VFI Associates, LLC v. Lobo Machinery Corp et al
Filing
358
OPINION. Signed by Judge James P. Jones on 3/22/12. (ejs)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF VIRGINIA
ABINGDON DIVISION
VFI ASSOCIATES, LLC, ET AL.
Plaintiffs,
v.
LOBO MACHINERY CORP.,
ET AL.,
Defendants.
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Case No. 1:08CV00014
OPINION
By: James P. Jones
United States District Judge
Thomas A. Leggette, Leggette Law Firm, PLC, Roanoke, Virginia, for
Plaintiffs; Jay H. Steele and Benjamin G. Sharp, Lebanon, Virginia, for Defendants.
In this civil action for damages, it is claimed that the defendants conspired with
an insider to defraud the plaintiffs’ business by submitting inflated invoices for
equipment and paying kickbacks. Based on the evidence presented at a bench trial,
the following are the court’s findings of fact and conclusions of law, as required by
Federal Rule of Civil Procedure 52(a)(1).1
1
The court made limited findings at the conclusion of the bench trial and this opinion
supplements and supercedes in part those rulings.
I
A. Procedural Background.
This action was filed by VFI Associates, LLC (“VFI”), Nicewonder LPI, and
Burke LPI in 2008 against Lobo Machinery Corp. (“Lobo Machinery”), Lobo Power
Tools, Inc. (“Lobo Power Tools”), Robin Yuan (“Yuan”), and Esther Pei Fang Chang
(“Chang”).2
There were extensive pretrial proceedings, including numerous
discovery disputes.3 In addition, a change in presiding judges, the substitution of
counsel for the defendants, and medical issues for plaintiffs’ counsel, all delayed the
ultimate trial.
In essence, the case boils down to a conspiracy by Yuan and Chang to defraud
VFI by charging excessive prices for equipment sold by their companies, Lobo
Machinery and Lobo Power Tools, and paying kickbacks to VFI’s dishonest manager,
Luther Boyd, in order to facilitate the fraud. In spite of the simplicity of this scheme,
2
“VFI” apparently stood for “Virginia Flooring International.” The original VFI has
since been replaced by a new entity, Reconstituted VFI, LLC, which has been substituted in
this case in the place of the original plaintiff. For convenience, both will be referred to
herein as “VFI.”
3
As will be later discussed in relation to the issue of attorneys’ fees, the pretrial
pleadings in this case far exceed what might otherwise be expected in regard to the straightforward nature of the issues. The docket indicates that prior to trial, 120 separate motions
were filed, the vast majority by the plaintiffs.
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the Third Amended Complaint seeks recovery on 12 different causes of action in 329
numbered paragraphs covering 68 pages.
Summary judgment as to liability was granted prior to trial in favor of the
plaintiffs against defendants Yuan, Lobo Machinery, and Lobo Power Tools, but
denied as to defendant Chang. See VFI Assocs., LLC v. Lobo Mach. Corp., Nos.
1:08CV00014, 1:08CV00027, 1:08CV00038, 2011 WL 4048774, at *1 (W.D. Va.
Sept. 12, 2011). The court also entered summary judgment against Lobo Machinery
and Lobo Power Tools as to their Counterclaim against VFI. See id. The parties
waived a jury, and the case was tried before the undersigned on February 14-15,
2012, as to damages against defendants Yuan, Lobo Machinery, and Lobo Power
Tools, and as to liability and damages against defendant Chang. Neither Yuan or
Chang appeared or testified at the trial, although portions of their pretrial depositions
were introduced by the plaintiffs.4 The defendants presented no evidence.
4
During the course of this case, a separate criminal investigation was begun by the
U.S. Attorney of the events in question and Chang thus refused to answer questions at a
second discovery deposition, relying on her Fifth Amendment rights. Accordingly, I
precluded her from testifying at trial. VFI Assocs., LLC v. Lobo Mach. Corp., No.
