ContiCommodity Services, Inc. v. Ragan

• Decision Date: 12 September 1995
• Docket Number: No. 94-20362,94-20362
• Citation: 63 F.3d 438
• Parties: Comm. Fut. L. Rep. P. 26,489 CONTICOMMODITY SERVICES, INC. and Continental Grain Company, Plaintiffs-Counter-Defendants-Appellees, v. David J. RAGAN, et al., Defendants, David J. Ragan and Joe O. Ragan, Defendants-Counter-Plaintiffs-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 438

63 F.3d 438

Comm. Fut. L. Rep. P. 26,489

CONTICOMMODITY SERVICES, INC. and Continental Grain Company Plaintiffs-Counter-Defendants-Appellees, v. David J. RAGAN, et al., Defendants David J. Ragan and Joe O. Ragan Defendants-Counter-Plaintiffs-Appellants.

No. 94-20362.

United States Court of Appeals Fifth Circuit.

Sept. 12, 1995.

Rehearing Denied Oct. 11, 1995.

Bruce Rose, Rose, Magnuson & James, Westchester, IL, for appellants.

David T. Pritikin, Constantine L. Trela, Jo Lynn Haley, Sidley & Austin, Chicago, IL, Lawrence G. Weppler, Continental Grain, New York City, William G. Rosch, III, Rosch & Ross, Houston, TX, for ContiCommodity.

Appeal from the United States District Court for the Southern District of Texas.

Before POLITZ, EMILIO M. GARZA and STEWART, Circuit Judges.

STEWART, Circuit Judge:

As part of multidistrict litigation, ContiCommodity Services, Inc. and Continental Grain Company (together referred to herein as "Conti") ¹ filed suit against David J. Ragan and Joe O. Ragan for damages arising from financial market trading activity attendant to the closing of Conti's Houston branch office. ContiCommodity Services, Inc. v. Ragan, No. H-84-4652 (S.D.Tex.); In re ContiCommodity Services, Inc., Securities Litigation, 733 F.Supp. 1555 (N.D.Ill.1990). The Ragans filed a counterclaim against Conti, asserting inter alia that these damages arose because Conti had breached its contract to finance their debit balances and had made defamatory statements about David Ragan. The district court granted in part Conti's motion for summary judgment against the Ragans, and the Ragans appeal. We affirm.

FACTS

In 1981, Conti hired David Ragan to work in its Houston, Texas branch office. He conducted arbitrage trading, ranging from less speculative hedged positions to more speculative cash trading, for his customers and for his own account. ² Conti routinely loaned money to Ragan's customers to finance trading activity, so that the customers had to deposit only a percentage of the transaction amount. The value of the customer's securities or commodities "position" could be expressed simultaneously in several ways which include (1) the net ³ face value of the position; (2) as the net market value of the position; (3) as the net face or market value of the position, minus the amount financed and associated fees or interest cost. By early 1984, the Houston branch office had sustained losses and Conti decided to close it. ⁴ The instant facts arise from Conti's decision Conti filed suit against David Ragan, alleging fraudulent and fictitious transactions. The Ragans filed a counterclaim against Conti. In this counterclaim, David Ragan alleged that Conti breached its contract with him, tortiously interfered with David Ragan's employment contract, reputation, and prospective customer relationships by making defamatory statements, and fraudulently concealed its decision to close the Houston office. Joe Ragan alleged that Conti breached its contractual and fiduciary obligations by closing out his positions and thereby keeping him from reducing or offsetting his losses.

to close out the customers' accounts in conjunction with the closing of its Houston office.

Many of the claims of the numerous parties to this case and related cases in this multidistrict litigation were disposed of in Illinois before United States District Judge Hart and are documented in a written opinion. See In re ContiCommodity Services, Inc., Securities Litigation. Among Judge Hart's rulings were summary judgments entered on several of the Ragans' claims against Conti. Judge Hart transferred the remaining claims between Conti and the Ragans to the United States District Court for the Southern District of Texas where United States District Judge Black rendered a final summary judgment against the Ragans on their remaining claims. The Ragans appeal this final summary judgment, as well as some of the judgments entered by Judge Hart. The parties agree that Texas law is applicable to these state law claims.

DISCUSSION

The Ragans argue that the Texas district court erred in entering summary judgment because the evidence was sufficient to defeat the motion for summary judgment and because it reached issues that either were not appealed or had been decided by Judge Hart.

