Opinion
Civil Action No. 99-1989, Section "E" (3)
September 18, 2001
FINDINGS AND CONCLUSIONS
The following findings of fact and conclusions of law are hereby entered on the basis of the record, the evidence adduced at the non-jury trial, including the testimony and exhibits, and the law. This Court has subject matter jurisdiction of this matter pursuant to 28 U.S.C. § 1332, diversity of citizenship, as the plaintiff is diverse in citizenship from all defendants, and the amount in controversy exceeds $75,000.00. The trial confirmed a preliminary default entered on October 19, 2000. Plaintiff Colin Cave testified at trial, and Ruth Hamacher, his former wife, testified by affidavit.
See Record V. 2, Doc. # 31. This matter was removed to federal court from Civil District Court for the Parish of Orleans. Defendants' counsel subsequently filed a motion to dismiss for lack of personal jurisdiction, improper venue, insufficient service of process, and forum non conviens. Prior to the hearing on the motion, and prior completion of jurisdictional discovery, defendants' counsel withdrew. Defendants failed to enroll new counsel, and failed to respond to the Court's orders and notices, or any pleadings, all of which were sent directly to defendants at their addresses in Bermuda. At the beginning of trial, the Court denied defendants' pending motion to dismiss.
See Trial Exhibit 35. Ruth Hamacher was hospitalized in Florida at the time of the trial.
I.
Plaintiff Colin Cave ("Cave"), a Canadian citizen, is a chartered accountant. He held several high ranking financial positions in a number of corporations prior to 1995. In 1995, Cave was employed as president of Eurofusion International, Inc., in Rochester, New York. Prior to that, he had been employed as Vice President of Finance of Tandem Optics also in Rochester. In April of 1995, Cave was contacted by an executive placement agency, K-International Group, Ltd., which informed him of a good opportunity in Bermuda. Having previously received employment from this agency as a Senior Manager of Corporate Finance in Barbados and Germany, Cave looked into the opportunity.On April 22, 1995, after the agency put them in touch with each other, Cave met with Norman Davison ("Davison")in New York to interview for the position of Vice President of Finance for B.V.H. and Bayland. Davison explained that he was looking for someone to "clean up" his current financial situation and help in future U.S. expansion. He explained that the current controller of his company was doing a very poor job, and that he wanted to expand the company into the U.S. Davison needed someone to take the job immediately who could modernize his operations and straighten out his finance problems.
Norman Davison is a resident of Bermuda. He and his wife own 60% of the stock in B.V.H., Limited, ("B.V.H.") and are stockholders in Bayland, Ltd. ("Bayland"). Davison is president of both corporations. Defendant B.V.H., a holding company for eight Davison's of Bermuda stores operated in Bermuda, is a Bermuda corporation with its registered address in Bermuda. B.V.H. manages Bayland, Ltd., which in turn owned and operated Davison's of Bermuda stores in the U.S.A. Defendant Bayland, incorporated in Delaware in 1993, operated retail Davison's of Bermuda stores in Baltimore, Maryland, and New Orleans at the Riverwalk Marketplace from late. 1993 through 1998.
Trial Exhibit 36 — Davison's affidiavit.
Trial Exhibit 8. By letter agreement on B.V.H. Limited/Davison's of Bermuda letterhead, dated 1 December 1998, Davison signed on behalf of Bayland agreeing to sell the Davison's of Bermuda store in Riverwalk to Evans company (Trial Exhibit 11).
During Cave's employment interview in New York, in the presence of Ruth Hamacher Cave, Davison promised an initial three year contract to Cave, with one year in Bermuda to resuscitate the companies, and the following two in the U.S. to expand the companies with new stores. Davison agreed to a starting salary at $65,000.00 and promised to cover health insurance to Cave's family. The two decided that Cave should not uproot and move his family for the one year in Bermuda since he would be relocating to Baltimore after the first year. Davison also assured Cave and his wife that he could take reasonable trips home to visit his family, as long as it didn't hinder his job performance. He promised Cave that he would pay for one trip for his family to come to Bermuda to visit him. Finally, Davison also promised $12,000 in relocation costs for the initial move that he would have to make. Davison hired Cave as Vice President of Finance for B.V.H. and Bayland, but there was no written agreement executed between Davison and Cave.
See generally, Trial Exhibit 35 — affidavit of Ruth Hamacher.
To expedite the process, Davison made the arrangements for Cave to get a work permit in Bermuda. Davison filled in Cave's Bermuda address, and added "CONTROLLER" to the initials VP on paragraph 8 of the form, entitled "Intended Occupation in Bermuda". The reference "Length of Contract" stated "Three years", and "Wages/salary" stated "$65,000,00".
Trial Exhibit 18 — Bermuda Department of Immigration Ministry of Labour and Home Affairs Initial Questionnaire Form.
Cave began working for Davison in Bermuda on May 15, 1995, as Vice-President of Finance for B.V.H. and Bayland. In his position, he prepared the companies' financial records, and created and maintained the centralized accounting of the companies' income and expenses. He has intimate knowledge of how the companies operated in that period. Cave testified that when he arrived in Bermuda, B.V.H. and Bayland were undercapitalized. As of May 1995, the companies had exhausted most of their credit lines with the Bank of Bermuda. By June of that year, EVE had used about $475,000.00 of its $600,000.00 operating line and Bayland had used about all of its $225,000.00 operating line. The undercapitalization was so considerable that the auditors were about to add a "going concern" opinion to the financials generated by Cave. At that time, the companies' lenders were putting pressure on them to provide monthly financials which did not exist. Davison was a personal guarantor. of the lines of credit.
B.V.H. maintained an account with the Bank of Bermuda Limited ("BOB") and Bank of N.T. Butterfield Son, Ltd., ("Butterfield") and Bayland maintained an account with Premier Bank in Baton Rouge, Louisiana (now Bank One) and Nations Bank in Baltimore. However, B.V.H. and Bayland failed to provide separate bookkeeping. When Cave started working for Davison, the companies had maintained virtually no accounting. Cave discovered that in 1994 Bayland's Maryland charter had been cancelled for non payment of taxes. Nevertheless, B.V.H. continued to transact business in the U.S., including New Orleans, under the name of Bayland.
Trial Exhibit 19 — Davison's statement to Bermuda Police dated June 25, 1996.
Trial Exhibit 12.
During the first four months, Cave generally cleaned up the companies' accounting. He reorganized and revamped Davison's prior accounting and financial reporting procedures with a modern system giving him access to financial reports and statements. Davison supplied Cave with pre-signed blank checks to handle the affairs of the business, Cave endorsed these checks for necessary expenditures like travel expenses and health insurance, which Cave routinely documented in the regular course of business. As part of his duties, Cave traveled to Baltimore on more than one occasion and on at least one occasion he met with Davison in Baltimore.
Trial Exhibit 17.
Sometime in September of 1995, Cave suggested a profit-sharing plan to Davison where Cave would get a part of the sales revenue from the future U.S. stores. Part of this proposal included a pay increase to $95,000.00. At this time, the company was considering opening a third U.S. location in Myrtle Beach, South Carolina.
Id.
On December 13, 1995, Davison abruptly terminated Cave's employment with the company. At that time, the business was going smoothly and the operations were running profitably. Cave was making plans to return to the U.S. to open the new location. Davison had not indicated any dissatisfaction with Cave prior to his being fired. Unknown to Cave, Davison had already hired Cave's replacement to start January 1, 1996. During their December 13, 1995 conversation, Cave reminded Davison of the three year commitment he had made, and told Davison that he was still owed for two and half years under the contract. Davison told him that they had nothing in writing, and that "Bermuda is [my] island, and [you] have no rights here." Although the evidence is not absolutely clear, at first Davison apparently agreed to and then refused Cave's. request that Davison at least pay him for the remaining six months of the first year of the contract. He also asked Cave to stay on another month to train his replacement. Davison left Cave's office after refusing to honor the remainder of Cave's contract, and refusing severance pay.
Trial Exhibit 31 — Cave's written statement of events to attorney Manual Vazquez, at page 4 of 9, item 6.
