UET RR, LLC v. Comis

• Court: Court of Appeals for the Tenth Circuit
• Decided: June 19, 2018
• Docket: 17-1200
• Status: Unpublished

Opinion

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 This order and judgment is not binding precedent, except under the doctrines of law of the case, res judicata, and collateral estoppel.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