JOHN NIEMI; ROBERT NAEGELE, III; JESPER PARNEVIK, Plаintiffs - 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.
No. 12-1233
United States Court of Appeals for the Tenth Circuit
September 10, 2013
D.C. No. 1:12-CV-00869-RBJ (D. Colo.)
Before TYMKOVICH, GORSUCH, and HOLMES, Circuit Judges.
This matter is before the court to correct small clerical errors found on pages 6, 7, and 12 of the opinion that originally issued on September 6, 2013. The corrected version
Entered for the Court
ELISABETH A. SHUMAKER, Clerk
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.
No. 12-1233
United States Court of Appeals Tenth Circuit
September 6, 2013
PUBLISH; Appeal from the United States District Court for the District of Colorado (D.C. No. 1:12-CV-00869-RBJ)
Before TYMKOVICH, GORSUCH, and HOLMES, Circuit Judges.
GORSUCH, Circuit Judge.
An unconventional reаl 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 dеvelopment 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
Of coursе, Mr. Burgess is 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 is 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 is 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
Soon enough Mr. Burgess and Mr. Lasshofer began the finger pointing. Mr. Burgess insisted he was just following Mr. Lasshofer is instructions. Mr. Lasshofer rejoined that he found himself unwittingly in business with a con man. Unpersuaded that
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Mr. Niemi and his colleagues say we should dismiss the defendants is 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 is the subject of this appeal. In the plaintiffs is 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 is 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 is.
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 is 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;
Alternatively, Mr. Niemi and his colleagues suggest we still shouldn is 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 fаct, 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 is 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 is do nearly so much work as this. To understand the doctrine is 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 is use lightly. An outlaw was, literally, outside the law is 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
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 is find me.” See Allen v. Georgia, 166 U.S. 138, 141 (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
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) crimеs, and they aren is hiding from the law — the usual preconditions for the doctrine is 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 is ve taken in the direction they encourage. This court has held that aliens hiding from deportation orders cannot simultaneously challenge those orders in court. We is ve done so exрlaining that the rationale underlying the doctrine in the criminal context applies with equal force in the immigration context: a fugitive alien makes the enforcement of any deportation order against him impossible, just as a fugitive defendant does with the criminal judgment against him — in this way again turning the litigation into a one-way street. See Martin v. Mukasey, 517 F.3d 1201, 1204-05 (10th Cir. 2008); Sapoundjiev v. Ashcroft, 376 F.3d 727, 729-30 (7th Cir. 2004). The only other time we tried to extend the doctrine into the civil arena — a case involving a civil forfeiture action itself closely tied
Even worse for the plaintiffs, the Supreme Court long ago expressly rejected the very idea they ask us to accept — that a civil contemnor loses the right to participate further in his case because he — as here — failed to deposit funds in the court is registry pursuant to a court order. See Hovey v. Elliott, 167 U.S. 409, 411-14 (1897). The plaintiffs is suggestion that we turn away a civil contemnor is interlocutory appeal sits more than a little awkwardly, too, with the law is jealous insistence in other situations that a civil litigant must invite and accept contempt as the price to be paid for earning the right to pursue an interlocutory appeal. See, e.g., United States v. Copar Pumice Co., 714 F.3d 1197, 1206-07 (10th Cir. 2013).
