Alcorn County, Miss. v. U.S. Interstate Supplies, Inc.

• Decision Date: 10 May 1984
• Docket Number: No. 83-4015,83-4015
• Citation: 731 F.2d 1160
• Parties: , 39 Fed.R.Serv.2d 171 ALCORN COUNTY, MISSISSIPPI, Plaintiff-Appellant, v. U.S. INTERSTATE SUPPLIES, INC., et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1160

731 F.2d 1160

76 A.L.R.Fed. 181, 39 Fed.R.Serv.2d 171

ALCORN COUNTY, MISSISSIPPI, Plaintiff-Appellant, v. U.S. INTERSTATE SUPPLIES, INC., et al., Defendants-Appellees.

No. 83-4015.

United States Court of Appeals Fifth Circuit.

May 10, 1984.

Smith, Downs, Ross, Trapp & Coleman, Orma R. Smith, Jr., Corinth, Miss., for plaintiff-appellant.

Ralph E. Pogue, Aberdeen, Miss., for U.S. Interstate, Rado and Creditor.

Appeal from the United States District Court for the Northern District of Mississippi.

Before CLARK, Chief Judge, GARZA and JOLLY, Circuit Judges.

E. GRADY JOLLY, Circuit Judge:

This action arises from illegal purchases of office supplies by a county official. Alcorn County sued to recover all amounts paid by it in violation of state bidding laws to the defendant USIS. Additionally, the county sought punitive damages under state law and treble damages under 18 U.S.C. Sec. 1964(c), the civil remedy provision of the Racketeer Influenced and Corrupt Organizations Act (RICO). The district court directed a verdict for the county on its claim for restitution under state law. Neither party appeals that judgment. The court, however, further directed verdicts against the county on its punitive damages and RICO claims. The county appeals, arguing that it was entitled to present these claims to the jury. We affirm in part, reverse in part, and remand the case for a new trial on the county's RICO claim.

I.

During 1979 and 1980, the defendant, U.S. Interstate Supplies, Inc., (USIS), collected more than $46,000 from Alcorn County for office supplies it sold to the county at inflated prices, including seventy-one cartons of toner for use in copying machines and seventy-three thousand ballpoint and felt-tipped pens, the majority of which were never delivered. Local news media personnel, understandably dubious that the county had validly purchased approximately 2.7 pens per each of its twenty-seven thousand inhabitants, dubbed the event "Penscam."

USIS, a California corporation, at the time of "Penscam" was engaged in telephone solicitation sales. Individual defendants Morris Savitz and David Creditor were salesmen ¹ for USIS, and Janice Rado was the corporation's sole stockholder, officer and director. USIS began doing business with Alcorn County in 1979 through its salesmen Savitz and Creditor. Janice Rado sent Alcorn County a price list intending this list to represent its bid for Alcorn County's business. No public notice or request for bids was made by Alcorn County in connection with purchases of office supplies during the relevant time period.

Billie Cutchens, a deputy chancery court clerk of Alcorn County, admitted that she ordered the supplies from USIS. She pleaded guilty to embezzlement of public funds and testified for the county at the trial of this suit. Cutchens testified that she received payments of cash and other property, including three television sets and two radios, from Creditor and USIS in return for making the orders and that Creditor told her these "gifts" were intended for her and not the county. She also testified that pursuant to instructions from Creditor, she falsified invoices and entries into the county's claim docket in order to conceal the purchases from county authorities. Cutchens maintained at trial that Creditor threatened to harm her when she attempted to withdraw from the scheme.

II.

In March 1981, Alcorn County sued USIS in federal district court, invoking both diversity and federal-question jurisdiction. The complaint alleged that USIS was obligated under Mississippi law to reimburse all payments made in violation of the state's public purchase laws. In addition, the complaint demanded punitive damages based on fraud and conspiracy to embezzle public funds and treble damages based on violations of RICO. The complaint was later amended to name Creditor, Savitz and Rado individual defendants. Savitz and Rado filed bankruptcy petitions prior to trial, and the complaint was dismissed as to them.

The case was tried before a jury in the Northern District of Mississippi in November 1982. After all parties had presented evidence, the district judge made rulings on cross-motions for directed verdicts, which disposed of all issues in the case, and he dismissed the jury without submitting the case to it. The court ruled that Alcorn County was entitled to repayment of all amounts that it paid on invoices for more than $250, because the evidence conclusively demonstrated that those payments were made in violation of the state law requiring competitive bidding. The district judge also found the county entitled to attorney's fees and prejudgment interest.

