Teague v. Bakker
| Decision Date | 23 September 1994 |
| Docket Number | 91-2120,Nos. 91-2101,s. 91-2101 |
| Citation | 35 F.3d 978 |
| Parties | , Fed. Sec. L. Rep. P 98,400, 30 Fed.R.Serv.3d 561, RICO Bus.Disp.Guide 8656 Joseph W. TEAGUE; Helen B. Teague; Steven Allen Barker; Rita Strahowski; Swannee Beck; Karen Perez Tucker, Lifetime Partners of PTL, as representatives of a nationwide class consisting of 150,000 PTL Lifetime Partners, Plaintiffs-Appellants, v. James O. BAKKER; David A. Taggart; Aimee Cortese; Deloitte, Haskins & Sells, Defendants-Appellees, and Roe Messner, a/k/a Ronald Messner; Messner Enterprises; Commercial Builders of Kansas, Inc.; Laventhol & Horwath; William J. Spears, Defendants. North Carolina Securities Commission, Amicus Curiae. Joseph W. TEAGUE; Helen B. Teague; Steven Allen Barker; Rita Strahowski; Swannee Beck; Karen Perez Tucker, Lifetime Partners of PTL, as representatives of a nationwide class consisting of 150,000 PTL Lifetime Partners, Plaintiffs-Appellees, v. David A. TAGGART, Defendant-Appellant, and James O. Bakker; Aimee Cortese; Roe Messner, a/k/a Ronald Messner; Messner Enterprises; Commercial Builders of Kansas, Inc.; Laventhol & Horwath; William J. Spears; Deloitte, Haskins & Sells, Defendants. North Carolina Securities Commission, Amicus Curiae. Joseph W. TEAGUE; Helen B. Teague; Steven Allen Barker; Rita Strahowski; Swannee Beck; Karen Perez Tucker, Lifetime Partners of PTL, as representatives of a nationwide class consisting of 150,000 PTL Lifetime Partners, Plaintiffs-Appellees, v. DELOITTE, HASKINS & SELLS, Defendant-Appellant, and James O. Bakker; David A. Taggart; Aimee Cortese; Roe Messner, a/k/a Ronald Messner; Messner Enterprises; Commercial Builders of Kansas, Inc.; Laventhol & Horwath; William J. Spears, Defendants. North Carolina Securities Commission, Amicus Curiae. Joseph W. TEAGUE; Helen B. Teague; Steven Allen Barker; Rita Strahowski; Swannee Beck; Karen Perez Tucker, Lifetime Partners of PTL, as representatives of a nationwide class consisting of 150,000 PTL Lifetime Partners, Plaintiffs-Appellees, v. JAMES O. BAKKER, Defendant-Appellant, and Dav |
| Court | U.S. Court of Appeals — Fourth Circuit |
ARGUED: Wendell R. Bird, Bird & Associates, Atlanta, GA, for appellants. James T. Williams, Jr., Brooks, Pierce, McLendon, Humphrey & Leonard, Greensboro, NC, Michael Eli Quiat, Uscher, Quiat, Uscher & Strull, Hackensack, NJ, Ben Cotten, Cotten & Selfon, Washington, DC, for appellees. ON BRIEF: David J. Myers, Bird & Associates, Atlanta, GA, Thomas T. Anderson, Samuel F. Trussell, Thomas T. Anderson & Associates, Indio, CA, Jonathan F. Wallas, Ferguson, Stein, Watt, Wallas, Adkins & Gresham, Charlotte, NC, for appellants. Robert A. Singer, Jim W. Phillips, Jr., Brooks, Pierce, McLendon, Humphrey & Leonard, Greensboro, NC, for appellee Deloitte, Haskins & Sells; Daniel Schumack, Cotten & Selfon, Washington, DC, for appellee Taggart; Nelson M. Casstevens, Jr., Casstevens, Hanner, Gunter & Gordon, P.A., Charlotte, NC, for appellee Cortese; James H. Toms, Hendersonville, NC, for appellee Bakker.
Before RUSSELL and HALL, Circuit Judges, and CLARKE, Senior United States District Judge for the Eastern District of Virginia, sitting by designation.
Affirmed in part and reversed and remanded in part by published opinion. Judge DONALD RUSSELL wrote the opinion, in which Judge K.K. HALL and Senior Judge CLARKE joined.
The plaintiffs, members of a class of approximately 160,000 individuals who purchased "Lifetime Partnerships" from an entity known as "PTL" entitling them to a short stay annually in a hotel at a vacation retreat constructed by PTL, brought the instant suit against numerous defendants alleging common law fraud, federal and state securities fraud, state timeshare fraud, federal and state RICO violations, and negligence, all in connection with the oversale of PTL Lifetime Partnerships. Plaintiffs proceeded to trial against James O. Bakker ("Bakker"), Deloitte, Haskins & Sells ("DH & S"), Aimee Cortese ("Cortese") and David A. Taggart ("Taggart"). Before the case was sent to the jury, the district court granted defendants' motion for a directed verdict with respect to plaintiffs' securities fraud claims. Following deliberations, the jury found Bakker guilty only of common law fraud. DH & S, Taggart and Cortese were absolved of all liability. The district court entered judgment against Bakker on the common law fraud count for $129,618,000 in compensatory damages and for an additional $129,618,000 in punitive damages.
