Court Opinion

ID: 4185239
Source: CourtListenerOpinion
Date Created: 2017-07-11 20:00:57.284348+00
Date Added: 2024-06-11T07:47:20.997683
License: Public Domain

NOT PRECEDENTIAL

                       UNITED STATES COURT OF APPEALS
                            FOR THE THIRD CIRCUIT
                                 ___________

                                       No. 16-1687
                                       ___________

                    CEVDET ASKÜT VE OĞULLARI KOLL, STI,

                                             v.

                              HUSEYIN CAVUSOGLU,
                                                  Appellant
                       ____________________________________

                     On Appeal from the United States District Court
                               for the District of New Jersey
                         (D.C. Civil Action No. 2-12-cv-02899)
                      District Judge: Honorable William J. Martini
                      ____________________________________

                    Submitted Pursuant to Third Circuit LAR 34.1(a)
                                    July 11, 2017

              Before: AMBRO, KRAUSE and NYGAARD, Circuit Judges

                              (Opinion filed: July 11, 2017)
                                     ___________

                                        OPINION *
                                       ___________

PER CURIAM

       Huseyin Cavusoglu appeals from the District Court’s entry of final judgment,

*
 This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not
constitute binding precedent.
following a jury verdict, against him and in favor of Cevdet Asküt Ve Oğullari Koll, STI

(“Cevdet”). We will affirm.

                                            I.

      This case arises from the parties’ dealings in the international market for Turkish

food products. Cevdet is a Turkish company that sells and exports such products, and

Cavusoglu owned several American companies that imported them. One such company

was HGC Commodities Corporation (“HGC”), a now-dissolved New Jersey corporation.

Cevdet and HGC began doing business in 2009. Cevdet initially sent two shipments to

HGC on a “cash-against-documents” basis that required HGC to pay for the shipments

before their release from customs, which HGC did. Cavusoglu, however, then convinced

Cevdet to send 13 shipments totaling approximately $1.1 million worth of dried apricots

and pine nuts to HGC on an open account basis without requiring any security. HGC

received and sold the goods but never paid Cevdet.

      Cevdet filed suit against Cavusoglu and HGC alleging, among other things, that

they fraudulently induced it to make the $1.1 million shipments. That suit resulted in a

settlement under which Cavusoglu and HGC agreed to make certain payments to Cevdet.

The settlement agreement provided that, if Cavusoglu and HGC defaulted, then Cevdet

could reinstate its claims against Cavusoglu and file a confession of judgment against

HGC for the approximate $1.1 million amount. Cavusoglu and HGC defaulted, and the

District Court entered a $1.1 million judgment against HGC only.

      Cevdet later filed the action at issue here against Cavusoglu. Cevdet asserted

                                            2
several claims under New Jersey law, including a claim for fraud and a claim to pierce

HGC’s corporate veil and hold Cavusoglu personally liable for the $1.1 million

judgment. On the parties’ cross motions for summary judgment, the District Court

allowed Cevdet’s claims for fraud and veil-piercing to proceed. The District Court later

granted in part and denied in part the parties’ pre-trial motions in limine, and the case

proceeded to a jury trial. After Cevdet rested, Cavusoglu orally moved for judgment as a

matter of law under Fed. R. Civ. P. 50(a). He orally renewed the motion under Rule

50(b) after the close of evidence, and the District Court took it under advisement.

       The jury then returned a verdict in favor of Cevdet on both claims. On Cevdet’s

claim for fraud, the jury found Cavusoglu liable for approximately $1 million but also

found that Cevdet was 20% at fault under New Jersey’s Comparative Negligence Act. 1

N.J. Stat. § 2A:15-5.2. Thus, the District Court entered judgment in favor of Cevdet for

approximately $800,000 on its fraud claim and approximately $1 million on its veil-

piercing claim. Because both claims sought compensation for the same injury, however,

the District Court entered a total judgment for approximately $1 million plus interest.

Cavusoglu appeals. He was represented by counsel in the District Court but has filed his

brief on appeal pro se. 2

1
  Application of the Act to Cevdet’s fraud claim is not at issue on this appeal, but we note
that New Jersey courts have applied the Act to intentional torts as well. See Martin v.
Prime Hosp. Corp., 785 A.2d 16, 20 (N.J. Super. Ct. App. Div. 2001) (citing Blazovic v.
Andrich, 590 A.2d 222 (N.J. 1991)).
2
 Cevdet argues that a lawyer must have ghostwritten Cavusoglu’s brief and that we
should thus “deny” his appeal for “lack of candor.” We deny that request, but we do take

                                              3
                                             II.

       The District Court had diversity jurisdiction under 28 U.S.C. § 1332 and, to the

extent that we have jurisdiction, it is under 28 U.S.C. § 1291. Cavusoglu challenges the

District Court’s orders: (1) denying in part his motion for summary judgment (ECF No.