Quite apart from these formal problems with the plaintiffs is invitation to extend into mainstream civil litigation a doctrine rooted in crime, the rationale underlying the doctrine simply isn is in play here. The reason it isn is lies in the difference between cash and the corporeal. In crime, the absence of the defending party is person prevents a trial and the execution of an adverse judgment. Any litigation could only inhere to his advantage, creating a one-way street. But the same isn is necessarily true when lucre rather than liberty is at stake. When only money is at stake, a court can usually proceed to issue an executable judgment even if the defendant chooses not to appear. Before final judgment, the court can try contempt orders to cajole his appearance and compliance. Failing that,
The fugitive disentitlement doctrine provides a discretionary remedy whose provenance lies in the common law or “inherent powers” of a court. Degen, 517 U.S. at 823-24. We are always hesitant about deploying аuthority of that kind, especially when existing rules or statutes anticipate and address the same subject. See id.; Chambers v. NASCO, Inc., 501 U.S. 32, 46-47 (1991) (inherent power to sanction bad-faith conduct “fill[s] in the interstices” of federal statutes and rules). This isn is to say a court is common law or inherent powers are always enervated when rules and statutes touch on the same subject. See Chambers, 501 U.S. at 46. Or even that the disentitlement doctrine might
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With that and at long last, we turn to consider the defendants is appeal.
Mr. Lasshofer and the corporate defendants argue that the preliminary injunction must be overturned because of Grupo Mexicano de Desarrollo, S.A. v. Alliance Bond Fund, Inc. There the Supreme Court held that, in cases seeking money judgments, federal district courts do not possess the inherent equitable power to issue preliminary injunctions preventing the transfer of assets in which the plaintiffs claim no pre-existing lien or equitable interest. 527 U.S. 308, 310, 333 (1999). Yet that, the defendants argue, is exactly what happened here: in the June 2012 prеliminary injunction the district court purported to freeze all of their assets worldwide, whether or not connected in any way to the allegations in this case and no matter if they greatly exceeded the amount of damages sought. Because the district court overstepped the bounds of its inherent authority, the defendants say, we must reverse.
The defendants is argument here, like both of the plaintiffs is arguments before it, overstates its case. No doubt, Grupo Mexicano held that district courts lack inherent authority to issue preliminary injunctions like the one here, just as the defendants suggest. But the Supreme Court in Grupo Mexicano also acknowledged that Congress can and
Of course, Grupo Mexicano didn is resolve — only highlighted — the question whether state law can expand the equitable powers of a federal court sitting in diversity. For its part, the district court ventured an affirmative answer to the question because of FDIC v. Antonio, 843 F.2d 1311 (10th Cir. 1988). As a matter of state law, Antonio held that subsection (6) of COCCA is civil remedies section authorizes courts to issue preliminary injunctions seizing assets even in the absence of a pre-existing lien or equitable interest. As a matter of federal law, Antonio saw no reason to doubt that a
The defendants take issue with the district court is analysis but give us too little to work with. For example, they argue that Antonio is no longer good law after Grupo Mexicano. But they (again) disregard the fact that Grupo Mexicano purported to speak only to a district court is inherent authority to issue preliminary injunctions and expressly left open the question of a district court is authority to issue preliminary injunctions under the diversity statute and state law. Separately, the defendants before us fault the defendants in Antonio for failing to identify federal statutory limits on the authority of a district court sitting in diversity to impose a preliminary injunction authorized by state law. But then Mr. Lasshofer and the corporate defendants themselves fail to identify any such limits in their briefing in this case. They point to § 11 of the Judiciary Act of 1789. But that provision says only that federal courts shall have cognizance of civil suits “at common law or in equity,” see
This isn is to suggest a federal court sitting in diversity may always and everywhere impose a remedy authorizеd by state law. The Supreme Court has told us that it is a mistake to assume “that whatever equitable remedy is available in a State court must be available in a diversity suit in federal court.” Guaranty Trust Co. v. York, 326 U.S. 99, 105 (1945). The difficulty is that the defendants haven is developed a theory why, as a matter of federal law, the district court in this case couldn is issue a preliminary injunction authorized by COCCA. A good argument might exist — we do not prejudge what arguments other parties might muster in other cases — but none is been made here.
