Douglas Asphalt Co. v. Qore, Inc.

657 F.3d 1132
CourtCourt of Appeals for the Eleventh Circuit
DecidedSeptember 20, 2011
DocketNos. 10-12695, 10-12827
StatusPublished

This text of 657 F.3d 1132 (Douglas Asphalt Co. v. Qore, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Eleventh Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Douglas Asphalt Co. v. Qore, Inc., 657 F.3d 1132 (11th Cir. 2011).

Opinion

ARNOLD, Circuit Judge:

This consolidated appeal arises from a contract dispute between Douglas Asphalt Company, including its principals Joel and Kyle Spivey, and the Georgia Department of Transportation (GDOT). GDOT awarded Douglas two paving contracts to mill and resurface certain stretches of interstate highway in Georgia. After the first project was completed, GDOT began noticing that the asphalt that Douglas had laid was showing excessive wear, which GDOT [1136]*1136attributed to an insufficient amount of hydrated lime, an ingredient in the asphalt that reduces its susceptibility to moisture damage. GDOT therefore requested that Douglas remove and replace some of the asphalt, but Douglas refused, maintaining that the problems were caused by a faulty substructure that had been installed years before it had performed its work.

GDOT retained QORE, Inc., an engineering and materials testing company, to remove asphalt samples from the first project site and conduct tests to determine the samples’ lime content. QORE performed three such tests: a “fizz test,” a “color test,” and a “tensile strength test,” all of which GDOT employees developed. QORE retained, at GDOT’s direction, Applied Technical Services, Inc. (ATS), to perform a fourth test that GDOT developed, called an atomic absorption test. QORE and ATS sent the data that those tests produced to GDOT for its analysis and consideration. GDOT concluded from those data that the asphalt that Douglas had laid did not contain enough hydrated lime; it then relied, in part, on those test results to justify its decision to place Douglas in default on both highway contracts.

Douglas responded by filing this action against QORE, ATS, and several individual GDOT officials. According to Douglas’s complaint, as relevant here, none of the tests that QORE or ATS performed was capable of accurately quantifying the amount of hydrated lime in the asphalt samples; it also alleged that QORE, ATS, and the named GDOT officials were all aware of this before the completion of those tests. Douglas asserted that by performing what it called fraudulent tests and enabling GDOT to rely upon them to declare it in default on both projects, the defendants had violated the federal Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961-1968. The complaint also contained state-law claims for negligent misrepresentation, fraud, and defamation against QORE and ATS.

The district court dismissed the RICO, negligent misrepresentation, and fraud claims during pretrial proceedings. After Douglas moved for reconsideration, the court concluded that the complaint had made out a claim for simple negligence against QORE and ATS, even though Douglas had not used the title “negligence” for any count in the complaint. The court later granted summary judgment for QORE on this new-found claim and on Douglas’s claim for defamation; ATS failed to move for summary judgment on the negligence claim, though, and the court denied it summary judgment as to the defamation claim. Douglas therefore proceeded to trial against ATS on the two state-law tort claims, and, after a five-day trial, a jury returned a general verdict of $150 million in Douglas’s favor.

Both Douglas and ATS appealed. Douglas contends that the district court erred by dismissing its RICO claims and by granting summary judgment for QORE on its claims for defamation and negligence. ATS maintains that the court erroneously failed to grant its motions for judgment as a matter of law on both the defamation and negligence claims, see Fed. R.Civ.P. 50(a), (b). Because we hold that the district court did not err in dismissing Douglas’s RICO claims, and that QORE and ATS were entitled to judgment as a matter of law on both the defamation and negligence claims, we affirm in part, reverse in part, vacate the judgment against ATS, and remand for entry of judgment in favor of ATS.

I.

Douglas Asphalt first contends that the district court erroneously dismissed its [1137]*1137RICO claims against all the defendants. We disagree.

In addition to making certain activities criminal, see 18 U.S.C. § 1962, RICO provides that any “person injured in his business or property by reason of a violation” of § 1962 may bring a civil action for damages in federal district court, 18 U.S.C. § 1964(c). Douglas claimed that the defendants violated subsection 1962(c), which prohibits a person associated with “an enterprise” from participating, “directly or indirectly,” in the enterprise’s affairs “through a pattern of racketeering activity.” “Racketeering activity” includes, among other so-called predicate acts, the acts “indictable” under the mail and wire fraud statutes, 18 U.S.C. §§ 1341, 1343, on which Douglas predicated its claims. 18 U.S.C. § 1961(1)(B). To make out a “pattern” of racketeering, Douglas had to plead at least two related acts of mail or wire fraud, see 18 U.S.C. § 1961(5), and— with respect to each such act — to allege with particularity the defendants’ intentional participation in a “scheme ... to defraud [Douglas] of money or property” and their use of either the mails or wires to execute the scheme, United States v. Ward, 486 F.3d 1212, 1222 (11th Cir.2007); Fed.R.Civ.P. 9(b); American Dental Ass’n v. Cigna Corp., 605 F.3d 1283, 1291 (11th Cir .2010).

QORE and ATS moved to dismiss all claims except the one for defamation for failure to state a claim, see Fed.R.Civ.P. 12(b)(6), and the individual GDOT defendants sought judgment on the pleadings, see Fed.R.Civ.P. 12(c). The district court dismissed Douglas’s RICO claims predicated on mail and wire fraud because Douglas had not pleaded that it relied on the defendants’ misrepresentations. The parties agree that in doing so the court correctly applied the law that existed at the time: We had held that by providing a civil claim to persons injured “by reason of’ a RICO violation under § 1964(c), Congress gave standing only to persons whose injuries “flowed directly” from a RICO violation, and that therefore only persons who had detrimentally relied on the defendants’ misrepresentations could succeed on a RICO claim based on mail or wire fraud. See Pelletier v. Zweifel, 921 F.2d 1465, 1499-1500 (11th Cir.1991); Byrne v. Nezhat, 261 F.3d 1075, 1110 (11th Cir.2001); see also Andrews v. Am. Tel. & Tel.

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Bluebook (online)
657 F.3d 1132, Counsel Stack Legal Research, https://law.counselstack.com/opinion/douglas-asphalt-co-v-qore-inc-ca11-2011.