Jo Ann Howard & Assocs., P.C. v. Cassity

• Decision Date: 17 August 2017
• Docket Number: No. 15-3872, No. 15-3878,15-3872
• Citation: 868 F.3d 637
• Parties: JO ANN HOWARD AND ASSOCIATES, P.C., Special Deputy Receiver of Lincoln Memorial Life Insurance Company, Memorial Service Life Insurance Company, and National Prearranged Services, Inc.; National Organization of Life and Health Insurance Guaranty Associations; Missouri Life and Health Insurance Guaranty Association; Texas Life and Health Insurance Guaranty Association; Illinois Life and Health Insurance Guaranty Association; Kansas Life and Health Insurance Guaranty Association; Oklahoma Life and Health Insurance Guaranty Association; Kentucky Life and Health Insurance Guaranty Association; Arkansas Life and Health Insurance Guaranty Association, Plaintiffs-Appellees, v. J. Douglas CASSITY; Randall Sutton; Brent D. Cassity; Tyler J. Cassity; Rhonda L. Cassity; Katherine P. Scannell ; Randall J. Singer; Howard A. Wittner ; Wittner, Spewark and Maylack, PC; David R. Wulf; Wulf, Bates and Murphy, Inc.; Michael R. Butler; Lennie J. Cappleman; James M. Crawford; Larry Keith Hale; Tony B. Lumpkin, III; Erin P. Engle; Nekol Province; Roxanne J. Schnieders; Kelly Tate ; George Wise, III; Marianne Jones; Anne Chrun; National Heritage Enterprises, Inc. ; Forever Enterprises, Inc., formerly known as Lincoln Heritage Corporation ; Lincoln Memorial Services, Inc.; Forever Network, Inc.; Forever Illinois, Inc.; Hollywood Forever, Inc.; Texas Forever, Inc.; National Prearranged Services Agency, Inc.; Legacy International Imports, Inc.; Wise, Mitchell and Associates, LTD; Brentwood Heritage Properties, LLC; Brennen Bank and Trust Company, Defendants, National City Bank, Defendant-Appellant, Marshall and Ilsley Trust Company, N.A. ; Southwest Bank; U.S. Bank, N.A.; Bank of America, N.A.; American Stock Transfer and Trust Company; Comerica Bank and Trust, N.A.; Brown Smith Wallace, LLC; John Does, 1-25; Rhonda L. Cassity, Inc., Defendants, PNC Bank, N.A., Defendant-Appellant, BMO Harris Bank, N.A.; Richard Markow; Herbert Morisse, Defendants, American Bankers Association; Missouri Bankers Association, Amici on Behalf of Appellant(s). Jo Ann Howard and Associates, P.C., Special Deputy Receiver of Lincoln Memorial Life Insurance Company, Memorial Service Life Insurance Company, and National Prearranged Services, Inc.; National Organization of Life and Health Insurance Guaranty Associations; Missouri Life and Health Insurance Guaranty Association; Texas Life and Health Insurance Guaranty Association; Illinois Life and Health Insurance Guaranty Association; Kansas Life and Health Insurance Guaranty Association; Oklahoma Life and Health Insurance Guaranty Association; Kentucky Life and Health Insurance Guaranty Association; Arkansas Life and Health Insurance Guaranty Association, Plaintiffs-Appellants, v. J. Douglas Cassity; Randall Sutton; Brent D. Cassity; Tyler J. Cassity; Rhonda L. Cassity; Katherine P. Scannell ; Randall J. Singer; Howard A. Wittner ; Wittner, Spewark and Maylack, PC; David R. Wulf; Wulf, Bates and Murphy, Inc.; Michael R. Butler; Lennie J. Cappleman; James M. Crawford; Larry Keith Hale; Tony B. Lumpkin, III; Erin P. Engle; Nekol Province; Roxanne J. Schnieders; Kelly Tate ; George Wise, III; Marianne Jones; Anne Chrun; National Heritage Enterprises, Inc. ; Forever Enterprises, Inc., formerly known as Lincoln Heritage Corporation ; Lincoln Memorial Services, Inc.; Forever Network, Inc.; Forever Illinois, Inc.; Hollywood Forever, Inc.; Texas Forever, Inc.; National Prearranged Services Agency, Inc.; Legacy International Imports, Inc.; Wise, Mitchell and Associates, LTD; Brentwood Heritage Properties, LLC; Brennen Bank and Trust Company, Defendants, National City Bank, Defendant-Appellee, Marshall and Ilsley Trust Company, N.A. ; Southwest Bank; U.S. Bank, N.A.; Bank of America, N.A.; American Stock Transfer and Trust Company; Comerica Bank and Trust, N.A.; Brown Smith Wallace, LLC; John Does, 1-25; Rhonda L. Cassity, Inc., Defendants, PNC Bank, N.A., Defendant-Appellee, BMO Harris Bank, N.A.; Richard Markow; Herbert Morisse, Defendants, American Bankers Association; Missouri Bankers Association, Amici on Behalf of Appellee(s).
• Court: U.S. Court of Appeals — Eighth Circuit

