Heck v. Triche
| Decision Date | 23 December 2014 |
| Docket Number | No. 14–30146.,14–30146. |
| Citation | 775 F.3d 265 |
| Parties | Raymond E. HECK; Doug Hamley; Charles Moore; Joseph McKearn; Allen Richardson, Plaintiffs–Appellees v. Wayne TRICHE, Defendant–Appellant. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Donald Lee Beckner, Esq., Donald L. Beckner & Associates, Peter Gray Carmichael, Esq., Seago & Carmichael, Baton Rouge, LA, for Plaintiffs–Appellees.
Claude Favrot Reynaud, Jr., Esq., Carroll Devillier, Jr., Breazeale, Sachse & Wilson, L.L.P., Baton Rouge, LA, for Defendant–Appellant.
Appeal from the United States District Court for the Middle District of Louisiana.
Before HIGGINBOTHAM, CLEMENT, and HIGGINSON, Circuit Judges.
Following a jury trial, the district court entered judgment imposing liability on Defendant–Appellant Wayne Triche for violations of the Louisiana Securities Law, La.Rev.Stat. Ann. § 51.701 et seq. Triche appealed the judgment to this court and, for the reasons to be explained, we AFFIRM.
The facts developed at trial, consistent with the jury's verdict, are as follows. Defendant Ken Buhler was an auctioneer specializing in antique furniture. Buhler met co-defendant Triche, a certified public accountant, in 1990, and shortly thereafter hired Triche's then accounting firm, Triche and Associates. In the late 1990s, with the help of Triche and Associates, Buhler launched “Go Antiques,” an internet antique furniture business. Triche and Associates helped Buhler draft prospectuses for Go Antiques, raising approximately eight and a half million dollars.
Buhler was fired from his dual roles as president and CEO of Go Antiques on December 20, 2002. Prior to his termination, Buhler took out a number of loans in connection with Go Antiques that left him personally indebted to First Bank for just over one million dollars. Buhler also had a number of outstanding claims and judgments against him totaling over half a million dollars. Triche was aware of these debts. Buhler considered Triche his “business advisor” and close friend and went to Triche for advice after his termination from Go Antiques. Triche advised him to get back into the auction business.
Buhler set out to form a new antique company in the fall of 2003, which ultimately took the name of Antique Investment Group, LLC (“AIG”). With the help of Triche and a partner in Triche's consulting firm, Daryl DeArmond, Buhler created a prospectus (or “AIG pool document”) to raise money for AIG from private investors. The AIG pool document explained that “[t]he investors will make loans to [AIG], the proceeds of which will be used to buy inventory pool items.” The inventory would then be sold through auctions, showrooms and warehouses, and over the internet. Investors were entitled to a percentage of AIG's “gross profits,”1 determined by the amount of money they advanced to AIG. The AIG pool document assured investors that “[a]ll investments are secured by inventory purchased on the behalf of AIG,” and that “[t]he inventory pool will fully collateralize the loans.” Triche did not draft any of the prospectus himself, but contributed to portions of the document related to payout structure, loan terms and conditions, and securitization.
Buhler used the AIG pool document to solicit investments from Raymond Heck, Doug Hamley, Charles Moore, Joseph McKearn, and Allen Richardson (collectively “plaintiffs”). Between September 12, 2003, and May 5, 2004, plaintiffs advanced Buhler $324,949.00. Buhler reported to Triche each time he obtained money from an investor. Triche, however, did not have direct contact with any of the investors except for Heck. Buhler told Heck that Triche's firm would provide accounting services for AIG, and when Heck called Triche to inquire about the company's legitimacy, Triche assured him it was the “real deal.”
During the time Buhler was soliciting investments for AIG, Buhler and Triche had multiple meetings with representatives of First Bank to address his debt obligations. On November 25, 2003, Buhler and Triche had a meeting with Andy Adler, Buhler's loan officer, and Rick Holland, the president of First Bank. Triche was a shareholder in First Bank and had a personal relationship with Adler and Holland. During this meeting, or around this time period, First Bank asked Buhler for “more collateral” for his outstanding loans because his “debt to inventory ratio ... [was] upside down.” The only assets he had to pledge were the inventory of AIG, which had been purchased with plaintiffs' funds. On December 17, 2003, Buhler and Triche again met with representatives of First Bank regarding his debt and borrowing capacity. An invoice from Triche and Associates billed for Triche's time as “meeting with client and bankers regarding loan package and restructure of present debt.” The bank demanded additional security from Buhler and, consequently, Buhler “ended up having to pledge assets belonging to [AIG] to the bank in order to get [his] loans restructured.”
