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Rosemann v. St. Louis Bank

United States Court of Appeals, Eighth Circuit

May 24, 2017

Phil Rosemann; Judith Smith; Suzanne Glisson; Clark Amos; Odis Hash; Mark Bernstein; Marie Merlotti; Robert Givens; Preston Amos; Clayton Givens; Jill Wittenmyer; Mary O'Sullivan, individually and as Trustee of the Thomas E. O'Sullivan Revocable Living Trust and Neil J. O'Sullivan Trust and Executor of Neil J. O'Sullivan Estate; Donna Hogshooter; Thomas Currier; Rudolf Ouwens; Barbara O'Hanlon, as successor co-trustee of the Angelene Block Revocable Trust and as trustee of the Barbara J. O'Hanlon Living Trust; Roy Currier; Richard Aguilar; Billy Harrison; Sheila Mays; Elaine Reed; Cindy Merlotti; Buddy Quessenberry; Dorothy Smith; Arlene Sincoski; Jerry Cronkite; Northwest Properties (1973), LTD; Marjorie Bernstein; Stanley Kuhlo; Lewis Bernstein; Brad Werner, trustee of the JH Werner Revocable Trust; Tom Bertani; Daryll Currier; Jim Neill; Lorena Messenger; Homer Smith; Henry Barthel; Casey Cook; Mark Merlotti; Donna Bertani; John Holl; Gary Smith; Charles Davis; Stanko Matayo; Carol McCarthy, as successor co-trustee of the Angelene Block Revocable Trust & co-trustee of the Carol A. McCarthy Living Trust; Delores Cook; William McLemore; Wanda Lavender; Carol Green; Lewis Vollmar; Daren Mays; William Wantling; Ben Miller; Kent Sturhahn; Sharon Cobb; Gifford ordan; Mark Cunningham; Bonita Cobb; Melba Aguilar; Thomas Barnes; Dorothy Ziegler; Leonard Roman; John Shahan; Bob Moore; Julia Barthel; Audrey Holl; Barbara Jordan; Eric Wittenmyer Plaintiffs - Appellants
St. Louis Bank Defendant-Appellee

          Submitted: December 14, 2016

          Before WOLLMAN, SMITH, [1] and BENTON, Circuit Judges.

          SMITH, Circuit Judge.

         This case continues to chronicle the legal consequences flowing from Martin Sigillito's Ponzi scheme known as the British Lending Program (BLP). See, e.g., Aguilar v. PNC Bank, N.A., 853 F.3d 390 (8th Cir. 2017); United States v. Sigillito, 759 F.3d 913 (8th Cir. 2014). Sigillito maintained commercial accounts at defendant St. Louis Bank during the Ponzi scheme's life. In this case, the plaintiffs, seeking to recoup losses due to the BLP, sued St. Louis Bank, alleging (1) violations of Missouri's Uniform Fiduciaries Law (UFL); (2) aiding and abetting the breach of Sigillito's fiduciary duties; (3) conspiracy to breach Sigillito's fiduciary duties; and (4) conspiracy to violate the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1962(d). The district court[2] granted summary judgment to St. Louis Bank, and the plaintiffs appeal. We affirm.

         I. Background A. Martin Sigillito and the BLP

         Sigillito, an attorney located in St. Louis, Missouri, and J. Scott Brown, an attorney in Kansas, formed the BLP in the late 1990s. They formed the BLP to serve as "an investment program to facilitate loans to an English law firm . . . to fund 'black lung' claims brought on behalf of English coal miners. In approximately 2000 or 2001, the BLP began marketing loans for purported investments in real estate developments in England." Aguilar, 853 F.3d at 395. Sigillito operated the BLP from 1999 to 2010. During the Ponzi scheme, Sigillito directed investors to deposit money for BLP loans into his Interest on Lawyers Trust Account (IOLTA). But instead of sending the funds to England for investment, Sigillito fraudulently drew the funds out of his IOLTA account for distribution to himself and others. In 2012, "Sigillito was convicted of multiple counts of wire fraud, mail fraud, conspiracy to commit wire and mail fraud, and money laundering because of his involvement in" the BLP Ponzi scheme. Sigillito, 759 F.3d at 920.

         B. St. Louis Bank's Role

         From 2006 to 2010, Sigillito was a commercial customer at St. Louis Bank. Sigillito's accounts at St. Louis Bank included (1) the Martin T. Sigillito & Associates, Ltd. business account ("Business Account"); (2) the Martin T. Sigillito & Associates, Ltd. business checking account ("Checking Account"); and (3) the Martin T. Sigillito Attorney At Law IOLTA. In addition, Sigillito had lines of credit at St. Louis Bank ("4316 Loan" and "4382 Loan" (collectively, "MTSA Loans")) and a Certificate of Deposit Account Registry Service (CDARS).

         Except for plaintiff Phil Rosemann's money, Sigillito deposited most of the BLP investors' funds into the IOLTA and immediately transferred them into another account. Investors authorized Sigillito to manage their investments for them. Rosemann signed four handwritten authorizations directing St. Louis Bank to follow instructions from Sigillito on specific transactions.