There is, however, another, related problem lurking here, one neither party has addressed. As a matter of state law, Antonio held that subsection (6) of COCCA is civil-remedies section authorizes preliminary injunctions freezing assets worldwide. See
While we would normally pursue the question to its end and decide definitively whether we have a true jurisdictional problem knocking about here, we discern another and easier avenue to resolve this appeal. Even assuming a preliminary injunction is available in a COCCA action seeking only damages, Mr. Lasshofer and the corporate defendants argue another problem still bars the plaintiffs is way. As a matter of state law, they say, the plaintiffs have failed to demonstrate statutory standing to pursue any COCCA claim. And without the right to pursue any COCCA claim, it follows that the preliminary injunction must be withdrawn. This argument has the virtue of being fully briefed, easily resolved, and right. It has another virtue too. Because both this more modest state statutory standing question and any possible “jurisdictional” problem concerning the limits of the district court is authority to issue injunctive relief in this case amount to “threshold grounds” for resolving this appeal short of reaching its merits, we possess “leeway to choose among” them and to “take[] the less burdensome course.” Sinochem Int‘l Co. v. Malaysia Int‘l Shipping Corp., 549 U.S. 422, 431, 436 (2007). We think it prudent to do
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The statutory standing question is (relatively) easily resolved and dispositive for a reason we alluded to some time ago. It was Mesatex that sought the loan, signed the loan application, and received the loan commitment. It was Mesatex is subsidiaries that signed the loan agreement and its amendment, paid the loan fees, and advanced the loan collateral. It was those companies, too, that owned the Breckenridge properties and whose business allegedly suffered when the loan failed to materialize. Yet neither Mesatex nor any of its subsidiaries is named as a plaintiff in this lawsuit. Mr. Niemi and his colleagues stress that they invested in Mesatex and its subsidiaries; they stress, too, that they guaranteed some of the corporations is loans. But it is long settled law that a shareholder or guarantor lacks standing to assert RICO claims when their losses are only derivative of a corporation is — when the individuals is losses come about only because of the firm is loss. Every circuit to have addressed the question — including this one in Bixler v. Foster, 596 F.3d 751, 758-59 (10th Cir. 2010) — has held that the proper plaintiff in these situations is the corporation, not the investor or guarantor. See Sparling v. Hoffman Const. Co., Inc., 864 F.2d 635, 640-41 (9th Cir. 1988) (collecting cases). We know, too, that Colorado courts interpreting COCCA look to federal RICO law for guidance. Sеe Floyd v. Coors Brewing Co., 952 P.2d 797, 803 (Colo. App. 1997), rev is d on other grounds sub nom. Coors Brewing Co. v. Floyd, 978 P.2d 663 (Colo. 1999). So taking all this together it
Admittedly, few rules lack exceptions and the statutory standing rule we is ve just identified certainly bears an important one we must pause to consider. A plaintiff who can identify some way in which he or she suffered personally and directly as a result of the defendant is conduct — some way in which his or her losses are not derivative of the corporation is losses — can proceed with or without the corporation in the case. See generally Franchise Tax Bd. of Cal. v. Alcan Aluminium Ltd., 493 U.S. 331, 336 (1990). So, for example, when a plaintiff can claim that the defendant is actions not only hurt the corporation but prevented her personally from practicing her trade or profession, that can be enough to allow a suit to proceed with her as plaintiff. See Heart of Am. Grain Inspection Servs., Inc. v. Missouri Dep‘t of Agric., 123 F.3d 1098, 1102 (8th Cir. 1997); Cooper v. McBeath, 11 F.3d 547, 551 (5th Cir. 1994); see also Hobby Lobby, 723 F.3d 1114, 2013 WL 3216103, at *34 (10th Cir. 2013) (en banc) (Gorsuch, J., concurring).