See, e.g. Trial Exhibit 21 — Letter dated January 22, 1996, to Davison from John L. Triglio, cave's attorney in Buffalo.
Id. and Trial Exhibit 17.
Taking expenses into consideration and amortizing the unaccrued remainder of his salary, Cave estimated that $25,000.00 was due under the first year of the contract. He prepared and signed a loan agreement and note, and transferred $25,000.00 into his own bank account in New York by international wire. The loan agreement stated that Cave would pay Davison the difference when he found new employment in the U.S. Unable to find or meet with Davison or his partner, Cave put copies of the note on Davison's desk and in the corporate file. He returned home to the U.S. the next day. After deciding not to return to Bermuda after the Christmas holiday, on December 28, 1995, Cave wrote a letter to Davison explaining his (Cave's) understanding of their employment agreement, and his "employment loan" for $25,000.00, and that he had set up in "general ledger account number 11225-000 B.V.H. Employee Loans", to be amortized against his salary.
Id.
Id.
On January 15, 1996, Cave received a telephone call from Davison from Bermuda. Davison claimed that Cave owed him in excess of $50,000.00, and that he wanted the money immediately. According to Cave, Davison threatened to "follow [him] to the ends of the earth and destroy [him]" if he was not repaid immediately. Cave contacted John Triglio, a lawyer in Buffalo, New York, who wrote to Davison on January 22, 1996, reiterating Cave's understanding of the employment agreement, and the circumstances of his termination.
Trial Exhibit 31 at page 5 of 9, item 13.
Trial Exhibit 21.
On December 16, 1995, unknown to Cave, Davison made a formal complaint against Cave to the Officers of the Fraud/Commercial Crime Unit of Bermuda Police Service. In his complaint, Davison alleged that Cave, as his company's former financial controller, misappropriated funds for his personal use from May 1995 to December 1995.
Trial Exhibit 19.
After returning to the U.S. from Bermuda, it took Cave seven months to find employment. During that time, Ruth Hamacher Cave borrowed $15,000.00 to $20,000.00 from friends and relatives, and borrowed $20,000.00 from "the Bank". She suffered a stress/nervous disorder which required prescription medication.
Trial Exhibit 35.
In September of 1996, Cave secured a job with Miller Solomon, a major construction company in Miami. He moved his family to Florida. During his first few months, Cave was treated well at Miller Solomon, and was promoted from "consultant" to a permanent position of "vice president of finance". During his employment at Miller Solomon, Cave secured a home mortgage from Mackinac Savings Bank. The bank filed a routine request for verification of employment to Miller Solomon, inquiring into Cave's position with the company and his source of income. Miller Solomon complied with this request on December 6, 1996. In box 10 of the request response filled out by Miller, Cave is listed as Vice President of Corporate Development. In box 12, his salary of $85,000 a year can be found. Box 11, which describes "probability of continued employment," states "excellent."
Trial Exhibit 37 — Letter from Miller Solomon dated December 17, 1996 with Request for Verification of Employment dated 12/6/96.
As part of Cave's shift into a permanent position in January of 1997, the company ran a background check on him. After the background check, the company abruptly fired Cave and asked him to leave immediately, but did not tell Cave the reason for his termination. In April, Cave obtained a job as Vice President of Finance at CellIT Inc. at a salary of $100,000.00 with future stock options to be vested over a three year period.
Trial Exhibit 23.
Unknown to Cave, on January 23, 1997, Davison had instituted formal charges against Cave in Bermuda, and an arrest warrant issued by the Magistrates Court in Pembroke Parish, Bermuda. Cave was charged with 12 counts of stealing (larceny) and 24 counts of false accounting, alleging theft of a total of $54,871.05. Also unknown to Cave, because the amount of the alleged theft was over $50,000.00, extradition proceedings were initiated by the government of Bermuda in March, 1997.
Trial Exhibits 38 and 39, see statement from Deputy Governor's Office dated March 5, 1997.
The criminal charges were based on formal sworn statements dated June 25, 1996 and January 22, 1997 by Davison to the Bermuda Police. Davison's statement of June 25, 1996, includes the following allegations:
Trial Exhibits 7 and 19.
* * * * *
At 2:00pm on Friday the 15th December, 1995 I attended a meeting with Derek Selly and Steven Smith, at the Bank of Bermuda Limited, to discuss banking policies for the forthcoming year. During discussions, Mr. Selly displayed the company's current account activity on his computer screen and I noticed a $25,000.00 transaction had been carried out. Further research identified this as an International Monetary Transfer (ITM) to the Key Bank in New York, USA, for the benefit of Colin CAVE. I immediately contacted our auditor, Ken O'Neill, at Butterfield Steinhoff, and he initiated a detailed review of the company's accounts. That afternoon I reported the preliminary findings to the Police.
* * * * *
I have subsequently reviewed the findings of the analysis, and can comment on them as follows; —
Transaction #1: Consists of a cheque dated 25-July-1995, drawn on the BVH's account at the Bank of Bermuda Ltd., serial #006017, together with the corresponding cheque stub and computer printout. The cheque is made payable to U.S. Air in the amount of $531.45. I was not aware of this payment and would not have authorised it. Both the cheque and stub are in the handwriting of Colin CAVE.
Transaction #2: Consists of a cheque dated 01-August-1995 drawn on the BVH's account at the Bank of Bermuda Ltd., serial #006068, together with the corresponding cheque stub, General Ledger printout and bank statement. The cheque is in the amount of $350.00 and is identified as 'Travel Expenses' of CAVE to Baltimore, USA. This was not a business trip, I was not aware of this payment and would not have authorised it. Both the cheque and stub are in the handwriting of Colin CAVE.
Transaction #3: Consists of a cheque dated 29-September-1995, drawn on the BVH's account at the Bank of Bermuda Ltd., serial #006264, together with the corresponding cheque stub, General Ledger printout, and bank statement. The cheque is in the amount of $2,500.00 and is indicated as an 'adjustment to loan repayment — Bayland'. I was not aware of this payment and there is no logical reason why such a payment should have been made. Both the cheque and stub are in the handwriting of Colin CAVE.
Transaction #4: Consists of two cheques both drawn on BVH's Bank of Butterfield account. One cheque is dated 16-Oct-1995, serial # 6664, together with the corresponding cheque stub, General Ledger printout, and bank statement. This cheque is payable to the Bank of Bermuda for the sum of $2,750.00. There is no explanation on the stub or in the General Ledger as to why this payment was made, and I can find no logical reason for it. I was not aware of the payment, and based on what is recorded I would not have authorised it. Both the cheque and stub are in the handwriting of Colin CAVE. There was some reference made by CAVE in this transaction to an account name of "G.E.S." within BVH's accounting records. "G.E.S." are the initials of a lumber and kitchen cabinet company named Group Enterprise Services Limited. This is a Bermuda registered company, which is co-owned by William Nicholson and myself.
The second cheque is dated the 19-Oct-1995, serial #6666, together with the corresponding cheque stub, General Ledger prinout, and bank statement. This cheque is payable to the Bank of Butterfield for the sum of $545.00. The stub indicates a 'small adjustment' in relation to Petty Cash, but there is no logical reason why such a payment was made. I was not aware of the payment, and based on what is recorded I would not have authorised it. Both the cheque and stub are in the handwriting of Colin CAVE.
Transaction #5: Consists of two cheques both drawn on BVH's Bank of Bermuda account. Both cheques are dated 29-Oct-1995 and bear chronological serial #'s 006231 and 006232, together with the corresponding cheque stubs, General Ledger printouts, and bank statement. Both cheques are payable to Colin CAVE, in the amounts of $2,000.00 and $2949.00 respectively. The cheque stubs bear confusing comments about loan payments, loan advances, and loan adjustments, all of which make no sense to me and were not valid. I was not aware of these cheques, and would not have authorised them. Both the cheques and stubs are in the handwriting of Colin CAVE, and each cheque is countersigned by myself. At the time I signed those cheques, they were blank, and I signed them on the understanding and in the belief they would be used for valid company expenses.
