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explaining in dicta that, “although the Fourth Circuit has specifically reserved ruling on the issue of the impact of the statutory cap as applied to multiple plaintiffs as opposed to multiple defendants, it is difficult to discern a difference ... given the explicit language of § 8.01-38.1 ...”
Summary of this case from Sines v. KesslerOpinion
Civil Action No. 3:01CV103
March 15, 2002
MEMORANDUM OPINION
This matter is before the Court for entry of final judgment as against all Defendants other than the Defendant Clyde Austin and his affiliated business entity, International Financial Opportunities, L.L.C., in regard to which final judgment has been previously entered. (Judgment Order, entered Feb. 25, 2002). Plaintiffs seek judgment, including attorney's fees and costs, upon the jury's verdict that held in favor of all Plaintiffs on all claims submitted to them by special interrogatory. The verdict encompassed alternative relief pursuant to the Racketeer Influenced and Corrupt Organizations Act (RICO) as well as awards related to pendent state claims of common law fraud (Count IV), conspiracy to commit fraud (Count VI), and related punitive damages. The issues of merger and/or duplication of claims and possible multiple recovery were reserved for resolution after trial by the Court, together with the award of attorney's fees and costs as provided for by RICO and/or rule of procedure. 18 U.S.C. § 1964 (c); Fed.R.Civ.P. 54 (d)(2). The specific issues are: (1) whether the verdicts pursuant to different provisions of RICO are duplicative and thereby subject to being merged into a unitary award that must then be trebled as required by statute; (2) whether the state claims are encompassed within the RICO allegations (and the resultant award) or are separate claims providing for cumulative relief; (3) whether, if the state claims are sustainable as separate claims with separate relief, are the corresponding awards of punitive damages on each of the two state claims duplicitous and thereby constitute double recovery; (4) whether any award of punitive damages related to the state claims is encompassed within the required trebling of the RICO award; (5) whether, if the award of punitive damages related to the state claims is not encompassed within the RICO recovery, is the award of such punitive damages limited to a total of the state statutory maximum of $350,000 for all plaintiffs; (6) should the partial satisfaction of the acknowledged indebtedness by one Defendant (Austin) be credited toward satisfaction of the multiple awards due each Plaintiff from the remaining Defendants; and (7) what is the appropriate amount of attorney's fees and related costs for Plaintiffs as the prevailing parties.
The trial proceedings commenced on January 15, 2002, and concluded with the return of the jury's verdict on January 23. A verdict form with resolution of ten special interrogatories was returned by the jury.
Count I alleged that each defendant derived income from and invested income into a RICO enterprise in violation of 18 U.S.C. § 1961 (a); Count II alleged that each defendant was associated with a RICO enterprise in violation of § 1961(c); and Count III alleged each defendant conspired with another to violate provisions of RICO.
An additional state law claim for unjust enrichment (Count V) was withdrawn by the Plaintiffs before its submission to the jury.
Although the Plaintiffs have chosen not to address the issue further at this stage and they seek to preserve the matter for possible appeal, the Court concludes that the issue must be addressed and resolved in light of its conclusions as set forth herein, due consideration being given to the arguments presented by Plaintiffs' counsel at oral argument on the request for entry of final judgment. ( See Pls.' Mem. in Supp. of Pls.' Mot. for Atty's Fees and Proposed Award for J. (Pls.' Mem., n. 1)).
