United States Court of Appeals,

                                              Fifth Circuit.

                                              No. 92-3723.

                 Lee H. SCHLESINGER, Plaintiff-Cross Claim Defendant, Appellant,

                                                    v.

                          Mitchell W. HERZOG, et al., Defendants-Appellees,

                                                   and

                  Sidney Lassen, et al., Defendants-Cross Claim Plaintiffs, Appellees.

                              Lee H. SCHLESINGER, Plaintiff-Appellant,

                                                    v.

                     CORPORATE REALTY INC., et al., Defendants-Appellees.

                                 Lisa S. HERMAN, Plaintiff-Appellant,

                                                    v.

                     CORPORATE REALTY INC., et al., Defendants-Appellees.

                    Lisa S. HERMAN and Lee H. Schlesinger, Plaintiffs-Appellants,

                                                    v.

                          CORPORATE REALTY INC., Defendant-Appellee.

                                             Sept. 21, 1993.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before WIENER, EMILIO M. GARZA, Circuit Judges and LITTLE,* District Judge.

          LITTLE, District Judge:

          Lee Schlesinger and Lisa Herman brought suit against Mitchell Herzog, Sidney Lassen, and

various corporations controlled by Sidney Lassen, seeking damages pursuant to section 12(2) of the

Securities Exchange Act of 1933 and section 10(b) of the Securities Exchange Act of 1934, as well

as Rule 10b-5. Herman brought an alt ernat ive state claim under the Louisiana theory of unjust

enrichment. The district court denied all of the plaintiffs' claims, including two motions for sanctions.

   *
       District Judge of the Western District of Louisiana, sitting by designation.
For the reasons that follow, we affirm.

                                              I. Background

           Lee H. Schlesinger and his sister Lisa Herman were wealthy. As third-generation members

of the Latter real estate family of New Orleans, they owned partial shares in several central business

district buildings and in Westminster Management Company. Westminster managed the family's

downtown office properties, including three large Poydras Street buildings across from the

Superdome. By 1986, Schlesinger had purchased all other family members' shares in Westminster

except Herman's. He o wned eighty-two percent and was the only shareholder active in the

management of the corporation. Herman owned the remaining stock. The family gave Westminster

complete control in managing its properties. Westminster also managed the personal business,

including the establishment of credit lines, for several members of the family. Income generated by

rental properties, together with borrowings, provided the wherewithal for many of the family

members to live in the style to which they had become accustomed.

           In 1989, however, the family's lifestyle collided with the collapse of the New Orleans real

estate market to create a cash flow crisis. By the end of 1989, credit lines had been exhausted and

the family had insufficient resources to pay ad valorem taxes due. Schlesinger and Herman had drawn

on the family's credit lines in amounts disproportionate to their interest in the properties. Things were

particularly bad for Schlesinger. In December 1989, Westminster reported an annual loss for the

fourth time in five years, and the company's books showed a negative net worth of nearly $1.2

million.

           Westminster's cash-flow crisis prompted the Latter family to search for an investor to supply

a cash infusion for restructuring of shareholders' debts and redevelopment of certain properties. On

29 March 1990, the family held a meeting to discuss a proposal by one of Sidney Lassen's companies,

Sizeler Property Investors, Inc. ("SPI"). At the meeting, the family authorized Schlesinger to prepare

terms for an "asset deal" with SPI. The family engaged Young, Scanlon & Sessums, a Jackson,

Mississippi law firm, to prepare a private placement memorandum setting out the terms of the

intended t ransaction. By 9 April 1990, the Schlesinger and Lassen tentative agreement had been
unanimously approved by the family. In return for a cash infusion loan of $16 million, SPI would

receive repayment at Chase Manhattan Corporation's prime rate plus one percent, as well as fifty-two

percent ownership in the family's Common Street properties.

       Things got worse for Schlesinger, however. On 17 April 1990, an unpaid mortgagee, The

Equitable Life Assurance Society of the United States, threatened foreclosure on the Poydras Street

properties. Not only was this bad news for the members of the family who owned an interest in these

properties, but also Schlesinger felt an added pinch in that losing these propert ies meant losing

approximately one-third of Westminster's management fees. At the suggestion of Mitchell Herzog,

Schlesinger's lawyer and vice chairmen of SPI, Schlesinger went to Lassen for help. Lassen

suggested that Westminster merge into a Lassen-created corporati on. On the same day, at

Schlesinger's request, Herman agreed to the redemption of all her Westminster stock. In the

redemption agreement, Herman acknowledged that she had received value for the shares. Two days

later, Westminster was merged by stock transfer into a new company named Westminster Asset

Management Company ("WAM"), owned one percent by Schlesinger and ninety-nine percent by

Sizeler Realty Company (a management company owned by Lassen).1 In addition to a position in the

management of the new corporation, Schlesinger was to receive twenty percent of net fees earned

the first year or $400,000, whichever was greater.

