United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued March 27, 2000 Decided May 30, 2000
No. 99-7171
BCCI Holdings (Luxembourg), S.A., et al.,
Appellees
v.
Abdul Raouf Hasan Khalil,
Appellant
Appeal from the United States District Court
for the District of Columbia
(No. 95cv01252)
Stephen R. Johnson argued the cause for appellant. With
him on the briefs were James P. Linn and T. Jay Barry-
more.
Eric L. Lewis argued the cause for appellees. With him on
the brief was A. Katherine Toomey.
Before: Edwards, Chief Judge, Henderson and Rogers,
Circuit Judges.
Opinion for the Court filed by Chief Judge Edwards.
Edwards, Chief Judge: This case involves a civil action
resting on the Racketeer Influenced and Corrupt Organiza-
tion Act ("RICO"), 18 U.S.C. ss 1961, et seq. (1994), common
law fraud, unjust enrichment, and conversion. The lawsuit
was brought by appellees, fiduciaries appointed on behalf of
the Bank of Credit and Commerce International ("BCCI") to
liquidate the principal BCCI holdings and recover assets on
behalf of depositors and innocent creditors, against appellant,
Abdul Raouf Hasan Khalil, and three co-conspirators. The
District Court found Mr. Khalil liable on many, but not all, of
the claims arising under RICO, common law fraud, unjust
enrichment, and conversion. The total non-duplicative
amount of actual damages entered in favor of appellees
against Mr. Khalil was $388,402,534. The District Court
trebled this amount pursuant to 18 U.S.C. s 1964(c) (1994),
for a total judgment of $1,165,207,602 against Mr. Khalil.
On appeal, Mr. Khalil raises two principal issues: First,
Mr. Khalil claims that the District Court erred under Federal
Rules of Civil Procedure 39(b) in denying his late request for
a jury trial; second, Mr. Khalil contends that the District
Court erred in holding that appellant's alleged RICO and
common law tort violations were the legal cause of BCCI's
losses. With one exception, we find no merit in Mr. Khalil's
arguments.
Appellant's disputed motion for a jury trial was filed more
than a year late, after discovery had been concluded and after
a trial date had been set. The trial judge denied the motion
because of prejudice to the plaintiff, who had prepared for a
bench trial. The trial judge also noted that expediency would
be served in holding to the existing trial schedule, to avoid
undue delay and potential complications with other trials
involving related issues. In short, the District Court found
that counsel's inexcusable neglect in failing to request a jury
trial in a timely fashion waived defendant's right to a jury
trial. We find no error in this judgment, for the trial judge
acted within the discretion afforded him under Rule 39(b).
We also affirm most of the District Court's judgments on
the merits. As the court's opinion indicates, see BCCI Hold-
ings (Luxembourg), Societe Anonyme v. Khalil ("Khalil"), 56
F. Supp. 2d 14 (D.D.C. 1999), there is ample evidence in the
record to show but-for and proximate causation, supporting
most of the judgments on the RICO and the common law tort
claims. We can find no record evidence, however, to support
the District Court's finding that Mr. Khalil is liable to BCCI
for damages in the amount of $62,021,193 for certain silver
and copper trading losses.
We reverse the District Court's judgment for damages
resting on the silver and copper trading losses. We affirm
the District Court's judgment on all other points. The case
will be remanded for the District Court to recalculate the
damages that are due to appellees.
I. Facts
This lawsuit was spawned by BCCI's international collapse,
which was the largest international bank failure in history.
See Khalil, 56 F. Supp. 2d at 20. BCCI's court-appointed
liquidators filed a complaint on July 3, 1995 to recover
damages suffered by BCCI as a result of Mr. Khalil's alleged
violations of RICO, common law fraud, unjust enrichment,
and conversion. The liquidators charged that Mr. Khalil
participated in a conspiracy with BCCI's management that
allowed BCCI secretly to acquire ownership and maintain
control of First American Corporation and First American
Bankshares, Inc. (collectively "First American"). This illegal
scheme operated through the use of nominee shareholders--
like Mr. Khalil--who allowed BCCI to hide financial losses
from bank regulators.
