## United States Court of Appeals FOR THE EIGHTH CIRCUIT

___________ No. 10-3067

___________ Badger Capital, LLC; S. Bradley * Daniels, *
* Plaintiffs - Appellants, *
* Jay Garnett; Karen Garnett, *
* Plaintiffs, *
* GWE Holdings, LLC; Terry Harper; * LR Holdings, LLC; David Mix; Powell * Properties, LLC; James Renner; Scott * Smith; Arthur Starr; James Stilwell; * Laura Stilwell, *
* Plaintiffs - Appellants, * * Appeal from the United States v. * District Court for the * Western District of Arkansas. Chambers Bank of North Arkansas; * Chamber Bancshares, Inc.; John * Russell Meeks, Individually and as * agent for Chambers Bank or North * Arkansas and as agent for Northark * Holdings LLC; John Doe, I, * Individually and as agent for Chambers * Bank or North Arkansas; John Doe, II, * Individually and as agent for Chambers * Bank or North Arkansas; Growth * Group, LLC, Florida; Growth Group, * LLC, Arkansas; Edward Davis, * Individually and as agent for Growth *-2- Group, LLC - Florida and Growth * Group, LLC - Arkansas; Rick Hancock, * Individually and as agent for Growth * Group, LLC - Florida, Growth Group, * LLC - Arkansas and Strategic Builders, * LLC; Morgan Hooker, Individually and * as agent for Growth Group, * LLC - Florida, Growth Group, * LLC - Arkansas and Strategic Builders, * LLC; Mitchell Massey, Individually * and as agent for Growth Group, * LLC - Florida, Growth Group, * LLC - Arkansas, Strategic Builders, * LLC and Growth Ventures, LLC; * Growth Ventures, LLC; Scott McLain, * Individually and as agent for Growth * Ventures, LLC and McLain Group, * LLC; Dirk Van Veen, Individually and * as agent for Growth Ventures, LLC and * Zen Holdings, LLC; Heritage Coast * Properties, LLC; Bruce Millender, * Individually and as agent for Heritage * Coast Properties, LLC; Strategic * Builders, LLC; McLain Group, LLC; * Watering Place, LLC; J. Y. Massey, * Individually and as agent for Watering * Place, LLC; Zon Holdings, LLC, *
* Defendants - Appellees, *
* Northark Holdings, LLC, *
* Defendant. *1 The Honorable Joan N. Ericksen, United States District Judge for the District of Minnesota, sitting by designation.

2The Honorable Jimm Larry Hendren, Chie f Judge, United States District Court for the Western District of Arkansas.
-3- ___________ Submitted: June 14, 2011 Filed: August 16, 2011

___________ Before BYE and MELLOY, Circuit Judges, and ERICKSEN, 1 District Judge.

___________ MELLOY, Circuit Judge. Badger Capital, LLC and its co-plaintiffs (collectively refe rred to as "the Investors") sued Chambers Bank of No rth Arkansas ("the Bank") for fraudulent concealment. Specifically, the Investors cl aimed that the Bank failed to disclose to the Investors certain information regarding a real-estate development. The district
court 2granted summary judgment in favor of the Bank, finding as a threshold matter that the Bank owed no duty of disclosure to the Investors. The Investors appeal, and we affirm.

I. Background

In May of 2005, Mitchell Massey planned a real-estate development in Eastpoint, Florida. Massey's plan included the construction and sa le of 220 residential units on waterfront real estate. The de velopment—called Eastpoint Landing—was to offer its residents swimming pools and boat access "in a new urban atmosphere." In furtherance of this plan, Massey formed Eastpoint Redevelopmen t, LLC ("Eastpoint")-4- on June 21, 2005, to purchase a roughly seve nteen-acre parcel of real estate from Heritage Coast Properties, LLC ("Heritage") for $19 million.
Eastpoint financed the $19 million purchase by obtaining a $14 million loan from the Bank and by raising capital th rough a private offering to "accredited investors." Eastpoint so licited investors by using a private offering memorandum ("POM"). Under the terms of the POM, Eastpoint offere d 10,000 shares of ownership in Eastpoint at a price of $1,000 per share. The offering began on June 20, 2005, and was scheduled to close either when the 10,000 shares were sold or on June 30, 2005. The POM gave Eastpoint the authority to extend the offering period to December 31, 2005, but, under the POM, the offering was "not conditioned upon the sale of any aggregate minimum number of [shares]."

