F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
JUL 21 2003
UNITED STATES COURT OF APPEALS
PATRICK FISHER
Clerk
TENTH CIRCUIT
W. DAVID WESTON; REX MONTIS
SILVER COMPANY,
Cross-Counterclaimants -
Cross-Defendants -
Appellants,
v.
No. 01-4232
SAMUEL HARMATZ; H.E. MOSES;
BERNARD HODOWSKI; CHRIS
WAUGH; A.C. NEJEDLY; ESTATE
OF R.E. DONAHEY; GRACE V.
DUNCAN; ELLIOTT WEINBERG,
Defendants - Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH
(D.C. NO. 2:82-CV-1223-J)
Delano S. Findlay (W. David Weston, pro se, with him on the brief), Salt Lake
City, Utah, for Cross-Counterclaimants-Cross-Defendants-Appellants.
Eric C. Olson, Kirton & McConkie, Salt Lake City, Utah, for Defendants-
Appellees.
Before BRISCOE , McKAY , and McCONNELL , Circuit Judges.
McCONNELL , Circuit Judge.
Like miners brawling over tiny flecks of gold from the remains of a once-
promising strike, Appellants come to this Court for the third time, seeking to
extract a few pennies more from their investment in a gold mine venture that
failed almost twenty years ago. Resurrecting legal arguments rejected at earlier
stages of this litigation, contradicting their own contemporaneous valuations of
the assets at issue, and presenting a view of the record with as much resemblance
to reality as an ancient prospector’s memories of what might have been,
Appellants ask this Court to shield them from the consequences of their own folly
(and worse). We compliment the district court for extracting a fair result from the
evidentiary detritus put forward by these appellants, and now bring the legal saga
of the Telegraph Gold Mine to a close. The judgment of the district court is
AFFIRMED.
BACKGROUND
Our first opinion involving this case, Cascade Energy & Metals Corp. v.
Banks , 896 F.2d 1557 (10th Cir. 1990) (“ Cascade I ”), recounts the convoluted
history of the mining venture and resulting litigation, and also provides a helpful
diagram illustrating the web of inter-related business associations involved in the
mine. We provide here only an abbreviated history of the particular facts related
2
to the current appeal.
Cascade Energy and Metals Corporation (“Cascade”), a Nevada
corporation, acquired the Telegraph Gold Mine near California’s Death Valley in
1974. Appellant W. David Weston was Cascade’s president and owned or
controlled more than 50% of its stock. Cascade then leased the mine to a Weston-
controlled limited partnership, Telegraph Mine Limited (“Telegraph Limited”),
whose general partner was Cascade. In 1979, Telegraph Limited sold 40% of its
interest in the lease to a California limited partnership called Gold Technics, Ltd.
(“Gold Technics”). The appellees in this case are limited partners in Gold
Technics who collectively owned a 90% interest in the Gold Technics partnership.
Telegraph Limited and Gold Technics formed the Telegraph Mine Joint
Venture (the “Joint Venture”) to operate the mine. The Joint Venture Agreement
provided that Cascade would manage the Joint Venture. In 1980, Gold Technics
sold 75% of its share of the Joint Venture to Appellant Rex Montis Silver
Company (“Rex Montis”), a Utah corporation controlled by Weston. Rex Montis
became the general partner of Gold Technics as part of the deal. The transaction
required Rex Montis to convey 480,000 shares of its stock to Gold Technics, but
the shares were never delivered. After this transaction, the ownership structure of
the Joint Venture was as follows: 60% owned by Telegraph Limited, a Weston
controlled entity, 30% owned by Rex Montis, another Weston entity, and 10%
3
owned by Gold Technics, a limited partnership controlled by Weston entity Rex
Montis but 90% owned by the appellees. In essence, the appellees had a 9%
interest in and no control of a joint venture that was completely controlled and
majority owned by Weston and his affiliated entities.
Cascade then raised additional capital for the Joint Venture by selling
working interests in the mine to various individual and institutional investors
known as the “Associates,” among whom were some of the Gold Technics limited
partners. 1
The transaction required the Associates to hire Cascade to operate the
mine. According to the offering documents, Weston anticipated that the Joint
Venture’s initial capitalization would be sufficient to get the project going, and
that subsequent operations would be self-sustaining based on mining revenues.
