Karl Rove & Co. v. Thornburgh

• Decision Date: 16 June 1993
• Docket Number: Civ. No. A 92 CA 266-SS.
• Citation: 824 F. Supp. 662
• Parties: KARL ROVE & CO. v. Richard THORNBURGH, Raymond P. Dimuzio, and the Thornburgh for Senate Committee.
• Court: U.S. District Court — Western District of Texas

824 F. Supp. 662

KARL ROVE & CO. v. Richard THORNBURGH, Raymond P. Dimuzio, and the Thornburgh for Senate Committee.

Civ. No. A 92 CA 266-SS.

United States District Court, W.D. Texas, Austin Division.

June 16, 1993.

COPYRIGHT MATERIAL OMITTED

David Herndon, G. Michael Lawrence, Graves, Dougherty, Hearon & Moody, Austin, TX, for plaintiff Karl Rove & Co.

Jon David Ivey, J. Paige Bickley, Lindsay Lee Lambert, James C. Winston, Houston, TX, for defendants Richard Thornburgh, Raymond P. Dimuzio, The Thornburgh for Senate Committee.

MEMORANDUM OPINION AND ORDER

SPARKS, District Judge.

The primary issue before the Court in the above-styled and numbered cause is whether or not Richard Thornburgh, a former candidate for the United States Senate, and/or Raymond P. Dimuzio, treasurer of Thornburgh's designated principal campaign committee, may be held liable for a contract debt incurred by the principal campaign committee.

This case was tried before the Court, without a jury, on April 1 and 2, 1993. All parties were present and represented by counsel. Having carefully considered the evidence presented at trial, the arguments of counsel, and the extensive briefing in this cause, the Court concludes the Thornburgh for Senate Committee and Richard Thornburgh are liable for the Committee's debt to Karl Rove & Company. Raymond Dimuzio, however, is not personally liable.

I. PROCEDURAL BACKGROUND

Plaintiff, Karl Rove & Company, a Texas corporation with its principal place of business in Austin, Texas, originally filed suit against Defendants on March 30, 1992, in the 353rd Judicial District Court of Travis County, Austin, Texas. On May 1, 1992, Defendants, Richard Thornburgh ("Thornburgh"), a resident of Washington, D.C.; Raymond P. Dimuzio ("Dimuzio"), a resident of Pittsburgh, Pennsylvania; and The Thornburgh for Senate Committee ("the Committee"), an unincorporated association organized pursuant to the Federal Election Campaign Act and located in the State of Pennsylvania, removed the case to this Court pursuant to 28 U.S.C. § 1441. On October 23, 1992, Rove filed a First Amended Complaint, which states causes of action for breach of contract or, in the alternative, quantum meruit and fraud and theft of services. Also on October 23, 1992, Defendants filed counterclaims, which assert causes of action for statutory usury, common law usury, and violation of the Texas Deceptive Trade Practices — Consumer Protection Act ("DTPA"). All parties have requested attorneys' fees.

Construing Defendants' special appearances made in state court as motions to dismiss, the Court denied each of the Defendants' motions to dismiss, but instructed them they were free to argue lack of personal jurisdiction at trial. The Court also declined to rule on Plaintiff's motion for summary judgment until the time of trial, and, at that time, denied the motion as there are clearly material factual disputes with respect to Rove's claims against each Defendant.

II. FACTS

A. Pre-"Official" Campaign Events

Karl Rove ("Rove") is President of Karl Rove & Company ("Rove & Co.") and is very familiar with the organization and operation of political campaigns. Rove has been involved in politics since 1968 and has provided direct mail fund-raising services to candidates in 31 states and one foreign country since 1981. Rove & Co. prepares individualized solicitation letters for candidates; provides the artwork for those letters; mails the letters to targeted persons; and analyzes the responses to the mailings for use in future mailings and campaigns. As an experienced fund-raiser for political campaigns, Rove understands the uncertainty surrounding most elections and the risks involved in dealing with a campaign committee without obtaining separate guarantees for payment.

In June, 1991, Defendant Richard Thornburgh, then Attorney General of the United States, began considering running for the office of United States Senator from the State of Pennsylvania, following the April, 1991, death of Senator John Heinz. On June 5, 1991, Thornburgh advised President Bush, Senator Gramm, Senator Dole, and his family and close friends he intended to run for the vacant Senate position.