So long as Eastpoint's offering period remained open, the POM provided that "investors' funds [would] be placed in an interest bearing escrow account at Chambers Bank of North Arkansas (the 'Escrow Agen t')." Once the offering period closed, "the subscription funds [were to] be transferre d by the Escrow Agent to a bank account as designated by [Eastpoint]." The POM's glossary also defined "Escrow Agent" as the Bank. Additionally, a subscription agreem ent—which the Investors had to complete before purchasing interests in Eastpoint pur suant to the POM—indicated that the Bank would hold the Investors' funds in escrow until Eastpoint either accepted or rejected the subscription. Despite these identifica tions of the Bank as escrow agent in the POM and subscription agreement, however, the Investors had no verbal or written communication with the Bank regarding their investment in Eastpoint.

As it turned out, one of the investors in Eastpoint was also an employee of the Bank. The employee, J.R. Meeks, recei ved 1,000 shares in Eastpoint on June 27, 2005—one day before Eastpoint closed its real-estate transaction with Heritage and its loan with the Bank on June 28. In ex change for the owners hip interest, Meeks executed a $2 million personal guarantee on Eastpoint's loan from the Bank.3 The parties dispute what Meeks's official employment position was at the Bank, but there is no dispute that Meeks had an intimate connection with the Bank. He was the nephew of the Bank's president, his mother and two of his aunts sat on the Bank's board of directors, and he was a 0.0002% owner in the Bank.

4 The Investors also sued the Bank for civil conspiracy , usurious practices, and other equitable relief. The Bank moved for summary judgment on these claims, but the district court denied the Bank's motion. These claims were tried to a jury, and the jury rendered a verdict in fa vor of the Bank. The Invest ors do not appeal any aspect of the disposition of these claims.
-5- In addition to investing in Eastpoint, Meeks helped Eastpoint acquire its loan from the Bank. 3 Specifically, Meeks was briefed regarding Eastpoint's financial condition prior to Eastpoint's acquisition of the loan, Meeks co mmunicated with the lawyers who prepared the POM, Meeks wa s present at the June 28 closing, and, Massey stated that Meeks "had worked hard to get the deal done." However, on August 1, 2005—approximately one month after receiving his 1,000 shares of ownership in Eastpoint—Meeks essentially returned the shares in exchange for Massey taking responsibility for M eeks's $2 million personal guarantee.

In the months following Eastpoint's real -estate acquisition, real-estate values in Florida "plummeted." (At least part of th e decline appears to have been attributable to damage from multiple hurricanes that stru ck the Gulf Coast area within sixty days following Eastpoint's real-estate purchase. ) Consequently, Eastpoint had difficulty paying its loan from the Bank. Ultimately, the Bank foreclosed on its mortgage in January of 2009. The Bank purchased the prope rty at the foreclosure sale, and, during 2009, the real estate was appraised at a value of $1.69 million.

On June 19, 2008, the Investors filed an action against the Bank, Massey, Meeks, and a number of other entities and individuals who participated in the Eastpoint development. Among other claims, 4 the Investors sued the Bank for5 It is unclear from the Investors' br iefs whether this list of allegedly undisclosed facts is exhaustive. Whether this list is exhaustive is irrelevant, however, because we agree with the district court th at there is insuffici ent evidence indicating that the Bank owed a duty to disclose to the Investors information regarding their participation in Eastpoint's private offering.
-6- fraudulent concealment. On January 4, 2010, the Bank moved for summary judgment. The district court granted the Bank's motion, and now the Investors appeal.

