No. 99-1572
United States Court of Appeals FOR THE EIGHTH CIRCUIT
Submitted: December 15, 1999 Filed: May 25, 2000
Before BEAM and HEANEY, Circuit Judges, and KYLE, District Judge.
United States Court of Appeals FOR THE EIGHTH CIRCUIT
Submitted: December 15, 1999
Filed: May 25, 2000
KYLE, District Judge.
George T. Qualley (“Qualley“) brought suit in the United States District Court for the Northern District of Iowa alleging that Clo-Tex International, Inc. (“Clo-Tex“) and John T. Cross, Sr., (“Cross“) participated with as many as fifty other persons in a scheme to defraud Qualley‘s corporation, American African Trading Co., through the fictitious sale of Nigerian crude oil. Qualley asserted claims against Clo-Tex and Cross under the Racketeering Influenced and Corrupt Organizations Act (“RICO“),
Cross and Clo-Tex appeal, arguing that the district court erred in making several evidentiary rulings, in declining to give a requested jury instruction, and in sustaining the actual and punitive damages awarded by the jury. Cross and Clo-Tex also appeal from the district court‘s denial of their motion for judgment as a matter of law. For the reasons discussed below, we reverse and remand.
I.
George Qualley was a practicing attorney in Sioux City, Iowa from 1960 until his retirement in the mid 1990s. (Trial Tr. at 67.) Qualley specialized in tax law and commercial law. (Id.) By the 1970s and 1980s, Qualley had nine offices of his own in the United States, approximately 30 affiliated offices in the United States, and 15 or 16 affiliated offices in various parts of the world, including Nigeria. (Id.) The Nigerian law firm of Onyeukwu & Onyeukwu had been affiliated with Qualley‘s firm on certain international business transаctions since the mid-1980s. (Id. at 68.)
The negotiations leading up to the fateful oil transaction by Qualley‘s company are long and involved. In summary, on or about November 14, 1994, Qualley received a letter from Maxwell Onyeukwu, a Nigerian barrister at the firm of Onyeukwu & Onyeukwu.2 Onyeukwu, apparently a delegate to Nigeria‘s Constitutional Conference, sought Qualley‘s help in arranging a meeting with “some leading Congressmen to exchange ideas on matters of ideological interest” in order to help his political bid for the Governorship of the Imo State. (Appellants’ App. at 111.) Qualley responded thаt he was unable to put Onyeukwu in touch with American politicians; Qualley proposed instead that he and Onyeukwu work to develop trade relations between the United States and Nigeria as to certain products, including oil, gold, and shrimp. (Id. at 115-16, 118.)
On January 21, 1995, Onyeukwu stated that he had spoken to representatives of the Nigerian National Petroleum Corporation (“NNPC“). Onyeukwu reported that the NNPC was willing to sell 200,000 barrels of crude oil upon receipt up front of one-fourth the total cost, the balance being due upon receipt of the oil. (Id. at 119.) Qualley responded that he would not pay in advance for anything from Nigeria due to the political situation there, but could promise payment in full on delivery. (Id. at 120.)
Onyeukwu asked Qualley for a name to be used for incorporation in Nigeria so that they could enter into a joint venture with the NNPC for the “exporation [sic],
On or about February 16, 1995, Qualley signed a letter addressed to NNPC on African Trading Company letterhead applying for a three-year contract to “spot lift” between two and ten million barrels of crude oil “for Shell International in London.”4 (Id. at 136; Trial Tr. at 332.) On or about March 8, 1995, Qualley traveled to Nigeria to meet with members of the NNPC and sign contracts for the purchase of 2,000,000 barrels of crude oil. (Trial Tr. at 125.) Qualley testified that he hired his friend, Leo Eriksen, an engineer, to travel with him and advise him. (Trial Tr. at 115.) On or about March 15, 1995, Qualley signed a contract to purchase the crude oil on behalf of American African Trading Company. (Appеllants’ App. at 141-50.) Eriksen signed as a witness. (Id. at 150.) Qualley testified that a “John West” signed the contract as a director of the NNPC. (Trial Tr. at 125-127.)
