# U ni te d S ta te s Co ur t of A pp ea ls

For the Eig hth Circu it

__ __ __ __ __ __ __ __ __ __ __ __ __ _

No. 1 5- 35 14

__ __ __ __ __ __ __ __ __ __ __ __ __ _

Ri ch ard Agu il ar; Mel ba Agu il ar; Alb ert Carr el l; Sh aro n C ob b; Cla y to n Gi ve ns ; Lin da Giv en s; Sta nl ey

Kuh lo ; Gi na Mas tra nt on ia ; Ph il Ro se m an n; Lore n W in te rh of

; M ary W in te rh of

; Lewi s Vo ll m ar; Bri an W affl e; W il li am W an tl in g; Brad W ern er, i n a rep res en ta ti ve cap aci ty; Eric Wit te nm ey er; Ji ll W it te nm ey er; Dor ot hy Zeigl er; Cla rk Am os ; Pr es to n Am os ; Th om as Barn es ; Hen ry Bart he l;

Ju li a Bar th el ; No rth wes t Pr op ert ie s (1 97 3) , LTD; Tom Bert an i; Don na Bert an i;
Kris ty Bov a; Davi d C al dwe ll ; Bo ni ta Co bb ; Ca se y Co ok ; Del or es Co ok ; J erry Cro nk it e; Mark Cu nn in gh am ; Dar y ll Cu rri er; Ro y Cu rri er; Sam

Cu rri er; Tho m as Cu rri er; Ch arl es Davi s; Ch arl ot te Garret t; W il li am Gay lo r; R ob ert Giv en s; Su zan ne Gli ss on ; Ca ro l Gre en ; Ra nd al l Har p; Aub rey Harp ; Bi ll y

Harri so n; Odi s Has h; Don na Hog sh oo te r; J oh n Ho ll an d; Aud rey Hol la nd ; Do na ld Horn er; Dori s Howar d; Barb ara J or da n; Giffo rd Jo rd an ; Dav id Kell og g; Mary Kello gg ; St an ko

Mat ay o; Daren Mays; Sh ei la Mays; Will ia m McC al la ; Ca ro l M cCa rth y , in

rep res en ta ti ve cap aci ty; Barb ara O’Hanl on , in rep res en ta ti ve cap aci ty; W il li am McLem or e; Mark Merl ot ti ; Ci nd y Merl ot ti ; M ari e Me rlo tt i; Lore na Mes se ng er; Ben Mi ll er; Bo b M oo re; Ji m Neil l; Mary O’ Su ll iv an , in di vi du al ly and in a

rep res en ta ti ve cap aci ty; Ru do lf Ou wen s; Ro na ld Pas to r; Wil li am Ph il li ps ; Ca ro l
Ph il li ps ; Bu dd y

Ques se nb erry; Elai ne Reed ; Dar ren Ro ge rs ; Deb bi e Ro ge rs ; Be tt y Ro ll on ; Leo na rd Ro m an ; Dav id Sch ul tz ; J oh n S ha ha n; Arle ne Sin co sk i; Hom er Sm it h; Doro th y

Sm it h; Gary

Sm it h; Ju di th Sm it h; Kent Stu rh ah n; Arle ne Ste ve ns ; W in st on Vin es ; Ba rb ara Vo ll m ar

ll ll ll ll ll ll ll ll ll ll l Pla in ti

ff s - Ap pe ll an ts

v.

PNC Ba nk , N.A.

ll ll ll ll ll ll ll ll ll ll l Defe nd

an t - Ap pe ll ee

__ __ __ __ __ __
App eal fro m

Uni te d S ta te s Di st ric t Co ur t fo r th e Eas te rn Dis tri ct of M is so ur i - St . Lou is

__ __ __ __ __ __Su bm it te d: Sep te m be r 21 , 20 16
Fil ed : Fe br ua ry

7, 2 01 7

__ __ __ __ __ __

Befo re RI LEY, Chi ef J ud ge , MURPHY an d S MITH, Ci rcu it Ju dg es

.

__ __ __ __ __ __

SMI TH, Circ ui t J ud ge

.

Nin et y -two pl ai nt iff

s fil ed su it ag ai ns t PNC B a n k

, N.A. (PNC), al le gi ng , 1

am on g ot he r th in gs , (1 ) v i o l a ti on s of Mi ss ou ri’s Uni fo rm Fi du ci ari es Law (UFL);
(2 ) a i d i n g a n d ab et ti ng th e br each of fid uc ia ry du ti es ; (3 ) co ns pi racy to br each

fid uc ia ry du ti es ; an d (4 ) co ns pi racy to vi ol at e th e Rac ke te er In flu en ced an d Co rru pt
Org an iz at io ns Act (RIC O), 18 U.S

. C

. § 1 9 6 2( d)

. The se cl ai m s ari se fro m th e pl ai nt iff s’ in ve st m en t in th e Bri ti sh Len di ng Pro gr am ( B LP ) —a Po nz i sc he m e

op erat ed by Mar ti n Si gi ll it o. The pl ai nt iff s al le ge th at PNC’s pr ed eces so r, All eg ia nt

Ban k (“ All eg ia nt ”), co ns p i r e d wit h an d ai de d Si gi ll it o in hi s sc he m e to de frau d

in ve st or s whe n it se rv ed as t he cu st od ia n fo r th e se lf- di rect ed in di vi du al ret ire m en t

acco un ts (IRAs ) of th os e who ch os e to in ve st in th e BLP at it s in cep ti on

. The di st ric t

co ur t gra nt ed su m

m ary jud gm en t t o P NC, an d t he pl ai nt iff s ap pe al . W e aff

irm. 2

I. Bac kg ro un d

A. Mar ti n S ig il li to an d t he BLP

In t h e la te 19 90 s, Si gi ll it o, an at to rn ey lo cat ed in St

. Lou is

, Mi ss ou ri, an d

J. Sc ot t Br own , an a tt or ne y in Kan sa s, form ed th e BLP. The y or ga ni zed th e BLP as

an in ve st m en t pr og ram to faci li ta te lo an s to an Eng li sh la w fir m , Mar k Gil be rt Mo rs e

The am en de d co m

pl ai nt is br ou gh t by 91 in di vi du al s who are ci ti zen s of 1

va rio us st at es an d on e co m pa ny, Nor th wes t Pro pe rti es (1 97 3) Ltd

. The pl ai nt iff s are

no t a cert ifi ed cl as s. One pl ai nt iff

, Mar y O’ S u l l i v a n, br in gs he r cl ai m s in he r in di vi du al cap aci ty an d in he r rep res en ta ti ve c ap aci ty. Pl ai nt iff s Caro l McC art hy,
Barb ara O’ Han lo n, an d Brad W ern er br in g th ei r cl ai m s so le ly in th ei r rep res en ta ti ve

cap aci ti es

.

The Hon or ab le Lin da R. Rea de

, Ch ie f Ju dg e, Uni te d St at es Dis tri ct Co ur t fo r 2

th e Nor th ern Dis tri ct of I owa , si tt in g b y de si gn at io n.

-2

-(MGM ), to fu nd “ bl ac k lu ng ” cl ai m s br ou gh t on be ha lf of Eng li sh co al m in ers

. In

ap pr ox im at e l y 2 0 0 0 or 20 01

, th e BLP be ga n m ark et in g lo an s fo r pu rp or te d

in ve st m en ts in real est at e d ev el op m en ts in Eng la nd

.

Si gi ll it o so li ci te d Am eri can in ve st or s fo r th e BLP an d of te n in st ru ct ed th em to

ho ld th e lo an no te s i n s el f-d ire ct ed IRAs . He di rect ed th em to fun d t he in ve st m en ts by de po si ti ng m on ey in to hi s In te res t on Lawy ers T rust Acco un t (IOLTA). Acco rd in g

to th e u ns wor n d ecl arat io n o f Jo hn Mo rs e, an MGM pa rtn er, MGM “ ag reed

. . . f or

each £1 00 [th at MGM] bo rro wed [,] on e th ird (3 2%) wou ld be d e d u c t e d at so ur ce

rep res en ti ng [Si gi ll it o’s an d Bro wn’s] co m m is si on .” MGM ag reed to “ pa y in te res t of

25 % on th e fu ll £1 00 of th e lo an .” Alt ho ug h Mo rs e co ns id ered “ th e fees an d

in te res t

. . . a hu ge am ou nt ,” he fo un d th e de al ag reea bl e be cau se MGM “ ne ed ed th e

m on ey [,] an d th e rewar ds [MGM ] st oo d to reap in th e UK wou ld ou twei gh th e co st s.”

B. All eg ia nt ’s Rol e Beg in ni ng in Ju ly of 20 00

, All eg ia nt

, a Mi ss ou ri tru st co m pa ny wit h ba nk in g

po wers , se rv ed as th e c u s t o d i a n f o r th e se lf- di rect ed IRAs of th os e who ch os e to

in ve st in th e BLP. All eg ia nt was th e fir st ba nk to se rv e as th e IRA cu st od ia n fo r BLP 3

lo an s; th e m ajor it y of

th os e lo an s wen t t o fu nd MGM lo an s. “ Nin e of th e Pl ai nt iff

s,

Ri ch ard Agu il ar, Dav id Cal dwe ll

, Don al d Hor ne r, Ru do lf Ouwen s, W il li am Ph il li ps , C a r o l P h i ll ip s, Leo na rd Ro m an , Le wis Vol lm ar an d Lin da Giv en s, were cu st om ers

of All eg ia nt Ban k an d he ld sel f-d ire ct ed in di vi du al ret ire m en t acco un ts (‘IRAs’) a t

All eg ia nt Ban k (‘Cu st om er Pl ai nt iff s’).” 4

Alt ho ug h All eg ia nt act ed as th e cu st od ia n fo r t h e s e acco un ts

, th e Cu st om er

Pl ai nt iff s were “ so le ly res po ns ib le fo r de ci di ng ho w to i n v e s t th e m on ey in th es e

IRAs

, an d

. . . [th e Cu st om er] Pl ai nt iff s m ad e al l in ve st m en t de ci si on s in th es e IRAs

In 20 04 , Al l e g i a n t was acq ui red by Nat io na l Ci ty Ban k, whi ch , i n tu rn , wa s 3

acq ui red by PNC in 20 08

.

Th e rem ai nd er of th e pl ai nt iff s “ were no t cu st om ers of PNC Ban k or it s 4

pr ed eces so rs (‘Non- Cu st om er Pl ai nt iff s’).”

-3

-m ai nt ai ne d at All eg ia nt Ban k’s tru st de pa rtment.” Each Cu st om er Pl ai nt iff si gn ed an

IRA Si m pl ifi er, wh ic h p ro vi de d, i n re le va nt pa rt:

8.0 3 Rep re se nt at io ns an d Resp on si bi li ti es : You rep res en t an d warra nt

to u s th at an y in fo rm at io n y ou ha ve gi ve n or wil l gi ve us wit h

res pe ct to th is Agr eem en t is co m pl et e an d accu rat e. Fu rth er, y ou

ag ree th at an y di rect io ns y ou gi ve u s, or act io n y ou ta ke wil l be

pr op er un de r th is Agr eem en t an d th at we are en ti tl ed to rel y up on

an y su ch i n f

o r mat io n or di rect io ns

. W e sh al l no t be re sp on si bl e fo r lo ss es of an

y ki nd th at may re su lt fr om yo ur di re ct io ns to us

or yo ur ac ti on s o r f

ai lu re s t o a ct

an d y ou ag re e to re imb ur se us fo r a ny lo ss we may in cu r as a r es ul t o f s uc h d ir ect io ns , act io ns

or fa il ur es to ac t

.