1:08CV00014, 2010 WL 5557129, at *1 (W.D. Va. Nov. 22, 2010). As a separate discovery
sanction, I also precluded the defendants from offering evidence at trial as to the amount of
markup in the sale of the machinery in question, as well as related matters. VFI Assocs., LLC
v. Lobo Mach. Corp., No. 1:08CV00014, 2010 WL 4868110, at *1 (W.D. Va. Nov. 22,
2010).
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B. Findings of Fact.
The following are the court’s findings of fact. In determining the facts, I have
taken into account the rationality and internal consistency of the testimony, the extent
of detail and coherent nature of the testimony, the manner of testifying by the
witnesses, and the degree to which the subject testimony is consistent or inconsistent
with other evidence in the case.
1.
Plaintiff VFI is a Virginia limited liability company with its principal
place of business in Virginia. Its main business during the events in question in this
case was to purchase imported “exotic” wood and finish it as quality hardwood
flooring for sale to retail outlets in and outside of Virginia. Its owners included
plaintiff Burke LP I, a Virginia limited partnership whose general partner is G.
Michael Burke (“Burke”) and plaintiff Nicewonder LP I, a Virginia limited
partnership whose general partner is Donald Nicewonder (“Nicewonder”).
2.
Defendant Lobo Machinery is a California corporation with its principal
place of business in California. It is owned by defendant Yuan but had no legitimate
business activity during the events in question in this case. It was utilized by the
other defendants to carry out their frauulent scheme.
3.
Defendant Lobo Power Tools is a California corporation with its
principal place of business in California and which is owned by defendant Yuan and
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defendant Chang. It engaged in the business of purchasing industrial machinery in
China and reselling it elsewhere, including in Virginia.
4.
Defendant Yuan and defendant Chang are husband and wife. They
reside in and are citizens of California. Yuan is the chief executive officer of Lobo
Power Tools and Chang is its chief financial officer who maintains the books and
records of the business. While Chang denied being a shareholder of Lobo Power
Tools, the books of the company show that she received distributions as a
shareholder, in addition to her salary compensation, and I find that she was in fact a
shareholder.
5.
Chang exercised close control of the books and records of the business,
including the operation of the business’s accounting software program, known as the
“Platinum Program.” She routinely entered data into the Platinum Program.
6.
In late 2005, Nicewonder and Burke, wealthy businessmen, were
approached by a local attorney, John Bundy, with information about a new business
opportunity presented by a person named Luther Boyd. Boyd already operated a
similar business, called Clinch Mountain Hardwood Flooring, Inc. (“CMHF”).
Through representations about the business opportunity and the financial history of
CMHF, Boyd convinced Nicewonder and Burke to invest in the new business
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venture.5 Asked to investigate Boyd’s reputation, attorney Bundy reported to
Nicewonder and Burke that there were no problems.
7.
VFI was thereafter formed in order to carry out this new business
venture, with various limited partnership as owners, including those owned by Bundy
and Boyd. However, only Nicewonder and Burke actually invested money in the
business. Bundy received his interest as a “finder’s fee.” Under the Operating
Agreement for VFI, Boyd LP I (owned by Boyd) was named the manager of VFI.
8.
Boyd advised Nicewonder and Burke that VFI would need to purchase
a “finishing line,” that is, the machinery and equipment necessary to finish the wood
into quality hardwood flooring.6 He told them that he could get one from Taiwan and
that it would cost nearly $1 million. In fact, a finishing line as needed by VFI should
have cost only about one-quarter of that amount.
5
Luther Boyd and his wife, Teresa Colston-Boyd, have been recently indicted by the
grand jury of this court for conspiracy, mail fraud, bank fraud, money laundering, and other
crimes relating to the scheme described in this case and other matters. United States v. Boyd,
Case No. 1:12CR00005 (W.D. Va. Feb. 21, 2012). Of course, my findings here are derived
only from the evidence presented in this civil case, and I make no rulings applicable to the
criminal case and express no opinion as to whether the government will be able to prove its
criminal charges beyond a reasonable doubt. In addition, the plaintiffs in this case have also
sued Boyd, his wife, and related entities in separate civil actions for money damages. Treads
USA, LLC v. Boyd LP I, Case No. 1:08CV00027 (W.D. Va.) and Burke LP I v. Boyd, Case
No. 1:10CV00038 (W.D. Va.). I have stayed those cases pending the resolution of the
criminal case.
