Court Opinion

ID: 219557
Source: CourtListenerOpinion
Date Created: 2011-06-23 18:38:42+00
Date Added: 2024-06-11T17:28:41.055560
License: Public Domain

UNPUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT

                            No. 10-1880

WHITNEY, BRADLEY & BROWN, INC.,

                Plaintiff – Appellant,

           v.

CHRISTIAN L. KAMMERMANN,

                Defendant – Appellee.

Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria.    Claude M. Hilton, Senior
District Judge. (1:09-cv-00596-CMH-IDD)

Argued:   May 10, 2011                    Decided:   June 23, 2011

Before NIEMEYER, KING, and KEENAN, Circuit Judges.

Affirmed by unpublished per curiam opinion.

ARGUED: Michael Nicholas Petkovich, JACKSON LEWIS, LLP, Reston,
Virginia, for Appellant.       David Philip Korteling, CAPLAN,
BUCKNER, KOSTECKA & KORTELING, CHARTERED, Bethesda, Maryland,
for Appellee.   ON BRIEF: Kara Ariail, Amanda Vaccaro, JACKSON
LEWIS, LLP, Reston, Virginia, for Appellant.

Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:

       Plaintiff Whitney, Bradley & Brown, Inc. (“WBB”), appeals

from       the   district    court’s     award   of    summary   judgment   to   the

defendant, Christian L. Kammermann, on the basis of the court’s

conclusion        that      Kammermann    had    not    contravened    18   U.S.C.

§ 1962(c) (the “civil RICO statute”).                    See Whitney, Bradley &

Brown, Inc. v. Kammermann, No. 1:09-cv-00596, Memorandum Opinion

(E.D. Va. July 7, 2010) (the “Opinion”). 1                More specifically, the

Opinion rejected WBB’s civil RICO claim because WBB was unable

to show that Kammermann engaged in a pattern of racketeering

activity.        As explained below, we affirm.

                                           I.

                                           A.

       The civil RICO statute, which underlies the RICO tort claim

at issue here, provides, in pertinent part, that it is illegal

       for any person employed by or associated with any
       enterprise engaged in, or the activities of which
       affect, interstate or foreign commerce, to conduct or
       participate, directly or indirectly, in the conduct of
       such   enterprise’s affairs   through  a   pattern  of
       racketeering activity.

       1
       The Opinion is found at J.A. 238-54. (Citations herein to
“J.A. __” refer to the contents of the Joint Appendix filed by
the parties in this appeal.)

                                           2
18 U.S.C. § 1962(c).                The Supreme Court has explained that a

civil RICO claim has four essential elements:                                (1) conduct; (2)

of an enterprise; (3) through a pattern; (4) of racketeering

activity.          See Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S.

479, 496 (1985).              Only the third element — proof of a pattern

(hereinafter the “Pattern Element”) — is relevant here.                                            In

order to prove the Pattern Element, a RICO plaintiff must show

“a relationship between the predicate[] [acts and] the threat of

continuing activity.”              H.J. Inc. v. Nw. Bell Tel. Co., 492 U.S.

229,    239    (1989)         (internal        quotation            marks    omitted).            The

continuity-of-activity             requirement            of       the   Pattern     Element      has

been   described         as      “both    a     closed-            and   open-ended         concept,

referring either to a closed period of repeated conduct, or to

past conduct that by its nature projects into the future with a

threat of repetition.”             Id. at 241.

       As     alluded       to     by     the          Supreme       Court      in        H.J.,   the

alternatives         for      establishing              the        continuity        of     activity

essential to the Pattern Element are typically referred to as

“open-ended”         and      “closed-ended”             patterns.           The          Court   has

recognized      that,      in    order    to       show       an    open-ended       pattern      for

purposes      of    a    civil     RICO    claim,         a     plaintiff       is    obliged      to

demonstrate        the     continuity         of   the        racketeering       activities        by

presenting evidence of conduct “that by its nature projects into

the future with a threat of repetition.”                             H.J., 492 U.S. at 241.

                                                   3
On the other hand, in order to show a closed-ended racketeering

pattern, a multi-factor test must be satisfied, and a careful

assessment must be made of “the number and variety of predicate

acts and the length of time over which they were committed, the

number    of   victims,     the     presence   of   separate    schemes      and   the

occurrence of distinct injuries.”               Morgan v. Bank of Waukegan,

804 F.2d 970, 975 (7th Cir. 1986); see HMK Corp. v. Walsey, 828

F.2d 1071, 1073 (4th Cir. 1987).