75); (2) denying in part his motion in limine (ECF No. 113); (3) denying his Rule 50(b)

motion (ECF No. 131); and (4) entering final judgment (ECF No. 132). Cavusoglu raises

nine specific challenges, which we will address in three categories. We conclude that all

of them lack merit.

                               A.    Substantive Challenges

       Cavusoglu frames his substantive challenges as challenges to both the denial of

summary judgment and the denial of his Rule 50(b) motion. We lack jurisdiction to

review the order denying summary judgment except to the extent that it was based on a

“‘a purely legal issue’ capable of resolution ‘with reference only to undisputed facts.’”

Frank C. Pollara Gp., LLC v. Ocean View Inv. Holdings, LLC, 784 F.3d 177, 185 (3d

Cir. 2015) (quoting Ortiz v. Jordan, 562 U.S. 180, 190 (2011)). Only the last of the

substantive challenges addressed below arguably qualifies. We decide all other issues on

the basis of the trial record, provided that Cavusoglu preserved them in his Rule

50(b) motion. See id. at 186-88. 3

notice that Cavusoglu is an experienced litigant and sophisticated businessman who has
been able to draw on his counseled filings and arguments in the District Court.
3
 Our review of the denial of a Rule 50(b) motion is plenary. See Trabal v. Wells Fargo
Armored Serv. Corp., 269 F.3d 243, 249 (3d Cir. 2001). A Rule 50(b) motion may be
granted “only if, as a matter of law, the record is critically deficient of that minimum

                                             4
                                        1.   Fraud

       Cavusoglu raises three substantive challenges to Cevdet’s claim for fraud, which

required it to prove, inter alia, that Cavusoglu made a misrepresentation on which it

reasonably relied. See Banco Popular N. Am. v. Gandi, 876 A.2d 253, 260 (N.J. 2005).

       First, Cavusoglu argues that Cevdet, in deciding to make the $1.1 million

shipments, relied “entirely” on the representations of a third party named Aret Museoglo

over whom he had no control. Cevdet’s Sales and Marketing Director, Oguz Kanyilmaz,

testified that Museoglo spoke highly of Cavusoglu and suggested that Cevdet do business

with him. (App’x at 118-19; ECF No. 136 at 83-84.) In particular, Kanyilmaz testified

that Museoglo made representations (which proved to be false) that Cavusoglu was

trustworthy, had his own distribution facilities, and controlled 70-80% of the market for

dried apricots in the United States. (App’x at 118-22; ECF No. 136 at 83-87.)

       Kanyilmaz also testified, however, that Cavusoglu himself later repeated those

representations, that he made others of his own about such things as HGC’s distribution

capacity and its ability and intent to pay, and that Cavusoglu’s own representations

ultimately convinced Cevdet to make the $1.1 million shipments. (App’x at 124-30, 135-

39, 178, 181-83, 193; ECF No. 136 at 89-95, 100-04; ECF No. 137 at 18, 21-22, 33.)

Thus, although Kanyilmaz testified that he relied in part on Museoglo’s representations,

quantity of evidence from which a jury might reasonably afford relief.” Id. (quoting
Powell v. J.T. Posey Co., 766 F.2d 131, 133-34 (3d Cir. 1985)). In making that
determination, “we view the evidence in the light most favorable to the non-moving party
and give that party the advantage of every fair and reasonable inference.” Frank C.
Pollara Gp., LLC, 784 F.3d at 184 n.9. We also refrain from weighing evidence and
determining credibility, which are functions of the jury. See id.

                                             5
his testimony presented sufficient evidence that Cevdet relied on misrepresentations that

Cavusoglu made himself. See Eisenberg v. Gagnon, 766 F.2d 770, 779 (3d Cir. 1985)

(holding that evidence of reliance on a report was sufficient even though there was

evidence that plaintiffs may also have relied on a another source); Byrne v. Weichert

Realtors, 675 A.2d 235, 241-42 (N.J. Super. Ct. App. Div. 1996) (holding that similar

circumstance created question of fact for the jury).

       Second, Cavusoglu argues that Cevdet could not have relied on his representations

in making the $1.1 million shipments because (1) Cevdet previously made two smaller

shipments on a “cash-against-documents” basis, and (2) Kanyilmaz testified that

switching to an open account business was a common practice in the industry.

