Source: https://law.justia.com/cases/federal/appellate-courts/F3/88/563/486893/
Timestamp: 2020-06-06 08:38:42
Document Index: 209198116

Matched Legal Cases: ['§ 1961', '§ 1961', '§ 3575', '§ 1962', 'art, 461', '§ 3901', '§ 3901']

United Healthcare Corporation, a Minnesota Corporation,appellee/cross-appellant, v. American Trade Insurance Company, Ltd.; American Atlanticinsurance Company, Ltd.; Mitzi Alden King,individually, Defendants,edmund Hugh Benton, Individually, Appellant/cross-appellee,paragon Enterprises, Inc., an Arizona Corporation, Defendant,bft Management, Inc., an Oklahoma Corporation,appellant/cross-appellee,alan Teale, Defendant, 88 F.3d 563 (8th Cir. 1996) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › Eighth Circuit › 1996 › United Healthcare Corporation, a Minnesota Corporation,appellee/cross-appellant, v. American Trade I...
United Healthcare Corporation, a Minnesota Corporation,appellee/cross-appellant, v. American Trade Insurance Company, Ltd.; American Atlanticinsurance Company, Ltd.; Mitzi Alden King,individually, Defendants,edmund Hugh Benton, Individually, Appellant/cross-appellee,paragon Enterprises, Inc., an Arizona Corporation, Defendant,bft Management, Inc., an Oklahoma Corporation,appellant/cross-appellee,alan Teale, Defendant, 88 F.3d 563 (8th Cir. 1996)
U.S. Court of Appeals for the Eighth Circuit - 88 F.3d 563 (8th Cir. 1996) Submitted Jan. 11, 1996. Decided July 2, 1996
We first address the threshold issue of whether UHC is a real party in interest in this matter. Rule 17(a) of the Federal Rules of Civil Procedure provides that " [e]very action shall be prosecuted in the name of the real party in interest." This rule requires that the party who brings an action actually possess, under the substantive law, the right sought to be enforced. See Iowa Public Service Co. v. Medicine Bow Coal Co., 556 F.2d 400, 404 (8th Cir. 1977). Such a requirement is in place "to protect the defendant against a subsequent action by the party actually entitled to recover, and to insure generally that the judgment will have its proper effect as res judicata." Fed. R. Civ. P. 17(a), Advisory Committee Note.
We agree with UHC that Benton waived his real party in interest defense by failing to raise it in a timely fashion. Because the requirements in Rule 17(a) are for the benefit of the defendant, we have held that an objection on real party in interest grounds " 'should be raised with 'reasonable promptness' in the trial court proceedings. If not raised in a timely or seasonable fashion, the general rule is that the objection is deemed waived.' " Sun Refining & Marketing Co. v. Goldstein Oil Co., 801 F.2d 343, 345 (8th Cir. 1986) (quoting Chicago & Northwestern Transp. Co. v. Negus-Sweenie, Inc., 549 F.2d 47, 50 (8th Cir. 1977)) (internal citations omitted); see also Audio-Visual Mktg. Corp. v. Omni Corp., 545 F.2d 715 (10th Cir. 1976); Whelan v. Abell, 953 F.2d 663 (D.C. Cir. 1992). In this case, Benton was on notice at least as early as August 1992--nearly two years prior to trial--that UHC might seek reimbursement for the premiums it paid on behalf of the HMOs owned or managed by its subsidiary. Nevertheless, Benton made no objection on real party in interest grounds until the pre-trial conference held only one week before trial.3 Nor has Benton convincingly demonstrated that he could face double liability from UHC's subsidiary or HMOs. Under these circumstances, we conclude that Benton's objection pursuant to Rule 17(a) comes too late and is therefore waived.4 See Hefley v. Jones, 687 F.2d 1383 (10th Cir. 1982) (real party in interest defense raised sixteen days prior to trial deemed waived); Whelan, 953 F.2d at 671 (Rule 17(a) defense on the first day of trial deemed waived). Having decided that UHC may assert its claim against Benton, we proceed to Benton's arguments on the merits.
