EDITH BROWN CLEMENT, Circuit Judge:
Following a jury trial, the district court entered judgment imposing liability on Defendant-Appellant Wayne Triche for violations of the Louisiana Securities Law, La. Rev.Stat. Ann. § 51.701 et seq. Triche appealed the judgment to this court and, for the reasons to be explained, we AFFIRM.
The facts developed at trial, consistent with the jury's verdict, are as follows. Defendant Ken Buhler was an auctioneer specializing in antique furniture. Buhler met co-defendant Triche, a certified public accountant, in 1990, and shortly thereafter hired Triche's then accounting firm, Triche and Associates. In the late 1990s, with the help of Triche and Associates, Buhler launched "Go Antiques," an internet antique furniture business. Triche and Associates helped Buhler draft prospectuses for Go Antiques, raising approximately eight and a half million dollars.
Buhler was fired from his dual roles as president and CEO of Go Antiques on December 20, 2002. Prior to his termination, Buhler took out a number of loans in connection with Go Antiques that left him personally indebted to First Bank for just over one million dollars. Buhler also had a number of outstanding claims and judgments against him totaling over half a million dollars. Triche was aware of these debts. Buhler considered Triche his "business advisor" and close friend and went to Triche for advice after his termination from Go Antiques. Triche advised him to get back into the auction business.
Buhler set out to form a new antique company in the fall of 2003, which ultimately took the name of Antique Investment Group, LLC ("AIG"). With the help of Triche and a partner in Triche's consulting firm, Daryl DeArmond, Buhler created a prospectus (or "AIG pool document") to raise money for AIG from private investors. The AIG pool document explained that "[t]he investors will make loans to [AIG], the proceeds of which will be used to buy inventory pool items." The inventory would then be sold through auctions, showrooms and warehouses, and over the internet. Investors were entitled to a percentage of AIG's "gross profits,"
Buhler used the AIG pool document to solicit investments from Raymond Heck, Doug Hamley, Charles Moore, Joseph McKearn, and Allen Richardson (collectively "plaintiffs"). Between September 12, 2003, and May 5, 2004, plaintiffs advanced Buhler $324,949.00. Buhler reported to Triche each time he obtained money from an investor. Triche, however, did not have direct contact with any of the investors except for Heck. Buhler told Heck that Triche's firm would provide accounting services for AIG, and when Heck called Triche to inquire about the company's legitimacy, Triche assured him it was the "real deal."
During the time Buhler was soliciting investments for AIG, Buhler and Triche had multiple meetings with representatives of First Bank to address his debt obligations. On November 25, 2003, Buhler and Triche had a meeting with Andy Adler, Buhler's loan officer, and Rick Holland, the president of First Bank. Triche was a shareholder in First Bank and had a personal relationship with Adler and Holland. During this meeting, or around this time period, First Bank asked Buhler for "more collateral" for his outstanding loans because his "debt to inventory ratio ... [was] upside down." The only assets he had to pledge were the inventory of AIG, which had been purchased with plaintiffs' funds. On December 17, 2003, Buhler and Triche again met with representatives of First Bank regarding his debt and borrowing capacity. An invoice from Triche and Associates billed for Triche's time as "meeting with client and bankers regarding loan package and restructure of present debt." The bank demanded additional security from Buhler and, consequently, Buhler "ended up having to pledge assets belonging to [AIG] to the bank in order to get [his] loans restructured."
Triche instructed Buhler to pledge AIG's inventory to First Bank. Triche knew that the AIG pool document promised that the investors' loans would be secured by this inventory, and had specifically discussed this fact at the December 17, 2003 meeting with First Bank. On May 3, 2004, Buhler wrote a letter to First Bank, addressed to Andy Adler, titled "Re: In Reference to Loan Restructuring Proposal." In this letter, Buhler agreed to pledge AIG's inventory to "secure" his existing debt and open up a line of credit for AIG. Buhler wrote that he had "spent a significant amount of time" meeting with Triche "to come up with the best possible financial structure of [Buhler's] indebtedness with First Bank and the integration of that relationship with [his] new investor groups." Buhler proposed that the "balance of [his] current inventory loan would be converted to a working line of credit at a favorable interest rate for [him] personally and secured by first position in 100% of all inventory (including all inventory purchased with investor funds)." Buhler continued that pledging his AIG inventory would "secure this portion of the converted debt making your loan to value ratio favorable."
