Rosemann v. Sigillito

• Decision Date: 09 July 2013
• Docket Number: No. 10–CV–1165–LRR.,10–CV–1165–LRR.
• Parties: Phillip L. ROSEMANN et al., Plaintiffs, v. Martin T. SIGILLITO et al., Defendants.
• Court: U.S. District Court — Eastern District of Missouri

956 F.Supp.2d 1082

Phillip L. ROSEMANN et al., Plaintiffs,
v.
Martin T. SIGILLITO et al., Defendants.

No. 10–CV–1165–LRR.

United States District Court,
E.D. Missouri,
Eastern Division.

July 9, 2013.

[956 F.Supp.2d 1085]

James A. Vitullo, Law Offices of James Vitullo, Austintown, OH, Sebastian Rucci, Law Office of Sebastian Rucci, Long Beach, CA, for Plaintiffs.

Thomas J. Plunkert, Leritz and Plunkert, P.C., St. Louis, MO, for Defendants.

ORDER
LINDA R. READE, Chief Judge.

TABLE OF CONTENTS

I.	INTRODUCTION	1086
II.	RELEVANT PROCEDURAL HISTORY	1086

A.	Enterprise's Motion	1087
B.	Plaintiffs' Motion	1087

III.	SUBJECT MATTER JURISDICTION	1087
IV.	SUMMARY JUDGMENT STANDARD	1088
V.	FACTUAL BACKGROUND	1088

A.	Parties	1088
B.	Alleged “Ponzi Scheme”	1089
C.	Enterprise's Role in the Scheme	1089
D.	Collapse of the BLP	1093

VI.
ANALYSIS
1093

A.
Count I
1093

1.	Violation of RICO, 18 U.S.C. § 1962(c)	1094
2.	Existence of an enterprise	1094

a.	Applicable law	1094
b.	Application	1095

3.
Conduct in association with the enterprise
1096

a.	Applicable law	1096
b.	Application	1099

4.
Summary
1101

B.
Count II
1101

1.	Conspiracy to violate RICO, 18 U.S.C. § 1962(d)	1101
2.	Application	1102

C.
Count III
1102

1.
Applicable law
1103

a.	Causation requirement	1103
b.	General contract interpretation principles	1104

2.
Enterprise's Motion
1104

a.	Parties' arguments	1104
b.	Application	1105

3.
Plaintiffs' Motion
1107

a.	Parties' arguments	1107
b.	Application	1108

D.
Count IV
1109

1.	Applicable law	1109
2.	Enterprise's Motion	1110

a.	Parties' arguments	1110
b.	Application	1111

3.
Plaintiffs' Motion
1112

a.	Parties' arguments	1112
b.	Application	1112

VII.
CONCLUSION
1113

[956 F.Supp.2d 1086]

I. INTRODUCTION

The matters before the court are Defendant Enterprise Bank & Trust's (“Enterprise”) “Motion for Summary Judgment” (“Enterprise's Motion”) (docket no. 614) and Plaintiffs' “Motion for Partial Summary Judgment on Counts [III] and [IV] against Enterprise” (“Plaintiffs' Motion”) (docket no. 626).

II. RELEVANT PROCEDURAL HISTORY

On October 11, 2012, seventy ¹ Plaintiffs filed a Corrected Third Amended Complaint (“Complaint”) (docket no. 456) against thirteen Defendants,² including Enterprise. Relevant to the Motions are Counts I through IV against Enterprise. Count I of the Complaint alleges that Enterprise violated the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1962(c). Count II of the Complaint alleges that Enterprise conspired to violate RICO, 18 U.S.C. § 1962(c), in violation of 18 U.S.C. § 1962(d). Count III of the Complaint alleges breach of contract against Enterprise. Count IV of the Complaint alleges negligence against Enterprise. All Plaintiffs assert Counts I and II against Enterprise. However, only forty-one Plaintiffs maintained a self-directed Individual Retirement Account (“IRA”) with Enterprise. Thus, only forty-one of the Plaintiffs assert Counts III and IV against Enterprise.³See Stipulation of

[956 F.Supp.2d 1087]

Plaintiffs on Counts III and IV (docket no. 532).

A. Enterprise's Motion

On April 21, 2013, Enterprise filed Enterprise's Motion. On that same date, Enterprise filed a Brief in Support of Enterprise's Motion (docket no. 615) and a Statement of Material Facts in Support of Enterprise's Motion. On May 13, 2013, Plaintiffs filed a Resistance to Enterprise's Motion (docket no. 649).⁴ Plaintiffs did not file a response to the Statement of Material Facts in Support of Enterprise's Motion and did not file a statement of material facts to support their Resistance to Enterprise's Motion.⁵ Rather, Plaintiffs state in the Resistance to Enterprise's Motion that “there is a genuine dispute with conclusory facts [five] through [eight].” Resistance to Enterprise's Motion at 7. Plaintiffs do not contest any other facts.

B. Plaintiffs' Motion

On April 24, 2013, Plaintiffs filed Plaintiffs' Motion. That same date, Plaintiffs filed a Statement of Material Facts in Support of Plaintiffs' Motion (docket no. 627). On April 25, 2013, Plaintiffs filed a Brief in Support of Plaintiffs' Motion (docket no. 628).⁶ On May 15, 2013, Enterprise filed a Resistance to Plaintiffs' Motion. On that same date, Enterprise filed a Response to Plaintiffs' Statement of Material Facts in Support of Plaintiffs' Motion (docket no. 651) and an Additional Statement of Material Facts in Response to Plaintiffs' Motion (docket no. 652). On May 16, 2013, Plaintiffs filed a Reply to Enterprise's Resistance to Plaintiffs' Motion (docket no. 653).

