Court Opinion

ID: 185142
Source: CourtListenerOpinion
Date Created: 2011-02-05 02:28:17+00
Date Added: 2024-06-11T17:26:13.520741
License: Public Domain

214 F.3d 168 (D.C. Cir. 2000)
BCCI Holdings (Luxembourg), S.A., et al.,Appelleesv.Abdul Raouf Hasan Khalil, Appellant
No. 99-7171
United States Court of AppealsFOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued March 27, 2000Decided May 30, 2000

Appeal from the United States District Court for the District of Columbia(No. 95cv01252)
Stephen R. Johnson argued the cause for appellant.  With  him on the briefs were James P. Linn and T. Jay Barrymore.
Eric L. Lewis argued the cause for appellees.  With him on  the brief was A. Katherine Toomey.
Before:  Edwards, Chief Judge, Henderson and Rogers,  Circuit Judges.
Opinion for the Court filed by Chief Judge Edwards.
Edwards, Chief Judge:

1
This case involves a civil action  resting on the Racketeer Influenced and Corrupt Organization Act ("RICO"), 18 U.S.C. §§ 1961, et seq. (1994), common  law fraud, unjust enrichment, and conversion.  The lawsuit  was brought by appellees, fiduciaries appointed on behalf of  the Bank of Credit and Commerce International ("BCCI") to  liquidate the principal BCCI holdings and recover assets on  behalf of depositors and innocent creditors, against appellant,  Abdul Raouf Hasan Khalil, and three co-conspirators.  The  District Court found Mr. Khalil liable on many, but not all, of  the claims arising under RICO, common law fraud, unjust  enrichment, and conversion.  The total non-duplicative  amount of actual damages entered in favor of appellees  against Mr. Khalil was $388,402,534.  The District Court  trebled this amount pursuant to 18 U.S.C.  1964(c) (1994),  for a total judgment of $1,165,207,602 against Mr. Khalil.

2
On appeal, Mr. Khalil raises two principal issues:  First,  Mr. Khalil claims that the District Court erred under Federal  Rules of Civil Procedure 39(b) in denying his late request for  a jury trial;  second, Mr. Khalil contends that the District  Court erred in holding that appellant's alleged RICO and  common law tort violations were the legal cause of BCCI's  losses.  With one exception, we find no merit in Mr. Khalil's  arguments.

3
Appellant's disputed motion for a jury trial was filed more  than a year late, after discovery had been concluded and after  a trial date had been set.  The trial judge denied the motion  because of prejudice to the plaintiff, who had prepared for a  bench trial.  The trial judge also noted that expediency would  be served in holding to the existing trial schedule, to avoid  undue delay and potential complications with other trials  involving related issues.  In short, the District Court found  that counsel's inexcusable neglect in failing to request a jury  trial in a timely fashion waived defendant's right to a jury trial.  We find no error in this judgment, for the trial judge  acted within the discretion afforded him under Rule 39(b).

4
We also affirm most of the District Court's judgments on  the merits.  As thecourt's opinion indicates, see BCCI Holdings (Luxembourg), Societe Anonyme v. Khalil ("Khalil"), 56  F. Supp. 2d 14 (D.D.C. 1999), there is ample evidence in the  record to show but-for and proximate causation, supporting  most of the judgments on the RICO and the common law tort  claims.  We can find no record evidence, however, to support  the District Court's finding that Mr. Khalil is liable to BCCI  for damages in the amount of $62,021,193 for certain silver  and copper trading losses.

5
We reverse the District Court's judgment for damages  resting on the silver and copper trading losses.  We affirm  the District Court's judgment on all other points.  The case  will be remanded for the District Court to recalculate the  damages that are due to appellees.

I. Facts

6
This lawsuit was spawned by BCCI's international collapse,  which was the largest international bank failure in history. See Khalil, 56 F. Supp. 2d at 20.  BCCI's court-appointed  liquidators filed a complaint on July 3, 1995 to recover  damages suffered by BCCI as a result of Mr. Khalil's alleged  violations of RICO, common law fraud, unjust enrichment,  and conversion.  The liquidators charged that Mr. Khalil  participated in a conspiracy with BCCI's management that  allowed BCCI secretly to acquire ownership and maintain  control of First American Corporation and First American  Bankshares, Inc. (collectively "First American").  This illegal  scheme operated through the use of nominee shareholders-like Mr. Khalil--who allowed BCCI to hide financial losses  from bank regulators.