** *

8.0 5 In ves tmen t o

f Amo un ts in th e IRA :

a. Dir e c ti on of In ve st m en t— You ha ve ex cl us iv e

res po ns ib il it y fo r an d co nt ro l ov er th e in ve st m en t of
th e as se ts of y ou r IRA. You sh al l di r e c t al l
in ve st m en t tra ns act io ns , in cl ud in g earn in gs an d th e

pr oc eed s fro m se cu rit ie s sa le s. You r se le ct io n of
in ve st m en ts

, ho wev er, sh al l be li m it ed to pu bl ic ly

tra de d se cu rit ie s, m

ut ua l f un ds

, m on ey m ark et
in st ru m en ts an d o th er in ve st m en ts th at are ob ta in ab le by us an d th at we are cap ab le of ho ld in g in th e o rd in ary co ur se of o ur bu si ne ss

.

** *

b. Our In ve st m en t Po wers an d Dut ie s— W e sh al l ha ve

no di sc ret io n to di rect an y in ve st m en t in y ou r IRA.

W e as su m e n o res po ns ib il it y fo r ren de rin g in ve st m en t ad vi ce wit h res pe ct to y ou r IRA, no r wil l

we of fer an y op in io n or jud gm en t to y ou on m at te rs

co nc ern in g th e va lu e or su it ab il it y of an y in ve st m en t

or pr op o s e d in ve st m en t fo r y ou r IRA. W e sh al l

ex erci s e th e vo ti ng rig ht s an d ot he r sh areh ol de r

-4

-rig ht s wit h res pe ct to se cu rit ie s in y ou r IRA bu t on ly
in acco rd an ce wi th th e in st ru ct io ns y ou gi ve to us

.

c. Dele ga ti on of In ve st m en t Res po ns ib il it y —We m ay , bu t ar e no t req ui red to , per m it y ou to de le ga te y ou r in ve st m en t res po ns ib il it y fo r y ou r IRA to an ot he r

pa rty acce pt ab le to us by gi vi ng writ te n no ti ce of

y ou r d e l e ga ti on in a fo rm at we pr es cri be

. W e sh al l
fo ll ow th e di rect io n of an y s u c h p art y who is

pr op erl y ap po in te d an d we sh al l be un de r no du ty to

rev ie w or qu es ti on , no r sh al l we be res po ns ib le fo r,

a n y of th at pa rty’ s di rect io ns , act io ns or fai lu res t o

act

.

(Em ph as is ad de d i n p art .) (Bo ld om it te d.)

A f t e r de ci di ng to in ve st in th e BLP, each Cu st om er Pl ai nt iff op en ed a se lfdi rect ed IRA at All eg ia nt at Si gi ll it o’s di rect io n (o r at th e d i r e c t io n of on e of hi s

as so ci at es ). “ Each of th e All eg ia nt Cu st om er Pl ai nt iff s de si gn at ed Mar ti n Si gi ll it o as

hi s or he r au th or iz ed rep res en ta ti ve in co nn ect io n wit h th ei r se lf -d ir ec te d IR

A ac co un t

at All eg ia nt Ban k” an d “ di rect ed All eg ia nt Ban k to acce pt di rect io n fro m Si gi ll it o on [th ei r] be ha lf.” All eg ia nt ’s tru st de pa rtment m ai nt ai ne d th e se lf- di rec t e d IRAs

. All eg ia nt em

pl oyees in th e tru st de pa rtment kn ew th at Si g i ll it o rep res en te d th e

Cu st om er Pl ai nt iff

s an d h ad au th or it y

to act on th ei r be ha lf.

Dur in g 20 00 an d 20 01

, Si gi ll it o he ld an IOLTA an d ot he r ret ai l ba nk in g

acco un ts at All eg ia nt

. “ Si gi ll it o’s IOLTA was a de m an d de po si t acco un t m ai nt ai ne d

on th e ret ai l ba nk in g si de of All eg ia nt wit h hi s ot he r bu si ne ss acco un ts

. ” “Sig il li to

owe d fid uc ia ry du ti es to pe rs on s who se m on ey was de po si te d in to [h is ] IOLTA

. . . .”

The fu nd s he ld in a Mi ss ou ri IOLTA acco un t m ay co nt ai n a va rie ty of fu nd s,

in cl ud in g i nd iv id ua l cl ie nt fu nd s, m ul ti pl e cl ie nt fu nd s, an d at to rn ey ’s fees

. In th e 5

In 20 01 , Mis so ur i Su pr em e Co ur t Ru le 4– 1.1 5 s ta te d, i n re le va nt pa rt: 5

(a) A la wy er sh al l ho ld pr op ert y of cl ie nt s or th ird pe rs on s th at is
i n a la wy er’s po ss es si on in co nn ect io n wit h a rep res en ta ti on se pa ra t e

-5

-f

r o m th e la wy er’s own pr op ert y

. Fu nd s sh al l be ke pt in a se p a r a t e

acco un t m ai nt ai ne d in th e st at e whe re th e la wy er’s of fic e is si tu at ed

, or el se whe re wit h th e co ns en t of th e cl ie nt or th ird pe rs on

. Oth er pr op ert y sh al l be id en ti fie d as su ch an d ap pr op ria te ly sa feg ua rd ed

. Co m pl et e

reco rd s of su ch acco un t fu nd s an d o t h e r p r op ert y sh al l be ke pt by th e la wy er an d sh al l be pr es erv ed fo r a pe rio d of fiv e y ears aft er te rm in at io n of th e rep res en ta ti on

.

(b ) Upo n rece iv in g fu nd s or ot he r pr op ert y in whi ch a cl ie nt or th ird pe rs on ha s an in te res t, a la wy er sh al l pr om pt ly no ti fy th e cl ie nt or th ird pe rs on

. Exc ep t as st at ed in th is Ru le or ot he rwis e pe rm it te d by la w

or by ag reem en t wit h th e cl ie nt

, a la wy er sh al l pr om pt ly de li ve r to th e cl ie nt or th ird pe rs on an y fu nd s or ot he r pr op ert y th at th e cl ie nt or th ird

pe rs on is en ti tl ed to rece iv e an d, up on req ue st by th e cl ie nt or th ird

pe rs on , sh al l pr om

pt ly ren de r a fu ll acco un ti ng reg ard in g su ch pr op ert y

.

(c) W he n in th e co ur se of rep res en ta ti on a la wy er is in po ss es si on of pr op ert y in whi ch bo th th e la wy er an d an ot he r pe rs on cl ai m in te res ts

, th e la wy er sha ll ke ep th e p ro pe rty se pa rat e un ti l th ere is an acco un ti ng

an d se ve ran ce of th ei r in te r e s ts

. If a di sp ut e ari se s co nc ern in g th ei r

res pe ct iv e in te res ts

, th e la wy er sh al l ke ep th e po rti on in di sp ut e se pa rat e

un ti l t he di sp ut e is res ol ve d.

(d ) Exc ep t as pr ov id ed in pa rag rap h (e), a la wy er or la w fir m sh al l

es ta bl is h and m ai nt ai n on e or m or e in te res t-b eari ng in su red de po si to ry

acco un ts in to wh i c h s h al l be de po si te d al l fu nd s of cl ie nt s or th ird

pe rs on s th at are no m in al in am ou nt or are ex pe ct ed to be he ld fo r a sh or t

pe rio d o f ti m e . . . .

In 20 01 , th e co m

m en ta ry to Ru le 4– 1.1 5 e xp la in ed th at

[l]awy ers of

te n rece iv e fu nd s fro m th ird pa rti es fro m whi ch th e la wy er’s
fee wil l be pa id

. If th ere is ris k th at th e cl i e n t may d i ve rt th e fu nd s wit ho ut pa y in g th e fee, th e la wye r is no t re qu ir ed to re mit th e po rt io n fr om wh ic h th e fe e is to be pa id

. Howev er, a la wy er m ay no t ho ld fu nd s

to co erce a cl ie nt in to acce pt i n g t he la wy er’s co nt en ti on

. Th e di sp ut ed

po rt io n of th e fu nd

s s h o u ld be kep t in tr us t an d th e la wy er sh ou ld

su gg es t m ean s fo r pr om

pt res ol ut io n of th e di sp ut e, su ch as arb it rat io n. The un di sp ut ed po rti on of t he fun ds sh al l b e p ro m pt ly dis tri bu te d.

-6

-pr es en t ca se , it is un di sp ut ed th at

[i]n 20 01

, All eg ia nt Ban k’s un de rs ta nd in g of th e na tu re an d fu nc ti on of

IOLTA acco un ts was th at an IOLTA acco un t is an in te res t on la wy er’s

t ru st acco un t an d th at fu nd s in an IOLTA acco un t can be fu n d s f o r a n in di vi du al cli en t, m

ul ti pl e cl ie nt s, an d cou ld in cl ud e fu nd s th at be lo ng

t o th e la wye r , th em se lv es , an d th at es se nt ia ll y , IOLTA acco un t s w e r e

acco un ts whi ch were u se d t o fa ci li ta te th e o pe rat io n o f a l aw pr act ic e.

(Em ph as es ad de d.)

All eg ia nt ’s ret ai l an d tru st de pa rtments op erat ed se pa rat el y an d us ed se pa rat e

co m pu te r syste m s. Em

pl oyees in th e tru st de pa rtment lac ke d rou ti ne acce ss to ba nk

acco un ts in th e ret a i l de pa rtment, in cl ud in g IOLTAs. All eg ia nt ha d no syste m to

co m pa re tra ns act io ns be twee n th e two de pa rtment s

. B u t

, up on pr op er req ue st

,

em pl oyees i n t he tru st de pa rtment c ou ld rev ie w ret ai l b an ki ng act iv it ie s.

1. Th e W oma ck Tr an sa ct io n

On Sep te m

be r 26

, 20 01

, Si gi ll it o i n f o r med All eg ia nt th at hi s cl ie nt

, Bet ty

W om ack

, wan te d to li qu id at e he r se lf- di rect ed IRA. The on ly as se t in W om ack ’s IRA

was an un m at ur ed BLP lo a n n o t e w i th a face va lu e of $5 6,7 15 .19

. W om ack ha d 6

pr ev io us ly de si gn at ed Si gi ll it o as he r au th o riz ed rep res en ta ti ve to co nd uc t

tra ns act io ns on he r acco un t. On Sep te m be r 28

, 20 01

, All eg ia nt ’s tru st de pa rtment

rece iv ed a ch eck fro m Si gi ll it o dr awn on hi s IOLTA an d da te d Sep te m be r 27

, 20 01

. 7

The c h e c k was in th e am ou nt of $5 6,7 15 .19 . I t in cl ud ed th e no ta ti on “ W om ack ” in

th e m em o li ne

. All eg ia nt ’s tru st de pa rtment un de rs to od fro m Si gi ll it o’s pr io r

(Em ph as es ad de d.)

S p eci fic al ly, th e no te was an MGM lo an no te

. MGM lo an s were th e lo an s 6

m ad e to fun d “ bl ack lu ng ” li ti ga ti on in Eng la nd

.

The en ve lo pe th at th e ch eck was d el iv ered in ha d a ha nd writ te n n ot e st at in g 7

th at Ro bi n F it zg ib bo ns , an Alle gi an t tru st of fic er, recei ve d th e ch eck on Sep te m be r 28 , 20 01

.

-7

-co m

m un ic at io n th at th is ch eck was fo r th e pu rch as e of W om ack ’s un m at ur ed BLP

lo an no te

. The reco rd do es no t refl ect th e so ur ce of th e I O LT A fu nd s th at Si gi ll it o

us ed to fu nd th e pu rch as e. On Octo be r 9, 20 01

, All eg ia nt ’s tru st de pa rtment cred it ed

W om ack ’s IRA wit h $5 6,7 15 .19

. On Octo be r 19

, 20 01

, All eg ia nt ’s tru st de pa rtment

di sb ur se d t he same am ou nt by w ire tra ns fer t o Wom ack at h er re qu es t.

2. All eg ia nt ’s Resi

gn at io n a s C

us to di an

In Sep te m

be r 20 01

, All eg ia nt was in th e pr oc es s of acq ui rin g So ut hs id e Ban k
(“ So ut hs id e”). Matt he w Fi nn , So ut hs id e’s he ad of tru st op erat io ns , be ga n at te nd in g

All eg ia nt tru st co m

m it te e m eet in gs d u r i n g th is ti m e. On Sep te m be r 28

, 20 01

, So ut hs id e m erg ed wit h All eg ia nt

, an d Fi nn be cam e All eg ia nt ’s c h i e f i n ve st m en t

of fic er.

