UET RR, LLC v. Comis ( 2018 )

FILED
United States Court of Appeals
UNITED STATES COURT OF APPEALS Tenth Circuit
FOR THE TENTH CIRCUIT June 19, 2018
_________________________________
Elisabeth A. Shumaker
Clerk of Court
UET RR, LLC,
Plaintiff - Appellee/Cross-Appellant,
v. Nos. 17-1200 & 17-1218
(D.C. No. 1:14-CV-01237-RPM)
BENJAMIN D. COMIS; K3B (D. Colo.)
PARTNERS, ULC; BARRY COMIS;
FALCON CREEK ASSET
MANAGEMENT, INC.; RKB
INVESTMENTS, LTD.; RICHARD K.
BRUGGER; K. TODD HICKS; VIERO
GROUP, INC.,
Defendants – Appellants/
Cross-Appellees,
and
TALANDA SYKES,
Defendant.
_________________________________
ORDER AND JUDGMENT*
_________________________________
Before BRISCOE, MATHESON, and EID, Circuit Judges.
_________________________________
*
After examining the briefs and appellate record, this panel has determined
unanimously to honor the parties’ request for a decision on the briefs without oral
argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore
submitted without oral argument. This order and judgment is not binding precedent,
except under the doctrines of law of the case, res judicata, and collateral estoppel. It
may be cited, however, for its persuasive value consistent with Fed. R. App. P. 32.1
and 10th Cir. R. 32.1.
In No. 17-1200, Defendants appeal the district court’s award of damages in
favor of plaintiff UET RR, LLC (“UETRR”) on its fraud claims about railcar leases.
Defendants argue a judgment UETRR obtained against Viero Energy, LLC (“Viero
Energy”),1 in a previous Texas state-court suit for breach of the leases precluded
UETRR’s claims.
In No. 17-1218, UETRR cross-appeals from the district court’s dismissal of its
declaratory judgment claim and the court’s ruling that UETRR was entitled to
prejudgment interest only from the date it demanded the return of its deposits and not
the date it was fraudulently induced to pay them. Exercising jurisdiction under 28
U.S.C. § 1291, we affirm in No. 17-1200.
We affirm in part and reverse in part and remand for further proceedings in
No. 17-1218.
I. THE COURT’S FINDINGS OF FACT AND CONCLUSIONS OF LAW
The district court conducted an eight-day bench trial and then issued findings
of fact and conclusions of law, which we summarize below.
A. The Railcar Leases
UETRR transported crude oil from the production site to oil refineries
throughout the United States. Defendant Ben Comis, who negotiated railcar leases
on behalf of Viero Energy, represented to UETRR that Viero was owned in equal
shares by K3B Partners, ULC (“K3B”), and Minks, LLC—a company owned by
1
Viero Energy was an affiliate of defendant Viero Group, Inc. Defendant
K3B Partners, ULC owned both.
2
defendant Talanda Sykes.2 The court found that “K3B was the operating entity using
the Viero Energy name,” and “Ben Comis, [who was a shareholder and director of
K3B], was acting for K3B in entering into the[] leases using the name Viero Energy.”
Aplt. App., Vol. 3 at 750. 3
On February 19, 2013, the first railcar lease agreement was signed. It
obligated Viero Energy to deliver 120 tank cars—in two 60-car blocks—on or before
June 1, 2013. For its part, UETRR was to pay $624,000 immediately as a deposit to
secure the lease. On February 20, UETRR wired those funds to Viero Energy’s bank
account, which Mr. Comis and Mr. Sykes controlled. That same day, Mr. Comis
wired $472,800 to the bank account of SBG Transport, LLC (“SBG”)—an Arkansas-
based oilfield services company that had agreed to supply the railcars to Viero
Energy.4 UETRR was led to believe that Viero Energy owned the railcars. It was
therefore unaware of SBG’s role until discovery in this suit.
On March 19, 2013, the parties signed the second railcar lease agreement. It
called for the lease of 180 tank cars and a $936,000 deposit. UETRR wired those
funds to Viero Energy’s bank account on March 21. On March 25, Viero Energy
2
Mr. Sykes was named as a defendant and served in the suit. He failed to
respond and was found in default.
3
The other shareholders and directors of K3B were defendants Barry W.
Comis, RKB Investments, Ltd., Falcon Creek Asset Management, Inc., Richard K.
Brugger, and K. Todd Hicks.
4
David Selleck organized SBG. Fred Straub managed it. UETRR never
discovered their whereabouts.
3
wired $709,000 to SBG’s bank account. And on June 7, Mr. Comis demanded that
SBG transfer $362,000 to K3B.
When Viero Energy failed to deliver the railcars, UETRR terminated the leases
and requested immediate return of the deposits. The parties entered into a repayment
agreement, but when no payments were forthcoming, UETRR sued Viero Energy for
breach of the lease agreements in Texas state court in September 2013.5 Viero
Energy failed to appear, and UETRR obtained a default judgment in December 2013
for $1,560,000. During post-judgment discovery, UETRR began to uncover the true
facts about Viero Energy and the potential fraud, which in turn resulted in the filing
of this suit in April 2014.