While Qualley was in Nigeria, Eriksen caused three wire transfers to be made to account number 17692470 at First National Bank of Maryland (“FNB Maryland“).5 Qualley testified that John West provided the wiring instructions for the three transfers. (Trial Tr. at 134.) At this time, Clo-Tex, a Maryland corporation with its principal place of business in Baltimore, had account number 17692470 with FNB Maryland. (Trial Tr. at 65). All three wire transfers were made to the attention of John Cross, who was, at all material times, a stockholder, president and managing executive of Clo-Tex. (Id.) Cross testified that all three payments were credited to the account of a “Société James Mercantile,” a company located in Benin that purchases used clothing from Clo-Tex. (Id. at 503-05, 604-08.) The owner of Société James Mercantile is a Nigerian named James Kalu who also apparently was known by the name James Kelly. (Id. at 505.)
On March 20, 1995, Qualley signed agreements relating to the shipment of the oil to the United States. (Appellants App. at 163-77.) The oil was to arrive in Houston. (Trial Tr. at 203.) Qualley returned to Iowa and, several days later, flew to Houston to meet John West and watch the oil arrive. (Trial Tr. at 203-06.) West
In August of 1995, the American African Trading Company assigned to Qualley whatever claims it had against Clo-Tex, Cross and the others. (Trial Tr. at 185-86.) Qualley filed his Complaint on August 29, 1995, naming 51 defendants including appellants Cross and Clo-Tex. Qualley obtained service of process only on Cross and Clo-Tex.6
After a four-day trial, the jury returned a verdict by special interrogatories in favor of Qualley. The jury found that both Cross and Clo-Tex were liable to Qualley for actual damages totaling $41,282.00.7 Thе jury also awarded Qualley one million dollars in punitive damages against Clo-Tex. However, the jury determined that Clo-Tex‘s wrongful conduct was not directed primarily at Qualley; therefore, under Iowa law Qualley was entitled to receive only twenty-five percent of the punitive damage award, the remainder to be paid into Iowa‘s Civil Reparations Fund. (Amended J.) Following trial, Qualley moved for and was awarded treble damages against Cross pursuant to
II.
On appeal, Cross and Clo-Tex raise seven issues: (1) whether the trial court improperly admitted deposition testimony of Rudolph Datcher that contained inadmissible hearsay; (2) whether the trial court improperly admitted deposition testimony of Nathaniel Spinner that contained inadmissible hearsay; (3) whether the trial court improperly took judicial notice of the perpetration of Nigеrian fraud schemes on Americans; (4) whether the trial court erred in refusing to instruct the jury on an “in pari delicto” defense; (5) whether the punitive damage award against Clo-Tex is excessive; (6) whether the jury erred in including the $24,000.00 in wire transfers in its compensatory damages award; and (7) whether the trial court erred in denying their motion for judgment as a matter of law. We begin with the evidentiary issues.
A trial court‘s evidentiary rulings are reviewed under an abuse of discretion standard. See United HealthCare Corp. v. American Trade Ins. Co., Ltd., 88 F.3d 563, 573 (8th Cir. 1996); Maddox v. Patterson, 905 F.2d 1178, 1179 (8th Cir. 1990); Adams v. Fuqua Indus., 820 F.2d 271, 273 (8th Cir. 1987). With respect to a trial court‘s ruling that admits evidence, error may not be predicated on such a ruling unless a substantial right of the party is affected and a timely objection or motion to strike appears of record stating the specific ground for objection.
No error in either the admission or the exclusion of evidence and no error or defect in any ruling or order or in anything done or omitted by the court or by any of the parties is ground for granting a new trial or for setting aside a verdict or for vacating modifying or otherwise disturbing a judgment or order, unless refusal to take such action appears to the court inconsistent with substantial justice. The cоurt at every stage of the proceeding must disregard any error or defect in the proceeding which does not affect the substantial rights of the parties.