Benton asserts that UHC failed to present adequate evidence of each of RICO's required elements, and therefore the district court should have granted Benton's motion for judgment as a matter of law. When reviewing a district court's ruling on a motion for judgment as a matter of law, we consider de novo "whether there is sufficient evidence to support a jury verdict." White v. Pence, 961 F.2d 776, 779 (8th Cir. 1992). In so doing, we must " '(1) resolve direct factual conflicts in favor of the nonmovant, (2) assume as true all facts supporting the nonmovant which the evidence tends to prove, (3) give the nonmovant the benefit of all reasonable inferences, and (4) deny the motion if the evidence so viewed would allow reasonable jurors to differ as to the conclusions that could be drawn.' " Ryko Mfg. Co. v. Eden Servs., 823 F.2d 1215, 1221 (8th Cir. 1987), cert. denied, 484 U.S. 1026, 108 S. Ct. 751, 98 L. Ed. 2d 763 (1988) (quoting McCabe's Furniture v. La-Z-Boy Chair Co., 798 F.2d 323, 327 (8th Cir. 1986)).
In order to demonstrate a violation of this section, therefore, a plaintiff must establish (1) the existence of an enterprise; (2) defendant's association with the enterprise; (3) defendant's participation in predicate acts of racketeering; and (4) defendant's actions constitute a pattern of racketeering activity. See, e.g., Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496, 105 S. Ct. 3275, 3285, 87 L. Ed. 2d 346 (1985). In addition, the plaintiff must demonstrate that "he has been injured in his business or property by the conduct constituting the violation," id., a requirement equivalent to a showing of proximate causation and damages. We address each element in turn.
Benton argues that UHC failed to establish the existence of an "enterprise." Under RICO, an "enterprise" includes "any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity." 18 U.S.C. § 1961(4). The enterprise must be distinct from the person named as the RICO defendant. See Atlas Pile Driving Co. v. DiCon Fin. Co., 886 F.2d 986, 995 (8th Cir. 1989). Moreover, the enterprise must be distinct from the alleged pattern of racketeering activity. Id. In other words, as the Supreme Court explained in United States v. Turkette, 452 U.S. 576, 583, 101 S. Ct. 2524, 2528-29, 69 L. Ed. 2d 246 (1981), an enterprise is not established merely by proof of a series of racketeering acts. Instead, an enterprise must exhibit three characteristics: "(1) a common or shared purpose; (2) some continuity of structure and personnel; and (3) an ascertainable structure distinct from that inherent in a pattern of racketeering." Atlas Pile, 886 F.2d at 995.
To prevail under RICO, UHC was also required to demonstrate, at a minimum, two predicate offenses listed in 18 U.S.C. § 1961(1) (B); Atlas Pile, 886 F.2d at 990. In this case, UHC alleged predicate offenses of mail fraud and wire fraud. Mail and wire fraud are established through proof of: "(1) a scheme to defraud; (2) intent to defraud; (3) reasonable foreseeability that the mails (or wires) would be used; and (4) use of the mails (or wires) in furtherance of the scheme." Murr Plumbing, Inc. v. Scherer Bros. Fin. Servs. Co., 48 F.3d 1066, 1069 n. 6 (8th Cir. 1995). Each of these elements was satisfied in this case.5
We have held that a scheme to defraud requires "some degree of planning by the perpetrator." United States v. McNeive, 536 F.2d 1245, 1247 (8th Cir. 1976). Here, such a plan is evidenced by an examination of the money trail, which consistently made its way to various corporations and accounts controlled by Benton rather than to the intended insurance companies. From Benton's systematic siphoning of premium funds, a jury could reasonably find that Benton had the intent to defraud UHC and other HANA members. Thus, UHC established the first and second elements of mail and wire fraud.