B. The Fraud
After the bench trial, the district court found that “UETRR has proven by a
preponderance of the evidence that it lost $1.56 million in the deposits by fraudulent
inducements made by Ben Comis and it lost any means of recovery of that money by
the repeated fraudulent representations made by Ben Comis and Talanda Sykes after
failure of delivery.” Id. at 756. In particular, the court found three categories of
false representations.
The first two categories of false representations concerned the false
information provided to UETRR to induce it to enter into the lease agreements and
make the deposits. In this regard, the court found that Mr. Comis lied to UETRR
5
UETRR sued Viero Energy in the Texas case but not in the instant federal
case, in which it sued the Viero Group instead.
4
about the financial viability of Viero Energy. For example, Mr. Comis sent UETRR
a “completely false and contrived Profit and Loss Statement . . . [in] July [] 2013,
purporting to show total income of [more than $37 million] received in the first six
months of 2013.” Id. at 755. In truth, “Viero Energy was never a functioning
business entity,” id. at 749, and neither Viero Energy nor SBG “had financial
resources available to obtain the railcars they contracted to provide,” id. at 752.
Further, Mr. Comis “blatantly lied . . . about Viero Energy and its possession of
railcars leading to the signing of the lease agreements.” Id. Here, the court noted a
February 2013 email from Mr. Comis to UETRR in which he sent a photograph and
set of specifications for an alleged Viero Energy railcar stating “ALL OUR
[RAIL]CARS ARE FRA, AAR, & DOT APPROVED.” Id. at 755. According to the
court, “[a]ll of this was false.” Id.
The third category concerned affirmative acts of concealment that “delay[ed]
any recovery while there was some money still in [Viero Energy’s] bank account.”
Id. In particular, the district court found that Mr. Comis “continued [the] deception
by emailing assurances [to UETRR] through the Spring and Summer of 2013,
explaining failure to deliver the cars. Sykes took over that role in his
communications with [UETRR] also using false statements about obtaining financing
to repay the deposits.” Id. at 752.
The district court found that “[t]he lease agreements were not what UETRR
assumed them to be when it sued Viero Energy in Texas.” Id. at 750. Instead, the
facts first uncovered after the Texas suit (because defendants concealed them)
5
established that “[t]he Texas judgment is now meaningless because it was based on
the false assumption that Viero Energy was a functioning entity. In reality it was a
chimera—a mythical creature.” Id.
II. 17-1200 – DEFENDANTS’ APPEAL
Defendants argue the Texas state court judgment precluded UETRR’s fraud-
based claims. The parties agree that Texas law determines the preclusive effect of
the Texas state court judgment. See Aplt. Opening Br. at 12 & Aplee. Br. at 31. See
also Campbell v. City of Spencer, 777 F.3d 1073, 1077-78 (10th Cir. 2014) (“Federal
courts must give a state court judgment the same preclusive effect as would its
originating state.”). They further agree that Texas’s claim-preclusion doctrine
precludes relitigating claims that have been finally adjudicated, or that arise out of
the same subject matter. Specifically, “res judicata requires proof of the following
elements: (1) a prior final judgment on the merits by a court of competent
jurisdiction; (2) identity of parties or those in privity with them; and (3) a second
action based on the same claims as were raised or could have been raised in the first
action.” Amstadt v. U.S. Brass Corp., 919 S.W.2d 644, 652 (Tex. 1996).
The first two elements are satisfied. The parties disagree about the third
element—whether UETRR’s fraud claims were raised or could have been raised in
the Texas suit. According to defendants, this is a question of law that we review de
novo. See Aplt. Br. at 11 (“The res judicata effect of a prior judgment is a question
of law that we review de novo”) (internal quotation marks omitted)). UETRR
counters that de novo review applies only if it is undisputed what claims and facts
6
were alleged in the Texas state court suit. UETRR maintains we should review the
district court’s determination that it could not have discovered the potential fraud
claims until after the Texas suit for clear error, because it “involve[s], primarily, a
factual inquiry.” Aplee. Br. at 28 (internal quotation marks omitted).
“In an appeal from a bench trial, we review the district court’s factual findings
for clear error and its legal conclusions de novo.” Roberts v. Printup, 595 F.3d 1181,
1186 (10th Cir. 2010) (internal quotation marks omitted). We review “mixed
questions of law and fact . . . under the clearly erroneous or de novo standard,
depending on whether the mixed question involves primarily a factual inquiry or the
consideration of legal principles.” Id. (internal quotation marks omitted). Because
the district court’s determination that UETRR could not have discovered the potential
fraud claims until after judgment entered in the Texas state court suit involves
primarily a factual inquiry, our review is for clear error.
“A finding of fact is clearly erroneous if it is without factual support in the
record or if, after reviewing all the evidence, we are left with a definite and firm
conviction that a mistake has been made.” Mathis v. Huff & Puff Trucking, Inc.,
787 F.3d 1297, 1305 (10th Cir. 2015) (internal quotation marks omitted). “In
conducting this review, we view the evidence in the light most favorable to the
district court’s ruling and must uphold any district court finding that is permissible in
light of the evidence.” Id. (internal quotation marks omitted).
