Superior Oil Co. v. Fulmer
| Decision Date | 05 March 1986 |
| Docket Number | Nos. 84-2511,84-2561,s. 84-2511 |
| Citation | 785 F.2d 252 |
| Parties | , RICO Bus.Disp.Guide 6192 SUPERIOR OIL COMPANY, Appellee, v. Huey FULMER; James Branch; Roy Nichols and any other persons claiming an interest in property described further in these pleadings, Appellants. SUPERIOR OIL COMPANY, Appellant, v. Huey FULMER; James Branch; Roy Nichols and any other persons claiming an interest in property described further in these pleadings, Appellees. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Nicholas H. Patton, Texarkana, Ark., for appellants.
Winford L. Dunn, Jr., Texarkana, Ark., for appellee.
Before HEANEY and BOWMAN, Circuit Judges, and WANGELIN, * Senior District Judge.
This is an appeal from a jury-tried case. The jury found for plaintiff, Superior Oil Company, and against the defendants, Huey Fulmer, James Branch, and Roy Nichols. It returned a verdict on the claim for wrongful conversion in the amount of $145,125.00, on the claim under the Racketeer Influenced and Corrupt Organizations Act (RICO) in the amount of $25,000.00, and against defendant Fulmer alone on a compressor rental claim in the amount of $26,397.70. The court trebled the RICO award.
Huey Fulmer was an employee for Austral Oil Company (Austral). Austral had developed several oil and gas wells in South Lafayette County, Arkansas, and Fulmer was responsible for the mechanical upkeep and the production at the wells. Fulmer also leased a compressor to Austral to increase pressure in the pipeline and thereby aid the flow of Liquid Petroleum Gas (LPG) to an International Paper Company plant from a well denominated as International Paper Company No. 2 (I.P. No. 2).
I.P. No. 2 consists of an oil/gas well from which a pipeline runs to a separator plant. The oil is then transferred through a pipeline to two storage tanks. The LPG product continues down another pipeline, through a compressor, eventually joining with a pipeline that runs to the International plant. Just prior to the junction of the Superior and International pipelines is a metering devide and a six-inch flange. This was the physical arrangement of I.P. No. 2.
When appellee Superior Oil Company (Superior Oil) purchased this operation from Austral, it retained Fulmer as a pumper and also as lessor of the compressor unit. In 1981, Fulmer entered into a partnership with James Branch and Roy Nichols whereby they would install a cryogenic plant on the pipeline to remove the heavier hydrocarbons from the natural gas supply. To that end, they procured a letter of permission from the manager of the International Paper Company (International) mill to put a dryer on the pipeline. Testimony at trial indicated that the letter was addressed to Fulmer as the representative and employee of the appellee and that appellant Fulmer never indicated that the letter was intended for his personal use nor was it meant to convey ownership of LPG products. The mill manager also stated that he understood the purpose of Fulmer's request was to remove water from the gas purchased from I.P. Well No. 2, and that he would have no authority to authorize the installation of a cryogenic unit.
After Branch and Nichols installed the cryogenic plant, Fulmer removed the metering unit from its position near the juncture of the Superior Oil and International pipelines. This unit measured the quantity of gas moving through the pipeline and formed the basis for billing International. Fulmer installed the meter at a point on the pipeline prior to, or "upstream" from, the cryogenic plant. The original position of the meter had been "downstream" from the plant.
The cryogenic unit had the effect of reducing the burning capacity of the LPG product. The contract between Superior Oil and International provided that the LPG product purchased by International have a minimum 1,000 BTU capacity. It also provided that a premium would be paid for BTU capacity above 1,000. Testimony at trial indicated that the cryogenic plant reduced the BTU capacity from 1,170-1,200 BTU to approximately 1,050 BTU.
Among Fulmer's other duties as pumper of the Superior Oil station was to make daily reports regarding the pressure at the wellhead and in the pipeline.
Fulmer regularly reported that there was thirty pounds of pressure at the wellhead. At this pressure level, a well is barely producing and must have a compressor on the pipeline to operate efficiently. After Fulmer's termination, Superior Oil employees found that the actual wellhead pressure was between 300 to 380 pounds. At these pressure levels, a compressor unit is unnecessary. Testimony at trial indicated, however, that the appellant utilized the compressor to increase the pressure in the pipeline to 400 pounds in order to increase the efficiency of the cryogenic unit.