Cavusoglu raised the first aspect of this argument in his motion for summary judgment,

but we lack jurisdiction to review it to that extent because whether Cevdet actually relied

on Cavusoglu’s representations is not a pure issue of law. See Frank C. Polara Gp., Ltd.,

784 F.3d at 185; Byrne, 675 A.2d at 241-42. Cavusoglu did not raise either aspect of this

argument in his Rule 50(b) motion. Thus, we do not review it. We nevertheless note that

the evidence of Cevdet’s actual reliance was sufficient as discussed above.

       Third, Cavusoglu argues that Cevdet’s reliance on his representations was

unreasonable. Kanyilmaz testified that, before Cevdet did business with HGC, he took

various steps to verify Cavusoglu’s representations, including by consulting with others

in the industry who were familiar with Cavusoglu and HGC, confirming that HGC had a

shipping contract, and researching HGC on the Internet. (App’x at 125-26, 176-77; ECF

No. 136 at 90-91; ECF No. 137 at 16-17.) Kanyilmaz further testified that, when

                                             6
Cavusoglu proposed switching to an open account basis, Kanyilmaz discussed the matter

with his boss and they agreed that it was reasonable to do so in light of what they thought

they knew about Cavusoglu and because it was a common way of doing business in the

industry. (App’x at 129; ECF No. 136 at 94.) Kanyilmaz conceded on cross-

examination that he did not ask Cavusoglu to provide financial statements verifying

HGC’s financial condition, but he testified that it was not culturally appropriate to do so.

(App’x at 180; ECF No. 137 at 20.)

       Cavusoglu argues that Kanyilmaz should have requested the statements anyway

and should have taken various other measures to protect its interests before shipping $1.1

million worth of goods on an open account. Cavusoglu relies primarily on Allesandra v.

Gross, 453 A.2d 904 (N.J. Super. Ct. App. Div. 1982), but that case is inapposite. In

Allesandra, the plaintiffs delivered goods on an open account to a company that proved

unable to pay for them. See id. at 905-06. Plaintiffs later sued the company’s president

for fraud on the ground that he induced the deliveries by failing to disclose the

company’s financial condition. See id. at 906. The court held that the president had no

duty to disclose the company’s financial condition because the plaintiffs could have

availed themselves of various commercial safeguards. See id. at 906-07.

       In this case, by contrast, Cavusoglu did not merely fail to disclose HGC’s financial

condition. Instead, he affirmatively misrepresented (among other things) HGC’s ability

and intent to pay. New Jersey courts have distinguished Allesandra on that basis because

“[t]he law should not permit . . . principals of failing corporations to defraud suppliers of

goods and credit with impunity by misrepresenting the financial condition of the

                                              7
corporation and its intentions toward its creditors.” Van Dam Egg Co. v. Allendale

Farms, Inc., 489 A.2d 1209, 1212 (N.J. Super. Ct. App. Div. 1985). Cevdet also took

some steps to verify Cavusoglu’s representations. Whether Cevdet’s reliance on those

representations was reasonable under the circumstances was a question of fact for the

jury. See id. at 1211. Cevdet presented sufficient evidence for the jury to conclude that it

was. See Walid v. Yolanda for Irene Couture, Inc., 40 A.3d 85, 91-93 (N.J. Super. Ct.

App. Div. 2012) (holding that plaintiffs proved reasonable reliance even though there was

more they could have done to discover the fraud). 4

                             2.   Piercing the Corporate Veil

       Cavusoglu raises two substantive challenges to the piercing of HGC’s corporate

veil. He did not raise any such challenge in his Rule 50(b) motion, but his first challenge

overlaps with those discussed above, and his second, which he raised on summary

judgment, can be construed as raising a pure issue of law.

       First, Cavusoglu argues that Cevdet did not prove an element of this claim. A

corporate veil may be pierced under New Jersey law only when, inter alia, the defendant

used the corporation “to perpetrate a fraud or injustice.” Craig v. Lake Asbestos of

Quebec, Ltd., 843 F.2d 145, 149 (3d Cir. 1988) (quoting N.J. Dep’t of Envtl. Prot. v.

Ventron Corp., 468 A.2d 150, 164 (N.J. 1983)). Cavusoglu argues that, because Cevdet’s

4
  Cavusoglu asserts that the jury’s decision to assign some comparative fault to Cevdet on
this claim means that its reliance on his representations could not have been reasonable.
We will not address this issue because Cavusoglu did not raise it in the District Court and
because he has not adequately developed it on appeal.