Under this highly deferential clearly erroneous standard of review, we affirm
the district court’s findings of fact even if “the record supports a view of the evidence
7
that is permissible but contrary to the trial court’s findings . . . [because] [w]here
there are two permissible views of the evidence, the factfinder’s choice between them
cannot be clearly erroneous.” Id. at 1305-06 (internal quotation marks omitted). It is
not enough that the evidence could support a different finding—we cannot reverse
the district court’s finding unless it finds no support in the evidence. Here, evidence
supported the district court’s finding that UETRR was prevented from discovering
the potential fraud claims until after judgment entered in the Texas suit. Claim
preclusion therefore does not apply.
III. 17-1218 – UETRR’S CROSS APPEAL
A. Declaratory Judgment
In its second amended complaint, UETRR asserted a claim for declaratory
relief that defendants were liable for the judgment in the Texas suit as the privies or
alter egos of Viero Energy. It argues here that the district court erred when it
dismissed this claim.
UETRR is represented by counsel and therefore must file an appendix that
serves as the record on appeal. See 10th Cir. R. 10.2(B), 30.1(B)(1). Its appendix
contains the courtroom minutes from the hearing on the motion to dismiss, which
state that UETRR’s counsel “answer[ed] questions of the Court regarding the
declaratory judgment claim,” Aplt. App., Vol. 3 at 609, and that the court made its
oral ruling. UETRR, however, has not included a transcript from the hearing or
otherwise explained why one cannot be obtained.
8
Under 10th Cir. R. 10.1(A)(1), “[t]he appellant must provide all portions of the
transcript necessary to give the court a complete and accurate record of the
proceedings related to the issues on appeal.” See also 10th Cir. R. 10.3(C)(3)
(requiring a record on appeal to contain transcripts of oral rulings). “[F]ailure to file
the required transcript involves more than noncompliance with some useful but
nonessential procedural admonition of primarily administrative focus. It raises an
effective barrier to informed, substantive appellate review.” McGinnis v. Gustafson,
978 F.2d 1199, 1201 (10th Cir. 1992). Without the transcript, we affirm the district
court’s order. See id.
B. Prejudgment Interest
The district found that the Defendants—through Mr. Comis—fraudulently
induced UETRR to sign the contracts and make the deposits. UETRR paid Viero
Energy a $624,000 deposit on February 20, 2013, under the first railcar lease, and
paid Viero a $936,000 deposit on March 21, 2013, on the second railcar lease.
Nonetheless, the district court held that UETRR was entitled to prejudgment interest
under Colo. Rev. Stat. § 5-12-102(1) from the date it first demanded return of the
deposits—not when the deposits were made.
“A federal court sitting in diversity applies state law, not federal law,
regarding the issue of prejudgment interest.” Loughridge v. Chiles Power Supply
Co., 431 F.3d 1268, 1288 (10th Cir. 2005) (internal quotation marks omitted).
Though we review the district court’s award of prejudgment interest for abuse of
discretion, we review “any statutory interpretation or legal analysis underlying such
9
an award de novo.” Id. (internal quotation marks omitted). “Whether a particular
factual circumstance falls within the terms of the prejudgment interest statue is a
question of law reviewed de novo.” Id.
Section 5-12-102(1)(a) provides that the prevailing party is entitled to
prejudgment interest on money or property that is “wrongfully withheld.”
“Wrongfully withheld” means “when plaintiff’s injury is measured because the
damages, if then paid, would make the plaintiff whole.” Goodyear Tire & Rubber
Co. v. Holmes, 193 P.3d 821, 827 (Colo. 2008). Therefore, the Colorado courts have
held that injury from fraudulent or tortious conduct is typically measured from the
date of the defendant’s wrongful conduct. E.g., Frontier Exploration, Inc. v. Am.
Nat’l Fire Ins. Co., 849 P.2d 887, 893-94 (Colo. App. 1992) (holding prejudgment
interest began to accrue on date insured’s fraudulent estimates caused insurance
company to pay benefits); Arguelles v. Ridgeway, 827 P.2d 553, 558 (Colo. App.
1991) (holding prejudgment interest accrued from date defendant fraudulently
induced plaintiff to sign a real estate contract). Defendants wrongful conduct
occurred when they fraudulently induced UETRR to enter into the agreements and
make the deposits. UETRR is therefore entitled to prejudgment interest from the date
of the deposits.
IV. CONCLUSION
In No. 17-1200, we affirm the district court’s judgment in favor of UETRR
and against defendants on its fraud claims.
In No. 17-1218, we affirm the court’s order that dismissed UETRR’s
10
declaratory judgment claim. We reverse the court’s order that denied UETRR
prejudgment interest from the date of the deposits, and remand with instructions to
enter an award of prejudgment interest consistent with this order and judgment.6
Entered for the Court
Scott M. Matheson, Jr.
Circuit Judge
6
We deny UETRR’s motion to dismiss and further deny its motion for
attorney fees incurred in preparing the motion.
11