James v. Frame

United States Court of Appeals,

Fifth Circuit.

No. 93-2272

Summary Calendar.

Allan JAMES, et al., Plaintiffs,

v.

Suzanne FRAME, et al., Defendants.

In re Suzanne FRAME, Appellant.

Nov. 5, 1993.

Appeal from the United States District Court for the Southern District of Texas.

Before WISDOM, JOLLY, and JONES, Circuit Judges.

WISDOM, Circuit Judge:

In this case, we revisit a tireless litigant, impressive in her perseverance, if not her track

record. Fortunately, this case is nearing a final end and our task today is quite discrete.

To relay the complicated procedural history of this case would require more space than its

value warrants. This case originated in a suit filed by the appellant in late 1986. Six years later, after

judgment was entered against her, she appealed to this Court in Frame v. S-H, Inc. ("Frame I ").1

Although this Court expressed its displeasure with being forced to remand, it stressed that only a

narrow issue—one of damages—was left on the agenda.2 It is only the resolution of that narrow

question that we address today.

We find that the district court followed the instructions of this Court upon remand and,

accordingly, we affirm.

I. FACTS.

A detailed factual summary of the case appears in the opinion issued after this Court decided

1

967 F.2d 194 (5th Cir.1992).

2

This Court referred to the proceedings as a "story of gross abuse of discovery procedures

tolerated much too long by the trial court." Frame I, 967 F.2d at 196.

the first appeal.3 For the purposes of this appeal, we need to outline only the basic facts at issue.

This case originated in a suit filed by Suzanne Frame. Frame sought to recover money from

Manuel Zepeda who, she contended, had fraudulently induced her to entrust $7 million with him,

ostensibly for the purpose of funding an international perfume industry. Unfortunately, the money

disappeared without the expected returns or profits.

One year after Frame filed suit against Zepeda, the district court entertai ned a motion to

intervene brought by a group of 28 separate investors (the "intervenors"). The intervenors charged

that Frame's lawsuit against Zepeda was mere subterfuge for what really happened, namely that

Frame, herself, had defrauded the investors out of the money. The court granted the motion and

realigned the parties to reflect the new posture; Frame became the defendant.4

In the midst of these proceedings, Frame filed for bankruptcy protection for her company and

herself, perso nally, in the Southern District of New York. Her personal bankruptcy petition was

transferred to Texas where it was dismissed because of Frame's lack of good faith and other abuses.

In court, Frame engaged in a persistent practice of delaying tactics and other discovery abuses

too lengthy to recount here. These transgressions impelled the harassed district court to describe her

as a "disingenuous, obstreperous, obfuscating pain." Ultimately the court entered a final default

judgment against her for over $10.2 million.5

Frame appealed the $10.2 million judgment. In Frame I, this Court reluctantly found one

issue which required the district court's further attention: the proper calculation of damages. In

particular, this Court asked the district judge to consider the Najarro case which examined these

transactions and determined that the Texas usury laws might reduce the damages awarded.

The district court entered its Amended Final Judgment on March 2, 1993. In addition, the

3

Id. at 196-202.

4

Zepeda and his two business concerns remained separate and distinct defendants.

5

At the same time, a companion case was brought by other investors who contended that

Frame had similarly defrauded them. Judgment was rendered against Frame and affirmed by this

Court in Najarro v. SASI Int'l, 904 F.2d 1002 (5th Cir.1990), cert. denied sub nom., Najarro v.

Frame, 498 U.S. 1048, 111 S.Ct. 755, 112 L.Ed.2d 775 (1991).

district court entered an Order Awarding Attorneys' Fees and Expenses on March 25, 1993. It is

from these orders that Frame now appeals.

II. DISCUSSION.

A. Did the District Court Award Usury Penalties as Instructed by this Court?

Frame contends that the district court did not apply usury penalties as instructed by this Court

and that failure to do so constitutes reversible error.

The usury law this Court instructed the district court to consider upon remand is

Tex.Rev.Civ.Stat.Ann. art. 5069, § 1.01 et seq. That statute states a precise formula for determining

the usury set-off penalty. The formula boils down to a forfeit, by the person who received the

interest, of three times the amount of the usurious interest.6 In addition, the party seeking the

penalties may recover reasonable attorney fees.7

In the present case, the district court followed the Texas statute as instructed by this Court.

The district court stated in its Amended Final Judgment:

From the total damages is subtracted $501,760.00 which represents contemplated usury

charges of $161,420.00, tripled, plus $17,500.00 in attorney's fees. The offset is pro-rated

against each individual award.

Hence, on its face, the district court applied the proper usury penalties.

It is true that the district court judge expressed a desire to avoid applying the usury penalties

on the grounds that usury is not a valid counterclaim when one sues on a note that is void by reason

of common law fraud.8 In spite of that remark, the court applied the usury penalties as stated above.

Despite Frame's charge to the contrary, the district court followed this Court's instructions upon

remand.

B. Did the district court Err in Awarding Punitive Damages Under Common Law Fraud without

Conducting A Hearing?

The appellant contends that the district court committed error when the district court elected

6

Tex.Rev.Civ.Stat.Ann. art. 5069, § 1.06. The statute defines usurious interest as the total

interest charged that exceeds the amount of interest that could have been charged legally. Id.

7

Id.

8

R. 618, p. 26.

to calculate damages without the benefit of an evidentiary hearing. We review this determination

under an abuse of discretion standard.9

As a general proposition, in the context of a default judgment, unliquidated damages normally

are not awarded without an evidentiary hearing.10 That rule, however, is subject to an exception

where the amount claimed is a liquidated sum or one capable of mathematical calculation.11

The Federal Rules of Civil Procedure, contrary to the reading the appellant would ascribe,

does not require an evidentiary hearing. Fed.R.Civ.P. 55(b)(2) (default judgment rule) reads, in

pertinent part:

If, in order to enable the court to enter judgment or to carry it into effect, it is necessary to

take an account or to determine the amount of damages or to establish the truth of any

averment by evidence or to make an investigation of any other matter, the court may conduct

such hearings or order such references as it deems necessary and proper.... (Emphasis

added).