In Fi nn ’s un swo rn de cl arat io n, m uc h of whi ch he ha s si nc e reca nt ed

, he st at es 8

th at he “ at te nd ed a m eet in g i n e arl y Octo be r 20 01 whe re Mar ti n S ig il li to ex pl ai ne d

th e pa rti cu la rs of th e in ve st m en ts he was pr om ot in g cal le d th e [BLP].” Afte r he ari ng

Si gi ll it o’s pr es en ta ti on , Fi nn co nc lu de d “ [f]rom [h is ] pr io r ex pe rie nc e ru nn in g a tru st

de pa rtment, t he hi gh in te res t ra te s, l en di ng to a fo rei gn law fi rm , and in ve st m en t i n

fo rei gn real est at e d ev el op m en t wer e red fla gs .”

Sh or tl y aft er t he m eet in g wit h Si gi ll it o, Fi nn co nt act ed MGM an d se t up a

m eet in g wit h MGM p a r t n e r s Jo hn Mar k an d Jo hn Mo rs e. At th at m eet in g on

a p p r ox im at el y Octo be r 4, 20 01

, Mar k an d Mo rs e “ de sc rib ed ho w th ey bo rro we d

m on ey fro m th e St at es to fu nd li ti ga ti on ha vi ng so m et hi ng to do wit h co al m in ers an d

In a su bs eq ue nt de po si ti on , Fi nn reca nt ed la rg e po rti on s of hi s d e c l arat io n. 8

Fi nn al so su bm it te d a swo rn affi da vi t th at reject s th e pl ai nt iff s’ in te rp ret at io n of his
de cl arat io n. Befo re th e di st ric t co ur t, PN C ur ge d th e co ur t to di sr eg ard Fi nn ’s

un swo rn de cl arat io n be cau se of th e ci rcu m st an ces un de r whi ch th e pl ai nt iff s obt ai ne d
i t

. The co ur t, ho wev er, “ co ns id er[e d] th e de cl arat io n in de te rm in in g whe th e r a

ge nu in e is su e of m at eri al fact ex is ts wit h res pe ct to PNC Ban k’s m an ife st at io n of an

ag reem en t to pa rti ci pa te .” W e, li ke th e di st ric t co ur t, wil l co ns id e r F in n’s un swo rn de cl arat io n a nd affo rd th e p la in ti ffs th e b en efi t o f it

.

-8

-th e Bri ti sh go ve rn m en t. The y st at ed th at th ei r cl ai ms were go in g well bu t sa id th ey

were no t in a po si ti on to rep ay th e lo an s at th at ti m e.” The y al so to ld Fi nn “ th at 32 % 9

of th e lo an s were ta ke n as fees an d th at th is was pa id to Mr. Si gi ll it o an d hi s

as so ci at es di rect ly from

th e lo an fun ds .” Fi nn th ou gh t “ th at fees of 3 2% o f th e lo an

am ou nt se em ed ou tra ge ou s.” Hav in g rev ie wed th e lo an ag reem en ts

, Fi nn “ kn ew th at

up -fro nt fees were no t di sc lo se d in th e lo an ag reem en t s .” Fi nn co ns id ered th e

in fo rm at io n ab ou t th e fees to be “ an ot he r red fla g in a se rie s of red fla gs .” Mo r s e

reca ll s Fi nn st at in g “ th at he was co nc ern ed ab ou t va rio us as pe ct s whi ch ha d co m e to

hi s at te nt io n ab ou t th e lo an s, [th e] fact th at th ey were lo an s ou t of th e juri sd ic ti on , th e

hi gh in te res t rat es , an d h e a ls o qu es ti on ed [MGM ’s] ab il it y to rep ay th e lo an s.”

Acco rd in g to Mo rs e, Fi nn “ in di cat ed th at he th ou gh t t he lo an s d id no t co m pl y wit h

reg ul at or y req ui rem en ts .” At th e m eet in g’s co nc lu si on , Mar k an d Mo rs e ag reed to an

“ ur ge nt m eet in g” at Al le gi an t’s h ead qu art ers

.

The ne xt da y , Octo be r 5, 20 01

, th e MGM pa rtn ers m et wit h Ri ch ard Mar ko w,

pr es id en t of All eg ia nt ’s tru st de pa rtment, Fi nn , an d Si gi ll it o to “ di sc us s[ ] th e ba nk ’s

co nc ern s ab ou t t he se in ve st m en ts .” Dur in g t ha t m eet in g, a “ ge nt le m an fro m Arth ur

And ers on was co nc ern ed ab ou t co m pl ia nc e[,] an d [Mo rs e] reca ll [ed ] a m en ti on of

reg ul at or y au th or it ie s ha vi ng to be in fo rm ed .” At th e m eet in g’s co nc lu si on , M o rs e

fo un d it “ cl ear

. . . th at All eg ia nt Ban k wou ld no t be l e n d i n g [ MGM] an y fu rth er

m on ey ” an d t h a t All eg ia nt “ wou ld no t su pp or t an y th in g go in g fu rth er in res pe ct of

th e cu rren t lo an s. Th e r e w as co nc ern ex pr es se d ab ou t th e le ga li ty of th e lo an s in

ge ne ral a s t h e y ap pe ared to be lo an s of Trus t m on ie s ou t of th e juri sd ic ti on an d

br e a c h i ng th e m an da to ry li m it of a on e[-]y ear te rm .” Mo rs e no te d th at Si gi ll it o

di sa gr eed wit h th is as se ss m en t. Acco rd in g to Mo r s e , All eg ia nt ex pl ai ne d “ th at th e

Ban k co ul d no t be in vo lv ed in lo an s th at co ul d be in br each of va rio us la ws or

reg ul at io ns .”

Ult im at el y , MGM d i d rep ay al l am ou nt s bo rro wed fro m th e Cu st om er 9

Pl ai nt iff s, al on g wit h th e in te res t an d fees

. Bu t, at th e ti m e of th e Octo be r 4, 20 01

m eet in g, M GM h ad no t yet rep ai d t he lo an s.

-9

-“ Fo ll owi ng th e m eet in g, [All eg ia nt ] lo ok ed in to Mar ti n Si gi ll it o’s acco un ts at

All eg ia nt Ban k an d di sc ov ered ch eck s de po si te d in to th e acco un ts sh owi ng pa y m en t

of up -fro nt fees wit h na m es on th e IRAs at th e ba nk .” Acco rd in g to Fi nn , “ th e act iv it y

in Mar ti n Si gi ll it o’s acco un ts sh owe d th at he us ed in ve st or m on ey de po si te d in to hi s [IOLTA] to pa y

in te res t an d p rin ci pa l o n s om e o f th e lo an s.”

Fi nn fo un d th e Wo mac k tra ns act io n “ su sp ic io us ” be cau se of th e “ m ean s by

whi ch th e Wom ack lo an was re pa id .” Fin n “ kn ew th at th e b or ro wers ha d n ot pa id 1 0

[Wom ack ] ba ck be cau se th e la wy ers fro m Eng la nd to ld [h im ] th at th ey ha d no t rep ai d

an y of t he lo an s.” S ig il li to ’s us e o f in ve st or m on ey fro m Sig il li to ’s acco un t “ to pa y

ot he r in ve st or s co nf

irmed [Fi nn ’s] su sp ic io ns th at [All eg ia nt ] di d no t wan t to cu st od y

th es e lo an s.”

Finn re co m

m en de d to Arth ur W ei ss , All eg ia nt ’s Exe cu ti ve Vice Pres id en t, th at

All eg ia nt no lo ng er a c t as a cu st od ia n fo r se lf- di rect ed IRAs co nt ai ni ng BLP

in ve st m en ts . Acco rd in g t o F in n, th ey were “ in ap pr op ria te in ve st m en ts to be he ld in

an IRA” be cau se th ey were “ hi gh ly il li qu id

, . . . no t m ark et ab le th ro ug h an y of th e

acce pt ed ch an ne ls of in ve st m en ts

, [an d] th ey ha d hi gh fees .” The acco un t ag reem en ts

in cl ud ed a pr ov is io n th at pe rm it te d Alle gi an t to res ig n as cu st od ia n with or wit ho ut

cau se ; it st at ed : “ Eit he r pa rty may te rm in at e th is Agr eem en t at an y ti m e by gi vi ng

writ te n no ti ce to th e ot he r. W e can res ig n as Cu st od ia n at an y ti m e effe ct iv e 30 da y s

aft er we m ai l wri tt en no ti ce o f ou r res ig na ti on to y ou .”

On Octo be r 26 , 2 00 1, All eg ia nt in fo rm ed S ig il li to th at it wou ld be res ig ni ng

as th e IRA cu st od ia n. The reaf te r, “ Si gi ll it o and his as so ci at es req ue st ed th at All eg ia nt

no t co m m un ic at e th e res ig na ti on de ci si on di rect ly to th e acco un t own ers , bu t rat he r,

al lo w Si gi ll it o ’s t e a m to do it .” Si gi ll it o an d hi s as so ci at es as ke d th at All eg ia nt

The pl ai nt iff

s po in t ou t th at de sp it e ha vi ng rece iv ed Si gi ll it o’s ch eck fro m th e 1 0

W om ack lo an on Sep te m be r 28

, 20 01

, All eg ia nt Ban k di d no t cred it W o mac k’s

acco un t u nt il Octo be r 9, 2 00 1, af te r th e m eet in g wi th MGM.

-1 0-“ si m

pl y ad vi se acco un t own ers th at Mi ll en ni um Trus t wo ul d b e th e n ew cu st od ia n,

rat he r th an off

er ac co un t o wne rs an op po rtu ni ty to n am e an ot he r cu st od ia n.”

On Nov em

be r 13

, 20 01

, All eg i a n t s e n t a l e t t e r to th e Cu st om er Pl ai nt iff s,

in fo rm in g th em of it s res ig na ti on as IRA cu st od ia n, effe ct iv e Decem be r 14

, 20 01

. It

sa id :

It is All eg ia nt Ban k’s un de rs ta nd in g th at arra ng em en ts ha ve be en m ad e

to tra ns fer cu st od ia ns hi p of [th e] se lf- di rect ed IRA[s ] to M i ll en ni um Trus t Co m

pa ny, LLC. Pl e as e no te th at it is im po rta nt th at y ou act

pr om pt ly to co m

pl et e th e tr an sf

er . .

. to an ot he r fin an ci al org an iz at io n of y o u r ch oi ce. If th e tra ns fer of y ou r IRA is no t co m pl et ed by

Decem be r 14

, 20 01

, it m ay res ul t in th e di st r i b ut io n of as se ts as

pe rm it te d b y y ou r IRA Agr eem en t, whi ch co ul d ha ve ad ve rs e ta x

co ns eq ue nc es to y ou

.

Each of th e Cu st om er Pl ai nt iff s ei th er el e c t e d to ha ve hi s or he r acco un t

tra ns ferr ed to Mi ll en ni um Trus t Co m pa ny, LLC, or re l ie d up on Si gi ll it o an d hi s

as so ci at es to tra ns fer hi s or he r IRA. “ Non e of [th e]

. . . Cu st om er Pl ai nt iff s rece iv ed

an y ad vi ce fro m All eg ia nt Ban k in m ak in g th e de ci si on to tr a n s f e r t h ei r IRA fro m

All eg ia nt to Mi ll en ni um .”

3. End of th e BLP

The BLP co nt in ue d fo r m or e th an ei gh t y ears aft er All eg ia nt res ig ne d as

cu st od ia n in 20 01

. Bet ween 20 01 an d 20 10

, a se rie s of ot he r fin an ci al in st it u t i on s

se rv ed as cu st od ia n fo r BLP lo an s he ld in se lf- di rect ed IRA acco un ts an d m ai nt ai ne d

Si gi ll it o’s bu si ne ss acco un ts an d IOLTA. W hi le no ev id en ce ex is ts th at th e BLP was

frau du le n t f

r o m it s in cep ti on , as th e di st ric t co ur t no te d, “ it is un di sp ut ed th at [b y

2 0 1 0 ] th e BLP ‘ope rat ed as a cl as si c Po nz i sc he m e, in whi ch pa y m en ts on ex is ti n g

lo an s wer e p ai d wi th m on ey fro m ne w lo an s.’”