Buhler subsequently defaulted on his line of credit from First Bank. On July 13, 2005, First Bank's successor, State Bank & Trust, foreclosed on Buhler's AIG inventory. Plaintiffs sued Buhler and Triche
The district court denied Triche's motions for judgment as a matter of law after plaintiffs rested and at the close of evidence. Over plaintiffs' objections, the district court refused to instruct the jury on the Louisiana Securities Law, La.Rev.Stat. Ann. § 51:712. The court agreed with Triche's counsel that the elements of the state claim were identical to those under federal law, and concluded that the state law claim was "assumed" in plaintiffs' claim under Rule 10b-5.
The verdict form — in "yes or no" format — asked the jury whether each of the five elements of a Rule 10b-5 claim were met for each plaintiff as to both Buhler and Triche. The first element asked whether the individual defendant "used an `instrumentality of interstate commerce' in connection with the advance of funds ... to [AIG]" for at least one of the plaintiffs. The verdict slip then instructed the jury to consider each of the remaining four elements sequentially for each plaintiff, continuing on to the next element only if it answered "yes" to the previous one. If all elements were satisfied, the jury had the option to award damages to that plaintiff.
In determining Buhler's liability, the jury answered in the affirmative for every element as to every plaintiff. With regard to Triche, however, the jury answered "yes" to the interstate commerce element for Heck only, and answered "no" as to the other plaintiffs. Because the verdict form instructed that the interstate commerce element needed only be satisfied in connection with one plaintiff, the jury then moved on to consider the remaining four
When the verdict was returned, the district court informed the parties that "the jury did not follow the instructions" because it had awarded damages for each plaintiff against Triche even though it did not find that he used an instrumentality of interstate commerce in connection with four of the plaintiffs. The court announced that it planned to disregard the damage award against Triche for all plaintiffs except Heck. Plaintiffs objected on the ground that liability could be imposed on both defendants so long as one of the defendants was found to have used an instrumentality of commerce. The district court stated that it would withhold its ruling until briefing by the parties.
Plaintiffs subsequently submitted a "Motion to Enter Judgment in Accordance with Verdict Form" and argued that the verdict should be upheld because the jury found that Buhler used an instrumentality of interstate commerce as to all defendants, or, in the alternative, because their securities claim under Louisiana law did not require that an instrumentality of interstate commerce be used at all. Without explanation, the district court entered judgment on June 22, 2011, in the amounts recorded on the verdict form.
Plaintiffs first moved for attorney's fees on June 21, 2011, one day before the district court entered judgment. The district court dismissed plaintiffs' motion for attorney's fees with instructions to refile after it ruled on postjudgment motions.
On June 29, 2011, plaintiffs moved to amend the judgment pursuant to Federal Rule of Civil Procedure (or "Rule") 59(e) to include prejudgment interest and provide for joint and several liability among Triche and Buhler. On July 20, 2011, Triche timely filed his renewed motion for judgment as a matter of law under Rule 50(b) as to plaintiffs' claims under Rule 10b-5 and the Louisiana Securities Law.
The district court denied Triche's motions for judgment as a matter of law and for a new trial on September 28, 2012. In its ruling, the district court stated that "the verdict form sets forth all necessary elements for a finding of liability against [Triche]" and explained that its initial comment that the jury did not find the requisite elements to impose liability was "in error as there were sufficient elements to hold [Triche] liable under state law, not
On September 30, 2012, plaintiffs filed their second motion for attorney's fees. On July 2, 2013, in a document titled "Ruling and Order," the district court granted plaintiffs' Rule 59(e) motion with respect to prejudgment interest, but denied the motion's request to declare Triche and Buhler jointly and severally liable. The court again stated that "only the elements for liability under state law were found by the jury," and concluded that defendants could not be held jointly and severally liable under Louisiana law. The court ordered plaintiffs "to file a motion and proposed order within 14 days of this Ruling specifying the amounts owed by each defendant to each plaintiff, including interest."
The July 2, 2013 Order also denied plaintiffs' second motion for attorney's fees for failure to submit time sheets in compliance with Local Rule 54.2, but invited them to refile the motion in accordance with the rule. On July 12, 2013, Triche moved to toll the appeal deadline until the court ruled on plaintiffs' refiled motion for attorney's fees pursuant to Rule 58 and Federal Rule of Appellate Procedure (or "FRAP") 4(a)(4)(A)(iii). The district court granted the motion the same day and stayed the running of the appeals deadline until the court ruled on any refiled motion in an "Amended Final Judgment."
