RFT Mgmt. Co. v. Powell

RFT MANAGEMENT COMPANY LLC, Plaintiff - Appellant, v. JOHN D. POWELL; PROFESSIONAL APPRAISAL SERVICE INCORPORATED;TINSLEY & ADAMS LLP; WELBORN D. ADAMS, Defendants - Appellees,andLAKE GREENWOOD DEVELOPERS LLC; WILLIAM E. GILBERT; STEPHEN GILBERT;JAN BRADSHAW; COURTNEY R. FURMAN; FURMAN PROPERTIES LLC, Defendants.

No. 14-1488

UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT

Submitted: January 29, 2015

April 9, 2015

UNPUBLISHED

Appeal from the United States District Court for the District of South Carolina, at Anderson. Mary G. Lewis, District Judge. (8:10-cv-02503-MGL)

Before DUNCAN, WYNN, and DIAZ, Circuit Judges.

Affirmed in part, reversed in part, and remanded by unpublished per curiam opinion.

Harry A. Swagart, III, HARRY A. SWAGART, III, P.C., Columbia, South Carolina, for Appellant. William A. Coates, Carroll H.Roe, Jr., ROE CASSIDY COATES & PRICE, PA, Greenville, South Carolina; Matthew H. Henrickson, HENRICKSON LAW FIRM, LLC, Greenville, South Carolina; Amy M. Snyder, CLARKSON, WALSH, TERRELL & COULTER, P.A., Greenville, South Carolina, for Appellees.

Unpublished opinions are not binding precedent in this circuit.

PER CURIAM:

RFT Management Company, LLC, ("RFT"), through its manager, David Roatch, purchased two lots from a real estate developer in a residential subdivision, hoping that the lots' value would appreciate upon completion of the subdivision's development. Due to the economic downturn, development stalled, and the lots' value plummeted. With the real estate developer no longer in business, RFT filed suit against the appraiser, John Powell, and the appraisal company, Professional Appraisal Service, Incorporated (collectively with Powell, "PAS"), as well as the lawyer, Welborn Adams, and his law firm, Tinsley & Adams LLP (collectively with Adams, "T&A"), that had facilitated the purchase of the lots. A jury found in favor of Defendants on all claims that remained following dismissal of a number of claims during the pretrial stage. This appeal followed.

On appeal, RFT asserts that the district court erred by (1) dismissing its South Carolina Unfair Trade Practices Act ("UTPA"),¹ South Carolina Uniform Securities Act ("SCUSA"),² and civil conspiracy claims against T&A based on res judicata; (2) dismissing its claims under the Interstate Land Sales FullDisclosure Act ("ILSFDA")³ and § 10(b) of the Securities Exchange Act of 1934⁴ and Securities and Exchange Commission Rule 10b-5 implementing it⁵ (together, "federal securities claim") against T&A and PAS; (3) denying its motion for leave to amend its complaint in order to cure deficiencies identified by the district court; (4) denying its Fed. R. Civ. P. 50(b) motion for judgment as a matter of law on its UTPA claim against PAS; and (5) denying its motion for a new trial on its UTPA and professional negligence claims against PAS. Reviewing these decisions in turn, we affirm the first four, affirm in part and reverse in part the last, and remand to the district court.

I. Claims dismissed on the basis of res judicata

We review de novo a Fed. R. Civ. P. 12(b)(6) dismissal based on principles of res judicata. Brooks v. Arthur, 626 F.3d 194, 200 (4th Cir. 2010). Federal courts are bound by 28 U.S.C. § 1738 (2012) to apply the law of the rendering state to determine the extent to which a state court judgment should have preclusive effect in a federal action. Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 293 (2005); Brooks, 626 F.3d at 200. In South Carolina, the doctrine of res judicatawill bar a claim when "(1) the identities of the parties are the same as in the prior litigation, (2) the subject matter is the same as in the prior litigation, and (3) there was a prior adjudication of the issue by a court of competent jurisdiction." Catawba Indian Nation v. State, 756 S.E.2d 900, 907 (S.C. 2014). Moreover, res judicata "bars plaintiffs from pursuing [a claim in] a later suit where the claim . . . could have been litigated" in a prior suit, and "the claim[] arise[s] out of the same transaction or occurrence that was the subject of [the] prior action between [the same] parties." Id. at 906.⁶

Having reviewed the record, we conclude that RFT's civil conspiracy, UTPA, and SCUSA claims meet the requirements under South Carolina law for res judicata preclusion.⁷Accordingly, we affirm the district court's order dismissing these claims.

II. Claims dismissed for failure to state a claim

We review de novo a district court's dismissal for failure to state a claim under Rule 12(b)(6). Summers v. Altarum Inst., Corp., 740 F.3d 325, 328 (4th Cir. 2014). "To survive a motion to dismiss, a complaint must present factual allegations that 'state a claim to relief that is plausible on its face.'" Id. (quoting Ashcroft v. Iqbal, 556 U.S. 662 (2009)). In applying that standard, we take all facts pleaded as true, and draw all reasonable inferences in RFT's favor. Id. Relevant to this appeal, Fed. R. Civ. P. 8 requires that a complaint "give the defendant fair notice of what the claim is." Erickson v. Pardus, 551 U.S. 89, 93 (2007) (internal quotation marks and ellipsis omitted).