The RICO Verdicts Merge Into A Unitary Award That Must Be Trebled
The Plaintiffs properly pursued alternative theories for relief pursuant to RICO based on the same evidence as they also did with regard to the various pendent state claims. At the same time, however, it is clear that only a single, unitary award can be permitted for the multiple RICO claims because the same factual predicate was alleged and sought to be proven at trial as a basis for each claim. (Transition Compl., ¶¶ 1-112; Bell Compl. ¶¶ 1-92). A plaintiff cannot recover twice (let alone three times) for the same damages. EEOC v. Waffle House, Inc., ___ U.S. ___, 122 S.Ct. 754, 766 (2002). See also Gust K. Newberg Const. Co. v. Loven, 1993 WL 46828, at *2 (4th Cir. Feb. 23, 1993) (unpublished) (citing Tazewell Oil Co. v. United Virginia Bank, 243 Va. 94, 413 S.E.2d 611 (1992)) (in dealing with another issue, the court re-emphasized the prohibition of multiple recovery for the same damages). Such a conclusion is reinforced by the identical awards rendered in this case by the jury as to each Plaintiff on each alternate RICO claim. ( See Special Verdict Form, Answer to Question 2, 4 and 6). Each unitary award for each Plaintiff must therefore be trebled pursuant to statutory mandate. 18 U.S.C. § 1964 (c).
The jury could have concluded, for example, that although a defendant was "associated with" the alleged RICO "enterprise," the same defendant did not derive and reinvest income into the enterprise in violation of 18 U.S.C. § 1962 (a). The jury could also have concluded that a defendant was liable for common law fraud, but that the same defendant did not participate in any of the RICO activity as alleged, e.g., the predicate acts established by the evidence were not as alleged so as to establish the asserted "pattern of racketeering activity" as required to sustain the RICO allegations. 18 U.S.C. § 1962 (c)(d).
The State Claims Are Encompassed Within the RICO Awards
The Plaintiffs in the initial action brought on behalf of Transition, Inc. and James W. and Janet C. Triplett as well as the subsequent action brought by Plaintiff William S. Bell (that was then consolidated with the first case) chose to allege the same essential facts in support of the multiple RICO claims and the various state claims. (Transition Compl. ¶¶ 1-112; Bell Compl. ¶¶ 1-92). In fact, as is standard pleading practice, the detailed factual allegations, including those identified as "Common Facts" and "Facts Common to Other Similarly Situated `Investors,'" were incorporated by reference in regard to each separate RICO and state claim. (Transition Compl. ¶¶ 77-82, cts. IV, VI; Bell Compl. ¶¶ 56-61, cts. IV, VI). No different facts are alleged in the state claims that are not encompassed in the allegations underlying the RICO claims. ( Compare e.g., Transition Compl., ct. 144, § 144 with §§ 79-80; Bell Compl., ct. IV, § 113 with §§ 58-59). Therefore, whether it is considered in terms of alternate relief based on the same evidence or multiple recovery for the same damages, the damages recoverable pursuant to the RICO claims are inclusive of that recoverable under the state claims and the Plaintiffs are therefore only entitled under the particular facts of this case to the trebling of their respective RICO unitary awards. See Morley v. Cohen, 888 F.2d 1006, 1009 (4th Cir. 1989) (trial court held that RICO damages and damages in related state claims were duplicative and encompassed within RICO treble recovery); see also Schriefer v. Stewart, 1989 WL 156878, at *13 (4th Cir. Dec. 27, 1989) (unpublished) ( dictum language that the practice of "grab-bag" pleading in which all facts are alleged in support of multiple RICO and state claims necessarily results in duplicative awards).
Not surprisingly, the two complaints are nearly identical, but for different names, amounts, and specific factual averments that nevertheless are but a variation on the same basic scenario. The Plaintiff Bell also asserted an additional claim against the Defendant Knight for default on a promissory note that was not contested and which need only be addressed in the Final Judgment Order. (Bell Compl., ct. VII).
This Court does not share the same dim view of such pleading practice as the court in Schriefer; it simply agrees with what must be the consequences to preclude multiple recovery. 1989 WL 156878, at *13.