Cascade commenced operations at the mine, but Weston soon realized that the
initial capitalization was not enough even to sink a shaft. Weston persuaded the
Associates that Cascade could generate profits more quickly and with fewer start-
up costs by surface mining. However, more than a year’s worth of moiling for
gold succeeded only in draining the venture’s coffers. Throughout this period,
Weston repeatedly dunned the Associates for additional payments he claimed they
Throughout this opinion, the term “Gold Technics limited partners” refers
1
only to the appellees and not to Weston, who (confusingly) was also a Gold
Technics limited partner and owned the 10% of Gold Technics not owned by the
appellees.
4
were required to make, insisting all the while that only a little more time and a
little more money stood between them and a profitable gold mine. Some of the
Associates refused to pay Weston’s “assessments,” on the ground that the original
agreement did not obligate them to make additional payments.
In December, 1982, Cascade filed suit in district court against the non-
paying Associates. The Associates, together with the Gold Technics limited
partners who were not Associates, counterclaimed, alleging among other things
that Weston, through his affiliated entities, had misappropriated the Joint
Venture’s assets by mingling the funds among his various entities and using them
for his own separate purposes. The district court found, inter alia , that (1)
Weston and his entities had misappropriated more than $600,000 from the Joint
Venture and converted its funds for their own use, (2) Weston and Cascade were
liable for the Associates’ attorneys’ fees because the original suit to assess them
was meritless and brought in bad faith, (3) the Joint Venture and Gold Technics
should be terminated and dissolved, and (4) the Gold Technics limited partners
were entitled to damages for the wrongful termination of the Joint Venture.
This Court generally upheld these findings on appeal, except that it reduced
the amount of Weston’s misappropriation to $464,474.63. Cascade I , 896 F.2d at
1583-84. The Court then remanded for a “complete winding up of the Joint
Venture” because it could not determine “whether the district court . . . took into
5
account the Gold Technics [limited partners’] interest in the mine lease and other
mine assets.” Id. at 1583. On remand, the district court was instructed to
“allocate the venture’s assets (which may include the mine lease or its proceeds)
and the venture’s liabilities in accordance with the Joint Venture Agreement and
general partnership law.” Id.
Following a second district court trial on remand, Weston and Cascade
appealed again to this Court, challenging the district court’s valuation of the Joint
Venture’s assets and raising several other issues concerning the district court’s
winding up of the Joint Venture. In the second Tenth Circuit decision, Cascade
Energy & Metals Corp. v. Banks , 85 F.3d 640, 1996 WL 15549 (10th Cir. 1996)
(unpublished) (“ Cascade II ”), the Court upheld the district court’s valuation of
the Joint Venture’s principal asset, the prime lease on the Telegraph Mine, at
$1,100,000. Cascade II also reversed the district court’s finding that the Joint
Venture’s “Ore Milling Receivable” (valued at $239,034) was not a valid
collectible asset of the Joint Venture. 1996 WL 15549 at **1. The Court in
Cascade II then remanded the case for a proper winding up of the Joint Venture
as required by Cascade I , taking into account the adjudicated value of the Joint
Venture’s principal assets. Id. at **6.
The district court on remand held yet another trial in April, 2000, and
entered Amended Findings of Fact and Conclusions of Law on October 31, 2001
6
(“Amended Findings”). The Amended Findings established June 17, 1985 as the
dissolution date of the Joint Venture. On that date, Weston, without notice to the
Gold Technics limited partners, had caused the Joint Venture to sell substantially
all of its assets and liabilities to Appaloosa Technology, Inc., an unsuccessful
consulting and investment company that had been reduced essentially to a shell.
The district court valued the Joint Venture’s assets and liabilities as of the date of
the Appaloosa sale and the court’s valuation relied, to some extent, on the
transaction documents.