RFT does not challenge the district court's determination that aider and abettor liability is not available for private actions under ILSFDA or the federal securities law at issue. Accordingly, we do not review that determination. We conclude that RFT's complaint alleged only that Appellees were liable for aiding and abetting violations of ILSFDA and the federal securities law and did not provide fair notice of any claim of primary liability against Appellees. We therefore affirm the district court's order dismissing RFT's ILSFDA and federal securities claims.

III. Denial of motion for leave to amend complaint

We review for abuse of discretion the district court's denial of a motion to amend the pleadings under Fed. R. Civ. P. 15(a). Drager v. PLIVA USA, Inc., 741 F.3d 470, 474 (4th Cir. 2014). Although leave to amend a complaint should be "freely give[n] . . . when justice so requires," Fed. R. Civ. P. 15(a)(2), "after the deadlines provided by a scheduling order have passed, the good cause standard [of Fed. R. Civ. P. 16] must be satisfied to justify leave to amend the pleadings" Nourison Rug Co. v. Parvizian, 535 F.3d 295, 298 (4th Cir. 2008). "Rule 16(b)'s good cause standard emphasizes the diligence of the party seeking amendment." O'Connell v. Hyatt Hotels of P.R., 357 F.3d 152, 155 (1st Cir. 2004). We conclude that RFT did not demonstrate the diligence required by Rule 16(b), and, therefore, the district court acted well within its discretion in denying RFT leave to amend.

IV. Denial of motion for judgment as a matter of law

"We review the denial of a Rule 50(b) motion de novo, viewing the evidence in the light most favorable to the prevailing party, and will affirm the denial of such a motion unless the jury lacked a legally sufficient evidentiary basis for its verdict." Bunn v. Oldendorff Carriers GmbH & Co. KG, 723 F.3d 454, 460 n.4 (4th Cir. 2013) (internal quotation marks omitted). RFT contends that the district court erred in notgranting its Rule 50(b) motion on its UTPA claim against PAS because it presented undisputed evidence proving all three elements of UTPA.

"To recover in an action under [South Carolina's] UTPA, the plaintiff must show: (1) the defendant engaged in an unfair or deceptive act in the conduct of trade or commerce; (2) the unfair or deceptive act affected public interest; and (3) the plaintiff suffered monetary or property loss as a result of the defendant's unfair or deceptive act." Health Promotion Specialists, LLC v. S.C. Bd. of Dentistry, 743 S.E.2d 808, 816 (S.C. 2013). Under UTPA, to establish proximate cause, the alleged injury must be the natural and probable consequence of the complained of conduct. Collins Holding Corp. v. Defibaugh, 646 S.E.2d 147, 149-50 (S.C. Ct. App. 2007). More traditionally stated, proximate cause requires proof of causation-in-fact, or but-for causation, and legal causation, or foreseeability. Baggerly v. CSX Transp., Inc., 635 S.E.2d 97, 101 (S.C. 2006).

Viewing the evidence in the light most favorable to PAS, we conclude that PAS presented sufficient evidence from which a reasonable jury could conclude that PAS's appraisals of the two lots, even if unfair or deceptive, did not proximately cause RFT's loss. Thus, because a reasonable jury could have found against RFT on the proximate cause element of UTPA, we affirm the district court's denial of RFT's Rule 50(b) motion.

V. Denial of motion for a new trial

"A district court's denial of a motion for a new trial is reviewed for abuse of discretion[] and will not be reversed save in the most exceptional circumstances." Minter v. Wells Fargo Bank, N.A., 762 F.3d 339, 346 (4th Cir. 2014). After a jury trial, a district court may grant a motion for a new trial "for any reasons for which new trials have heretofore been granted in actions at law in federal court," Fed. R. Civ. P. 59(a)(1), including for "substantial errors in admission or rejection of evidence or instructions to the jury," Montgomery Ward & Co. v. Duncan, 311 U.S. 243, 251 (1940).

RFT contends that the district court erred by not granting its motion for a new trial on its UTPA and professional negligence claims against PAS citing asserted errors in the court's evidentiary rulings and jury instructions. We address RFT's assertions of error in turn, applying the appropriate standard of review to each issue raised. See Buckley v. Mukasey, 538 F.3d 306, 317-21 (4th Cir. 2008).

A. Evidentiary rulings. "We review a trial court's rulings on the admissibility of evidence for abuse of discretion, and we will only overturn an evidentiary ruling that is arbitrary and irrational." Minter, 762 F.3d at 349 (internal quotation marks omitted). Furthermore, we will not "set aside or reverse a judgment on the grounds that evidence waserroneously admitted unless justice so requires or a party's substantial rights are affected."...