The Award of Punitive Damages Is Extinguished by Merger of the RICO and State Claims
Plaintiffs argue persuasively that the punitive damages that were awarded by the jury in regard to the state claims of fraud and conspiracy to commit fraud are based on a different, clearly punitive purpose as contrasted to the remedial purpose for trebling the RICO amount such that the punitive damages are therefore separately recoverable. (Pls.' Mem. at 4-5). They further assert that the statutory "cap" of $350,000 (Va. Code § 8.01-38.1) only precludes the "stacking" of punitive damages as against multiple defendants, but that it should not prohibit an award to the benefit of separate plaintiffs that may exceed the "cap" where, otherwise, multiple plaintiffs would be unduly penalized for the economy of pursuing joint actions. (Id., at 5-6). Although, as observed by the court of appeals for this circuit, the purpose of trebling a RICO award is difficult to categorize in the traditional remedy/penalty dichotomy, legislative history as interpreted by consistent legal precedent holds that "civil RICO [was] intended to be primarily remedial rather than punitive." Tafflin v. Levitt, 493 U.S. 455, 464 (1990) (citing Shearson v. Am. Express Inc. v. McMahon, 482 U.S. 226, 240-241 (1987)); Faircloth v. Finesod, 938 F.2d 513, 518 (4th Cir. 1991). See also Al-Kazemi v. Gen. Acceptance Inv. Corp., 633 F. Supp. 540, 543-544 (D. D.C. 1986) (the court did not address the issue of multiple recovery for the same damages, nor can it be determined from the decision whether the issue existed). As such, the conclusion necessarily follows that the separate punitive damages awarded to each Plaintiff by the jury in this action are to be considered in addition to the trebled RICO award and not encompassed within it. At the same time, although the Fourth Circuit has specifically reserved ruling on the issue of the impact of the statutory cap as applied to multiple plaintiffs as opposed to multiple defendants, it is difficult to discern a difference based on the respective positions of the parties given the explicit language of § 8.01-38.1 while also discounting the argument that the Plaintiffs' protestations of undue prejudice are risks that are waived by voluntary joinder and/or consolidation. Nevertheless, both issues (as well as the question of whether the identical awards for punitive damages on each of the two state claims are, themselves, duplicative and result in a unitary award) are rendered moot by virtue of the underlying state claims being, in effect, extinguished by the RICO recovery where, certainly, a punitive damages award cannot exist separate and apart from the claim from which it is derived. See, e.g. Morley v. Cohen, 888 F.2d at 1009 (leaving intact a district court decision that underlying common law fraud awards were subsumed by RICO award). The Amount Paid in Partial Satisfaction by One of the Defendants Must Be Deducted From the Trebled RICO Award For Each Plaintiff Pursuant to the Agreement of the PlaintiffsOne of the Defendants (Austin) entered into a consent arrangement with the Plaintiffs before trial and made an initial installment payment of $150,000 toward satisfaction of the acknowledged indebtedness pursuant to the agreement. The parties agree that the amount must be credited toward satisfaction of the entire judgment amount. ( See Pls.' Mem. at 6, citing Morley v. Cohen, 888 F.2d at 1013). The Plaintiffs have entered into a joint agreement among themselves as to the apportionment of any partial satisfaction received and the sums due each shall be adjusted accordingly in the Final Judgment Order. ( See Aff. of Craig J. Curwood, Esq., dated Mar. 14, 2002).
The same defendant has since defaulted on the agreement and final judgment has been entered accordingly.
