Court Opinion

ID: 8248
Source: CourtListenerOpinion
Date Created: 2010-04-25 05:35:35+00
Date Added: 2024-06-11T15:04:43.366383
License: Public Domain

UNITED STATES COURT OF APPEALS
                              FIFTH CIRCUIT

                              _______________

                                No. 95-60316

                            (Summary Calendar)
                              _______________

                  ERNEST THOMAS; LARRY THOMAS,

                                           Plaintiffs-Appellants,

                  versus

                  CAN-DO, INC; WHITE PLAINS ELECTRICAL
                  SUPPLY COMPANY, INC,

                                           Defendants-Appellees.

           _______________________________________________

             Appeal from the United States District Court
               For the Southern District of Mississippi
                           (1:94-CV-351-RR)
           _______________________________________________

                        November 28, 1995
Before HIGGINBOTHAM, DUHÉ, and EMILIO M. GARZA, Circuit Judges.

PER CURIAM:*

      Plaintiffs Ernest and Larry Thomas appeal the district court's

grant of summary judgment in favor of Defendants Can-Do, Inc.

("Can-Do") and White Plains Electrical Supply Company, Inc. ("White

Plains").    We affirm.

                                       I

      Ernest and Larry Thomas operated a tape supply business called

     *
            Local Rule 47.5.1 provides: "The publication of opinions that have
no precedential value and merely decide particular cases on the basis of well-
settled principles of law imposes needless expense on the public and burdens on
the legal profession." Pursuant to that Rule, the Court has determined that this
opinion should not be published.
Appelton Rubber Company.        Larry was authorized by contract to

represent Can-Do as an independent sales representative.                Pursuant

to this contract, the Thomases supplied a shipment of tape to White

Plains.     White Plains then sold the tape to the United States

Department of Defense, which required vendors such as the Thomases

to prove or certify the percentage of foreign material in the goods

supplied.     Although the Thomases knew that the tape they were

supplying was manufactured entirely in Mexico, Larry certified that

the tape did not contain more than 20% foreign material.                        A

subsequent government investigation disclosed that                 "Hecho en

Mexico" labels had been removed from the tape prior to shipment to

the Department of Defense and replaced with "Made in America"

labels.

      Following a thirteen count indictment handed down by a federal

grand jury, Larry pled guilty to knowingly submitting a false claim

to   the   government   in   violation    of   18   U.S.C.   §   287,    and   to

concealing the country of origin in violation of 19 U.S.C. § 1304.

A jury found Ernest guilty of conspiracy to submit false claims,

conspiracy to make false statements, or conspiracy to remove

county-of-origin markings in violation of 18 U.S.C. § 371.

      The Thomases then filed suit against Can-Do and White Plains

alleging that the companies breached their fiduciary duty to the

Thomases by failing to disclose that the tape they provided was

subject to the standards of the Buy America Act ("BAA"), 41 U.S.C.

§ 10(a).     The Thomases alleged that they did not know that BAA

required that the tape be made in America, but that Can-Do and

                                    -2-
White Plains knew of this requirement and had a fiduciary duty to

disclose it to the Thomases.         The Thomases contended that Can-Do

and White Plains' failure to inform them of BAA requirements

resulted in their criminal convictions. The district court granted

Can-Do and White Plains' motion for summary judgment and dismissed

the Thomases' claims with prejudice.

      We review a district court's grant of summary judgment de

novo.     Matagorda County v. Russell Law, 19 F.3d 215, 217 (5th Cir.

1994).     "Summary judgment is appropriate if the record discloses

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

the moving party is entitled to judgment as a matter of law.'"              Id.

(quoting FED. R. CIV. P. 56(c)).         In reviewing a district court's

grant of summary judgment, we apply the same standard of review

that the district court applied.         "However, when this Court finds

'an adequate, independent basis' for the imposition of summary

judgment, the district court's judgment may be affirmed 'regardless

of the correctness of the district court's rulings.'"               Hetzel v.

Bethlehem Steel Corp., 50 F.3d 360, 363 (5th Cir. 1995) (quoting

Schuster v. Martin, 861 F.2d 1369, 1371 (5th Cir. 1988)).