                                             8
fraud claims fails, its claim to pierce the corporate veil fails as well. Cevdet’s fraud claim

does not fail as discussed above.

       Second, Cavusoglu argues that Cevdet’s attempt to pierce HGC’s corporate veil is

really a claim for “creditor fraud” like the one that the New Jersey Supreme Court

rejected in Banco Popular, 876 A.2d 253. In that case, a bank obtained a judgment

against a debtor, but the debtor transferred his assets on his attorney’s advice and the

transfer left him unable to satisfy the bank’s judgment. See id. at 257-58. The bank then

filed suit against the attorney and asserted a claim for “creditor fraud,” which it argued it

could bring even though the attorney did not make any representations to the bank and

the bank did not rely on any. See id. at 260. The court rejected that argument because

“[m]isrepresentations and reliance are the hallmarks of any fraud claim, and a fraud cause

of action fails without them.” Id. at 261. The court held, however, that the attorney

could be liable for conspiring to violate New Jersey’s Uniform Fraudulent Transfers Act

(“UFTA”). See id. at 263-64.

       Cavusoglu argues that, under Banco Popular, his fraud does not state a basis to

pierce the corporate veil and Cevdet’s remedy, which it is pursuing elsewhere, lies under

the UFTA instead. 5 Cavusoglu raised this argument in his motion for summary

judgment, but the District Court did not expressly address it. To the extent that this

argument raises a pure issue of law, it lacks merit. Banco Popular did not address a claim

5
 Cevdet filed a separate action against Cavusoglu and numerous persons and entities to
whom he allegedly transferred HGC’s assets. That action is pending at D.N.J. Civ. No.
2-14-cv-03326. Cavusoglu filed a motion to consolidate the two actions, but the District
Court denied it and Cavusoglu has not challenged that ruling on appeal.

                                              9
to pierce a corporate veil. Instead, it rejected an attempt to assert a fraud claim in the

absence of misrepresentation and reliance. Cevdet proved those elements as part of its

claim of fraud, and Cavusoglu’s use of HGC to perpetrate that fraud supported the jury’s

decision to pierce HGC’s corporate veil. That decision renders Cavusoglu personally

liable for Cevdet’s judgment against HGC. The fact that Cevdet can pursue relief from

Cavusoglu’s alleged efforts to frustrate collection of that judgment does not preclude his

liability for the judgment itself, and nothing in Banco Popular suggests otherwise.

                       B.   Evidentiary Challenges and Trial Errors 6

       Cavusoglu raises three challenges to the admission of evidence at trial and some

related claims of trial error. Cavusoglu first challenges the admission of evidence that,

before his dealings with Cevdet, other companies filed suit and obtained settlements or

judgments against him and his former businesses. This challenge has two aspects.

       First, Cavusoglu argues that this evidence was not admissible at all. He moved in

limine to exclude this evidence, but the District Court denied that motion because it

concluded that this evidence was relevant to both of Cevdet’s claims. (App’x at 24-25;

ECF No. 112 at 4-5.) Cavusoglu does not acknowledge the District Court’s reasoning or

6
  We review evidentiary challenges for abuse of discretion, and evidentiary errors do not
require a new trial unless they affect a party’s “substantial rights.” Becker v. ARCO
Chem. Co., 207 F.3d 176, 180 (3d Cir. 2000) (citing, inter alia, Fed. R. Evid. 103(a) and
Fed. R. Civ. P. 61). When a party does not object in the District Court, however, we
review the issue only for plain error. See Walden v. Georgia-Pacific Corp., 126 F.3d
506, 517 (3d Cir. 1997); Fed. R. Evid. 103(e). The same applies to challenges to jury
instructions and to arguments made by counsel. See Lesende v. Borrero, 752 F.3d 324,
336 (3d Cir. 2014); Dunn v. HOVIC, 1 F.3d 1371, 1377, 1379 (3d Cir. 1993) (en banc).

                                              10
raise anything calling it into question, and the District Court did not abuse its discretion

for the reasons it explained. 7

       Second, Cavusoglu argues that Cevdet improperly presented this evidence at trial.