Transaction #6: Consists of a cheque dated 07-Dec-1995 drawn on BVH's account at the Bank of Bermuda Ltd., serial #006493, together with the corresponding cheque stub, General Ledger printout, and the Bank of Bermuda account history printout. The cheque is in the amount of $1,249.58, and the stub indicates a payment regarding 'Blue Cross Blue Shield Medical Coverage.' I was not aware of the payment, there was no agreement with CAVE regarding the payment, and I would not have authorised it. At the time of employing CAVE, there was no discussion or agreement regarding U.S. medical health coverage. As an employee of BVH, CAVE had medical coverage with B.F. M. insurance company, so BVH should not have been paying for any private health insurance coverage. Both the cheque and stub are in the handwriting of Colin CAVE. The cheque is further signed by William Nicholson, who is one of the authorised signatories on the account whenever my wife and I are away.
Transaction #7: Consists of a Bank of Bermuda International Monetary Transfer (IMT) request form, control #70662, dated the 13th of December, 1995, together with the General Ledger printout and a Bank of Bermuda printout. The IMT form is signed by both Colin CAVE and William Nicholson, and authorises the transfer of $25,000.00 via the 'Bankline' facility to the Key Bank of New York, USA, for the benefit of Colin CAVE. It was this transaction which came to my attention on the 15th of December, 1995 which prompted the investigation into the company accounts. I was not aware of this transfer and would never have authorised it.
Transaction #8: Consists of two computer generated cheques, both drawn on BVH's Bank of Bermuda account. Both cheques are dated 13-Dec-1995, and bear chronological serial #'s 001058 and 001059, together with Payroll Check Register printouts, the General Ledger printouts, and a Bank of Bermuda printout. Both cheques are payable to Colin CAVE, each in the amounts of $2,400.00, and are portrayed as salary payments. Each cheque bears the signatures of Colin CAVE and William Nicholson. Company salary cheques are generated every two weeks (less deductions), but these two cheques were generated in addition to the regular payroll. I was not aware of either of these cheques and would not have authorised them.
Transaction #9: Consists of a cheque dated 06-Jul-1995, drawn on Bayland's account with Nations Bank in Baltimore, USA, serial # 3642, together with the supporting cheque stub, General Journal printout, and bank statement. The cheque is made payable to 'VIP Travel Services' in the amount of $310.10, and according to the stub it was for 'Travel Expenses' in respect of Colin CAVE. These are not valid expenses and I did not authorise this payment. Both the cheque and stub are in the handwriting of Colin CAVE.
Transaction #10: Consists of a cheque dated 18-Jul-1995, drawn on Bayland's account with the Premier Bank in Louisiana, USA, serial #1075, together with the supporting cheque stub, General Journal printout, and bank statement. The cheque is made payable to 'Leroy Village Green' in respect of Blue Cross/Blue Shield in the amount of $1,237.17. This is not a valid company expense, and I did not authorise this payment. Both the cheque and stub are in the handwriting of Colin CAVE.
Transaction #11: Consists of a cheque dated 27-Jul-1995, drawn on Bayland's account with the Premier Bank in Louisiana, USA, serial #1086, together with the supporting cheque stub, General Journal printout, and bank statement. The cheque is made payable to 'Leroy Village Green' in respect of Blue Cross/Blue Shield in the amount of $1,237.17. This is not a valid company expense, and I did not authorise this payment. Both the cheque and stub are in the handwriting of Colin CAVE.
Transaction 12: Consists of a cheque dated 07-Aug-1995, drawn on Bayland's account with the Premier Bank in Louisiana, USA, serial # 1097, together with the supporting cheque stub, General Journal printout, and bank statement (See Transaction #10). The cheque is made payable to 'VIP Travel Services', in the amount of $858.90, with a reference of "R. Hamacher/Cave." I know "R. Hamacher" as CAVE's wife, Ruth Hamacher-Cave. This is not a valid company expense and I did not authorise this payment. Both the cheque and stub are in the handwriting of Colin CAVE.
Transaction #13: Consists of a cheque dated 09-Sep-1995, drawn on Bayland's account with the Premier Bank in Louisiana, USA, serial #3660, together with the bank statement. The cheque is made payable to 'Cash' in supporting cheque stub, General Journal printout, and the amount of $200.00, with a reference of "Barbara/Colin". This is not a valid company expense and I did not authorise this payment. Both the cheque and stub are in the handwriting of Colin CAVE. Ms. Barbara Flowers is the Area manager of our Baltimore, Maryland, USA store.
Transaction #14: Consists of a letter signed by Colin CAVE, dated 15-Sep-1995, addressed to Nations Bank, Baltimore, Maryland, USA, in respect of BAYLAND's account, together with the General Journal printout, and the bank statement. This letter, signed by CAVE, instructs the bank to make a transfer of $2,000.00 to the Key Bank, Rochester, New York, USA, in favor of "R. Hamacher (Eurofusion International Inc.)". There is no logical reason for this transaction being made, and no explanation in the General Journal as to why this payment was made. BAYLAND does not engage in business with Hamacher (CAVE's wife), or with the company Eurofusion International Inc. I was not aware of this payment and would not have authorised it.
Transaction #15: Consists of a cheque dated 05-Sep-1995, drawn on Bayland's account with the Premier Bank in Louisiana, USA, serial #1129, together with the supporting cheque stub, General Journal printout, and bank statement. The cheque is made payable to Leroy Village Green in respect of Blue Cross/Blue Shield in the amount of $1,237.17. This is not a valid company expense, and I did not authorise this payment. Both the cheque and stub are in the handwriting of Colin CAVE.
Transaction #16: Consists of three cheques all drawn on Bayland's account with the Premier Bank in Louisiana, USA. Two are dated 21-Sep-1995, serial #'s 1400 and 1401, and are both made payable to the Key Bank in New York for $650.00 and $275.00 respectively. The third cheque, serial # 1402 is dated 25-Sep-1995, and is made payable to American Express in the amount of $371.95. These are not legitimate company expenses, and there is no explanation on either the cheque stubs, or in the accompanying General Journal, as to why they were made. I did not authorise any of these payments. All three cheques and stubs are in the handwriting of Colin CAVE.
Transaction #17: Consists of a cheque dated 26-Oct-995, drawn on Bayland's account with the Premier Bank in Louisiana, USA, serial #1152, together with the supporting cheque stub and General Journal printout. The cheque is made payable to American Express in the amount of $950.00. This is not a valid company expense, and I did not authorise this payment. Both the cheque and stub are in the handwriting of Colin CAVE.
It has also since been brought to my attention that a further discrepancy in the BVH accounts has been discovered by the auditors. This further transaction concerns a cheque dated 23-Nov-95, drawn on BVH's account with the Bank of Bermuda Ltd., serial #006358, together with the corresponding cheque stub, and account printouts. The cheque was made in favor of the Bank of Bermuda, and cashed in the amount of $3,250.00. There is no logical reason why this transaction took place. This is not a valid company expense, and I did not authorise the payment. Both the cheque and stub are in the handwriting of Colin CAVE.
On August 13, 1997 Cave was arrested outside his home in Fort Lauderdale, Florida at 6:30 a.m. by two U.S. Marshals. Cave testified that he was taken by car to Fort Lauderdale for an appearance at court, after which he was jailed without bail. In route to Fort Lauderdale, the Marshals had to stop twice because Cave was sick with shock. While in his cell, Cave tried to hang himself in panic, then tried to stuff socks down his mouth, his shock and fear were so great. Cave was shortly transported to the Miami Federal Prison, where he was held without bail until September 25, 1997. His life was threatened in the Miami prison, and he was under constant harassment, on one occasion resulting in a dislocated arm. Cave agreed to be extradited to Bermuda, believing that by agreeing to extradition, he would be back home in a few weeks.