                                          B.

       WBB is a federal government contractor, headquartered in

Reston,     Virginia,       that      facilitates       business     relationships

between private enterprise and the Department of Defense.                           WBB

continuously        employed      Kammermann   as   a   manager     from   May     2004

until January 2009.         In May 2006, unbeknownst to WBB, Kammermann

formed and also began working for a business entity called CLK

Executive Decisions, LLC (“CLK”), which provided services nearly

identical      to   those   performed     by   WBB.      In   January      2009,    WBB

terminated       Kammermann’s        employment       upon    learning       of     his

conflicting involvement in and ownership of CLK.

       On March 29, 2010, WBB filed the operative complaint in

this     case,      that    is,     its   Second      Amended      Complaint       (the

                                          4
“Complaint”),         in   the    Eastern       District   of    Virginia. 2    The

Complaint        alleges   that    Kammermann,       while      employed   by   WBB,

engaged in a scheme that encompassed two types of fraudulent

activities:           (1) the weekly transmission of false time entry

reports to WBB; plus (2) the submission of duplicative expense

reports to WBB and clients of CLK for the same activities. 3

According to the Complaint, Kammermann transmitted weekly time

entry reports to WBB documenting that he was working for WBB

when       he   was   actually   working    for     CLK.     The   Complaint    also

specifies fourteen instances of duplicate billing that occurred

in the nine-month period between March and December 2008:

       •        On March 18, 2008, Kammermann billed $300 to WBB
                for expenses he also billed to Electrovaya;

       •        Between   March   31   and    December    18,   2008,
                Kammermann   submitted   nine   separate    billings,
                totalling   approximately    $9300,    to   WBB   for
                expenses he also billed to Schiebel;

       •        On August 26 and September 3, 2008, Kammermann
                submitted two billings, totalling approximately
                $1800, to WBB for expenses he also billed to
                Security First;

       2
       The Complaint is found at J.A. 14-42.        The original
version thereof was filed in the district court on May 27, 2009.
       3
       The five CLK clients involved in the double-billing aspect
of Kammermann’s fraud scheme are Schiebel Technology, Inc.
(“Schiebel”),   Electrovaya  Company   (“Electrovaya”),  Security
First Corporation (“Security First”), Recon Robotics, Inc.
(“Recon Robotics”), and Free Wave Technologies, Inc. (“Free
Wave”).

                                            5
     •      On October 28, 2008, Kammermann billed $1,637 to
            WBB for expenses he also billed to Schiebel and
            Free Wave; and

     •      On November 12, 2008, Kammermann billed $973 to
            WBB for expenses he also billed to Free Wave and
            Recon Robotics.

The Complaint alleges six separate tort claims.                        Only one of

those    claims,   the   civil    RICO    claim      alleged   in   Count   I,    is

relevant to this appeal. 4

     In   the   civil    RICO    claim,       WBB   alleges,   inter    alia,   that

Kammermann

     [f]rom at least March 2008 and continuing through
     December   2008  . . .   unlawfully,   knowingly,  and
     intentionally conducted and participated, directly and
     indirectly, in the conduct, management, and operation
     of CLK . . . through a pattern of racketeering
     activity consisting of numerous acts . . . indictable
     under 18 U.S.C. §§ 1341 (mail fraud) and 1343 (wire
     fraud).

     4
        The Complaint’s other five claims each arise under
Virginia law:   Breach of Fiduciary Duty/Duty of Loyalty (Count
II); Actual Fraud: Hours Worked (Count III); Actual Fraud:
Expense Reimbursements (Count IV); Constructive Fraud: Hours
Worked (Count V), and Constructive Fraud: Expense Reimbursements
(Count VI).    Upon granting summary judgment to Kammermann on
Count I, the district court declined to exercise supplemental
jurisdiction over the state law claims and dismissed them
without prejudice.     See 28 U.S.C. § 1367(c).    The district
court’s discretionary dismissal was initially identified as an
issue on appeal, but WBB has since withdrawn that challenge from
our consideration.    We take scant pleasure in our affirmance
today of the district court’s award of summary judgment to
Kammermann, who has sought our succor notwithstanding his
apparent misdeeds. We note, however, that he could yet be held
accountable through an appropriate civil action in the courts of
the Commonwealth.

