City of Marion v. London Witte Grp., LLC

• Court: Indiana Supreme Court
• Writing for the Court: Massa, Justice.
• Citation: City of Marion v. London Witte Grp., LLC, 169 N.E.3d 382 (Ind. 2021)
• Decision Date: 17 June 2021
• Docket Number: Supreme Court Case No. 20S-MI-00567
• Parties: CITY OF MARION, Appellant/Cross-Appellee (Plaintiff below), v. LONDON WITTE GROUP, LLC, Chad Seybold, Estate of Michael Y. An, Global Investment Consulting, Inc., and World Enterprise Group, Inc., Appellees/Cross-Appellants (Defendants below).

169 N.E.3d 382

CITY OF MARION, Appellant/Cross-Appellee (Plaintiff below),

v.LONDON WITTE GROUP, LLC, Chad Seybold, Estate of Michael Y. An, Global Investment Consulting, Inc., and World Enterprise Group, Inc., Appellees/Cross-Appellants (Defendants below).

Supreme Court Case No. 20S-MI-00567

Supreme Court of Indiana.

Argued: November 19, 2020

Filed June 17, 2021

ATTORNEYS FOR APPELLANT/CROSS-APPELLEE: Philip A. Whistler, Derek R. Molter, Eric J. McKeown, Ice Miller LLP, Indianapolis, Indiana, Thomas R. Hunt, Corporate Counsel for City of Marion, Marion, Indiana

ATTORNEYS FOR APPELLEE/CROSS-APPELLANT: Thomas F. Falkenberg, Falkenberg Ives LLP, Chicago, Illinois, Crystal G. Rowe, Michael E. Brown, Kightlinger & Gray LLP, New Albany, Indiana

ATTORNEYS FOR AMICUS CURIAE INDIANA MUNICIPAL LAWYERS ASSOCIATION: Thomas K. Downs, Karen L. Arland, Kennedy Downs & Arland, PC, Indianapolis, Indiana

On Petition to Transfer from the Indiana Court of Appeals, No. 19A-MI-01762

Massa, Justice.

The City of Marion sued London Witte Group, LLC, an advisor to the City's former mayor, Wayne Seybold. The new City administration alleged corruption in the old, aided and abetted by London Witte. London Witte moved for summary judgment based on the statute of limitations. The City argued the doctrine of adverse domination tolled the statute of limitations until Mayor Seybold left office. The trial court granted partial summary judgment for London Witte. An appellate panel found all the City's claims were time-barred.

We now adopt and apply the adverse domination doctrine. And we conclude summary judgment was inappropriate for all the City's claims because there are genuine issues of material fact as to whether Mayor Seybold adversely dominated the City, and whether London Witte helped him do so. Therefore, we reverse in part, affirm in part, and remand.

Facts and Procedural History¹

I. Background

Mayor Seybold was sworn in as mayor on January 1, 2004 and remained mayor until his successor was sworn in on January 1, 2016. During his first few years in office, he met Michael An, a developer from California. An was president and owner of two companies: Global Investment Consulting, Inc., and World Enterprise Group, Inc. An was interested in potential redevelopment of abandoned buildings in Marion and visited several times to review prospective sites. An also hired the Mayor's brother, Chad Seybold, and the Seybolds’ father. An proposed redeveloping Marion's old YMCA building into a combination of hotel, restaurant, retail, and recreational spaces. The total project was estimated to cost approximately $5.5 million; the City was willing to provide $2.5 million of tax increment bond financing (TIF), meaning An had to come up with the remaining $3 million.

Mayor Seybold convened a project team, with the "core" members including himself, the City's Director of Development Darren Reese, Attorney Bruce Donaldson as bond counsel, and Robert Swintz of London Witte Group, LLC. London Witte is an accounting firm with a municipal advising department. Mayor Seybold had the "final say" in hiring London Witte as bond accountant and financial advisor for the project.² Appellant's App. Vol. IV, p.120. Swintz, a lawyer, certified public accountant, SEC-registered municipal advisor, and Mayor Seybold's good friend, started working at London Witte in 2003. Swintz worked for the City throughout Mayor Seybold's entire administration, and at times, the City was Swintz's biggest client.

During Mayor Seybold's administration, Swintz never had to bid on a project for the City, and London Witte earned approximately $1,840,825 from his work. London Witte was also involved in Mayor Seybold's political pursuits, donating more than $25,000 to his various campaigns and hosting a fundraiser. In 2012, Swintz served as treasurer for Mayor Seybold's congressional campaign, while another London Witte employee did the same for his 2014 state treasurer campaign.