6
According to the evidence, a finishing line consists of sanding machines, roll coaters
for applying lacquer, ultraviolet curing ovens, and conveyors. (Pls.’ Ex. 70.)
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9.
Thereafter, Boyd convinced Nicewonder and Boyd that the business
needed a second finishing line.
10.
Boyd arranged for the two finishing lines to be purchased from Lobo
Power Tools, which in turn purchased the equipment from a source in China and
resold it to VFI. The cost to Lobo Power Tools to purchase the equipment was
$197,730.79, as shown on its records.7 VFI paid a total of $1,485,443.57 for the
equipment, which was shipped and installed at VFI’s place of business in Virginia.
At the direction of Yuan and Chang, their companies paid large sums of money in
kickbacks or bribes to Boyd, his wife, relatives, or companies that they controlled, in
order to obtain the excessive prices for the equipment. As shown on its records, the
average markup taken by Lobo Power Tools on its sales was only 24.4 per cent, rather
than the over-500 per cent markup apparent here. There was no legitimate reason for
the payments from the defendants to Boyd and his affiliated persons and companies.
11. Chang was directly involved in the fraud. In her role as the CFO, Chang
was responsible for the books and records of Lobo Power Tools and exercised close
control over those books and records. She routinely entered data into the Platinum
Program and made multiple unorthodox entries to cover up the kickbacks that were
7
Although there was some confusion over the actual cost of the finishing lines to
Lobo Power Tools, this figure reflects the cost of the two machines ($133,233.37 and
$64,497.42) as submitted at trial through Plaintiffs’ Exhibit 46.
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being paid to Boyd and his associates. Chang either produced or assisted in the
production of the false invoices that were sent to VFI and signed multiple checks
constituting the kickback payments.
12. Once suit was filed in this case, Yuan, Chang, and their companies
obstructed discovery by producing false information in an effort to avoid liability.
13.
Although she initially provided deposition testimony, Chang then
invoked her Fifth Amendment right and thereafter refused to testify.
14. VFI’s business was not successful and it still possesses the finishing line
equipment purchased, which it has been unable to sell, although it did receive an offer
of $52,000.
C. Discussion.
Chang’s Liability.
The plaintiffs allege that Chang is liable under 18 U.S.C.A. §§ 1962 (c) and (d)
(West 2000). Section 1962 (c) states:
It shall be unlawful for any person employed by or associated with any
enterprise engaged in, or the activities of which affect, interstate or
foreign commerce, to conduct or participate, directly or indirectly, in the
conduct of such enterprise’s affairs through a pattern of racketeering
activity . . . .
18 U.S.C.A. § 1962 (c). Section 1962(d) states that it is unlawful for any person to
conspire to violate any of the provisions of subsections (a) through (c).
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The elements of a RICO violation have been proved by a preponderance of the
evidence. Chang presented no evidence to refute any of that presented by the
plaintiffs. The enterprise at issue is the association-in-fact between Yuan, Chang,
Boyd and Lobo Power Tools to defraud VFI by selling it finishing lines at vastly
inflated prices and kicking back the money to Boyd and his associates.8 See Boyle v.
United States, 556 U.S. 938 (2009). Chang was unquestionably associated with this
enterprise.
The enterprise was engaged in interstate commerce because
correspondence, payments, and machinery and equipment so traveled.
Further, Chang conducted or participated directly in the conduct of the
enterprise by manipulating Lobo Power Tools’ books and records, creating false
invoices, signing kickback checks, and obstructing access to accurate data and
documents. See Reves v. Ernst & Young, 507 U.S. 170, 179 (1993) (finding that it is
necessary only to prove that the defendant had some part in directing the enterprise
to prove participation). This is true even if she acted at the direction of her husband.