“ The BLP be ga n to cru m

bl e whe n [Ph il ] Ro se m an n fil ed su it ag ai ns t [Dere k]

Sm it h fo r rep ay m en t o f [a BLP] lo an .” Uni te d S ta te s v. Si gi ll it o , 7 59 F.3d 91 3, 9 21
(8 th Ci r. 20 14 ), cer t. de ni ed

, 13 5 S. Ct

. 10 19 (2 01 5)

. Sm it h was a real es ta te in ve st or

-1 1-in th e Uni te d Kin gd om

. Id

. at 92 0

. Si gi ll it o ha d pe rs ua de d Ro se m an n “ to lo an a

si gn ifi can t am ou nt to th e BLP; ho wev er, Ro se m an n s ou gh t accel erat io n of the lo an

aft er th e BLP m ad e la te pa y m en ts to hi m.” I d

. a t 92 1. To sa ti sf

y Ro se m an n’s

de m an ds

, Si gi ll it o co nt in ue d m ark et in g th e BLP an d m is rep res en te d th e sa fet y of th e

BLP an d Sm it h’s l ia bi li ti es

. Id

. W he n Ro se m an n fil ed su it ag ai ns t Sm it h, Sm it h

res po nd ed th at he ne ve r rece iv ed an y of Ro se m an n’s m on e y. Id

. Ro se m an n so ug ht

an ex pl an at io n fro m Si gi ll it o. Id

. “ Dur in g th is ti m e, Si gi ll it o’s se cret ary

. . . co nt act ed

th e Fed eral Bu reau of In ve st ig at io n (FBI ) ab ou t th e BLP. Th e F B I th en in it ia te d a

cri m in al in ve st ig at io n, whic h le d to Si gi ll it o’s arre st an d in di ct m en t.” Id

. In 20 12

, a jury co nv ic te d Si gi ll it o of m ul ti pl e co un ts of wire frau d, m ai l fr a ud

, co ns pi racy to

co m m it wire frau d, an d m on ey la un de rin g. Id

. at 92 0. On a p p e a l

, we affi rm ed

Si gi ll it o’s co nv ic ti on an d s en te nc e. Id

.

4. Pro ced ur al His to ry

Afte r Si gi ll it o’s co nv ic ti on in 20 12

, 92 pl ai nt iff s f i l ed su it ag ai ns t PNC as

su cces so r to All eg ia nt

. In th ei r am en de d co m pl ai n t

, t h e pl ai nt iff

s al le ge d, am on g

ot he r th in gs , (1 ) vi ol at io n of Mi ss ou ri’s UFL du e to act ua l kn owl ed ge (“ Co un t I”);

1 1

(2 ) vi ol at io n of M is so ur i’s UFL und er Mis so ur i Revi se d Stat ut e § 46 9.2 70 (“ Co un t II”) ; (3 ) v i ol at io n of Mi ss ou ri’s UFL du e to ba d fai th (“ Co un t III” ); (4 ) ai di ng an d

ab e t ti ng br each of fid uc ia ry du ty (“ Co un t V”); (5 ) co ns pi racy to br each fid uc ia ry

d u t ie s (“ Co un t VII”); an d (6 ) co ns pi racy to vi ol at e RICO, 18 U.S.C. § 19 62 (d )
(“ Co un t IX”). PNC m ov ed fo r su m m ary jud gm en t on th es e cl ai m s, an d th e pl ai nt iff s

m ov ed for pa rti al su m

m ary jud gm en t o n t he UFL cla im s s et for th in Co un ts I–I II.

The di st ric t co ur t gr an te d su m m ary jud gm en t in PNC’s fav or on al l th e cl ai m s

an d de ni e d th e pl ai nt iff

s’ m ot io n on th e UFL cl ai m s. The co ur t no te d th at th e pl ai nt iff s d id no t p ut for th ev id en ce o f whe n th e BLP b ecame fraud ul en t an d s ta te d

th at “ Si gi ll it o’s cri m in al act iv it y at so m e po in t in ti m e can no t be th e ba si s fo r fin di ng

an ot he r pa rty li ab le m erel y be cau se it in te ract ed wit h Si gi ll it o du rin g wha t m ay ha ve

The di st ric t co ur t gr an te d PNC’s m ot io n to di sm is s th e pl ai nt iff s’ cl ai m s fo r 1 1

ai di ng an d a be tt in g fr au d (“ Co un t IV”); b reac h o f fi du ci ary du ty (“ Co un t VI” ); a nd

ne gl ig en ce (“ Co un t VIII ”).

-1 2-be en th e earl y st ag es of hi s cri m in al sc he m e.” The co ur t co nc lu de d th at th e pl ai nt iff s

fai le d t o i de nt ify evi de nc e th at

P N C B an k ag reed to pa rti ci pa te in a RICO en te rp ris e; PNC Ban k an d
Si gi ll it o h ad a “ m eet in g o f th e m in ds ” reg ard in g an un la wfu l act; PNC

Ban k kn owi ng ly or su bs ta nt ia ll y as si st ed Si gi ll it o in b r e a ch in g a fid uc ia ry du ty; or PNC Ban k act ed in ba d fai th or wit h act ua l kn owl ed ge th at Sig il li to m is ap pr op ria te d fi du ci ary fu nd s o ut of h is IOLTA.

Add it io na ll y , th e co ur t fo un d th at th e pl ai nt iff s fai le d to “ pu t fo rth su ffi ci en t ev id en ce

fo r th e co ur t to de te rm in e wha t un de rlyin g br each of fid uc ia ry du ty Si gi ll it o al le ge dl y

co m m it te d d ur in g t he rel ev an t p eri od .”

II. Dis cu ss io n

On ap pe al

, th e pl ai nt iff

s arg ue th at th e di st ric t co ur t im pr op erl y gr an te d PNC’s

m ot io n fo r su m

m ary jud gm en t o n C ou nt s V, VII , a nd IX be cau se ge nu in e is su es of

m at eri al fact ex is t. The y al so arg ue th at th e di s t r i c t co ur t erro ne ou sl y gr an te d

su m m ary jud gm en t on Co un ts I– III (th e UFL cl ai m s) to PNC an d de ni ed th ei r m ot io n

fo r pa rti al su m

m ary jud gm en t on th os e cl ai m s be cau se th e un di sp ut ed fact s sh ow th at

Si gi ll it o w a s a f

id uc ia ry who br each ed hi s fid uc ia ry du ti es wit h All eg ia nt ’s act ua l

kn owl ed ge of th e br each

. The y co nt en d th at th e un di sp ut ed fact s sh ow th at All eg ia nt

act ed in ba d fa it h b y

no t i nv es ti ga ti ng it s s us pi ci on s ab ou t Si gi ll it o’s co nd uc t.

“ W e rev ie w de no vo a d is tri ct co ur t’s g ran t o r de ni al of su m m ary jud gm en t.”
Myer s v. Lu ts en Mou nt ai ns Co rp ., 58 7 F .3d 89 1, 8 92 (8t h C ir. 2 00 9)

.

A. Co mmon -la w Cl ai ms a nd RICO Cl ai m

The pl ai nt iff

s arg ue th at “ [t]he reco rd is rep le te wit h ev id en ce” su pp or ti ng

Co un t V (ai di ng an d a b e t t i n g br each of fid uc ia ry du ty); Co un t VII (co ns pi racy to

br each fid uc ia ry du ty); a n d C o u n t IX (RIC O). Acco rd in g to th e pl ai nt iff s, th ei r

ev id en ce “ is at l eas t co nt ro ve rte d a nd crea te s an is su e o f fac t fo r th e jury.”

The pl ai nt iff

s do no t se t fo rth th e el em en ts of th ei r co m m on -la w cl ai m s or th e

RICO clai m , no r do th ey di sc us s an y cas el aw rel ev an t to th es e cl ai m s. Ins te ad

, th ey

-1 3-di sp ut e th e di st ric t co ur t’s rev ie w of th e fact s, id en ti fy in g 16 pi eces of ev id en ce th at

pu rp or te dl y

ge ne rat e g en ui ne is su es of m at eri al fact on th es e cl ai m s.

Eve n if we ov erl oo k th e pl ai nt iff s’ fai l u r e to ci te an y le ga l au th or it ie s in

su pp or t o f t h e ir RICO an d co m m on -la w c la im s, th os e cl ai m s st il l fai l. To pr ov e a 1 2

RICO v io la ti on , a pl ai nt iff m us t p ro du ce ev id en ce

(1 ) th at an en te rp ris e ex is te d; [ ] (2 ) th at th e en te rp ris e affe ct ed in te rs tate 1 3

o r fo rei gn co m

m erce ; (3 ) th at th e de fen da nt as so ci at ed wit h th e

en te rp ris e; (4 ) th at th e de fen da nt pa rti ci pa te d, di rect ly o r in di rect ly, in
th e co nd uc t of th e affa irs of th e en te rp r i se ; an d (5 ) th at th e de fen da nt

pa rti ci pa te d in th e en te rp ris e th ro ug h a pa tt ern of rack et eeri ng act iv it y by com m it ti ng at l eas t t wo ra ck et eeri ng (pr ed ic at e) ac ts

.

Uni te d Sta te

s v. Dar de n , 70 F.3 d 15 07

, 15 18 (8 th Ci r. 19 95 ). Rac ke te eri ng (p red ic at e)

act s in cl ud e m on ey la un de rin g, m ai l frau d, an d wire frau d. Se e RJR Na bi sc o, In c. v.

Eur op ea n C

mty. , 13 6 S . Ct. 2 09 0, 2 10 5 (2 01 6)

.

PNC arg ue s th at th e pl ai nt iff s di d no t pr op erl y pr es en t th ei r R I C O a nd 1 2

co m m on -la w cla im s t o th is co ur t be cau se th ey fai le d to ci te an y leg al au th or it ie s t o

su pp or t th es e cl ai m s. Fed eral Ru le of App el la te Pro ced ur e 28 (a)( 8) (A) r e q u i r es an

ap pe ll an t’s br ie f to co nt ai n “ ap pe ll an t’s co n t e n t i o ns an d th e reas on s fo r th em , wi th
ci ta ti on s to ” le ga l au th or it ie s an d th e reco rd

. “ [We] reg ul arl y de cl i n e to co ns id er

cu rs or y or su m

m ary arg um en ts th at are un su pp or te d by ci ta ti on s to le ga l au th or it ie s.”

Uni te d S ta te s v. S tu ckey , 25 5 F .3d 52 8, 5 31 (8t h C ir. 2 00 1)

.
To p ro ve th at a RICO e nt erp ris e ex is te d, a p la in ti ff 1 3

mu s t of fer pr oo f of (1 ) a co m

m on or sh ared pu rp os e th at an im at e s t h e in di vi du al s as so ci at ed wit h it , ( 2) a fo rm al or in fo rm al or ga ni zat io n of
th e pa rti ci pa nt s in whi ch th ey f u n c t i o n as a un it

, in cl ud in g so m e

co nt in ui ty of bo th st ru ct ur e an d pe rs on ne l, an d (3 ) an as cert ai na bl e

st ru ct ur e di st in ct fro m th a t i n he ren t in th e co nd uc t of a pa tt ern of
rack et eeri ng act iv it y

.

Uni te d St at es v. Hen le

y , 76 6 F.3 d 89 3, 90 6 (8 th Ci r. 20 14 ) (ci ti ng Uni te d St at es v. Kr ag ne ss , 83 0 F .2d 84 2, 8 55 (8t h C ir. 1 98 7) ).

