54 F.3d 387 (7th Cir. 1995), 94-2394, LaSalle Bank Lake View v. Seguban

Docket Nº:94-2394, 94-2544.
Citation:54 F.3d 387
Party Name:RICO Bus.Disp.Guide 8799 LaSALLE BANK LAKE VIEW, an Illinois Banking Corporation, Plaintiff-Appellee, v. Rafael SEGUBAN and Ellen Seguban, Defendants-Appellants.
Case Date:May 05, 1995
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit

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54 F.3d 387 (7th Cir. 1995)

RICO Bus.Disp.Guide 8799

LaSALLE BANK LAKE VIEW, an Illinois Banking Corporation,



Rafael SEGUBAN and Ellen Seguban, Defendants-Appellants.

Nos. 94-2394, 94-2544.

United States Court of Appeals, Seventh Circuit

May 5, 1995

Argued Nov. 7, 1994.

Rehearing and Suggestion for Rehearing En Banc Denied June 7, 1995.

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Michael L. Shakman, Barry A. Miller, Edward W. Feldman (argued), Bernard A. Schlifke, Miller, Shakman, Hamilton, Kurtzon & Schlifke, Chicago, IL, for LaSalle Bank Lake View.

Michael D. Robbins (argued), Chicago, IL, for Rafael Seguban.

Patrick A. Tuite, Arthur L. Klein (argued), Kurt J. Heinz, Arnstein & Lehr, Chicago, IL, for Ellen Seguban.

Before COFFIN, [*] CUDAHY and ROVNER, Circuit Judges.


LaSalle Bank Lake View has sued its former Assistant Teller Manager, Ellen Seguban, under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. Sec. 1962(c) & (d), asserting that she embezzled $940,000 from the bank during twelve years of her employment there. The action, which was filed on September 29, 1993, also named as a defendant Ellen's husband, Rafael Seguban, alleging that he accepted and used the funds with full knowledge of their illegal source. 1 Along with its RICO claims, the bank brought supplemental state law claims for breach of fiduciary duty, conversion, and fraud.

In addition to this civil action, the Bank's allegations spawned a criminal investigation by the United States Attorney for the Northern District of Illinois. That investigation was underway on February 4, 1994, when the Bank moved for summary judgment in this action. The Segubans therefore asserted their Fifth Amendment privilege against self-incrimination in response to the Bank's motion and offered no evidence to rebut the Bank's statement of material facts. Finding that the Segubans had thereby failed to show the existence of a material factual dispute, the district court granted the Bank's motion and entered judgment against the Segubans in the amount of $2,820,000, three times the Bank's damages of $940,000, in accordance with RICO's trebling provision, 18 U.S.C. Sec. 1964(c). The Segubans now appeal, arguing that the district court improperly drew an inference of guilt based on their assertion of the Fifth Amendment privilege, and that without that inference the evidence did not entitle the bank to judgment as a matter of law. We reverse and remand for further proceedings.


The Northern District of Illinois' Local Rule 12(M) requires that a movant for summary judgment file "a statement of material facts as to which the moving party contends there is no genuine issue and that entitle the moving party to a judgment as a matter of law...." In response to that statement, Local Rule 12(N) requires the opposing party to file "a response to each numbered paragraph in the moving party's statement, including, in the case of any disagreement, specific references

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to the affidavits, parts of the record, and other supporting materials relied upon" and "a statement, consisting of short numbered paragraphs, of any additional facts that require the denial of summary judgment ...," also supported by record citations. Finally, Rule 12(N) admonishes that "[a]ll material facts set forth in the statement required of the moving party will be deemed to be admitted unless controverted by the statement of the opposing party." We have on numerous occasions upheld a district court's strict adherence to that rule. See, e.g., Stewart v. McGinnis, 5 F.3d 1031, 1034 (7th Cir.1993) (collecting cases), cert. denied, --- U.S. ----, 114 S.Ct. 1075, 127 L.Ed.2d 393 (1994). Thus, if the party opposing summary judgment fails to respond to the facts set out by the movant, the court may assume those facts to be admitted and use them in determining whether the movant is entitled to judgment as a matter of law. See Waldridge v. American Hoechst Corp., 24 F.3d 918, 922 (7th Cir.1994) (collecting cases). The first question posed by this appeal is whether the normal operation of Rule 12(N) is precluded here because the Segubans' failure to file a 12(N) response was based on their assertion of the Fifth Amendment privilege. 2