On August 5, 2013, plaintiffs filed a "Motion for Reconsideration." In this motion, plaintiffs renewed their request for attorney's fees, argued that the district court erred in denying their Rule 59(e) motion for joint and several liability, and provided a proposed judgment for each plaintiff that included the damages assessed against Triche in the jury verdict "plus legal interest from [the date the promissory note was issued] until paid." On February 4, 2014, the district court issued a "Ruling, Order and Judgment." The district court denied plaintiffs' fee motion for again failing to comply with Local Rule 54.2 and denied plaintiffs' request for reconsideration — treating it as a motion under Rule 60(b) — of the court's refusal to impose joint and several liability. The ruling also included judgments for each of the plaintiffs against Buhler and Triche. The judgments, for the first time, specified that that prejudgment interest would be paid at the statutorily-prescribed state rate from the date of the issuance of the promissory note until June 22, 2011 — the date of the initial judgment — and thereafter at the federal postjudgment rate, "until paid."
Triche filed a notice of appeal on February 14, 2014. On appeal, Triche argues that the district court erred by denying his motions for judgment as a matter of law and giving incomplete jury instructions. Triche also claims that there was insufficient evidence for the jury to find him liable under the state or federal securities laws. Plaintiffs moved to dismiss Triche's appeal as untimely and argue that the jury's verdict on the federal claim should be reinstated.
"We review de novo the district court's denial of a motion for judgment as a matter of law, applying the same standard as the district court." Foradori v. Harris, 523 F.3d 477, 485 (5th Cir.2008) (internal quotation marks omitted). A motion for judgment as a matter of law in a case tried by a jury, however, "is a challenge to the legal sufficiency of the evidence supporting the jury's verdict." Hiltgen v. Sumrall, 47 F.3d 695, 699 (5th
Plaintiffs first move to dismiss Triche's appeal for lack of jurisdiction on the grounds that it was untimely. See Freudensprung v. Offshore Technical Servs., Inc., 379 F.3d 327, 334 (5th Cir.2004) ("A timely filed notice of appeal is a jurisdictional prerequisite to appellate review." (alteration omitted)). The district court entered its initial judgment on June 22, 2011. In civil cases between private parties, the litigants have thirty days from the entry of judgment to file a notice of appeal unless certain postjudgment motions are filed before that time period has lapsed. See FRAP 4(a)(1)(A), (4)(A). As relevant here, timely filed postjudgment motions under Rules 50(b) and 59 will toll the thirty-day period for filing a notice of appeal until the last such remaining motion is decided. FRAP 4(a)(4)(A)(i) & (iv)-(v). A motion for attorney's fees under Rule 54 will also extend the time to appeal if, before a notice of appeal has been filed, the court orders that the motion will have the same tolling effect as one under Rule 59. FRAP 4(a)(4)(A)(iii); Rule 58(e).
Triche's February 14, 2014 appeal was timely if (1) any of plaintiffs' motions for attorney's fees tolled the time period for appeal until that date or (2) the district court's February 4, 2014 Order finally disposed of plaintiffs' Rule 59 motion for prejudgment interest.
Plaintiffs argue that the district court's disposition of their Rule 59(e) motion on July 2, 2013 disposed of the final postjudgment motion capable of tolling the appeal deadline and therefore started the thirty-day clock. Plaintiffs reason that the only extant issues after the July 2, 2013 Order were a ministerial calculation of legal interest and a decision on attorney's fees, which they contend do not affect the finality of a judgment.
Relying on Budinich v. Becton Dickinson and Co., 486 U.S. 196, 199-203, 108 S.Ct. 1717, 100 L.Ed.2d 178 (1988), plaintiffs argue that an outstanding issue of attorney's fees does not prevent a judgment from becoming final. Triche responds that the district court's order tolling the appeal deadline until it disposed of plaintiffs' motion for attorney's fees prevented the deadline from running until the court denied the motion on February 4, 2014.