7
Mr. Khalil is a wealthy Saudi Arabian businessman and  former government official who deposited large amounts of money in BCCI.  He may have been BCCI's largest depositor.  See id. at 21.  In their complaint, the liquidators claimed  that, in the late 1970s and 1980s, BCCI's former management  sought out Mr. Khalil and paid him large sums of money in  exchange for the use of his name and prestige to disguise  three schemes:  (1) Mr. Khalil agreed to act as a nominee  shareholder of First American Bank's parent corporation to  disguise BCCI's illegal acquisition of an American bank without required regulatory approval;  (2) Mr. Khalil agreed to  serve as a nominee shareholder of BCCI Holdings to disguise  the truth about BCCI's artificially and misleadingly inflated  capital resources and support;  and (3) Mr. Khalil agreed to  allow BCCI to use his name, both individually and on behalf  of his corporations, to disguise risky investments and to  create the false impression that BCCI was servicing large  loans that were actually in default.  See id.  The liquidators  contended that Mr. Khalil's assent to these schemes prevented BCCI's true financial condition from becoming apparent  much earlier, stopped BCCI from closing down much sooner,  and thus precipitated significant financial losses for thousands  of creditors and depositors.

8
Not all of the liquidators' claims against Mr. Khalil rested  on a passive view of Mr. Khalil's relationship with BCCI. The liquidators also asserted that Mr. Khalil and Mr. Syed  Ziauddin Ali Akbar conspired to loot BCCI's assets so that  they could create and fund a commodities brokerage that they  called Capcom UK.  Mr. Akbar, who was a BCCI officer from  1976 to 1986 and was in charge of BCCI's Treasury Division  from 1982 to 1986, created loans in BCCI's books to Mr.  Khalil and his companies.  Mr. Akbar never intended, however, for these loans to be repaid.  In particular, between  October 1984 and December 1984, Mr. Akbar transferred  $100,000,000 to Capcom that was not authorized by Mr.  Akbar's superiors.  Mr. Akbar also transferred $25,000,000 to  Capcom in June 1985 and $136,000,000 to Capcom between  January and April 1986.  See id. at 42-43.  For his part, on  August 20, 1985, Mr. Khalil negotiated a $12.5 million check  from BCCI as a payment for his share of the "profits" from  the trading operations, received a $15 million "parting gift" on July3, 1987 that he had cajoled when he withdrew his  deposits from BCCI, and, on June 25, 1987, coaxed a $17,000,000 "loan" from BCCI to General Securities Corp., a company  co-owned by Mr. Khalil and Mr. Akbar that had an account at  Capcom.  See id. at 43-45.

9
Mr. Khalil does not disavow this general characterization of  the facts.  And he does not claim that he was innocent.  His  appeal is based on two much more narrow grounds.  The first  ground centers on the District Court's denial of Mr. Khalil's  request for a jury trial.  The liquidators filed their complaint  on July 3, 1995, and Mr. Khalil filed his answer on February  10, 1997.  Subsequently, on April 21, 1998, the parties had a  status conference and agreed to schedule a bench trial to  begin on January 25, 1999.  On April 24, 1998, Mr. Khalil's  attorney filed a motion for a jury trial, claiming that counsel  had inadvertently omitted a jury demand from Mr. Khalil's  answer to the complaint.  Under Fed. R. Civ. P. 38(b), the  jury demand was over a year late;  it was therefore deemed  "waived" under Fed. R. Civ. P. 38(d).  Mr. Khalil's attorney  argued, however, that the tardy demand for a jury trial could  be granted by the District Court under Fed. R. Civ. P. 39(b).