We review the district court's grant of summary judgment de novo. International Shortstop, Inc. v. Rally's, Inc., 939 F.2d 1257, 1263 (5th Cir.1991), cert. denied, 502 U.S. 1059, 112 S.Ct. 936, 117 L.Ed.2d 107 (1992). Summary judgment is appropriate when the moving party shows that there is no genuine issue of material fact. Id. The moving party may make this showing by pointing out the lack of evidence to support the nonmoving party's case. Duffy v. Leading Edge Products, Inc., 44 F.3d 308, 312 (5th Cir.1995); Skotak v. Tenneco Resins, Inc., 953 F.2d 909, 913 (5th Cir.1992), cert. denied, --- U.S. ----, 113 S.Ct. 98, 121 L.Ed.2d 59 (1992). Once this showing is made, summary judgment is proper against the nonmoving party when the nonmoving party "fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 321, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986); Duffy, 44 F.3d at 313-14. In order to defeat a properly supported motion for summary judgment, the nonmoving party must direct the court's attention to admissible evidence in the record which demonstrates that it can satisfy a "fair-minded jury" that it is entitled to a verdict in its favor. International Shortstop, Inc., 939 F.2d at 1263; Howell, 897 F.2d at 192. At this point, the mere allegations in the complaint are not sufficient; the non-movant is required to identify specific evidence in the record, and to articulate the "precise manner" in which that evidence supported their claim. Id.; Forsyth v. Barr, 19 F.3d 1527, 1537 (5th Cir.1994), cert. denied, --- U.S. ----, 115 S.Ct. 195, 130 L.Ed.2d 127 (1994).

We shall address the summary judgment entered as to David Ragan and Joe Ragan, respectively.

A. Summary Judgment Against David Ragan ⁵

Criminal charges were instituted against David Ragan for fraudulent and fictitious trade transactions in the form of eighteen counts of mail and wire fraud. A jury found him guilty on all eighteen counts. On July 16, 1993, while Ragan's conviction was on Before transfer of this case to Texas, Judge Hart had dismissed Ragan's tortious interference with employment claims "to the extent claims are made based on any employment relationship other than the one with Merrill Lynch", and had dismissed Ragan's claims of tortious interference with customer and business relations because Ragan presented "no nonhearsay testimony showing that counterdefendants provided any false information to the customers." In re ContiCommodity Services, Inc., Securities Litigation, 733 F.Supp. at 1581. Judge Hart's reasoning was as follows:

appeal to this court, Judge Black granted summary judgment in favor of Conti and against David Ragan because "David Ragan's criminal conviction eliminates any genuine issue of material fact regarding the issue of truth...." ⁶

There is evidence from which it can be inferred that counterdefendants intended to induce David Ragan's firing. David Ragan has also presented evidence to support the claim that the information provided by counterdefendants caused David Ragan's dismissal from Merrill Lynch. David Ragan, however, has not presented specific facts showing counterdefendants caused the loss of any other employment.

In the "Final Judgment" at bar, Judge Black granted summary judgment against Ragan on all remaining claims. The basis expressed for this judgment was that (1) Ragan's criminal conviction settled the question of the truth of Conti's allegedly tortious and defamatory statements in Conti's favor; (2) therefore, there is no longer a genuine issue of material fact about the truth of these statements; and (3) therefore summary judgment is proper. There being no statutory or jurisprudential basis for the proposition that a criminal conviction satisfies the truth inquiry in a civil proceeding for defamation or tortious interference by way of these statements, neither party argues on appeal that Judge Black entered summary judgment against David Ragan for the correct reasons. ⁷

The district court's grant of summary judgment against David Ragan, on the basis of his conviction which was on appeal at the time of judgment, was improper. Nevertheless, summary judgment may be affirmed on grounds other than the basis of the district court's decision. See Howell Hydrocarbons, Inc. v. Adams, 897 F.2d 183, 193 (5th Cir.1990); see also, Matter of Lewisville Properties, Inc., 849 F.2d 946, 950 (5th Cir.1988) and cases cited therein. We shall therefore address de novo whether the judgment was proper despite its improper basis.

Accusations or comments about an employee by his employer, made to a person having an interest or duty in the matter to which the communication relates, have a qualified privilege. Schauer v. Memorial Care Systems, 856 S.W.2d 437, 449 (Tex.App.--Houston [1st Dist.] 1993) (citations omitted). This privilege protects such communications in the absence of actual malice.

In the defamation context, actual malice does not include ill will, spite or evil motive. Hagler v. Proctor & Gamble Mfg. Co., 884 S.W.2d 771 (Tex.1994). "Actual malice" is a term of art which is defined as "the making of a statement with knowledge that it is false, or with reckless disregard ⁸ of whether it is true." See Duffy, 44 F.3d at 313, quoting Carr v. Brasher, 776 S.W.2d 567, 571 (Tex.1989). A finding of such malice requires "sufficient evidence to permit the conclusion that the defendant in fact entertained serious doubts as to the truth of his The plaintiff employee must show that the defendant employer acted with malice in...