Plaintiffs correctly state the holding of Budinich, but misunderstand its import here. In 1993, Congress amended FRAP 4(a)(4) to conform to Budinich. See FRAP 4, Advisory Committee Notes, 1993 Amendments. The Rule now provides that a timely filed motion for attorney's fees under Rule 54 will delay the time for an appeal "if the district court extends the
Rule 58(e) provides that "if a timely motion for attorney's fees is made under Rule 54(d)(2), the court may act before a notice of appeal has been filed and become effective to order that the motion have the same effect under [FRAP] 4(a)(4) as a timely motion under Rule 59." The first issue is whether plaintiffs' fee motion was timely.
Rule 54(d)(2)(B)(i) provides, in relevant part, that "[u]nless a statute or a court order provides otherwise, the motion [for attorney's fees] must ... be filed no later than 14 days after the entry of judgment." (emphasis added).
There is nothing in the text of Rule 58(e) that prevents a district court from ordering that a prospective timely fee motion will toll the deadline for appeal. The rule simply states that "if a timely motion for attorney's fees is made," the court may order that the motion has the same tolling effect as one under Rule 59, provided that the order is entered "before a notice of appeal has been filed and become effective." The only temporal limitation on the court's authority to treat a Rule 54 motion for attorney's fees as a motion under Rule 59 is that the order must be issued before a party has filed a notice of appeal and before the time to notice an appeal has expired. See Burnley v. City of San Antonio, 470 F.3d 189, 200 (5th Cir.2006) (holding that even if no appeal is taken, the district court cannot "revive and retroactively delay [a party's] time to appeal from the judgment on the merits after that judgment ha[s] become final and unappealable"). Thus, a district court may order that a motion for attorney's fees has the same tolling effect as a motion filed under Rule 59 even if the order is entered before a fee motion is filed, so long as: the fee motion is timely, no appeal has been noticed, and the time for appeal has not expired.
In dicta, the Second Circuit has endorsed a contrary interpretation. In holding that a Rule 58(e) order can only toll the time for appeal while the possibility of an appeal exists, the Second Circuit — interpreting an iteration of the rule prior to the 2007 amendments
This conclusion is strengthened when one considers the "intertwined provisions" of FRAP 4(a)(4), Rule 58, and Rule 54. Mendes Junior, 215 F.3d at 311. FRAP 4(a)(4)(iii) provides that a timely fee motion under Rule 54 will extend the time for appeal if the district court designates that it will have such effect under Rule 58(e). Rule 54, in turn, permits a district court, by court order, to determine the timeliness of a fee motion. It follows that a court, in setting a deadline for the filing of a fee motion consistent with its power under Rule 54, may also order that a complying motion will toll the time for appeal under Rule 58(e). If Rule 58(e) is read to prevent a district court from treating an anticipated fee motion as one under Rule 59, the district court will be forced to file two orders: one permitting an extension of time; and, once the fee motion that was the subject of the court's first order is filed, a separate order declaring that it will toll the time for appeal.
Even assuming that the district court's Rule 58(e) Order was ineffective, Triche's appeal would still be timely. Triche argues that the district court's July 2, 2013 Order did not completely dispose of plaintiffs' Rule 59 motion for prejudgment interest, and that this disposition was not accomplished until the court's February 4, 2014 Order and Judgment. Plaintiffs respond that the June 22, 2011 Judgment was a final judgment even though it made no mention of interest because prejudgment and postjudgment interest were both statutorily mandated and thus all that remained was a ministerial calculation.
Plaintiffs' argument ignores the Supreme Court's admonition that "prejudgment interest is an element of [a] plaintiff's complete compensation" and a district court, in deciding whether to award prejudgment interest (and how much), must examine "matters encompassed within the merits of the underlying action." Osterneck v. Ernst & Whinney, 489 U.S. 169, 175-76, 109 S.Ct. 987, 103 L.Ed.2d 146 (1989) (alterations omitted). For this reason, the Supreme Court has held that a postjudgment motion for discretionary or mandatory prejudgment interest is a Rule
The question remains whether the district court's July 2, 2013 Order completely disposed of plaintiffs' Rule 59(e) motion for prejudgment interest seven months before Triche's appeal. In that Order, the district court announced that it would award prejudgment interest at the Louisiana statutory rate and specified the date from which the interest would run. This Order could be interpreted to contain the requisite amount of information pertaining to the award of prejudgment interest to constitute a final amended judgment. See, e.g., SEC v. Carrillo, 325 F.3d 1268, 1272 (11th Cir.2003) (holding that "if the judgment amount, the prejudgment interest rate, and the date from which prejudgment interest accrues have been established ... the court's failure to calculate the precise amount of prejudgment interest does not prevent the court's order from constituting a final judgment.").