Id. at 184; see also MCM Partners, Inc. v. Andrews-Bartlett & Assocs., Inc., 62 F.3d
967, 978-79 (7th Cir. 1995) (finding that under Reves, lower-rung participants in an
enterprise who are under the direction of management can still be liable as
8
I will deny the plaintiffs’ post-trial Motion to Conform the Pleadings to the
Evidence (ECF No. 345) as unnecessary and moot.
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participants in the enterprise). Chang’s actions were integral to the operation of the
enterprise. Without the manipulation of Lobo’s accounting records, the issuing of
false invoices, and the cutting of the kickback checks, the enterprise would have not
been able to achieve its goal. Id. at 979 (“[E]ven if [the defendants] may have been
reluctant participants in a scheme devised by ‘upper management,’ they still
knowingly implemented management’s decisions, thereby enabling the enterprise to
achieve its goals.”).
The defendants argue that the fraud in which Chang, her husband, their
companies were involved does not rise to the level of a RICO violation. I note that
I entered summary judgment against Chang’s co-defendants on all claims, including
RICO and RICO conspiracy. The defendants’ argument is essentially that the scheme
which occurred here, the sale of finishing lines at inflated prices and the paying of
kickbacks to those involved, did not involve a “pattern of racketeering activity” such
that RICO is implicated.
A “pattern of racketeering activity” requires at least two acts of racketeering
activity, one occurring after the effective date of the RICO statute and the last of
which occurring within ten years after a prior act. See 18 U.S.C.A. § 1961(5) (West
2000). The “pattern” element of a RICO violation has two distinct, but often
overlapping, parts. First, the acts of racketeering activity and the predicate acts must
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be related. The Supreme Court has defined the requirement of relatedness in this
way, “[C]riminal conduct forms a pattern if it embraces criminal acts that have the
same or similar purposes, results, participants, victims, or methods of commission .
. . .” Id. at 240 (quotation marks and citation omitted). Second, the predicate acts
must “amount to, or . . . otherwise constitute a threat of, continuing, racketeering
activity.” Id. (emphasis in original). The requirement of continuity does not limit
RICO to conduct making up multiple schemes. Rather, continuity focuses on the
temporal reach of the related conduct. As the Supreme Court explained, “A party
alleging a RICO violation may demonstrate continuity over a closed period by
proving a series of related predicates extending over a substantial period of time.”
Id. at 242.
The fraud engaged in by the defendants may have been a single overall scheme
related to the sale of the machinery, but it was made up of multiple related predicate
acts extending over a substantial period of time. The predicate acts included multiple
acts not just of mail and wire fraud, but also included commercial bribery, and
obstruction of justice. The acts were related in that they were all undertaken with the
purpose of defrauding VFI. Finally, the acts occurred over a substantial period of
time, namely from at least September 2005 through at least 2008, when, in the course
of this litigation, the defendants refused to provide relevant documents and altered
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data in the Platinum Program. This is sufficient to show a pattern of racketeering
activity under RICO. See Ashland Oil, Inc. v. Arnett, 875 F.2d 1271, 1279 (7th Cir.
1989) (finding continuity where scheme involved many different types of predicate
acts); Morley v. Cohen, 888 F.2d 1006, 1010-11 (4th Cir. 1989) (finding continuity
shown in single scheme case where duration of activities was five years).
Finally, as to Chang’s overall liability, I note that she invoked her Fifth
Amendment privilege against self-incrimination at her second deposition. As the
finder of fact, I am permitted to draw an adverse inference from this invocation and
I find that it provides additional evidence that she participated in an enterprise
engaged in a pattern of racketeering activity and violated the federal RICO statute.
See ePlus Tech., Inc. v. Aboud, 313 F.3d 166, 183-84 (4th Cir. 2002).
