Crowe v. Henry

• Decision Date: 04 June 1997
• Docket Number: No. 96-30588,96-30588
• Citation: 115 F.3d 294
• Parties: RICO Bus.Disp.Guide 9288 Larry D. CROWE and Sue Ellen Crowe Silman as the Administratrix of Reba Coody Crowe, Plaintiffs-Appellants, v. Sam O. HENRY, III, the Law Firm of Blackwell, Chambliss, Hobbs & Henry, Murphy Blackwell, Jr., Frank N. Chambliss, James A. Hobbs, Chet Harrod, Douglas C. Caldwell, K. Tod Cagle and Continental Casualty Co., Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 294

115 F.3d 294

RICO Bus.Disp.Guide 9288

Larry D. CROWE and Sue Ellen Crowe Silman as the Administratrix of Reba Coody Crowe, Plaintiffs-Appellants, v. Sam O. HENRY, III, the Law Firm of Blackwell, Chambliss,

Hobbs & Henry, Murphy Blackwell, Jr., Frank N. Chambliss,

James A. Hobbs, Chet Harrod, Douglas C. Caldwell, K. Tod

Cagle and Continental Casualty Co., Defendants-Appellees.

No. 96-30588.

United States Court of Appeals, Fifth Circuit.

June 4, 1997.

Joseph R. Ward, Jr., Lynn Henry Frank, Ward, Nelson & Pelleteri, New Orleans, LA, for Crowe and Silman.

W. Craig Henry, Robert McCullen Baldwin, James A. Rountree, Hudson, Potts & Bernstein, Monroe, LA, for Sam O. Henry, III.

David Finley Butterfield, Mayer, Smith & Roberts, Shreveport, LA, for Blackwell, Chambliss, Hobbs & Henry Law Firm, Murphy Blackwell, Jr., Frank N. Chambliss, James A. Hobbs, Chet Harrod, Douglas C. Caldwell and K. Tod Cagle.

Emmett C. Sole, H. Aubrey White, III, Stockwell, Sievert, Viccellio, Clements & Shaddock, Lake Charles, LA, for Continental Casualty Co.

Appeal from the United States District Court for the Western District of Louisiana.

Before POLITZ, Chief Judge, DeMOSS, Circuit Judge, and JUSTICE, ^* District Judge.

JUSTICE, District Judge:

Plaintiffs-appellants, Larry D. Crowe and Sue Ellen Crowe Silman, as the Administratrix of Reba Coody Crowe (collectively referred to as "Crowe"), appeal the district court's summary judgment in favor of the defendants, Sam O. Henry, III ("Henry"); the law firm of Blackwell, Chambliss, Hobbs & Henry ("the law firm"); Murphy Blackwell, Jr., Frank N. Chambliss, James A. Hobbs, Chet Harrod, Douglas C. Caldwell, K. Tod Cagle (collectively, "the partners"); and Continental Casualty Company ("the law firm's insurance company"). We REVERSE and REMAND.

I. FACTS AND PROCEDURAL HISTORY

The facts in the case are exceedingly complicated, and they will not be completely reviewed here. ¹ According to the evidence presented by Crowe, Henry was his long-time lawyer, business associate, and friend, whom he trusted completely. Initially, Henry advised Crowe to transfer certain land and money ("the properties") to Henry, in order to hide them from a potential adverse legal claim. Although Henry promised to return the properties once the adverse claim was removed, he advised Crowe to transfer the properties to him without a counter letter. Crowe took Henry's advice. Henry then undertook a convoluted series of transactions to reorganize and reconfigure the properties. These transactions included channeling the properties through numerous bank accounts, reinvesting certain portions in a joint farming venture between Henry and Crowe, using the properties as collateral for the purchase of other properties, and using some of the properties to purchase a condominium for his son. After several years, Crowe's properties were so interwoven with Henry's that they were barely distinguishable. When Crowe eventually asked Henry for an accounting, Henry did not provide one. Crowe thereupon asked for his properties back, and Henry refused to return them.

Crowe then brought suit against Henry, Henry's law firm, the partners, individually, and the law firm's insurance company. Crowe alleges violations of the Racketeering Influenced and Corrupt Organizations ("RICO") statute, 18 U.S.C. § 1964, in addition to several state law violations. In this regard, he alleges that the series of transactions which made the properties virtually untraceable by him was a scheme by Henry to defraud him of those properties. Henry admits that he took Crowe's properties, that he promised to return them, and that he has not done so. Henry claims, however, that he never intended to defraud Crowe, but simply decided to keep the properties as satisfaction for Crowe's debts to him.

Previously, the district court granted the defendants' motion to dismiss the RICO claims, for failure to state a claim. This court, however, reversed the dismissal, in part, and instructed the district court to allow Crowe to proceed on his claims against Henry for RICO violations under 18 U.S.C. § 1962(a) and (b), and on his claims against the law firm and the partners for aiding and abetting. Crowe v. Henry, 43 F.3d 198, 207 (5th Cir.1995). Subsequently, the district court granted summary judgment and dismissed all claims. Crowe again appeals to this court.