Mr. Khalil is a wealthy Saudi Arabian businessman and
former government official who deposited large amounts of
money in BCCI. He may have been BCCI's largest deposi-
tor. See id. at 21. In their complaint, the liquidators claimed
that, in the late 1970s and 1980s, BCCI's former management
sought out Mr. Khalil and paid him large sums of money in
exchange for the use of his name and prestige to disguise
three schemes: (1) Mr. Khalil agreed to act as a nominee
shareholder of First American Bank's parent corporation to
disguise BCCI's illegal acquisition of an American bank with-
out required regulatory approval; (2) Mr. Khalil agreed to
serve as a nominee shareholder of BCCI Holdings to disguise
the truth about BCCI's artificially and misleadingly inflated
capital resources and support; and (3) Mr. Khalil agreed to
allow BCCI to use his name, both individually and on behalf
of his corporations, to disguise risky investments and to
create the false impression that BCCI was servicing large
loans that were actually in default. See id. The liquidators
contended that Mr. Khalil's assent to these schemes prevent-
ed BCCI's true financial condition from becoming apparent
much earlier, stopped BCCI from closing down much sooner,
and thus precipitated significant financial losses for thousands
of creditors and depositors.
Not all of the liquidators' claims against Mr. Khalil rested
on a passive view of Mr. Khalil's relationship with BCCI.
The liquidators also asserted that Mr. Khalil and Mr. Syed
Ziauddin Ali Akbar conspired to loot BCCI's assets so that
they could create and fund a commodities brokerage that they
called Capcom UK. Mr. Akbar, who was a BCCI officer from
1976 to 1986 and was in charge of BCCI's Treasury Division
from 1982 to 1986, created loans in BCCI's books to Mr.
Khalil and his companies. Mr. Akbar never intended, howev-
er, for these loans to be repaid. In particular, between
October 1984 and December 1984, Mr. Akbar transferred
$100,000,000 to Capcom that was not authorized by Mr.
Akbar's superiors. Mr. Akbar also transferred $25,000,000 to
Capcom in June 1985 and $136,000,000 to Capcom between
January and April 1986. See id. at 42-43. For his part, on
August 20, 1985, Mr. Khalil negotiated a $12.5 million check
from BCCI as a payment for his share of the "profits" from
the trading operations, received a $15 million "parting gift"
on July 3, 1987 that he had cajoled when he withdrew his
deposits from BCCI, and, on June 25, 1987, coaxed a $17,000,-
000 "loan" from BCCI to General Securities Corp., a company
co-owned by Mr. Khalil and Mr. Akbar that had an account at
Capcom. See id. at 43-45.
Mr. Khalil does not disavow this general characterization of
the facts. And he does not claim that he was innocent. His
appeal is based on two much more narrow grounds. The first
ground centers on the District Court's denial of Mr. Khalil's
request for a jury trial. The liquidators filed their complaint
on July 3, 1995, and Mr. Khalil filed his answer on February
10, 1997. Subsequently, on April 21, 1998, the parties had a
status conference and agreed to schedule a bench trial to
begin on January 25, 1999. On April 24, 1998, Mr. Khalil's
attorney filed a motion for a jury trial, claiming that counsel
had inadvertently omitted a jury demand from Mr. Khalil's
answer to the complaint. Under Fed. R. Civ. P. 38(b), the
jury demand was over a year late; it was therefore deemed
"waived" under Fed. R. Civ. P. 38(d). Mr. Khalil's attorney
argued, however, that the tardy demand for a jury trial could
be granted by the District Court under Fed. R. Civ. P. 39(b).
On October 8, 1998, guided by the Supreme Court's deci-
sion in Pierce v. Underwood, 487 U.S. 552, 562 (1988), the
District Court denied Mr. Khalil's motion for a jury trial.