It is apparent, however, that the district court did not intend for its July 2, 2013 Order to be final. Rule 58(a) requires that "[e]very judgment and amended judgment must be set out in a separate document."
Plaintiffs' motion to dismiss Triche's appeal for lack of jurisdiction is DENIED.
Triche argues that the district court's judgment must be reversed because the court gave "incomplete" jury instructions under federal law and no instructions at all under state law. Because of the confusing procedural posture, both parties misunderstand the district court's final judgment and the issues on appeal. The district court did not hold Triche liable under federal law. As detailed above, after the district court announced its intention to disregard much of the damages award against Triche, plaintiffs argued that the verdict was proper under both the federal and state securities statutes. The district court subsequently entered a judgment against Buhler and Triche consistent with the jury's award of damages, without explanation as to whether Triche's liability rested on Rule 10b-5, the Louisiana Securities Law, or both statutes. In its orders denying Triche's Rule 50(b) motion and granting-in-part plaintiffs' Rule 59(e) motion, the district court stated that the jury's verdict against Triche satisfied the elements of plaintiffs' state law claim, but not their federal law claim.
Whether this "clarification" is viewed as the court's fixing of a clerical error in its June 22, 2011 judgment — i.e. a "failure to memorialize part of its decision," Garamendi v. Henin, 683 F.3d 1069, 1079 (9th Cir.2012) — or as the court's exercise of its authority to substantively amend its initial judgment in response to the parties' postjudgment motions, the final disposition in district court was that Triche's liability is predicated entirely on La.Rev.Stat. Ann. §§ 51:712 & 714. See In re Galiardi, 745 F.2d 335, 337 (5th Cir.1984) (Rule 60(a) permits a court, at any time, "to correct omissions in a judgment that had been intended at the time of its entry," but "does not grant a district court carte blanche to supplement by amendment an earlier order by what is subsequently claimed to be an oversight or omission."); Rivera v. PNS Stores, Inc., 647 F.3d 188, 198-99 (5th Cir.2011) ("[A] change to a judgment that affects the substantive rights of the parties is beyond the scope of
Triche also challenges the district court's failure to instruct the jury on the elements of a claim under La.Rev.Stat. Ann. §§ 51:712(A) & 714(B), and failure to require the jury to make a factual finding as to whether or not Triche was a "seller" or "control person" under the Louisiana Securities Law. Triche, however, has forfeited his right to raise these claims here. Under the invited error doctrine, "[a] party cannot complain on appeal of errors which he himself induced the district court to commit." United States v. Lopez-Escobar, 920 F.2d 1241, 1246 (5th Cir.1991). "This Court has made clear that the invited error doctrine applies to jury instructions as well as evidentiary rulings." United States v. Baytank (Houston), Inc., 934 F.2d 599, 606-07 (5th Cir.1991).
The district court refused to instruct the jury on plaintiffs' state law claim because it concluded that the elements of the claim were identical to a claim under Rule 10b-5. This determination was clearly erroneous. To establish a claim under Rule 10b-5, a plaintiff must prove "1) a misstatement or omission 2) of material fact 3) occurring in connection with the purchase or sale of a security, that 4) was made with scienter and 5) upon which the plaintiff justifiably relied, 6) and that proximately caused injury to the plaintiff." Brunig v. Clark, 560 F.3d 292, 295-96 (5th Cir.2009) (internal quotation marks omitted). Section 712 of the Louisiana Securities Law, La.Rev.Stat. Ann. § 51:712, is not based on Section 10(b) of the Securities and Exchange Act of 1934, but is "[m]odeled after Section 12(2) of the Securities Act of 1933." State v. Powdrill, 95-2307 (La.11/25/96), 684 So.2d 350, 354. The Louisiana statute provides:
La.Rev.Stat. Ann. § 51:712.
It must first be noted that the statute contains a scrivener's error that inverts its purpose. As currently written the statute imposes liability on "any person" who makes a material misstatement or omission "if such person in the exercise of reasonable care could not have known of the untruth or omission." That is, the statute penalizes a seller that did not know, and, acting with reasonable care, still could not have known, of the falsity of the statement or the misleading nature of the omission.