The rule explicitly grants the district court wide latitude; the appellate court, in review, should defer

to that discretion.

A default judgment typically arises early in the proceedings, often when the court has

received little substantive evidence. We are not presented with that problem here. To the contrary,

plentiful evidence on defendant's conduct has been received. The district judge, himself, has

maintained a long and close familiarity with the issues in this matter. We cannot say in this case that

this evidence was insufficient to allow a district court, in its measured discretion, to forego an

evidentiary hearing.

The case of Action S.A. v. Marc Rich & Co., Inc.12 resolved a like issue with similar

reasoning. In that case, the U.S. Court of Appeals for the Second Circuit upheld a district court's

9

HMG Property Investors v. Parque Indus. Rio Canas, 847 F.2d 908 (1st Cir.1988). See

generally, 10 C. Wright, A. Miller, & M. Kane, Federal Practice & Procedure § 2693 at 472-74

(2d ed. 1983).

10

See United Artists Corp. v. Freeman, 605 F.2d 854, 857 (5th Cir.1979).

11

Id.; see also, Flaks v. Koegel, 504 F.2d 702, 707-09 (2d Cir.1974).

12

951 F.2d 504 (2nd Cir.1991), cert. denied, --- U.S. ----, 112 S.Ct. 1763, 118 L.Ed.2d 425

(1992).

determination of damages without an evidentiary hearing. 13 The district court judge similarly had

denied the request for an evidentiary hearing and expressed his displeasure with what he perceived

as delaying tactics by counsel.

On appeal, the court determined that the judge permissibly relied on "detailed affidavits and

documentary evidence, supplemented by the district court Judge's personal knowledge of the record,

gained during four years of involvement with the litigation."14 Similarly, in HMG Property

Investors15, the court deferred to the district judge on a Rule 55(b) decision in the light of his "years

of travail" and intimate familiarity with the case.

The case at hand presents a paradigm of what the Action S.A. court termed "the long and

tortuous history of these proceedings."16 This case has literally dragged on for years, prompting this

Court, in its last meeting with these litigants, to express its exasperation: "It is unfortunate that we

cannot put this litigation, which has lingered in the courts for seven years, to a swift end."17 The

district court was familiar with the twists and turns of these proceedings.

On the specific issue of punitive damages, the Action S.A. court again deferred to the district

judge: "[The district judge] was in the best position to determine whether or not the award of

punitive damages was an appropriate remedy."18 That deference is equally appropriate in the case

at hand. The court explicitly made its findings on the basis of an ample record.19 After seven years

13

Id. at 508-09.

14

Id. at 508 (quoting Fustok v. ContiCommodity Services, Inc., 873 F.2d 38, 40 (2d

Cir.1989)).

15

847 F.2d at 919.

16

Action S.A., 951 F.2d at 508.

17

Frame I, 967 F.2d at 196.

18

Action S.A., 951 F.2d at 509.

19

The court stated:

I also find that the record amply supports the finding that Ms. Frame routinely and

deliberately misrepresented present material facts ... with a reckless disregard for

whether they were true.

of trying a case, a district court judge should be trusted when he elects not to seek more evidence on

matters with which he is already familiar.

C. Did the District Court Judge Err When He Awarded Additional Collection Fees and Attorney

Fees?

The appellant charges that the district court failed to conduct a necessary evidentiary hearing

before awarding the Appellees additional collection fees and attorney fees.20 As detailed above,

Fed.R.Civ.P. 55(b) does not mandate an evidentiary hearing but, rather, gives the judge wide latitude

in determining whether such a hearing will be beneficial.

An evidentiary hearing would have revealed no pertinent information on the collection fees.21

The damages on the notes at issue totaled $2,504,510.00. The terms of the notes allow for 107 of

the principal to go to collection fees in the event of a default on the notes. Hence, the district court

awarded the intervenors $250,451. The fees could be "computed with certainty by reference to the

pleadings and supporting documents alone," rendering an evidentiary hearing unnecessary.22

The appellant also charges that the district court committed reversible error when it awarded

additional attorney fees. Her argument is similar to those already addressed: she contends that the

district court was required to hold a separate hearing on the question. The attorney fees at issue,

however, were not unliquidated damages. Instead, the record shows that detailed billing records

substantiated the district court's award.

Again, where t he evidence before the court allows it to make findings based upon that

The investors reasonably relied on those representations of material present

facts and promises of performance in the future, and that reliance caused them

damage, it caused them damage in the loss of their legally recoverable principal,

and because it was done in a calculated deliberate scheme, and because every turn

in the investors attempt to recover their investment has been met with what could

only be generously characterized as an obstruction of justice, there is the predicate

at law for the awarding of punitive damages.

20

Pursuant to the district court's amended final judgment, the intervenors received a total of

$525,000.00 in attorney fees and $250,451 in collection fees.

21

Even the appellant appears to concede this point and does not press the need for a hearing

beyond her misinformed contention that formalities require it.

22

Frame I, 967 F.2d at 204.

evidence, the court need not jump through the hoop of an evidentiary hearing.23 In the case at hand,

the district court judge asked both sides to react to the proposals of the other on the issue of attorney

fees. Both parties had input, even in the absence of a formal hearing. Where a district court has

made a reasonable determination that an additional hearing would be superfluous, we will defer.

III. CONCLUSION

For the foregoing reasons, the district court judgment is AFFIRMED.

23

See Fustok, 873 F.2d at 40.