       By 1 May 1990, the foreclosure crises was over, and on 15 June 1990, a private place

memorandum was issued containing the final terms of the family's "asset deal." In the meantime,

however, auditors from the accounting firm of Ernst & Young had discovered that Westminster had

greater debt than previously revealed. To close the asset deal, the family would have to provide an

additional $3.6 million, an apparently unattainable amount. On Sunday, 9 September 1990,

Schlesinger went to Lassen's ho me, called off the asset deal, and insisted that Lassen unwind the

merger. Lassen refused.

       The next day, 10 September, Schlesinger testified in a federal age discrimination case filed


   1
   The survivor corporation was later renamed Westminster/Sizeler Asset Management
Company and ultimately renamed Corporate Realty, Inc.
against Westminster. He asserted that the company had fired the plaintiff, an elderly security guard,

not because of age, but because Westminster had been in such dire financial straits that it could not

afford to pay the guard's salary. Referring to Lassen as a "white knight," Schlesinger testified that

the merger into Lassen's created corporation had allowed Westminster to survive and had been in the

best interest of all concerned.

       On 12 September 1990, Schlesinger renewed his request to unwind the April transaction.

Lassen responded with a letter refusing to unwind the merger, terminating Schlesinger's employment

with WAM, but confirming that WAM would continue to comply with its agreement to pay

Schlesinger 207 of net fees for one year or $400,000, whichever was greater.

       On 9 October 1990, Schlesinger filed suit to rescind the merger, claiming that Westminster

was a valuable and prestigious company stolen from him by fraud. He denied that "family problems"

played any part in his agreeing to the merger.          Rather, the merger was to have occurred

simultaneously with the asset deal and was pushed through ahead of the asset deal solely because of

Equitable's unexpected foreclosure threat. According to Schlesinger, the only reason he agreed to

the merger was to give Lassen (who knew Equitable's president) "standing" to negotiate a workout

with Equitable—both Lassen and Herzog had assured him that this "merger for convenience only"

would be reversed if the asset transaction was not perfected.

       After various counterclaims, removals, motions to intervene, and consolidations not at issue

here, Schlesinger and Herman litigated claims before the federal district court for damages under

section 12(2) of the Securities Exchange Act of 1933, section 10(b) of the Securities Exchange Act

of 1934, and Rule 10b-5, as well as Herman's unjust enrichment claim. Pursuant to Rule 12(b)(6),

the district court dismissed the plaintiffs' section 12(2) claims for failing to allege that they were

"purchasers" with standing to bring the claim. After a bench trial, the court denied the 10b-5 claim,

finding that the plaintiffs had failed to prove the requisite elements of misrepresentation, scienter,

reliance, and due diligence. The court found that no promise to unwind the merger was ever made.

Rather, faced with financial disaster and the threat of foreclosure, Schlesinger had agreed to the best

deal he could negotiate under the circumstances—a deal he later regretted. The court also denied
Herman's unjust enrichment claim, finding that the redemption of Herman's stock had enriched

Schlesinger, not the defendants.

                                          II. The 10b-5 Claim

        Because the alleged promise to unwind the merger was not documented, resolution of this

case rested on the credibility of testimony. In an effort to remove this appeal from the credibility

realm, the appellants manage to contort their dissatisfaction into at least seven alleged failures of the

district court to make specific findings of subsidiary facts in violation of Rule 52(a), eleven clearly

erroneous findings of fact, and six errors of law.

A. Rule 52(a)

        The appellants first attack the district court's decision on grounds that the court failed to

make specific findings of fact and state separately its conclusions of law as required by Rule 52(a).

Federal Rules of Civil Procedure. In essence, the appellants list their own version of the facts and

then complain that the district court violated Rule 52 by ignoring these "facts."2 The district court

did not ignore facts. It simply found facts contrary to the appellants' liking.