         Primarily, two St. Louis Bank employees interacted with Sigillito during the relevant time period: Craig Hingle and Julie Ohlms. Hingle served as a commercial loan officer at St. Louis Bank from 2005 until 2012. Previously, Hingle worked as a loan officer at Allegiant Bank and knew Sigillito as a trust customer. While at Allegiant Bank, Hingle set up a commercial line of credit for Sigillito and hired Sigillito to create a trust for Hingle's children. During his employment with St. Louis Bank, Hingle helped to secure and service lines of credit for Sigillito and Rosemann. Hingle was generally aware of the BLP and knew that Sigililto was involved with it.

         Ohlms was the Assistant Vice President of Treasury Management at St. Louis Bank from 2006 to 2010. She worked with Sigillito and Elizabeth Stajduhar, his executive assistant, on various financial transactions, such as wire transfers, transfers between accounts, and check cashing. Stajduhar was responsible for reconciling Sigillito's IOLTA and reviewing monthly account statements. Stajduhar frequently contacted Ohlms to transfer money. At some point, Stajduhar began stealing money out of Sigillito's accounts by writing checks payable to "Elizabeth Perigen, " her maiden name. Sigillito discovered Stajduhar's defalcation and asked Ohlms to tell him if any checks payable to "Elizabeth Perigen" were cashed. Ohlms called Sigillito's office, spoke to Stajduhar, and asked her to tell Sigillito that these checks were being cashed. Ohlms did not know that Stajduhar was Perigen. Stajduhar never explained anything about the BLP to Ohlms and "did not want [Ohlms] to know what was going on." Nothing in Stajduhar's "conversation with [Ohlms] suggested that [Ohlms] knew that [Stajduhar] or somebody was stealing-just that Sigillito wanted to know when these checks were cashed."

         The only discussions that Stajduhar and Sigillito had with Ohlms "concerned issues with the accounts, and at no time did the discussions concern[] the BLP." At no time did Stajduhar or Sigillito provide St. Louis Bank with any fee deduction authorities, loan agreements, spreadsheets, reconciliation of the IOLTA, or other BLP transaction records, nor did they provide documentation showing where investors thought their money was going or the intent behind deposits. Stajduhar "never explained to anyone at [St. Louis] Bank what was going on with the BLP borrowers . . ., and no one explained these to [St. Louis] Bank when checks were issued with various names in the memo lines." Neither Stajduhar nor Sigillito informed St. Louis Bank that Sigillito was only engaged in work for the BLP, as opposed to other types of legal work. And they never spoke with St. Louis Bank about how BLP investments were distributed. In May 2010, Stajduhar believed that Sigillito was defrauding his investors; however, she never informed St. Louis Bank.

         Sigillito engaged in numerous transactions at St. Louis Bank, beginning in 2006. The most relevant transactions occurred in 2008, 2009, and 2010, as thoroughly detailed in the district court's order. See Rosemann v. St. Louis Bank, No. 14-CV-983-LRR, Doc. 152 at 8-15 (E.D. Mo. Nov. 17, 2015).

         C. Procedural History

         Sixty-eight plaintiffs filed suit against St. Louis Bank, alleging (1) violation of Missouri's UFL ("Count I"); (2) aiding and abetting breach of fiduciary duty ("Count II"); (3) conspiracy to breach fiduciary duty ("Count III"); and (4) conspiracy to violate RICO ("Count IV"). St. Louis Bank moved for summary judgment on all claims, and the plaintiffs moved for partial summary judgment on Count I. In a 60-page opinion, the district court granted St. Louis Bank's motion for summary judgment on all claims and denied the plaintiffs' motion for partial summary judgment on Count I.

         II. Discussion

         The plaintiffs appeal the district court's grant of summary judgment to St. Louis Bank on all claims and the district court's denial of summary judgment to them on Count I (UFL claim).

         "We review de novo a district court's grant or denial of summary judgment." Aguilar, 853 F.3d at 401 (quoting Myers v. Lutsen Mountains Corp., 587 F.3d 891, 892 (8th Cir. 2009)).

         A. Count I-UFL Claim

         The plaintiffs argue that the district court erred in granting summary judgment to St. Louis Bank on Count I for violations of the UFL. They contend that the undisputed evidence establishes that (1) Sigillito was a fiduciary of the IOLTA; (2) Sigillito breached his fiduciary duty; and (3) St. Louis Bank (a) had actual knowledge of Sigillito's breach, (b) acted in bad faith, or (c) knew that Sigillito received a benefit from the breach of his fiduciary duty.

         We recently set forth the state of the law regarding Missouri's UFL in Aguilar. See 853 F.3d at 405-06. As in Aguilar, the UFL provision at issue provides:

If a check or other bill of exchange is drawn by a fiduciary as such, or in the name of his principal by a fiduciary empowered to draw such instrument in the name of his principal, the payee is not bound to inquire whether the fiduciary is committing a breach of his obligation as fiduciary in drawing or delivering the instrument, and is not chargeable with notice that the fiduciary is committing a breach of his obligation as fiduciary unless he takes the instrument with actual knowledge of such breach or with knowledge of such facts that this action in taking the instrument amounts to bad faith. If, however, such instrument is payable to a personal creditor of the fiduciary and delivered to the creditor in payment of or as security for a personal debt of the fiduciary to the actual knowledge of the creditor, or is drawn and delivered in any transaction known by the payee ...

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