He was taken to Atlanta in the custody of a U.S. Marshals and two Bermudian fraud officers. On the trip from Atlanta to Bermuda, Cave was in the custody of the two Bermudian police officers. They told Cave that "he had stood up against the wrong man." Upon arrival in Bermuda Cave was incarcerated at Westgate prison, where he was held in solitary confinement from September 25, 1997, until his trial date, May 18, 1998. He was only allowed out of his cell for one hour in the morning and one hour at night during the week. On the weekends, he was only allowed out for one hour at night.
Cave was unable to afford a private attorney, and his application for legal aid was eventually denied. On February 5, 1998, Cave went to court without representation, having received no response from the Bermuda legal aid. At the pre-trial hearing he was refused bail. Bail was set on February 19, but was so high chat he could not meet the terms and conditions.
From December 8, 1997, to May, 1998, Cave kept a diary. He sought frequent medical assistance in prison. He regularly experienced involuntary shaking, particularly in his left arm, which was painful, and for which he somewhat irregularly received pain medication. The unheated cell was cold and damp during the Bermuda winter. On at lease one occasion, he was put on suicide watch due to depression. He was subjected to threats and abuse from both other prisoners and some guards. His diary notes detail his despair, his loneliness for his wife and child, and his physical and emotional struggle to survive his ordeal.
Trial Exhibit 24.
see, generally, Id.
As a result of his lenghty incarceration, Cave host his job at CellIT Inc. His wife and daughter host the "breadwinner" of the family as Cave's job was their main source of income. They were virtually destitute while he was in prison. Ruth was traumatized by her husband's arrest and incarceration, and had no one in Florida to turn to for help other than her neighbor. Because Ruth did not speak or write English fluently, she was unable to find employment, but raised some money babysitting. She had to sell most of her and her family's jewelry to support herself and their daughter, Ashley. She had no health insurance had to borrow prescription medication when Ashley fell ill. The family car was repossessed and they were in danger of losing the family home for non-payment of the mortgage. After paying her bills with money borrowed from friends, she had $20.00 per week for food and other necessities. She became a social outcast. During Cave's incarceration, Ruth lost 20 pounds, was depressed and cried daily, and experience insomnia. Ashley's only Christmas present was from a church group who donated gifts to children whose parents were in prison.
See generally, Trial Exhibit 35.
Cave finally contacted a friend and former business associate, Walter Panfil, who agreed to help with his family's expenses and arranged for and paid a lawyer to represent Cave at trial in Bermuda. Cave entered a not guilty plea on March 2, 1998, and his trial date was set for May 18. He was was released on bail on the actual trial date when the court reduced the terms and conditions of bail. Cave's trial on the 36 felony counts lasted three and half weeks. The jury of twelve took about two hours to acquit him of all charges.
Trial Exhibit 22 — certificate of Acquittal.
Upon Cave's release, he had great difficulty salvaging his life with his family. His credit had been ruined and his professional integrity and reputation was destroyed. He could not find a good job, and could not support his wife and child. After brief periods of employment at two companies, Cave started his own company where he was employed at the time of this trial. He suffered from depression. After two years, his wife left him and filed for divorce. He believed that his relationship with his daughter was irretrievably broken. He grew to be suicidal. At the urging of a friend, he sought professional help. Cave began treatment with Caroline Baker, a licensed psychotherapist, in January, 2001. She described his appearance at that time:
Trial Exhibit 31 — Letter from cave to G.D. Ross Properties dated August 6, 1998.
Ms. Baker was accepted by the court as an expert in the field of psychotherapy.
His appearance was of a broken man with downcast eyes, his shoulders were slumped and he dragged his feet almost as if he were a prisoner in chains. He mumbled and would not look at me for the whole of the first consultation. His self confidence was shattered, he was in an extreme state of fear, acute anxiety and stress. He was also deeply depressed and was suffering disturbed sleep patterns; mainly due to recurrent nightmares about his time in solitary confinement in prison . . .
Trial Exhibit 40 — Caroline Baker's summary of first consultation and subsequent psychotherapy sessions.
According to Ms. Baker's report, after several months of treatment Cave has regained much of his self confidence, and no longer harbors suicidal thoughts. She opined that he would require continuing psychological support in the future, by telephone, email and face to face consultations. He apparently does not suffer any lingering or permanent physical disabilities as a result of his ordeal.
see, generally, id.
II
Defendants' counsel filed a motion to dismiss for lack of personal jurisdiction, insufficiency of service of process, improper venue, and forum non conveniens prior to withdrawal from representation of defendants. Because counsel withdrew before the scheduled hearing on the motion, and defendants failed to enroll new counsel or respond to Court Orders, the motion was not heard prior to trial. The Court denied the motion in its entirety at the commencement of trial, but each issue will now be addressed.A. PERSONAL JURISDICTION
In System Pipe Supply, Inc., v. M/V Viktor Kurnatovskiy, 242 F.3d 322 (5th Cir. 2001), the Fifth Circuit addressed the issue of personal jurisdiction in a default context as follows:
It should therefore be apparent that a district court has the duty to assure that it has the power to enter a valid default judgment. Our colleagues in the Tenth Circuit have held that "[W]hen entry of default is sought against a party who has failed to plead or otherwise defend, the district court has an affirmative duty to look into its jurisdiction both over the subject matter and the parties."
System Pipe Supply, 242 F.3d at 324, quoting Williams v. Life Savings and Loan, 802 F.2d 1200, 1203 (10th Cir. 1986)
Louisiana's Long-Arm Statute provides, in pertinent part:
A. A court may exercise personal jurisdiction over a nonresident, who acts directly or by an agent, as to a cause of action arising from any one of the following activities performed by the nonresident:
(1) Transacting any business in this state.
(2) Contracting to supply services or things in this state.
(3) Causing injury or damage by an offense or quasi offence committed through an act or omission in this state.
(4) Causing injury or damage in this state by an offense or quasi offense committed through an act or omission outside of this state if he regularly does or solicits business, or engages in any other persistent course of conduct, or derives revenue from goods used or consumed or services rendered in this state.
. . .
B. In addition to the provisions of Subsection A. a court of this state may exercise personal jurisdiction over a nonresident on any basis consistent with the constitution of this state and the Constitution of the United States."
LA. REV. STAT. ANN. § 13:3201 (West 1994).
Because Louisiana's Long-Arm Statute extends to the limits of due process, this Court need only determine if subjecting the defendants to suit in Louisiana would offend the Due Process Clause of the Fourteenth Amendment. Interpreting this due process protection, the United States Supreme Court repeatedly has held that personal jurisdiction may be asserted over a nonresident defendant only if that defendant has certain "minimum contacts" with the forum such that the maintenance of the suit does not offend "traditional notions of fair play and substantial justice."
See, e.g., International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945).
The United States Supreme Court has recognized two categories of "minimum contact" with a state that may subject a defendant to jurisdiction in that forum. A state has "specific jurisdiction" over a defendant when the suit arises out of or is related to the defendant's contacts with the forum state. A single action on the part of the defendant can justify the exercise of personal jurisdiction if the cause of action arises from that action. A state has "general jurisdiction" over a defendant when the defendant has "continuous and systematic" contacts with the forum state. In this context, minimum contacts means that the defendant has purposely availed himself of the privilege of conducting activities within the forum state and that he should reasonably anticipate being hailed into Court in the forum state. In this instance, personal jurisdiction may be exercised over the defendant even when the suit does not arise out of the defendant's contacts with the forum state.
See Helicopteros Nacionales de Columbis, S.A. v. Hall, 466 U.S. 408, 414 n. 8, 104 S.Ct. 1868, 1872 n. 8, 80 L.Ed.2d 404 (1984).
McGee V. International Life Insurance, 355 U.S. 220, 223, 78 S.Ct. 199, 201 (1977); accord, Irving v. Owens-Corning Fiberglas Corp., 864 F.2d 383, 385 (5th Cir. 1989)
See, e.g., Perkins v. Benguet Consolidated Mining Co., 342 U.S. 437, 72 S.Ct. 413, 96 L.Ed. 485 (1952)
Dickson Marine Inc., v. Panalpina, Inc., 179 F.3d 331, 336 {5th Cir. 1999)
See Helicopteros, 466 U.S. at 415 n. 9, 104 S.Ct. at 1872 n. 9.