II. The YMCA Project

An purchased the YMCA building. In August of 2009, he hired Timothy Chambers to clean up the property after a flood. Chambers then received a "very angry" call from Chad telling him to leave and give Chad his key because Chad was An's only representative. Appellant's App. Vol. VI, p.151. Chad made "several threats" to Chambers, and "wanted to know if [Chambers] knew who his brother was and what he could do to our business." Id. Chambers and An met to discuss the incident, and An told Chambers that he was only going to be working with Chad because "he had been told that the only way he could pursue the TIF was if ... Chad worked on the project." Id. , p.152.

In October, First Farmers Bank & Trust Co., which was buying the City's bonds and lending the proceeds to An, began asking whether An actually had $3 million to cover his share of the project's financing. The Bank informed the City's Director of Development that its approval was contingent on An having the funds. Still, no such proof had been provided by December 1, the date on which the City entered into a loan agreement with An, and a corresponding trust indenture with the Bank. Under the loan agreement, Global agreed to use all the bond proceeds for the costs of construction, to pay back the principal sum of $2.5 million—along with any interest—and cover all additional costs. An provided a personal guaranty of the promissory note, and the Bank held the mortgage on the YMCA property as security for the loan.

Two days later, on December 3, An sent Chad his personal finance statement, Global's finance statement, a memorandum of understanding (MOU) with a previously-unknown individual named Se Kwon Cho, and Cho's bank balance. An's personal finance statement showed only $32,356.66 in current assets, while Global's balance sheet showed $40,922.04 in current assets. And while the MOU stated that "Mr. Choi" agreed to make $3 million available for An to complete the project, it explicitly said "this MOU is not intended to be a legally binding agreement."³ Id. , p.177. Cho's bank balance, as of August 24, was $7,679,353.56 New Zealand dollars. The next day, Chad sent Swintz the documents, which Swintz forwarded only to the bond counsel, without converting from New Zealand dollars. Swintz then emailed the Bank, saying "I just spoke with [Reese] and the mayor and the City has received documentation providing the comfort they need for the YMCA project." Appellant's App. Vol. III, p.231.

On December 8, the Bank again asked when it would receive An's proof of funds. Bond counsel Donaldson told Swintz the Bank would not want to close if An could not prove that he had $3 million. Swintz replied, "[the Bank] doesn't get a choice on funding the $2.5 million. If [it] backs on [sic] now, [it] is F (you know the rest)." Id. , p.233. Swintz then told the Bank the developer had provided written documentation to the City of funding sufficient to complete the project. Swintz further told the Bank, "I am not sure I understand the [B]ank's need to know the other funds are available." Id. , p.237. Swintz said it was the City's risk to assure that the project was completed, and the City would address that risk in the loan agreement with An. But the loan agreement had already been signed and did not address the risk of incompletion.

The Bank had also asked Swintz on December 8 what the requirements were for its trust department, for the distributions, and for inspections. Chad had already asked Swintz how the distribution of funds would work and whether funding would be based off the completed stages of the project, and Swintz told him the "Trustee will not monitor project completion/stages." Appellant's App. Vol. VI, p.174. So even though the trust indenture required the draw requests be reimbursements for completed work, Swintz responded, "I guess I generally don't understand the need for an inspection for the Bank." Appellant's App. Vol. III, p.237.

On December 16, the day before the bonds closed, Swintz reviewed the draw request from bond proceeds for $481,097 that Chad and An were going to submit the next day. Even though construction had not yet begun, the draw request listed reimbursements for $383,000 worth of construction work. The trust indenture required the Bank's Trustee to receive a signed written request, stating that the costs were already incurred and necessary for the project before disbursements were to be made. And while the draw request did not comply with the trust indenture, neither Swintz nor the Trustee raised any objections. The Trustee did not obtain the documentation or invoices necessary to support the distributions because Mayor Seybold had told him to "treat this as a special account" and to "work directly with Mr. An and have all distributions go through them." Appellant's App. Vol. IV, pp. 27, 29. And Swintz told Chad and An that he did not "see anything on here that would cause a problem," even though there was a $20,120 attorney fee listed, about which Swintz could not explain what services were rendered or by whom. Appellant's App. Vol. V, p.128. When the bonds closed the next day, London Witte's contingent fee of $25,000 was paid out of the bond proceeds. Global submitted the $481,097 draw request later that day and received the funds.

In February of 2010, An signed a Global check to Mayor Seybold's wife for $1,000. The next month, Global submitted a distribution request for $1,154,518. The request included an itemized list of the amounts allegedly payable to World Enterprise, including $31,600 for the elevator and $104,941 for HVAC work. Neither were ever installed. An then signed another check to Mayor Seybold's wife from World Enterprise. In September, Global made a distribution request for $403,400, and received the funds. The request again itemized amounts allegedly payable, including another $60,000 for HVAC and $63,400 for the elevator.

In late 2010, and into 2011, Mayor Seybold moved to refinance the 2009 bonds. London Witte was retained to...