Triche instructed Buhler to pledge AIG's inventory to First Bank. Triche knew that the AIG pool document promised that the investors' loans would be secured by this inventory, and had specifically discussed this fact at the December 17, 2003 meeting with First Bank. On May 3, 2004, Buhler wrote a letter to First Bank, addressed to Andy Adler, titled “Re: In Reference to Loan Restructuring Proposal.” In this letter, Buhler agreed to pledge AIG's inventory to “secure” his existing debt and open up a line of credit for AIG. Buhler wrote that he had “spent a significant amount of time” meeting with Triche “to come up with the best possible financial structure of [Buhler's] indebtedness with First Bank and the integration of that relationship with [his] new investor groups.” Buhler proposed that the “balance of [his] current inventory loan would be converted to a working line of credit at a favorable interest rate for [him] personally and secured by first position in 100% of all inventory (including all inventory purchased with investor funds).” Buhler continued that pledging his AIG inventory would “secure this portion of the converted debt making your loan to value ratio favorable.”
On August 20, 2004, Buhler, on behalf of AIG, executed a promissory note with First Bank in the amount of $350,000 evidencing a line of credit advanced by First Bank to Buhler and AIG. On that same day, Buhler signed a “Commercial Security Agreement,” which offered as collateral “all inventory, accounts, equipment, general intangibles and fixtures” of AIG. A few days before August 20, 2004, Triche went to Buhler's office to assist him in putting together the AIG inventory to present to First Bank. Buhler's then accountant, Charlotte Glaspie, asked Triche whether it was legal to pledge the AIG inventory twice. Triche responded that the inventory did not belong to the investors, and that all Buhler owed them was a return on their investment. Buhler told Glaspie that if “Wayne [Triche] said it was okay[,] I guess it's okay.”
Buhler subsequently defaulted on his line of credit from First Bank. On July 13, 2005, First Bank's successor, State Bank & Trust, foreclosed on Buhler's AIG inventory. Plaintiffs sued Buhler and Triche2 for violations of state and federal securities laws, La.Rev.Stat. Ann. § 51:712 and § 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and Rule 10b–5 promulgated thereunder. Plaintiffs alleged that the omission of Buhler's dire financial condition and lack of notice that Buhler could pledge the collateral promised to investors to First Bank constituted fraud.3 In exchange for plaintiffs' agreement not to pursue any judgment against him, Buhler—although nominally a defendant—cooperated with plaintiffs.
The district court denied Triche's motions for judgment as a matter of law after plaintiffs rested and at the close of evidence. Over plaintiffs' objections, the district court refused to instruct the jury on the Louisiana Securities Law, La.Rev.Stat. Ann. § 51:712. The court agreed with Triche's counsel that the elements of the state claim were identical to those under federal law, and concluded that the state law claim was “assumed” in plaintiffs' claim under Rule 10b–5.
The verdict form—in “yes or no” format—asked the jury whether each of the five elements of a Rule 10b–5 claim were met for each plaintiff as to both Buhler and Triche. The first element asked whether the individual defendant “used an ‘instrumentality of interstate commerce’ in connection with the advance of funds ... to [AIG]” for at least one of the plaintiffs. The verdict slip then instructed the jury to consider each of the remaining four elements sequentially for each plaintiff, continuing on to the next element only if it answered “yes” to the previous one. If all elements were satisfied, the jury had the option to award damages to that plaintiff.
In determining Buhler's liability, the jury answered in the affirmative for every element as to every plaintiff. With regard to Triche, however, the jury answered “yes” to the interstate commerce element for Heck only, and answered “no” as to the other plaintiffs. Because the verdict form instructed that the interstate commerce element needed only be satisfied in connection with one plaintiff, the jury then moved on to consider the remaining four elements sequentially for each plaintiff and answered “yes” as to all. The jury awarded damages for all plaintiffs against Buhler and Triche totaling $301,949.00. The jury apportioned 60% of the liability to Buhler and 40% to Triche.
When the verdict was returned, the district court informed the parties that “the jury did not follow the instructions” because it had awarded damages for each plaintiff against Triche even though it did not find that he used an instrumentality of interstate commerce in connection with four of the plaintiffs. The court announced that it planned to disregard the...
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