The court found that (1) Mr. Khalil's lawyer's claimed inad-
vertent omission was not excusable, given that counsel had
taken so long to discover the omission, discovery was com-
plete, the deadline for motions had passed, and the court and
the opposing party had prepared for a bench trial; (2)
plaintiffs would be significantly prejudiced if the court were
to grant Mr. Khalil's tardy request for a jury trial, because
plaintiffs had premised many of their decisions in discovery
upon their understanding that there would be a bench trial;
(3) a bench trial would be much more efficient than a jury
trial; (4) granting Mr. Khalil's motion would translate into
delays for other litigants awaiting trial; (5) given Mr. Khalil's
poor health, the court would be ill-advised to delay Mr.
Khalil's case pending resolution of the other cases; and (6)
there was no real threat of bias or prejudice, even though the
court had presided over related criminal and civil cases. See
BCCI Holdings (Luxembourg), Societe Anonyme v. Khalil,
Civ. Act. No. 95-1252, Mem. Op. (D.D.C. Oct. 8, 1998) ("Mem.
Op."), reprinted in Joint Appendix ("J.A.") 277.
The issues on the merits raised by Mr. Khalil focus on the
District Court's award of damages and the underlying find-
ings of causation. The District Court generally agreed with
the liquidators that Mr. Khalil was liable for receiving money
for his participation in the various nominee schemes, though
the trial court did not accept all of the liquidator's claims. In
particular, the court found that Mr. Khalil was liable for
$27,500,000 that he received as direct payments from BCCI
for his participation in the nominee schemes, $15,249,283 that
BCCI paid for Mr. Khalil's expenses, $47,069,808 that BCCI
paid to Mr. Khalil's companies, an additional $236,562,250
that BCCI sent to Capcom, and $62,021,193 that represented
the losses that BCCI suffered from silver and copper trading
that involved and was facilitated by accounts in Mr. Khalil's
name. The final result was that the liquidators were awarded
damages of $388,402,534, which were tripled to $1,165,207,602
pursuant to 18 U.S.C. s 1964(c). See Khalil, 56 F. Supp. 2d
at 66-69. This appeal followed.
II. Discussion
A. Standard of Review
The parties agree that the standard of review covering the
District Court's denial of Mr. Khalil's Rule 39(b) motion for a
jury trial is abuse of discretion. The parties also agree that
the findings on the claims based on common law fraud, unjust
enrichment, and conversion are reviewed under the clearly
erroneous standard. The parties disagree, however, over the
standard of review covering the findings of proximate cause
under RICO.
On this last point, we find the Supreme Court's decision in
Exxon Co., U.S.A. v. Sofec, Inc., 517 U.S. 830, 840-41 (1996),
to be persuasive. In Sofec, the Court explained that "[t]he
issues of proximate causation and superseding cause involve
application of law to fact, which is left to the factfinder,
subject to limited review." Id. Mr. Khalil argues that Sofec
is inapposite, because the standard enunciated there is limited
to admiralty cases. There is nothing in the Court's opinion,
however, that so narrows its applicability. It seems clear
here, just as in Sofec, that findings on proximate causation
involve mixed questions of law and fact subject to limited
review. In any event, even if we were to engage in de novo
review, as Mr. Khalil suggests, our judgments on the matters
in issue would not change.
B. The Jury Issue
Mr. Khalil's jury-demand argument is specious. Mr. Khalil
did not file a jury demand either when the liquidators filed
their complaint on July 3, 1995 or when he filed his answer to
the complaint on February 10, 1997. It took almost three
years from the filing of the complaint and more than a year
after the filing of the answer for Mr. Khalil to bring it to the
District Court's attention that he wanted a jury trial. By
then, the trial court had scheduled the case for a bench trial,
discovery had been extended and closed, and the deadline for
motions had already passed.
Federal Rule of Civil Procedure 38 is clear that a party
waives his right to a trial by jury if he does not "(1) serv[e]
upon the other parties a demand therefor in writing at any
time after the commencement of the action and not later than
10 days after the service of the last pleading directed to such
issue, and (2) fil[e] the demand as required by Rule 5(d)."
