43 F.3d 198 (5th Cir. 1995), 94-40166, Crowe v. Henry

Docket Nº:94-40166.
Citation:43 F.3d 198
Party Name:RICO Bus.Disp.Guide 8743 Larry D. CROWE and Sue Ellen Crowe Silman, as Administratrix of the Succession of Reba Coody Crowe, Plaintiffs/Appellants, v. Sam O. HENRY, III, the Law Firm of Blackwell, Chambliss, Hobbs & Henry, Murray Blackwell, Jr., Frank N. Chambliss, James A. Hobbs, Chet Harrod, Douglas C. Caldwell, K. Tod Cagle, and Continental Insu
Case Date:January 30, 1995
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit
 
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43 F.3d 198 (5th Cir. 1995)

RICO Bus.Disp.Guide 8743

Larry D. CROWE and Sue Ellen Crowe Silman, as Administratrix

of the Succession of Reba Coody Crowe, Plaintiffs/Appellants,

v.

Sam O. HENRY, III, the Law Firm of Blackwell, Chambliss,

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

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

Cagle, and Continental Insurance Co., d/b/a/ CNA,

Defendants/Appellees.

No. 94-40166.

United States Court of Appeals, Fifth Circuit

January 30, 1995

Rehearing Denied March 1, 1995.

Page 199

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[Copyrighted Material Omitted]

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Joseph R. Ward, Jr., Lynn H. Frank, Ward & Clesi, New Orleans, LA, for appellants.

David F. Butterfield, Caldwell Roberts, Mayer, Smith & Roberts, Shreveport, LA, for Blackwell, Chambliss, et al.

Joseph D. Cascio, Jr., Karen L. Hayes, Hayes, Harkey, Smith, Cascio & Mullens, Monroe, LA, for Henry.

Emmett C. Sole, Stockwell, Sievert, Viccellio, Clements & Shaddock, Lake Charles, LA, for Continental Ins. Co.

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

Before JOHNSON, HIGGINBOTHAM and DAVIS, Circuit Judges.

JOHNSON, Circuit Judge:

Larry D. Crowe 1 brought this RICO 2 action against Sam O. Henry, III, his attorney, and against Henry's law firm, each individual partner of that firm and the firm's insurer. Crowe contended that Henry, with the aid of the firm, engaged in a series of fraudulent acts through which Henry converted, for his personal benefit, certain property owned by Crowe. The defendants brought a motion to dismiss under Fed.R.Civ.P. 12(b)(6) which the district court granted finding that the plaintiffs had failed to sufficiently plead a RICO enterprise. We affirm in part, reverse in part and remand.

I. FACTS 3 AND PROCEDURAL HISTORY

Larry Crowe is a farmer and a businessman. In the early 1960s, he met Sam Henry and they became friends and business associates. Over the next twenty-five to thirty years, Henry, through his firm of Blackwell, Chambliss, Hobbs & Henry (hereinafter "the firm"), represented Crowe and his family in most of their legal matters.

In the mid-1980s, Crowe became involved in litigation with James W. Smith and People's Homestead. Henry, who was representing Crowe in that action, advised Crowe to accept $1.175 million in settlement from People's Homestead so that they could concentrate on the threat from Smith. Moreover, to protect the settlement funds from any possible judgment that Smith might obtain

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against Crowe, the money was placed into accounts in the name of the law firm. 4

At about this same time, Henry and Crowe began to discuss a joint venture involving buying and developing farm land in East Carroll Parish (East Carroll). 5 To accomplish the purchase of this property, Crowe and Henry planned that land which Crowe owned in West Carroll Parish (West Carroll) 6 would be used as collateral. Further, they anticipated that funds from the People's Homestead settlement would be used to clear most of the debt on West Carroll in order to get ready for the joint venture.

However, still concerned about the possibility of a judgment against Crowe in favor of Smith, Henry advised Crowe to transfer various immovable properties to him in "trust." Chiefly, 7 this involved Crowe "selling" West Carroll to Henry with the secret, oral 8 understanding that Henry would return the property to Crowe upon request. Despite any such sale, though, Crowe insists that the parties understood that Crowe remained the true owner of the land.

This "sale" took place in early 1987. To gain court approval for the sale, Crowe alleges that Henry 9 misled the court about the value of the property, the amount of debt encumbering it, and the danger of foreclosure. According to the papers submitted to the court, the consideration paid by Henry to purchase this property was the assumption of certain indebtedness. However, Crowe maintains that both he and Henry knew that the indebtedness allegedly assumed had either already been satisfied or was otherwise not valid and thus that Henry effectively gave no consideration. After this "sale," Crowe and his family remained on the property.

On the day that title to West Carroll was transferred to Henry, he placed a collateral mortgage on it for the purchase of East Carroll. Title to East Carroll was placed in Henry's name. Even so, Crowe contends that the parties (Crowe and Henry) understood that Crowe owned fifty percent of East Carroll 10 and that East Carroll was only titled in Henry's name alone to protect the property from the Smith litigation.

Initially, Henry financed the purchase by a loan from the Federal Land Bank. This was interim financing, however, and Crowe expected that two new loans would be obtained. One loan would be for $300,000 on West Carroll and the other would be for $1,000,000 on East Carroll. Crowe believed that this was the best arrangement because it would keep the ownership and the financing on the two properties separate. However, in late 1989, Henry refinanced the debt with a combined loan from an out-of-state bank.

From 1987 to 1989, East Carroll and West Carroll were farmed as combined acreage either by Larry Crowe or under lease. Even when the property was under lease, though, Crowe provided equipment and services to help with the farming. Crop proceeds or lease payments from those years went to pay the mortgage and to buy additional farm equipment and make improvements to the

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land. 11

In 1990, Crowe and Henry decided to farm East Carroll and West Carroll separately. As the two properties were burdened by the same mortgage, they drew up a Farm Operating Agreement under which the mortgage payment would be allocated as twenty-nine percent to West Carroll and seventy-one percent to East Carroll. The funds would be sent to Henry at his office and he would make the combined mortgage payment.

Crowe became concerned, however, when Henry made it known that he wanted the money from West Carroll sent to him and marked as rent. Under that arrangement, Crowe worried that Henry could claim that he was paying all of the note on the properties. Moreover, Crowe began to suspect that all of Henry's actions were being taken to freeze him out and to erase any evidence of his ownership. Therefore, Crowe instead tendered West Carroll's portion of the mortgage into the registry of the court.

On June 22, 1990, Henry sent a letter to Crowe informing Crowe that no one in the firm represented him any longer. Litigation ensued shortly thereafter and Henry sought to evict Crowe from West Carroll. Members of the firm participated in drawing up documents and submitting them to the court to accomplish this eviction.

Crowe brought the instant suit against Henry, the firm, each individual partner of the firm and the firm's insurer on a myriad of state theories and on a civil RICO claim. As to the RICO claim, Crowe sought relief for alleged violations of 18 U.S.C. Secs. 1962(a), (b), (c) and (d). In response, the defendants filed a motion to dismiss under Fed.R.Civ.P. 12(b)(6) contending that Crowe had failed to adequately plead 1) a pattern of racketeering activity; 2) violations of 18 U.S.C. Sec. 1962; and 3) a RICO enterprise.

The...

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