Rahr v. Rescue Capital Corp, et al

UNITED STATES COURT OF APPEALS
For the Fifth Circuit
No. 00-10947
STEWART RAHR, in his own right and in the right
and on behalf of Continental Investment,
Plaintiff-Appellee,
VERSUS
RESCUE CAPITAL CORPORATION, ET AL.,
Defendants,
MALCOLM M. KELSO, R. DALE STERRITT, JR., EDWARD W.
ROUSH, JR., FRED ROYER, RICHARD D. STERRITT, SR.,
LARRY STERRITT, STERRITT PROPERTIES, INC., and
20TH CENTURY HOLDINGS, INC.,
Defendants-Appellants,
VERSUS
CONTINENTAL INVESTMENT CORPORATION,
Defendant-Appellee.
Appeal from the United States District Court
For the Northern District of Texas
(3:99-CV-628-G)
June 7, 2002
Before DUHÉ, DeMOSS, and CLEMENT, Circuit Judges.

-- 1 of 5 --

*Pursuant to 5TH CIR. R. 47.5, the Court has determined that this
opinion should not be published and is not precedent except under
the limited circumstances set forth in 5TH CIR. R. 47.5.4.
1 On March 19, 2001, this Court dismissed Kelso’s appeal pursuant
to the fugitive disentitlement doctrine. On September 17, 2000, we
reconsidered that decision and reinstated his appeal.
2
PER CURIUM:*
I. PROCEDURAL HISTORY
This case involves a convoluted mix of facts and parties.
There is one plaintiff, Stewart Rahr (suing on his own behalf and
on behalf of Continental Investment Corporation), and five groups
of appealing defendants: (1) Dale Sterritt; (2) the “Sterritt
Group” (consisting of Dick Sterritt, Larry Sterritt, Sterritt
Properties, Inc. and 20th Century Holdings, Inc.); (3) Edward W.
Roush; (4) Fred Royer; and (5) Malcolm Kelso.1
Rahr initially sued the defendants on October 9, 1998, in the
Eastern District of New York. He alleged that various defendants
were engaged in a massive fraudulent enterprise related to
Continental Investment Corporation (CIC). He sought to recoup the
approximately $12 million that he invested in CIC and lost as a
result of the defendants’ fraudulent activities.
The suit was then moved by the defendants to a bankruptcy
court in Texas. On May 18, 1999, it was transferred to the
Northern District of Texas. CIC then intervened to assert claims
against the defendants. When the case was finally tried in the
Northern District of Texas, the jury returned a unanimous verdict

-- 2 of 5 --

3
for the plaintiffs against some of the defendants, and the District
Court accordingly entered judgment in their favor. Some of those
defendants now appeal here. Finding no error, we AFFIRM the
District Court’s judgment.
II. THE FACTS
CIC is a waste disposal company, which has been liquidated in
bankruptcy since the onset of this litigation. Dale Sterritt was
CIC’s President and CEO. Before 1998, Sterritt Properties, Inc.
was CIC’s largest shareholder.
Rahr met Dale Sterritt in 1995. Based on Dale’s
representations about CIC, Rahr began investing in the company and
continued to purchase stock in CIC through 1998. In total, he
invested about $11.6 million, becoming CIC’s largest investor. He
also made loans totaling $450,000 to Dale and a Sterritt-family-
owned company. Ultimately, his entire investment was lost, and the
loans were never repaid.
At trial, the specifics of the various business ventures and
dealings at issue were discussed in great detail. In brief,
according to the plaintiffs’ allegations, the defendants induced
investors to buy millions of dollars of CIC stock by “representing
that CIC’s immense quarry excavation in Atlanta was ideally suited
for use as a municipal landfill, and by promising that CIC was
about to be listed on the NASDAQ.” Then, “[o]nce the investment

-- 3 of 5 --

4
dollars started pouring in, the Sterritts, Roush, and Royer used
[several] related corporations to siphon the money into their own
pockets, and used various illegal stock sales to raise even more
cash for themselves.” According to Rahr, the defendants
accomplished their fraudulent scheme in part by using companies
that, while held out as unrelated to the Sterritts, were secretly
owned and controlled by them.
III. ISSUES RAISED
Five groups of defendants filed briefs here. Each defendant
raised several issues, and some issues were raised by more than one
defendant. In summary, the defendants challenge: (1) whether the
District Court abused its discretion by imposing sanctions against
the defendants who did not participate in the pre-trial order; (2)
whether the District Court abused its discretion by placing time
limitations on the parties during trial; (3) whether the defendants
are entitled to a new trial because the jury foreperson allegedly
engaged in misconduct; (4) whether the plaintiff, Stewart Rahr, had
standing to bring claims on CIC’s behalf; (5) whether the District
Court lacked jurisdiction to submit certain questions to the jury;
and (6) whether the District Court erred by issuing an All Writs
Act injunction requiring permission from the court for any party to
file bankruptcy or any related lawsuits in other jurisdictions. In
addition, the defendants raised numerous challenges related to the

-- 4 of 5 --

5
legal and factual sufficiency of the evidence.
IV. CONCLUSION
After reviewing the voluminous record in this case and
carefully considering the parties’ respective briefings, we find no
error on the part of the District Court with respect to those
issues not waived on appeal. Accordingly, we AFFIRM the District
Court’s judgment.

-- 5 of 5 --