                                          6
Complaint ¶ 99.         The alleged predicate offenses of mail and wire

fraud     underlying        the        civil    RICO     claim       were    Kammermann’s

submissions to WBB, through an overnight delivery service and

email     transmissions,          of     the    false    time     entry      and    expense

reports.

                                               C.

    On June 2, 2010, defendant Kammermann moved for summary

judgment    on    the    RICO      claim,          submitting    a    stipulation      that

spelled out more than 100 facts he deemed pertinent.                           Relying on

the stipulation, Kammermann contended that WBB could not, for

lack of the essential continuity of activity, establish the RICO

claim’s Pattern Element.                 According to Kammermann, neither an

open-ended       nor    a    closed-ended             pattern     had       been    proved.

Kammermann argued that an open-ended pattern was not apparent

because there was no evidence that his fraudulent activities had

continued beyond December 2008.                     Kammermann maintained that his

scheme was not closed-ended either, because his fraudulent acts

— however despicable — were, even when viewed in the light most

favorable to WBB, merely an ordinary commercial fraud scheme

that failed to rise to the level of a RICO violation.

        On June 14, 2010, plaintiff WBB responded to Kammermann’s

summary    judgment      motion,         supporting      its     opposition        primarily

with three items of evidence:                       (1) the affidavit of Ana R.

Richey, WBB’s Vice-President of Administration, explaining that

                                               7
WBB’s “Employee Stock Ownership Plan (ESOP)” makes WBB a wholly

employee-owned company and that there were more than 150 ESOP

participants; (2) a stipulation of over 200 assertedly pertinent

facts detailing Kammermann’s employment history and relationship

with WBB, including his submission of various expense reports

and time entry reports (reporting hours worked) to WBB; 5 and (3)

an   excerpt   from   Kammermann’s   deposition   in   this   case.   WBB

emphasized that its position was supported by our unpublished

decision in Professionals, Inc. v. Berry, No. 91-1509, 1992 WL

64796 (4th Cir. Apr. 2, 1992) (affirming civil RICO liability

where predicate acts arose from commercial fraud scheme).             WBB

also contended that Kammermann was incorrect on the number of

predicate acts, in that the fraud scheme actually involved more

than 150 such acts (including duplicate billings and false time

entry reports), the scheme in fact continued for nearly three

years (beginning shortly after Kammermann formed CLK in 2006 and

continuing until his termination from WBB in 2009), and there

were vastly more than the six victims acknowledged by Kammermann

(namely, WBB’s more than 150 ESOP participants).

      5
       The stipulation filed with WBB’s response was somewhat
more comprehensive than the stipulation filed with Kammermann’s
summary judgment motion. However, none of the stipulated facts
appear to contradict one another.

                                     8
                                            D.

        On July 7, 2010, the district court issued its Opinion,

ruling that, because WBB was unable to satisfy the continuity-

of-activity requirement of the Pattern Element, Kammermann was

entitled      to     summary       judgment      on    the      civil     RICO       claim.

Significantly,       the     court    recognized       that   the     only     fraudulent

activity     supported        by     the    record      was     the     submission          of

duplicative        expense    reports       to   WBB    and     clients       of    CLK     on

fourteen occasions between March and December 2008.                            The court

characterized WBB’s allegations of an open-ended pattern as “pro

forma,” concluding that no such pattern existed absent evidence

that Kammermann’s fraudulent activities continued after December

2008.      Opinion 9.      The court also agreed with Kammermann that a

closed-ended pattern had not been shown, explaining that only

“fourteen     predicate        acts     over     a     twelve     month       period        is

insufficient to make out a case for RICO.”                       Id. at 14.              In so

ruling,     the    district    court       emphasized    that     (1)    we    have       been

reluctant to find civil RICO liability where the only predicate

acts are mail and wire fraud offenses; (2) the only participants

in   the    fraud    scheme    were     Kammermann      and     CLK;    (3)        the    only

victims of the scheme were WBB and the five clients of CLK; (4)

the scheme was limited to “misrepresentations made in order to

obtain expense reimbursements from WBB”; and (5) the Complaint

and evidence failed to show any distinct injuries.                       Id. at 16.

                                             9
     WBB     filed     a    timely          notice     of    appeal,    and     we     possess

jurisdiction pursuant to 28 U.S.C. § 1291.

                                               II.

