity factor.” See Primary Care Investors Seven, Inc. v. PHP

Healthcare Corp., 986 F.2d 1208, 1215 (8th Cir. 1993) (rejecting a “letter [that]

evinces no fraud” as a possible “predicate act[] purportedly marking the beginning . . .

of the alleged scheme”). The district court did not err by finding defendants’

solicitation postcards, which contained no misrepresentations, could not be used to

establish the continuity factor.

Second, Stonebridge contends Cutting-Edge’s receipt of the sample knives it

fraudulently induced Stonebridge to send via United Parcel Service amounted to mail

fraud. The district court found Cutting-Edge fraudulently induced Stonebridge to send

the 6,476 knives from July 2009 to March 2010, a time period too short to satisfy the

continuity factor. See Hively, 437 F.3d at 761 (explaining a “closed ended continuity”

claim, like the one brought here, must span “a period of time lasting at least one

year”).

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Finally, Stonebridge claims Massey’s emailing Stonebridge’s converted files

from TaylorMade to Cutting-Edge between November 2010 and March 2011 and

Cutting-Edge’s emailing the customer list in May 2011 constituted wire fraud. Even

if we were to consider the two sets of actions together, we do not find “related acts

continuing over a period of time lasting at least one year,” id. (emphasis added), nor

do we find the “‘organized, long-term, habitual criminal activity,’” Crest Constr. II,

660 F.3d at 353 (quoting Gamboa, 457 F.3d at 705), over a “substantial period of

time,” H.J. Inc., 492 U.S. at 242, contemplated by RICO. See, e.g., Primary Care

Investors, 986 F.2d at 1215-16 (stating “[m]any cases in which courts have found a

‘substantial period of time’ have involved schemes extending for a number of years”

and deciding eleven months was not a substantial period). Stonebridge has “presented

evidence sufficient to establish violations of state law,” but it has “not presented

sufficient evidence to satisfy the more onerous requirements of RICO.” Craig

Outdoor, 528 F.3d at 1029.11

F. Attorney Fees

Both parties appeal the district court’s denial of attorney fees. We affirm the

district court’s denial of attorney fees to Stonebridge under RICO, see 18 U.S.C.

§ 1964(c), and the ADTPA, and to defendants on Stonebridge’s conversion and fraud

claims.

11We have considered Stonebridge’s remaining RICO arguments and find them

to be without merit. See Johnson, 360 F.3d at 817-18; Orr v. Wal-Mart Stores, Inc.,

297 F.3d 720, 725 (8th Cir. 2002) (stating ordinarily we do not reach issues argued

for the first time on appeal).

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III. CONCLUSION

We affirm in part and remand to the district court for reassessment of the

amount of damages due for conversion of the inside-customer files.

______________________________

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