Finally, UHC provided sufficient evidence to satisfy the fourth element, actual use of the mails and wires in furtherance of the scheme. Several witnesses at trial described both mail and wire transfers of premiums. For example, Mark Robis, the insurance intermediary who introduced IMACO to the HANA program, made repeated references to wire transfers from his office to Comtell. Mitzi King, co-founder of Comtell, testified that after premiums were received by Comtell, insurance certificates purporting to verify insurance coverage were mailed by Comtell to the HANA insureds. UHC's accounting expert Arthur Cobb also testified, based on his analysis of check registers and other bank documents, that premium funds were wire-transferred into accounts controlled by Benton. Although Benton contends these mailings were not fraudulent and were not a part of his scheme to defraud but were merely "incidental" to the operation of Comtell, this argument is to no avail. We have held that even a routine mailing (or wire use), or one sent for a legitimate business purpose may satisfy the "actual use" requirement "so long as it assists ... in carrying out the fraud." United States v. Leyden, 842 F.2d 1026, 1028 (8th Cir. 1988). Therefore, we conclude that UHC presented sufficient evidence to establish the predicate acts of racketeering.
Although UHC clearly presented sufficient evidence to sustain the jury's finding of predicate offenses, RICO's language specifically requires that a plaintiff establish a "pattern" of racketeering activity. This language "implies 'that while two acts are necessary, they may not be sufficient' " to constitute a pattern of racketeering activity. H.J. Inc. v. Northwestern Bell Tel., 492 U.S. 229, 237, 109 S. Ct. 2893, 2899-2900, 106 L. Ed. 2d 195 (1989) (quoting Sedima, 473 U.S. at 496 n. 14, 105 S. Ct. at 3285 n. 14). Instead, to 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." Id. at 239, 109 S. Ct. at 2900-01 (emphasis original). The Court has stated that the "relatedness" element of this test embraces " 'criminal acts that have the same or similar purposes, results, participants, victims or methods of commission, or otherwise are interrelated by distinguishing characteristics and are not isolated events.' " Id. at 240, 109 S. Ct. at 2901 (quoting 18 U.S.C. § 3575(e)). "Continuity," the Court has held, is essentially a temporal concept, and may refer "either to a closed period of repeated conduct, or to past conduct that by its nature projects into the future with a threat of repetition." Id. at 241, 109 S. Ct. at 2901-02.
Section 1964(c) of the RICO Act provides that " [a]ny person injured in his business or property by reason of a violation of section 1962" may sue for threefold the damages sustained. In Holmes v. Securities Investor Protection Corp., 503 U.S. 258, 112 S. Ct. 1311, 117 L. Ed. 2d 532 (1992), the Supreme Court "construed the 'by reason of' language to incorporate the traditional requirements of proximate ... causation." Bieter Co. v. Blomquist, 987 F.2d 1319, 1325 (8th Cir.), cert. denied, 510 U.S. 823, 114 S. Ct. 81, 126 L. Ed. 2d 50 (1993). In the RICO context, proximate causation requires "some direct relation between the injury asserted and the injurious conduct alleged." Holmes, 503 U.S. at 268, 112 S. Ct. at 1317-18. Once such a relationship is established, our cases allow a range of damages, subject to the limitations which typically apply in ordinary tort cases. See Bieter, 987 F.2d at 1329.
Benton's arguments are without merit. The record clearly demonstrates that UHC paid hundreds of thousands of dollars in insurance premiums on behalf of the HMOs it owned and managed. Due to the fraudulent acts of Benton, these premiums did not reach Victoria and Diversified, and therefore risks were never properly underwritten. Comtell's subsequent mailing of insurance certificates confirming the purported insurance coverage did not alter the fact that coverage was nonexistent. Thus, UHC failed to receive the benefit of its bargain, and has, as a result, sustained substantial financial damage. See Bennett v. Berg, 685 F.2d 1053 (8th Cir. 1982) (retirement community residents sustained damages when "Entrance Endowments" entitling a resident to occupy an apartment for life were reduced to ten percent of their intended value due to defendants' conversion of payments), aff'd on rehearing, 710 F.2d 1361 (8th Cir.), and cert. denied, 464 U.S. 1008, 104 S. Ct. 527, 78 L. Ed. 2d 710 (1983). The jury's damage award reflects the amount of premiums paid by UHC on behalf of its HMOs, and is fully supported by the record. We therefore find that UHC presented sufficient evidence from which a reasonable jury could find that UHC had demonstrated the elements of causation and damages. Having determined that UHC demonstrated each element required to establish a violation of 18 U.S.C. § 1962(c), we conclude that the district court correctly denied Benton's posttrial motion for judgment as a matter of law.