     We    review    de         novo    a    district       court’s    award    of    summary

judgment. See S.C. Green Party v. S.C. State Election Comm’n,

612 F.3d 752, 755 (4th Cir. 2010).                          In so doing, we view the

underlying facts and the permissible inferences drawn therefrom

in the light most favorable to the non-moving party.                                See In Re

French, 499 F.3d 345, 352 (4th Cir. 2007).

                                              III.

     In     pursuing       this        appeal,       WBB    contends    that        there    are

genuine disputes           of    material      fact        that   preclude     an    award    of

summary     judgment.             Furthermore,             WBB    urges,     the      relevant

evidence,     when     viewed           in    the     proper       light,      compels       the

conclusion that Kammermann contravened the civil RICO statute

because    the   facts      of     this       case    parallel      those     presented       in

Professionals, Inc. v. Berry, where we affirmed a finding of

civil RICO liability.              See No. 91-1509, 1992 WL 64796 (4th Cir.

Apr. 2, 1992).         As explained below, both of these contentions

are without merit.

                                               10
                                             A.

        WBB maintains that the district court erred in failing to

recognize       three        genuine     disputes    of   material       fact.         More

specifically,          WBB     contends     that     Kammermann’s        fraud     scheme

involved      more     than     150    predicate    acts,    continued     for     nearly

three years, and had more than 150 victims.                    WBB’s assertions of

disputed fact, however, are not supported by the evidentiary

record, and therefore are not genuine.

     First, WBB maintains that, in addition to the duplicate

billings to WBB and CLK’s clients, Kammermann submitted false

expense reports and weekly time entry reports to WBB from 2006

until       2009.      The    record,     however,    discloses     no    evidence       of

wrongdoing          beyond     the     duplicate    billing    recognized        by     the

district       court    in     its     Opinion.      Thus,    the    court       did    not

erroneously determine — viewing the evidence most favorably to

WBB — that only fourteen predicate acts were shown as part of

Kammermann’s fraud scheme. 6

        Second,       WBB      asserts     that     Kammermann’s      fraud        scheme

continued for nearly three years, beginning when he formed CLK

in 2006 and continuing until his termination from WBB in 2009.

        6
       If Kammermann’s transmission of expense reports to CLK’s
clients are also deemed to be predicate acts for the purposes of
our civil RICO analysis, the number of such acts would increase
from fourteen to about thirty.      Such an increase would not,
however, have any bearing on our analysis.

                                             11
The    evidence,          however,    fails       to     support       this         assertion,

establishing only the duplicate billing scheme that occurred in

the nine-month period between March and December 2008.

       Finally, WBB entreaties us to conclude that there were more

than 150 victims of Kammermann’s fraud scheme, mainly by adding

WBB’s ESOP participants.              Unfortunately for WBB, however, it is

“[a]   basic    tenet       of   American     corporate        law    .    .    .    that    the

corporation and its shareholders are distinct entities.”                                    Dole

Food   Co.     v.    Patrickson,      538     U.S.      468,    474       (2003).         Thus,

“[p]eople dealing with a corporation are obliged to look to the

corporation         for    satisfaction       of       their    claims.              Only     in

extraordinary circumstances are directors liable for corporate

debts.”      Flip Mortg. Corp. v. McElhone, 841 F.2d 531, 534 (4th

Cir. 1988).          As a corollary, a corporate entity is generally

treated as a single victim for purposes of civil RICO liability.

Accordingly, the district court correctly recognized that there

were, at most, six victims of Kammermann’s fraud scheme — WBB

and the five clients of CLK.

                                             B.

       At    bottom,       WBB   is   left    to       rely    solely      on       our   Berry

decision.       Unfortunately         for    WBB,      however,       that      decision      is

neither controlling nor apposite.                       First, the Berry decision

bears no precedential weight.                 See Local Rule 32.1; Pressly v.

Tupperware Long Term Disability Plan, 553 F.3d 334, 338 (4th

                                             12
Cir.    2009)    (recognizing         that      unpublished         decisions      are       not

binding in this Court).               Second, the Berry decision is readily

distinguishable on its facts, and therefore not on point.                                   That

case involved a real estate company (Professionals), a family

(the Berrys), and another business that the Berrys formed and

operated      (Berry    Associates).            In     1985,   the    Berrys      solicited

investments for two plots of land, which they titled to Berry

Associates.             Professionals        later        contracted            with    Berry

Associates      to    develop    the     land     in    exchange     for    part       of    any

profits.