Attorney's Fees And Costs
18 U.S.C. § 1964 (c) provides that a prevailing plaintiff in a civil RICO action "shall recover threefold the damages he sustains and the cost of the suit, including a reasonable attorney's fee. . . ." 18 U.S.C. § 1964 (c). Plaintiffs' counsel have submitted by affidavit and supporting documentation evidence of the nature and extent of their efforts as well as unrebutted proof of what other skilled practitioners in the same market area believe to be a reasonable hourly rate for such effort, taking into account respective levels of experience and expertise. ( See Addendum to Mot. for Award of Pls.' Atty's Fees and Costs, Ex. A (Aff. of Gerald Zerkin, Esq.), Ex. B (Aff. of Steven W. Bricker, Esq.)). In addition, the Court is guided by reference to the factors set forth initially in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, 717-719 (9 Cir. 1974), and subsequently adopted in this circuit in Barber v. Kimbrell's, Inc., 577 F.2d 216, 226-228 (4th Cir. 1978) cert. denied, 439 U.S. 934 (1978) In addition, certain basic rules emerge from an analysis of relevant case precedent:
The often-cited Johnson factors are: "(1) the time and labor expended; (2) the novelty and difficulty of the questions raised; (3) the skill required to properly perform the legal services rendered; (4) the preclusion of other employment by the attorney as a result of acceptance of the case; (5) the customary fee for like work; (6) whether the fee is fixed or contingent; (7) the time limitations imposed by the client or the circumstances; (8) the amount in controversy and the results obtained; (9) the experience, reputation and ability of the attorney; (10) the `undesirability' of the case within the legal community in which the suit arose; (11) the nature and length of the professional relationship with the client; and (12) attorneys' fees awards in similar cases." Rehab. Ass'n of Va., Inc. v. Metcalf, 8 F. Supp.2d 520, 527 (E.D. Va. 1998).
1. The moving party has the burden of "establishing the reasonableness of the requested amount both by showing the reasonableness of the rate claimed and the number of hours spent." Rehab. Ass'n of Va., Inc. v. Metcalf, 8 F. Supp.2d at 527 (citations omitted).
2. A court must make "detailed findings of fact with regard to the factors considered . . . in arriving at a determination of reasonable attorneys' fees in any case where such determination is necessary." Barber v. Kimbrell's, Inc., 577 F.2d at 229.
3. The "reasonableness of the rate" must be based on an assessment of the prevailing market rate in the relevant legal community ". . . for similar services by lawyers of reasonably comparable skill, experience, and reputation. . . ." Blum v. Stenson, 465 U.S. 886, 895-6 n. 11 (1984); see also Rehab. Ass'n of Va., Inc. v. Metcalf, 8 F. Supp.2d at 527 (citing authority); Am. Canoe Ass'n v. EPA, 138 F. Supp.2d 722, 740-741 (E.D. Va. Apr. 9, 2001).
4. The court can and should assess the degree of skill demonstrated in performing the representation and factor that into a determination of the prevailing market rate. See Johnson v. Georgia Highway Express. Inc., 488 F.2d 714, 718 (1974).
5. Many of the factors involved in the Johnson twelve point analysis are "subsumed within the initial calculation of hours reasonably expended at a reasonable hourly rate." Hensley v. Eckerhart, 461 U.S. 424, 434 n. 9 (1983).
6. The hourly rate charged consistent with the prevailing market rate, multiplied by the number of hours spent, equals the "lodestar" figure that is presumed to be reasonable. See, e.g., United States Football League, et al. v. Nat'l Football League, 887 F.2d 408, 413 (1989), cert. denied, 493 U.S. 1071 (1990).
7. In addition, the lodestar figure may be adjusted upward or downward to take into account additional or remaining factors set forth in the twelve point analysis of Johnson so as to result in a combined lodestar and Johnson standard whereby ". . . the product of reasonable hours times a reasonable rate represents a proper fee. . . ." In re Great Sweats of Va., Inc., 109 B.R. 696, 697-98 (E.D. Va. Nov. 27, 1989) (discussing the evolution of relevant precedent to result in the combined analysis). See also EEOC v. Serv. News Co., 898 F.2d 958 (4th Cir. 1990) (holding that the twelve factors should be considered in determining the lodestar figure).
8. "[W]here full relief is obtained, the plaintiff's attorney should receive `a fully compensatory fee,' and in some cases of exceptional success, even an enhancement." Rehab. Ass'n of Va.., Inc. v. Metcalf, 8 F. Supp.2d at 529 (quoting Rum Creek Coal Sales, Inc. v. Caperton, 31 F.3d 169, 175 (4th Cir. 1994) (quoting Hensley v. Eckerhart, 461 U.S. 424, 435 (1983)).