        In a separate section of its opinion labeled "The Law of 10B-5," the district court set out each

element of a 10b-5 claim as defined by this court in Dupuy v. Dupuy, 

, 1014 (5th Cir.),

cert. denied, 

, 

, 

(1977). To establish a Rule 10b-5 violation

in this circuit, the plaintiff must prove: (1) a material misrepresentation in connection with the

purchase or sale of a security (2) committed with scienter by the defendants and (3) relied upon by

the plaintiff, (4) who has exercised due diligence to pursue his own interest so that his reliance is

justifiable. See Stephenson v. Paine Webber Jackson & Curtis, Inc., 

, 1098 (5th

Cir.1988); 

. The court's many-paged opinion detailed its findings of no

misrepresentation, no scienter, no reliance, and no due diligence.

        The district court did not recite every piece of evidence supporting its findings. Nor did it sort

through the testimony of each of two dozen witnesses. But Rule 52(a) " " "exacts neither punctilious

   2
    For example, the appellants argue that the district court ignored the "fact" that the merger
was to unwind if the asset deal failed. The district court, however, specifically found that no such
agreement was made. This finding was the linchpin of the court's decision.
detail nor slavish tracing of the claims issue by issue and witness by witness." ' " Collins v. Baptist

Memorial Geriatric Cent., 

, 194 (5th Cir.1991) (quoting Lopez v. Current Director of

Texas Economic Dev. Comm'n, 

, 434 (5th Cir.1987) (quoting Ratliff v. Governor's

Hwy. Safety Program, 

, 400 (5th Cir.1986))), cert. denied, --- U.S. ----, 

,

(1992). It simply "require[s] findings that are explicit and detailed enough to enable

us to review them under the applicable standard." 

(quoting 

). The district court's opinion easily passes this test.

B. "Clearly Erroneous" Findings of Fact

         It is not difficult to see why the appellants contorted the court's factual findings into Rule 52

violations and errors of law. When, as here, "the district court is faced with testimony that may lead

to more than one conclusion, its factual determinations will stand so long as they are plausible—even

if we would have weighed the evidence otherwise." Nielsen v. United States, 

, 956 (5th

Cir.1992) (citing Anderson v. Bessemer City, 

, 574, 

, 1511-12, 

(1985). Because this case turned almost exclusively "on determinations regarding the

credibility of witnesses, Rule 52(a) demands even greater deference to the trial court's findings."

, 105 S.Ct. at 1512. Where the court's finding is based on its decision to

credit the testimony of one witness over that of another, "that finding, if not internally inconsistent,

can virtually never be clear error." 

standard, none of the district court's findings is

clearly erroneous.

        The appellants challenge eleven of the court's findings. We need consider only one. Because

we find no clear error in the district court's finding that the defendants made no misrepresentation,

we need not address the remaining factual challenges, for without misrepresentation, there can be no

10b-5 liability.

        The alleged misrepresentation was that the defendants promised to undo the merger if the

asset transaction failed. This alleged link between the two transactions is not subject to any writing

whatsoever. The memorandum containing the asset deal's final terms does not mention the merger

and the merger documents do not mention the asset deal. Thus, the court's decision rested almost
entirely on credibility determinations. The appellants claimed that during the two days prior to the

merger, Herzog made oral statements to Schlesinger that the merger would be unwound if the asset

deal fell through. Herzog denied this. Lassen denied that any such agreement had been made

between Lassen and Schlesinger. At trial, testimony was introduced that Herzog had told others that

the merger would be reversed if the asset transaction was not completed. Herzog does not deny that

he suggested that as a possibility but was steadfast in his testimony that such an agreement between

the principals was never prerequisite to the merger. To make the credibility call, the court looked to

the circumstantial evidence surrounding the merger and t o Schlesinger's testimony in the age

discrimination case one day after asking to unwind the merger. The evi dence did not support

Schlesinger's allegation that a promise to unwind was made prior to the merger. Rather, the court

found that a financially desperate Schlesinger had agreed to a merger he later regretted. We find no

clear error.

C. Errors of Law

        The appellants' asserted "errors of law" are not attacks on the court's conclusions of law, but

rather syntactic variations of their factual challenges. As we explained in our Rule 52(a) discussion,

the district court's opinion sets out in detail the necessary elements of a 10b-5 claim in this circuit and

reflects a clear understanding of and strict adherence to these elements. Nevertheless, the appellants

extract six errors of law.

        First, the appellants argue that the court committed an error of law in finding it "significant"

that none of the several merger and pre-merger documents mentioned the alleged promise to unwind.