II. Discussion

The Investors argue that the district court erred in granting summary judgment in favor of the Bank on their fraudulent-con cealment claim. The Investors argue that they have established a triable issue of fact regarding whether the Bank had a duty to disclose to the Investors certain inform ation regarding Eastpoint's real-estate transaction. According to the Investors, the Bank had a duty to disclose that (1) Eastpoint's private offering had not raised$10 million at the time the offering closed, (2) Eastpoint obtained a loan in addition to its loan from the Bank to pay for some of the costs to close the real-estate purchase with Heritage, and (3) Meeks and an entity operated by Massey's father r eceived equity interests in Eastpoint without making any cash investment. 5

The district court granted summary judg ment in favor of the Bank because it found that the Investors had failed to create a triable issue of fact on the threshold issue regarding whether the Bank owed a duty to disclose to the Investors information regarding their participation in Eastpoint's private offering. We review this decision de novo, "reading the record in a light most favorable to the [Investors] and giving the [Investors] the benefit of all reasonable in ferences drawn from th e record." Chivers v. Wal-Mart Stores, Inc. , 641 F.3d 927, 932 (8th Cir. 2011) (internal quotation marks omitted). "We will affirm if no genuine issu e of material fact exists and the [Bank] is entitled to judgment as a matter of law." Id. (internal quotation marks omitted).-7- Under Arkansas law, "when a failure to speak is th e equivalent of fraudulent concealment," "the law imposes a duty to speak rather than remain silent." Ward v. Worthen Bank & Trust Co., N.A. , 681 S.W.2d 365, 368 (Ark. 1984). "Such a duty of disclosure arises only where special circumstances exist." Union Nat'l Bank of Little Rock v. Farmers Bank , 786 F.2d 881, 887 (8th Cir. 1986) (citing Berkeley Pump Co. v. Reed-Joseph Land Co. , 653 S.W.2d 128 (Ark. 1983)). Such "special circumstances" may exist between parties th at have a "confidential relationship" when "one party knows another is relying on mi sinformation to his detriment." Ward , 681 S.W.2d at 368. The Investors argue that they have produced su fficient evidence that "special circumstances" existe d in this case which obligatedthe Bank to disclose the above-referenced facts to the Investors. See Berkeley Pump , 653 S.W.2d at 134 (holding that there must be sufficient ev idence regarding the ex istence of "special circumstances" before the jury may consider the issue).

The Investors first argue that ther e is sufficient evidence that special circumstances exist because th ere is sufficient evidence for a jury to find that the Bank served as an escrow agent for Eastpoint's private offering. Arkansas courts have noted that an escrow agent is in a confidentia l relationship with the other parties to an escrow agreement. Collins v. Heitman , 284 S.W.2d 628, 633 (Ark. 1955). In this case, however, the district court found there to be insufficient ev idence that the Bank was an escrow agent because, even though the POM and subscription agreement indicated that Eastpoint and the Investors intended the Bank to be an escrow agent, there was "no evidence" indicating that the Bank had entered into an oral or written escrow agreement or had seenthe POM or subscription agreement prior to closing the loan with Eastpoint on June 28, 2005. The Investors do not appear to dispute these findings. The Investors argue, however, thatthere was evidence indicating that the Bank had implicitly agreed to serve as an escrow agent.

Arkansas courts have noted that even if an entity does not expressly agree to serve as an escrow agent, the entity may be held liable as an escrow agent if the entity6 Although Meeks's attorney stated at oral argument that Meeks testified at trial that he signed the subscription agreement, Meeks's attorney is not representing the Bank, this trial took place after the districtcourt's grant of summary judgment on the Investors' fraudulent-concealment claim, a nd the Investors failed to make the trial transcript part of the record. Even if the Investors had produced a copy of the subscription agreement signed by Meeks, howev er, we decline to address whether this evidence would create a triable issue of f act regarding whether the Bank agreed to serve as an escrow agent, especially b ecause it is unclear whether Meeks allegedly signed a copy of the agreement before or af ter the Investors wired their funds to the Bank.
-8- has implicitly "agreed to act as such and is aware of the term s under which the deposit has been made and the conditions upon which it may be released ." Lasley v. Bank of Ne. Ark. , 627 S.W.2d 261, 263 (Ark. Ct. App. 1982) (emphasis added); see also Rosell v. Pulaski Bank & Trust Co. , 582 S.W.2d 1, 3 (Ark. 1979) (finding that a bank was estopped from denying that it was holding particular property in escrow because the bank was holding the property in a file th at also included a document that appeared to provide for the bank serving as an escr ow agent for the property); Smith v. Dixon , 386 S.W.2d 244, 246 (Ark. 1965) (finding sufficient evidence that a bank agreed to serve as an escrow agent b ecause a contract designating the bank as an escrow agent had been delivered to the bank and the bank had "knowledge of the escrow provisions" while holding the property that allegedly was in escrow). Thus, even though there is no evidence indicating that th e Bank expressly agreed to serve as an escrow agent, the Bank could be held liabl e as an escrow agent if the Bank saw the POM or subscription agreement prior to r eceiving the Investors' subscription funds.

