Randall Waldman, et al v. Ronald Stone

Filing

OPINION: the district court's judgment is AFFIRMED, decision not for publication. David W. McKeague, Circuit Judge; Raymond M. Kethledge, Authoring Circuit Judge and Jane Branstetter Stranch, Circuit Judge.

Case: 16-5160

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NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 16a0652n.06
No. 16-5160
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
RANDALL SCOTT WALDMAN, et al.,
Appellants,
v.
RONALD B. STONE,
Appellee.

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FILED
Dec 06, 2016
DEBORAH S. HUNT, Clerk

ON APPEAL FROM THE
UNITED STATES DISTRICT
COURT FOR THE WESTERN
DISTRICT OF KENTUCKY

Before: McKEAGUE, KETHLEDGE, STRANCH, Circuit Judges.
KETHLEDGE, Circuit Judge. This case is before us a third time. We have already
recited the relevant facts in the first two appeals, but the short version is that in 2005 Randall
Waldman and a now-disbarred attorney, Bruce Atherton, defrauded Ronald Stone of most of the
value of his tool-manufacturing business. See Waldman v. Stone, 698 F.3d 910 (6th Cir. 2012)
(Waldman I); see also Waldman v. Stone, 599 F. App’x 569 (6th Cir. 2015) (Waldman II). Stone
later filed for bankruptcy; his estate brought fraud claims against Waldman and Atherton. The
bankruptcy court entered a $3 million judgment in favor of Stone and against Waldman and
Atherton jointly and severally. Waldman appealed to the district court, which affirmed, and then
to us. Although we held in Waldman I that there was ample evidence that Waldman and
Atherton had defrauded Stone, we vacated the bankruptcy court’s judgment on Article III
grounds unrelated to the merits of Stone’s claims. On remand, the district court again found (this

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Randall Scott Waldman, et al., v. Ronald B. Stone
time de novo) that Waldman and Atherton had defrauded Stone. The district court entered a
judgment against them jointly and severally for over $1 million in compensatory damages and $2
million in punitive damages. Again Waldman appealed to this court. Again we affirmed that
Waldman and Atherton had committed fraud, but we reduced the amount of compensatory
damages to $650,776 and vacated the court’s finding of joint and several liability. Waldman II,
599 F. App’x at 571-72. We remanded for the limited purpose of apportioning liability among
the parties for Stone’s compensatory damages and, if appropriate, for his punitive damages. Id.
On remand, the district court found Waldman and Atherton each 50% responsible (and Stone not
responsible at all) for Stone’s compensatory and punitive damages. The court also reduced the
amount of punitive damages from $2 million to $1.2 million to retain the 2:1 ratio of punitive to
compensatory damages in its earlier judgment.
Waldman now appeals yet again, challenging not only the district court’s apportionment
per our limited remand, but also its decision to impose punitive damages and its use of a 2:1 ratio
of punitive to compensatory damages. With the exception of Waldman’s challenges to the
apportionment determination, however, those challenges (subject to Waldman’s ability to show
otherwise, as discussed below) are legally frivolous.

As an initial matter, the latter two

challenges—to the award of punitive damages and to the ratio—are patently beyond the scope of
our limited remand and therefore out of bounds in this appeal. See United States v. O’Dell,
320 F.3d 674, 679 (6th Cir. 2003). Moreover, Waldman waived both of these challenges in
Waldman II. Waldman waived his challenge to the 2:1 ratio because he had obtained a decision
on that issue in the district court during that round but did not raise the issue in his opening brief
in our court. (He raised it only in his reply.) See generally United States v. Hendrickson,
822 F.3d 812, 830 (6th Cir. 2016). And in Waldman II we expressly held that Waldman’s

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challenge to the punitive award—based on precisely the same Kentucky statute he invokes now,
namely K.R.S. 411.186—was “waived.” 599 F. App’x at 574. Both of these challenges are
therefore doubly out of bounds here. See O’Dell, 320 F.3d at 679 (describing both the “limitedremand rule” and the “waiver rule”).
That leaves the only two arguments that are properly before us, both of which concern
the district court’s finding (per the limited remand) that Waldman and Atherton each bore
50% responsibility for Stone’s damages. We review that finding for clear error. See Fed. R. Civ.
P. 52(a)(6); Vill. of Milford v. K-H Holding Corp., 390 F.3d 926, 936 (6th Cir. 2004).
Waldman’s first argument is that the district court should have apportioned 100% of the
responsibility for Stone’s damages to Atherton and 0% to Waldman himself. In making that
argument Waldman comes perilously close to arguing for a third time that he did not commit
fraud at all: we rejected that argument on the merits in Waldman I, and when Waldman
nonetheless made the same argument in Waldman II, we rejected it on the ground that we had
“already rejected” it in Waldman I. Waldman II, 599 F. App’x at 575. As for the 50/50
allocation itself, the district court explained that “both Atherton and Waldman played essential
roles in perpetrating fraud upon Stone.” Op. at 9. Specifically, the court noted, Atherton
“introduce[d] Stone to Waldman” and “completed all of the legal steps to transfer [Stone’s
business] to Waldman[.]” Id. But “Waldman concealed the fact that he was not paying off”
Stone’s debts as part of the fraudulent deal into which Waldman himself entered with Stone, and
Waldman “cultivated a false image in Stone’s mind” of Stone’s interest in the business after the
deal was closed. Id. at 8. And “[w]hile Atherton violated his ethical duties as a lawyer to Stone,
his client, Waldman violated his fiduciary duties to Stone, his business partner.” Id. at 9. We
see nothing clearly erroneous about that determination of respective fault. Waldman contends

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further that Atherton should bear all the fault because Atherton was a “but-for cause” of Stone’s
damages; but if three rounds of litigation in this case establish anything, it is that Waldman was a
but-for cause of them as well.
Waldman’s final argument is that Stone bears some of the fault for his damages because
he was slow to uncover the fraud. One answer to that argument is that Waldman himself did
everything in his power to prevent Stone from uncovering the fraud. Another is the district
court’s observation that “Stone was neither a sophisticated party nor was he provided with a
meaningful opportunity to review the closing documents.” Id. at 10. Waldman’s arguments are
meritless.
To summarize: Waldman defrauded Stone more than a decade ago, and since then has
subjected Stone to three rounds of litigation in the district court and in this court as Stone sought
a remedy for the fraud. A handful of Waldman’s arguments (among the baskets-full he has
presented to us and the district court) have been meritorious; but Waldman has repeatedly
presented arguments that we have already rejected or for which he presented no support. See,
e.g., Waldman II, 599 F. App’x at 574. Stone has borne the expense of responding to all those
arguments. And in this appeal, as explained above, Waldman has presented arguments that
Waldman or his counsel (subject to their right to attempt to show otherwise) should have known
not to present. We therefore invite Stone to file a motion for his attorneys’ fees, costs, and
expenses arising from any frivolous arguments that Waldman made in this appeal.
The district court’s judgment is affirmed.

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