Niemi v. Lasshofer

• Decision Date: 06 September 2013
• Docket Number: No. 12–1233.,12–1233.
• Citation: 728 F.3d 1252
• Parties: John NIEMI; Robert Naegele, III; Jesper Parnevik, Plaintiffs–Appellees, v. Erwin LASSHOFER; Innovatis GMBH; Innovatis Immobilien GMBH; Innovatis Asset Management SA, Defendants–Appellants, and Michael Frank Burgess; Lexington Capital & Property Investments, LLC; Barry Funt, Defendants.
• Court: U.S. Court of Appeals — Tenth Circuit

728 F.3d 1252

John NIEMI; Robert Naegele, III; Jesper Parnevik, Plaintiffs–Appellees,

v. Erwin LASSHOFER; Innovatis GMBH; Innovatis Immobilien GMBH; Innovatis Asset Management SA, Defendants–Appellants,andMichael Frank Burgess; Lexington Capital & Property Investments, LLC; Barry Funt, Defendants.

No. 12–1233.

United States Court of Appeals, Tenth Circuit.

Sept. 6, 2013.

Kevin D. Evans (Phillip L. Douglass with him on the briefs), of Steese, Evans & Frankel, P.C., Denver, CO, for Defendants–Appellants.

Christopher W. Madel of Robins, Kaplan, Miller & Ciresi L.L.P., Minneapolis, MN (Robert N. Miller and Stephanie E. Dunn of Perkins Coie LLP, Denver, CO, with him on the briefs), for Plaintiffs–Appellees.

Before TYMKOVICH, GORSUCH, and HOLMES, Circuit Judges.

GORSUCH, Circuit Judge.

An unconventional real estate financing scheme presents us with some unconventional legal questions. Questions ranging from whether an Austrian financier should be denied access to the American legal system because he failed to comply with an order freezing his assets worldwide—to whether the district court had the power to issue such a far-flying order in the first place.

Our case starts in Breckenridge and lean economic times. John Niemi and his business partners set out to build a large luxury ski condominium complex in two phases, working through a set of companies controlled by Mesatex, LLC. But traditional financing proved hard to find: after completing the first phase of development they found no bank willing to loan the $220 million needed to finish the project. So they began casting about for alternative sources.

They found a shady one in Michael Burgess. A Florida businessman, Mr. Burgess claimed to represent a European investor, Erwin Lasshofer, with an easy $250 million at hand. All Mesatex had to do to secure a loan was to pay a $180,000 commitment fee and provide another $2 million as a collateral deposit. This Mesatex did, but the promised loan never materialized. Where the $2.18 million wound up is anyone's guess, but for his part in the scheme Mr. Burgess eventually found himself in federal prison serving time for fraud and money laundering.

Of course, Mr. Burgess's sentence did little to satisfy Mesatex and its investors. They wanted their money back, and damages too. So they brought this lawsuit alleging that the lost loan wrecked Mesatex's business, caused it millions in lost profits, and sent its properties into foreclosure. But for whatever reason, neither Mesatex nor any of its subsidiaries—the only parties to the loan arrangements with Mr. Burgess—was included as a party to this lawsuit. Instead, the suit named only Mr. Niemi, Robert Naegele, and Jesper Parnevik—Mesatex's investors—as plaintiffs. A tactical decision with consequences that will become apparent soon enough.

As defendants Mr. Niemi and his fellow investors named not just Mr. Burgess and Mr. Lasshofer. Thinking here about the relevant companies, the plaintiffs sued as well the Innovatis Group, a set of foreign companies associated with Mr. Lasshofer. Proceeding under (among other laws) the Racketeer Influenced and Corrupt Organizations Act and the Colorado Organized Crime Control Act, Mr. Niemi and the other plaintiffs demanded as much as $150 million in relief. See18 U.S.C. §§ 1961–1968; Colo.Rev.Stat. §§ 18–17–101 to 109.

Soon enough Mr. Burgess and Mr. Lasshofer began the finger pointing. Mr. Burgess insisted he was just following Mr. Lasshofer's instructions. Mr. Lasshofer rejoined that he found himself unwittingly in business with a con man. Unpersuaded that Mr. Lasshofer was quite the innocent he claimed to be, the district court in June 2012 granted the plaintiffs' motion for a preliminary injunction, effectively freezing the worldwide assets of Mr. Lasshofer and the corporate defendants and ordering them to deposit $2.18 million in escrow pending a final judgment. It is this interlocutory order Mr. Lasshofer and the corporate defendants now ask us to undo. See28 U.S.C. § 1292(a)(1).

* * *

Mr. Niemi and his colleagues say we should dismiss the defendants' appeal summarily, without reaching the merits. They offer two reasons why.

In the first place, they insist this appeal is moot. Moot because the district court granted a second preliminary injunction in October 2012 affording the same relief as the June 2012 injunction that's the subject of this appeal. In the plaintiffs' view, the June 2012 injunction no longer does any independent work of its own and anything we might say about its propriety would be academic because the October 2012 injunction hasn't been appealed and will remain in force no matter what we do. Put plainly, Mr. Niemi and his colleagues argue the defendants needed to appeal both orders and didn't.