Apparently, it is the appellants' contention that the court viewed written documentation of the alleged

misrepresentation as a prerequisite to establishing a 10b-5 violation. A reading of the court's

statement in context, however, reveals that it was directed toward credibility. The court expressly

stated in its opinion that it did not consider lack of documentation an issue. At most, the co
                                                                                             urt

viewed the lack of writing as one of the many factors undermining the credibility of Schlesinger's

testimony. If the court had viewed lack of documentation as an impediment to 10b-5 liability, it is

doubtful that it would have spent six days listening to twenty-four witnesses testify as to whether the
alleged oral promise was made. We find no error.

        The appellants' second asserted error of law is that the court placed excessive significance on

Schlesinger's "white knight" testimony. This is really an attack on the district court's finding that no

misrepresentation was made. In making this determination, the court was particularly swayed by

testimony given by Schlesinger one day after he had asked Lassen to unwind the merger. In the age

discrimination suit, Schlesinger attempted to show that an elderly security guard had been discharged

not because of age, but because Westminster was in such dire financial straits that it could not pay

the guard's salary. To this end, Schlesinger testified that he was concerned about the company's

financial future, that the merger had allowed the company to stay in business, that the merger was in

the best interest of all concerned, and that Lassen had been a "white knight." One month later,

Schlesinger filed this suit claiming that he had no economic motive for the merger—it had been for

convenience only. The court found Schlesinger seriously impeached by the earlier testimony. The

appellants point to no authority that would render this credibility call clearly erroneous, much less an

error of law.

        The third assignment of legal error is the district court's finding that the $400,000 "salary"

was consideration for Schlesinger's surrender of Westminster stock in order to accomplish the

merger. This argument is another factual challenge incognito and it too is without merit. The court

did not find the $400,000 paid to Schlesinger to be salary. It constituted consideration for

Schlesinger's stock and management position with the company in the merger. In addition to one

percent ownership (which Schlesinger claims he refused to accept), it was agreed that Schlesinger

would receive $400,000 or twenty percent of net fees, whichever was greater, to be paid in biweekly

payments from April 1990 to April 1991. The obligation to make these payments apparently existed

independent of any services performed by Schlesinger, for even after Schlesinger's employment with

the survivor corporation was terminated in September 1990, the company continued with the

payments through April 1991, until the $400,000 was paid in full. The appellants contend that the

finding constitutes an error of law in addition to being clearly erroneous because the court failed to

determine the value of Westminster and thus, could not have determined that the $400,000 was
adequate compensation. We disagree. The court did not determine that the price paid to Schlesinger

was an adequate one, and because the court never reached damages, nothing required it to do so.

The court's finding that the $400,000 was consideration for the transfer of Schlesinger's stock in the

merger was merely one of several factors militating against the credibility of Schlesinger's claim that

the merger did not stand alone but was to dissolve if the asset deal did not close. If Schlesinger's

story that he received nothing in the merger had been true, it might have bolstered this otherwise

tenuous claim. The court found, however, that while the merger "may not have been the smartest

deal Schlesinger ever made," the consideration received was significant. This, along with other

circumstantial evidence, undermined t he existence of the alleged agreement to unwind. We find

neither clear error nor error of law.

        But the appellants wrench yet another error of law allegation from the district court's opinion.

Pointing to a comment by the court that the plaintiff had created a "speculative grand conspiracy,"

the appellants complain that the court held them to a conspiracy burden of proof. This imaginative

argument must fall with the others, for the court's comment appears to be just that, a comment upon

the plaintiffs' gothic tale of third-generation family fortunes plundered by corporate huns

masquerading as white knights. The plaintiffs' burden of proof is set out in the paragraph preceding

the gratis dictum: "In order to prevail, Plaintiffs must show that the Defendants engaged in fraudulent

practices or made material omissions or misrepresentations in connection with the sale of securities,

upon which Plaintiffs relied, and which ultimately resulted in damages to Plaintiffs." This is precisely

correct. See 

.

        The appellants concoct their fifth error of law from a statement by the court that it is not the

court's function "to throw "liferings' to plaintiffs who are the victims of their own poor business

judgment." The appellants argue that this statement constitutes an error of law because it reflects a

misunderstanding of securities fraud. We disagree. First, even if this "liferings" adage were incorrect,

it would not constitute reversible error, for the district court explained and applied the proper

standard under 10b-5. Second, the statement also happens to be correct. To recover under 10b-5,

a plaintiff must have relied on a fraudulent misrepresentation and must have exercised due diligence
in pursuing his own interest. See 

. The appellants did neither.

        Because the appellants' sixth error of law goes to the 10b-5 element of due diligence, or

justifiability, we need not consider it, having found no clear error in the district court's finding of an

absence of misrepresentation.

