Rosemann v. Sigillito (956 F. Supp. 2d 1082, 2013)

ORDER

LINDA R. READE, Chief Judge.

TABLE OF CONTENTS

I. INTRODUCTION......................................................1086

II. RELEVANT PROCEDURAL HISTORY..................................1086

A. Enterprise’s Motion................................................1087

B. Plaintiffs’Motion..................................................1087

III. SUBJECT MATTER JURISDICTION....................................1087

IV. SUMMARY JUDGMENT STANDARD ...................................1088

V. FACTUAL BACKGROUND..............................................1088

A. Parties............................................................1088

B. Alleged “Ponzi Scheme”............................................1089

C. Enterprise’s Role in the Scheme.....................................1089

D. Collapse of the BLP................................................1093

VI. ANALYSIS............................................................1093

A. Count I...........................................................1093

1. Violation of RICO, 18 U.S.C. § 1962(c)............................1094

2. Existence of an enterprise.......................................1094

a. Applicable law .............................................1094

b. Application ....................................... 1095

3. Conduct in association with the enterprise........................1096

a. Applicable law .............................................1096

b. Application ................................................1099

4. Summary......................................................1101

B. Count II........ 1101

1. Conspiracy to violate RICO, 18 U.S.C. § 1962(d)...................1101

2. Application....................................................1102

C. Count III..........................................................1102

1. Applicable law.................................................1103

a. Causation requirement......................................1103

b. General contract interpretation principles ....................1104

2. Enterprise’s Motion ............................................1104

a. Parties’ arguments.........................................1104

b. Application ................................................1105

3. Plaintiffs’Motion..............................................1107

a. Parties’arguments.........................................1107

b. Application ................................................1108

D. Count IV..........................................................1109

1. Applicable law.................................................1109

2. Enterprise’s Motion ............................................1110

a. Parties’arguments.........................................1110

b. Application ................................................1111

3. Plaintiffs’Motion..............................................1112

a. Parties’arguments.........................................1112

b. Application ................ 1112

VII. CONCLUSION...................................... 1113

I. INTRODUCTION

The matters before the court are Defendant Enterprise Bank & Trust’s (“Enterprise”) “Motion for Summary Judgment” (“Enterprise’s Motion”) (docket no. 614) and Plaintiffs’ “Motion for Partial Summary Judgment on Counts [III] and [IV] against Enterprise” (“Plaintiffs’ Motion”) (docket no. 626).

II. RELEVANT PROCEDURAL HISTORY

On October 11, 2012, seventy Plaintiffs filed a Corrected Third Amended Complaint (“Complaint”) (docket no. 456) against thirteen Defendants, including Enterprise. Relevant to the Motions are Counts I through IV against Enterprise. Count I of the Complaint alleges that Enterprise violated the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1962(c). Count II of the Complaint alleges that Enterprise conspired to violate RICO, 18 U.S.C. § 1962(c), in violation of 18 U.S.C. § 1962(d). Count III of the Complaint alleges breach of contract against Enterprise. Count IV of the Complaint alleges negligence against Enterprise. All Plaintiffs assert Counts I and II against Enterprise. However, only forty-one Plaintiffs maintained a self-directed Individual Retirement Account (“IRA”) with Enterprise. Thus, only forty-one of the Plaintiffs assert Counts III and IV against Enterprise. See Stipulation of Plaintiffs on Counts III and IV (docket no. 532).

A. Enterprise’s Motion

On April 21, 2013, Enterprise filed Enterprise’s Motion. On that same date, Enterprise filed a Brief in Support of Enterprise’s Motion (docket no. 615) and a Statement of Material Facts in Support of Enterprise’s Motion. On May 13, 2013, Plaintiffs filed a Resistance to Enterprise’s Motion (docket no. 649). Plaintiffs did not file a response to the Statement of Material Facts in Support of Enterprise’s Motion and did not file a statement of material facts to support their Resistance to Enterprise’s Motion. Rather, Plaintiffs state in the Resistance to Enterprise’s Motion that “there is a genuine dispute with conclusory facts [five] through [eight].” Resistance to Enterprise’s Motion at 7. Plaintiffs do not contest any other facts.

B. Plaintiffs’ Motion

On April 24, 2013, Plaintiffs filed Plaintiffs’ Motion. That same date, Plaintiffs filed a Statement of Material Facts in Support of Plaintiffs’ Motion (docket no. 627). On April 25, 2013, Plaintiffs filed a Brief in Support of Plaintiffs’ Motion (docket no. 628). On May 15, 2013, Enterprise filed a Resistance to Plaintiffs’ Motion. On that same dáte, Enterprise filed a Response to Plaintiffs’ Statement of Material Facts in Support of Plaintiffs’ Motion (docket no. 651) and an Additional Statement of Material Facts in Response to Plaintiffs’ Motion (docket no. 652). On May 16, 2013, Plaintiffs filed a Reply to Enterprise’s Resistance to Plaintiffs’ Motion (docket no. 653).

