Opinion ID: 6295
Heading Depth: 2
Heading Rank: 1

Heading: The Severance Order

Text: Conkling first contends that the trial court abused its discretion in severing from his RICO case all predicate acts except for his claim that Turner defrauded him into executing the 1963 agreement. Essentially, the trial court determined that Conkling would not be able to show any pattern of racketeering activity unless he could show that the agreement he and Turner entered into in June 1963 was fraudulently induced. Thus, the trial judge deemed it appropriate to try this issue alone before proceeding to any other acts that could be predicate acts for the RICO claims. In fact, after the jury determined that Turner had not defrauded Conkling with respect to the 1963 agreement, the court below dismissed the entire RICO case as a matter of law on the basis of this finding. Severance is proper when a trial court determines that severance is in furtherance of convenience or to avoid prejudice, or when separate trials will be conducive to expedition or 11 economy. FED.R.CIV.P. 42(b); see also FDIC v. Selaiden Builders, Inc., 973 F.2d 1249, 1253 (5th Cir.1992), cert. denied, --- U.S. -- --, 113 S.Ct. 1944, 123 L.Ed.2d 650 (1993). We review a severance order for an abuse of discretion, recognizing that the decision to bifurcate is a matter within the sole discretion of the trial court. First Tex. Sav. Ass'n v. Reliance Ins. Co., 950 F.2d 1171, 1174 n. 2 (5th Cir.1992). An abuse of discretion exists only when there is definite and firm' conviction that the court below committed clear error of judgment in the conclusion it reached upon a weighing of the relevant factors. Hoffman v. Merrell Dow Pharmaceuticals, Inc. (In re Bendectin Litig.), 857 F.2d 290, 307 (6th Cir.1988) (citation omitted), cert. denied, 488 U.S. 1006, 109 S.Ct. 788, 102 L.Ed.2d 779 (1989). To determine whether the severance order was proper in this case, we must first evaluate the basis of the RICO claims. Section 1962(b) of Title 18 makes it unlawful for any person through a pattern of racketeering activity ... to acquire or maintain, directly or indirectly, any interest in or control of any enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce. 18 U.S.C. § 1962(b). While the RICO statute is by no means clear in many of its provisions, it does provide explicitly that there must be a pattern of racketeering activity and that pattern is defined to require[ ] at least two acts of racketeering activity. 18 U.S.C. § 1961(5) (emphasis added); see also H.J., Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 237-38, 109 S.Ct. 2893, 2899-2900, 106 L.Ed.2d 12 195 (1989); McLaughlin v. Anderson, 962 F.2d 187, 192 (2d Cir.1992) (noting that the bare minimum of a RICO charge is that a defendant personally committed or aided and abetted the commission of two predicate acts). The trial court reasoned that unless Conkling could show a scheme to defraud stemming from the 1963 agreement,2 he could not prove the minimum two predicate acts to support a RICO claim. We note at the outset that RICO cases appear to be specially suited for trial limitation. In fact, numerous trial courts have ordered separate trials on RICO claims to facilitate their resolution and simplify jury presentation. See, e.g., Agency Holding Corp. v. Malley-Duff & Assoc., Inc., 483 U.S. 143, 145, 107 S.Ct. 2759, 2761, 97 L.Ed.2d 121 (1987) (reciting that RICO case had been severed from antitrust and tortious interference claims); United States v. Quintanilla, 2 F.3d 1469, 1479-80 & n. 13 (7th Cir.1993) (recognizing that trial court had ordered separate trial on RICO count and other fraud counts pertaining to an identifiable fraudulent scheme); First Nat'l Bank and Trust Co. v. Hollingsworth, 931 F.2d 1295, 1301 (8th Cir.1991) (noting that RICO case had been tried separately from fraudulent conveyance issues); cf. Laitram Corp. v. Hewlett-Packard Co., 791 F.Supp. 113, 117-118 2 As noted above, both parties agree that their agreement to share proportionate ownership in Nichols' affiliates was tied to the ownership ratio of Nichols itself. Thus, if Conkling were entitled only to 8% of Nichols, he would similarly be entitled only to 8% of the affiliates, all of which he admits having received. Conversely, if he could establish that he was defrauded out of 8.69565% of Nichols, he would have a claim to an additional .69565% ownership in each of the spin-off companies. 13 (E.D.La.1992) (trifurcating complex patent trial into phases to diminish potential of jury confusion). Other courts have bifurcated distinct classes of predicate acts supporting the substantive RICO claim for separate disposition. E.g., United States v. Jenkins, 902 F.2d 459, 461 (6th Cir.1990) (observing that district court had severed mail fraud predicate acts from substantive RICO claim and bribery and extortion predicate acts); cf. United States v. Coonan, 839 F.2d 886, 889-90 (2d Cir.1988) (suggesting a bifurcation procedure to be used at the charge/deliberation stage in which jury is first asked to determine which, if any, of the charged predicate acts were committed and, only if two or more are found, to consider their relatedness for purposes of a racketeering pattern).3 Conkling's RICO case is similarly complex. In all, Conkling has alleged during the course of this litigation at least 25 predicate acts, including the derivative claims for diminution in value of Nichols and its affiliates. Ten of these were adjudicated in the pre-trial summary judgment. The trial court apparently considered the predicate acts relating to Merit, Merit Environmental, and Gymco not to be predicate acts as a matter of law. See below infra at section II.B.3.b. The Harmony dilution claim was conceded by the parties to involve fact issues, but, as discussed above, its viability under RICO depended upon the 3 Although several of these cases involve criminal, rather than civil, RICO charges, we note that bifurcation is even more remarkable in criminal trials since the Federal Rules of Criminal Procedure do not have an analogue to Federal Rule of Civil Procedure 42(b). 