10
On October 8, 1998, guided by the Supreme Court's decision in Pierce v. Underwood, 487 U.S. 552, 562 (1988), the  District Court denied Mr. Khalil's motion for a jury trial. The court found that (1) Mr. Khalil's lawyer's claimed inadvertent omission was not excusable, given that counsel had  taken so long to discover the omission, discovery was complete, the deadline for motions had passed, and the court and  the opposing party had prepared for a bench trial;  (2)  plaintiffs would be significantly prejudiced if the court were  to grant Mr. Khalil's tardy request for a jury trial, because  plaintiffs had premised many of their decisions in discovery  upon their understanding that there would be a bench trial;(3) a bench trial would be much more efficient than a jury  trial;  (4) granting Mr. Khalil's motion would translate into  delays for other litigants awaiting trial;  (5) given Mr. Khalil's  poor health, the court would be ill-advised to delay Mr.  Khalil's case pending resolution of the other cases;  and (6)  there was no real threat of bias or prejudice, even though the court had presided over related criminal and civil cases.  See  BCCI Holdings (Luxembourg), Societe Anonyme v. Khalil,  Civ. Act. No. 95-1252, Mem. Op. (D.D.C. Oct. 8, 1998) ("Mem.  Op."), reprinted in Joint Appendix ("J.A.") 277.

11
The issues on the merits raised by Mr. Khalil focus on the  District Court's award of damages and the underlying findings of causation.  The District Court generally agreed with  the liquidators that Mr. Khalil was liable for receiving money  for his participation in the various nominee schemes, though  the trial court did not accept all of the liquidator's claims.  In  particular, the court found that Mr. Khalil was liable for  $27,500,000 that he received as direct payments from BCCI  for his participation in the nominee schemes, $15,249,283 that  BCCI paid for Mr. Khalil's expenses, $47,069,808 that BCCI  paid to Mr. Khalil's companies, an additional $236,562,250  that BCCI sent to Capcom, and $62,021,193 that represented  the losses that BCCI suffered from silver and copper trading  that involved and was facilitated by accounts in Mr. Khalil's  name.  The final result was that the liquidators were awarded  damages of $388,402,534, which were tripled to $1,165,207,602  pursuant to 18 U.S.C.  1964(c).  See Khalil, 56 F. Supp. 2d  at 66-69.  This appeal followed.

II. Discussion
A. Standard of Review

12
The parties agree that the standard of review covering the  District Court's denial of Mr. Khalil's Rule 39(b) motion for a  jury trial is abuse of discretion.  The parties also agree that  the findings on the claims based on common law fraud, unjust  enrichment, and conversion are reviewed under the clearly  erroneous standard.  The partiesdisagree, however, over the  standard of review covering the findings of proximate cause  under RICO.

13
On this last point, we find the Supreme Court's decision in  Exxon Co., U.S.A. v. Sofec, Inc., 517 U.S. 830, 840-41 (1996),  to be persuasive.  In Sofec, the Court explained that "[t]he  issues of proximate causation and superseding cause involve application of law to fact, which is left to the factfinder,  subject to limited review."  Id.  Mr. Khalil argues that Sofec  is inapposite, because the standard enunciated there is limited  to admiralty cases.  There is nothing in the Court's opinion,  however, that so narrows its applicability.  It seems clear  here, just as in Sofec, that findings on proximate causation  involve mixed questions of law and fact subject to limited  review.  In any event, even if we were to engage in de novo  review, as Mr. Khalil suggests, our judgments on the matters  in issue would not change.

B. The Jury Issue

14
Mr. Khalil's jury-demand argument is specious.  Mr. Khalil  did not file a jury demand either when the liquidators filed  their complaint on July 3, 1995 or when he filed his answer to  the complaint on February 10, 1997.  It took almost three  years from the filing of the complaint and more than a year  after the filing of the answer for Mr. Khalil to bring it to the  District Court's attention that he wanted a jury trial.  By  then, the trial court had scheduled the case for a bench trial,  discovery had been extended and closed, and the deadline for  motions had already passed.