A. Judicial Notice of Nigerian Fraud Scams
Cross and Clo-Tex assert that the trial court erred in taking judicial notice of the following facts pursuant to
One, that at all times pertinent to this lawsuit, there were Nigerian fraud scams perpetrated on people in the United States and other countries in the world;
Two, the fraud scams involved, among other things, oil deals that never materialized.
(Trial Tr. at 483; see also id. at 444-45.) In deciding whether to take judicial notice of these facts, the trial court examined a Congressional report dated December 12, 1995, a Senate committee report, at least two newspaper articles, a videotape from the television news magazine “20/20,” a videotape from the television news magazine “60 Minutes,” and a videotape from the British Broadcasting Corporation. (Addendum to Appellants’ Br. at 12.)
The facts of which the trial court took judicial notice did not specifically concern the parties before the court. The trial court acknowledged that the evidence underlying the noticed facts “[had] to do with the pretty much universal publicity that was out abоut what Nigeria was doing, Nigerian people.” (Trial Tr. at 445.) The videotapes contained nothing involving anyone with whom Qualley had communicated. (Trial Tr. at 12.) Nor were the other exhibits the trial court considered “specific to Mr. Cross or even to Maxwell [Onyeukwu] and others [involved in the scheme Qualley alleged].” (Id. at 445.) Indeed, two of the documents, Exhibits 109 and 110, were legislative reports. Thus, the trial court erred in using
B. Admission of Deposition Testimony
Cross and Clo-Tex contend that several portions of the deposition testimony of Rudolph Datcher and Nathaniel Spinner were inadmissible, either as hearsay or as testimony lacking foundation. In 1994, Datcher and Spinner each lost money in connection with shipments of crude oil purportedly sent to the United States from Nigeria. Both Datcher and Spinner met in Maryland on one or more occasions with James Cooper, Allen Cassidy, Joyce Cassidy, and Prince Zankli about oil
1. Datcher Testimony
After Datcher had turned over the cashiers check to ABI, he heard nothing further about the oil shipment and could not reach the Cassidys or Prince Zankli. He then called the First National Bank of Maryland and spоke with a bank employee. Datcher testified that this employee told him that Account No. 17692470 was open and that the names of John Cross, Joyce Cassidy and Prince Zankli were on the account. (Trial Tr. at 476.) Appellants contends that Datcher‘s testimony about the bank employee‘s statements contained hearsay and was not admissible. In response, Qualley made only a bald assertion that the bank employee‘s statements were not hearsay.
We agree with the Appellants. Hearsay includes any oral or written assertion, other than one made by the declarant while testifying at the trial or hearing, offered to prove the truth of the matter asserted.
Qualley argues that any error in admitting the testimony was harmless because it was cumulative of other testimony from Datcher about the names on the account. Elsewhere in Datcher‘s deposition, Datcher stated that the account at FNB Maryland belonged to John Cross, Joyce Cassidy and Prince Zankli and that it was “their” account. (Trial Tr. at 473-74.) Qualley contends that this other testimony was based on Datcher‘s personal knowledge and argues that, because Appellants did not object to this other testimony as hearsay, they cannot challenge the bank employee‘s “confirming” statements as hearsay.
We disagree. Appellants did object to Datcher‘s other testimony as being without foundation. (App. of Appellants at 37.) The record contains no evidence from which one could infer that Datcher had any independent personal knowledge about whose names appeared on the account. Therefore, Datcher‘s testimony about the bank employee‘s statements is not merely “confirming” or “cumulative” and the trial court‘s error cannot be exсused as “harmless” on that account. We will evaluate whether Appellants have established prejudice arising from this error in section C, infra.
