Antitrust Law Daily Wrap Up, RICO—5thCir: Homeowners, Counsel Sanctioned for Appeal of Dismissal of RICO Claims Alleging Real Estate Fraud, (Dec 27, 2012)

By Tobias J. Gillett, J.D., LLM.

The U.S. Court of Appeals in New Orleans has sanctioned Louisiana homeowners and their attorney for their “frivolous” appeal from the district court’s dismissal of their RICO lawsuit over alleged real estate fraud, finding that the homeowners failed to raise any significant issues or identify any legal errors committed by the district court (Martin v. Magee, December 21, 2012, Per Curiam).

In their complaint, the homeowners, including Lloyd and Nicole Martin, had alleged that the defendants had engaged in a scheme in which they would take possession of property in Louisiana and later fraudulently obtain title to it by filing declaratory judgment actions in state court based on false quit claim deeds. The property would then be subdivided and transferred to third parties for development. Among other consequences, this scheme allegedly prevented the Martins from selling their home due to the title defects.

In August 2010, the homeowners filed suit in federal district court, alleging that the scheme violated federal RICO law. In June 2011, the district court dismissed the complaint and granted the homeowners 20 days to amend it. In November 2011, a magistrate judge denied the homeowners’ motion to amend. In February 2012, when the homeowners failed to object to this decision, the district court dismissed the case with prejudice. The homeowners appealed.

The Fifth Circuit, in an unpublished opinion, found the appeal frivolous, observing that it did not raise “any significant issue” and did not identify “any legal error of the district court.” The Fifth Circuit noted that to the extent the homeowners were “attempting to appeal the magistrate judge’s denial of leave to file the amended complaint, they [were] unable to do so.” The court found this behavior warranted sanctions.

Moreover, the court noted that the homeowners’ attorney, Daniel G. Abel, had previously represented a client who had also been subject to sanctions for similar conduct. The court observed that in the present case Abel had “failed to address or even to mention a fatal flaw in the appeal, which either was or should have been obvious to him: his delay in objecting to the magistrate judge’s denial of the motion to amend the complaint.”

Finding that “Mr. Abel has demonstrated a continued pattern of filing frivolous, vexatious appeals that waste judicial resources,” the court determined that sanctions against him were appropriate as well. Therefore, the court imposed sanctions of $3,000 against him personally, to be paid to the appellees.

The case is No. 12-30263.

Daniel G. Abel (Daniel G. Abel, Incorporated) for Lloyd Raymond Martin, III. Gustave A. Fritchie, III (Irwin Fritchie Urquhart & Moore, L.L.C.) for William M. Magee.

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