E. John Hosch v. Michael Anthony Pozer, III

• Court: Court of Appeals for the Eleventh Circuit
• Decided: May 18, 2020
• Docket: 19-14164
• Status: Unpublished

Opinion

Case: 19-14164 Date Filed: 05/18/2020 Page: 1 of 13

[DO NOT PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT ________________________

No. 19-14164 Non-Argument Calendar ________________________

D.C. Docket No. 4:10-cv-00191-AT

E. JOHN HOSCH,

Plaintiff- Counter Defendant- Appellant,

versus

WACHOVIA BANK, N.A., et al.,

Defendants,

MICHAEL ANTHONY PROZER, III,

Defendant- Counter Claimant- Appellee.

________________________

Appeal from the United States District Court for the Northern District of Georgia ________________________

(May 18, 2020) Case: 19-14164 Date Filed: 05/18/2020 Page: 2 of 13

Before WILSON, WILLIAM PRYOR, and JILL PRYOR, Circuit Judges.

PER CURIAM:

E. John Hosch appeals the district court’s order dismissing his Georgia

fraud, Georgia conspiracy to commit fraud, Georgia Racketeer Influenced and

Corrupt Organizations Act (RICO), and federal RICO claims against Wachovia

and Wells Fargo (collectively, the Banks) under Federal Rule of Civil

Procedure 12(b)(6). He also appeals the court’s order denying his motion for

summary judgment and dismissing his amended complaint, which contained

claims against Michael Prozer, due to his failure to comply with a prior court

order. For the following reasons, we affirm in part, reverse in part, and remand for

further proceedings.

I.

First, the district court’s decision to dismiss Hosch’s fraud, conspiracy to

commit fraud, and RICO claims against the Banks under Rule 12(b)(6). We

review de novo the district court’s grant of a motion to dismiss under

Rule 12(b)(6), accepting the factual allegations in the complaint as true and

construing them in the light most favorable to the plaintiff. Edwards v. Prime,

Inc., 602 F.3d 1276, 1291 (11th Cir. 2010). However, we are not required to

accept as true the labels and legal conclusions in the complaint. Id. Dismissal for

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failure to state a claim is appropriate if the factual allegations in the complaint do

not raise more than a speculative right to relief. Id.

Hosch argues that he adequately pled facts as to his fraud and fraud-based

RICO claims for the purposes of Federal Rule of Civil Procedure 9(b), and that his

allegations were sufficient to establish vicarious liability on the Banks’ part based

on apparent authority, respondeat superior, negligence, and gross negligence. We

disagree.

As an initial matter, Hosch has waived several arguments by failing to

adequately raise and brief issues. An appellant’s “passing reference to an issue in a

brief” is insufficient to raise that issue, “and the failure to make arguments and cite

authorities in support of an issue waives it.” Hamilton v. Southland Christian Sch.,

Inc., 680 F.3d 1316, 1319 (11th Cir. 2012). Regarding his RICO claims, Hosch

makes no more than a passing reference to his disagreement with the district

court’s dismissal of his federal RICO claim, and he does not even suggest that the

district court erred in dismissing his Georgia RICO claim. We conclude that he

waived those arguments. As for his fraud and conspiracy-to-commit-fraud claims,

Hosch did not raise an issue as to ratification, so to the extent those claims were

premised on a ratification theory of liability, he also waived those arguments.

Further, we generally will not consider issues raised for the first time on

appeal. Access Now, Inc. v. Sw. Airlines, Co., 385 F.3d 1324, 1332 (11th Cir.

3 Case: 19-14164 Date Filed: 05/18/2020 Page: 4 of 13

2004). Hosch did not assert a claim for negligence or gross negligence against the

Banks in his amended complaint, nor does it appear that he otherwise raised that

issue in the district court. Though we have permitted exceptions to the general rule

under five circumstances, those circumstances do not exist here. See id.

Therefore, we will not consider these claims.

As a result, the only remaining issues regarding the order granting the

motion to dismiss are whether the district court properly concluded that the Banks

could not be held liable for fraud or conspiracy to commit fraud under the theories

of respondeat superior 1 or apparent authority. It did.

Where a plaintiff alleges fraud, he “must state with particularity the

circumstances constituting fraud,” though he may allege generally “[m]alice,

intent, knowledge, and other conditions of a person’s mind.” Fed. R. Civ. P. 9(b).

