Young v. Hamilton

92 F. App'x 389
Court of Appeals for the Ninth Circuit·Decided October 31, 2003·No. Nos. 01-56557, 01-56573; D.C. No. CV-97-01962-RMB·Published·Cited by 3 cases

Opinion

[391] MEMORANDUM **

William and Sandra Young and Justin McNamara invested funds in what they thought was a riskless high-yield investment program operated by JV Ventures (JW), a Utah limited liability company managed by Alan Williams. Williams arranged for a man named Scott Hamilton to handle the investment. Instead, Hamilton (with the involvement of others, including a man named Clarence Winning) wired the money to a third party in England. Unable to recover anything, the Youngs and McNamara brought suit in the Southern District of California against JW, Williams, and other alleged facilitators of the unauthorized transfer, including Winning. The complaint alleged violations of the civil provisions of RICO and California law (breach of contract, fraud and deceit, and related claims). After a bench trial, the district court concluded that the “investment program” was a fraud and that Williams, JW, Winning, and other defendants were hable under RICO and on many of the state law claims. Williams, JW, and Winning appeal.

Williams contends that the district court erred in holding him hable under civil RICO. A violation of the relevant provision, 18 U.S.C. § 1962(c),1 requires “(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.” Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 496, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985) (footnote omitted). A pattern of racketeering activity requires at least two predicate acts within a ten-year period. See 18 U.S.C. § 1961(5).2

Williams’s only argument against liability under § 1962(c) is that all his actions were part of a single fraudulent scheme, and that under Superior Oil v. Fulmer, 785 F.2d 252 (8th Cir.1986), and Allington v. Carpenter, 619 F.Supp. 474 (C.D.Cal.1985), predicate acts that are part of a single fraudulent scheme do not establish a pattern of racketeering activity. This court, however, has rejected that interpretation of RICO’s pattern requirement. See United Energy Owners Committee, Inc. v. U.S. Energy Management Systems, Inc., 837 F.2d 356, 360-61 (9th Cir.1988). Shortly afterward the Supreme Court rejected it as well. See H.J. Inc. v. Northwestern Bell Telephone Co., 492 U.S. 229, 234-43, 109 S.Ct. 2893, 106 L.Ed.2d 195 (1989); see also Allwaste, Inc. v. Hecht, 65 F.3d 1523, 1528 (9th Cir.1995) (citing H.J., 492 U.S. at 240, 243, 109 S.Ct. 2893). We therefore uphold the district court’s conclusion that Williams violated RICO. Williams does not contest the imposition of vicarious liability on JW for his actions, so the court’s conclusion that JW violated RICO stands as well.

As to the plaintiffs’ California law claims, the court held Williams and JW liable on the claims for fraud, breach of contract, breach of the implied covenant of good faith and fair dealing, and common [392] count. Williams appeals on the ground that other defendants (Hamilton and Matz) carried out the unauthorized transfer of the funds to England. He claims that their actions relieve him of liability.

It is true that in California the defendant in a tort action is not liable if there is a superseding cause that breaks the chain of causation between the defendant’s act and the injury. See, e.g., Powell v. Standard Brands Paint Co., 166 Cal.App.3d 357, 212 Cal.Rptr. 395, 398 (1985). Whether an intervening event is a superseding cause generally depends on whether the intervening event and the resulting injury were reasonably foreseeable. See id.; Arreola v. County of Monterey, 99 Cal. App.4th 722, 122 Cal.Rptr.2d 38, 68 (2002); Restatement (Second) of Torts § 442 (1965). Similarly, in a breach of contract action, the plaintiff must prove that the damages from the breach were reasonably foreseeable. See Wynn v. Monterey Club, 111 Cal.App.3d 789, 168 Cal.Rptr. 878, 882-83 (1980).

Williams’s liability, however, is entirely consistent with these principles. Williams and Hamilton had worked together on unsuccessful investment programs before the program in question, but Williams contracted with Hamilton to carry out the program anyway. In light of the previous “investment” failures, Hamilton and Matz’s loss of the money was well within the foreseeable consequences of Williams’s misrepresentations to the plaintiffs. The district court’s analysis therefore stands regardless whether Williams had any knowledge of or control over the actual unauthorized transfer.

Williams’s final argument is that Utah limited liability company law shields him from personal liability because he dealt with the plaintiffs on behalf of JW rather than in his personal capacity. The Utah Revised Limited Liability Company Act provides that, with certain exceptions not relevant here, no manager of a limited liability company is personally liable for a liability of the company or for the acts of the company or of any other manager of the company. See Utah Code Ann. § 48-2c-601. But Williams offers no explanation how he can invoke Utah law in a suit in federal court in California. Even if Utah law does apply under California choice of law rules, the Utah courts have imposed personal tort liability on corporate directors and officers for fraudulent acts committed in furtherance of corporate business. See Armed Forces Ins. Exch. v. Harrison, 70 P.3d 35, 41 (Utah 2003); cf. Norman v. Murray First Thrift & Loan Co., 596 P.2d 1028, 1030 (Utah 1979); Reedeker v. Salisbury, 952 P.2d 577, 582 (Utah App.1998). Here, since Williams used JW to commit fraud, Utah law does not protect Williams from personal liability for his actions on behalf of the company.

Like Williams, Winning disputes his liability under both RICO and California law. The district court held Winning liable for conspiring to violate RICO, which is unlawful under 18 U.S.C. § 1962(d).3 Winning’s principal argument against RICO liability-that he committed no predicate acts-is ineffective. Section 1962(d) forbids the mere agreement to violate RICO. It does not require that the defendant actually have committed predicate acts. Cf. Oki Semiconductor Co. v. Wells Fargo Bank, 298 F.3d 768, 774-75 (9th Cir.2002). Winning’s other arguments against RICO liability also rest on incorrect statements of § 1962(d)’s requirements.

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Young v. Hamilton, 92 F. App'x 389 (9th Cir. 2003).

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