Appaloosa acquired the Joint Venture’s assets in exchange for 65,000,000
shares of Appaloosa stock, which amounted to approximately 85.5% of
Appaloosa’s total capitalization. Weston prepared proxy materials for the
Appaloosa deal that included financial statements which Weston claimed “fairly
present[ed] the financial condition” of the Joint Venture and were prepared “in
conformity with generally accepted accounting principles.” The financial
statements indicated that the Joint Venture’s “Total Assets” were $6,529,305 and
that its partnership capital was $6,024,191. The proxy materials also indicated
that the recent trading range of Appaloosa shares in the over-the-counter markets,
taking into account an Appaloosa reverse stock split, was between $0.04 and
$0.12 per share.
At the trial in April, 2000, Weston argued that the financial statements in
7
the proxy materials he had prepared in June 1985 did not reflect the real value of
the Joint Venture as of that date. According to Weston, the balance sheet inflated
the value of the Joint Venture because the assets were contingent on the Joint
Venture’s ability to collect debts from the Associates, which were subsequently
invalidated by the court, and the balance sheet omitted significant liabilities,
mostly litigation expenses, because these were not to be assumed by Appaloosa.
The trading range also did not reflect any genuine value, because the volume of
trading in Appaloosa shares was so thin that there was no real market for the
shares. Weston then provided alternative accounting documents that he claimed
represented the real value of the Joint Venture’s assets and properly allocated its
liabilities. The bottom line of the Weston documents was that Gold Technics’
share of the true value of the assets was essentially canceled out by its share of
responsibility for the Joint Venture’s liabilities, with the result that the Gold
Technics limited partners were not entitled to recover anything from the winding
up of the Joint Venture.
The district court rejected Weston’s alternative accounting, finding that
“[t]here is no credible evidence that this court should reduce the amount in the
Gold Technics’ capital account by reason of Weston’s after-the-fact accounting
and reallocation of purported liabilities . . . .” Amended Findings at 8. The court
ruled that the proper value of the Appaloosa stock delivered in exchange for the
8
Joint Venture’s assets was $0.013 per share. Id. at 10.
According to the district court’s valuation, the appellees’ share of the Joint
Venture’s assets was 5,593,600 shares, valued as of June 17, 1985, at $71,416.80.
Id. at 11. The court therefore found that Weston and Rex Montis were liable to
Appellees for that amount, as adjusted for certain other transactions between the
parties, including a previously-adjudicated liability of $18,620 due to Appellees
from Weston and Rex Montis for conversion of Rex Montis shares that belonged
to Gold Technics. Amended Findings at 4, 11; See Cascade I, 896 F.2d at 1582-
83; Cascade II, 1996 WL 15549 at **3. The court ordered Weston and Rex
Montis to pay that amount, in cash, directly to Appellees.
DISCUSSION
After three district court trials and two prior appeals to this Court, the only
issue remaining is whether the district court correctly valued and properly
distributed the assets and liabilities of the Joint Venture.
I.
The issues in this appeal can be categorized under three heads. First,
Appellants Weston and Rex Montis (hereinafter “Weston”) argue that the district
court overvalued the Joint Venture’s assets and failed to take into account Gold
Technics’ share of responsibility for its liabilities. Second, Weston claims that
the district court erred when it dissolved the Gold Technics partnership and
9
distributed its share of the Joint Venture’s assets directly to the individual limited
partners. Third, Weston argues that the district court should have enforced
certain indemnification provisions in the Joint Venture Agreement and the Gold
Technics Partnership Agreement and required Gold Technics to indemnify Weston
and Rex Montis for expenses they incurred on behalf of the Joint Venture.
A.
Weston advances a number of arguments that purport to show that the
district court’s valuation of the appellees’ share of the Joint Venture’s assets and
liabilities was clearly erroneous. In general, findings of fact are not clearly
erroneous unless they are without factual support in the record or the appellate
court, after reviewing the evidence, is firmly convinced that a mistake has been
made. Manning v. United States , 146 F.3d 808, 812 (10th Cir. 1998).
Weston claims that the district court erroneously refused to adjust the
appellees’ accounts for their share of expenses that the Joint Venture continued to
incur after the dissolution of the Joint Venture. These expenses turn out to be the
money that Weston and his affiliated entities spent on the very lawsuits that
generated this appeal. At first blush, it seems that Weston, with astonishing
chutzpah, is attempting to bill the appellees for the money Weston spent suing
them, even though Cascade I required Weston to pay the defendants’ attorneys’
fees because his original cause of action was without merit and brought in bad
10
faith. 896 F.2d at 1579. However, Weston points out that he also spent money
defending himself and his affiliated entities against securities fraud and other
counterclaims made by the Associates, some of whom were not Gold Technics
limited partners, and that his successful defense against these claims effectively
preserved assets that, in part, belonged to Gold Technics. Gold Technics should,
he reasons, therefore be required to pay some share of these expenses.
