Police Retirement System of St. Louis v. Midwest Inv. Advisory Service, Inc.
| Decision Date | 17 September 1991 |
| Docket Number | 89-3028EM and 90-1743EM,Nos. 89-2770E,s. 89-2770E |
| Citation | 940 F.2d 351 |
| Parties | Fed. Sec. L. Rep. P 96,165, RICO Bus.Disp.Guide 7820, 33 Fed. R. Evid. Serv. 998 The POLICE RETIREMENT SYSTEM OF ST. LOUIS, a Missouri Statutory Pension Trust, Appellee, v. MIDWEST INVESTMENT ADVISORY SERVICE, INC.; James F. Bridges; The Guaranty Trust Co. of Missouri; Angelo J. Parato; James A. Finch, III; I.M. Simon & Co., Inc.; Thomas D. Pixley; E.F. Hutton & Co., Inc.; Paine, Webber, Jackson & Curtis; Diversified Consultants, Inc.; Donald C. Anton, Appellant, Dotto Enterprises, Inc.; Aurora L. Anton; Walter P. Klein; Anthony D. Daniele; Vining-Sparks Securities, Inc.; U.S.A. Continental Investors Group, Inc. The POLICE RETIREMENT SYSTEM OF ST. LOUIS, a Missouri Statutory Pension Trust, Appellant, v. MIDWEST INVESTMENT ADVISORY SERVICE, INC.; James F. Bridges; Appellees, The Guaranty Trust Co. of Missouri; Angelo J. Parato; James A. Finch, III; I.M. Simon & Co., Inc.; Appellee, Thomas D. Pixley; E.F. Hutton & Co., Inc.; Paine, Webber, Jackson & Curtis; Diversified Consultants, Inc.; Donald C. Anton; Appellees, Dotto Enterprises, Inc.; Aurora L. Anton; Walter P. Klein, Appellee, Anthony D. Daniele; Vining-Sparks Securities, Inc.; U.S.A. Continental Investors Group, Inc. The POLICE RETIREMENT SYSTEM OF ST. LOUIS, a Missouri Statutory Pension Trust, Appellant, v. MIDWEST INVESTMENT ADVISORY SERVICE, INC.; James F. Bridges; Appellees, The Guaranty Trust Co. of Missouri; Angelo J. Parato; James A. Finch, III; I.M. Simon & Co., Inc.; Thomas D. Pixley; E.F. Hutton & Co., Inc.; Paine, Webber, Jackson & Curtis; Appellees, Diversified Consultants, Inc.; Donald C. Anton; Dotto Enterprises, Inc.; Aurora L. Anton; Walter P. Klein; Anthony D. Daniele; Vining-Sparks Securities, Inc.; U.S.A. Continental Investors Group, Inc. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Andrew F. Puzder, St. Louis, Mo., argued, for appellant; Charles Alan Seigel and Doreen D. Dodson, on brief.
Donald C. Anton, pro se.
Alan E. Popkin, and Byron E. Francis, St. Louis, Mo., argued, for appellee; Michael H. Wetmore, Alan N. Zvibleman, Steven P. Sanders, Jordan B. Cherrick, Andrew B. Mayfield, Michael D. O'Keefe, Gerard K. Sandweg, Jr. and Kenton E. Knickmeyer, on briefs.
Before ARNOLD and FAGG, Circuit Judges, and RE, * Chief Judge.
This consolidated appeal is about the Police Retirement System of St. Louis and the companies chosen to manage that pension fund's assets. The System grew increasingly dissatisfied with some of its investment advisors. Eventually it fired them, and then sued. The complaint alleged a multi-level scheme to defraud the System. An intervening prosecution of some of the named defendants for crimes arising out of their role in managing the System's investments set the stage for the civil trial on review here. A mid-trial settlement between the System and several defendants further narrowed the proceedings. After over two months of proof, the jury (with three exceptions) returned verdicts for the remaining defendants. Almost every party appeals some aspect of the proceedings below. We affirm the judgment of the District Court. 1
The Police Retirement System of St. Louis is a creature of Missouri law, Mo.Rev.Stat. Secs. 86.200-86.366 (1971 & Supp.1991). By 1982 it had amassed approximately $150,000,000 from the contributions of St. Louis police officers and the City of St. Louis. The System, through its Board of Trustees, decided to change the way it managed its investments: in addition to retaining the services of one J.A. Glynn, who had advised the fund for nearly forty years, two new investment advisors, Midwest Investment Advisory Services, Inc., and Guaranty Trust Company of Missouri, were selected. The System divided its assets into three portions, one for each advisor. Each new advisor, in turn, dealt with several brokers as it managed its share of the System's investments. Midwest mainly used three brokers: I.M. Simon & Co., Inc., E.F. Hutton & Company, Inc., and Paine-Webber, Inc. (then known as Paine, Webber, Jackson & Curtis, Inc.). Guaranty mainly used two brokers: Vining-Sparks Securities, Inc., and U.S.A. Continental, Inc. J.A. Glynn handled all of his transactions for the System through his own brokers.