DEFENDANT BAYLAND, LTD.
The Court finds that defendant Bayland has sufficient "continuous and systematic" contacts with the State of Louisiana to be subject to general jurisdiction in this forum. Bayland owned and operated a retail store at the Riverwalk in New Orleans from late 1993 through 1998, the time period covered in the instant lawsuit. Bayland entered into a lease for the retail space in Louisiana, maintained an active account at Premier Bank in Louisiana for business transactions including salary payments, employed Louisiana residents in its store, solicited business in New Orleans, and kept business records in New Orleans. The corporation derived and kept business records in New Orleans. The corporation derived benefits from its activity in Louisiana in the form of profits. Bayland registered with the Secretary of State of the State of Louisiana listing its address at the Riverwalk Marketplace, #1 Poydras St., New Orleans, as its principal place of business in the state, and appointed a registered agent for service of process in Louisiana.DEFENDANTS B.V.H. LIMITED AND NORMAN DAVISON
General JurisdictionIn Dickson Marine Inc., v. Panalpina, Inc., 179 F.3d 331 (5th Cir. 1999), the Fifth Circuit considered whether a parent company can be held amenable to personal jurisdiction because of the acts of a subsidiary.
Courts have long presumed the institutional independence of related corporations, such as parent and subsidiary, when determining if one corporation's contacts with a forum can be the basis of a related corporations's contacts. See Cannon Mfg. Co. v. Cudahy Packing Co., 267 U.S. 333, 45 S.Ct. 250, 69 L.Ed. 634 (1925). This presumption of corporate separateness, however, may be overcome by clear evidence. Donatelli v. National Hockey League, 893 F.2d 459, 465 1st Cir. 1990). . . . There must be evidence of one corporation asserting sufficient control to make the other its agent or alter ego. Id, 893 F.2d at 456-66.
Dickson Marine Inc., 179 F.3d at 338.
Citing Hargrave V. Fibreboard Corporation, 710 F.2d 1154 (5th Cir. 1983), the Dickson court listed factors to be considered:
The Hargrave factors are (1) amount of stock owned by the parent of the subsidiary; (2) did the two corporations have separate headquarters; (3) did they have common officers and directors; (4) did they observe corporate formalities; (5) did they maintain separate accounting systems; (6) did the parent exercise complete authority of general policy; (7) did the subsidiary exercise complete authority over daily operations. Id.. at 1160.
Id., at 339.
Similarly, in United States of America v. Clinical Leasing Service, Inc., 982 F.2d 900 (5th Cir. 1992), the Fifth Circuit stated Louisiana law on piercing the corporate veil as to corporate shareholders:
Under Louisiana law, shareholders are generally not held individually responsible for debts of the corporation. Kingsman Enterprises v. Bakersfield Elec. Co., 339 So.2d 1280, 1282 (La.App. 1st Cir. 1976). However, where the corporation is merely the alter ego of the shareholder, Louisiana courts have ignored the corporate form and have held the individual shareholder or shareholders liable. Id. In applying this alter ego doctrine, Louisiana courts have traditionally focused on the following five elements: (1) commingling of corporate and shareholder funds; (2) failure to follow statutory formalities for incorporation and the transaction of corporate affairs; (3) undercapitalization of the corporation; (4) failure to provide separate bank accounts and bookkeeping records; (5) failure to hold regular shareholder or director meetings. Id. [Citations omitted.]
Clinical Leasing Services, Inc., 982 F.2d at 902.
Not quite parent and subsidiary, Bayland and B.V.H. are more accurately sibling corporations, although B.V.H. is the "manager" of Bayland. In any case, both corporations are dominated by and are mere extensions of Davison personally. The Court finds that all defendants are alter egos of one another. This court has personal jurisdiction over all defendants.
B.V.H. and Bayland were undercapitalized when Cave arrived in Bermuda. It is true that Bayland maintained an office in Baltimore and Davison identified Ms. Barbara Flowers as "Area Manager" of the Baltimore store. However, both corporations were operated from Bermuda with common employees located in common offices. Bayland's bills were paid in Bermuda, often from B.V.H. accounts. B.V.H. and Bayland had common stockholders and identical or substantially identical ownership. Davison was president of and controlled both Bayland and B.V.H. Cave observed that B.V.H. and Bayland failed to observe corporate formalities for the transaction of corporate affairs, and neither BVH nor Bayland held regular shareholder meetings or board of director meetings.
Record Vol. 2, Doc. # 30 — Request for Admissions and court Order deeming Request for Admissions admitted.
While the two corporations did have accounts at separate banks, the companies had maintained virtually no separate accounting. B.V.H. sometimes paid for retail stock delivered directly to the Bayland Davison's of Bermuda retail stores in the U.S.A., and vice versa, Bayland sometimes paid for stock and expenses for the B.V.H. Davison's of Bermuda retail stores in Bermuda. Funds from the B.V.H. and Bayland bank accounts were routinely transferred to G.E.S., a separate corporation in Bermuda owned by Davison. Funds from both corporations were used to pay Davison's expenses with no record as to whether the expenses were incurred for corporate business.
Funds were transferred between B.V.H. and Bayland on a regular basis without accurate accounting. From July 1, 1995 to January 1, 1996, B.V.H. incurred expenses in the amount of $315,152.00 on behalf of Bayland. This included three types of charges and/or expenses incurred by B.V.H. on behalf of Bayland. The first was a monthly management fee charged by B.V.H. to Bayland for $5,750.00. This was charged on the first of every month for corporate services performed by Davison and Cave in running Bayland. B.V.H. made bank transfers to Bayland charged to inter-company. For example, Bank transfers were made between Bayland and B.V.H. On February 14, 1995, Bayland transferred $150,000.00 from its account with the Bank of Bermuda to B.V.H. On July 25, 1995, B.V.H. transferred $35,000.00 from its account with the Bank of Butterfield to Bayland. On September 27, 1995, B.V.H. transferred $85,000.00 from its Bank of Butterfield account to Bayland.
Trial Exhibit 13B.
Trial Exhibit 13.
Trial Exhibits 13 and 13B — General Ledger Trial Balance for B.V.H. from February 1995 through November 1995 attached in globo.
Lastly, B.V.H. paid international suppliers for clothes and goods made for Bayland and shipped directly overseas to Bayland. The businesses were seasonal with the U.S.A. operations (Bayland) generating income in the winter season, and the Bermuda (B.V.H.) generating more income in the summer season. The company with the most funds at any given time would pay the trade suppliers of the other company and account for the charge as an inter-company transaction. For example, from July 1, 1995 to January 1, 1996, Bayland paid separate expenses on behalf of B.V.H. in the amount of $282,067.27. This includes payments made by Bayland to international suppliers for clothes that were made abroad and shipped directly to Bermuda to be sold in B.V.H. stores there, and payments to designers who designed items for B.V.H. Such international suppliers included Nice Rendy, paid $13,242.22 on July 5, 1995; Servicios de Aplocaiones paid $22,067.80 on October 12, 1995; Confecciones Anderson paid $16,051.12 on July 21, 1995; and Pan Oceanic paid $1,397.00 on September 19, 1995. Designers Gator Graphic Design was paid $3,095.20 on November 24, 1995, and Vera Bradley Designs was paid 3,982.00 on September 19, 1995.
Trial Exhibit 13B.
As Vice-President of Finance, Cave observed the commingling of the corporations' funds with those of Davison' own personal assets. Davison had considerable expenses which were reimbursed without documentation that they were incurred for corporate, as opposed to personal, purposes. Further, Davison used funds of B.V.H. to support another business, G.E.S., that he owned personally and which benefitted Davison personally. Sepcific Jurisdiction
Trial Exhibit 14.