A plaintiff may satisfy Rule 9(b)’s heightened pleading requirements if the

complaint sets forth:

(1) precisely what statements were made in what documents or oral representations or what omissions were made, and

(2) the time and place of each such statement and the person responsible for making (or, in the case of omissions, not making) same, and

(3) the content of such statements and the manner in which they misled the plaintiff, and

1 The Banks argue that Hosch abandoned this issue, but we disagree. Hosch made a distinct argument and cited caselaw specific to the theory of respondeat superior. 4 Case: 19-14164 Date Filed: 05/18/2020 Page: 5 of 13

(4) what the defendants obtained as a consequence of the fraud.

Brooks v. Blue Cross and Blue Shield of Fla., Inc., 116 F.3d 1364, 1371 (11th

Cir. 1997) (per curiam) (internal quotations mark omitted). Rule 9(b)’s

requirements apply to state-law fraud and fraud-based RICO claims. See Am.

United Life Ins. Co. v. Martinez, 480 F.3d 1043, 1066–68 (11th Cir. 2007)

(analyzing a plaintiff’s state-law fraud and fraud-based RICO claims under

Rule 9(b) and affirming the dismissal of those claims for failing to meet that rule’s

heightened pleading requirements).

We need not get into the elements of fraud or conspiracy to commit fraud to

decide this case; analyzing the alleged agency relationship between the Banks and

its employee, Stan Salinas, 2 suffices here. Under Georgia law, “[t]he principal

shall be bound by all the acts of his agent within the scope of his authority.”

O.C.G.A. § 10-6-51. “A bare assertion of the existence of an agency relationship,

when made by an outsider to the alleged relationship, is not a statement of fact, but

merely an unsupported conclusion of law.” Thornton v. Carpenter, 476 S.E.2d 92,

94 (Ga. Ct. App. 1996) (alteration omitted).

Under Georgia’s theory of respondeat superior, a principal is liable for the

acts of its agent where the agent is acting “in furtherance of the [principal’s]

2 Hosch focuses exclusively on Salinas’s actions as they relate to this issue, so we will too. It appears that Salinas was the only actor from the Banks with whom Hosch interacted. 5 Case: 19-14164 Date Filed: 05/18/2020 Page: 6 of 13

business . . . and . . . acting within the scope of [the principal’s] business.”

Piedmont Hosp., Inc. v. Palladino, 580 S.E.2d 215, 217 (Ga. 2003). If the agent

commits a tort for reasons unconnected to his employment, the principal is not

liable for that conduct. Id. The principal also is not liable for its agent’s tortious

acts when they are “committed not in furtherance of the [principal’s] business, but

rather for purely personal reasons disconnected from the authorized business of

the [principal].” Id. (internal quotation mark omitted); see also Wittig v. Spa Lady,

Inc. of Marietta, 356 S.E.2d 665, 666 (Ga. Ct. App. 1987) (holding that

employee’s act of forging purported customer’s signature to a company contract

was not within the scope of employee’s employment and, thus, employer could not

be held liable).

“Apparent authority is that which the principal’s conduct leads a third party

reasonably to believe the agent has; it creates an estoppel allowing third parties to

bind a principal to the agent’s acts on account of the principal’s conduct,

reasonably construed by third parties acting in innocent reliance thereon.” Morris

v. Williams, 448 S.E.2d 267, 269 (Ga. Ct. App. 1994). Where the principal made

no manifestations of authority to a third party, “apparent authority is not in issue.”

Id. “Apparent authority is not predicated on whatever a third party chooses to

think an agent has the right to do, or even upon what the agent says he can do, but

[rather] must be based on acts of the principal which have led the third party to

6 Case: 19-14164 Date Filed: 05/18/2020 Page: 7 of 13

believe reasonably the agent had such authority.” Thompson v. Gen. Motors

Acceptance Corp., 389 S.E.2d 20, 21–22 (Ga. Ct. App. 1989) (internal quotation

mark omitted).