-1 4-“ To es ta bl is h th e ch arg e of co ns pi racy to vi ol at e th e RICO st at ut e

. . . , [a pa rty]

m us t pr ov e, in ad di ti on to el em en ts on e, two

, an d th ree de sc rib ed im m ed ia te ly ab ov e,

th at th e de fen da nt ‘objec ti ve ly m an ife st ed an ag reem en t to pa r t i c i p a t e

. . . in th e

affa irs of [th e] ent erp ris e.’” Dar de n , 70 F.3d at 1 51 8 (s eco nd alt erat io n a nd se co nd

el li ps is in or ig in al ) (q uo ti ng U n i t e d St at es v. Ben ne tt , 4 4 F.3 d 13 64 , 1 37 4 (8 th Ci r.

19 95 )). The pl ai nt iff ne ed no t pr ov id e “ [p ]roo f of an ex pr es s ag reem en t.” Id

. In st ead

, th e pl ai nt iff “ ne ed on ly esta bl is h a tac it un de rs ta nd in g b et ween th e pa rti es , an d th is

m ay be sh ow n w h o l ly th ro ug h th e ci rcu m st an ti al ev id en ce of [eac h de fen da nt ’s]

act io ns .” Id

. (al te rat io n in or ig in al ) (q uo ti ng Uni te d St at es v. Freg os o , 60 F.3 d 13 14

, 13 25 (8 th Ci r. 19 95 )). Bu t th e pl ai n t i ff “ do es ha ve to sh ow m or e th an ‘m ere

as so ci at io n wit h co ns pi rat or s, kn owl ed ge of a co ns pi racy, an d p res en ce du rin g

co ns pi rat or ia l di sc us si on s

. . . .’” Uni te d St at es v. Mus ko vs ky , 8 63 F.2 d 13 19 , 1 32 4
(7 th Ci r. 19 88 ) (el li ps is in or ig in al ) (q uo ti ng Uni te d St at es v. Perc iv al

, 75 6 F.2 d 60 0,

61 0 (7 th Ci r. 19 85 )). The pl ai nt iff m us t p ro ve “ th at th e de fen da nt was aware of th e

s co pe of th e en te rp ris e an d in te nd ed to pa rti ci pa te in it .” Uni te d St at es v. St ep he ns , 46 F.3d 58 7, 5 92 (7t h C ir. 1 99 5)

.

Und er Mi ss ou ri la w, to pr ov e co ns pi racy to br each fid uc ia ry du ties, a plai nt iff 1 4

m us t p ro ve th e el em en ts of c iv il co ns pi racy,

whi ch are: (1 ) two or m or e pe rs on s, (2 ) an ob ject t o be acco m

pl is he d, (3 ) a m eet in g o f th e m in ds on th e o bjec t o r co ur se of a ct io n, (4 ) on e or

m or e u n l a w f

u l ov ert act s, an d (5 ) res ul ti ng da m ag es . Th e es se nc e of a ci vi l co ns pi racy is an un la wf ul act ag reed up on by two or m or e pe rs on s.

Mac key v. M

a c k e y , 9 1 4 S.W .2d 48

, 50 (Mo

. Ct

. App

. 19 96 ) (ci ta ti on om it te d)

. Reg ard in g th e th ird el em en t, th ere m us t be ev id en ce “ th at an y two of th e Defen da nt s

i n v o lv ed in th e al le ge d ci vi l co ns pi racy m et

, ne go ti at ed

, an d m or e im po rta nt l y,

ach ie ve d a m eet in g o f th e m in ds to carr y ou t so m e un la wfu l pu rp os e.” In te rt el , Inc

.

v. Se dg wi ck Cl ai ms Mgmt

. Se rv s., In c ., 20 4 S.W .3d 18 3, 20 4– 05 (Mo

. Ct

. App

. 20 06 ).

“ A m eet in g of th e m in ds is pr es en t if each pa rti ci pa nt act ed wit h ‘a un it y of pu rp os e

The pa rti e s a g ree th at Mi ss ou ri la w ap pl ie s to th e pl ai nt iff s’ co m m on -la w 1 4

cl ai m s.

-1 5-or a co m

m on de si gn an d u nd ers ta nd in g.’” Glo b. Co nt ro l S ys ., Inc . v. Lue bb er t , No.

4: 14 -CV-6 57 -DGK, 20 16 W L 91 01 90

, at *2 (W. D. Mo

. Mar

. 9, 20 16 ) (q uo ti ng Oak

Blu ff Par tn er s, In c. v. Meyer

, 3 S.W .3d 77 7, 78 1 (Mo

. 19 99 ) (en ba nc )); se e al so Jo hn

Kn ox Vil l. v. For ti s Co ns tr

. Co

., LLC

, 44 9 S.W .3d 68

, 80 (Mo

. Ct

. App

. 20 14 ) (“ Cl ear

an d co nv in ci ng ci rcu m st an ti al ev id en ce es ta bl is he d th at each of th e App el la nt s act ed

wit h a ‘uni ty of pu rp os e,’ a ‘com m on de si gn an d un de rs ta nd in g,’ or ‘a m eet in g of th e

m in ds ’ to un la wfu ll y

be ne fit th em se lv es

. . . .”).

To pr ov e th at a de fen da nt ai de d an d ab et te d, a pl ai nt iff m us t sh ow th at th e 1 5

de fen da nt “ kn [e w] th at th e ot he r’s co nd uc t co ns ti tu te s a br each of du ty an d g[ av e]

su bs ta nt ia l as si st an ce or en co ur ag emen t to th e ot he r so to co nd uc t hi m se lf.” Bra dl ey

v. Ray

, 90 4 S.W .2d 30 2, 31 5 (Mo

. Ct

. App

. 19 95 ) (em ph as es in or ig in al ) (q uo ti ng

Res ta te m en t (Sec on d) of Tort s § 87 6( b) (Am

. Law In st

. 19 65 )). The pl ai n t i f f must

pr ov e th at th e de fen da nt “ affi rm at iv el y act [ed ] to ai d th e pr im ary to rtf eas or ; ne it he r

fai lu re to ob

ject to th e to rti ou s act no r de fen da nt ’s m ere pr es en ce at th e co m m is si on

of t h e t o r t is su ffi ci en t to ch arg e on e wit h res po ns ib il it y .” Id

. The de fen da nt m us t

ha ve “as s o c i a t e[d ] hi m se lf in so m e way wit h th e pr in ci pa l in br in gi ng ab ou t th e

co m m is si on of th e cri m e, an d m ere ne ga ti ve acq ui es cen ce is no t su ffi ci en t.” Id

. (q uo ti ng St at e v. Cl ar k , 59 6 S .W .2d 74 7, 7 51 (Mo . Ct. Ap p. 1 98 0) ).

The pl ai nt iff

s rel y pr im ari ly on Fi nn ’s un swo rn de c l a r at io n to pr ov e th ei r

cl ai m s. In su m

m ary, th at de cl arat io n sh ows th at (1 ) MGM pa id Si gi ll it o hi gh fees (3 2

pe rcen t of th e lo an am ou nt ), whi ch were “p a id to Mr. Si gi ll it o an d hi s as so ci at es

di rect ly fro m th e lo an fu nd s” ; (2 ) th es e “ up -fro nt fees were no t di sc lo se d in th e lo an

ag reem en t s ” ; ( 3 ) b efo re he r lo an cam e du e, W om ack was rep ai d fro m Si gi ll it o’s

IOLTA; (4 ) at th e ti m e of th e W om ack tra ns act io n, MGM ha d no t repa id an y of th e

lo an s; a n d ( 5) Fi nn ha d “ su sp ic io ns th at [All eg ia nt ] di d no t wan t to cu st od y th es e

lo an s” ba se d on “ [t]he fact th at in ve st or m on ey fro m Mar ti n Sig il li to ’s acco un t was

As the dis tri ct co ur t reco gn iz ed

, th e Mi ss ou ri Su pr em e Co ur t ha s y et to de ci de 1 5

whe th er Mi ss ou ri reco gn iz es a cau se of act io n fo r ai di ng an d a be tt in g a br each of
fid uc ia ry du ty. Fo r pu rp os es of a pp eal , we wil l as su m e th at it do es

.

-1 6-us ed to pa y ot he r in ve st or s.” The pl ai nt iff s al so rel y on Mo rs e’s un swo rn de cl arat io n,

in whi ch he st at es t h a t Fi nn “ qu es ti on ed [MGM ’s] ab il it y to rep ay th e lo an s” an d

“ in di cat ed th at he th ou gh t th e lo an s di d no t co m pl y wit h reg ul at or y req ui rem en ts .” 1 7

An d

, t he pl ai nt iff

s ci te PNC’s or ig in al an swe r in whi ch it ad m it te d th at All eg ia nt

The pl ai nt iff

s al so rel y on th e “ Mi nu te s of Trus t Co m m it te e Mee ti ng ” ta ke n 1 7

on A u g u s t 1 4 , 2 00 1, whi ch pr ov id e th at “ Mar ko w .

. . rep or te d th at th e Co -Tru st ee

an d in co m e be ne fic ia ry un de r th e Bo ss e tru st ha s ag ai n req ue st ed co ns id erat io n of th e

pu rch as e of fir st an d se co nd ch arg es on real pr op ert y i n En g l an d (d eed s of tru st on Eng li sh real pr op ert y ). Afte r di sc us si on , [Ch ie f Fi na nc ia l Offi cer Je ff] Sch at z st at ed
th at he wou ld in ve st ig at e th e p ro po se d i nv es tm en t furt he r.” A s PNC po in ts ou t, t he

reco rd co nt ai ns no ev id en ce th at S c h a t z c o n du ct ed th e in ve st ig at io n or wha t, if

an y th in g, he di sc ov ered

. Mo re im po rta nt ly, th is co ur t is pr oh ib it ed fro m co ns id eri ng th e m eet in g m in ut es in li gh t of th e pa rti es ’ st ip ul at io n pr oh ib it in g th e pl ai nt iff s fro m

“ refe r[ri ng ] to or in tro du c[i ng ] an y ev id en ce at tri al or in di sp os it iv e m ot io n br ie fin g rel at in g t o (1 ) an y

m em be r of th e Bo ss e fam il y

. . . .”

The pl ai n t iff

s al so arg ue th at PNC ad m it te d cert ai n th in gs by fai li ng to de ny th em

. In th ei r am en de d co m pl ai nt

, th e pl ai nt iff

s al le ge th at “ All eg ia nt ’s co un se l, Ja n Alo nz o, aft er an ex te ns iv e in ve st ig at io n, in fo rm ed Hay es an d Mar ko w th at Si gi ll it o

was di ve rti ng fid uc ia ry fu nd s in hi s IOLTA acco un t in a cl as si c Po nz i sc he m e whe re IOLTA pa y m en ts to ex is ti ng in ve st or s were be in g pa id by IOLTA de po si ts fro m ne w in ve st or s.” PNC o r i g i na ll y res po nd ed

, “ PNC la ck s kn owl ed ge or in fo rm at io n

su ffi ci en t to fo rm a be li ef ab ou t th e tru th of th e al le ga ti on s in th is pa rag rap h an d
th eref or e de ni es th e sa m e.” The reaf te r, in it s am en de d an swe r, PNC res po nd ed

, “ PNC

can ne it he r ad m it no r de ny th is al le ga ti on , be cau se th e su b s t a n c e of an y

co m m un ic at io ns be twee n Al le gi an t Ba nk an d i ts lawyers i s p riv il eg ed . PNC de ni es

an y rem ai ni ng al le ga ti on s co nt ai ne d in th is pa rag rap h.” The pl ai nt iff s arg ue th at PNC
ad m it te d th e al le ga ti on by fai li ng to de ny it

. Bu t in b o t h i t s or ig in al an d am en de d

an swe r, PNC al so m ad e a ge n eral de ni al

, st at in g, “ PNC de ni es each an d ev ery al le ga ti on co nt ai ne d in Pl ai nt iff s’ Fi rs t Am en de d Co m

pl ai nt

, in cl ud in g al l he ad in gs

an d su b- h e a d i n g s , t ha t is no t sp eci fic al ly ad m it te d to be tru e in th e pr eced in g

pa rag rap hs of th is Ans wer an d Affi rm at iv e Defen se s.” Fed eral Ru le of Ci vi l

Pro ced ur e 8( b) ( 3 ) p r o v i d e s th at “ [a] pa rty th at in te nd s in go od fai th to de ny al l th e al le ga ti on s of a pl ead in g

. . . m ay do so by a ge ne ral d e n i a l

. A p a r ty th at do es no t
in te nd to de ny al l th e al le ga ti on s m us t ei th er sp eci fic al ly de ny de si gn at ed al le ga ti on s

or ge ne ral ly de ny al l ex cep t th os e sp eci fic al ly ad m it te d.” In li gh t of t h i s g e n e ral
de ni al , we con cl ud e th at PNC s at is fie d t he fed eral pl ead in g ru le s.