The court further finds that all defendants are subject to the Court's specific jurisdiction. Included in the 36 criminal charges brought by Davison against Cave in Bermuda are 16 separate counts, 8 larceny and 8 false accounting counts, that arise from Cave's check transactions at Premier Bank in Louisiana pursuant to his employment as Vice President of B.V.H./Bayland. Transaction #s 10, 11, 12, 13, 15, 16 and 17 are described by Davison as fraudulent in his statement to the Bermuda Police dated June 25, 1996. All are Premier Bank check transactions with a cumulative amount of $6,404.97. The Louisiana bank transactions were essential to Cave's criminal prosecution in Bermuda because without them, the amount of Cave's alleged theft would have been less than the $50,000.00 required for his extradition to Bermuda for criminal prosecution. Clearly, the subject matter of this suit is directly related to defendants' (and plaintiff's) contacts with the forum state.
Trial Exhibit 38 — "Analysis of fraudulent transactions".
Trial Exhibit 19.
B. SERVICE OF PROCESS
At the time defendants' Motion to Dismiss was filed, no executed return of service on Davison or B.V.H. was in the record. However, the completed record includes returns of Service of Process as to all defendants.
Record V. 2, Doc. 25 is return of service as to both Norman Davison and B.V.H., Limited; Record V. 2, Doc. 28 is the return of service as to Bayland, Ltd.
C. VENUE
Defendants argued that venue in this district is not proper as to Davison and B.V.H. because neither can be served with process in any parish of the State pursuant to La. C.C.P. Art. 42(5). Defendants did not challenge venue as to Bayland. Because all defendants are subject to the Court's personal jurisdiction, venue is proper as to all defendants.D. FORUM NON CONVENIENS
Defendants argued that Bermuda is the proper forum for this litigation because all defendants are amenable to process in Bermuda, Louisiana has no interest in the subject matter of the lawsuit whereas Bermuda is the location of the alleged breach of contract and various tort claims, most witnesses and evidence are located in Bermuda, and that because Louisiana is not plaintiffs' "home" forum, their choice of Louisiana as a forum for this lawsuit should be little deference,
Defendants' motion to dismiss, Record 1, Doc. # 4, pp. 16 17.
The general principle of the doctrine of forum non conveniens "is simply that a court may resist imposition upon its jurisdiction even when jurisdiction is authorized." The doctrine presupposes at lease two fora where the defendant is amenable to process and simply furnishes criteria in the form of "private" and "public" interest factors for choice between them.
Dickson Marine Inc., 179 F.3d at 342, citing Gulf Oil Corporation v. Gilbert, 330 U.S. 501, 67 S.Ct. 839, 842, 91 L.Ed. 1067 (1947).
Id.
The "private" interest factors are:
[T]he relative ease of access to sources of proof; availability of compulsory process for attendance of unwilling, and the cost of obtaining attendance of willing, witness; possibility of view of premises, if view would be appropriate to the action; and all other practical problems that make trial of a case easy, expeditious and inexpensive.
Id.
The "public" interest factors are:
[T]he administrative difficulties flowing from court congestion; the "local interest in having localized controversies decided at home", the interest in having the trial of a diversity case in a forum that is at home with the law that must govern the action; the avoidance of unnecessary problems in conflict of laws, or in the application of foreign law; and the unfairness of burdening citizens in an unrelated forum with jury duty.
Id.
Plaintiffs are citizens of Canada and residents of Florida. Defendant Bayland is a Delaware corporation which operated businesses in Louisiana and Maryland. Defendant B.V.H. is a Bermuda corporation which operates retail stores in Bermuda and manages Bayland. Defendant Davison is a citizen of the United Kingdom and a resident of Bermuda. The employment contract at issue was negotiated in New York, New York. Cave was arrested and imprisoned in Florida for 5 weeks awaiting extradition to Bermuda, where he was then imprisoned for another 8 months prior to his trial on multiple criminal charges.
The basis of plaintiffs' claims against Davison, other than the breach of contract, arise from Cave's arrest in Florida and extradition to Bermuda, his incarceration and prosecution in Bermuda pursuant to multiple criminal charges brought by Davison based on various allegedly fraudulent financial transactions in Bermuda, Maryland, New York and Louisiana. Whatever the reasons for their choice of Louisiana as a home forum, it is certainly understandable that plaintiffs chose not to litigate their claims against Davison in Davison's home forum of Bermuda.
The Court will first consider the private interests of the litigants. Plaintiffs produced substantial documentary evidence without the necessity of their physical presence in Bermuda. The obvious witnesses to the circumstances of the negotiation of the contract at issue, and Cave's ultimate hiring in New York and firing in Bermuda, are Cave, his wife, and Davison. Two of the three were readily available to testify in Louisiana. Evidence of the physical and emotional effects of Cave's incarceration in Florida and Bermuda and his criminal prosecution in Bermuda, rest with Cave, his wife and his expert witness, all of whom were available for testimony at trial in Louisiana, either in person, by affidavit, or by expert report. Any testimony required from absent or unwilling witnesses could have been offered by deposition testimony or by affidavit, if such witness was unavailable for trial. It was not necessary for the court to view the premises of the prisons involved to appreciate the conditions of those facilities. Davison, presumably the most important witness for all defendants as to all claims, traveled to New Orleans multiple times in the course of owning and operating a business in the city, and could easily have traveled to the city for trial.
Record V. 1, Doc. #6 — Davison's Affidavit.
Turning to the public factors to weigh in considering forum non conveniens, the docket of the United States District Court for the Eastern District of Louisiana is not so overly burdened that trying this matter created administrative difficulties related to court congestion. The matter was tried to the Court eliminating any inconvenience to a local jury.
Defendants' counsel cautioned that Cave has "attacked the integrity of the Bermudian government and criminal justice system", and that "considerations of comity preclude a court from adversely judging the quality of a foreign justice system absent a showing of inadequate procedural safeguards." Plaintiffs did not attack the Bermudian government and criminal justice system, which, after all, ultimately worked in Cave's favor when, after his trial in a Bermudian court he was acquitted of all criminal charges by a Bermudian jury. Plaintiffs' claim is against an individual Bermuda resident, Davison, for his alleged misuse of his apparent influence with some officials in Bermuda and abuse of the Bermudian justice system for his own personal purposes.
Record V. 1, Doc. 4 — Defendants' Brief in Support of Motion to Dismiss at p. 22.
Finally, Louisiana's connection to this matter is far more than just happenstance. Davison purposefully reached into Louisiana for criminal charges against Cave by claiming that multiple check transactions drawn on a Premier Bank account in Louisiana, arising out of the operation of Bayland's Riverwalk store, were fraudulent. Those transactions were necessary to meet the threshold requirement of a theft of at least $50,000.00 to extradite Cave to Bermuda for criminal prosecution. The State of Louisiana has an interest in protecting businesses and their employees operating in the state from abuse or misuse by foreign corporations or individuals who then withdraw to the distant and secure haven of their country of domicile to claim that being forced to litigate in Louisiana is unfair or inconvenient. Defendants' choice to simply withdraw from active participation in defending this lawsuit in Louisiana cannot shield them from the consequences of their actions which reach well beyond Bermuda.
Defendants' motion made a passing reference to a conflict of laws issue but failed to develop or brief the issue. The party who challenges the application of the law of the forum state to a controversy "assumes the burden of showing, upon some rational basis" that the conflicting interests of the foreign state outweigh the interests of the forum state in the application of its law. Alaska Packers Assn. v. Industrial Accident Comm'n, 294 U.S. 532, 55 S.Ct. 518, 524, 79 L.Ed 1044 (1935); see also Allstate Ins. Co. v. Hague," 449 U.S. 302, 101 S.Ct. 633, 647 n. 13, 66 L.Ed 2d 521 (1981) ("It is clear that a litigant challenging the forum's application of its own law to a lawsuit properly brought in its courts bears the burden of establishing that this choice of law infringes upon interests protected by the Full Faith and Credit clause." (Justice Stevens concurring in the judgement, citing Alaska Packers Assn., supra.)); accord Friou v. Phillips Petroleum Company, 948 F.2d 972, 974 (5th Cir. 1992) citing Villanueva v. CNA Ins. Cos., 868 F.2d 684, 687 n. 5 (5th Cir. 1989) ("A party who inadequately briefs an issue is considered to have abandoned the claim.")