Accordingly, I find Chang liable under 18 U.S.C.A. § 1962 (c). I also find her
liable under 18 U.S.C.A. § 1962 (d) for conspiring to violate subsection (c).
The plaintiffs alleged multiple other counts against the defendants, namely
common law conspiracy, statutory conspiracy under Va. Code Ann. §§ 18.2-499 and
500 (2009), conspiracy to commit fraud, conspiracy to commit conversion, conspiracy
to breach a fiduciary duty, conspiracy to breach a contract, unjust enrichment,
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conversion, fraud and money paid.9 At trial, the plaintiffs agreed that the claims of
conversion and conspiracy to commit conversion had not been proven and thus could
be dismissed.
The evidence submitted supports a finding of Chang’s liability on all of the
remaining claims except for the claim of conspiracy to commit breach of fiduciary
duty. This claim is based on the plaintiffs’ allegation that Boyd, as manager of VFI,
owed a fiduciary duty to the company and its shareholders, including Nicewonder LP
I and Burke LP I and that the conspiracy between Boyd, Yuan, Chang and Lobo
Power Tools had as a goal, the breach of that fiduciary duty to VFI and its
shareholders. While, as discussed, the evidence shows that Chang conspired with her
husband and Boyd to defraud VFI, there is no evidence of any contact between Chang
and Boyd and no evidence that Chang had any knowledge of, much less any
agreement to breach, Boyd’s fiduciary duty to VFI. See Feddeman & Co., C.P.A.,
P.C., v. Langan Assocs., P.C., 530 S.E.2d 668, 674-75 (Va. 2000) (finding that where
9
The plaintiffs’ claim for “money paid” seeks compensation for money paid by the
plaintiffs “under mistake” due to the actions of the defendants. This is essentially a claim
for unjust enrichment. See Cent. Nat’l Bank of Richmond v. First & Merchs. Nat’l Bank of
Richmond, 198 S.E. 883, 892 (Va. 1938) (“‘The principle upon which a right of recovery is
based, in the case of money paid by mistake of fact, is well settled. The right of recovery,
where it exists, is based upon the promise to return the money which the law implies . . .
whenever the circumstances are such that ex aequo et bono the money should be paid back
. . . .’” (quoting Hibbs v. First Nat’l Bank of Alexandria, Va., 112 S.E. 669, 673 (Va. 1922)).
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outside firm had specific knowledge of breach of fiduciary duties and assisted in the
breach, the evidence supported a finding that outside firm conspired with employees
to breach employees’ fiduciary duties).
Damages.
Based on the evidence at trial, I find that the appropriate measure of damages
to be the amount VFI paid for the two finishing lines ($1,485,443.57), less the cost
of the finishing lines to Lobo Power Tools ($133,233.37 and $64,497.42), less Lobo
Power Tools’ average 24.4 per cent markup on its costs ($48,246.31), for a total of
$1,239,466.47. Although at trial I indicated that I would not deduct the $52,000 offer
for the machines that VFI received from a potential buyer (as testified to by Burke),
I have decided that such a deduction is appropriate. Thus, the proper amount of
damages, before trebling, is $1,187,466.47.10
Because I have determined that Chang, along with the other defendants, are
liable for both RICO and Virginia statutory conspiracy violations, I now find that
such damages should be trebled, thus amounting to $3,562,399.41.
The plaintiffs have also asked for punitive damages. The claim for punitive
damages is not tied to any specific cause or causes of action. The plaintiffs are not
10
Although there were various theories of recovery, the plaintiffs are only entitled
to a unitary award of damages, as they agree.
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entitled to punitive damages on their RICO claims. See In re XE Servs. Alien Tort
Litig., 665 F. Supp. 2d 569, 599 (E.D. Va. 2009) (it is “well-settled that the statutory
civil remedy for RICO violations . . . is exclusive.”). Further, because the state law
claims arise from the same set of facts and are based on essentially the same duties
and injuries as the RICO claims, awarding punitive damages would be duplicative.
