Bonilla v. Volvo Car Corp.

• Decision Date: 02 December 1997
• Docket Number: No. 97-1135,97-1135
• Citation: 150 F.3d 62
• Parties: Luis BONILLA, et al., Plaintiffs, Appellees, v. VOLVO CAR CORPORATION, Defendant, Appellant. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 62

150 F.3d 62

Luis BONILLA, et al., Plaintiffs, Appellees, v. VOLVO CAR CORPORATION, Defendant, Appellant.

No. 97-1135.

United States Court of Appeals First Circuit.

Heard Dec. 2, 1997.

Decided July 28, 1998.

Gael Mahony with whom Michael D. Weisman, Michael D. Vhay, Andres W. Lopez, Anne L. Showalter, Hill & Barlow, P.C., Rafael Perez-Bachs, Nereida Melendez-Rivera and McConnell Valdes were on brief for defendant Volvo Car Corporation.

Daniel L. Goldberg, Alicia L. Downey, Bingham, Dana & Gould LLP, Charles H. Lockwood II, Vice President & General Counsel, Association of International Automobile Manufacturers, Inc., and Phillip D. Brady, Vice President & General Counsel, American Automobile Manufacturers Association, on brief for Association of International Automobile Manufacturers, Inc. and American Automobile Manufacturers Association, Amici Curiae.

Allan Kanner with whom Conlee Schell Whiteley, Elizabeth B. Cowen, Allan Kanner & Associates, P.C., Paul H. Hulsey, Frederick J. Jekel, Theodore H. Huge, Ness, Motley, Loadholt, Richardson & Poole, P.A., Jose F. Quetglas Jordan, Eric Quetglas Jordan, Zygmunt Slominski, Quetglas Law Offices, Daniel Harris and Law Offices of Daniel Harris were on brief for plaintiffs Luis Bonilla, et al.

Before SELYA, Circuit Judge, CAMPBELL, ^* Senior Circuit Judge, and BOUDIN, Circuit Judge.

BOUDIN, Circuit Judge.

In these seven related appeals, we are asked to examine numerous rulings and decisions in a complex civil suit brought under the Racketeering Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962 ("RICO"). This opinion addresses the first of the appeals, the principal appeal (No. 97-1135) of Volvo Car Corporation ("Volvo"), and two companion opinions resolve the remaining appeals. ¹ We briefly set forth the procedural history of the case as background for all three opinions.

The plaintiffs are a class of individuals and corporations who, between 1983 and 1993, among them purchased 9,077 cars of the 200 series manufactured by Volvo, a Swedish automobile manufacturer. The cars were imported to Puerto Rico by Trebol Motors Distributor Corporation ("Trebol Distributor"), and sold for the most part by Trebol Motors Corporation ("Trebol Motors"). Both of these companies (together "Trebol") were owned by Jorge Gonzalez and, after his death, by his widow and son, defendants Conchita Navarro de Gonzalez and Ricardo Gonzalez Navarro (together "the Gonzalez defendants").

Plaintiffs have advanced various arguments at different times, but the claims coalesce around one general complaint: that Volvo, Trebol, and the Gonzalez defendants conspired to violate, and did in fact violate, RICO by engaging in hundreds of predicate acts of mail and wire fraud. 18 U.S.C. §§ 1341, 1343, 1962. The plaintiffs allege that the acts were part of a complex and multifaceted scheme to defraud Puerto Rican purchasers by overcharging them for series 200 Volvo cars.

The plaintiffs' first complaint was filed in the district court on June 16, 1992, and named as defendants Volvo, Trebol, and the Gonzalez defendants, and certain other companies no longer parties to the case. The parties spent nearly four years in bitterly waged discovery battles. On April 26, 1996, the district court granted the plaintiffs' motion to file a Third Amended Complaint, which is the operative complaint in the suit. Trial was scheduled to begin before a jury on Monday, June 24, 1996.

On the afternoon of Friday, June 21, 1996--almost literally the eve of trial--Trebol and the Gonzalez defendants presented the district court with a joint notice consenting to entry of default "as to the factual averments of the Third Amended Complaint." The district court entered a "final Partial Judgment on the issue of liability" against Trebol and the Gonzalez defendants on July 2.

Trial proceeded with Volvo as the sole defendant. The district court had earlier bifurcated the proceedings, intending that the jury would produce a general liability verdict first and then, if necessary, a verdict regarding damages. Indeed, the district court envisioned two separate damages proceedings, one to determine class-wide damages, and a second (probably involving a special master) to determine the damages of individual class members. However, the presentation of the evidence was not bifurcated, and the jury heard testimony regarding both liability and damages over twenty days of trial.

On July 25, 1996, the twenty-second day of trial, the jury returned a verdict finding that Volvo was liable for violating and conspiring to violate RICO's prohibition on racketeering activity. 18 U.S.C. § 1962(c), (d). The jury also found that Volvo had used or invested income from a pattern of racketeering activity, id. § 1962(a), but that the plaintiffs had not been injured by this violation.