III. SUBJECT MATTER JURISDICTION

The court has federal question jurisdiction over Plaintiffs' claims against Enterprise

[956 F.Supp.2d 1088]

in Counts I and II, which arise under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1962(c)–1962(d). See28 U.S.C. § 1331 (“The district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States.”).

The court has supplemental jurisdiction over Plaintiffs' state-law breach of contract claim in Count III and negligence claim in Count IV because they are so related to the claims over which the court has federal question jurisdiction that they form part of the same case or controversy. See28 U.S.C. § 1367(a) (“[T]he district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy....”). In other words, “[t]he federal-law claims and state-law claims in the case derive from a common nucleus of operative fact and are such that [a plaintiff] would ordinarily be expected to try them all in one judicial proceeding.” Kan. Pub. Emps. Ret. Sys. v. Reimer & Koger Assocs., Inc., 77 F.3d 1063, 1067 (8th Cir.1996) (alteration in original) (quoting Carnegie–Mellon Univ. v. Cohill, 484 U.S. 343, 349, 108 S.Ct. 614, 98 L.Ed.2d 720 (1988)) (internal quotation marks omitted).

IV. SUMMARY JUDGMENT STANDARD

Summary judgment is appropriate “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). “A dispute is genuine if the evidence is such that it could cause a reasonable jury to return a verdict for either party; a fact is material if its resolution affects the outcome of the case.” Amini v. City of Minneapolis, 643 F.3d 1068, 1074 (8th Cir.2011) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 252, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)), cert. denied,––– U.S. ––––, 132 S.Ct. 1144, 181 L.Ed.2d 1018 (2012). “[S]elf-serving allegations and denials are insufficient to create a genuine issue of material fact.” Anuforo v. Comm'r, 614 F.3d 799, 807 (8th Cir.2010). “To survive a motion for summary judgment, the nonmoving party must substantiate [its] allegations with sufficient probative evidence [that] would permit a finding in [its] favor based on more than mere speculation, conjecture, or fantasy.” Barber v. C1 Truck Driver Training, LLC, 656 F.3d 782, 801 (8th Cir.2011) (second alteration in original) (quoting Putman v. Unity Health Sys., 348 F.3d 732, 733–34 (8th Cir.2003)) (internal quotation marks omitted). The court must view the record in the light most favorable to the nonmoving party and afford it all reasonable inferences. See Schmidt v. Des Moines Pub. Sch., 655 F.3d 811, 819 (8th Cir.2011).

V. FACTUAL BACKGROUND

Viewing the evidence in the light most favorable to the nonmoving parties and affording them all reasonable inferences, the uncontested material facts are as follows.

A. Parties

The Complaint names thirteen Defendants: (1) Martin T. Sigillito, an attorney, American Anglican Bishop and Missouri citizen who did business as Martin T. Sigillito & Associates, Ltd. (“Martin Sigillito & Associates”); (2) Paul Vogel, an accountant, attorney, former President and CEO of Enterprise Bank & Trust's Trust Department and Missouri citizen; (3) Enterprise Bank & Trust, a Missouri corporation and subsidiary of Enterprise Financial Services Corp.; (4) James Scott Brown, an attorney and Kansas citizen who did business as the British American Group, Inc., a Kansas corporation; (5) Metis Insaat ve Ticaret A.S. (“Metis”), a Turkish company;

[956 F.Supp.2d 1089]

(6) Swinburne & Jackson, a law firm with offices in England; (7) Metis Holding A.S., a Turkish company and principal shareholder of Metis Insaat ve Ticaret A.S.; (8) Veysel Sever, a resident of Turkey and shareholder and officer of Metis Insaat ve Ticaret A.S.; (9) Ayse Sever, a resident of Turkey and shareholder and officer of Metis Insaat ve Ticaret A.S.; (10) Fatma Nese Özdemir, a resident of Turkey and shareholder and officer of Metis Insaat ve Ticaret A.S.; (11) Levent Rifki Sever, a resident of Turkey and shareholder and officer of Metis Insaat ve Ticaret A.S.; (12) Bedri Sever, a resident of Turkey and shareholder and officer of Metis Insaat ve Ticaret A.S.; and (13) M & M Financial Investors, LLC, an Ohio limited liability company.

The only remaining Defendants in this action are Enterprise and Sigillito.⁷ Derek Smith, a nonparty in this action, is a real estate developer in England. Smith owns Distinctive Properties (UK) Limited (“Distinctive Properties”), which is also a nonparty. Counts 1 and 2 are brought by sixty-nine individuals who are citizens of various states and one company, Braithwaite Consulting Limited (“Braithwaite”). Counts 3 and 4 are brought by forty-one individuals who maintained a self-directed IRA with Enterprise. Plaintiffs are not a certified class and each Plaintiff is bringing the claims against Enterprise in his or her individual capacity.

B. Alleged “Ponzi Scheme”

Sigillito and others organized and operated a fraudulent loan program called the British Lending Program (“BLP”) in which individuals, including Plaintiffs, loaned money to Smith and Distinctive Properties for purported land purchases in England. Sigillito and others attracted lenders “with written marketing materials which misrepresented the quality of the investment and the...