United States Steel v. Tieco Inc.

• Citation: 261 F.3d 1275
• Decision Date: 17 August 2001
• Docket Number: 00-12842,Nos. 00-11309,s. 00-11309
• Parties: (11th Cir. 2001) UNITED STATES STEEL, LLC, Heatherwood Golf Club, Inc., Plaintiffs-Appellants-Counterclaim Defendants, v. TIECO, INC., Atoz Management, Inc., Fletcher Yielding, Defendants-Appellees-Counterclaim Plaintiffs.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1275

261 F.3d 1275 (11th Cir. 2001)

UNITED STATES STEEL, LLC, Heatherwood Golf Club, Inc., Plaintiffs-Appellants-Counterclaim Defendants, v. TIECO, INC., Atoz Management, Inc., Fletcher Yielding, Defendants-Appellees-Counterclaim Plaintiffs.

Nos. 00-11309, 00-12842.

United States Court of Appeals Eleventh Circuit.

August 17, 2001.

[Copyrighted Material Omitted]

[Copyrighted Material Omitted]

[Copyrighted Material Omitted] Appeals from the United States District Court for the Northern District of Alabama.

Before BLACK, RONEY and COX, Circuit Judges.

BLACK, Circuit Judge:

Appellants, the plaintiffs and counterclaim defendants, are United States Steel LLC (USX)¹ and its subsidiary the Heatherwood Golf Club (Heatherwood). Appellees, the defendants and counterclaim plaintiffs, are Fletcher Yielding and two of his corporate entities, TIECO, Inc. (TIECO) and ATOZ Management, Inc. (ATOZ). TIECO is a vendor of golf course maintenance equipment, light industrial equipment, and irrigation equipment. ATOZ is the management arm of TIECO. USX operates a tractor shop, and Heatherwood operates a golf course. Prior to this litigation, USX's tractor shop and Heatherwood's golf course were customers of TIECO.

Appellants sued Appellees alleging liability under the federal RICO statutes and state law. Appellees filed several counterclaims, alleging violations of 42 U.S.C. § 1983 and state law. The district court granted Appellee Yielding summary judgment on all of Appellants' claims. The case proceeded to a jury trial. Before submitting the case to the jury, the district court granted Appellees TIECO and ATOZ judgment as matter of law on Appellant Heatherwood's claims. During jury deliberations, the district court dismissed Appellant USX's claims as a sanction for discovery violations. The jury rendered a verdict in favor of Appellees on the counterclaims, awarding $6.8 million to TIECO and $375,000 to Mr. Yielding, and the district court entered judgment accordingly. Subsequently, regarding Appellees' counterclaims, the district court denied Appellants' renewed motion for judgment as matter of law and motion for remittitur. With respect to Appellants' claims, the court denied Appellants' motion for a new trial and to vacate judgment of dismissal. Lastly, the district court awarded attorney's fees and costs to Appellees in the total amount of $1,442,769.27.

Appellants contend the following rulings from the district court were erroneous: (1) the grant of judgment as a matter of law to TIECO and ATOZ on Heatherwood's claims and the denial of Appellants' motion for a new trial on Heatherwood's claims, (2) the dismissal of USX's claims as a discovery sanction and the denial of Appellants' motion for a new trial on USX's claims, (3) the judgment awarding $6.8 million to TIECO and $375,000 to Mr. Yielding, (4) the denial of Appellants' renewed motion for judgment as matter of law on Appellees' counterclaims or, in the alternative, the denial of Appellants' motion for remittitur, and (5) the judgment awarding $1,442,769.27 in attorney's fees and costs to Appellees.²

The first two errors claimed by Appellants do not warrant discussion, and we affirm without opinion pursuant to 11th Cir. R. 36-1.³ In Part I of this opinion, we address the third and fourth errors claimed by Appellants, both of which concern Appellees' counterclaims. In Part II, we address the fifth alleged error, concerning the award of attorney's fees and costs.

I. APPELLEES' COUNTERCLAIMS

Appellees' counterclaims rest on USX's cooperation with the Alabama Attorney General's Office (AG)⁴ during a criminal investigation and prosecution of Appellees. According to Appellees, the manner in which USX cooperated with the AG violated federal and Alabama law. The jury agreed. It found USX liable, under federal law, for a violation of 42 U.S.C. § 1983, and, under Alabama law, for the torts of malicious prosecution, abuse of process, interference with business relationships, civil conspiracy, and defamation. Except for the defamation tort, TIECO was the sole counterclaimant. Both TIECO and Mr. Yielding won damages under the defamation counterclaim. Appellants contend USX was entitled to judgment as matter of law on Appellees' counterclaims. In addition, Appellants challenge the judgment on the ground the district court made numerous errors at trial.