868 F.3d 637

JO ANN HOWARD AND ASSOCIATES, P.C., Special Deputy Receiver of Lincoln Memorial Life Insurance Company, Memorial Service Life Insurance Company, and National Prearranged Services, Inc.; National Organization of Life and Health Insurance Guaranty Associations; Missouri Life and Health Insurance Guaranty Association; Texas Life and Health Insurance Guaranty Association; Illinois Life and Health Insurance Guaranty Association; Kansas Life and Health Insurance Guaranty Association; Oklahoma Life and Health Insurance Guaranty Association; Kentucky Life and Health Insurance Guaranty Association; Arkansas Life and Health Insurance Guaranty Association, Plaintiffs-Appellees,
v.
J. Douglas CASSITY; Randall Sutton; Brent D. Cassity; Tyler J. Cassity; Rhonda L. Cassity; Katherine P. Scannell ; Randall J. Singer; Howard A. Wittner ; Wittner, Spewark and Maylack, PC; David R. Wulf; Wulf, Bates and Murphy, Inc.; Michael R. Butler; Lennie J. Cappleman; James M. Crawford; Larry Keith Hale; Tony B. Lumpkin, III; Erin P. Engle; Nekol Province; Roxanne J. Schnieders; Kelly Tate ; George Wise, III; Marianne Jones; Anne Chrun; National Heritage Enterprises, Inc. ; Forever Enterprises, Inc., formerly known as Lincoln Heritage Corporation ; Lincoln Memorial Services, Inc.; Forever Network, Inc.; Forever Illinois, Inc.; Hollywood Forever, Inc.; Texas Forever, Inc.; National Prearranged Services Agency, Inc.; Legacy International Imports, Inc.; Wise, Mitchell and Associates, LTD; Brentwood Heritage Properties, LLC; Brennen Bank and Trust Company, Defendants,

National City Bank, Defendant-Appellant,

Marshall and Ilsley Trust Company, N.A. ; Southwest Bank; U.S. Bank, N.A.; Bank of America, N.A.; American Stock Transfer and Trust Company; Comerica Bank and Trust, N.A.; Brown Smith Wallace, LLC; John Does, 1-25; Rhonda L. Cassity, Inc., Defendants,

PNC Bank, N.A., Defendant-Appellant,

BMO Harris Bank, N.A.; Richard Markow; Herbert Morisse, Defendants,

American Bankers Association; Missouri Bankers Association, Amici on Behalf of Appellant(s).

Jo Ann Howard and Associates, P.C., Special Deputy Receiver of Lincoln Memorial Life Insurance Company, Memorial Service Life Insurance Company, and National Prearranged Services, Inc.; National Organization of Life and Health Insurance Guaranty Associations; Missouri Life and Health Insurance Guaranty Association; Texas Life and Health Insurance Guaranty Association; Illinois Life and Health Insurance Guaranty Association; Kansas Life and Health Insurance Guaranty Association; Oklahoma Life and Health Insurance Guaranty Association; Kentucky Life and Health Insurance Guaranty Association; Arkansas Life and Health Insurance Guaranty Association, Plaintiffs-Appellants,
v.
J. Douglas Cassity; Randall Sutton; Brent D. Cassity; Tyler J. Cassity; Rhonda L. Cassity; Katherine P. Scannell ; Randall J. Singer; Howard A. Wittner ; Wittner, Spewark and Maylack, PC; David R. Wulf; Wulf, Bates and Murphy, Inc.; Michael R. Butler; Lennie J. Cappleman; James M. Crawford; Larry Keith Hale; Tony B. Lumpkin, III; Erin P. Engle; Nekol Province; Roxanne J. Schnieders; Kelly Tate ; George Wise, III; Marianne Jones; Anne Chrun; National Heritage Enterprises, Inc. ; Forever Enterprises, Inc., formerly known as Lincoln Heritage Corporation ; Lincoln Memorial Services, Inc.; Forever Network, Inc.; Forever Illinois, Inc.; Hollywood Forever, Inc.; Texas Forever, Inc.; National Prearranged Services Agency, Inc.; Legacy International Imports, Inc.; Wise, Mitchell and Associates, LTD; Brentwood Heritage Properties, LLC; Brennen Bank and Trust Company, Defendants,

National City Bank, Defendant-Appellee,

Marshall and Ilsley Trust Company, N.A. ; Southwest Bank; U.S. Bank, N.A.; Bank of America, N.A.; American Stock Transfer and Trust Company; Comerica Bank and Trust, N.A.; Brown Smith Wallace, LLC; John Does, 1-25; Rhonda L. Cassity, Inc., Defendants,

PNC Bank, N.A., Defendant-Appellee,

BMO Harris Bank, N.A.; Richard Markow; Herbert Morisse, Defendants,

American Bankers Association; Missouri Bankers Association, Amici on Behalf of Appellee(s).

No. 15-3872
No. 15-3878

United States Court of Appeals, Eighth Circuit.