In this case, however, ther e is insufficient evidence indicating that the Bank saw the POM or subscription agreement prior to receiving the Investors' subscription funds. As noted above, the Investors do notdispute the districtcourt's finding that there is no evidence that th e Bank viewed these documents until June 28, 2005. (The Investors argue that Meeks signed a subscription agreement and thus bound the Bank to serve as an escrow agent, but the Investors have not included a copy of this signed agreement in the record. 6 ) Meanwhile, the Investors alleged in their complaint that-9- they wired their funds to the Bank from June 23 to June 28. Thus, the undisputed facts indicate that by the time the Bank ma y have seen the POM or subscription agreement, the Investors had already wired th eir funds to the Bank. Consequently, the evidence does not indicate that the Bank was aware of the terms of the POM or subscription agreement when the deposits we re made. Based on th e record, therefore, we agree with the district court that ther e was insufficient eviden ce for a jury to find that the Bank served as an es crow agent for Eastpoint's private offering. Accordingly, there was insufficient evidence to find thatthe Bank had a confidential relationship with the Investors that would have given rise to the special circumstances creating disclosure duties for the Bank under Arkansas law.

The Investors argue that even if the Bank and the Investors were not in a confidential relationship, special circumstan ces still existed in th is case which created disclosure duties for the Bank. Arkansas courts have noted that a confidential relationship may not be necessary to creat e special circumstances for purposes of a fraudulent-concealment claim. SeeHoliday Inn Franchising, Inc. v. Hotel Assocs., Inc. , No. CA 10-21, 2011 WL 657222 (Ark. Ct . App. Feb. 23, 2011) ("The duty to disclose is not limited to confidential or fi duciary relationships . . . ."). However, Arkansas courts appear to require the existe nce of some type of relationship or contact between the parties before they conclude that special circ umstances exist. See, e.g. , Camp v. First Fed. Sav. & Loan , 671 S.W.2d 213, 215–16 (Ark. Ct. App. 1984) (finding that a bank owed a duty of disclosureto a purchaser of real estate because, even though the bank was not the seller, th ere was evidence that the bank had "made its offices available for the conclusion of th e transaction" and th at the purchaser had "relied considerably upon the integrity of [the bank] throughout the negotiations"); Holiday Inn , 2011 WL 657222 (finding that a hotel franchisor owed a duty of disclosure to a hotel franchisee because the parties had maintained a decades-long, personal relationship in which they woul d regularly communicate regarding potential business opportunities).-10- In this case, the Investors point to a number of facts that they claim establish the presence of special circumstances. None of these facts, however , establish that the Bank had any type of contact or relationship with the Investors. Indeed, the Investors concede that they had no oral or written communication with the Bank. Without additional evidence indicating that the Ba nk and the Investors had some type of relationship or contact with the Investors, we agree with the district court that there is insufficient evidence to find that special circumstances existed in this case.

III. Conclusion

In sum, the district court properly found there to be insufficient evidence of special circumstances that ob ligated the Bank to make di sclosures to the Investors regarding their investment in Eastpoint. Ther efore, we affirm the district court's grant of summary judgment in favor of the Ba nk on the Investors' fraudulent-concealment claim.

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