In their complaint and at trial the System alleged the following scheme. Midwest and Guaranty were chosen by the System's Board of Trustees at the urging of Walter Klein, a policeman and the Board's chairman, and Donald Anton, a prominent St. Louis lawyer. The price of Klein's and Anton's support was personal profit. Midwest and Guaranty then supposedly selected brokers for the System's transactions based on the benefits to themselves, and to Anton and Klein, rather than on the System's interests. From E.F. Hutton and PaineWebber, Midwest received what are called "soft dollar" benefits--research information about various financial markets. Sending the System's transactions to those brokers, at excessive commission rates, is allegedly how Midwest paid for those benefits. The relationship between Midwest and the broker I.M. Simon was slightly different. Simon also allegedly charged the System excess commissions. A large part of those commissions was then, the System claimed, funnelled back to Midwest and chairman Klein, through two consulting firms owned and controlled by Anton, Dotto Industries, Inc., and Diversified Consultants, Inc., also known as Dicon. Anthony Daniele, a trustee elected after the selection of Midwest and Guaranty, also supposedly benefited from these kickbacks in return for his support of the scheme. In addition, Midwest allegedly increased its investment management fees by "churning" its part of the System's portfolio, that is, by ordering excessive transactions. The particulars of how Guaranty supposedly worked with its brokers to defraud the System are not, in light of its settlement during trial, material to these appeals.
Midwest told a different story. It denied any untoward relationship with Anton, Klein, and Daniele. And it defended its relationships with the various brokers, arguing that their commission rates had not been excessive, and that the market information gleaned from the various soft-dollar agreements was indispensable in advising the System. Further, Midwest claimed to have notified the System's Board of Trustees of these arrangements, and denied churning the System's account. Anton, Klein, and Daniele attempted a defense too. Their efforts were hampered, however, by their prior convictions, which were admitted into evidence, for conspiring to defraud the System.
The jury sorted out the evidence and explanations this way. It considered six counts of the System's twenty-one-count amended complaint. 2 On count fourteen, alleging a breach of fiduciary duty by Daniele, the former trustee, the jury found that there was no breach. (The System does not appeal this part of the judgment.) The jury's verdict was mixed on count sixteen, which alleged breaches of fiduciary duty by Midwest and I.M. Simon, and a conspiracy to violate those duties involving, in addition to I.M. Simon, James F. Bridges (Midwest's president), Klein, Anton, and Dicon. The jury found that Midwest had not violated its fiduciary duty. It also found, however, that I.M. Simon had violated its duty to the System. In addition, it found that I.M. Simon, Anton, Dicon, and Klein had conspired in furtherance of a breach of duty by Midwest. Counts seventeen and eighteen alleged further breaches of fiduciary duty, and conspiracies to that end, involving the two brokers, E.F. Hutton and PaineWebber. The jury found for all the defendants in each of these counts. The remaining two counts, twenty and twenty-one, alleged breaches of Midwest's contract with the System, and conspiracies to accomplish those breaches involving Midwest, Bridges, I.M. Simon, Anton, Dicon, Klein, and E.F. Hutton. The jury again absolved Midwest and Bridges, and E.F. Hutton, of any liability. On count twenty, however, it found that I.M. Simon, Anton, Dicon, and Klein had indeed conspired to help Midwest break its contract with the System.
These appeals followed the entry of judgment and various post-trial motions. No. 89-3028EM is the main appeal. In that case the System alleges that various trial errors led the jury to a confused and mistaken verdict. Midwest and Bridges were found to have done nothing wrong, while the evidence of their liability was allegedly overwhelming, and while some of their associates were found liable. And the amount of damages awarded against those found to have harmed the System, approximately $120,000, was nowhere near the approximately $11 million it alleged and says it proved. No. 89-2770EM is a cross-appeal. In that case Anton presses a variety of alleged trial errors, most prominently the preclusive effect the District Court gave to the facts he admitted in his guilty plea. No. 90-1743EM is the System's appeal of the District Court's decision to award costs to various defendants.
The first set of questions on appeal clusters around the prior criminal prosecutions of some of the defendants in these cases. Several defendants either admitted, or were found guilty of, crimes. Donald Anton pleaded guilty to conspiracy to set in motion a scheme to defraud the System. He admitted using his influence with the System's investment advisors to steer transactions to I.M. Simon, and sharing in the excess commissions I.M. Simon charged. Joint Appendix Vol. 5, pp. 1800-1830. Walter Klein pleaded guilty to the same crime. Anthony Daniele decided to take his case to a jury. He was convicted of mail fraud, extortion, and conspiracy; his conviction has been affirmed by this...
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