The previous decisions of this case, however, have already established that
Gold Technics is not responsible for post-1985 liabilities of the Joint Venture.
The district court in 1985 issued a finding that relieved Gold Technics of any
liability for the subsequent legal fees and other expenses of Weston and his
related entities:
There [was] a complete and irremedial [sic] breakdown in the
relationship between Gold Technics, Ltd. on the one hand and
Cascade, Rex Montis, Weston and his related entities on the other with
respect to the joint venture. The purpose of that venture as far as the
interest and participation of Gold Technics, Ltd. is concerned, has
been frustrated, obstructed, and rendered impracticable and futile by
the unlawful and improper conduct of the other members of the joint
venture and of Weston, the joint venture thereby has been terminated
de facto as far as Gold Technics, Ltd. is concerned and the latter
should be relieved from further participation and responsibility with
respect to the joint venture .
District Court Findings of Fact and Conclusions of Law on Accounting Dated
September 16, 1985 (“Accounting Findings”), Cascade Energy & Metals Corp. v.
Banks , No. C-82-1223C, (D. Utah September 16, 1985) at 22-23, (emphasis
11
added). This finding was not subsequently overturned in Cascade I or Cascade
II. The district court’s refusal to revisit this finding was not clearly erroneous
(indeed we can perceive no lawful basis for doing so), and we accordingly affirm
the district court’s refusal to hold Gold Technics responsible for the subsequent
legal fees and other expenses of Weston and his affiliated entities.
Even if Gold Technics is excused from post-1985 liabilities, Weston still
maintains that the district court erroneously refused to consider certain pre-1985
liabilities that were not disclosed on the financial statements Weston prepared for
the Appaloosa transaction. The district court found that, according to the terms of
the Appaloosa transaction, there were no outstanding liabilities of the Joint
Venture that were not assumed by Appaloosa. Amended Findings at 8. The
district court therefore ignored the alleged liabilities and proceeded directly to a
valuation of the Joint Venture’s assets and the Appaloosa shares. Weston now
contends that, despite the plain language of the transaction documents, Appaloosa
only assumed some of the Joint Venture’s liabilities. The Appellees, naturally,
strenuously disagree.
Even if we agree with the Appellees and the district court that Appaloosa
assumed all of the Joint Venture’s liabilities, this does not cause the liabilities to
disappear magically. Assumed liabilities would decrease the value of the
Appaloosa shares that the Joint Venture received as consideration, and unassumed
12
liabilities would remain on the Joint Venture’s balance sheet. Either way, if the
liabilities are genuine, they must be taken into account in valuing the Joint
Venture’s assets and the shares received in exchange for those assets. Thus, the
real inquiry is what the relevant assets and liabilities were and how much they
were worth.
Because the case had already been tried and appealed twice, the district
court could not perform its valuation from a blank slate. The value of the Joint
Venture’s principal assets, the mine lease and the “Ore Milling Receivable,” had
already been set in Cascade II at $1,339,034. 1996 WL 15549 at **1. The
district court valued the 65,000,000 Appaloosa shares acquired in exchange for
these assets at $0.013 per share, for a total value of $840,000. Unfortunately, the
district court did not plainly set forth the method it employed to reach this
valuation. However, since the district court was bound by Cascade II ’s asset
valuation, we can infer from the $499,034 difference between the Cascade II
asset valuation and the district court’s current valuation that the district court
determined that there were almost half a million dollars’ worth of offsetting
liabilities.
It is not clear from the district court’s findings why it applied the half-
million dollar haircut. An examination of the numbers, however, reveals the
probable basis for this conclusion. As noted above, the district court primarily
13
relied on the balance sheet Weston prepared for the Appaloosa proxy materials.