Benton also challenges several of the district court's evidentiary rulings and his decision to reject Benton's proposed special verdict form. We note at the outset that Benton brought only a motion for judgment as a matter of law under Rule 50 of the Federal Rules of Civil Procedure. He did not bring an alternative motion for new trial pursuant to Rule 59 of the Federal Rules. Generally, parties filing motions for judgment as a matter of law are limited to arguing that there is no legally sufficient evidentiary basis supporting the jury's verdict. See Fed. R. Civ. P. 50(a) (1). Having decided that Benton's motion for judgment as a matter of law was properly denied, and given Benton's failure to file an alternative motion for a new trial, we are skeptical, at best, that we can grant a new trial based on evidentiary or jury instruction error. See Goldsmith v. Diamond Shamrock Corp., 767 F.2d 411, 414-15 (8th Cir. 1985) (when court believes the moving party is not entitled to judgment notwithstanding the verdict, it lacks power to grant a new trial unless it acts on the basis of a motion of a party pursuant to Rule 59(b) of the Federal Rules of Civil Procedure). Nevertheless, even if we do consider Benton's evidentiary and jury instruction arguments properly before this court, we note that a district court has wide discretion with respect to these issues, and its decision "will not be disturbed unless there is a clear and prejudicial abuse of discretion." Maddox v. Patterson, 905 F.2d 1178, 1179 (8th Cir. 1990); Bissett v. Burlington N. R.R. Co., 969 F.2d 727, 729 (8th Cir. 1992). Benton has failed to demonstrate that the district court abused its discretion in its trial rulings.
In his last challenge to the district court's trial rulings, Benton argues that the court erred in refusing to submit his proposed special verdict form to the jury and in submitting, instead, its own special verdict form. We review the denial of a request for a special verdict form for an abuse of discretion. E.I. du Pont de Nemours v. Berkley & Co., 620 F.2d 1247, 1271 (8th Cir. 1980).
Following the trial of this case, UHC petitioned the court for attorney's fees and costs pursuant to section 1964(c) of RICO. In support of this application, UHC submitted a memorandum of law in which it argued that fees and costs are mandated by RICO. UHC's memorandum further addressed each of the factors the Supreme Court has indicated are relevant to fee determinations in the federal civil rights context when a plaintiff prevails on less than all of his or her claims. See Hensley v. Eckerhart, 461 U.S. 424, 103 S. Ct. 1933, 76 L. Ed. 2d 40 (1983).9 Finally, UHC submitted affidavits from two of the attorneys who worked on the case describing: 1) the work which had been done; 2) the names and billable rates of the attorneys who had participated in the case; 3) how the tasks performed in the case were necessary to its successful resolution; 4) the total time billed; and 5) the total amounts of fees and costs requested. UHC submitted none of its actual billing records, but did offer to provide for the court's in camera review itemized billing statements detailing the time spent and costs incurred in the case.
Although the question of when to award attorney's fees and costs in a RICO action has never before been squarely before us, we have had occasion in other circumstances to examine similar fee-shifting statutes. As we noted in these instances, we will generally not overturn a district court's decision on attorney's fees and costs absent an abuse of discretion. Walitalo v. Iacocca, 968 F.2d 741, 747 (8th Cir. 1992). "If the district court has used improper standards or procedures in determining fees, however, we will reverse." Id.
