
USCA1 Opinion

	




                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                 ____________________        No. 94-1870                          MANUEL RODRIGUEZ O'FERRAL, ET AL.,                               Plaintiffs, Appellants,                                          v.                          TREBOL MOTORS CORPORATION, ET AL.,                                Defendants, Appellees.                                 ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                           FOR THE DISTRICT OF PUERTO RICO                     [Hon. Carmen C. Cerezo, U.S. District Judge]                                             ___________________                                 ____________________                                        Before                                Torruella, Chief Judge,                                           ___________                                Boudin, Circuit Judge,                                        _____________                         and Boyle,* Senior District Judge.                                      _____________________                                 ____________________            Luiz G.  Rullan with whom Limeres,  Vergne, Duran &  Rullan was on            _______________           _________________________________        brief for appellants.            Maria del  Carmen Taboas with  whom Fiddler,  Gonzalez & Rodriguez            ________________________            ______________________________        was on brief for appellees.                                 ____________________                                  January 27, 1995                                  ____________________                                    ____________________        *Of the District of Rhode Island, sitting by designation.                 Per Curiam.  In  May 1991 Manuel Rodriguez-O'Ferral, his                 __________            wife  and their  conjugal  partnership brought  a civil  RICO            action in  the district court  in Puerto Rico  against Trebol            Motors Corp.,  which distributes Volvos there.   18 U.S.C.               1961 et seq.  Also named were the Swedish manufacturer of the                 _______            car, its North American  distributor, and officers of Trebol.            The  gist  of the  complaint  was a  garden  variety consumer            deception charge sought to be  brought within RICO by  claims            that pertinent advertising comprised mail and wire fraud.                 In brief,  the complaint charged that  Volvo had earlier            made two  related models, a 240  DL and a more  expensive 240            GLE with additional  features; that in 1984  Volvo had ceased            to  make (or  at least to  export to Puerto  Rico) the latter            model; that Trebol  had thereafter ordered the  DL model with            extra features  and attached its  own GLE badge;  that Trebol            had advertised these  cars as GLEs;  that the added  features            cost Trebol significantly less than  its mark-up over the  DL            price; and that  Rodriguez and  his wife had  been duped  and            injured when in 1986  they had brought one of  these upgraded            DLs under the impression that it was a factory made GLE.                 None of  the advertisements cited by  the plaintiffs had            occurred until  after plaintiffs  bought their own  car; but,            framing  the RICO suit as a  class action on behalf of 15,000            customers allegedly so deceived, plaintiffs' counsel asserted            that this  did  not  matter.   The  complaint  sought  treble                                         -2-                                         -2-            damages,  as permitted by RICO, 18 U.S.C.   1964(c); given an            alleged $5,000 loss  per customer, this brought the  total ad                                                                       __            damnum to $225  million.   The complaint was  signed by  Jose            ______            Quetglas Jordan, one of the plaintiffs' attorneys.                 The district  court ordered  the plaintiffs to  submit a            "RICO case statement," which sets forth answers to a standard            questionnaire  that the  court  by  standing order  routinely            employed in civil RICO  cases.  See Miranda v.  Ponce Federal                                            ___ _______     _____________            Bank, 948  F.2d 41, 44  n.3 (1st Cir.  1991).  The  filing is            ____            intended to adduce the specifics that underlie general claims            of  RICO misconduct.   In  this instance,  the filing--signed            both  by Quetglas  and by  co-counsel Luis  Rullan Marin--was            extensive but it failed  substantially to bolster the general            claims of fraud.                 In  particular,  there  was   nothing  even  by  way  of            allegation  to  show  that  the features  added  at  Trebol's            request  were fewer than,  or inferior  to, those  that Volvo            ordinarily  supplied in  its GLE  car.   It was  alleged that            Trebol  represented  the  cars  as  factory-made,  but  those            allegations  were not borne  out by the  advertisements.  