In denying Cavusoglu’s motion in limine, the District Court noted that this evidence

should not be introduced to show Cavusoglu’s propensity to defraud. Cavusoglu argues

that Cevdet’s counsel did just that. Cavusoglu argues that counsel raised propensity

arguments during his opening argument, but he did not object to them. (App’x at 64-68;

ECF No. 136 at 29-33.) Cavusoglu also argues that counsel pursued improper lines of

questioning, but the portions of the transcripts that he cites reveal only one instance in

which he objected. The District Court sustained that objection and also sua sponte

directed the jury to disregard testimony about a certain complaint. (App’x at 261; ECF

No. 137 at 101.) Cavusoglu nevertheless asserts that the District Court should have given

a limiting instruction or declared a mistrial, but he requested neither form relief in the

District Court. See Lesende, 752 F.3d at 334. Regardless, even if some isolated

comments may have suggested a propensity, we are satisfied that they “did not so

pervade the trial as to render the verdict a product of prejudice.” Draper v. Airco, Inc.,

580 F.2d 91, 96 (3d Cir. 1978). Thus, we perceive no basis for relief in this regard.

       Cavusoglu’s second challenge is to testimony that Kanyilmaz gave regarding

HGC’s capitalization. HGC’s capitalization was relevant because “gross

7
  Cevdet appears to suggest that we may not review this issue because Cavusoglu
stipulated to the admission of this evidence in the District Court. Cavusoglu did so only
after the District Court unequivocally denied his motion in limine. Thus, he was not
required to object again to preserve this issue for review. See Walden, 126 F.3d at 518.

                                              11
undercapitalization” weighs in favor of piercing the corporate veil. Craig, 843 F.2d at

150. Kanyilmaz testified that, if HGC’s business were really as extensive as Cavusoglu

represented it to be, then HGC would require capitalization of at least $50 million.

(App’x at 121; ECF No. 136 at 86.)

       Cavusoglu objected to this line of questioning in the District Court (id.), but he did

not specify on what basis and has not developed any specific challenge on appeal.

Cavusoglu appears to argue that Kanyilmaz’s lay opinion was not properly supported.

See Fed. R. Evid. 701. Cevdet counters that Kanyilmaz’s opinion was properly

supported by his experience in the industry. We need not address this issue because,

even if there were any preserved error in this regard, any such error would be harmless.

Cavusoglu’s own testimony was hopelessly contradictory regarding whether he even

capitalized HGC at all. 8 Cevdet focused on that testimony at closing (App’x at 596; ECF

No. 139 at 132), and neither party mentioned Kanyilmaz’s testimony on this point.

Cavusoglu also did not argue that HGC was properly capitalized and instead argued

merely that undercapitalization by itself is not enough to pierce the corporate veil.

(App’x at 614-16; ECF No. 139 at 150-51.) Thus, it is highly unlikely that this testimony

affected the outcome of the case. See Becker, 207 F.3d at 180.

8
  Cavusoglu testified variously: (1) that he did not capitalize HGC because it did not
require capitalization in order to run; (2) that he did capitalize it with loans he obtained
by mortgaging his houses; but (3) when pressed on a timing discrepancy, that he might
have put that money into one of his other companies called CMC Trading instead.
(App’x at 273-75, 317-18, 320, 403, 405-06; ECF No. 137 at 113-15; ECF No. 138 at 28-
29, 31, 115, 117-18.) Cavusoglu testified inconsistently on this point even under
questioning by his own counsel.

                                             12
       Cavusoglu’s third challenge is to Kanyilmaz’s testimony (referenced above) that

Museoglo told him certain things about Cavusoglu. Cavusoglu argues that Museoglo’s

statements to Kanyilmaz were inadmissible hearsay. Cavusoglu did not object to this

testimony before the District Court, however, and we perceive no error (plain or

otherwise) because Museoglo’s statements to Kanyilmaz were not hearsay. Cevdet

offered those statements not for their truth (to the contrary, it claimed that they were

false), but to help explain why it agreed to make the $1.1 million shipments to HGC. See

Fed. R. Evid. 801(c)(2).

                           C.   Comparative Fault and Damages

       Cavusoglu’s final argument is based on the jury’s finding that Cevdet was 20% at

fault on its fraud claim. The District Court reduced the jury’s finding of liability for

fraud by 20% on that basis, but it ultimately imposed the full amount of liability because

Cavusoglu remained liable for Cevdet’s previous $1.1 million judgment against HGC on

a veil-piercing theory. Cavusoglu argues that the District Court should have reduced the

amount awarded under that theory by 20% as well. We will not address this issue

because Cavusoglu did not raise it in the District Court and because he has not adequately

developed it on appeal. We note, however, that the veil-piercing inquiry focused solely

on Cavusoglu’s own conduct, not Cevdet’s. See Craig, 843 F.2d at 149-50. Cavusoglu

cites no authority for the proposition that New Jersey’s Comparative Negligence Act

applies to veil-piercing claims, and we are aware of none.

                                             III.

       For these reasons, we will affirm the judgment of the District Court.

                                             13