9. "If more than one attorney is involved, the possibility of duplication of effort along with the proper utilization of time should be scrutinized." Johnson v. Georgia Highway Express, Inc., 488 F.2d at 717.
10. An objecting party must demonstrate specific instances of unreasonable charges and/or efforts and cannot simply rely on general protestation. Blum v. Stenson, 465 U.S. at 892 n. 5; United States Football League. et al. v. Nat'l Football League, 887 F.2d at 413.
The Court has reviewed the detailed time records of counsel (that have not been specifically challenged by any defendant) and although there is evidence of parallel efforts by Plaintiffs' co-counsel, e.g., conferences and joint interviews of clients, such occurrences were minimal and the Court is not otherwise prepared to find that any of the extensive efforts were needlessly duplicative or wasteful, especially given the extreme complexity of the situation. In this regard, the Court is mindful of the need for close attention in the representation of multiple clients against multiple parties, represented by capable, multiple attorneys, in a specialized area of the law by attorneys who do not have the advantage of larger firm resources. The Court is also painfully aware from its own extended efforts as confirmation of what was required of counsel in a case that not only involved a myriad of complex, and sometimes novel issues, but also multiple hearings at every stage. Plaintiffs' counsel exhibited throughout the case the highest level of competence and professionalism and it is obvious from not only witnessing their efforts first hand, but also confirming by a review of their recorded efforts, that the "mission" was a most difficult one that many attorneys would decline and that it surely involved a high price for those like Plaintiffs' counsel who are members of a relatively small law firm dependant on their own individual effort and sacrifice.
See n. 10 above.
It is also appropriate to include all efforts expended in pursuit of the state claims, even though they were ultimately "extinguished," because they were properly pursued as alternate bases for relief and, as already discussed, they involved the same essential factual predicate as the RICO claims in any event so that any effort in that regard was not wasteful.
In fact, it is a situation in which the Court would not hesitate to adjust the "lodestar" figure (the amount of effort (hours) expended multiplied by the prescribed rate), given the various Johnson factors and the obvious degree of success achieved, but for the fact that the Court concludes that the prescribed hourly rate for at least lead counsel (Mr. Thorsen) is at the higher range for such expertise in this local market area so as to sufficiently account for any other upward adjustment. The Court will therefore award the full amount of requested fees and costs, the Court having also reviewed the statement of costs and having found them to be reasonable and necessary in all respects.
Conclusion
For the reasons stated, final judgment will be entered in favor of each Plaintiff in an amount corresponding to the jury's determination of RICO damages (less credit for partial satisfaction by the one defendant), together with an award for the attorney's fees and costs as requested and found to be reasonable by the Court. The Court declines to grant any specific declaratory relief as requested by the Plaintiffs for the Defendants to obey the law as it is their existing obligation. Furthermore, the Court does not deem it necessary nor appropriate to specify that it maintains jurisdiction for purposes of collection of the judgment amounts awarded in light of Fed.R.Civ.P. 69 and other applicable provisions that enable the Court to revisit the matter in the future should it become necessary to do so.
An appropriate Order shall issue.