The origin of this mistake is clear. Unlike Section 12(2) of the Securities Act of 1933, the Louisiana Securities Law was also intended to serve as a criminal statute. The previous version of the statute was identical to the current version except for the last clause. That iteration made it "unlawful for any person" to make a material misstatement or omission "if such person
La.Rev.Stat. Ann. § 51:712(A)(2) thus requires the plaintiff to show that:
Ponthier v. Manalla, 06-632 (La.App. 5 Cir. 1/30/07); 951 So.2d 1242, 1255 (quoting Taylor v. First Jersey Securities, Inc., 533 So.2d 1383, 1386 (La.App.4 Cir. 1988)).
There are obvious differences between the elements required to establish liability under Rule 10b-5 and Louisiana's Section 712. As the district court acknowledged in recognizing the error in its verdict form, Section 712 does not require a connection to interstate commerce. Next, Section 712 does not require a plaintiff to establish scienter, but, like Section 12(2) of the Securities Act of 1933, requires only a showing that the defendant was negligent. See Landry v. Thibaut, 523 So.2d 1370, 1380 (La.Ct.App.5 Cir.1988); Dupuy v. Dupuy, 551 F.2d 1005, 1023 n. 31 (5th Cir.1977) (Section 712 "measures the conduct of defendants against a negligence standard of care."). Also like its federal analog Section 12(2), Section 712 does not require a
Thus, the district court erred in requiring the jury to find the elements of a Rule 10b-5 claim to impose liability under Section 712 of the Louisiana Securities Law. But this error was committed at Triche's insistence. In his proposed jury instructions, Triche represented that the provisions of the Louisiana Securities Law are analogous to Rule 10b-5, and thus that his suggested federal jury charges also covered plaintiffs' claims under Section 712. At the charging conference, it was plaintiffs' counsel that requested a separate instruction for the state claim. In fact, plaintiffs' counsel specifically requested an instruction on Louisiana's control person statute — the omission of which Triche now alleges prejudiced him. Triche's counsel, on the other hand, not only failed to object to the omission of a state law instruction, but encouraged the district court to reject plaintiffs' proposed instruction and erroneously argued that Louisiana law is "replete" with jurisprudence that the state statute contains the same elements as a claim under Rule 10b-5. Because Triche invited the error he now complains of, he is foreclosed from seeking relief from this court. See United States v. Gray, 626 F.2d 494, 501 n. 2 (5th Cir.1980) ("The invited error doctrine bars reversal even if the instruction constituted plain error.").
Triche next argues that there was insufficient evidence from which a properly instructed jury could find that he was a "seller" of the AIG securities or a "control person" of AIG under Louisiana law. Because these questions were not submitted
Section 712(A) makes it unlawful for a seller to make a material misstatement or omission in a prospectus. See Powdrill, 684 So.2d at 353; Dupuy, 551 F.2d at 1024. Section 714(A) imposes liability on "[a]ny person who violates [Section] 712(A)." La.Rev.Stat. Ann. § 51:714(A). Because there is a dearth of law interpreting the definition of a seller under the state statute, we look to federal law interpreting the Louisiana law's model, Section 12(2) of the Securities Act of 1933. Powdrill, 684 So.2d at 353. Section 12(2) requires a two-step inquiry to determine if a defendant is a "seller" within the meaning of the statute: "(1) who passed title to the purchaser or solicited the title-passing transaction; and (2) from whom did the plaintiff buy the security?" Ins. Co. of N. Am. v. Dealy, 911 F.2d 1096, 1101 (5th Cir.1990) (applying the rule articulated in Pinter v. Dahl, 486 U.S. 622, 108 S.Ct. 2063, 100 L.Ed.2d 658 (1988), for determining who is a seller under Section 12(1) of the Securities Act of 1933 to the same inquiry under Section 12(2)).
It is clear that Triche was not a "seller" of the AIG securities under Section 712. Triche did not solicit any of the plaintiffs, nor did any of the plaintiffs purchase AIG securities from him. On the other hand, it is equally clear that Buhler was a "seller" of the AIG securities under Section 712 (Triche does not argue to the contrary) and, as such, is liable to plaintiffs under Section 714(A).
Section 714(B) of the Louisiana Securities Law provides that:
La.Rev.Stat. Ann. § 51:714(B) (emphases added). Thus, Triche is liable for Buhler's primary violations of Section 712 if he "directly or indirectly control[led]" him, unless Triche "sustains the burden of proof that he did not know and in the exercise of reasonable care could not have known" of the material omissions in the AIG pool document giving rise to Buhler's liability.