14 existence of at least one other predicate act. The remaining predicate acts were dependent upon a finding of fraud in the 1963 agreement4, an issue which was tried to the jury and found against Conkling. It is clear to us that the court below had a specific purpose in paring down the issues for jury resolution to the lowest common denominator. If the 1963 agreement issue were to be resolved in the defendants' favor, the RICO case could be decided as a matter of law, thus simplifying the number of issues ultimately submitted to the jury. See, e.g., Rossano v. Blue Plate Foods, Inc., 314 F.2d 174, 176 (5th Cir.) (Issue severed need not conclusively decide entire case on given claim; [i]t is enough that there be on the record at the time a substantial issue of fact which, if determined in favor of defendant, will eliminate expense for all concerned without prejudice to the rights of the parties.), cert. denied, 375 U.S. 866, 84 S.Ct. 139, 11 L.Ed.2d 93 (1963); see also In re Bendectin Litig., 857 F.2d at 308, 320 (recognizing the numerous cases that have tried an individual 4 Conkling's claims that he was deprived of his relative ownership—i.e., 8.69565%, rather than 8%—interests in National Maintenance, International Maintenance, TSMC, BTL, TL, Blast, Trebco, and IPS were all dependent upon a determination that he rightfully owned 8.69565% of Nichols. The jury's finding that the 1963 agreement was valid, and the inescapable conclusion that Conkling was therefore entitled only to 8% of Nichols similarly rendered the claims for an additional 8.69565% of National and International Maintenance, TSMC, BTL, and TL fatally deficient since the relative ownership in those companies was determined by Nichols ownership ratio. Conkling admitted as much in his portion of the pre-trial order. Moreover, since Blast, Trebco, and IPS were each acquired by Nichols as a wholly-owned subsidiary, the confirmation of Conkling's 8% interest in Nichols demonstrated that he had a corresponding relative ownership in each of these companies. 15 issue separately under circumstances that, had the issue been decided in favor of the plaintiff, the trial would have had more than two phases to it, and affirming district court's trifurcation order). Under these circumstances, we cannot find that the trial court acted arbitrarily in severing the 1963 agreement predicate act. Rather, the trial transcript reflects that the court was concerned with preventing the jury from being needlessly confused by the complexity of the case, and the court's actions were in line with this interest. The court's concern about jury confusion was justified, considering that the case involved over twenty years of historical facts, a substantial number of witnesses, and countless theories of recovery. In fact, trial on the single issue (and the contract claim) took almost three and one-half weeks and involved numerous Federal Rule of Evidence 104 hearings outside the presence of the jury to determine the admissibility of evidence as to the numerous contested factual issues. Moreover, this court's long-standing rule that a district court is accorded great deference on review with respect to its severance decision reflects our perception that the trial court is in the best position to determine whether bifurcation is appropriate. The only possible prejudice Conkling could have suffered in proceeding in this manner was his inability to aggregate the allegations of fraud with respect to his multiple claims. However, as seen above, the RICO predicate acts remaining for trial were dormantly dependent upon a finding of initial fraud in the 1963 16 agreement, and Conkling would have been not one whit more entitled to a verdict [in the RICO case] merely because lengthy additional testimony might have been taken on the separate and irrelevant issues relating to the dependent claims. Rossano, 314 F.2d at 176-77. The real injury to Conkling, as is evident in his argument to this court, was not the bifurcation of trial, but the trial court's subsequent resolution of the entire RICO case based upon the jury finding as to the one predicate act, a point which we will address below. Finally, and although Conkling complains that he was not given any notice of the dramatic severance until the weekend before trial, we note that he would have been in no different a position if the trial court had granted summary judgment on the RICO predicate acts severed.5 The dependence of the spin-off predicate acts upon the 1963 agreement was fully briefed by the defendants in their motion for summary judgment, and, had the trial court found no fact issue with respect to that agreement, it would have necessarily dismissed these claims as well. Indeed, Conkling's own Statement of Plaintiffs' Claims in the pre-trial order acknowledged the dependence: [The ownership relationship agreement between Conkling and Turner] was established on the basis of Turner owning 85 shares of Nichols and Conkling owning 10 shares.... This ownership relationship was what Turner and Conkling agreed would always determine their relative ownership in all 5 In this regard, we observe that a district court may sever a case on its own motion. FDIC v. Selaiden Builders, Inc., 973 F.2d 1249, 1253 (5th Cir.1992). Thus, the fact that no formal request was made by either of the parties is not fatal to the decision to stage separate trials. 17 subsequently formed entities.... Each time Turner formed a new entity, ... Mr. Conkling was entitled to acquire his proportionate ownership relative to Turner's. Turner later formed National Maintenance, International Maintenance, Harmony, TSMC, BTL, and TL. Each time one of these entities was formed, Turner tacitly reaffirmed ... the ownership relationship agreement with Conkling.... Because Turner had reduced Mr. Conkling's ownership interest in Nichols through the 1963 fraud, Conkling received less of an interest in those entities than that to which he was entitled. (emphasis added). Accordingly, once the jury decided that there was no fraud in the 1963 agreement, the vitality of these pendent claims then became a matter of law, thereby eliminating a large portion of the litigation. We hold that the district court did not abuse its discretion in staging the trial in this way.