The balance sheet lists liabilities of $495,114. We infer that the district court
subtracted the balance sheet liabilities ($495,114) from the adjudicated value of
the Joint Venture’s principal assets ($1,339,034), yielding $843,920, and then
rounded down to $840,000, which is equivalent to $0.013 per share of Appaloosa
stock.
This valuation is actually generous to Weston. Almost half of the liabilities
on the balance sheet are bank notes payable to Downey Bank and Zions Bank.
Weston previously stipulated to the fact that these bank notes should not be
considered as liabilities of the Joint Venture in the winding up. See District Court
Order Denying Relief from Prior Contention Dated September 30, 1999. The
district court therefore has arguably undervalued the Joint Venture’s assets by
approximately $225,000. Since Appellees have not filed a cross-appeal, there is
no need for this Court to determine whether that constituted legal error.
Not content with this apparent boon, Weston contends that the district court
should have considered numerous additional liabilities that were not disclosed in
the Appaloosa proxy materials. The district court, as noted above, rejected
Weston’s after-the-fact accounting on credibility grounds, and we see no reason
to overturn that determination. When a trial court’s findings are based on
credibility determinations, those findings are entitled to great deference. Fed. R.
14
Civ. P. 52(a); Anderson v. City of Bessemer City , 470 U.S. 564, 575 (1985). The
documents in question are particularly suspect, because they were prepared after
the onset of litigation, and in some instances twenty years after the transactions
they purported to record took place. In addition, two different district court
judges in this case have made findings criticizing the “convoluted nature of
[Weston’s] control,” Accounting Findings at 17, and commenting that Weston’s
“commingling” of funds and other dubious accounting practices raised “serious
questions concerning credibility.” Id. at 15-16; see also Amended Findings at 8.
Weston also expressly represented in the Appaloosa transaction documents that
the Joint Venture had no liabilities that were not disclosed on the balance sheet.
The district court’s decision not to credit Weston’s convenient, post hoc
accounting and to rely instead on Weston’s contemporary representations in the
proxy materials was not clearly erroneous.
Finally, Weston contends that the district court’s valuation of the
Appaloosa shares impermissibly relied on “pink sheet” price quotations as set
forth in Weston’s proxy materials. He points out that this Court has previously
questioned the validity of pink sheets in establishing the value of over-the-counter
stock. See Schwartz v. Slawter , 751 F.2d 317, 321 (10th Cir. 1984) (suggesting
pink sheets can be used to establish value, but only where a limited number of
shares would be available at one time); Pandolfo v. United States , 128 F.2d 917,
15
921 (10th Cir. 1942) (concluding pink sheet quotations were “too uncertain,
shadowy, and speculative, to form any sound foundation for the determination of
value” in a mail fraud prosecution). This contention is without merit, because it
mischaracterizes the extent to which the district court relied on the pink sheet
quotations. As noted above, the district court’s valuation of the Appaloosa stock
was based primarily on a valuation of the Joint Venture assets and liabilities that
were exchanged for the stock. In addition, the district court expressly noted that
it also took into account the fact that the shares were “restricted” under applicable
securities laws and that there was no immediate public market for the shares.
Amended Findings at 10-11. Thus, the district court’s valuation was
appropriately based on reliable indicators of value independent of the pink sheet
quotations.
For these reasons, we see no reversible error in the district court’s
valuation. Cascade I recognized that the dizzying multitude of parties, issues,
business entities, and inconsistent financial records in this case imposed on the
district court an exceedingly difficult task, and the Court accordingly
complimented the district court for its efforts. 896 F.2d at 1584 n.28. As the first
district court pointed out, “ The accounts and accounting involved here are so
voluminous, convoluted and complex as likely to have required months of work
by accounting experts and the expenditure of unacceptable sums of money to fully
16
evaluate and determine the accuracy of the accounting submitted herein, if this
could ever be accomplished.” Accounting Findings at 9. In such a case, it is
appropriate to grant the district court considerable latitude in its effort to impose
order on chaos, and the district court’s valuation is well within the permissible
range.
B.