2. Spinner Testimony
Among the excerpts from Spinner‘s deposition that were read to the jury are passages in which Spinner testified that (a) on several occasions, Prince Zankli answered the telephone at the Cassidys’ office by saying “Clo-Tex“; (b) Prince Zankli told Spinner that “We deal with Clo-Tex“; (c) one of the Cassidys said to Spinner “We need to wire the money to Clo-Tex
Appellants contend that the trial court erred in finding that there was sufficient evidence to establish the factual prerequisite for admitting the statements of Cassidys and Prince Zankli as co-conspirator admissions. Specifically, Appellants argue that the only evidence linking Cross and Clo-Tex to the Cassidys and Prince Zankli, aside from the statements themselves, were the payments frоm Datcher and Qualley deposited into Clo-Tex‘s account at FNB Maryland. In response, Qualley contends that there was enough evidence in the record to support the trial court‘s finding of a conspiracy.11
“To the extent that the admissibility of evidence is conditioned on the resolution of a second question . . . it is the function of the court to determine whether or not the condition has been fulfilled.”
person at NNPC whom Qualley identified as “John West.”15 This lettеr instructed Allen Cassidy and “Prince” to wire transfer $21,000 to account number 17692470 at FNB Maryland to the attention of “John Cross for the order of Chief Kelly of Aba Nigeria.”16 (Ex. 107.) One month later, Datcher‘s check for $21,000 was deposited into account number 17692470 at FNB Maryland.
Even when considered together with the contents of the statements themselves, this evidence is not sufficient to establish, by a preponderance of the evidence, that Prince Zankli and the Cassidys were participants in a conspiracy with Cross and Clo-Tex and that the statements made to Spinner were made as part of and in furtherance of the conspiracy. Accordingly, the statements are not admissible under the co-conspirator provision of the rule on admissions of party opponents. We address the prejudice arising from the erroneous admission of the Spinner testimony below.
C. Harmless error
To determine whether the evidentiary errors discussed above prejudicially influenced the outcome of the case, we look to the jury‘s verdict. See Lovett, 201 F.3d at 1080. The parties have a right to untainted jury deliberations and a verdict which is based upon admissible evidence. See Nichols v. American Nat‘l Ins. Co., 154 F.3d 875, 890 (8th Cir. 1998) (citing Crane v. Crest Tankers, Inc., 47 F.3d 292, 296 (8th Cir. 1995)); see also Drabik v. Stanley-Bostitch, Inc., 997 F.2d 496 (8th Cir. 1993); Hale v. Firestone Tire & Rubber Co., 756 F.2d 1322, 1333 (8th Cir. 1985). Here, the jury awarded Qualley one million dollars in punitive damages, yet also found that Clo-Tex‘s wrongdoing was not directed specifically at Qualley. (Addendum to Appellants’ Br. at 4.) To make such a finding, the jury had to look beyond the events as to which Qualley himself testified, to the judicially noticed facts and to the Datcher and Spinner hearsay which purported to linked Zankli and the Cassidys to Clo-Tex and Cross.
This evidence, which was erroneously submitted to the jury, had a prejudicial impact upon the jury‘s consideration of this case. “Legislative facts,” such as those judicially noticed in this case, are “[i]n the great mass of cases decided by courts . . . either absent or unimportant or interstitial, because in most cases, the applicable law and policy have been previously established.” Gould, 536 F.2d at 220
Qualley bears the ultimate burden of persuasion as tо his claims under RICO and the common law. Appellants are entitled to have the jury evaluate those claims by the greater weight of the admissible evidence. A substantial right of the Appellants was affected by the trial court‘s evidentiary errors. Those errors constituted an abuse of discretion and were not harmless.
III.
Based upon the foregoing and our review of the record in this case, we reverse the trial court‘s rulings on the evidentiary issues raised on appeal. Furthermore, in light of this Court‘s resolution of the evidentiary issues raised on appeal, we cannot say that there is sufficient evidence to support an award of punitive damages in the amount of $1,000,000.00. See Economy Roofing & Insulating Co. v. Zumaris, 538 N.W.2d 641, 653-55 (Iowa 1995) and Wilson v. IBP, Inc., 558 N.W.2d 132, 144-48 (Iowa 1996), cert. denied sub nom. IBP, Inc. v. Wilson, 522 U.S. 810 (1997). Accordingly, we vacate the judgment, including the award of punitive damages, and remand this case to the district court for a new trial, consistent with this Court‘s rulings, on all of the issues.18
A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.