In subpart A, we set forth the admissible evidence in the record in the light most favorable to Appellees. Our review of the evidence, however, does not include any evidence derived from a state judicial opinion which was erroneously entered into evidence. In subpart B, we explain why the district court's admission of the state judicial opinion constituted reversible error. In subpart C, we examine, as to each of Appellees' counterclaims, whether USX was entitled to judgment as a matter of law.

A. Background

1. Initial Stages

The genesis of the USX-AG cooperation was a disclosure by a former TIECO employee, Marty Colby. By May 1995, Mr. Colby had communicated to his attorney, Victor Hayslip,⁵ that TIECO's accounting practices with respect to USX were questionable. Essentially, Mr. Colby alleged that TIECO used bogus invoices and disloyal USX employees to bill USX for materials purchased but never received. Mr. Colby admitted misappropriating goods himself. Ironically, Mr. Hayslip was an attorney with a firm, Burr & Foreman, which had been serving as USX's outside counsel for many years. Mr. Hayslip informed the AG and USX about Mr. Colby's allegations and arranged a meeting in his office on June 13, 1995.

Prior to the June 13th meeting, the AG and USX discussed Mr. Colby's allegations. At the meeting, the AG and USX interviewed Mr. Colby separately. Mr. Colby repeated his allegations about TIECO's accounting practices. USX's assistant general counsel questioned Mr. Colby's credibility. Nonetheless, both USX and the AG effectively acceded to Mr. Colby's request (made by Mr. Hayslip) that they not pursue any criminal or civil remedies against him.

Although the AG and USX interviewed Mr. Colby separately, they jointly conferred at the June 13th meeting. When USX signaled its intention to conduct an internal audit, the AG requested that USX abstain from any actions which would alert TIECO. Accordingly, USX agreed not to interview any suspected USX employees or pursue any remedy against TIECO.

On June 27, 1995, the AG sent a letter to USX requesting any information possessed by USX about vendors, other than TIECO, who similarly defrauded USX. USX provided the requested information and indicated it was "very interested" in cooperating with the AG's investigation of TIECO and other vendors. Additionally, USX interviewed former TIECO employees, and, on July 18, 1995, forwarded summaries of the interviews to the AG. Lastly, in the summer of 1995, Mr. Hayslip called the AG on behalf of USX, inquiring repeatedly about the status of the investigation.

2. The AG's Seizure of TIECO's Records

On August 30, 1995, the AG applied in state court for a warrant to seize specific documents and materials from TIECO's place of business. The affidavit accompanying the warrant was signed and prepared by the AG's chief investigator, and it was reviewed by one of the AG's criminal prosecutors. According to the chief investigator, the information in the affidavit was gained from interviews conducted by the AG of Mr. Colby and four other former TIECO employees. Finding probable cause, the state court issued the warrant. On August 31, 1995, led by the chief investigator, the AG seized numerous TIECO documents and computer tapes.

No USX official was present during either the issuance or execution of the warrant. Moreover, the chief investigator, as well as USX, denied that USX was involved in, or even had knowledge of, the AG's efforts to procure the search warrant. No evidence in the record rebuts this denial by the chief investigator, indicates he had a motive to lie, or in any way impeaches his credibility.

3. USX's Cooperation with the AG after the Seizure of TIECO's Records

By the time of the seizure, the AG realized it did not have the expertise or the resources to fully investigate the seized records and to pursue a criminal prosecution of TIECO. Accordingly, after the seizure, the AG requested auditors from victim companies, including USX. In particular, the auditors were asked to compare their own company's records with those seized from TIECO. The AG planned, with USX's cooperation, to have the auditors serve as expert witnesses in any criminal proceeding.

On three separate occasions (October 11-12, 1995, November 7-9, 1995, and January 31-February 1, 1996), USX auditors visited the AG's office to review the seized TIECO records. One of these reviews occurred after USX had filed the instant lawsuit. The auditors examined all documents related to any USX-TIECO transaction. The AG did not permit the auditors to photocopy or remove the records. Instead, the auditors took copious notes, entered data on USX computers, and created spreadsheets from the data. USX kept the AG apprized of the information gained from the audit.

Two of TIECO's suppliers were also present during portions of these reviews. At times, USX auditors reviewed documents with TIECO's suppliers. On at least one occasion, a USX auditor provided an invoice to one of TIECO's suppliers.

In addition to examining records, USX auditors assisted the AG in deciphering computer tapes seized from TIECO. Duplicate tapes were sent for reformatting to a California company, which returned the tapes directly to USX along with software to read the tapes. Although the AG paid the California company for this service, it intended to seek reimbursement from USX and the other victim companies. Moreover, because the AG did not have a computer capable of reading the tapes, USX auditors analyzed the tapes on their own computer. USX and the AG exchanged results of these analyses and...