15
Federal Rule of Civil Procedure 38 is clear that a party  waives his right to a trial by jury if he does not "(1) serv[e]  upon the other parties a demand therefor in writing at any  time after the commencement of the action and not later than  10 days after the service of the last pleading directed to such  issue, and (2) fil[e] the demand as required by Rule 5(d)."  Fed. R. Civ. P. 38.  A party who fails to make a timely request  for a jury trial may avoid waiver and secure a jury trial only  if the District Court "in its discretion" acts favorably on such  a request.  Fed. R. Civ. P. 39(b).

16
Under Rule 39, a trial court may abuse its discretion in  denying a late request for a jury trial.  This does not mean,  however, that a trial court must indulge a presumption in  favor of the neglectful party when faced with a late demand. Thus, a trial court is not required to grant a Rule 39(b)  request based on nothing but inadvertence, because,  "[t]hough the court might, in its discretion, have ordered a jury trial, it [is] under no obligation to do so."  May v.  Melvin, 141 F.2d 22 (D.C. Cir. 1944);  see also Wall v.  National R.R. Passenger Corp., 718 F.2d 906, 910 (9th Cir.  1983) ("The record does not demonstrate any reason, other  than counsel's inadvertence, for the failure to comply with  rule 38(b).  The district judge did not abuse his discretion.");Rhodes v. Amarillo Hosp. Dist., 654 F.2d 1148, 1154 (5th Cir.  Unit A 1981) (finding even under a presumption in favor of  granting untimely jury demands that "[i]t is not an abuse of  discretion by a District Judge to deny a Rule 39(b) motion  ... when the failure to make a timely demand for a jury trial  results from mere inadvertence on the part of the moving  party");  Paramount Pictures Corp. v. Thompson Theatres,  Inc., 621 F.2d 1088, 1090 (10th Cir. 1980) ("By failing to make  a timely demand defendants waived their rights.  The trial  court then has the discretion, upon motion, to order trial by  jury. That discretion is broad, and the court's exercise, either  to grant or to deny a jury trial, is reversible only if it appears  from all of the facts and circumstances that the court abused  its discretion." (internal citations omitted)).

17
In this case, mere inadvertence is the only leg upon which  Mr. Khalil can stand, and it is at best a very weak base.  Mr.  Khalil does not deny that he waived his right to a jury. Rather, he claims that despite his mistake, the burden should beon the opposing party to present strong and compelling  reasons why the late demand for a jury trial should not be  granted.  This is not what Rule 39 says, however.  The rule  merely states that, upon motion from a party like Mr. Khalil,  the District Court "may" (not shall) "in its discretion" order  a trial by jury.  Absent an abuse of discretion by the trial  court, a defaulting party who has already waived the right to  a jury trial under Rule 38(d) has no viable claim.  This does  not mean that a trial court can simply ignore a Rule 39(b)  motion or whimsically deny it for no good reason.  But trial  courts have wide latitude under the abuse of discretion standard to weigh the merits of late demands for jury trials.

18
The District Court's judgment in this case easily survives  review under the abuse of discretion standard.  The District  Court reasonably considered the factors enunciated by the Supreme Court in Pierce v. Underwood, 487 U.S. 552.  In  Pierce, the Court noted that,

19
[o]ver the years, appellate courts have consistently up-held the trial judges in allowing or refusing late-demanded jury trials, but in doing so have laid down two guidelines for exercise of the discretionary power.  The products of cumulative experience, these guidelines re-late to the justifiability of the tardy litigant's delay andthe absence of prejudice to his adversary.

20
Id. at 562.  Following the Pierce Court's lead, the District  Court found that Mr. Khalil's delay was not justified, because  it was the product of mere inadvertence, and "where the  length of time to discover the error is as long as here, where  discovery is complete and the motions' deadline has passed,  and where the Court and the opposing party have come to  rely on a bench trial, this factor weighs against granting a  trial by jury."  Mem. Op. at 8, reprinted in J.A. 284.  The  trial court also reasonably found that BCCI had made a  "plausible and specific enough showing of prejudice."  Id. at  9, reprinted in J.A. 285.  In short, we have no basis upon  which to second-guess the judgment of the District Court.