                                          III. The 12(2) Claim

        The appellants argue that the district court erred in dismissing the plaintiffs' section 12(2)

claims pursuant to Rule 12(b)(6). We do not reach the merits of this challenge. Although a section

12(2) plaintiff need not establish the 10b-5 elements of scienter and reliance, he must prove that the

defendant made a misrepresentation or omission of material fact in connection with the securities

transaction. Because the appellants have failed to establish the existence of such a misrepresentation,

no 12(2) claim can lie.

                                         IV. Unjust Enrichment

        Herman's jeremiad charges that the trial court failed to evaluate adequately her alternative

state claim of unjust enrichment. To recover under the Louisiana theory of unjust enrichment, a

plaintiff must establish five factors:     (1) the defendant was enriched;        (2) the plaintiff was

impoverished; (3) the enrichment and impoverishment were causally connected; (4) no justification

existed for the enrichment and impoverishment; and (5) the plaintiff has no remedy at law. Minyard

v. Curtis Prod., Inc., 

, 432 (La.1967). The district court found that Herman's transfer

of her stock enriched Schlesinger, not the defendants. In other words, the court found no causal

connection between Herman's impoverishment, if any, and any enrichment on the part of the

defendants.

        Herman owned no stock at the time of the merger. Prior to the merger, at Schlesinger's

request, Herman's stock was redeemed by Westminster. If Westminster had owed Herman for the

redemption at the time of the merger, the survivor corporation would have assumed this obligation

(as it did other outstanding obligations on Westminster's books) and Herman would have had a claim

in contract. But Herman could not assert such a claim because on the date Westminster redeemed

her stock, she signed a document acknowledging receipt of consideration.
       The district court rejected Herman's unjust enrichment claim, finding that Herman transferred

her stock to benefit Schlesinger and that any additional compensation owed her was owed by

Schlesinger. Although any claim Herman might have had against Schlesinger was not before the

court, the trial court noted in dicta that Schlesinger had compensated Herman for her stock by making

payments on her Mercedes. The court noted that in her motion to intervene (which was denied),

Herman stated that "with the exception of the use of a Mercedes Benz automobile, [she] received no

consideration for the transfer of her stock interest." On appeal, Herman calls this clearly erroneous,

claiming that the Mercedes was part of a divorce settlement. We need not address this, however, as

it was dicta and is immaterial to the district court's finding that any enrichment resulting from

Herman's alleged impoverishment enured to the benefit of Schlesinger, not the defendants. This

ultimate finding is supported by Herman's own testimony that it was her understanding that she and

Schlesinger would "settle up later." It is not clearly erroneous.

                                             V. Sanctions

        Finally, the appellants challenge the district court's denial of two motions for sanctions. Prior

to trial, Schlesinger filed a motion for sanctions alleging that certain documents had been back-dated

to 18 July 1990, when in fact the documents were drawn and signed after Schlesinger's employment

was terminated in September 1990. Specifically, Schlesinger alleged that the defendants back-dated

(1) the minutes of the board meeting at which the board ratified the agreement to pay Schlesinger

$400,000 and one percent ownership, (2) the document reflecting this ratification, and (3) the stock

certificate for 100 shares (one percent) issued to Schlesinger. The district court deferred ruling on

the motion until the conclusion of trial. After trial , on the same date that the court rendered its

opinion, the court denied the motion as "inappropriate and unwarranted." The appellants complain

on appeal that the court failed to give specific reasons for denying the motion. We disagree. In light

of the detailed opinion issued the same day as the ruling, this is hardly abuse of discretion. See Hogue

v. Royse City, 

, 1256 (5th Cir.1991).

       The appellants' second motion for sanctions was made orally on the third day of trial, after

the defendants produced a copy of the WAM stock certificate issued and signed by Schlesinger on
19 April 1990, the date of the merger. From the start of the litigation, Schlesinger consistently denied

receiving any stock in the new corporation, arguing that it was not offered until after he was

terminated in September 1990, at which time he refused to accept it. The defendant s maintained

invariably that a certificate was tendered to and accepted by Schlesinger on the date of the merger.

When the defendants produced the copy at trial and admitted that they had discovered it six weeks

earlier, the plaintiffs moved for sanctions arguing nondisclosure. The plaintiffs, however, had not

requested production of the certificate or of copies. The defendants were under no obligation to

disclose that which was not requested. Thus, the motion for sanctions was completely without basis

in law or fact, particularly in light of the defendants' constant position and Schlesinger's vehement

denial that the certificate had been issued. The court did not abuse its discretion.

       The rulings and judgment of the district court are AFFIRMED.