-1 7-“ ad vi se d it s co un se l up on be co m in g su sp ic io us of th e act iv it y in Si gi ll it o’s acco un ts

an d t ha t co un se l i nv es ti ga te d t he m at te r.” 1 8

W e co nc lu de th at th e pl ai nt iff s’ RICO an d co m

m on -la w cl ai m s fai l be cau se th e

afo rem en ti on ed e v i d e n c e do es no t ge ne rat e ge nu in e is su es of m at eri al fact

. The

reco rd is in su ffi ci en t to es ta bl is h a reas on ab le fact di sp ut e as to whe th er All eg ia nt

, PNC’s pr ed eces so r, ob

jecti ve ly m an ife st ed an ag r e e ment to pa rti ci pa te in cri m in al

act iv it y wit h Si gi ll it o, ha d a m eet in g of th e m in ds wit h Si g i l l i t o , o r su bs ta nt ia ll y

as si st ed or en co ur ag ed Si gi ll it o’s co nd uc t. Fi rs t, no ne of th e afo rem en ti on ed 1 9

ev id en ce de m on st rat es th at All eg ia nt “ ob jecti ve ly m an ife st ed an ag reem en t to

pa rti ci pa te

. . . in th e affa irs of [th e] en te rp ris e.” Dar de n , 70 F.3 d at 15 18 (al te rat io n

an d el li ps is in or ig in al ) (q uo ti ng Ben ne tt

, 44 F.3 d at 13 74 ). As th e di st ric t co ur t

ex pl ai ne d, “ [a]t m os t, Fi nn ’s de cl arat io n de m on st rat es th a t [ A l le gi an t] be cam e

su sp ic io us of act iv it y rel at ed to th e W om ack se lf- di rect ed IRA an d en ga ge d in so m e

l e v el of rev ie w of th e se lf- di rect ed IRAs co nt ai ni ng BLP lo an s.” Bu t All eg ia nt ’s

su sp ic io ns ab ou t Si gi ll it o’s co nd uc t are in su ffi ci en t to pr ov e th at All eg ia nt “ was

aware of th e s c o p e of th e en te rp ris e an d in te nd ed to pa rti ci pa te in it .” St ep he ns , 46 F.3 d at 59 2. The di st ric t co ur t co rrec tl y ob se rv ed th at “ [i]f an y th in g, th e ev id en ce

es ta bl is he s th at [All eg ia nt ] to ok st ep s to rem ov e it se lf as cus to di an of acco un ts th at

In it s am en de d an swe r, PNC de ni ed th e al le ga ti on

. PNC arg ue s on ap pe al th at 1 8

it s am en de d an swe r su pe rs ed ed it s or ig in al an swe r; th eref or e, we sh ou ld no t co ns id er th e or ig in al

. Our co ns id erat io n of th e or ig in al an swe r, ho wev er, do es no t ch an ge th e

res ul t.

As th e di st ric t co ur t co rrec tl y ob se rv ed

, th e pl ai n t i ff fai le d to pr od uc e

1 9

ev id en ce of “ th e cri m in al act iv it y be in g un de rta ke n by Si gi ll it o or Bro wn du ri ng th e ti me All eg ia nt Ban k se rv ed as th e cu st od ia n fo r se lf- di rect ed IRAs co nt ai ni ng BLP
lo an s.” The pl ai nt iff

s ha ve no t pu t fo r t h “ev i d en ce th at es ta bl is he s th e BLP was frau du le nt fro m

it s i nc ep ti on .” Non et he le ss , we wil l as su m e, wit ho ut de ci di ng , th at

s o me fo rm of rack et eeri ng act iv it y oc cu rred du rin g th is ti m e fo r pu rp os es o f t h e RICO cl ai m

. Add it io na ll y , we ag ree wit h th e di st ric t co ur t th at th e pl ai nt iff fai le d to

“ es ta bl is h[ ] wha t sp eci fic br each of fid uc ia ry du ty, or ot he r un la w f u l act

, Si gi ll it o al le ge dl y co m

m it te d wit h res pe ct t o t h e[] co m m on [-]law cl ai m s du rin g th [e] [rel ev an t] ti m e pe rio d.” Aga in

, we wil l as su m e, wit ho ut de ci di ng , th at Si gi ll i to di d
br each a fi du ci ary du ty for p ur po se s o f th e co m

m on -la w cla im s.

-1 8-c on ta in ed pr ob le m at ic or un su it ab le in ve st m en ts .” The refo re, th e pl ai nt iff s ’ R I C O

cl ai m fai ls as a m at te r of

law.

Seco nd

, th e ev id en ce fai ls to es ta bl is h a “ m eet i n g o f t h e m in ds ” be twee n

All eg ia nt an d Si gi ll it o. Se e Mac key

, 91 4 S.W .2d at 50

. Aga in

, th e pl ai nt iff s’ ev id en ce

sh ows on ly th at All eg ia nt in ve st ig at ed Si gi ll it o’s su sp ic io us act iv it y

. All e gi an t’s

in ve st ig at io n of Si gi ll it o’s act i o n s do es no t eq ua te to co ns pi rat or ia l co nd uc t. Thu s,

th e p la in ti ffs ’ cl ai m

of c on sp ira cy

to bre ach fid uc ia ry

du ty fail s.

Fi na ll y , th e pl ai nt iff

s ha ve p r od uc ed no ev id en ce sh owi ng ho w All eg ia nt

su bs ta nt ia ll y as si st ed or en co ur ag ed Si gi ll it o’s br each of fid uc ia ry du ty. Se e Bra dl ey , 90 4 S.W .2d at 31 5. In st ead

, th e pl ai nt if f s ’ ev id en ce sh ows th e op po si te —t ha t

All eg ia nt be cam e su sp ic io us of Si gi ll it o an d th e lo an s to M G M a n d su bs eq ue nt ly

te rm in at ed it s r e l a ti on sh ip wit h Si gi ll it o. As a res ul t, th e pl ai nt iff s’ cl ai m of ai di ng

an d a be tt in g b reac h o f fi du ci ary du ty fail s.

B. UFL Cla ims

Th e pl ai nt iff

s arg ue th at th e di st ric t co ur t erro ne ou sl y gr an te d s u mm a r y jud gm en t t o P NC an d de ni ed su m m ary jud gm en t to th em on Co un ts I– III (th e UFL

cl ai m s)

. The pl ai nt iff

s co nt en d th at a reas on ab le fact fi n d er co ul d co nc lu de th at (1 ) Si gi ll it o was a fid uc ia ry who ha d a n a t t or ne y –c li en t rel at io ns hi p wit h th e IRA

cu st om ers who in ve st ed in th e BLP an d owe d fid uc ia ry ob li ga ti on s to pe op le who se

m on ey was in hi s IOLTA at All eg ia nt ; (2 ) Si gi ll it o br each ed hi s fid uc ia ry ob li ga ti on s by rece iv in g un di sc lo se d fees no t au th or iz ed by th e lo an ag r e e men t s; (3 ) All eg ia nt

ha d act ua l kn owl e d g e of Si gi ll it o’s br each of fid uc ia ry du ty whe n it cas he d th e

W om ack ch eck aft er l earn in g fr om MGM t ha t Si gi ll it o was br each in g hi s fid uc ia ry

ob li ga ti on s; (4 ) All eg ia nt act ed in ba d fai th be cau se it was co m m erci al ly un

jus ti fia bl e

fo r All eg ia nt to acce pt th e W om ack ch eck an d di sr eg ard fact s read il y av ai la bl e ba se d

on a rev ie w of Si gi ll it o’s IOLTA; (5 ) PNC, as All eg ia nt ’s su cces so r, is st ric tl y li ab le

un de r th e UFL ba se d on ev id en ce tha t th e W om ack ch eck was dra wn an d del iv ered

to All eg ia nt as pa y ee in a tra ns act io n th at All eg ia nt kn ew was fo r Si gi ll it o’s pe rs on al

be ne fit ; an d (6 ) Si gi ll it o br each ed hi s f i d u ci ary du ti es to Lin da Giv en s an d Ru do lf

-1 9-Ouwen s in th e W om ack tra ns act io n whe n he ha d All eg ia nt tra ns fer m on ie s fro m th ei r

acco un ts to Sig il li to ’s IOLTA.

“ The UFL ‘is th e Mi ss ou ri co di fic at io n of th e Uni fo rm Fi du ci ari es Act,’ whi ch

al te rs ‘the co m

m on la w wit h r e sp ect to th e du ti es of pa rti es who de al wit h

fid uc ia rie s.’” W

at so n Co at in gs
, In c. v. Am. Exp re ss Tr av el Rela te d Se rv s., In c ., 43 6

F.3 d 10 36

, 10 40 (8 th Ci r. 20 06 ) (fo ot no te om it te d) (q uo ti ng In re La ue r , 98 F.3 d 37 8,

38 2– 83 (8 th Ci r. 19 96 )). The UFL’ s pu rp os e is “ to faci li ta te ba nk in g tra ns act io ns by

rel ie vi ng de po si to ry ba nk s of th ei r co m m on la w du ty to in qu ire in to th e pr op rie ty of

fid uc ia ry tra ns act io ns .” Hen dr en v. Far mer s St at e Ban k, S.B.

, 27 2 S.W .3d 34 5, 34 8
(Mo

. Ct

. App

. 20 08 ) (q uo ti ng Bar i v. Li nd el l Tr us t Co

. , 9 9 6 S

. W. 2d 65 5, 65 9
(Mo

. Ct

. App

. 19 99 )). Und er th e UFL, a de p o s i to ry ba nk m ay “ in du lg e in th e

pr es um pt io n th at th e f

i d u c i a r y in wit hd rawi ng fu nd s fro m th e fid uc ia ry acco un t is

act in g la wfu ll y an d in acco rd an ce wit h hi s du ti es .” Id

. (q uo ti ng Gen

. In s. Co

. of Am.

v. Co mmerc e Ban k o

f S t. Ch ar le s , 50 5 S .W .2d 45 4, 4 57 (Mo . Ct. Ap p. 1 97 4) ).

“ The ba nk ’s ob li ga ti on [is ] to th e tru st ee, to ho no r hi s ch e c k w h en dr awn to

fo rm ”; by co nt ras t

, t h e b a n k ha s “ no du ty to th e tru st es ta te sa ve to refr ai n fro m

pa rti ci pa t in g in m is ap pr op ria ti on of th e fu nd s.” Id

. at 34 9 (al te rat io n in or ig in al )
(q uo ti ng Gen . I

ns . C o. of Am. , 5 05 S.W .2d at 45 8) . A ba n k ’s “ m ere pa y m en t of th e

m on ey to or up on th e ch eck of th e de po si to r do es no t co ns ti tu te a pa rti ci pa ti on in an

act ua l or in te nd ed mi s a pp ro pr ia ti on by t he fid uc ia ry .” Id . ( qu ot in g Gen . I ns . C o. of

Am.

, 50 5 S.W .2d at 45 8)

. Bu t th e fid uc ia ry ’s “ co nd uc t or co ur se of de al in g m ay br in g

to th e no ti ce of th e b a n k c i r c u m st an ces whi ch wou ld en ab le it to kn ow th at he is

vi ol at in g hi s tru st .” Id

. (q uo ti ng Gen

. In s. Co

. of Am.