UHC argues that the district court's outright denial of attorney's fees and costs conflicts with RICO's statutory language and purpose, and therefore constitutes reversible error. We agree. Section 1964(c) provides that " [a]ny person injured in his business or property by reason of a violation of section 1962 ... shall recover threefold the damages he sustains and the cost of the suit, including a reasonable attorney's fee." (emphasis added). This language indicates that an award of reasonable attorney's fees and costs under RICO is mandatory, and several courts of appeals have so held. See, e.g., Stochastic Decisions, Inc. v. DiDomenico, 995 F.2d 1158, 1167 (2d Cir.), cert. denied, 510 U.S. 945, 114 S. Ct. 385, 126 L. Ed. 2d 334 (1993); Quick v. Peoples Bank of Cullman County, 993 F.2d 793, 799 (11th Cir. 1993); FMC Corp. v. Varonos, 892 F.2d 1308, 1315 (7th Cir. 1990). Indeed, the Supreme Court has implicitly acknowledged the mandatory nature of the fee award, stating in H.J., Inc. that "a person found in a private civil action to have violated RICO is liable for treble damages, costs, and attorney's fees." 492 U.S. at 233, 109 S. Ct. at 2897-98. Such an interpretation is consistent with Congress' intent in enacting the civil portion of the RICO statute "to enlist the aid of civil claimants in deterring racketeering." Alcorn County, Mississippi v. U.S. Interstate Supplies, Inc., 731 F.2d 1160, 1165 (5th Cir. 1984). Thus, by failing to award both fees and costs to UHC for its efforts in prosecuting this suit, the district court acted contrary to both the plain language and the purpose of RICO. Accordingly, we find that the district court abused its discretion in denying UHC's petition for costs and attorney's fees.
In concluding that the district court abused its discretion on this issue, we do not suggest that the district court must make a fee and cost award based on UHC's present submission. It remains the fee applicant's burden to establish entitlement to a particular award by presenting adequate documentation of its efforts in the litigation. See Hensley, 461 U.S. at 437, 103 S. Ct. at 1941. In this case, it is apparent that the district court could benefit from additional summaries from UHC addressing the deficiencies the district court discussed in its order denying fees. Moreover, the district court may wish to accept briefs on the standards which should guide its discretion in determining what constitutes a "reasonable" fee award under RICO.10 We therefore hold only that the district court abused its discretion in denying UHC's petition in its entirety, and remand to the district court so it may, with assistance from the litigants, make a determination of reasonable fees and costs.
The Act defines a risk retention group as any corporation or limited liability association chartered or licensed as a liability insurance company under the laws of a state "whose primary activity consists of assuming and spreading all, or any portion, of the liability exposure of its group members." 15 U.S.C. § 3901(a) (4) (A)-(C). A purchase group includes a group domiciled in any state which "has as one of its purposes the purchase of liability insurance on a group basis." 15 U.S.C. § 3901(a) (5) (A)
461 U.S. at 430 n. 3, 103 S. Ct. at 1937-38 n. 3.
We note, for example, that there is some disagreement among the courts regarding the extent to which the Hensley factors should apply in cases involving mandatory, rather than permissive, fee-shifting statutes. See, e.g., Stochastic Decisions, 995 F.2d at 1168 ("Hensley analysis 'is of limited applicability' to statutes that mandate an award of attorney fees") (quoting United States Football League v. National Football League, 887 F.2d 408, 412 (2d Cir. 1989)); Northeast Women's Center v. McMonagle, 889 F.2d 466, 470 (3d Cir. 1989) (applying Hensley approach when RICO plaintiff prevailed on only some of its claims), cert. denied, 494 U.S. 1068, 110 S. Ct. 1788, 108 L. Ed. 2d 790 (1990). Although UHC's submission assumes that the Hensley factors apply in this context, neither party has briefed the issue and we decline to announce universal standards for RICO fee awards without a more fully-developed record