Reported oil production during the time that Fulmer operated the station also differed radically from subsequent events. Under Fulmer's operation, the well produced approximately seventeen barrels of oil for every million cubic feet of gas. When Superior undertook operation of the plant, oil production increased to approximately thirty-five barrels per million cubic feet of gas. This production output has remained constant since that time.
In this regard, relevant testimony indicated that all authorized sales of oil were made to P & O Fulco. On several occasions, however, Delton Hanson, an employee of one Dewey Williams, testified that he had gone to I.P. No. 2 and picked up truckloads of oil. Fulmer was present on these occasions, and demonstrated to Hanson how the oil could be obtained without breaking the seals.
Superior was notified by an anonymous letter that Fulmer was stealing LPG product. It notified the Federal Bureau of Investigation (FBI) which investigated the allegations. Fulmer was later arrested and the cryogenic plant was seized by the FBI and placed in Superior Oil's possession. Fulmer's indictment was dismissed and Superior Oil was ordered to return the cryogenic plant. Thereafter, Superior Oil filed a cause of action for a receiver to be appointed in the Chancery Court of Lafayette County, Arkansas. This action was removed to the United States District Court where Superior prevailed.
Under Arkansas law, which controls this diversity action, a reviewing court must examine the evidence in the light most favorable to the appellee and must sustain the jury verdict if it is supported by substantial evidence. DeWitt v. Brown, 669 F.2d 516 (8th Cir.1982); Garoogian v. Medlock, 592 F.2d 997, 999-1000 (8th Cir.1979).
The appellants cite as their first point of error that the Court erred in failing to direct a verdict in favor of the appellants on the issue of conversion of LPG products. Essentially, the appellants argue that no conversion of the LPG products occurred because the meter which determined the amount of product sold to the International plant was moved upstream of the cryogenic unit. Thus, the appellants conclude that the appellee suffered no loss through the taking of the LPG product.
We disagree. The contract between Superior Oil and the International specified that the point of delivery of the LPG product was a six-inch flange downstream of the cryogenic unit. Moving the meter unit did not change the contractually mandated point of sale. Thus, whether the meter was upstream or downstream to the cryogenic unit is irrelevant; the LPG product belonged to appellee Superior Oil at the time of its conversion.
Nor can it be said that Superior Oil suffered no damages. The evidence adduced at trial, even under appellant's theory of the case, indicated that the International was billed $145,125.00 of LPG product that it did not receive. It would appear then that the unauthorized taking of the LPG product by appellant Fulmer, a then-employee of Superior Oil, resulted in a breach of contract with International. This Court is not prepared to rule that the taking of goods, by a seller's employee, entrusted to deliver those goods, does not result in some damages to the seller.
The appellants next allege that the trial court erred in failing to direct a verdict in their favor on the RICO count. We agree. In our view, Superior Oil failed to prove that Fulmer, Branch and Nichols engaged in a "pattern of racketeering activity" as that term is construed in the United States Supreme Court's recent decision in Sedima, S.P.R.L. v. Imrex Co., --- U.S. ----, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985). In Sedima, the Court held that "[a] violation of Sec. 1962(c), the section on which [Superior Oil] relies, requires (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity." 87 L.Ed.2d at 358-59 (footnote omitted). 1 The definition of a "pattern of racketeering activity" set forth in section 1961(5) states that a pattern "requires at least two acts of racketeering activity, one of which occurred after the effective date of this chapter and the last of which occurred within ten years * * * after the commission of a prior act of racketeering activity." "Racketeering activity" is defined in section 1961(1) to include a wide range of criminal acts, including mail and wire fraud.
Prior to the Supreme Court's decision in Sedima, several courts had suggested that a "pattern of racketeering activity" requires "related" 2 predicate acts which have "continuity" in the sense of some prolonged course of conduct, not merely an isolated event. 3
The majority of pre-Sedima decisions, however, concluded that a "pattern" of racketeering activity could be proved simply by showing the commission of two acts of "racketeering activity" within the last ten years, see, e.g., Alexander Grant v. Tiffany, 742 F.2d 408, 410 (8th Cir.1984), vacated, --- U.S. ----, 105 S.Ct. 3550, 87 L.Ed.2d 673 (1985), on remand, 770 F.2d 717 (8th Cir.1985); 4 United States v. Aleman, 609 F.2d 298 (7th Cir.1979), ...
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