Here, the district court did not err in dismissing Hosch’s fraud or conspiracy-

to-commit-fraud claims based on a theory of respondeat superior or apparent

authority against the Banks. Starting with respondeat superior, Hosch failed to

allege enough facts establishing that Salinas’s actions were within the scope of his

employment, notwithstanding the fact that he was the Banks’ employee during the

relevant time. Hosch’s allegations indicate that Salinas converted the fraud

proceeds for his personal use. Hosch did not allege that the Banks received any

proceeds from or otherwise benefited from the fraudulent scheme, which indicates

that the fraudulent scheme did not further their business. Rather, Hosch’s

allegations established that Salinas used his position with the Banks to obtain a

purely personal benefit that did nothing to further the Banks’ interests. If anything,

Hosch’s allegations, taken as true, indicate that Salinas was acting outside of the

scope of his employment when he made fraudulent representations to Hosch.

We do not find Hosch’s insistence to the contrary persuasive. Hosch’s

allegation that Salinas was working for the primary purpose of benefiting the

Banks amounted to a legal conclusion that neither we nor the district court are

bound to accept as true. To the extent that Hosch alleged that the Banks had an

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interest in facilitating a banking relationship with Xchangeagent and Prozer, he

failed to plead facts showing that the Banks’ interest motivated Salinas’s actions.

And nothing suggests that the Banks obtained the relationship with Xchangeagent

and Prozer that they allegedly desired. Therefore, the district court correctly

concluded that the Banks could not be held liable under a theory of respondeat

superior, given the allegations Hosch made.

As for apparent authority, Hosch failed to plead facts showing that the Banks

engaged in conduct that would have cloaked Salinas with the apparent authority to

make the fraudulent misrepresentations that induced Hosch to execute the

Guaranty and provide the personal loan. Hosch says that Salinas was conducting

the type of business that the Banks held him out to perform. But Hosch’s

subjective impressions and beliefs are not enough. Apparent authority could only

have arisen based on representations that the Banks made to Hosch, but Hosch fails

to allege, at least with enough specificity to survive dismissal, that the Banks made

any such representations.3 Finally, any awareness that the Banks had about the

fraud is irrelevant because Hosch did not allege that the Banks made any

3 Hosch relies on Arrington & Blount Ford, Inc. v. Jinks, 270 S.E.2d 27 (Ga. Ct. App. 1980), but that case is unhelpful because of its dissimilar procedural posture: appeal followed from denial of a motion for new trial, id. at 28. And, in any event, here Hosch rested on conclusory allegations and failed to allege facts about the Banks’ representations to Hosch about Salinas and his employment responsibilities and authority to compare the two cases properly. 8 Case: 19-14164 Date Filed: 05/18/2020 Page: 9 of 13

representation to him concerning any internal investigation. Thus, the district court

correctly concluded that the Banks could not be held liable under this theory.

In sum, the district court did not err in dismissing Hosch’s claims against the

Banks because he failed to plead facts that could have established their vicarious

liability.4 We affirm the court’s dismissal of those claims under Rule 12(b)(6).

II.

Next, the district court’s dismissal of Hosch’s claims against Prozer for

Hosch’s failure to comply with its order and the local rule. As an initial matter, we

have jurisdiction to review this issue. Prozer incorrectly argues that the Guaranty

bars Hosch’s claims and, therefore, our jurisdiction. We see no support for this

assertion. At most, the Guaranty would function as a defense to those claims and

would have no bearing on our authority to adjudicate them.

We normally review for an abuse of discretion a district court’s dismissal for

failure to comply with the rules of the court. Betty K Agencies, Ltd. v. M/V

MONADA, 432 F.3d 1333, 1337 (11th Cir. 2005). Under the Northern District of

Georgia’s local rules, “[t]he court may, with or without notice to the parties,

dismiss a civil case for want of prosecution if . . . [a] plaintiff or [his] attorney . . .

4 We need not address punitive damages; we have recognized that, under Georgia law, “[a] punitive damages claim is derivative of a plaintiff’s tort claim, and where a court has dismissed a plaintiff’s underlying tort claim, dismissal of a plaintiff’s punitive damages claim is also required.” Mann v. Taser Int’l, Inc., 588 F.3d 1291, 1304 (11th Cir. 2009).

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after notice . . . fail[s] or refuse[s] to obey a lawful order of the Court in the case.”

N.D. Ga. Civ. R. 41.3(A)(2). “We give great deference to a district court’s

interpretation of its local rules.” United States v. Padgett, 917 F.3d 1312, 1317–18

(11th Cir. 2019) (internal quotation mark omitted).