In determining who is a "control person," the Fifth Circuit similarly construes the control person provisions in Section 15 of the Securities Act of 1933, 15 U.S.C. § 77o, and Section 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. § 78t(a). See e.g., Paul F. Newton & Co. v. Tex. Commerce Bank, 630 F.2d 1111, 1115 (5th Cir.1980). Control person liability does not require participation in the fraudulent transaction. G.A. Thompson & Co. v. Partridge, 636 F.2d 945, 958 (5th Cir.1981). But a plaintiff "must at least show that the defendant had an ability to control the specific transaction or activity upon which the primary violation is based." Meek v. Howard, Weil, Laboisse, Friedrichs, Inc., 95 F.3d 45, at *3 (5th Cir.1996) (unpublished decision) (citing Abbott v. Equity Group, Inc., 2 F.3d 613, 619-20 (5th Cir.1993)).
The alleged fraudulent conduct is the omission of Buhler's financial condition and a proviso from the prospectus explaining that, despite the prospectus's statement that plaintiffs' loans would be secured by the AIG inventory purchased with the money, Buhler could pledge the promised collateral to another entity with a priority lien. Buhler's testimony evinced that he was completely dependent on Triche after he was fired from Go Antiques. Buhler went to Triche for guidance after his termination and Triche advised Buhler to get back into the antique business, precipitating the formation of AIG. Triche contributed to the AIG pool document, including the portion that stated that the investors' loans would be collateralized with AIG inventory. Triche was the "financial guy," and approved the language in the prospectus. Charlotte Glaspie, Buhler's former secretary (whom Buhler fired and had not spoken to until questioning her at trial), testified that upon completing the AIG pool document, Triche remarked that it was "a good document" and said "we're going to raise some money and we're going to get Ken and them back flush." Heck testified that he called Triche to determine if he should invest in AIG and Triche told him it was the "real deal."
AIG was created as an entity to pool investor funds, and during the time Buhler was soliciting investments, AIG's main purpose was capital acquisition. Buhler testified that he reported to Triche "every single time" he obtained money from an investor. Buhler also testified that he would not do anything substantial without Triche's "blessing." He would consult with Triche about all decisions except for "day-to-day small things in the operation."
During the time Buhler was soliciting investments, Triche and Buhler met with Buhler's loan officer and the president of First Bank to discuss the "restructuring of his debt." Buhler owed over a million dollars to First Bank, and although his debt apparently was not yet delinquent, he had no plan other than AIG to come up with the money. Triche was a shareholder in First Bank and had a personal relationship with its president. When First Bank demanded more collateral from Buhler, Triche instructed Buhler to pledge the AIG inventory purchased with the investors'
The district court's (implied) determination that Triche controlled Buhler was not clearly erroneous. Buhler testified, in sum, that: he was dependent on Triche to get him out of debt; Triche advised him to get back into the auction business; Triche contributed and approved the financial concepts detailed in the prospectus; Buhler checked in with Triche after every investment; during the time Buhler was soliciting investments, Triche conducted meetings with his friends at First Bank to find a solution to satisfy Buhler's million dollar debt; Triche discussed the AIG inventory that was promised to the investors with First Bank; Triche instructed Buhler to pledge AIG's inventory to First Bank; and Buhler, relying on Triche, obliged. The evidence permits a finding that Triche effectively controlled Buhler in the creation of AIG, drafting of the relevant portions of the AIG pool document, soliciting of loans from investors, and pledging of AIG's inventory to First Bank.
To be sure, there is also evidence suggesting that Triche was only peripherally involved, at least in the formation of the prospectus and at the fundraising stage. Buhler testified that AIG was his business and that Triche was an "advisor." Out of the "twenty or thirty" meetings between Buhler and DeArmond relating to the AIG pool document, Triche attended only "three or four." Triche knew the prospectus would be used to raise money, but never explicitly directed Buhler to collect funds. And, although Buhler testified that he notified Triche every time he obtained a loan from an investor, Buhler did not say that Triche offered anything more than "great job" in response.