The problem we face is this. Despite being challenged to do so in this appeal, the plaintiffs have not identified in their brief any direct and personal injury they suffered. Mr. Niemi points out that he signed the loan agreement with Mr. Burgess and that he
Without proof of a direct and personal injury, the plaintiffs try to save the preliminary injunction with a very different line of attack. They assert that Mesatex assigned its claims to them or that they otherwise succeeded to the company is interests when it became defunct. But everyone acknowledges that standing to рursue a claim must normally exist by the time a lawsuit is filed. See Friends of the Earth, Inc. v. Laidlaw Envtl. Servs., Inc., 528 U.S. 167, 180 (2000); Utah Ass is n of Counties v. Bush, 455 F.3d 1094, 1099 (10th Cir. 2006). And though the record before us on appeal suggests an
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Even so, that isn is quite the end of the story. After briefing and oral argument and while this case was under submission, the plaintiffs graced us with no fewer than five Rule 28(j) letters. See
We decline to resolve the parties is collateral appeal by correspondence. In their opening appellate brief, the defendants contested the plaintiffs is statutory standing. In their responsive appellate brief, the plaintiffs chose to meеt the defendants is statutory standing challenge head on, asking us to affirm their standing outright, forgoing any suggestion that the defendants forfeited the issue in district court. Only after we voiced interest in the
The proper functiоn of Rule 28(j) letters, after all, is to advise the court of “new authorities” a party has learned of after oral argument, not to interject a long available but previously unmentioned issue for decision. See
This is not to suggest that we cannot take notice on our own of a forfeiture not timely raised by the opposing party, only that nothing compels that course in this case.
Besides pressing forfeiture for the first time, the plaintiffs use Rule 28(j) letters to say even more about statutory standing. They assеrt that, since oral argument in this appeal, the district court has addressed the issue further and in doing so resolved any worry we might have. But even assuming the district court had the power to address the statutory standing question while it was pending in this court — see Colorado v. Idarado Min. Co., 916 F.2d 1486, 1490 n.2 (10th Cir. 1990) — the transcript the plaintiffs provide from the district court proceeding does not resolve this appeal. To be sure, the transcript discusses how Mr. Niemi and his partners advanced the $2.18 million to the defendants on behalf of Mesatex. But it does not discuss Bixler or examine how the individual plaintiffs is payment on behalf of and in the name of Mesatex and its affiliated companies might avoid Bixler. Neither does the transсript reveal when Mesatex is interests might have been
This isn is to suggest the statutory standing problem is insurmountable — or even close to it. Though standing isn is apparent in the transcript the plaintiffs recently supplied or the record they prepared for our review on appeal, perhaps on remand the plaintiffs can muster credible evidence that an assignment occurred before the lawsuit began. Perhaps they can persuade the district court to add Mesatex and the other corporations to the suit. Perhaps they can establish some direct and personal injury. Some other possible factual or legal angle might appear. But at this point — on the arguments before us and with the record on appeal supplied to us — we see no way we might lawfully avoid the conclusion that the plaintiffs have not established statutory standing under COCCA.
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We take no joy in having to undo the district court is work in this case. As this appeal illustrates (and only illustrates — representing just a small window into the case), this litigation has already proven a long and arduous journey with the parties avidly clawing for every inch tooth and nail. It pleases us not at all to add to the delay and сost of this litigation or to the district court is plate — and to do so in a case that, we must add, the district court has managed with extraordinary diligence, rectitude, and care. But we take cases as they come to us, and on the briefs and record that come to us in this one, the law demands that we recognize the absence of statutory standing. For this court in this appeal, if not for the district court on remand, that has to mark the end of the road. The June 2012
Notes
(1) Any district court may, after making due provision for the rights of innocent persons, enjoin violations of the provisions of section 18-17-104 by issuing appropriate orders and judgments, including, but not limited to:
(a) Ordering any defendant to divest himself of any interest in any enterprise, including real property;
(continued...) (...continued)(b) Imposing reasonable restrictions upon the future activities or investments of any defendant . . . ;
[other forms of equitable relief].
(6) Any aggrieved person may institute a proceeding under subsection (1) of this section. In such proceeding, . . . . a temporary restraining order and a preliminary injunction may be issued in any such action before a final determination on the merits.
(7) Any person injured by reason of any violation of the provisions of section 18-17-104 shall have a cause of action for threefold the actual damages sustained. . . .