The            case statement did  not point to any  other express statement            in the advertising alleged to be false.  Nor were there other            allegations of fact from which fraudulent intent could easily            be inferred.                                           -3-                                         -3-                 The district court then  dismissed the case, ruling that            no RICO claim had been  set forth, Fed. R. Civ.  P. 12(b)(6),            and  that the plaintiffs had failed to alleged fraud with the            required particularity, Fed. R.  Civ. P. 9.  On  appeal, this            court affirmed  in a unpublished per  curiam opinion; without                                             ___________            resolving plaintiffs' standing, we  held that in this context            mere nondisclosure, absent some affirmative misrepresentation            or a  special  duty of  disclosure,  does not  comprise  RICO            fraud.   Rodriguez O'Ferral v.  Trebol Motors Corp.,  No. 92-                     __________________     ___________________            2303,  slip op. at 8-9 (1st Cir., July 9, 1993) (citing cases            from other circuits).                 While  the appeal  was  pending,  defendants  moved  for            sanctions against plaintiffs' attorneys under Fed. R. Civ. P.            11  for  filing  a groundless  action.    Finding  a lack  of            reasonable inquiry, the  court awarded the defendants  $8,000            as  attorney's fees as a  sanction.  Independently, the court            awarded  the defendants costs in the amount of $3,973.40.  On            this  appeal, Rullan  disputes the  award of  attorney's fees            against  him as to both basis and amount (co-counsel have not            appealed).  The award of costs is also challenged.                 Starting with the  sanction, we think it  plain that the            plaintiffs' suit was extremely thin.  The question whether it            was so thin as to warrant sanctions is, as is typical in Rule            11 matters,  a "judgment call,"   Anderson v.  Beatrice Foods                                              ________     ______________            Co., 900 F.2d 388, 394 (1st Cir.), cert. denied, 498 U.S. 891            ___                                ____________                                         -4-                                         -4-            (1990),  ordinarily  reviewed only  for abuse  of discretion.            Kale v. Combined  Ins. Co.,  861 F.2d 746,  757-58 (1st  Cir.            ____    __________________            1988).    Still, there  may be  a  determination of  law that            underpins an award  of sanctions, and  Rullan raises such  an            issue here.                 Pointing out that he did not sign the  complaint, Rullan            says that the  only pleading to which he  is connected is the            RICO case statement.   This case statement, he says,  did not            institute the  action or amend  the complaint; the  fault, if            any, is with the original complaint;  and to impose sanctions            on  him  is   therefore  to  impose  on  him   a  "continuing            obligation" to assure that a case does not continue unless it            is  well  grounded.   Although  this  court used  "continuing            obligation" language  in Cruz  v. Savage,  896 F.2d  626, 630                                     ____     ______            (1st  Cir.   1990),  Rullan  says  that   the  Fifth  Circuit            precedents relied on in Cruz have been overruled and that all                                    ____            other circuits reject the continuing obligation theory.1                 Rule 11 is not all of a piece.  Much of  its language is            directed  to the signing of documents, see Rule 11(a), but at            least  one sentence  concerns "later  advocating" an  earlier            filed document.  Rule  11(b).  We have no  occasion to pursue                                            ____________________                 1Thomas v. Capital Sec. Servs., Inc., 836 F.2d 866, 874-                  ______    _________________________            75 (5th Cir. 1988)  (en banc) (rejecting any such  continuing                                 _______            obligation); see also Dahnke v. Teamsters Local 695, 906 F.2d                         ________ ______    ___________________            1192,   1200-01  (7th  Cir.   1990)  (same);  Corporation  of                                                          _______________            Presiding  Bishop of  Jesus  Christ of  Latter-Day Saints  v.            _________________________________________________________            Associated Contractors, Inc., 877 F.2d 938, 942-43 (11th Cir.            ____________________________            1989) (same), cert. denied, 493 U.S. 1079 (1990).                          ____________                                         -5-                                         -5-            the problem in  this case  because Rullan did  sign the  RICO            case statement  which  effectively reasserted  the  positions            taken  in the complaint.  