Whatever we would have made of these potentially conflicting inferences in the first instance, the clear error standard "plainly does not entitle a reviewing court to reverse the finding of the trier of fact simply because it is convinced that it would have decided the case differently." Anderson v. Bessemer City, 470 U.S. 564, 573, 105 S.Ct. 1504, 84 L.Ed.2d 518 (1985). When "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, 976 F.2d 951, 956 (5th Cir.1992). In other words, "[w]here there are two permissible views of the evidence, the factfinder's choice between them cannot be clearly erroneous." Anderson, 470 U.S. at 574, 105 S.Ct. 1504. Because the district court's interpretation of the evidence was certainly plausible, Triche's sufficiency argument fails.
Triche's reliance on Solow v. Heard McElroy & Vestal, L.L.P., 44,042 (La.App. 2 Cir. 4/8/09); 7 So.3d 1269, is misplaced. In Solow, the Louisiana Court of Appeals held that a CPA firm that served as a
On appeal, Triche does not challenge or brief the insufficiency of the evidence as to any of the other elements of plaintiffs' state law claim under Section 712. Triche does assert that there is insufficient evidence to find that he had scienter under Rule 10b-5, but, as discussed above, the district court did not find him liable under the federal statute.
Notwithstanding this waiver, the jury could have reasonably concluded, as it did, that Buhler and Triche acted with scienter. Plaintiffs' theory of the case was that Triche oversaw Buhler's creation of AIG and solicitation of funds with the intent to convince Buhler to pledge those funds to First Bank, in which he had a substantial financial interest.
Moreover, plaintiffs were not required to prove Triche's intent to commit fraud to find Triche liable under Section 714(B). Plaintiffs needed only to show that Buhler, in the exercise of reasonable care, could have discovered the material omissions in the AIG pool document, and that Triche, as a control person, did not sustain his burden of proving that, in the exercise of reasonable care, he could not have known of the omissions or the facts rendering the omissions materially misleading. See La. Rev.Stat. Ann. §§ 51:712 & 714. In other words, although the burden is flipped, the showing needed to impose primary liability on a seller and secondary liability on a control person under the Louisiana Securities Law is only negligence. The court could have concluded, consistent with its judgment, that Buhler and Triche did not act with reasonable care in soliciting hundreds of thousands of dollars of loans and promising that the loans would be secured by inventory purchased with the money, while failing to disclose that Buhler was bankrupt, heavily indebted, and, at the very least, contemplating pledging the promised inventory to First Bank. Indeed, Triche does not even argue that the omissions were not negligent. Accordingly, Triche's claim that the evidence does not support the district court's judgment of liability under the Louisiana Securities Law fails.
Finally, plaintiffs dedicate almost their entire brief to arguing that Triche is liable under Rule 10b-5 and, accordingly, that the "verdict of the jury on the Rule 10b-5 claim must be reinstated." Plaintiffs contend that the district court erred in holding that the verdict supported liability solely under the state statute because only one use of an instrumentality of interstate commerce is required in connection with a scheme to defraud in a Rule 10b-5 action.
The district court denied plaintiffs' motion for joint and several liability on the grounds that they failed to "establish the requisite conspiracy" for its application under state law. Thus, as the judgment stands, plaintiffs can collect only 40% of the damage award — the portion of liability the jury assigned to Triche. But because the jury found that Triche acted "knowingly and with intent to deceive, manipulate, or defraud," if Triche is held liable for securities violations under Section 10(b) and Rule 10b-5, plaintiffs will be entitled to the imposition of joint and several liability, and will thus be able to enforce the judgment against Triche for the full damage award. See 15 U.S.C. § 78u-4(f)(2)(A) ("Any covered person against whom a final judgment is entered in a private action shall be liable for damages jointly and severally only if the trier of fact specifically determines that such covered person knowingly committed a violation of the securities laws.").
Whether or not plaintiffs are correct that the jury found the requisite elements to hold Triche liable under Rule 10b-5, this argument is not properly before
Likewise, it is obvious that the district court erred in rejecting plaintiffs' motion for joint and several liability under Louisiana law for lack of evidence of a conspiracy. Section 714(B) provides, right in the middle of the control person definition, that such a person "is liable jointly and severally with and to the same extent as the person liable under [Section 714(A)]." La.Rev.Stat. Ann. § 51:714(B). As Buhler was liable to plaintiffs as a seller of securities under Section 714(A), Triche should have been held jointly and severally liable for the total damage award under Section 714(B). But, because plaintiffs have not cross-appealed (or even mentioned this issue in their brief), we are without jurisdiction to correct this error as well.
For the foregoing reasons, we AFFIRM the judgment of the district court.