Weston also challenges two of the district court’s conclusions of law, in
which the district court held that Appellees were entitled to a judicial dissolution
not only of the Joint Venture but also of the Gold Technics partnership itself, and
that Weston and Rex Montis, through their breaches of fiduciary duties, were
responsible for the dissolution. Weston now argues that the district court should
not have dissolved Gold Technics because neither party had raised the issue of
dissolution at any stage of the two-decade litigation, and none of the previous
decisions had ordered it. Weston points out that, under various state laws,
partnerships are presumed to continue in existence and should not be dissolved
without good cause. According to Weston, the district court’s sua sponte
dissolution of Gold Technics constitutes a due process violation because it was
done without the issue having been raised previously, without notice to the
parties, and without adequate briefing.
Weston’s claim that none of the previous decisions ruled on the dissolution
17
of Gold Technics is false. The first district court ordered that “Gold Technics,
Ltd. is terminated and dissolved and shall have no separate right against any of
the entities herein.” Order Amending Judgment and Finding of Fact Dated
November 19, 1985, Cascade Energy & Metals Corp. v. Banks , No. C-82-1223C,
(D. Utah November 19, 1985) at 3; see also Cascade I , 896 F.2d at 1567 (noting
the district court’s order to dissolve Gold Technics). Neither Cascade I nor
Cascade II overturned the dissolution of Gold Technics. The legal conclusion
regarding the dissolution of Gold Technics is therefore law of the case in this
appeal. Under the law of the case doctrine, “[a] legal decision made at one stage
of litigation, unchallenged in a subsequent appeal when the opportunity to do so
existed, becomes the law of the case for future stages of the same litigation, and
the parties are deemed to have waived the right to challenge that decision at a
later time.” Concrete Works of Colorado, Inc. v. City and County of Denver , 321
F.3d 950, 992 (10th Cir. 2003) (quotation omitted). The establishment in
Cascade I of the law of the case not only binds the trial court on remand but also
must be followed by the appellate court in subsequent appeals. Rohrbaugh v.
Celotex Corp., 53 F.3d 1181, 1183 (10th Cir. 1995). We therefore must uphold
the dissolution of Gold Technics unless one of three narrow exceptions to the law
of the case doctrine applies: (1) the evidence in the subsequent trial is
substantially different; (2) controlling authority has subsequently made a contrary
18
rule of law applicable; or (3) the decision was clearly erroneous or would work a
manifest injustice. Concrete Works , 321 F.3d at 993.
None of the exceptions applies here. Weston has pointed to no new
evidence or new law that would require or even suggest that the earlier
dissolution of Gold Technics was erroneous. Moreover, the decision itself was
not clearly erroneous, because there is ample support in the record for the
dissolution. The misappropriation by Weston and his entities of roughly half a
million dollars’ worth of the Joint Venture’s assets was simultaneously a
misappropriation of Gold Technics’ assets, since Gold Technics was one of the
parties to the Joint Venture. In addition, Weston and Rex Montis were found
liable to the Gold Technics limited partners for conversion of $18,620 worth of
Rex Montis shares that belonged to Gold Technics. Cascade II , 1996 WL 15549
at **3. These egregious breaches of the fiduciary duties Weston and Rex Montis
owed to the Gold Technics limited partners clearly justify the dissolution.
Finally, we do not see how dissolving Gold Technics would work a
manifest injustice. Indeed, Weston provides no explanation of why Gold
Technics should continue in existence. Gold Technics’ original purpose,
investment in the Telegraph Mine, has been frustrated by Weston’s
misappropriations, and the partnership does not seem to have conducted any
business activity since 1985. Thus, the only effect of not dissolving Gold
19
Technics would be that Weston, through his control of Rex Montis, Gold
Technics’ general partner, would maintain control of Appellees’ share of the Joint
Venture’s assets. Preserving the Gold Technics partnership would likely result in
nothing other than additional shell games and further litigation before the limited
partners could finally extract their money from the Weston vortex.
For these reasons, the conclusion that Gold Technics be dissolved and its
assets distributed among its partners is law of the case, and we must follow it.
The district court’s conclusions to that effect are accordingly affirmed.
C.
