858 F.3d 488
8th Cir.2017Background
- Martin Sigillito ran the British Lending Program (BLP), a Ponzi scheme; he deposited investor funds into his IOLTA and diverted them for personal and other uses; he was later criminally convicted.
- From 2006–2010 Sigillito maintained several accounts at St. Louis Bank, including an IOLTA, business accounts, lines of credit (MTSA loans), and CDARS; many BLP deposits flowed through the IOLTA.
- Bank employees (Hingle and Ohlms) handled transfers and overdraft corrections; Sigillito’s assistant, Stajduhar, reconciled accounts but did not provide the bank with BLP documents or explain the investments.
- Plaintiffs (68 investors) sued St. Louis Bank alleging: violation of Missouri’s Uniform Fiduciaries Law (UFL), aiding-and-abetting breach of fiduciary duty, conspiracy to breach fiduciary duty, and RICO conspiracy; district court granted summary judgment to the bank; plaintiffs appealed.
- The central factual disputes concerned (1) whether St. Louis Bank had actual knowledge or acted in bad faith regarding misappropriation from the IOLTA, and (2) whether the bank knowingly benefitted from payments of Sigillito’s debts.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| UFL liability under Mo. Ann. Stat. § 469.270 (actual knowledge / bad faith / personal benefit) | Bank had actual knowledge from emails and overdrafts; covering overdrafts showed bad faith; loan repayments benefited bank | IOLTA commonly holds mixed funds; emails/overdrafts did not show awareness funds were misappropriated or that repayments were for Sigillito’s personal debt | Affirmed for bank — plaintiffs failed to show actual knowledge, bad faith, or that bank knew payments were for Sigillito’s personal benefit |
| Aiding and abetting breach of fiduciary duty | Bank’s processing of transfers and overdraft accommodations substantially assisted Sigillito’s breaches | Bank did not affirmatively act to facilitate breaches; mere processing or accommodation is insufficient | Affirmed for bank — no evidence bank knew of breach and provided substantial assistance |
| Civil conspiracy to breach fiduciary duty | Bank had a meeting of the minds with Sigillito (via emails/transactions) to misuse IOLTA funds | No meeting of the minds or unity of purpose; bank lacked knowledge of BLP and did not agree to unlawful plan | Affirmed for bank — plaintiffs failed to show agreement or concerted unlawful action |
| RICO conspiracy (conspiracy to participate in enterprise affairs) | Bank’s role in transactions and knowledge of scheme establish agreement to participate in enterprise | Association or awareness is insufficient; must show intent to participate and knowledge of enterprise scope | Affirmed for bank — no evidence bank objectively manifested an agreement to participate in RICO enterprise |
Key Cases Cited
- Aguilar v. PNC Bank, N.A., 853 F.3d 390 (8th Cir. 2017) (explains Missouri UFL standards for actual knowledge and bad faith)
- United States v. Sigillito, 759 F.3d 913 (8th Cir. 2014) (criminal convictions arising from the BLP Ponzi scheme)
- Lerner v. Fleet Bank, N.A., 459 F.3d 273 (2d Cir. 2006) (overdrafts as indicia of commingling or misuse of trust funds)
- Buffets, Inc. v. Leischow, 732 F.3d 889 (8th Cir. 2013) (distinguishes bad faith from actual knowledge; context of fiduciary vs. personal accounts)
- Watson Coatings, Inc. v. Am. Express Travel Related Servs., Inc., 436 F.3d 1036 (8th Cir. 2006) (bad faith test for failure to inquire when facts are readily available)
- Chouteau Auto Mart, Inc. v. First Bank of Mo., 55 S.W.3d 358 (Mo. 2001) (interpreting second-sentence strictures of Missouri’s UFL regarding personal creditors and personal benefit)