The state law claims are, effectively, subsumed by the RICO award. See Transition,
Inc. v. Austin, No. CIV. A. 301CV103, 2002 WL 1050240, at *2 (E.D. Va. Mar. 15,
2002) (finding that, for damages purposes, state law claims were effectively
extinguished by a RICO recovery ).11
There remain certain outstanding issues related to damages. First, plaintiffs in
this action include VFI, the company which was victimized by the fraud in this case,
and two of its owners/members, Nicewonder LP I and Burke LP I.12 Shareholders in
a corporation, or members in a limited liability company, cannot maintain a direct
action for injuries to the corporation.
Rather, such actions must be brought
derivatively. See Simmons v. Miller, 544 S.E.2d 666, 674 (Va. 2001); see also
Remora Invs., L.L.C. v. Orr, 673 S.E.2d 845, 847-48 (Va. 2009). There may be
11
Because of the award of triple damages, I will not award prejudgment interest.
12
The evidence shows that under VFI’s Operating Agreement, any recovery made by
VFI will go first to Nicewonder LP I and Burke LP I.
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exceptions to this rule where the shareholder/member can show that it suffered injury
independent and distinct from that suffered by the corporation. See id., at 848
(noting, but not deciding whether to adopt, Delaware rule that a shareholder may
maintain a direct action where injury is independent of any injury to the corporation
and duty breached was owed directly to the shareholder); see also Lyon v. Campbell,
No. 93-1570, 1994 WL 369453, at *3 n.2 (4th Cir. July 15, 1994) (unpublished)
(noting, but not deciding, that a shareholder may maintain a direct action under RICO
where injury sustained is separate and distinct from other shareholders).
The evidence does not support the conclusion that Nicewonder LP I and Burke
LP I suffered separate and distinct injuries from those suffered by VFI. The
defendants’ fraudulent scheme and actions, including the fraudulent invoices and
kickback payments, were directed at VFI. VFI suffered the injury of paying inflated
prices to the defendants for the finishing line equipment. The injuries claimed by
Nicewonder LP I and Burke LP I are grounded only in their investment of funds in
VFI, investments which were not made based on the fraud perpetrated by the present
defendants. Thus, Nicewonder LP I and Burke LP I did not suffer any injuries
separate and distinct from that of VFI and, under the law, cannot recover damages in
this action.
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The plaintiffs argue that they can recover directly from the defendants on the
conspiracy to breach fiduciary duty claim. They argue that the evidence shows that
the defendants conspired with Boyd specifically to breach Boyd’s fiduciary duty
which he owed as manager of VFI. As I have noted, the general rule is that members
of a limited liability company “cannot bring individual, direct suits against officers
or directors for breach of fiduciary duty, but instead [members] must seek their
remedy derivatively on behalf of the corporation.” Remora, 673 S.E.2d at 848 (citing
Simmons, 544 S.E.2d at 675)). The plaintiffs argue that their claim of fiduciary duty
is an exception to this general rule because VFI’s Operating Agreement establishes
that Boyd, as the manager of VFI, owed a fiduciary duty both to VFI and to its
members. The Operating Agreement states:
The Manager shall be under a fiduciary duty to conduct the affairs of the
Company in the best interests of the company and of the Members,
including the safekeeping and use of all of the Property and the use
thereof for the exclusive benefit of the Company.
(Pls.’ Ex. 38.) In Remora, the Virginia Supreme Court recognized that limited
liability companies and their members are free to vary commercial rules, such as the
limitation on direct actions by members, if they agree to do so. 673 S.E.2d at 848.
Thus, where an operating agreement specifically states that a manager owes a
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fiduciary duty to the members of the limited liability company, such members can
maintain a direct action for breach of that fiduciary duty.