Weston argues that the district court improperly refused to enforce
provisions of the Joint Venture Agreement that require Gold Technics to
indemnify Weston and Rex Montis for losses they incurred on behalf of the Joint
Venture. Because the “losses” for which Weston claims indemnity are the loans
from Zions Bank and Downey Bank discussed in Part A above, this argument is
simply an attempt to smuggle the bank liabilities back into the case. As noted
above, the district court in 1999 refused to allow Weston to reverse his prior
concession that the bank loans were unavailable as offsets. In addition, the first
district court found that the loans in question were disbursed to Cascade, for its
own purposes, and that liability for the notes never appeared on any Joint Venture
documents until after litigation commenced. Accounting Findings at 19. The
20
same reasons for refusing to allow the bank loans as offsets apply to the refusal to
allow the bank loans as obligations requiring indemnification. Therefore, the
district court’s refusal to allow Weston to revisit this issue was not erroneous.
II.
Tenth Circuit Rule of Appellate Procedure 46.5(B)(2) states that an
attorney, by signing and submitting a brief to the Court, certifies that “the issues
presented are warranted by existing law or by a nonfrivolous argument for
extending, modifying, or reversing existing law or establishing new law.”
Regrettably, the briefs signed and submitted by Delano S. Findlay, attorney for
Appellant Rex Montis, fail to meet this standard.
The Appellants’ briefs, which are the joint product of Findlay and Weston,
pro se, advance several arguments that have already been decided in the prior
appeals or were not raised in the prior appeals. As noted in Part B above, the law
of the case doctrine forecloses reconsideration of these issues. Appellants did not
argue any exception to law of the case, nor did they present any other good faith
reasons for seeking to overturn previous judgments. Instead, Appellants in some
instances falsely asserted that the issue remained open, and in others they failed to
mention that the issue had already been decided and simply argued the issue
anew, as if the previous trials and appeals had never taken place.
The following list enumerates only the most obvious examples of
21
Appellants’ advancement of arguments that have already been adjudicated.
1. Appellants’ brief states repeatedly that the issue of dissolution of Gold
Technics “has never been raised previously,” Appellants’ Br. iii, that “the Gold
Technics Limited Partnership has never been dissolved,” id. at 39, that the
“Circuit Court did not provide for or require a dissolution or winding up of Gold
Technics,” id., and that Appellants have “never been given any notice of any kind
to dissolve the limited partnership.” Id. None of this true, as the first district
court filed an amended order specifically mandating the dissolution of Gold
Technics. Order Amending Judgment and Finding of Fact Dated November 19,
1985 at 3. This holding was specifically noted by this Court on appeal, Cascade
I, 896 F.2d at 1567, and was not overturned, id. at 1583-84.
2. Appellants’ brief argues that the Gold Technics limited partners are
required to indemnify Weston and his affiliated entities for the Zions Bank and
Downey Bank loans. Appellants’ Br. 43-45. However, the appellants
conveniently neglect to mention that they had previously conceded that these
liabilities were unavailable as offsets and that the district court had, after
extensive briefing, denied their motion for relief from this prior contention. See
District Court Order Denying Relief from Prior Contention Dated September 30,
1999. In addition, the appellants failed to inform us that the first district court
had issued a relevant finding of fact, in which the court stated that the loans were
22
obtained by Cascade for its own purposes and that liability for the notes did not
appear on Joint Venture documents until after the onset of litigation. Accounting
Findings at 19.
3. Appellants contend that Gold Technics is only entitled to a distribution
of 5% of the Joint Venture’s assets, regardless of its 10% ownership interest,
because it had only contributed $75,000 of its original $150,000 obligation.
Appellants’ Br. 28. Yet again, Appellants fail to mention that a relevant finding
of an earlier district court relieves Gold Technics from any payment or
accountability for the $75,000 balance and that this finding was expressly upheld
by this Court in Cascade II. 1996 WL 15549 at **3.
4. Appellants assert that the Joint Venture’s assets were worth $325,000 as
of June 17, 1985. Appellants’ Br. 18. But the value of these assets was already
set in Cascade II at approximately $1,339,000, a fact which somehow failed to
make an appearance in Appellants’ briefs. Later, they claim that the district
court’s finding of a $1,339,000 value was erroneous, Appellants’ Br. 30
(challenging Conclusion of Law No. 2), and urge us to overturn it, even though
that finding is compelled by our ruling in Cascade II.