II. STANDARD OF REVIEW

This court reviews the grant of summary judgment de novo. S.W.S. Erectors, Inc. v. Infax, Inc., 72 F.3d 489, 494 (5th Cir.1996). Summary judgment is proper, "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show 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." Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). A factual dispute is "genuine," if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). When ruling on a motion for summary judgment, "the inferences to be drawn from the underlying facts ... must be viewed in the light most favorable to the party opposing the motion." Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986) (quoting United States v. Diebold, 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962)); Hansen v. Continental Ins. Co., 940 F.2d 971, 975 (5th Cir.1991). The presiding judge is not to weigh the evidence nor engage in credibility determinations. Anderson, 477 U.S. at 249, 106 S.Ct. at 2511.

III. DISCUSSION

In order to bring a successful civil RICO claim, Crowe must prove the following three elements:

(1) the identification of a person, who,

(2) through a pattern of racketeering activity,

(3) uses or invests income derived therefrom to acquire an interest in or to operate an enterprise engaged in interstate commerce, or acquires, maintains an interest in, or controls such an enterprise.

18 U.S.C. § 1962(a), (b); H.J. Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 232, 109 S.Ct. 2893, 2897, 106 L.Ed.2d 195 (1989); In re Burzynski, 989 F.2d 733, 741 (5th Cir.1993). To prove a pattern of racketeering activity, it is necessary that Crowe present evidence of at least two predicate acts of racketeering activity by Henry. 18 U.S.C. § 1961(5); H.J. Inc., 492 U.S. at 237, 109 S.Ct. at 2899. As predicate acts of racketeering activity, Crowe alleges Henry committed mail fraud, wire fraud, and financial institution fraud. ² 18 U.S.C. § 1961 (listing predicate acts). Crowe is required to establish that Henry had fraudulent intent in committing the acts which constituted the claimed frauds. Finding that Crowe failed to present evidence of Henry's fraudulent intent, the district court granted summary judgment on all of plaintiff's claims.

A. Mail and Wire Fraud

RICO mail fraud and wire fraud require, inter alia, evidence of intent to defraud, that is, evidence of "a scheme to defraud by false or fraudulent pretenses, representation, or promises." Landry v. Air Line Pilots Ass'n Int'l AFL-CIO, 901 F.2d 404, 428 (5th Cir.), cert. denied, 498 U.S. 895, 111 S.Ct. 244, 112 L.Ed.2d 203 (1990). See also In re Burzynski, 989 F.2d 733, 742 (5th Cir.1993); United States v. Shively, 927 F.2d 804, 813 (5th Cir.), cert. denied, 501 U.S. 1209, 111 S.Ct. 2806, 115 L.Ed.2d 979 (1991). Circumstantial evidence can be sufficient to prove fraudulent intent in mail and wire fraud cases. United States v. Salvatore, 110 F.3d 1131, 1136-37 (5th Cir.1997); United States v. Robichaux, 995 F.2d 565 (5th Cir.), cert. denied, 510 U.S. 922, 114 S.Ct. 322, 126 L.Ed.2d 268 (1993); United States v. Aubrey, 878 F.2d 825, 827 (5th Cir.), cert. denied, 493 U.S. 922, 110 S.Ct. 289, 107 L.Ed.2d 269 (1989) ("Proof of intent may arise by inference from all of the facts and circumstances surrounding the transactions.").

Fraudulent intent may be found from circumstantial evidence that one party arranged matters with another party in such a way as would facilitate the commission of fraud, especially where the evidence further shows that the first party gained money or advantage at the expense of the second. Landry, 901 F.2d at 429, United States v. Jimenez, 77 F.3d 95, 97 (5th Cir.1996), Powers v. British Vita, P.L.C., 57 F.3d 176, 184 (2d Cir.1995); see also United States v. Sokolow, 91 F.3d 396, 406 (3d Cir.1996), cert. denied, --- U.S. ----, 117 S.Ct. 960, 136 L.Ed.2d 846 (1997). For example, in Landry, a group of pilots alleged that their employer, union, and union representative had defrauded them by arranging for the pilots to lose their jobs and their retirement benefits unless they relocated to another country. The summary judgment evidence showed that the pilots were forced into this choice, because the employer, union, and union representative had secured a strategic advantage in negotiations by means of a series of unfulfilled promises and misleading omissions of material facts. The evidence further showed that the employer, union, and union representative each materially benefitted from forcing this choice upon the pilots. "Only the pilots lost out." Landry, 901 F.2d at 429. This circumstantial evidence of fraudulent intent was held sufficient for the pilots to survive summary judgment on their claim of RICO mail fraud. Id. at 430.

The district court held that Crowe had not submitted "a soupcon of evidence which raises an issue as to Henry's intent." Memorandum Ruling and Judgment at 7. We disagree. The evidence that Henry gained control and reorganized Crowe's properties in such manner as to permit Henry to most easily defraud Crowe, combined with evidence that Crowe lost money from Henry's control and reorganization of the properties, ³ constitutes circumstantial evidence sufficient to...