, 50 5 S.W .2d a t 4 5 8 )

. “ Su ch

ci rcu m st an ces do no t im

po se up o n t h e b a n k th e du ty o r gi ve it th e rig ht to in st it ut e

an y in qu iry int o th e co nd uc t of it s cu st om er, in or de r to pr ot ect th os e fo r who m th e

cu st om er m ay ho ld th e fu nd

, bu t be twee n who m an d th e ba nk th ere is no pr iv it y .” Id

. (q uo ti ng Gen . Ins . Co. o

f Am. , 50 5 S .W .2d at 4 58 ).

A ba nk ’s ag reem en t wit h th e de po si to r is th at th e ba nk “ wil l pa y acco rd in g to

th e ch eck s of th e [d ep os it or ], a nd whe n [th e ch eck s are] dr awn in pr op er fo rm th e

ba nk is bo un d to pr es um e th at th e tru st ee is in th e co ur se of la wfu ll y pe rfo rm in g hi s

-2 0-du ty an d to ho no r th em acco rd in gl y .” Id

. (s eco nd al te rat io n in or ig in al ) (q uo ti ng Gen

.

In s

. C o

. of Am. , 5 05 S.W .2d at 45 8– 59 ). The ba nk do es no t ha ve a du ty “ to in qu ire

whe th er th e fid uc ia ry pr op erl y ap pl ie s fu nd s he ld in tru st

. ‘[M] ere ne gl ig en ce on th e

p a r t o f th e de po si to ry ba nk is no t su ffi ci en t to ho ld it li ab le to th e pr in ci pa l i f t h e

fid uc ia ry in fact m is ap pr op ria te d th e fu nd .’ ” Id

. (al te rat io n in or ig in a l ) ( q u ot in g

Tr en to n T r. Co . v. W

. Su r. Co

. , 59 9 S .W .2d 48 1, 4 90 (Mo . 19 80 ) (en ba nc )).

The UFL pro vi si on at i ss ue in th is cas e p ro vi de s:

If a ch eck or ot he r bi ll of ex ch an ge is dr awn by a fid uc ia ry as su c h, or in th e na m e of hi s pr in ci pa l by a fid uc ia ry em po wered t o d r a w s uc h
in st ru m en t in th e na m e of hi s pr in ci pa l, th e pa y ee is no t bo un d to in qu ire
whe th er th e fid uc ia ry is co m m it ti ng a br each of h i s o b l ig at io n as fid uc ia ry in dr awin g or de li ve rin g th e in st ru m en t, an d is no t ch arg eab le
wit h no ti ce th at th e fid uc ia ry is co m m it ti ng a br each of hi s ob li ga ti on as fid uc ia ry un le ss he ta kes th e in st ru men t wit h act ua l kn ow le dg e of su ch
br ea ch or wi th kn ow le dg e of su ch fa ct s th at th is a c t i o n in ta ki ng th e in st ru men t amo un ts to ba d fa it h

. If, ho wev er, su ch in st ru m en t is pa y ab le

to a pe rs on al c r e d it or of th e fid uc ia ry an d de li ve red to th e cred it or in

pa y m en t of or as se cu rit y fo r a pe rs on al de bt o f t h e f i du ci ary to th e

ac tu al kn ow le dg e of th e cred it or , or i s d r a w n an d de li ver ed in an y

tr an sa ct io n kn ow n by th e pa yee to be fo r t h e pe rs on al be ne fi t of th e fi du ci ar y , th e cred it or or ot he r pa y ee is li ab le to th e pr i n c i p a l if th e fid uc ia ry in fact co m

m it s a br each of hi s ob l i g a t i o n as fid uc ia ry in
dr awin g o r de li ve rin g t he in st ru m en t.

Mo . Ann . Sta t. § 46 9.2 70 (em ph as es ad de d)

.

In su m m ary, “ [t]he UFL pr ov id es th at ba nk s an d ot he rs who typic al ly de al wit h

fid uc ia rie s m ay no t be he ld li ab le fo r a fid uc ia ry ’s br each of du ty ab s e n t e i t he r (1 ) ‘actu al kn owl ed ge ’ of th e br each or (2 ) kn owl ed ge of su ffi ci en t fact s to co ns ti tu te

‘bad fai th .’ ” In re La ue r , 98 F.3 d at 38 3 (q uo ti ng Tr en to n , 59 9 S.W .2d at 49 1– 92 ). 2 0

As a th res ho ld m at te r, th e di st ric t co ur t fo un d th at th e pl ai nt iff s pr od uc ed no 2 0

ev id en ce of a sp eci fic tra ns act io n in vo lv in g th e m is ap pr op ria ti on of fid uc ia ry fu nd s

to su pp or t th ei r UFL cl ai m s. As to th e W om ack tra ns act io n, th e co ur t fo un d th at th e pl ai nt iff s on ly pr ov ed “ th at Si gi ll it o wro te th e ch eck fro m hi s IOLTA to faci li ta te th e

-2 1-1. Actu al Kn ow le dg e (Co un t I)

Co un t I st a t e s t ha t PNC, th ro ug h it s pr ed eces so r All eg ia nt

, “ ha d act ua l

kn owl ed ge of Si gi ll it o ’s br each of fid uc ia ry du ty an d kn ew Si gi ll it o was

m is ap pr op ria ti ng fid uc ia ry fun ds .”

“ ‘A ct ua l kn owl ed ge ,’ as th e te rm s are us ed in th e Law, m ean s aware ne ss th at

, at th e m om en t, th e fid u c i a r y w as de frau di ng th e pr in ci pa l.” Gen

. In s. Co

. of Am.

, 50 5 S.W .2d at 45 7. “It mea ns ex pr es s fact ua l
in fo rm at io n t h a t t h e fu nd s are be in g us ed fo r pr iv at e pu rp os es in
vi ol at io n of th e fid uc ia ry rel at io ns hi p.” Id

. A ba nk m ay no t be fo un d to

po ss es s “ act ua l kn owl ed ge ” of a br each of tru st m erel y be cau se “ at so m e

st ag e of th e ha nd li ng of th e fid uc ia ry acco un t it co ul d, by in sp ect io n of

pu bl ic reco r ds or by pi eci ng to ge th er al l th e fact s kn own by di ffer en t

em pl oyees o f th e b an k, b eco m e aware of a bre ach of t ru st .” Id

.

Hen dr en , 27 2 S .W .3d at 3 50

.

The pl ai nt iff

s arg ue th at PNC’s pr ed eces so r, All eg ia nt

, ha d act ua l kn owl ed ge

th at Si gi ll it o was br each in g hi s fid uc ia ry du ty to th e pl ai nt iff s. Acco rd in g to th e pl ai nt iff s, whe n All eg ia nt cas he d th e W om ack ch eck

, A l l eg ia nt ha d a pr es en t

aware ne ss ba se d on th e in fo rm at io n le arn ed fro m MGM th at Si gi ll it o was br each in g

hi s fid uc ia ry ob li ga ti on s an d de frau di ng hi s cl ie nt s. The pl ai nt iff s as se rt th at th e

fo ll owi ng pu r p o r t e d ev id en ce sh ows th at All eg ia nt ha d act ua l kn owl ed ge of

Si gi ll it o’s brea ch : (1 ) All eg ia nt kn ew in 20 01 th at Si gi ll it o was a fid uc ia ry an d was

th e at to rn ey an d ag en t fo r it s IRA cu st om ers in ve st ed in th e BLP; (2 ) All eg ia nt kn ew

pu rch as e of W om ack ’s un m at ur ed no te .” Acco rd in g to th e co ur t, th e pl ai nt iff s fai le d

to sh ow “ th at tru st of

fic ers at All eg ia nt Ban k kn ew th e so ur ce of fu nd s in Si gi ll it o’s
IOLTA or co nt act ed th e ret ai l d e p a r tm en t at All eg ia nt Ban k to in qu ire ab ou t th e IOLTA.” And th e co ur t po in te d ou t th at “ th e fu nd s fro m th e IOLTA were pa id ou t to
Wom ack

, no t Si gi ll it o.” As a res ul t, th e co ur t fo un d no ev id en ce “ th at Si g i l l i t o

m is ap pr op ria te d W om ack ’s fu nd s” or th at “ th e fu nd s us ed to pu rch as e th e W om ack

no te were m is ap pr op ria te d.” Fo r pu rp os es of th is ap pe al

, ev en if we as su m e th at th e pl ai nt i f f s p r ov ed th at th e W om ack tra ns act io n in vo lv ed th e m is ap pr op ria ti on of
fid uc ia ry fu nd s to su pp or t th ei r UFL cl ai m s, we no ne th el es s co n c l u d e th at th es e cl ai m s fa il

.

-2 2-th at Sig il li to owed fid uc ia ry du ti es to in ve st or s who de po si te d th ei r m on ey in to hi s

IOLTA; (3 ) whe n it cas he d th e W om ack ch eck

, All eg ia nt ha d a pr e s e n t a w aren es s

ba se d on th e in fo rm at io n le arn ed fro m MGM th at Si gi ll it o w a s br each in g hi s

fi d uc ia ry ob li ga ti on s an d de frau di ng hi s cl ie nt s; (4 ) All eg ia nt le arn ed in Octo be r

20 01 th at Si gi ll it o was rece iv in g hi gh fees of 32 pe rcen t on th e am ou nt s in ve st ed in

th e BLP by hi s cl ie nt s; (5 ) All eg ia nt ha d cu st od y of th e lo an ag reem en ts ev id en ci ng

th e in ve st m en t in t h e B LP a n d kn ew th at th e lo an ag reem en ts di d no t di sc lo se or

pr ov id e fo r pa y m en t of fees ; an d (6 ) Si gi ll it o as an at to rn ey an d fid uc ia ry was

se lf- de al in g i n b reac h of his fid uc ia ry du ti es by rece iv in g un di sc lo se d, h ig h fe es on

th e m on ey

in ve st ed in th e BLP b y

hi s cl ie nt s.

W e co nc lu de th at no ev id en ce ex is ts th at All eg ia nt pr oc es se d an y tra ns act io n

wit h act ua l kn owl e d g e th at Si gi ll it o was br each in g hi s fid uc ia ry du ti es

. Fi rs t,

Si gi ll it o’s pu rch as e of th e W om ack n o t e i n S ep te m be r 20 01 wit h an IOLTA ch eck

do es no t pro ve th at All eg ia nt ha d a ct ua l k no wled ge th at Si gi ll it o was brea ch in g hi s

fid uc ia ry du ti es

. The reco rd es ta bl is he s th at du r i n g t h e ti m e pe rio d in qu es ti on , Mi ss ou ri IOLTA acco un ts co ul d ho ld cl ie nt fu nd s an d, in cert ai n ci rcu m st an ces ,
at to rn ey ’s f

e e s. Neit he r pa rty di sp ut es th at “ [i]n 20 01

, All eg ia nt Ban k’s

un de rs ta nd in g of th e na tu re an d fu nc ti on of IOLTA acco un ts was th at

. . . an IOLTA

acco un t can be fu nd s fo r an in di v i d u al cl ie nt

, m ul ti pl e cl ie nt s, an d co ul d in cl ud e

fu nd s th at be lo ng to th e la wy er, th em se l v e s

. ” Fu rth erm or e, no ev id en ce ex is ts th at

All eg ia nt kn ew fo r who m Si gi ll it o was pu rch as in g th e W om ack no te ; no ev id en ce

ex is ts th at All eg ia nt Ban k kn ew th at Si gi ll it o wa s the ult im at e int en ded pu rch as er— as

op po se d to an ot he r pr in ci pa l— of th e lo an it se lf. In fact

, th e reco rd do es no t es ta bl is h

wha t h ap pe ne d t o t he MGM n ot e fo ll owi ng th e Wom ack tra ns act io n.