Submitted: September 20, 2016
Filed: August 17, 2017

Farrell A. Carfield, Robert J. Kelly, Clare S. Pennington, Larry Pozner, Daniel M. Reilly, Michael P. Robertson, Reilly & Pozner, Sean Connelly, Zonies Law, Denver, CO, Morry Sean Cole, Maurice B. Graham, Gray & Ritter, Saint Louis, MO, Eric John Magnuson, Robins & Kaplan, Minneapolis, MN, for Plaintiffs–Appellees.

Michele (Mike) W. Bartolacci, Thompson & Coburn, James F. Bennett, Caitlin E. O'Connell, Dowd & Bennett, Saint Louis, MO, Teagan J. Gregory, J. Andrew Keyes, Stephen Raber, Amy Saharia, Williams & Connolly, Washington, DC, for Defendants–Appellants.

Susan Ford Robertson, The Robertson Law Group, Kansas City, MO, for Amici on Behalf of Appellant(s).

Before COLLOTON, MELLOY, and SHEPHERD, Circuit Judges.

COLLOTON, Circuit Judge.

PNC Bank appeals a jury verdict in favor of special deputy receiver Jo Ann Howard and Associates, P.C., and a group of state guaranty associations (together, Appellees). The jury found PNC liable for negligence and breach of fiduciary duty in violation of its duties as trustee of various preneed trusts created by National Prearranged Services, Inc. On appeal, PNC makes three arguments: (1) the district court improperly concluded that Appellees' claims arise in tort rather than under the law of trusts; (2) Appellees' claims should have been tried to the court rather than a jury; and (3) the district court improperly disallowed PNC's defenses. Appellees cross-appeal, arguing that the district court erroneously dismissed their tort claims alleging that PNC's predecessor-in-interest aided and abetted fraud and breaches of fiduciary duty. We conclude that Appellees' claims arise under trust law, that the claims are properly tried to the court, and that the measure of damages is limited accordingly. We further hold that the district court properly limited PNC's defenses, and correctly dismissed Appellees' aiding-and-abetting claims. We therefore affirm in part, reverse in part, and remand for further proceedings.

I.

This case arises out of the nationwide fraud scheme of National Prearranged Services, Inc. (NPS), a Missouri-based seller of preneed funeral contracts. The Cassity family owned and operated NPS. NPS operated across the country, but the

868 F.3d 643

company's activities in Missouri are the subject of this appeal. The Cassitys also owned two Texas-based life insurance companies, Lincoln Memorial Life Insurance Company (Lincoln) and Memorial Service Life Insurance Company (Memorial).

Chapter 436 of the Missouri Revised Statutes, now repealed, governed the making of preneed funeral contracts in Missouri during the relevant period. Mo. Rev. Stat. §§ 436.005-.071 (2008) (repealed 2009). A preneed contract was an arrangement that required the current payment of money in consideration for funeral services to be provided later at the time of a death. Id. § 436.005(5). NPS sold preneed funeral contracts that allowed consumers to purchase funeral services at a fixed price. Under a preneed contract, a purchaser selected the merchandise and services that the purchaser wanted for the contract beneficiary, which was either the purchaser or a third party. When this contract beneficiary died, the purchaser's chosen funeral home performed the funeral according to the contract.

Under Missouri law, NPS could retain up to twenty percent of the proceeds of each preneed funeral contract. Mo. Rev. Stat. § 436.027. NPS was required to deposit the other eighty percent into a trust. Id. §§ 436.021.1(2), 436.027, 436.031.1. The statute provided that NPS must appoint a state or federally chartered financial institution as trustee of its trusts. Id. § 436.031.1. The trustee was to invest and reinvest the assets deposited in the trusts. Id. § 436.031.2. Because the NPS trusts held funds in excess of $250,000, NPS was allowed to appoint an independent qualified investment advisor to make investment decisions for the trust property. Id.

Missouri law also dictated how NPS distributed payments to funeral homes. After a consumer's funeral, the funeral home submitted a written certification to NPS establishing that it provided the funeral services to the deceased consumer. Id. § 436.045. Upon receipt of the certification, NPS paid the funeral home the amount specified in the preneed contract plus a "growth" payment. The "growth" payment protected funeral homes against rising funeral costs. Once NPS paid the funeral home, NPS was entitled to a distribution from the trust equal to all deposits made into the trust for the particular preneed contract. Id.

Allegiant Bank became the trustee of NPS's Missouri trusts in August 1998. Allegiant's responsibilities as trustee were set forth in the NPS trust agreement, which was governed by Chapter 436. When Allegiant assumed its role as trustee, NPS already had appointed Wulf Bates & Murphy (Wulf) as its investment advisor. Wulf served throughout Allegiant's tenure as trustee. During this time, Wulf used trust assets to purchase Lincoln life insurance policies. The policies insured the lives of NPS's preneed consumers in Missouri. When a consumer died, Lincoln paid the proceeds of the policies to the NPS trusts.

Allegiant served as trustee until May 2004, when it resigned after being acquired by National City Bank. Because National City...