Metropolitan News-Enterprise


Thursday, July 19, 2018


Page 4


Ninth Circuit:

Judge May Substitute RICO Damages for Reversed Punitive Damages


By a MetNews Staff Writer


Reversal of a punitive-damage award for a common-law fraud, based on a lack of support for the amount, did not preclude the District Court judge on remand from awarding, instead, treble damages under the Racketeer Influenced and Corrupt Organizations Act, the Ninth U.S. Circuit Court of Appeals has held.

The memorandum opinion, filed Tuesday, affirms an award by Judge Dale Susan Fischer of the Central District of California of $ 1,574,355 in Racketeer Influenced and Corrupt Organizations Act (“RICO”) damages, plus postjudgment interest and attorney fees. Fischer had previously awarded the plaintiff, Thomas E. Alexander, $2 million in punitive damages for his state law claim, as an alternative to RICO damages.

The underlying lawsuit was brought by Alexander after he was tricked by Kevin W. Wessell into depositing money into a Swedish credit union called The Alps. As it happened, Wessell was a board member of that bank.

Instead of keeping the money safe, the defendant and his co-conspirators invested in real estate in Washington state, and the funds were lost.

Fischer’s Ruling

After a 2013 bench trial in downtown Los Angeles, Fischer wrote:

“The Alps was undercapitalized, was controlled by Wessell, was not regulated by Swedish authorities and was being used to buy, sell and lend money on real estate ventures in the state of Washington.”

Wessell, whom Fischer described as “the mastermind behind the scheme,” appealed from the punitive-damage award, as did one of his co-defendants

A panel of the Ninth U.S. Circuit in 2016 reversed the award, noting that the record did not contain evidence of Wessell’s net worth, which is required by California law in awarding such damages. The panel did, however, affirm the determination of liability, noting that Fischer’s factual findings supported liability under either cause of action.

On remand, Fischer in 2017 substituted RICO damages for the punitive-damage award, and Wessell brought the present appeal.

Rule of Mandate

“Under the rule of mandate, the district court was permitted on remand to substitute RICO’s treble damages for the award of punitive damages,” Tuesday’s opinion says.

It explains that, on remand, the lower court must follow the mandate of the appellate court, but is free to make any decision not foreclosed by that mandate. It continues:

“Because we affirmed the district court’s factual findings supporting Wessell’s liability for RICO violations, did not direct the district court to impose punitive damages, and did not decide whether a treble damages award under RICO could be reinstated against Wessell, the district court’s substitution of RICO damages was proper.”

The case is Alexander v. Wessell, 17-55409.


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