III. SUBJECT MATTER JURISDICTION

The court has federal question jurisdiction over Plaintiffs’ claims against Enterprise in Counts I and II, which arise under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1962(c)-1962(d). See 28 U.S.C. § 1331 (“The district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States.”).

The court has supplemental jurisdiction over Plaintiffs’ state-law breach of contract claim in Count III and negligence claim in Count IV because they are so related to the claims over which the court has federal question jurisdiction that they form part of the same case or controversy. See 28 U.S.C. § 1367(a) (“[T]he district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy....”). In other words, “[t]he federal-law claims and state-law claims in the case derive from a common nucleus of operative fact and are such that [a plaintiff] would ordinarily be expected to try them all in one judicial proceeding.” Kan. Pub. Emps. Ret. Sys. v. Reimer & Koger Assocs., Inc., 77 F.3d 1063, 1067 (8th Cir.1996) (alteration in original) (quoting Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 349, 108 S.Ct. 614, 98 L.Ed.2d 720 (1988)) (internal quotation marks omitted).

IV. SUMMARY JUDGMENT STANDARD

Summary judgment is appropriate “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). “A dispute is genuine if the evidence is such that it could cause a reasonable jury to return a verdict for either party; a fact is material if its resolution affects the outcome of the case.” Amini v. City of Minneapolis, 643 F.3d 1068, 1074 (8th Cir.2011) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 252, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)), cert. denied, — U.S. -, 132 S.Ct. 1144, 181 L.Ed.2d 1018 (2012). “[S]elf-serving allegations and denials are insufficient to create a genuine issue of material fact.” Anuforo v. Comm’r, 614 F.3d 799, 807 (8th Cir.2010). “To survive a motion for summary judgment, the nonmoving party must substantiate [its] allegations with sufficient probative evidence [that] would permit a finding in [its] favor based on more than mere speculation, conjecture, or fantasy.” Barber v. C1 Truck Driver Training, LLC, 656 F.3d 782, 801 (8th Cir.2011) (second alteration in original) (quoting Putman v. Unity Health Sys., 348 F.3d 732, 733-34 (8th Cir.2003)) (internal quotation marks omitted). The court must view the record in the light most favorable to the nonmoving party and afford it all reasonable inferences. See Schmidt v. Des Moines Pub. Sch., 655 F.3d 811, 819 (8th Cir.2011).

V. FACTUAL BACKGROUND

Viewing the evidence in the light most favorable to the nonmoving parties and affording them all reasonable inferences, the uncontested material facts are as follows.

A. Parties

The Complaint names thirteen Defendants: (1) Martin T. Sigillito, an attorney, American Anglican Bishop and Missouri citizen who did business as Martin T. Sigillito & Associates, Ltd. (“Martin Sigillito & Associates”); (2) Paul Vogel, an accountant, attorney, former President and CEO of Enterprise Bank & Trust’s Trust Department and Missouri citizen; (3) Enterprise Bank & Trust, a Missouri corporation and subsidiary of Enterprise Financial Services Corp.; (4) James Scott Brown, an attorney and Kansas citizen who did business as the British American Group, Inc., a Kansas corporation; (5) Metis Insaat ve Ticaret A.S. (“Metis”), a Turkish company; (6) Swinburne & Jackson, a law firm with offices in England; (7) Metis Holding A.S., a Turkish company and principal shareholder of Metis Insaat ve Ticaret A.S.; (8) Veysel Sever, a resident of Turkey and shareholder and officer of Metis Insaat ve Ticaret A.S.; (9) Ayse Sever, a resident of Turkey and shareholder and officer of Metis Insaat ve Ticaret A.S.; (10) Fatma Nese Ózdemir, a resident of Turkey and shareholder and officer of Metis Insaat ve Ticaret A.S.; (11) Levent Rifki Sever, a resident of Turkey and shareholder and officer of Metis Insaat ve Ticaret A.S.; (12) Bedri Sever, a resident of Turkey and shareholder and officer of Metis Insaat ve Ticaret A.S.; and (13) M & M Financial Investors, LLC, an Ohio limited liability company.