      The district court granted summary judgment on the ground that

the Thomases were collaterally estopped from asserting that they

did not know that the tape they were providing was subject to BAA

standards.1     The district court reasoned that since the Thomases

      1
            Collateral estoppel applies in criminal and civil cases to bar
"relitigation of an issue actually and necessarily decided in a prior action."
Wolfson v. Baker, 623 F.2d 1074 (5th Cir. 1980), cert den., 450 U.S. 966, 101 S.
Ct. 1483, 67 L. Ed. 2d 615 (1981). A guilty plea or a criminal conviction can
collaterally estop the relitigation of certain issues in subsequent civil

                                      -3-
knew the sale of the tape was subject to BAA, then Can-Do and White

Plains' failure to inform them of this could not have breached a

duty to them and caused them damages.         In this regard, the district

court's reasoning is erroneous.         While the Thomases were convicted

of crimes which required a finding of knowledge of wrongdoing,2

their convictions did not necessarily determine that they knowingly

violated BAA.     However, we hold that Can-Do and White Plains are

still entitled to summary judgment on other grounds.

      A breach of fiduciary duty occurs when a "party breaches the

others trust or confidence by affirmatively acting in a way that

produces the other party's loss."            Carter Equipment Co. v. John

Deere Industrial Equipment Co., 681 F.2d 386, 392 (5th Cir. 1982).

To establish that a party has breached a fiduciary duty to another,

one must establish (1) that a fiduciary relationship existed, (2)

that a party has breached its duty under this relationship, and (3)

litigation; however, estoppel extends only to those issues that were essential
to the plea or conviction. Emich Motors Corp. v. General Motors Corp., 340 U.S.
558, 568-69, 71 S. Ct. 408, 414, 95 L. Ed. 534 (1951); Appley v. West, 929 F.2d
1176 (7th Cir. 1991); Alsco-Harvard Fraud Litigation, 523 F. Supp. 790, 802
(D.D.C. 1981).
      2
            Larry pled guilty to 18 U.S.C. § 287 which makes it a crime to
knowingly make a false statement to a department or agency of the United States
government and to Title 19, section 1304(a) which makes it a crime to knowingly
and intentionally deface, destroy, remove, alter, cover, obscure or obliterate
a country of origin mark.
      A jury convicted Ernest of conspiring to commit an offense against the laws
of the United States. The district court instructed the jury that to find Ernest
guilty they would have to find that the government had proven beyond a reasonable
doubt that (1) two or more persons made an agreement to submit false claims, make
false statements, and remove country of origin markings; (2) the defendant knew
the unlawful purpose of the agreement and joined in it willfully, that is, with
the intent to further the unlawful purpose; and (3) one of the conspirators
during the existence of the conspiracy knowingly committed at least one of the
overt acts described in the indictment in order to accomplish some object or
purpose of the conspiracy. The court further instructed that a person who has
no knowledge of a conspiracy but who happens to act in a way which advances some
purpose of a conspiracy, does not thereby, become a conspirator.

                                      -4-
that this breach has caused a party to suffer damages.                   See id. at

390-92.   The Thomases allege that Can-Do and White Plains' failure

to   inform    them   of   BAA   standards       resulted   in   their    criminal

convictions.       However,      the    Thomases'    actions     were    criminal))

knowingly making a false statement to the government, removing

country   of    origin     labels,      and    conspiracy   to   do     the   same))

irrespective of whether the tape they provided was subject to BAA

or not.       As the Thomases themselves make clear, they were not

convicted of violating BAA.            Can-Do and White Plains are therefore

entitled to summary judgment because even assuming, arguendo, that

Can-Do and White Plains owed the Thomases a fiduciary duty, and

even assuming further, that they breached such a duty by not

informing them that BAA applied to the sale of the tape, the

Thomases fail to satisfy the causation element of the prima facie

case for breach of fiduciary duty.             Since the Thomases cannot make

out a prima facie case, summary judgment as a matter of law is

appropriate.

                                          II

      For the foregoing reasons, we affirm the district court's

judgment.

                                         -5-