On July 31, 1996, the district court held a hearing on damages. Neither plaintiffs nor Volvo presented further evidence, but both presented arguments to the jury based on the evidence already submitted. The next day, the jury found Volvo liable for $43,197,100. The district court trebled the amount under 18 U.S.C. § 1964(c), yielding $129,591,300. The plaintiffs then moved for prejudgment interest, attorney's fees, and costs, alleging vexatious discovery conduct by Volvo. Volvo moved for judgment as a matter of law or a new trial.

On August 29, 1996, the court held a hearing on damages as to Trebol and the Gonzalez defendants. On October 10, 1996, the district court issued an opinion and orders denying Volvo's motion for judgment in its favor or new trial and the plaintiffs' motion for prejudgment interest. The court also entered a final judgment as to all defendants (including Trebol and the Gonzalezes) in the full amount of the trebled verdict. Volvo renewed its motion for judgment or new trial, and Trebol and the Gonzalez defendants filed separate motions to set aside the judgment under Fed.R.Civ.P. 59, all of which were eventually denied.

On March 27, 1997, the district court entered two lengthy orders. The first order sanctioned all defendants for vexatious conduct during discovery by declaring that the court would view plaintiffs' submission regarding computation of attorney's fees with indulgence. The second order awarded attorney's fees and costs to the plaintiffs in the amount of $3,518,844.41. Trebol Motors and Trebol Distributor had filed for bankruptcy under Chapter 11 nearly six months before, on September 30, 1996.

Volvo now appeals the denial of its motion for judgment as a matter of law, for a new trial, or for a remittitur (No. 97-1135), as well as the district court's ruling on sanctions and attorney's fees (No. 97-1599). ² Trebol and the Gonzalez defendants appeal from the entry of judgment against them (Nos. 97-1140, 97-1143), and the Gonzalez defendants also appeal the sanction and fee award (No. 97-1790). Finally, the plaintiffs have filed a protective appeal asking that, in the event of a remand, this court should require the district court to award them prejudgment interest (No. 97-1145).

In this opinion, we address only Volvo's appeal on the merits; the remaining appeals are dealt with in two separate opinions also issued today. In the instant appeal, Volvo argues that judgment should be entered in its favor because several elements necessary to the plaintiffs' claims were not established by the evidence. Volvo also makes several attacks on procedural and evidentiary rulings, which it claims warrant a remand for a new trial. ³

Volvo's main contention is that the evidence does not support a finding that Volvo committed predicate acts of mail or wire fraud, a crucial element of plaintiffs' RICO claim. See Ahmed v. Rosenblatt, 118 F.3d 886, 888 (1st Cir.1997). ⁴ We review the district court's denial of Volvo's motion for judgment as a matter of law de novo as to issues of law. We resolve credibility issues and draw inferences in favor of the jury verdict and examine the evidence as a whole. Still, the verdict cannot stand if no reasonable reading of the evidence will support it. See Schultz v. Rhode Island Hosp. Trust Nat'l Bank, N.A., 94 F.3d 721, 731 (1st Cir.1996).

To prove mail or wire fraud, plaintiffs must show three elements: a "scheme to defraud," Volvo's "knowing and willful participation in the scheme with the intent to defraud," and the use of the mails or interstate wire or radio communication in furtherance of the scheme. United States v. Cassiere, 4 F.3d 1006, 1011 (1st Cir.1993). The conduct must "be intended to deceive another, by means of false or fraudulent pretenses, representations, promises, or other deceptive conduct." McEvoy Travel Bureau, Inc. v. Heritage Travel, Inc., 904 F.2d 786, 791 (1st Cir.1990), cert. denied, 498 U.S. 992, 111 S.Ct. 536, 112 L.Ed.2d 546 (1990). In addition to demonstrating the fraud, however, RICO requires the plaintiffs to show that they were "injured in [their] business or property by reason of" the fraud. 18 U.S.C. § 1964(c).

The plaintiffs presented the jury with "five frauds" in which they claimed Volvo participated. These are not five isolated acts of fraud, but different groups of activity, each comprising multiple acts; if the activities within the group were fraudulent, any one group would reflect multiple "predicate acts" under RICO. We must determine whether the evidence presented as to at least one of the five frauds is sufficient to support the verdict. We conclude that none of the frauds has been established against Volvo, that the judgment against it must be reversed, and that plaintiffs' claims against Volvo fail in their entirety.

Excise Taxes. First, the plaintiffs claim that Volvo and Trebol together fraudulently underreported material data to the Puerto Rican tax authorities, resulting in reduced excise tax payments on vehicles shipped to Puerto Rico. During the class period, the excise tax on a car imported to Puerto Rico was a function of its horsepower,...