However, a dismissal with prejudice “is an extreme sanction that may be

properly imposed only when: (1) a party engages in a clear pattern of delay or

willful contempt (contumacious conduct); and (2) the district court specifically

finds that lesser sanctions would not suffice.” Betty K Agencies, Ltd.,

432 F.3d at 1337–38 (internal quotation mark omitted). “Moreover, the harsh

sanction of dismissal with prejudice is thought to be more appropriate in a case

where a party, as distinct from counsel, is culpable.” Id. at 1338. We have stated

that “[o]ur case law has articulated with crystalline clarity the outer boundary of

the district court’s discretion in these matters: dismissal with prejudice is plainly

improper unless and until the district court finds a clear record of delay or willful

conduct and that lesser sanctions are inadequate to correct such conduct.” Id.

at 1339.

The district court’s consideration of alternative, lesser sanctions need not be

explicit, if the record supports the conclusion that the court implicitly found that

such sanctions would not better serve the interests of justice. Zocaras v. Castro,

465 F.3d 479, 484 (11th Cir. 2006). Yet, in Betty K Agencies, Ltd., we clarified

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that, though we had occasionally found implicit in an order the findings necessary

to support dismissal, we had never suggested that the district court need not make a

lesser-sanctions finding. 432 F.3d at 1339. There, while “we look[ed] beyond the

Dismissal Order in search of a reason to affirm,” nothing in the record suggested

that the plaintiff had “acted willfully or contumaciously,” and the plaintiff’s

violation appeared to be its first and only violation of a court rule. Id. at 1340.

A dismissal without prejudice that “has the effect of precluding a plaintiff

from refiling his claim due to the running of the statute of limitations . . . is

tantamount to a dismissal with prejudice, a drastic remedy to be used only in those

situations where a lesser sanction would not better serve the interests of justice.”

Mickles on behalf of herself v. Country Club Inc., 887 F.3d 1270, 1280 (11th Cir.

2018) (internal quotation mark omitted) (citing Burden v. Yates, 644 F.2d 503 (5th

Cir. Unit B 1981), which held that dismissal without prejudice was inappropriate

when it had preclusive effect because the relevant statute of limitations had run, the

plaintiff asserted his noncompliance with three pretrial orders and a prior version

of Local Rule 41.3(A)(2) was due to negligence, and the district court failed to use

lesser sanctions before dismissal).

At play here are several statutes of limitation; key to our decision is the one

for federal RICO actions. “The statute of limitations for [federal] civil RICO

actions is four years,” which “begins to run when the injury was or should have

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been discovered, regardless of whether or when the injury is discovered to be part

of a pattern of racketeering.” Lehman v. Lucom, 727 F.3d 1326, 1328, 1330 (11th

Cir. 2013) (internal quotation mark omitted). Generally, “the filing of a lawsuit

which later is dismissed without prejudice does not automatically toll the statute of

limitations” for federal claims. Justice v. United States, 6 F.3d 1474, 1478–79

(11th Cir. 1993).

Hosch argues that the court abused its discretion by dismissing his claims

against Michael Prozer based on his omission of two documents that the court

ordered him to file. We agree.

To start, the dismissal without prejudice functioned as a dismissal with

prejudice for Hosch’s federal RICO claim against Prozer. Even if we assume that

the statute of limitations started to run on the date that he filed his original

complaint, it ran in November 2014. The district court dismissed Hosch’s claims

in September 2018. Thus, the district court was required to find both that Hosch

engaged in a clear pattern of delay or willful contempt (contumacious conduct) and

that lesser sanctions would not suffice. See Betty K Agencies, Ltd.,

432 F.3d at 1337–38.

But it did not. Setting aside the willfulness finding and Hosch’s related

arguments, at minimum, the district court did not find that lesser sanctions would

not suffice. Further, nothing in the order indicates that the court implicitly

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considered lesser or alternative sanctions, and the record does not suggest that

Hosch’s conduct warranted a dismissal with prejudice. Certainly, Hosch failed to

comply with the district court’s order by omitting documents the court ordered him

to file; this he does not dispute. Rather, he insists that he meaningfully complied

with the order by filing a 25-page brief and other supporting documents and that

his noncompliance was not willful. And it appears that this failure to comply was

his first. Therefore, the district court improperly dismissed the amended

complaint.

Finally, Hosch asserts that the court erred in failing to grant his motion for

summary judgment against Prozer. But because the district court did not reach the

motion’s merits or make initial findings as to the appropriateness of lesser or

alternative sanctions, we remand so that the district court can address those issues

in the first instance.

AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.