The Fifth Amendment provides that "[n]o person ... shall be compelled in any criminal case to be a witness against himself...." Not limited to the criminal context, the privilege protects the individual from being compelled " 'to answer official questions put to him in any ... proceeding, civil or criminal, formal or informal, where the answers might incriminate him in future criminal proceedings.' " Baxter v. Palmigiano, 425 U.S. 308, 316, 96 S.Ct. 1551, 1557, 47 L.Ed.2d 810 (1976) (quoting Lefkowitz v. Turley, 414 U.S. 70, 77, 94 S.Ct. 316, 322, 38 L.Ed.2d 274 (1973)). If required to answer, the individual "must be offered 'whatever immunity is required to supplant the privilege' and may not be required to 'waive such immunity.' " Id. (quoting Lefkowitz, 414 U.S. at 85, 94 S.Ct. at 326). In addition to direct compulsion, the Supreme Court has prohibited practices that are coercive in that they make the exercise of the privilege "costly." Spevack v. Klein, 385 U.S. 511, 515, 87 S.Ct. 625, 628, 17 L.Ed.2d 574 (1967). Into that category the Court has placed sanctions with serious economic consequences, such as the loss of employment or state contracts. See Lefkowitz, 414 U.S. 70, 94 S.Ct. 316 (architects may not be forced to choose between loss of state contracts and self-incrimination); Uniformed Sanitation Men Ass'n v. Commissioner of Sanitation, 392 U.S. 280, 88 S.Ct. 1917, 20 L.Ed.2d 1089 (1968) (public employees may not be forced to chose between discharge from employment and self-incrimination); Gardner v. Broderick, 392 U.S. 273, 88 S.Ct. 1913, 20 L.Ed.2d 1082 (1968) (same); Spevack, 385 U.S. 511, 87 S.Ct. 625, 17 L.Ed.2d 574 (attorney may not be disbarred for exercising the privilege); Garrity v. New Jersey, 385 U.S. 493, 87 S.Ct. 616, 17 L.Ed.2d 562 (1967) (testimony compelled by threatened loss of employment cannot be used in subsequent criminal prosecution); see also National Acceptance Co. v. Bathalter, 705 F.2d 924, 927-28 (7th Cir.1983).

In Baxter v. Palmigiano, 425 U.S. 308, 96 S.Ct. 1551, 47 L.Ed.2d 810 (1976), the Court discussed whether the drawing of an adverse inference from Fifth Amendment silence in a civil proceeding imposed too high a cost on the exercise of the privilege. 3 In that case, a prison inmate had been brought before a prison disciplinary board on charges of inciting a disturbance. Informed that state criminal charges might also be brought against him, the inmate was advised that he could remain silent at the disciplinary proceeding, but that his silence "would be held against

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him" in that forum. Id. at 312, 96 S.Ct. at 1555. At the hearing, Palmigiano was confronted with incriminating evidence and remained silent. The board placed him in segregation for thirty days and downgraded his institutional status. Id. at 313, 317, 96 S.Ct. at 1555, 1557. The Court held that the rule it had articulated in the Garrity- Lefkowitz line of cases did not prohibit the drawing of an adverse inference from Fifth Amendment silence in a prison disciplinary proceeding when incriminating evidence had also been presented. Such an inference did not, in other words, impose an unconstitutional cost on the exercise of the privilege. The rule that adverse inferences may be drawn from Fifth Amendment silence in civil proceedings has been widely recognized by the circuit courts of appeals, including our own, in the two decades since Baxter was decided. See, e.g., Daniels v. Pipefitters' Ass'n Local Union No. 597, 983 F.2d 800, 801-02 (7th Cir.1993); National Acceptance, 705 F.2d at 929-932; Koester v. American Republic Investments, Inc., 11 F.3d 818, 823-24 (8th Cir.1993); RAD Services, Inc. v. Aetna Casualty & Surety Co., 808 F.2d 271, 274-75, 277 (3d Cir.1986); Brink's, Inc. v. City of New York, 717 F.2d 700 (2d Cir.1983); Hoover v. Knight, 678 F.2d 578, 581-82 (5th Cir.1982); United States v. White, 589 F.2d 1283, 1286-87 (5th Cir.1979). 4

But while holding that factual inferences based on the assertion of the privilege do not place too high a cost on its exercise, the Baxter Court was just as clear that the rule of Lefkowitz and its predecessors would be violated if the failure to testify alone were taken as an admission of guilt, without regard to other evidence:

[T]his case is very different from the circumstances before the Court in the Garrity-Lefkowitz decisions, where refusal to submit to interrogation and to waive the Fifth Amendment privilege, standing alone and without regard to the other evidence, resulted in loss of employment or opportunity to contract with the State. There, failure to respond to interrogation was treated as a final admission of guilt. Here, Palmigiano remained silent at the hearing in the face of evidence that incriminated him; and, as far as this record reveals, his silence was given no more evidentiary value than was warranted by the facts surrounding this case.

425 U.S. at 318, 96 S.Ct. at 1558. Thus, although "the Fifth Amendment does not forbid adverse inferences against parties to civil actions when they refuse to testify in response to probative evidence offered against them" (id.), an analysis of that evidence is nonetheless required. Silence is a relevant factor to be considered in light of the proffered evidence, but the direct inference of guilt from silence is forbidden. The Court reiterated that limitation on Baxter the following year in Lefkowitz v. Cunningham, which characterized Baxter's holding in this way:

Baxter did no more than permit an inference to be drawn in a civil case from a party's refusal to testify. Respondent's silence in Baxter was only one of a number of...

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