155 F.3d 500 (4th Cir. 1998), 96-2221, Anderson v. Foundation for Advancement, Educ. and Employment of American Indians

Docket Nº:96-2221.
Citation:155 F.3d 500
Party Name:Paull ANDERSON, Plaintiff-Appellee, v. FOUNDATION FOR ADVANCEMENT, EDUCATION AND EMPLOYMENT OF AMERICAN INDIANS, an Eleemosynary Corporation; H. Nicholas Johnson, Defendants-Appellants, Edward M. Mezvinsky, Defendant.
Case Date:September 10, 1998
Court:United States Courts of Appeals, Court of Appeals for the Fourth Circuit
 
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Page 500

155 F.3d 500 (4th Cir. 1998)

Paull ANDERSON, Plaintiff-Appellee,

v.

FOUNDATION FOR ADVANCEMENT, EDUCATION AND EMPLOYMENT OF

AMERICAN INDIANS, an Eleemosynary Corporation; H.

Nicholas Johnson, Defendants-Appellants,

Edward M. Mezvinsky, Defendant.

No. 96-2221.

United States Court of Appeals, Fourth Circuit

September 10, 1998

Argued May 8, 1998.

Page 501

ARGUED: William Thomas Dillard, Ritchie, Fels & Dillard, P.C., Knoxville, Tennessee, for Appellants. Christen Wood Burkholder, Christen W. Burkholder, P.C.,

Page 502

Bristol, Virginia, for Appellee. ON BRIEF: Robert W. Ritchie, Ritchie, Fels & Dillard, P.C., Knoxville, Tennessee, for Appellants.

Affirmed in part, vacated in part, and remanded by published opinion. Judge ERVIN wrote the opinion, in which Judge DIANA GRIBBON MOTZ and Senior Judge BEEZER joined.

OPINION

ERVIN, Circuit Judge:

The appellants in this case are the Foundation for Advancement, Education and Employment of American Indians and the Foundation's president, H. Nicholas Johnson (we will refer to the appellants collectively as the "Foundation," except where necessary to distinguish any separate actions by Johnson). The Foundation challenges the district court's grant of a default judgment against it under Rule 37 of the Federal Rules of Civil Procedure for abuse of the discovery process. The Foundation further claims that the complaint was invalid for failing to state a claim under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1861 (1994) et seq. Finally, the Foundation claims that the district court erred in the manner and amount in which it assessed damages.

We hold that the district court did not abuse its discretion in granting a default judgment under Rule 37, though we hold that the judgment should not have been based on Anderson's RICO claim. We do find, however, that the district court erred in its calculation of damages and therefore we remand for a hearing on damages in accordance with this opinion.

I.

In January of 1992, Paull Anderson, the plaintiff-appellee, entered into a "finders-fee" contract with the Foundation, which is a nonprofit organization under section 501(c)(3) of the Internal Revenue Code. The contract provided that the Foundation would pay Anderson 10 percent of the value of any property he persuaded people to donate to the Foundation.

The Foundation never paid Anderson for the work he claims he did on its behalf. Among other transactions, Anderson claims he mediated a deal between the owners of a tree farm and the Foundation. Once the Foundation owned the tree farm, it further promised to pay Anderson 10 percent of the value of any trees Anderson sold on behalf of the Foundation. He also claims to have arranged the donation of a former Unisys plant, worth six million dollars, to the Foundation.

Anderson sued the Foundation and its principals, H. Nicholas Johnson and Edward Mezvinsky (Mezvinsky was dismissed from the case for lack of personal jurisdiction) in district court, alleging civil RICO violations, fraud, and breach of contract. He claimed the Foundation engaged in a pattern of activity that involved persuading people to donate properties, or to work to obtain the donation of properties, without fulfilling the terms of the donation agreements. He also claimed the Foundation and its principals made promises that they had no intention of keeping in order to induce him to enter into the contracts.

The Foundation moved to dismiss for failure to state a claim on which relief can be granted under Federal Rule of Civil Procedure 12(b)(6). It argued that Anderson had failed to allege a "pattern of racketeering activity" sufficient to support the civil RICO claim and had failed to allege fraud with particularity under Fed.R.Civ.P. 9(b). The district court denied its motion, finding that Anderson had pled sufficiently to withstand a motion to dismiss under Rule 12(b)(6) on both counts.

The parties conducted discovery under the supervision of Magistrate Judge Kinser. The Foundation was extremely dilatory in responding to both interrogatories and requests for documents. A short summary of the procedural history follows:

After various preliminary skirmishes regarding service of process and responsive pleadings, the parties began discovery. On February 6, 1995, Anderson first submitted interrogatories and document production requests to the Foundation. The Foundation

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objected even to the most ordinary questions as "unduly burdensome or harassing" and responded "to be supplied" to almost all questions to which it did not object. On June 13, Magistrate Judge Kinser entered a partial scheduling order directing that the Foundation provide answers to interrogatories and document requests for all questions and requests to which it had not previously objected no later than June 26. The Foundation filed its interrogatory responses on June 26, and its document production responses on June 27. Those responses were still incomplete.

The parties dueled over discovery throughout the rest of the summer. The Foundation never supplied the requested documents, but renewed its objections to the pleadings (though its motion to dismiss under Rule 12(b)(6) had already been denied), complaining that the documents requested in discovery might incriminate them in racketeering activities.

In September, Magistrate Judge...

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