The district judge directed a verdict against Alcorn County on its claims for punitive and treble damages without a written opinion. From our examination of the record, we gather that the district judge was of the opinion that no basis had been established for the award of punitive damages under state law. With respect to treble damages, the district judge made the following remarks: "Racketeering, as counsel has so ably pointed out to me, contemplates an illegal enterprise, an illegal enterprise, such as a gambling, a prostitution type thing. I'm of the opinion in this case that the proof does not rise to that degree which would justify either a racketeering charge going to the jury or punitive damages."

On November 16, 1982, the district court entered judgment for Alcorn County for repayments and interest totalling more than $50,000. The judgment contained the following paragraph:

"The plaintiff is also entitled to recover attorney's fees, which matter is held in abeyance to be determined on affidavits and counteraffidavits."

On January 3, 1983, Alcorn County filed a notice of appeal from both the judgment denying it recovery on its RICO and punitive damages theories and the denial of its motion for a new trial. Attorney's fees were awarded in a judgment entered on January 28, 1983. The parties submitted briefs and presented oral arguments before this panel in November 1983. At no time did the defendants question the timeliness of Alcorn County's notice of appeal. Following oral argument, we requested that the parties submit additional briefs addressing whether the notice of appeal was filed within the prescribed time limit. ²

III.

This appeal involves some complex procedural issues as well as questions of substantive law. If the notice of appeal in this case was not filed in time, then we must dismiss the appeal without reaching the merits of Alcorn County's claims. The resolution of the timeliness issue, as we will explain in detail, hinges upon whether the judgment entered on November 16, 1982, was a final, therefore appealable, judgment. If the November 16 judgment was final, then Alcorn County's January 3, 1983, notice of appeal was not filed in time. If there was no final judgment in this case until January 28, 1983, then we must consider whether the premature filing of the notice of appeal vested jurisdiction in this court.

If we resolve these procedural issues in Alcorn County's favor, then we must address whether the district court erred in directing verdicts on the civil RICO and punitive damages claims.

IV.

A.

The judgment entered on November 16, 1982, assessed liability for attorney's fees against the defendants, but left the amount of the fee award undetermined. We must decide whether this judgment, which on its face leaves an issue in the case undecided, was a final or appealable judgment under 28 U.S.C. Sec. 1291. If so, no timely notice of appeal from that judgment was filed, and we must dismiss this appeal. The standard for determining whether such a judgment is final is set forth in Holmes v. J. Ray McDermott & Co., Inc., 682 F.2d 1143 (5th Cir.1982), cert. denied, 459 U.S. 1107, 103 S.Ct. 732, 74 L.Ed.2d 956 (1983). Synthesizing the holdings of prior cases, we derived this rule:

When attorney's fees are similar to costs ... or collateral to an action ... a lack of determination as to the amount does not preclude the issuance of a final, appealable judgment on the merits. When, however, the attorney's fees are an integral part of the merits of the case and the scope of relief, they cannot be characterized as costs or as collateral and their determination is a part of any final, appealable judgment.

Id. at 1146 (citations omitted). In Holmes, we held that a request for attorney's fees in a maritime action for arbitrary and willful failure to pay maintenance and cure was similar to an element of damages and "not uniquely separable from the merits but ... bound hand in hand with them." Id. at 1147.

Since Holmes was decided, we have applied its finality test to an action on a contract, holding that where attorney's fees were provided for in the contract, an award of such fees was an integral part of the merits of the case and that a judgment assessing liability for, but not the amount of, attorney's fees was not final. Oxford Production Credit Ass'n v. Duckworth, 689 F.2d 587 (5th Cir.1982). In reaching our decision, we looked to Mississippi law for guidance because it governed the construction of the contract in that diversity case. Id. at 588. Here we have looked to the law governing Alcorn County's claims, both state and federal, but we have found no cases which address the particular question before us. We do find some guidance, however, in the nature of the cause of action created by 18 U.S.C. Sec. 1964(c).

Alcorn County maintains that its request for attorney's fees is an integral part of the merits of this case, pointing to the fact that attorney's fees were a part of the relief requested in its complaint. If the county had failed to request attorney's fees in its complaint, that would suggest that they were not integral to the merits of this case. We do not, however, consider the fact that the claim was in the complaint to be dispositive of this issue.

On consideration of the...