III. A. BREACH OF CONTRACT
In Meredith v. Louisiana Federation of Teachers, 209 F.3d 398, 403 (5th Cir. 2000), the Fifth Circuit stated Louisiana law as to employment contracts:
Under Louisiana law, employment is at-will unless it is for a definite term. [fn 14] When an employee is hired for a "certain time" and is terminated "without any serious cause," the employer is liable to the employee for the amount of salary due under the contract." [fn 15]. An oral contract for more than five hundred dollars may be proved by the testimony of "one witness and other corroborating circumstances. [fn 16] The requirement of "one witness" may be met by the plaintiff's own testimony, and the corroborating evidence may be the fact that the plaintiff left a secure position to work for the new employer. [fn 17]
See Brannan v. Wyeth Lab., Inc., 526 So.2d 1101, 1103 (La. 1988).
See LA. Civ. CODE art. 2749.
See id. art. 1846.
See Higgins v. Smith Int'l, 716 F.2d 278, 283 n. 3 (5th Cir. 1983) disavowed on other grounds by Overman v. Fluor Constructors, Inc., 797 F.2d 217, 219 n. 8 (5th Cir. 1986); Lanier v. Alenco, 459 F.2d 689, 692 (5th Cir. 1972).
The Court finds that Cave had an oral employment contract with Davison on behalf of B.V.H. and Bayland for a term of three years at a beginning salary of $65,000.00 tax free. The contract terms included health insurance for his family, reasonable trips by Cave to Rochester, New York, to visit his family and one trip by his family to Bermuda, and relocation costs. The court further finds that Davison breached the employment contract by terminating Cave without cause only six months into the duration of the contract.
Both Cave and his wife testified as to the terms of the oral employment contract agreed to by Davison in New York City. Cave left a secure position at Eurofusion International, Inc., in Rochester, New York, to accept Davison's employment offer. As further corroborating evidence, Cave produced a copy of the Bermuda Department of Immigration Ministry of Labour and Home Affairs Initial Questionnaire Form which confirmed Cave's understanding of the agreement.
Trial Exhibit 18.
Plaintiffs are entitled to damages for Davison's breach of contract in the amount of $130,000.00 for the remaining two years of Cave's employment contract. In a diversity case such as this one, pre-judgment interest on a money judgment is determined by state law; post-judgment interest on money judgments recovered in federal court is governed by federal law under 28 U.S.C. § 1961 (a). Louisiana law provides for pre-judgment interest on a breach of contract claim from the date of an "active" breach of contract. The Court finds that Davison's breach was active. Plaintiffs are entitled to pre-judgment interest on the damages for breach of contract from December 13, 1995, to date of judgment at the rate set forth in LSA-R. S. 13:4202, and post judgment interest at the federal rate.
La. Civil Code art. 2749 provides:
If, without any serious ground of complaint, a man should send away a laborer whose services he has hired for a certain time, before that time has expired, he shall be bound to pay to such laborer the whole of the salaries which he would have been entitled to receive, had the full term of his services arrived.
Cave borrowed the remainder of his salary due for the first year of his employment after his termination in the form of the $25,000.00 employment loan drawn down monthly while he searched for another job in the U.S.
The Prytania Park Hotel v. General Star Indemnity Company, 1997 WL 250023 at *1 (E.D. LA, May 9, 1997) (Berrigan, J., Order and Reasons, citing Fuchs v. Lifetime Doors, Inc., 939 F.2d 1275, 1280 (5th Cir. 1991)); Forrester v. ARCO Oil Gas Co.,. 1992 WL 298048 at *7 (E.D. La., Oct. 8, 1992) (Livaudais, J.)
Sharbono v. Steve Lang Boris Loggers, 97-0110 at *6 (La. 7/1/97), 696 So.2d 1382, 1387, citing La. C.C. art. 1969 (interest as to an active breach of contract runs "from the moment" of an active violation of the contract).
B. MALICIOUS PROSECUTION
Under Louisiana law, a malicious prosecution claim requires: 1) the commencement of an original criminal or civil judicial proceeding; 2) its legal causation by the present defendant against the present plaintiff who was the defendant in the original proceeding; 3) its bona fide termination in favor of the present plaintiff; 4) the absence of probable cause for such proceeding; 5) the presence of malice therein; and 6) damages conforming to legal standards resulting to the plaintiff.St. Paul Mercury Insurance Co. v. WIlliamson, 224 F.3d 425, 435 (5th Cir. 2000) citing Hibernia Nat'l Bank v. Bolleter, 390 So.2d 842, 843 (La. 1980); see also Piazza v. Mayne, 217 F.3d 239, 245 (5th Cir. 2000).
The first three elements are easily established. Cave was the defendant in a criminal prosecution in Bermuda which was based entirely on a formal complaint made to the Bermuda police, supported by sworn statements by Davison. Cave stood trial in a Bermuda court on multiple larceny and false accounting counts and was acquitted of all charges by a Bermuda jury.
The court finds that the fourth element of a malicious prosecution is met. To determine if there was an absence of probable cause for Davison's criminal complaint against Cave, the Court must determine whether Davison had an honest and reasonable belief that Cave was guilty of theft by fraud and larceny.
St. Paul Mercury Insurance Co., 224 F.3d at 435.
The check identified in Transaction #1 of Davison's statement was for a trip to Rochester for a family visit, and then on to Baltimore on Bayland business where Cave met with Davison at the. Bayland office. Transaction #2 was for travel expenses related to the same trip. Davison was aware of both transactions.
Transaction #4 included a cheque for $2,750.00 from B.V.H., payable to the Bank of Bermuda on behalf of G.E.S. Davison swore that he was "unaware" of the transfer, that there was "no logical reason" for it and that he "would not have authorised" it. He acknowledged that G.E.S. was another of his Bermuda companies. On May 5, 1995, before Cave began work for Davison, $43,443.05 was transferred from a B.V.H. account to an account for G.E.S.; on July 27, 1995, $10,000.00 was transferred from B.V.H. to G.E.S.; on November 2, 1995, $4,921.00 was transferred from B.V.H. to G.E.S.; and on November 30, 1995, $60,341.95 was transferred from B.V.H. to G.E.S. Davison failed to inform the Bermuda police about these check transfers from B.V.H. to G.E.S. totaling nearly $120,000.00, all but one of which occurred during Cave's employment.
Trial Exhibit 14.
Transaction #'s 6, 10 and 11 are payments for the medical insurance coverage for Cave's family that Davison had agreed to. Transaction #8 consisted of pay checks to Cave for the two pay periods in December of 1995 for which he had not been paid when he was fired by Davison. Transaction #12 was for a trip to Bermuda by Cave's wife and daughter arranged through Davison's travel agency. Davison and his wife took Cave and his wife out to dinner during the visit. The trip was pursuant to Davison's agreement to provide for reasonable travel by Cave's family to Bermuda to visit Cave, and Davison was well aware of the circumstances of the trip.
All challenged financial transactions were within the course and scope of Cave's duties as Vice President and controller of the companies involved or within the scope of Cave's employment contract with Davison. The authorities in Bermuda accepted Davison's sworn statements at face value and proceeded to extradite and prosecute Cave pursuant to Davison's complaint. At the time Davison filed the criminal complaint against Cave, he was well aware of the terms of employment that he had agreed to. Cave made no attempt to conceal any of the allegedly fraudulent transactions, and in fact, dutifully documented each one in the normal course of business. Even assuming that Davison may not have understood the explanations or descriptions in the company ledgers for every transaction he claimed to be fraudulent and unauthorized, the Court finds that he could not possibly have had an honest and reasonable belief that any questioned transaction was intentionally or actually fraudulent.
The Court finds that the fifth element of malicious prosecution is met. Malice "is inferred when there is an absence of probable cause resulting from wanton and reckless disregard of the rights of the party sued, evincing absence of that caution and inquiry a party should employ before filing a suit." Hibernia National Bank of New Orleans, 390 So.2d at 844 citing Robinson v. Goudchaux's, 307 So.2d 287, 289 (La. 1975). On January 15, 1996, Davison called Cave in New York claiming that Cave owed him over $50,000.00 and threatened to "follow [him] to the ends of the earth and destroy [him]" if Cave did not immediately repay the money. The Court finds that Davison's threat against Cave, and his dogged pursuit of criminal charges against Cave that he knew to be false, are sufficient evidence of malice.