This line of attack rests on a faulty premise. Even a glance at the two injunctions reveals that they are not at all the same, contrary to the plaintiffs' representations. The October 2012 injunction controls only the disposition of approximately $6.8 million in a specific numbered bank account located in Switzerland and belonging to one of the corporate defendants. The June 2012 injunction, meanwhile, binds both Mr. Lasshofer and all the corporate defendants; it freezes virtually all their assets anywhere in the world; and it requires them to deposit $2.18 million in an escrow account. Pretty plainly, the June 2012 injunction does quite a bit of lively work all its own, and the dispute over its issuance is anything but academic. Cf. Wyoming v. U.S. Dep't of Interior, 587 F.3d 1245, 1250 (10th Cir.2009) (finding an order moot because it no longer had any “effect in the real world”) (internal quotation marks omitted).

Alternatively, Mr. Niemi and his colleagues suggest we still shouldn't reach the merits of the appeal because of the “fugitive disentitlement doctrine.” The plaintiffs note that Mr. Lasshofer and the corporate defendants have failed to abide fully the terms of the June 2012 preliminary injunction. In fact, since we heard argument in this appeal, the district court apparently first held Mr. Lasshofer and his companies in (civil) contempt—for failing to deposit the $2.18 million in escrow as ordered—and then entered a default judgment against them for nearly $62 million. In the plaintiffs' view, the defendants should not be allowed to challenge on appeal the lawfulness of an order they have defied in the district court.

But the so-called “fugitive disentitlement doctrine” doesn't do nearly so much work as this. To understand the doctrine's pedigree is to understand why. At common law, when someone was charged with a crime but failed to appear for trial, he was deemed an outlaw—a term the common law didn't use lightly. An outlaw was, literally, outside the law's protection. His goods and chattels were forfeit to the crown, he could be punished just as if he had been convicted, and—in the earliest days—he could be killed with impunity. 4 William Blackstone, Commentaries *319–20. Happily, the criminal law has long since abandoned outlawry. See United States v. Hall, 198 F.2d 726, 727–28 (2d Cir.1952). But this humane advance brought with it new questions of its own. If the absconding defendant is no longer entirely outside the law's protection, the question inevitably arises: which specific legal protections is he entitled to? Surely his life now receives a degree of protection—pursuers are supposed to try to arrest the fugitive rather than feel free to slay him on sight. 4 William Blackstone, Commentaries *320. And no trial can begin without his presence. See Crosby v. United States, 506 U.S. 255, 262, 113 S.Ct. 748, 122 L.Ed.2d 25 (1993); see alsoFed.R.Crim.P. 43(a), (c)(1)(A). But what happens if he flees after indictment or conviction? Can he use the legal system to challenge the charges against him from the safety of his hideout? Does the law give a fleeing criminal defendant protection enough to do that? The answer courts have arrived at is a firm no, and today we call that answer by this mouthful—the “fugitive disentitlement doctrine.”

Courts have adopted this rule in order to avoid turning trials and appeals into unenforceable farces. If a defendant could file motions and appeals while on the lam, any litigation would risk devolving into nothing more than a rigged game, a sort of no-lose proposition for the defendant in which an adverse judgment would guarantee only a continuation of the chase—“heads, I win; tails you can't find me.” See Allen v. Georgia, 166 U.S. 138, 141, 17 S.Ct. 525, 41 L.Ed. 949 (1897); United Elec., Radio & Mach. Workers of Am. v. 163 Pleasant St. Corp., 960 F.2d 1080, 1097 (1st Cir.1992). Contemporary fugitive disentitlement doctrine exists to rebalance the playing field, to afford courts the “discretion to refuse to hear a criminal case ... unless the convicted party [or charged defendant] ... is where he can be made to respond to any judgment we may render.” Ortega–Rodriguez v. United States, 507 U.S. 234, 240, 113 S.Ct. 1199, 122 L.Ed.2d 581 (1993); see also Bonahan v. Nebraska, 125 U.S. 692, 8 S.Ct. 1390, 31 L.Ed. 854 (1887); Smith v. United States, 94 U.S. 97, 24 L.Ed. 32 (1876).

Precisely none of this helps Mr. Niemi and his colleagues. So far as we know, neither Mr. Lasshofer nor any of his companies has been charged with (let alone convicted of) crimes, and they aren't hiding from the law—the usual preconditions for the doctrine's application. Instead, they seem to be in their home countries, Austria and Panama, going about their business as usual, if in contempt of civil court orders here. All this leaves the plaintiffs to argue less for an application of the fugitive disentitlement doctrine than for a serious extension of it. They want us to disentitle not a criminal in hiding, but a civil litigant who has chosen to sit defiantly at home.

That is quite a leap. To date, the plaintiffs can point to only one small step we've taken in the direction they encourag...