The only remaining Defendants in this action are Enterprise and Sigillito. Derek Smith, a nonparty in this action, is a real estate developer in England. Smith owns Distinctive Properties (UK) Limited (“Distinctive Properties”), which is also a nonparty. Counts 1 and 2 are brought by sixty-nine individuals who are citizens of various states and one company, Braithwaite Consulting Limited (“Braithwaite”). Counts 3 and 4 are brought by forty-one individuals who maintained a self-directed IRA with Enterprise. Plaintiffs are not a certified class and each Plaintiff is bringing the claims against Enterprise in his or her individual capacity.

B. Alleged “Ponzi Scheme”

Sigillito and others organized and operated a fraudulent loan program called the British Lending Program (“BLP”) in which individuals, including Plaintiffs, loaned money to Smith and Distinctive Properties for purported land purchases in England. Sigillito and others attracted lenders “with written marketing materials which misrepresented the quality of the investment and the destination of loan funds, which were represented to be invested in land options in England.” Complaint ¶ 10. As part of the BLP, the lenders entered into loan agreements whereby they lent money to Distinctive Properties, which is listed as the borrower in the loan agreements. Smith is listed as the surety in the loan agreements. Each loan agreement included an “Asset & Liability Statement,” which the loan agreements warranted as “a true, accurate and current statement of [Smith’s] assets and liabilities.” Id. ¶ 51. However, the Asset & Liability Statements significantly overstated Smith’s assets and understated his liabilities.

The BLP “operated as a classic Ponzi scheme in which loan payments were paid from new loans.” Id. ¶ 14 (emphasis omitted). Over one hundred individuals loaned a total of approximately $52.5 million to the BLP. “Defendants only transferred $1.15 million of this amount to ... Smith for purported investments.” Id. Self-directed IRAs were the main source of BLP funds. Sigillito and others “targeted these IRAs because they tend[ ] to be renewed (rolled over) each year and the account holders would not ask for the money until retirement.” Id. ¶ 12.

C. Enterprise’s Role in the Scheme

Self-directed IRAs, which were a primary source of funding for the BLP, require “a qualified custodian to hold IRA assets on behalf of the account holder.” Id. ¶86. “IRA custodians maintain the assets and all corresponding transactions and records, file required [Internal Revenue Service] reports, issue client statements, and assist clients in understanding the rules and regulations pertaining to certain prohibited transactions.” Id. From December 2001 until summer of 2008, Millennium Trust Company, LLC (“Millennium”) served as the custodian for the IRAs invested with the BLP. In the spring of 2008, Vogel became involved with the BLP and began marketing BLP loans in return for fees. Later that year, Vogel secured the transfer of all IRA loans from Millennium to Enterprise, making Enterprise the custodian of the IRA loans invested with the BLP. Marti Gurley served as the Vice President and Trust Counsel at Enterprise until 2009, when she became a Senior Vice President. Gurley was designated to be in charge of compliance at Enterprise sometime in 2011 and ran Enterprise’s Compliance Committee. Rick Blume was the account manager at Enterprise for all BLP loans until the summer of 2009, when Dana Muskoph took over the accounts. Liz Brahm is the Assistant Vice President of Trust Operations at Enterprise.

“Enterprise commenced their custodial relationship” with the individual IRA lenders (“Customers”) “with a Custody Agreement.” Id. ¶ 117. The Custody Agreements include the following language:

1. Safekeeping

Enterprise ... agrees to hold and keep safely all securities and other property (hereinafter “Assets”) which Customer shall elect to deposit in the Account and which are acceptable to Enterprise ..., or which may be acquired or collected for or otherwise added to this Account (and then only as expressly provided herein), and thereafter shall be responsible for such Assets only until such time as they have been transmitted to and received by another person or entity pursuant to the terms of this Agreement or Instructions as defined in Section 11, hereof.

4. Distributions

Enterprise ... shall make distributions from the Account as directed, in writing, by customers.

Enterprise ... may charge the Account an amount that will cover all related charges, but not limited to, wire charges, postage and other such items relating to processing the distributions. In addition, if such distributions result in an overdraft in the account, Enterprise ... reserves the right to offset such deficiency against the existing assets in the account in any manner deemed appropriate by Enterprise....

5. Purchases and Sales

On the receipt of Instructions, Enterprise ... shall purchase additional securities in the Account, and shall charge the Account an amount that will cover the cost of the securities purchased plus all related charges, but not limited to, brokerage commissions, wire charges, postage, and other such items. Such payment shall be made only upon receipt by Enterprise ... of the securities so purchased in such form as is satisfactory to Enterprise....

If upon settlement of the trade(s) an overdraft is created in the Account, Enterprise ... reserves the right to offset such deficiency against the existing assets in the account in any manner deemed appropriate by Enterprise....