FINAL JUDGMENT ORDER
This matter is before the Court for entry of final judgment on the jury's verdict in favor of the Plaintiffs, all of whom prevailed, as against all of the Defendants, with the exception of Defendant Clyde Austin and International Financial Opportunities, L.L.C. against whom separate judgment has been previously entered. (Judgment Order, entered Feb. 25, 2002). Having considered the evidence presented at trial, the arguments of counsel, and deeming it otherwise proper and just to do so, it is hereby
ORDERED that:
1. Judgment is hereby entered in favor of Plaintiff, Transition, Inc., as against Defendants Lamont C. Knight, ADAR, Inc.; Thomas Hofler, Freedom Financial Company, L.L.C.; Richard A. Hertz and Moredoe, Inc., jointly and severally, in the amount of Four Hundred Twenty Six Thousand Six Hundred Seventy-Five and 00/100 Dollars ($425,675), trebled to One Million Two-Hundred Eighty Thousand Twenty-Five and 00/100 Dollars ($1,280,025), less Forty Five-Thousand Nine-Hundred Fifty and 00/100 Dollars ($45,950) as a credit for partial satisfaction, for a resulting total amount of One Million Two-Hundred Thirty-Four Thousand Seventy-Five and 00/100 Dollars ($1,234,075) with interest thereon at the prevailing judgment rate of 2.41% from the date of this Final Judgment Order until paid;
2. Judgment is hereby entered in favor of Plaintiffs James and Janet Triplett as against Defendants Lamont C. Knight, ADAR, Inc.; Thomas Hofler, Freedom Financial Company, L.L.C.; Richard A. Hertz and Moredoe, Inc., jointly and severally, in the total amount of Seven Hundred Forty Seven Thousand Seven Hundred Sixty-Six and 00/100 Dollars ($747,766), trebled to Two Million Two Hundred Forty Three Thousand Two Hundred Ninety-Eight and 00/100 Dollars ($2,243,298), less Seventy Three-Thousand Four Hundred and 00/100 Dollars ($73,400) as a credit for partial satisfaction, for a resulting total amount of Two Million One Hundred Sixty Nine Thousand Eight Hundred Ninety-Eight and 00/100 Dollars ($2,169,898), with interest thereon at the prevailing judgment rate of 2.41% from the date of this Final Judgment Order until paid;
3. Judgment is hereby entered in favor of Plaintiff, William S. Bell, as against Defendants Lamont C. Knight, ADAR, Inc.; Thomas Hofler, Freedom Financial Company, L.L.C.; Richard A. Hertz and Moredoe, Inc., jointly and severally, in the total amount of Three Hundred Forty Seven Thousand Four Hundred Eighty-Three and 00/100 Dollars ($347,483), trebled to One Million Forty-Two Thousand Four Hundred Forty-Nine and 00/100 Dollars ($1,042,449), less Thirty Thousand Six Hundred Forty and 00/100 Dollars ($30,640) as a credit for partial satisfaction, for a resulting total amount of One Million Eleven Thousand Eight Hundred Nine and 00/100 Dollars ($1,011,809), with interest thereon at the prevailing judgment rate of 2.41% from the date of this Final Judgment Order until paid;
4. Judgment is hereby entered in favor of Plaintiff, William S. Bell, as against the Defendants Lamont C. Knight and ADAR, Inc., jointly and severally, in the amount of Twenty-Two Thousand One Hundred Sixty-Six and 50/100 Dollars ($22,169.50) as for principle and unpaid interest through January 31, 2002, pursuant to the terms of the promissory note executed by said Defendants, dated March 16, 1998, with interest on the total amount of Twenty-Two Thousand One Hundred Sixty-Six and 50/100 Dollars ($22,169.50) at the prescribed rate of 5% per month, compounded monthly per the terms of the Note, from the date of February 1, 2002, until paid;
5. Judgment is hereby entered in favor of Plaintiffs Transition, Inc., James and Janet Triplett, and William S. Bell, as against Defendants Lamont C. Knight, ADAR, Inc.; Thomas Hofler, Freedom Financial Company, L.L.C.; Richard A. Hertz and Moredoe, Inc., jointly and severally, pursuant to 18 U.S.C. § 1964 (c), in the total amount of Two Hundred Eleven Thousand Six Hundred Forty-One and 75/100 Dollars ($211,641.75) as attorney's fees and the additional amount of Nineteen Thousand Three Hundred Fifteen and 00/100 Dollars ($19,315) for costs with interest thereon at the prevailing judgment rate of 2.41% from the date of this final judgment order until paid; and
6. All pending motions are DENIED as moot.
It is further
ORDERED that the case is DISMISSED and thereby CLOSED.
Let the Clerk forward a copy of this Final Judgment Order and the accompanying Memorandum Opinion to all counsel of record.