In the early summer of 1991, Rove telephoned Murray Dickman, then Assistant to Attorney General Thornburgh in Washington, D.C. to express his interest in providing direct mail fund-raising services to Thornburgh in the event he ran for Senator.¹ Rove called Dickman because he knew Dickman had been Thornburgh's political advisor, administrative assistant, and the person primarily in control of Thornburgh's previous campaigns. Rove also knew the Republican Senatorial Committee was very involved in the consideration of Thornburgh as the Republican candidate for the vacant Senate seat and communicated with one of its members, Carla Eudy, as well as Dickman. Eudy recommended Dickman use Rove. On June 10, 1991, the United States District Court for the Eastern District of Pennsylvania ruled Pennsylvania's special election statute unconstitutional, and enjoined the November special election for the vacant Senate seat. See Trinsey v. Commonwealth of Pa., Dep't of State Bd. of Elections, 766 F.Supp. 1338 (E.D.Pa.1991). Two weeks later on June 24, 1991, despite the fact the election was officially "off", Rove sent his "Direct Mail Proposal for the Thornburgh for Senate Campaign" ("the Proposal") to Eudy and Dickman. On July 1 or 2, 1991, Dickman called Rove and said the Proposal looks "great"; "let's get going," and indicated they should be ready to move in August. Testimony of Karl Rove; see also Plaintiff's Exhibit # 10 (memorandum from Bob Mason to Murray Dickman, Michele Davis, and Ray Dimuzio, stating, "Carla's recollection is that Murray reviewed and approved of the Rove proposal"). However, Dickman told Rove the executing of the contract would need to wait until the campaign officially began.

In response to Dickman's inquiry as to what steps needed to take place prior to the actual start of the campaign and execution of a contract, Rove told Dickman he would need to locate a reciprocal post office; he would need Thornburgh's political donors' list, a collection of Thornburgh's speeches, personal letters, previous campaign materials, Thornburgh's signature; and he would need to know Thornburgh's favorite colors (for use in the mailings). Dickman personally obtained and federal expressed to Rove Thornburgh's signature exemplar, Thornburgh's donors' list; and Thornburgh's personal list of mailing addresses. Dickman also advised Rove that Thornburgh wanted the letterhead on solicitation letters to read "Dick Thornburgh."

On August 6, 1991, the Third Circuit Court of Appeals reversed the District Court's June 10, 1991 decision and held the Pennsylvania statute for filling vacant U.S. Senate seats constitutional, thus reinstating the November, 1991 election. See Trinsey v. Commonwealth of Pa., 941 F.2d 224 (3d Cir.), cert. denied, ___ U.S. ___, 112 S.Ct. 658, 116 L.Ed.2d 750 (1991). Rove & Co. immediately had its attorneys prepare a draft agreement between Rove and the Thornburgh for Senate Committee. See Plaintiff's Exhibit 4 (Proposed Agreement between Rove and the Committee). This draft incorporated the terms of the June 24 Proposal, but was more specific than the Proposal and raised the monthly charge from $1500.00 to $2000.00 as the original proposal anticipated a four, not three, month campaign. See Plaintiff's Exhibit 66 (June 24, 1991 Proposal and August 7, 1991 Proposed Agreement).

According to the August 7 Proposed Agreement, in addition to the monthly charge of $2000.00, the Committee would pay Rove's expenses in connection with the direct mail campaign, the Committee would pay Rove 4.5 cents per fund-raising letter and 3.0 cents per each other letter sent to voters, and Rove would retain any industry discount up to 15% of the gross price. Id. In the event payments due were not paid on time, interest at the rate of 18% per annum, or the highest legal rate, whichever was lower, would be charged. Id. And, in the event a lawsuit was filed, the prevailing party would be "entitled to recover its reasonable attorney's fees." Id. The Agreement further provided it was "made, would be performed, and would be construed in accordance with the laws of the State of Texas...." Id. However, the Proposed Agreement left blank who the Committee's designated representatives would be and left blank who was to sign on the signature line under "Thornburgh for Senate Committee." See id. Rove did not request, at this time or any time thereafter, a guaranty of payment from Thornburgh or any other person.

This Proposed Agreement was apparently never formally executed by Thornburgh, Dickman, Dimuzio, or a representative for the Thornburgh for Senate Committee. However, no disagreement of the terms were advised, and the parties conducted business according to those terms.

In anticipation of Thornburgh's official entry into the Senate race, Rove began preparing, and completed, the first solicitation letter long before Thornburgh filed his statement of candidacy on August 16, 1991 or announced publicly his candidacy on August 29, 1991. On August 15 or 16, 1991,² Rove mailed the first batch of letters soliciting donations on behalf of Thornburgh's candidacy for Senator. See Note 2, supra. Prior to doing so, Rove sent a draft of this first letter to Dickman. Dickman, in turn, gave the letter to Thornburgh, who reviewed the letter for factual errors and sent the draft containing his changes back to Rove by way of Dickman. Thornburgh testified this was done at his request so that he could "protect his reputation." He further testified he reviewed letters before they were mailed on other occasions.

B. Post — "Official" Campaign Events

On August 15, 1991, Rove resigned as United States Attorney General. On August 16, 1991, he filed his Statement of Candidacy and designation of the Thornburgh for Senate...