Even if Boyd did owe a fiduciary duty directly to the members such that they
could recover directly on his breach, the instant action is not against Boyd. The
plaintiffs’ assert that the conspiracy alleged in this case specifically contemplated
breach of Boyd’s fiduciary duty to Nicewonder LP I and Boyd LP I. However, the
evidence simply does not support this claim. The conspiracy here was to defraud
VFI. To that end, the defendants submitted false invoices to VFI and paid kickbacks
to Boyd and his associates. There is simply no evidence that this conspiracy reached
beyond VFI to its members or that injuring those members was a goal of the
conspiracy. This is true even if, as the plaintiffs argue, Yuan was aware that Boyd
was not the only member of VFI. The evidence does not show that Yuan knew and
agreed to Boyd’s breach of his fiduciary duty to the other members. Nicewonder LP
I and Burke LP I cannot recover on this ground.13
Attorney’s Fees.
The plaintiffs’ have moved for attorney’s fees and submitted extensive time
sheets reflecting work done in this case. The total amount of attorney’s fees claimed
13
The conclusion that Nicewonder LP I and Burke LP I cannot recover directly from
the defendants makes no practical difference. As noted above, they will recover first from
any damages awarded to VFI.
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is $712,773.81. Both RICO and the Virginia conspiracy statute provide that an
injured party may recover a reasonable attorneys’ fee. 18 U.S.C.A. § 1964(c); Va.
Code Ann. § 18.2-500.
“The starting point for establishing the proper amount of [a fee] award is [the
so-called lodestar product,] the number of hours reasonably expended, multiplied by
a reasonable hourly rate.” Rum Creek Coal Sales, Inc. v. Caperton, 31 F.3d 169, 174
(4th Cir. 1994). Other considerations, such as those identified in Johnson v. Georgia
Highway Express, Inc., 488 F.2d 714 (5th Cir. 1974), may require that the award is
adjusted from the lodestar figure.14 The hourly rate charged by counsel for the
plaintiffs is reasonable. However, the overall fee is not justified by the case itself.
The fraud perpetrated by the defendants in this case was relatively
straightforward. There were no significant novel or complex legal issues. The facts,
once uncovered, were clear. I acknowledge that discovery in this case was difficult
and made more so by the obstruction of the defendants. I also acknowledge that the
14
The Johnson factors are: (1) the time and labor required; (2) the novelty and
difficulty of the questions; (3) the level of skill required to perform the legal service properly;
(4) the preclusion of employment by the attorney due to acceptance of the case; (5) the
customary fee; (6) whether the fee is fixed or contingent; (7) the time limitations imposed by
the client or the circumstances; (8) the amount involved and the results obtained; (9) the
experience, reputation, and the ability of the attorneys; (10) the undesirability of the case;
(11) the nature and length of the professional relationship with the client; and (12) awards
in similar cases. 488 F.2d at 717-19; Rum Creek, 31 F.3d at 175.
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plaintiffs were successful in the prosecution of the case, although I note that
defendants did not present any evidence on their behalf. However, the requested
attorney’s fees must be reasonable in light of the case as a whole. I will apply a
reduction of 50 percent to the plaintiffs’ request.
D. Conclusions of Law.
1.
This court has subject matter jurisdiction.
2.
Defendant Esther Pei Fang Chang is liable for Counts One through Five
and Eight through Twelve of the Third Amended Complaint.
3.
By agreement, Counts Six and Ten are dismissed.
4.
The defendants are jointly and severally liable to VFI for damages in the
amount of $3,562,399.41.
5.
The defendants are not liable for punitive damages.
6.
Plaintiffs Nicewonder LP I and Burke LP I did not suffer any injuries
separate and distinct from those suffered by VFI and cannot recover damages.
7.
The defendants are jointly and severally liable for attorneys’ fees to VFI
in the amount of $356,386.91.
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II
For the foregoing reasons, final judgment will be entered awarding plaintiff
Reconstituted VFI Associates, LLC, damages against all of the defendants, jointly
and severally, in the amount of $3,562,399.41, together with attorneys’ fees in the
amount of $356,386.91.
DATED: March 22, 2012
/s/ JAMES P. JONES
United States District Judge
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