Seco nd

, we reject th e pl ai nt iff s’ arg um en t th at All eg ia nt ha d act ua l kn owl ed ge

th at Si gi ll it o was br each in g hi s fid uc ia ry du ti es by rece iv in g hi gh fees on th e MGM

lo an s. As th e di st ric t co ur t po in te d ou t, no ev id en ce e x is ts th at th e pl ai nt if fs were

pa y in g th e un di sc lo se d fees to Si gi ll it o. In st ead

, it was th e MGM bo rro wers th at ha d

an ag reem en t wi t h S i g il li to to pa y th e 32 -p erce nt “ fin de r’s fee” on th e lo an s. Sp eci fic al ly, Fi nn ’s de po si ti on pr ov id es , “ Dur in g pa rt of ou r co nv ers at io n in th e ho te l

lo bb y , Jo hn Mar k an d Jo hn Mo rs e [fro m MGM] ex pl ai ne d th at 32 % of th e lo an s were

-2 3-ta ke n as fees an d th at th is was pa id to Mr. Si gi ll it o a nd hi s as so ci at es di rect ly fro m

th e l oa n fu nd s.” Mo rs e’s de cl arat io n li ke wis e co nf irms th at MGM “ ag reed wit h

who m fo r each £1 00 we bo rro wed on e th ird (3 2%) wou ld be d e d u c t e d at so ur ce

rep res en ti ng th ei r co m

m is si on an d we wou ld pa y in te res t of 25 % on th e fu ll £1 00 of

th e lo an .” In th ei r st at em en t of m at eri al fact s, th e pl ai nt iff s st at ed th at “ MGM ha d

be en ask ed to pa y

fur th er ar ran ge m en t fe es of 3 2% o n [M GM] loa ns .”

Fu rth erm or e, th e pl ai nt iff s’ c la im s wou l d f

a i l ev en if th e ag reem en t be twee n

MGM an d Si gi ll it o req ui red th e pl ai nt iff s to pa y th e un di sc lo se d fees to Si gi ll it o on

th e lo an s. All eg ia nt ’s pu rp or te d kn owl ed ge th at th es e fees were no t di sc lo se d in th e

lo an ag reem en t do es no t eq ua te to act ua l kn owl ed ge th at Si gi ll it o was br each in g hi s

fid uc ia ry du ti es

. As PNC po in ts ou t, “ Si gi ll it o co ul d ha ve to ld hi s cl ie nt s in an y

nu m be r of way s ho w he was be in g pa id ”; it di d no t ha ve to be in th e lo an ag reem en t.

2. Bad Fai th (Co un t II

I)

Co un t III st at es th at PNC, th ro ug h it s pr ed eces so r All eg ia nt

, vi ol at ed th e UFL

“ be c a u s e it ha d act ua l kn owl ed ge th at [Si gi ll it o] br each ed hi s fid uc ia ry ob li ga ti on

. Alt ern at iv el y , All eg ia nt Ban k’s act io ns were co m m erci a l l y un

jus ti fia bl e an d

am ou nt ed to ba d fa it h b y no t i nv es ti ga ti ng th e so ur ce o f th e fi du ci ary fu nd s.”

“ The UFL do es no t de fin e ba d f a i th ; ho wev er, it do es de fin e ‘goo d fai th .’ ”

W at so n Co at in gs , 43 6 F.3 d at 10 41

. U n d e r Mi ss ou ri la w, an act is do ne in “ go od

fai th ” if it is “ in fact do ne ho ne st ly, whe th er it be do ne ne gl ig en tl y or no t.”

Mo

. Ann

. St at

. § 46 9.2 40 (2 ). W hi le a ne gl ig en t act do es no t am ou nt to ba d fai th

, “ it

is no t en ti rel y ac c u rat e to eq ua te ‘bad fai th ’ wit h ‘dis ho ne st y ,’ if th e la tt er te rm is

ta ke n to de no te a hi gh de gr ee of m or al gu il t, or ev il m ot iv es .” W at so n Co at in gs , 43 6

F.3 d at 10 41 (q uo ti ng Tr en to n , 59 9 S.W .2d at 49 2)

. “ The te st of ba d fai th is ‘w he th er

it is co m m erci al ly un

jus ti fia bl e fo r th e pe rs on acce pt in g a ne go ti ab le in st ru m en t to

di sr eg ard an d refu se to le arn fact s read il y av ai la bl e. W he re ci rcu m st an ces su gg es ti ve

of th e fid uc ia ry ’s br each be co m e su ffi ci en tl y ob vi ou s it is “ ba d fai th ” to rem ai n

pa ss iv e.’” Id

. (q uo ti ng Tr en to n , 59 9 S.W .2d a t 49 2)

. Fo r a ba nk to act in ba d fai th

,

“ [t]he fact s an d ci rcu m st an ces m us t be so co ge nt an d ob vi ou s th at to rem ai n pa ss iv e

wou ld am ou nt to a de li be rat e d es ire to ev ad e k no wled ge be cau se of a be li ef or fear

-2 4-th at in qu iry wou ld di sc lo se a de fect in th e tra ns act io n.” Hen dr en , 27 2 S.W .3d at 35 0

(q uo ti ng Gen . Ins . Co. o

f Am. , 50 5 S .W .2d at 4 58 ).

The pl ai nt iff

s arg ue th at PNC’s pr ed eces so r, All eg ia nt

, act ed in ba d fai th whe n

it pr oc es se d th e W om ack ch eck

. In su pp or t, th e pl ai nt iff s ci te th e fo ll owi ng pu rp or te d

ev id en ce: (1 ) All eg ia nt

, as pa y ee, rece iv ed th e W om ack ch eck k no win g th at it was

dr awn by Si gi ll it o as a fid uc ia ry on a fid uc ia ry a c c o un t; (2 ) All eg ia nt kn ew th at

MGM was no t th e so ur ce of th e m on ey dr awn fro m th e IOLTA to rep ay W om ack an d

pu rch as e h er l oa n; (3) th e Wom ack ch eck was d rawn an d d el iv ered in a tr an sa ct io n

th at All eg ia nt kn ew was fo r Si gi ll it o’s pe rs on al be ne fit ; an d (4 ) All eg ia nt ha d act ua l

kn owl ed ge th at Sig il li to was s el f-d eal in g i n b reac h o f hi s fi du ci ary du ti es

.

W e co nc lu de th at th e ev id en ce fai ls to sh ow th at All eg ia nt act ed in ba d fait h.

Si gi ll it o’s dr awin g of th e W om ack ch e c k o n hi s IOLTA di d no t pu t All eg ia nt on

n o t i c e th at Si gi ll it o was us in g fid uc ia ry fu nd s. As ex pl ai ne d su pr a , th is is be ca u s e

du rin g th e ti m e pe rio d in qu es ti on , Mi ss ou ri IOLTA acco un ts co ul d ho ld cl ie nt fu nd s

an d, in cert ai n ci rcu m st an ces , at to rn ey ’s fees

. Aga in

, th e pl ai nt iff s ha ve no t di sp ut ed

th at All eg ia nt ’s u nd ers ta nd in g of an IOLTA was th at it co ul d i nc lu de “ fu nd s fo r an

in di vi du al cl ie nt

, m

ul ti pl e cl ie nt s, an d co ul d in cl ud e fu nd s th at be lo ng to th e la wy er,

th em se lv es .” Fu rth erm or e, th e po ss ib il it y ex is ts th at Si gi ll it o was pu rch as in g th e

W om ack no te for

an ot he r cl ie nt an d n ot for hi m se lf.

3. St ri ct Lia bi li ty (Co un t II

)

Co un t II al le ge s th at PNC, th ro ug h it s pred eces so r All eg ia nt

, is st ric tl y li ab le

un de r § 46 9.2 70 of th e UFL du e to it s rece ip t o f p r o ceed s fro m Si gi ll it o’s

m is ap pr op ria ti on of f

id uc ia ry fun ds

.

The pl ai nt iff

s’ as se rti on th at PNC is st ric tl y li ab le is ba se d on th e se co nd

se nt en ce o f § 4 69 .27 0, u nd er wh ic h

a pa y ee is li ab le to th e pr in ci pa l fo r a fid uc ia ry ’s br each if ei th er: (1 ) th e ch eck is pa y ab le to a pe rs on al cred it or of th e fid uc ia ry an d de li ve red to th e cred it or to pa y or se cu re th e f i du ci ary’ s pe rs on al de bt to th e act ua l
kn owl ed ge of th e cred it or , or (2 ) th e ch eck is dr awn an d de li ve red in an y

-2 5-tra ns act io n kn ow n by th e pa yee to be fo r th e pe rs on al b e n efi t of th e fid uc ia ry

.

Ch ou te au Aut o Mar t, In c. v. Fir st Ban k of Mo.

, 55 S.W .3d 35 8, 36 0 (Mo

. 20 01 ) (en

ba nc ) ( c i t i ng Mo

. Ann

. St at

. § 46 9.2 70 ). Und er th e se co nd al te rn at iv e of th is

se nt en ce, “ th e Ban k m

us t kn ow th at [th e fid u c i a r y] i s us in g th e fid uc ia ry fu nd s fo r [h is ] pe rs on al be ne fit .” Id

.

W hi le th e pl a in ti ffs arg ue th at th is se nt en ce pr ov id es fo r st ric t li ab il it y , we

ag ree wit h th e di st ric t co ur t th at “ by it s ve ry te rm s, th e U F L r eq ui res act ua l

kn owl ed ge .” Sect io n 46 9.2 70 us es th e te rm s “ act ua l kn owl ed ge ” an d “ kn own by th e

pa y ee.” Mo

. Ann

. St at

. § 46 9.2 70

. “ Kno ws” un de r th e UFL m ean s “ act ua l kn owl ed ge by th e pa y ee [ta ke r] th at th e tra ns act io n is fo r th e pe rs on al be ne fit of th e fid uc ia ry .”

Ch ou te au Aut o Mar t, In c. , 55 S.W .3d at 3 6 1 (al te rat io n in or ig in al ). “ Co ns tru ct iv e

kn owl ed ge un de r th e UF[L] is in su ffi ci en t to im po se li ab il it y up on th e pa y ee be cau se

th e UF[L] li m it s li ab il it y ‘to rel at iv el y un co m m on cas es in w h i c h t he pe rs on who

de al s wit h th e fid uc ia ry kn ows al l th e rel ev an t fact s.’” W at so n Co at in gs , 43 6 F.3 d at

1 0 42 –4 3 (q uo ti ng Ct

y. of Mac on v. Edg co mb

, 65 4 N.E.2d 59 8, 60 2 (Il l. Ct

. A p p

. 19 95 ) (rev ie win g Ill in oi s’s ve rs io n of th e Uni fo rm Fi du ci ari es Act, whi ch is id en ti cal

to Mi ss ou ri’s UFL))

.

W e ha ve al read y he ld th at th e pl ai nt iff s ha ve fai le d to pr es en t e v i d e n c e th at

All eg ia nt ha d act ua l kn owl ed ge th at Si gi ll it o was br each in g hi s fid uc ia ry du ti es

. W e

al so ag ree wit h th e di st ric t co ur t th at th e pl ai nt iff s di d no t pr es en t ev id e n ce th at

All eg ia nt kn ew th at th e pu rch as e of th e W om ack no te was fo r Si gi ll it o’s pe rs on al

be ne fit

. As th e di st ric t co ur t ob se rv ed

, th e pl ai nt iff s pr od uc ed no ev id en ce th at “ an y

ba nk em pl oyee lo ok ed in to th e IOLTA to de te rm in e th e so ur ce of f u n d s u s ed to

pu rch as e th e W o mac k n o t e or to de te rm in e fo r who m Si gi ll it o was pu rch as in g th e

no te , eit he r hi m se lf o r so m eo ne el se .” Lik e th e d is tri ct co ur t, we co nc lu de th at “ th e

fact th at Si gi ll it o co ul d ha ve be ne fit te d fro m th e [Wo mac k ] t ran sa ct io n do es no t

su ffi ce un de r th e UFL to de m on st rat e th at PNC Ban k kn ew th at th e p u r c h as e of

W om ack ’s no te was fo r Si gi ll it o’s p ers on al be ne fit .” (Em ph as is ad de d.)

-2 6-III. Co nc lu si on

Acco rd in gl y , we affi rm

th e jud gm en t o f th e d is tri ct co ur t.

__ __ __ __ __ __ __ __ __ __ __ __ __ __ __

-2 7-