Fed. R. Civ. P. 38. A party who fails to make a timely request
for a jury trial may avoid waiver and secure a jury trial only
if the District Court "in its discretion" acts favorably on such
a request. Fed. R. Civ. P. 39(b).
Under Rule 39, a trial court may abuse its discretion in
denying a late request for a jury trial. This does not mean,
however, that a trial court must indulge a presumption in
favor of the neglectful party when faced with a late demand.
Thus, a trial court is not required to grant a Rule 39(b)
request based on nothing but inadvertence, because,
"[t]hough the court might, in its discretion, have ordered a
jury trial, it [is] under no obligation to do so." May v.
Melvin, 141 F.2d 22 (D.C. Cir. 1944); see also Wall v.
National R.R. Passenger Corp., 718 F.2d 906, 910 (9th Cir.
1983) ("The record does not demonstrate any reason, other
than counsel's inadvertence, for the failure to comply with
rule 38(b). The district judge did not abuse his discretion.");
Rhodes v. Amarillo Hosp. Dist., 654 F.2d 1148, 1154 (5th Cir.
Unit A 1981) (finding even under a presumption in favor of
granting untimely jury demands that "[i]t is not an abuse of
discretion by a District Judge to deny a Rule 39(b) motion
... when the failure to make a timely demand for a jury trial
results from mere inadvertence on the part of the moving
party"); Paramount Pictures Corp. v. Thompson Theatres,
Inc., 621 F.2d 1088, 1090 (10th Cir. 1980) ("By failing to make
a timely demand defendants waived their rights. The trial
court then has the discretion, upon motion, to order trial by
jury. That discretion is broad, and the court's exercise, either
to grant or to deny a jury trial, is reversible only if it appears
from all of the facts and circumstances that the court abused
its discretion." (internal citations omitted)).
In this case, mere inadvertence is the only leg upon which
Mr. Khalil can stand, and it is at best a very weak base. Mr.
Khalil does not deny that he waived his right to a jury.
Rather, he claims that despite his mistake, the burden should
be on the opposing party to present strong and compelling
reasons why the late demand for a jury trial should not be
granted. This is not what Rule 39 says, however. The rule
merely states that, upon motion from a party like Mr. Khalil,
the District Court "may" (not shall) "in its discretion" order
a trial by jury. Absent an abuse of discretion by the trial
court, a defaulting party who has already waived the right to
a jury trial under Rule 38(d) has no viable claim. This does
not mean that a trial court can simply ignore a Rule 39(b)
motion or whimsically deny it for no good reason. But trial
courts have wide latitude under the abuse of discretion stan-
dard to weigh the merits of late demands for jury trials.
The District Court's judgment in this case easily survives
review under the abuse of discretion standard. The District
Court reasonably considered the factors enunciated by the
Supreme Court in Pierce v. Underwood, 487 U.S. 552. In
Pierce, the Court noted that,
[o]ver the years, appellate courts have consistently up-
held the trial judges in allowing or refusing late-
demanded jury trials, but in doing so have laid down two
guidelines for exercise of the discretionary power. The
products of cumulative experience, these guidelines re-
late to the justifiability of the tardy litigant's delay and
the absence of prejudice to his adversary.
Id. at 562. Following the Pierce Court's lead, the District
Court found that Mr. Khalil's delay was not justified, because
it was the product of mere inadvertence, and "where the
length of time to discover the error is as long as here, where
discovery is complete and the motions' deadline has passed,
and where the Court and the opposing party have come to
rely on a bench trial, this factor weighs against granting a
trial by jury." Mem. Op. at 8, reprinted in J.A. 284. The
trial court also reasonably found that BCCI had made a
"plausible and specific enough showing of prejudice." Id. at
9, reprinted in J.A. 285. In short, we have no basis upon
which to second-guess the judgment of the District Court.
C. Proximate Causation
On the merits of this case, Mr. Khalil first posits that the
District Court's standard of proximate cause under RICO was
too lax. He argues that "a RICO claimant must prove that
he was the 'intended target' of the RICO scheme and that the
alleged injury was the 'preconceived purpose' of the RICO
activity." Br. of Appellant at 35. In our view, appellant's
argument on this point is simply wrong.