       During    the     following       three       years,    the    Berrys       diverted

approximately $500,000 from Professionals.                          In so doing, they,

inter alia, (1) caused Professionals to pay salaries to Berry

family members who were performing no services; (2) fraudulently

purchased and resold land; (3) wrote checks to themselves to

cover unsubstantiated expenses; (4) directed their accountant to

falsely indicate that a loan from Professionals had been repaid;

(5)    made     false       entries    in    check       records      on    which        their

accountant relied; and (6) filed misleading financial reports.

Additionally,         the     Berrys     opened         bank    accounts          for       sham

construction         companies    that      had      failed    to    maintain       business

records, pay taxes, or register under state law.                            Nevertheless,

the    Berrys    fraudulently         charged        Professionals         in    excess      of

$325,000      for     services    never       performed        by    the        construction

                                             13
companies.        As    a    result,         Professionals     pursued       a     civil    RICO

claim against the Berrys and Berry Associates.                          After conducting

a    bench      trial,       the     district          court   ruled      in        favor    of

Professionals,         rendering         a    plaintiff’s      judgment       on    the     RICO

claim.

      On appeal to this Court, the Berrys contended that the RICO

claim’s       predicate      acts       failed        to   constitute     a      pattern     of

racketeering activity.              We disagreed, however, and affirmed the

district court’s judgment for the plaintiff.                          For our purposes

today,    two    observations         are        pertinent.      First,       although       the

Berrys used mail and wire transfers and communications, they did

so   in   a   variety       of   ways        —   by   “solicitation     of       initial    and

multiple       subsequent          fiscal        contributions,        preparation          and

furnishing       of    false       and       misleading      financial        reports,       and

participation in shareholders’ meetings during which the Berrys

disseminated false and misleading reports on the progress of the

sites.”       Berry, 1992 WL 64796, at *3.                  The extensive and varied

manner in which the Berrys used mail and wire transfers is an

important distinction from this case, where Kammermann used mail

and wire transfers solely to file his false expense reports.

Second, in Berry there were fifty-eight fraudulent acts over a

three-year period that victimized sixteen investors and involved

three individual schemes and participants.

                                                 14
     As    our   unpublished     decision    in    Berry   emphasized,    “[t]he

acts encompassed a variety of techniques to deplete corporate

assets     and   support   the     Berrys’        method   of     operating    the

corporation,     including     falsified      invoices      and     creation    of

fictitious subcontractors.”         1992 WL 64796, at *3.            These facts

stand in contrast to the ordinary commercial fraud cases where

we have been consistently reluctant to approve use of the civil

RICO statute, such as where “one perpetrator undertook actions

directed    toward   a   single    fraudulent       goal   that    impacted    two

investors over a period of approximately one year” — a set of

facts much more analogous to those presented here.                   Id. (citing

Menasco, Inc. v. Wasserman, 886 F.2d 681, 684 (4th Cir. 1989)).

As we have emphasized, “[i]f the pattern requirement [of the

civil RICO statute] has any force whatsoever, it is to prevent

. . . ordinary commercial fraud from being transformed into a

federal RICO claim.”       Menasco, 886 F.2d at 685.               Moreover, “we

are cautious about basing a RICO claim on predicate acts of mail

and wire fraud because it will be the unusual fraud that does

not enlist the mails and wires in its service at least twice.”

GE Inv. Private Placement Partners v. Parker, 247 F.3d 543, 549

(4th Cir. 2001) (internal quotation marks omitted).

     As the district court explained in its Opinion, there was

no showing of the continuity-of-activity aspect of the Pattern

Element.     Kammermann’s fraudulent activities actually ceased by

                                      15
December    2008,     foreclosing      the      possibility      of   an   open-ended

pattern.      On    the    closed-ended         pattern   question,        the   record

circumscribes the predicate acts, and, as the court properly

recognized, those acts are insufficient to form the basis for

such    a   scheme.       Put     simply,      this    dispute    exemplifies         the

situation of a RICO plaintiff who seeks to transform an ordinary

commercial    fraud      scheme    into   a     RICO   claim,    something       we   are

loath to approve.          In such circumstances, we are satisfied to

affirm the award of summary judgment to Kammermann.

                                          IV.

       Pursuant     to    the     foregoing,      we   reject     WBB’s     appellate

contentions and affirm the summary judgment award.

                                                                             AFFIRMED

                                          16