Indeed, the intended purpose of the            case  statement  was  to  flesh  out  and  particularize  the            complaint; and at  the time that Rullan  placed his signature            on the  document, the fraud claims  which remained inadequate            became his own.                 As  we  have said,  it is  a  judgment call  whether the            defects  were so severe as  to justify a  court in concluding            that the assertion of  the RICO claims was done  in bad faith            or without reasonable inquiry.  Here, other circuits prior to            the case statement had  already ruled that mere nondisclosure            in a  context like this one  did not support a  claim of RICO            fraud; but  we had not  done so  and, if this  were the  only            flaw, one  might argue about  whether Rullan  was obliged  to            anticipate our ruling.                 But  even if  nondisclosure  were here  enough for  RICO            fraud, nothing  in the case statement here points directly to            fraudulent intent.  Fraudulent intent is  often easy to infer            from  an affirmative false statement; but no one could fairly            infer  fraudulent   intent  merely  from   the  nondisclosure            attributed to Trebol.  The car did have extra features; as it            happens they  were installed  in the  Volvo factory;  and the            central,  identified nondisclosure  appears  to be  that  the            badge was  added in Puerto Rico.   To say that  the cars were                                         -6-                                         -6-            not genuine GLEs without  pointing to material differences is            unpersuasive.                 As  to  the  amount  of  the  sanction,  admittedly  the            district court did not explain the basis for the  calculation            that led to the $8,000 figure.  But the complaint sought $225            million  for a large class, and  the litigation consumed more            than  two years and generated  a record that  stands nearly a            foot  high.    Further,  the  case  statement  was  not  some            incidental filing--say,  a  dispute about  one deposition  or            discovery request--but related  to the core  of the case  and            was a condition of any further proceedings.                 No one remotely familiar with lawyer fees can doubt that            the defense  spent vastly more than $8,000 on this case.  The            district  court  plainly chose  a  figure  that, measured  by            defense costs,  was practically nominal but  was large enough            to serve as a warning and deterrent to counsel.  Explanations            are  always helpful, and  in some  cases explanations  may be            required for appellate  review of  a Rule 11  award; but  the            logic  of   the  district   court's  approach  here   is  not            mysterious, and the  result is well within the  wide latitude            allowed for remedial judgments.                 Finally,  we find no error in the award of other defense            costs  in  the  amount  of $3,973.40,  for  such  matters  as            photocopying,  translation,  delivery,  and other  logistics.            Despite plaintiffs' contrary claim, the award was timely even                                         -7-                                         -7-            though made  after the original judgment;  the district court            may  wait  until a  judgment  is  affirmed  on appeal  before            awarding  costs.  See  10  C. Wright  &  A.  Miller,  Federal                              ___                                 _______            Practice and Procedure   2668, at 212 (2d Ed. 1983).            ______________________                 Plaintiffs also claim that  because RICO provides for an            award  of  costs  to  plaintiffs,  18  U.S.C.    1964(c),  it            implicitly  bars  costs  for  defendants  even  if  elsewhere            authorized.   We see no basis for  such an implication.  Fed.            R. Civ. P. 54(d)(1)  allows costs other than attorney's  fees            to  the prevailing  party as  a matter  of course  unless the            court directs otherwise; the introductory proviso to the rule            ("Except when express provision therefor is  made . . .  in a            statute  of  the  United   States")  might  limit  a  court's            discretion to deny costs to  a prevailing RICO plaintiff, but            does not  affect an award  of defense costs--which  RICO does            not address.                 It  is  true  that some  of  the  costs  allowed by  the            district  court went beyond those listed in 28 U.S.C.   1920,            but a district court has discretion to award costs other than            those  so enumerated.   Although  this discretion  "should be            used sparingly"  for such  expenses, Farmer v.  Arabian Amer.                                                 ______     _____________            Oil Co., 379 U.S. 227, 235 (1964), we have examined the costs            _______            allowed and conclude that there was no abuse of discretion in            this case.                 Affirmed.                 ________                                         -8-                                         -8-                                         -9-                                         -9-