These are serious misrepresentations, but it gets worse. In their reply brief,
Appellants attempt to re-litigate the issues of whether Weston and his affiliated
entities breached fiduciary duties to the limited partners and whether there was a
23
“wrongful termination” and “wrongful mismanagement” of the Joint Venture by
Weston and his affiliated entities. Appellants’ Reply Br. 12-13. These issues
were already decided by the first district court, Accounting Findings at 19, and
upheld in Cascade I, 896 F.2d at 1570-74. Appellants, however, not only fail to
explain how they can reargue these issues in the face of Cascade I, but they also
claim that these issues were expressly left open by Cascade II. In support of this
surprising proposition, Appellants’ brief contains the following text, indented and
single-spaced in block quote form, that purports to be an exact quotation of
footnote 28 in Cascade II:
the case was a complicated case and that it did not foreclose the
district court from filling in gaps and doing other things consistent
with its opinion to achieve a just resolution of the case. The Limited
Partners have not countered the arguments made by appellant in
their opening briefs on these points. Their only defense on these
matters is to argue they were not properly part of the issues to be tried
on remand. This Court should consider and determine these issues
based upon the weight of the evidence.” (Emphasis added)
Appellants’ Reply Br. 13.
As it turns out, there is no footnote 28 in Cascade II. Cascade I, however,
has a note 28, which reads as follows:
We note that this is a complicated case and things may have changed
since trial. We do not foreclose the district court from filling in gaps
and doing other things consistent with this opinion in order to achieve
a just resolution of the case. We also want to compliment the district
court for its careful analysis and review of the very complex facts
underlying the many disputes between the parties.
24
896 F.2d at 1584 n.28.
Comparing Appellants’ quotation with the original, we see that the first
sentence of Appellants’ purported quotation from Cascade II is actually a
paraphrase of the first two sentences of a footnote in Cascade I. The rest of
Appellants’ quotation, which is the part that supports their position, is not to be
found in the footnote at all. Although part of the rest of the quotation is similar
to language found in Cascade II, 2 the substance of the quotation does not appear
in Cascade II, and Cascade II does not support Appellants’ assertion.
The quotation is therefore not a quotation at all. It is, instead, Appellants’
unfounded arguments in Appellants’ own words, masquerading as an exact
quotation from a decision of this Court.
This is not the first time that Mr. Findlay has re-litigated issues already
decided, or misrepresented the law in an attempt to mislead the court. In Cascade
II, we upheld the district court’s imposition of a $250 sanction on Mr. Findlay for
2
In its remand to the district court for a winding up of the Joint Venture, the
Court noted that “the appellees have failed to address the issues concerning the
district court’s winding up of the Joint Venture in their brief.” Cascade II, 1996
WL 15549 at **6. The “issues” that the appellees failed to address are limited to
the winding up of the Joint Venture and clearly do not include whether Weston
and his entities breached fiduciary duties or caused the termination of the Joint
Venture. As noted above, these issues had already been decided in Cascade I. By
juxtaposing language similar to the above quotation from Cascade II with the
beginning of footnote 28 from Cascade I, which refers to the case in general,
Appellants’ “quotation” gives the impression that the “issues” left open by
Cascade II are much broader than they really are.
25
attempting to have the district court reconsider an issue already decided in
Cascade I. 1996 WL 15549 at **5. We also upheld sanctions against Mr.
Findlay for deceptively misquoting a California statute in a bankruptcy
proceeding involving many of the same facts and parties as this case. Cascade
Energy & Metals Corp. v. Banks, 87 F.3d 1146, 1151-52 (10th Cir. 1996). It
seems, then, that Mr. Findlay has been fairly warned that conduct of this sort
violates Tenth Circuit rules and warrants imposition of sanctions.
We therefore order Appellants’ counsel, Mr. Findlay, to show cause why
monetary sanctions should not be imposed on him personally. Mr. Findlay shall
have ten days from the date of this opinion to file his objections. The appellees
also may, but are not required to, file a brief. Briefs shall not exceed ten pages.
If the objections are not filed within ten days, monetary sanctions shall be
imposed. If Mr. Findlay timely files objections, we will not impose sanctions
until we have ruled on the objections.
For the foregoing reasons, we AFFIRM the district court’s decision in its
entirety.
26