The court finds that the last element of a malicious prosecution is also met. "Damages are also to be presumed in a case where all other elements of a suit for malicious prosecution are satisfied." Id. Cave was unexpectedly arrested outside of his home in Florida some nineteen months after Davison's threatening phone call in January, 1996. He was incarcerated for over nine months and endured a three and a half week trial based solely on Davison's false sworn statements. He lost two jobs as a direct result of Davison's malicious prosecution and had difficulty finding a job after his release. His wife and daughter were virtually destitute during his incarceration, dependent on loans and assistance from family and friends to provide for food and avoid foreclosure on their home. His credit record was ruined by the financial losses. His professional integrity and reputation were destroyed, limiting future job opportunities. He suffered physical abuse and deprivation while incarcerated, and significant emotional distress and mental anguish throughout the ordeal. His sense of self esteem was shattered and he suffered acute anxiety and depression. His marriage and his relationship with his daughter was destroyed. In short, Davison made good on his threat to follow Cave to the ends of the earth and destroy him.
The Court awards Cave damages for Davison's malicious prosecution, including his unwarranted arrest and imprisonment, for physical discomfort, injury, loss of health, loss of. time, deprivation of society and separation from his family, humiliation, shame, emotional distress and mental anguish, past and present, in the amount of $500,000.00. The court awards $75,000.00 for such future damages. The Court's damage award is supported by several Louisiana cases: Gibson v. State of Louisiana, 98-1100 (La.App. 4 Cir. 2/24/99), 731 So.2d 379 ($5,000,000.00 awarded to plaintiff who spent 25 years in prison after having been arrested with no probable cause and wrongly convicted of murder); Hayes v. Kelly, 625 So.2d 628 (La.App. 3 Cir. 1993) r'hng denied Nov. 12, 1993, ($55,000.00 awarded to plaintiff who spent an extra 171 days in jail as a result of mistaken identity); and, Lewin v. First Paratransit Corp., 387 So.2d 1254 (La.App. 1 Cir. 1980) ($7,500.00 awarded for damage to reputation, embarrassment, humiliation and mental anguish to plaintiff who was falsely arrested and jailed for 5 days.)
Plaintiffs offered no evidence as to the coat of Cave's psychotherapy, thug the Court makes no specific award for such past and future expenses.
Plaintiffs argue that Cave's case is "strikingly similar" to plaintiff's circumstances in Coumou v. U.S., 1995 U.S. Dist. LEXIS 6665. In that case, as a result of the negligence of the United States, Coumou was unjustly incarcerated for 6 months in a Haitian prison on drug smuggling charges prior to his acquittal at trial. Coumou was awarded general damages in the amount of $2,000,000.00. The conditions of Coumou's imprisonment were unspeakably cruel and inhumane. Indeed, Coumou was truly fortunate to have escaped his ordeal with his life. While this Court does not take lightly Cave's suffering, the conditions of his imprisonment and the damage done to his physical and emotional being are not comparable to that suffered by Coumou.
In January, 1997, Cave was fired from his job at Miller . Solomon as a result of the criminal charges and arrest warrant issued in Bermuda. His annual salary was $85,000.00, or $7,080.00 per month. Cave would have earned $21,240.00 for the three months he was out of work. In April, he was hired at CellIT, Inc., at an annual salary of $100,000.00. He was arrested on August 13, 1997, and obviously unable to continue working. Cave had earned $30,535.74 of his annual salary at the time of his arrest, and is entitled to the $69,464.26 due for the remainder of his first year's salary. After he returned to the U.S. in June of 1997, Cave again began searching for a job. One job offer was withdrawn by G.D. Ross Properties when the company checked Cave's credit and asked for an explanation for his terrible credit report. He finally found employment in mid September. He was out of work May, June, July, August and half of September 1998. Had he continued to work at CelIIT at his beginning salary of $100,000.00 annually, he would have earned $34,615.44 during those four and one half months. He is entitled to compensation from Davison in the total amount of $125,319.70 for his loss of income as a result of Davison's malicious prosecution.
Trial Exhibit 30, 1997 W-2 statement from CellIT, Inc.
At an annual salary of $100,000.00, Cave's weekly salary was $1,923.08. He had been paid for slightly less than 16 weeks at the time of his arrest. Counting backward from his date of arrest, he began working at Cellit on about May 1, 1997.
Trail Exhibit 31.
Trial Exhibit 30 — 1998 W-2 form from Video Central-South, Inc.
Cave's employment agreement at CellIT, Inc., included stock options for 100,000 shares in the company vested over a three year period. See Exhibit 25, Draft of CellIT Business Plan, at page 35. During trial, plaintiff's counsel suggested that the estimated value of those stock options is $950,000.00, and that Cave is entitled to that amount as damages. The Court declines to award that amount because the value of the stock options can only be estimated, and Cave's interest in the future vesting of those options is merely speculative.
Plaintiffs' are entitled to $102,121.24 as compensation for the expenses and costs incurred as a result of Davison's malicious prosecution. Cave was billed $686.55 by John Triglio, the attorney in Buffalo, New York, who Cave consulted after Davison's threatening telephone call of January 15, 1996, and who wrote a letter to Davison on Cave's behalf. He was billed $405.00 by the Bermuda Hospital Board for services rendered by the prison infirmary while he was in Westgate prison. Cave and his wife signed a promissory note in the amount of $95,000.00 to Walter Panfil, who incurred significant expenses on Cave's behalf during Cave's incarceration and trial. Panfil prepared an itemized list of his actual cash outlay totaling $101,029.59. The itemization includes an estimate of $6,000.00 for expenses to be incurred after the date of promissory note, including expenses for an accounting consultant, for Panfil's and Ruth Hamacher Cave's trip to Bermuda for Cave's trial, and miscellaneous bills and expenses for the remainder of the month of May. The Court finds the estimated expenses to be reasonable.
Trial Exhibit 26.
Trial Exhibit 29.
Id.
At trial, counsel suggested that Cave as entitled to recover a $15,000.00 fee he paid to his attorney in Miami as a result of his arrest and incarceration in Florida. However, plaintiff's did not submit an invoice or any evidence of the amount actually charged and/or paid by Cave. The Court declines to award damages for that amount.
For Ruth Hamacher Cave's loss of consortium claim, the Court awards $50,000.00. She and their daughter were virtually destitute as a result of Davison's prosecution of her husband. She suffered significant mental anguish, emotional distress and physical hardship. Her marriage did not survive the ordeal.
Plaintiffs are entitled to pre-judgment interest on damages for Davison's malicious prosecution from the date of judicial demand under Louisiana law, at the rate set by Louisiana law, and post-judgment interest is at the federal rate.
See LA.REV.STAT. § 13:4203.
In summary, the Court finds that plaintiffs' are entitled to recover damages as follows:
Compensatory damages:
Past $500,000.00 Future $ 75,000.00 $575,000.00
Loss of Income
Miller Solomon $ 21,240.00 CellIT, Inc. $ 104,079.70 $125,319.70
Expenses
John Triglio $ 686.55 Bermuda Hospital $ 405.00 Walter Panfil $ 101,029.59 $102,121.24 Breach of Contract $130,000.00 Loss of Consortium $ 50,000.00 TOTAL $982,440.94
Judgment in the sum of $982,440.94, with pre- and post-judgment interest as directed, will accordingly be entered.
In addition to claims for damages for breach of contract and malicious prosecution, plaintiffs' lawsuit also alleges intentional infliction of emotional distress, defamation, abuse of process and negligence. Only the claims of breach of contract and malicious prosecution were argued at trial and briefed. The court considers the claims for damages based on intentional infliction of emotional distress, defamation, abuse of process and negligence to have been abandoned by plaintiffs.