C. Proximate Causation

21
On the merits of this case, Mr. Khalil first posits that the  District Court's standard of proximate cause under RICO was  too lax.  He argues that "a RICO claimant must prove that  he was the 'intended target' of the RICO scheme and that the  alleged injury was the 'preconceived purpose' of the RICO  activity."  Br. of Appellant at 35.  In our view, appellant's argument on this point is simply wrong.

22
In Holmes v. Securities Investor Protection Corp., 503 U.S.  258 (1992), which involved a civil action under RICO, the  Court considered the meaning of the statutory phrase-"[a]ny person injured in his business or property by reason of  a [RICO] violation"--found in 18 U.S.C.  1964(c).  The  Court's discussion is illuminating:

23
This language [18 U.S.C.  1964(c)] can, of course, beread to mean that a plaintiff is injured "by reason of" a RICO violation, and therefore may recover, simply on showing that the defendant violated  1962, the plaintiff was injured, and the defendant's violation was a "but for" cause of plaintiff's injury.  This construction is hardly compelled, however, and the very unlikelihood that Congress meant to allow all factually injured plaintiffs to recover persuades us that RICO should not get such an expansive reading

24
.... Congress modeled  1964(c) on the civil-action provision of the federal antitrust laws,  4 of the Clayton Act

25
.... [W]e [have] held that a plaintiff's right to sue unders 4 required a showing that the defendant's violation not only was a "but for" cause of his injury, but was the proximate cause as well.The reasoning applies just as readily to  1964(c)....Proximate cause is thus required [under RICO].Id. at 265-68.

26
The Court in Holmes defined proximate cause as essentially reflecting "ideas of what justice demands, or of what is  administratively possible and convenient."  Id. at 268.  Proximate cause exists to ensure that a random third party who  suffers "merely from the misfortunes visited upon [him] by  the defendant's acts" does not recover.  Id.  It also ensures  that courts do not get ensnared in administratively complex  questions over factual causation and apportionments of damages.  The Court reasoned that a proximate cause requirement would sufficiently deter injurious conduct, because "directly injured victims can generally be counted on to vindicate  the law as private attorneys general, without any of the  problems attendant upon suits by plaintiffs injured more  remotely."  Id. at 269-70.  The Court never suggests, however, that the only or best way to prove proximate cause is for a  plaintiff to prove he was the "intended target" and that the  injury was the "preconceived purpose" of the RICO activity. We therefore reject appellant's highly restrictive reading of  RICO.

27
With one exception, the record in this case offers ample  evidence to support the District Court's findings that Mr.  Khalil was the proximate cause of RICO injuries suffered by  BCCI, as well as the District Court's findings of common law  violations.  The District Court's judgments on these points  are well-explained in its published opinion;  that opinion needs  no revision, save for one point.

28
The one exception centers on the $62,021,193 in silver and  copper trading losses that the District Court found were  directly linked to the use of Mr. Khalil's name.  Unlike the  other payments, which are directly traceable to Mr. Khalil's  fees for participating in the nominee scheme, the silver and  copper trading losses are much more contingent on other  factors.  Without much other analysis, the trial court reasoned that, "[a]lthough market conditions played an important role in bringing those losses about, the use of Khalil's  name remained a substantial factor causing those losses.These losses can be traced directly to the fraudulent use of  Khalil-owned companies."  Khalil, 56 F. Supp. 2d at 61.  The  District Court and appellees seem to claim that the bank's  losses would have been prevented or reduced had the bank  known about the futures trading at issue.  In particular, they  suggest that the Board of Directors had placed limits on  investments and that Khalil facilitated the avoidance of these  limits by lending his name to fraudulent endeavors, thus  causing the bank to suffer losses.  We can find no record  evidence demonstrating that this specific set of losses is  directly traceable to the ability of the perpetrators to hide the  losses in Mr. Khalil's name.  We therefore reverse the judgment against Mr. Khalil resting on the disputed silver and  copper trading losses.

III. Conclusion

29
We reverse the judgment of the District Court resting on  the silver and copper trading losses.  We affirm the judgment  of the District Court in favor of appellees on all other points.

30
The case is hereby remanded to the District Court to recalculate the damages that are due to appellees.

31
So ordered.