Plaintiffs appeal from the judgments entered against them. Bakker cross-appeals on the ground that the issues of reliance, causation and damages in relation to the adverse fraud verdict should have been handled on an individual class member basis. DH & S and Taggart cross-appeal from the district court's denial of their petition for reimbursement of costs. We reverse the district court's grant of judgment as a matter of law against plaintiffs on their securities fraud claims against Bakker, and otherwise affirm the district court's judgments in all respects. 1
PTL, which stands for "Praise the Lord" and "People that Love," consists of various nonprofit entities. Bakker was the founder, president, a director, and the spiritual and financial leader of PTL. DH & S, an international accounting firm, provided PTL with independent auditing services in the early 1980's. DH & S's last audit of PTL was completed by October 24, 1984. In addition, during the time that it provided auditing services and for a time thereafter, DH & S administered PTL's "Executive Payroll Account" upon which checks transmitting salary and benefits to Bakker and other PTL executives were drawn.
Cortese was the pastor of a small church in New York City. In 1979, a director of PTL, Reverend Richard Dortch ("Dortch"), approached Cortese about the possibility of Cortese joining PTL's board of directors. In 1980, despite her lack of experience with financial matters, Cortese agreed to serve on PTL's board. She remained a board member until 1987.
Taggart held various offices in PTL, including the title of vice-president, but he had few, if any, real management duties. Taggart was primarily Bakker's administrative aide and was not a PTL director.
This case concerns primarily PTL's sale of Lifetime Partnerships ("LTPs"). 2 We previously affirmed criminal convictions against Bakker arising therefrom. United States v. Bakker, 925 F.2d 728 (4th Cir.1991). At the time, we summarized the relevant underlying facts thus:
... [I]n the late 1970s PTL began construction on "Heritage USA," described by PTL officials as a Christian retreat center for families. In 1983, Bakker announced plans to enlarge the center by adding a vacation park, "Heritage Village," that would include the 500-room Grand Hotel. Between 1984 and 1986, [Bakker] announced further proposals to expand the Village by constructing the Towers Hotel, 50 bunkhouses, and several additional facilities.
Bakker planned to finance these projects by selling lifetime partnerships. He offered eleven different partnership programs ranging in cost from $500 to $10,000. Eight of the partnerships promised benefits that included annual lodging in one of the Heritage Village facilities. In January 1984, [Bakker] began using the mail to solicit lifetime partners. Also, from February 1984 through May 1987, Bakker used broadcasts carried on the PTL Television Network and various commercial affiliates to solicit lifetime partners. Many of these partners drew on meager incomes to purchase Heritage Village lodging benefits. [Bakker] raised at least $158 million through the sale of approximately 153,000 partnerships with lodging benefits.
Bakker promised television viewers that he would limit the sale of partnerships to ensure that each partner would be able to use the facilities annually. [Bakker], however, oversold the partnerships. He promised, for instance, to limit the sale of Grand Hotel partnerships to 25,000 but actually sold 66,683. In addition, Bakker used relatively few of the funds solicited from the partners to construct promised facilities. In fact, of the proposed Heritage Village facilities, only the Grand Hotel and one bunkhouse were actually completed. Instead, Bakker used partnership funds to pay operating expenses of the PTL and to support a lavish lifestyle.... This combination of overselling partnerships and diverting partnership proceeds meant that the overwhelming majority of the partners never received the lodging benefits Bakker promised them.
Some additional facts will allow for a more complete understanding of the circumstances involved herein. First, when PTL announced the beginning of the LTP program and the construction of the Heritage Grand Hotel in December of 1983, the program was limited to 25,000 subscribers. As of May 31, 1984, the end of the last fiscal year audited by DH & S, approximately 17,000 LTPs had been purchased. In September of 1984, after DH & S had completed its audit field work, a PTL vice-president informed DH & S that construction of a second hotel, the Heritage Towers, was planned and that the LTP program was to be expanded so as to increase the maximum number of potential subscribers by 30,000 to a total of 55,000. Upon learning of PTL's contemplated expansion of the LTP program, DH & S added a note, dated October 24, 1984, to the financial statement it had prepared for PTL's 1984 fiscal year; this note detailed the PTL's planned expansion of the LTP program.
Plaintiffs contend that DH & S was aware of, but failed to disclose, oversales of LTPs. The evidence shows that DH & S checked and knew...
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...eases, whether the ultimate question of the existence of a security is for the jury depends on the jurisdiction. See Teague v. Bakker, 35 F.3d 978, 990 (4th Cir. 1994) (holding that the issue of whether a lifetime partnership could be considered a security is for jury); Zolfaghari v. Sheikh......
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