Antitrust Law Daily Wrap Up, RICO—D. Nev: Jury’s punitive damage award in racketeering action upheld, (Jun 17, 2015)

By Michael Menzhuber, J.D., LL.M.

A renewed motion for judgment as a matter of law, that challenged a jury’s verdict of civil racketeering and award of punitive damages against a law firm and its separately formed collection services company, was denied by the federal district court in Reno, Nevada (Ellis v. Alessi Trustee Corporation, June 13, Hicks, L.).

Background. Melinda Ellis (homeowner) defaulted on her homeowner’s association (HOA) dues for the two properties that she had purchased in the Arrow Creek subdivision of Washoe County, Nevada. Alessi & Koenig, LLC (A&K), a law firm, and its separately-formed collections services company, Alessi Trustee Corporation (ATC), were retained to collect the homeowner’s delinquent assessments.

After contacting the homeowner, ATC and A&K began non-judicial foreclosure proceedings in an attempt to collect the delinquent assessments. During this process, the defendants sent the homeowner collection notices and recorded liens against her properties in ever increasing amounts as they added their own costs and fees to the collection amounts.

The homeowner filed a complaint against the defendants that alleged breach of fiduciary duty, violation of the Fair Debt Collection Practices Act (FDCPA), and civil racketeering. After the court granted the defendants’ motion to dismiss the breach of fiduciary duty claim, a jury returned a verdict in favor of the homeowner on her FDCPA and civil racketeering claims and awarded her: (1) statutory damages of $1,000; (2) compensatory damages of $75,000; and (3) punitive damages of $157,000. The defendants filed a renewed motion for judgment as a matter of law that challenged the verdict as to the civil racketeering claim and award of punitive damages.

Renewed judgment as matter of law. Pursuant to Federal Rule of Civil Procedure 50(a)(1), a renewed judgment as a matter of law is appropriate if “a reasonable jury would not have a legally sufficient evidentiary basis to find for the party on the issue.” In challenging the verdict as to the civil racketeering claim and award of punitive damages, the defendants contended that there was insufficient evidence to support: (1) the jury’s finding that either defendant engaged in civil racketeering; and (2) the jury’s award of punitive damages.

Civil racketeering. To prevail on a claim for civil racketeering, a plaintiff must prove: (1) that the defendant(s) engaged in at least two crimes related to the acts of racketeering; (2) the time, place, and manner of each act; and (3) damages. After reviewing the evidence and testimony submitted at trial, the court determined that there was sufficient evidence to support the jury’s verdict on civil racketeering as to both defendants. Specifically, the court noted the evidence presented by the homeowner that both defendants demanded ever increasing amounts for her allegedly unpaid assessments that far surpassed the amount at which her delinquent assessments were growing.

Punitive damages. The court found that, because their initial motion for judgment of a matter of law did not address the homeowner’s punitive damages claim, the defendants were precluded from challenging the punitive damages in their renewed motion for judgment as a matter of law.

Even if the issue had been initially raised, the court noted that the renewed motion for judgment challenging the award of punitive damages would fail. To support an award of punitive damages, Nevada Revised Statute 42.05 provides that a plaintiff must establish, by clear and convincing evidence, that the defendant(s) acted with oppression, fraud, or malice. The court determined that this standard was met because the homeowner presented substantial evidence that demonstrated that the defendants acted with both fraud and malice in their collection efforts.

The case is No. 3:09-CV-0428-LRH-WGC

Attorneys: Mark J. Bourassa (The Bourassa Law Group, LLC) for Melinda Ellis. Bradley D. Bace (Alessi & Koenig, LLC) for Alessi Trustee Corp., and Alessi & Koenig, LLC.

Companies: Alessi Trustee Corp.; Alessi & Koenig, LLC

Cases: RICO NevadaNews