In Holmes v. Securities Investor Protection Corp., 503 U.S.
258 (1992), which involved a civil action under RICO, the
Court considered the meaning of the statutory phrase--
"[a]ny person injured in his business or property by reason of
a [RICO] violation"--found in 18 U.S.C. s 1964(c). The
Court's discussion is illuminating:
This language [18 U.S.C. s 1964(c)] can, of course, be
read to mean that a plaintiff is injured "by reason of" a
RICO violation, and therefore may recover, simply on
showing that the defendant violated s 1962, the plaintiff
was injured, and the defendant's violation was a "but for"
cause of plaintiff's injury. This construction is hardly
compelled, however, and the very unlikelihood that Con-
gress meant to allow all factually injured plaintiffs to
recover persuades us that RICO should not get such an
expansive reading.
... Congress modeled s 1964(c) on the civil-action provi-
sion of the federal antitrust laws, s 4 of the Clayton Act.
... [W]e [have] held that a plaintiff's right to sue under
s 4 required a showing that the defendant's violation not
only was a "but for" cause of his injury, but was the
proximate cause as well.
The reasoning applies just as readily to s 1964(c)....
Proximate cause is thus required [under RICO].
Id. at 265-68.
The Court in Holmes defined proximate cause as essential-
ly reflecting "ideas of what justice demands, or of what is
administratively possible and convenient." Id. at 268. Proxi-
mate cause exists to ensure that a random third party who
suffers "merely from the misfortunes visited upon [him] by
the defendant's acts" does not recover. Id. It also ensures
that courts do not get ensnared in administratively complex
questions over factual causation and apportionments of dam-
ages. The Court reasoned that a proximate cause require-
ment would sufficiently deter injurious conduct, because "di-
rectly injured victims can generally be counted on to vindicate
the law as private attorneys general, without any of the
problems attendant upon suits by plaintiffs injured more
remotely." Id. at 269-70. The Court never suggests, howev-
er, that the only or best way to prove proximate cause is for a
plaintiff to prove he was the "intended target" and that the
injury was the "preconceived purpose" of the RICO activity.
We therefore reject appellant's highly restrictive reading of
RICO.
With one exception, the record in this case offers ample
evidence to support the District Court's findings that Mr.
Khalil was the proximate cause of RICO injuries suffered by
BCCI, as well as the District Court's findings of common law
violations. The District Court's judgments on these points
are well-explained in its published opinion; that opinion needs
no revision, save for one point.
The one exception centers on the $62,021,193 in silver and
copper trading losses that the District Court found were
directly linked to the use of Mr. Khalil's name. Unlike the
other payments, which are directly traceable to Mr. Khalil's
fees for participating in the nominee scheme, the silver and
copper trading losses are much more contingent on other
factors. Without much other analysis, the trial court rea-
soned that, "[a]lthough market conditions played an impor-
tant role in bringing those losses about, the use of Khalil's
name remained a substantial factor causing those losses.
These losses can be traced directly to the fraudulent use of
Khalil-owned companies." Khalil, 56 F. Supp. 2d at 61. The
District Court and appellees seem to claim that the bank's
losses would have been prevented or reduced had the bank
known about the futures trading at issue. In particular, they
suggest that the Board of Directors had placed limits on
investments and that Khalil facilitated the avoidance of these
limits by lending his name to fraudulent endeavors, thus
causing the bank to suffer losses. We can find no record
evidence demonstrating that this specific set of losses is
directly traceable to the ability of the perpetrators to hide the
losses in Mr. Khalil's name. We therefore reverse the judg-
ment against Mr. Khalil resting on the disputed silver and
copper trading losses.
III. Conclusion
We reverse the judgment of the District Court resting on
the silver and copper trading losses. We affirm the judgment
of the District Court in favor of appellees on all other points.
The case is hereby remanded to the District Court to recalcu-
late the damages that are due to appellees.
So ordered.