On the receipt of Instructions, Enterprise ... shall deliver or cause to be delivered securities sold by or from the Account to the broker or other person specified in the Instructions. Such delivery shall be made only upon receipt of payment therefore in such form as is satisfactory to Enterprise ..., with the understanding that Enterprise ... may deliver securities or cause them to be delivered and arrange for payment therefore in accordance with the customs then prevailing among dealers in securities.

9. Instructions

As used herein, the term “Instructions” shall mean written ... or oral ... Instructions to Enterprise ... which Enterprise ... reasonably believes to have been transmitted by the Customer or any Investment Advisor designated in Section 26, hereof. No later than the next business day immediately following each oral Instruction, the Customer or Investment Advisor giving that oral Instruction shall send to Enterprise ... written confirmation of such oral Instruction, but the lack of such confirmation shall in no way affect Enterprisers] ... authority to act upon such oral Instruction or invalidate any actions taken by Enterprise ... in reliance upon such oral Instruction. Enterprise ... shall be protected and shall be indemnified and held harmless by Customer in executing any instructions hereunder.

11. No Duty to Provide Investment Advice

Enterprise ... will provide custodial services only and has no duty to provide investment advice. Enterprise ... is not responsible for investment performance and does not guarantee that investment losses will not occur in the Account. It is expressly agreed that Enterprise ... has no obligation to advise or recommend to Customer the purchase, retention, sale, exchange, or otherwise of any Assets at any time.

12. Standard of Care

In the absence of gross negligence or willful misconduct on its part, Enterprise ... shall not be liable to the Customer or any other person with respect to any action taken or omitted by it in connection with the Agreement. In no event shall Enterprise ... be liable for attorney’s fees or for consequential or punitive damages.

Enterprise ... shall not be responsible for any loss occasioned by the actions, omissions, defaults, or insolvency of any investment advisor, broker, bank, trust company, or any other person with whom Customer may deal, so long as Enterprise ... has not engaged in gross negligence or willful misconduct. Enterprise ... shall not be responsible for losses resulting from events beyond its control, such as strikes, lockouts or labor disputes, riots, war, equipment or transmission failure or damage, fire, flood, earthquake, windstorm or other natural disaster, action or inaction of governmental authority, or other causes beyond its control.

20. Missouri Law Controlling

This Agreement shall be governed by the laws of the State of Missouri.

26. Designation of Broker or Investment Advisor

(Optional) Enterprise ... is directed to accept and to rely fully upon all Instructions with respect to the purchase and sale of, and other transactions in securities, given by_(hereinafter “Investment Advisor”), with the brokerage firm of Investment Advisor’s choosing, and no further authorization by Customer shall be required. Therefore, Enterprise ... shall have no liability as a result of following such instructions.

Thomas Currier Custody Agreement (docket no. 456-12) at 1, 2, 3-4, 5, 7; Daryll Currier Custody Agreement (docket no. 456-12) at 9, 10, 11-12, 13, 15; Roy Currier Custody Agreement (docket no. 456-12) at 17, 18, 19-20, 21, 23; Phillip L. Rosemann Custody Agreement (docket no. 616-1) at 5, 6, 7-8, 9, 11; Leonard Roman Custody Agreement (docket no. 651-11) at 1, 2, 3-4, 5, 7. Each Customer paid Enterprise an annual fee of $1,250 for its services. Complaint ¶ 119; Enterprise Fee Invoice (docket no. 456-13). Sixteen Plaintiffs designated Sigillito or Martin Sigillito & Associates as their investment advisor, while four or five designated Gerald Messenger and twenty or twenty-one left Section 26 blank. Despite the fact that twenty-two or twenty-three Plaintiffs did not designate Sigillito as their investment advisor, “Enterprise operated as if Martin Sigillito & Associates was the investment advisor for every British Lending Program IRA.” Complaint ¶ 161.

Each Customer listed Enterprise as the account custodian and identified an attorney as “the Lender’s Solicitors” in the loan agreement. See, e.g., David Caldwell Loan Agreement (docket no. 456-6) at 2. Pursuant to the Custody Agreements, the Customers made payments into their IRAs by sending money to Enterprise. Although the loan agreements listed Distinctive Properties as the borrower, after Customers executed their loan agreements and sent their IRA loan funds to Enterprise, Enterprise mailed the Customers’ money to Sigillito’s IOLTA account at a St. Louis Bank without written documentation or confirmation that Smith or Distinctive Properties ultimately received the loan funds. Complaint ¶¶ 133-135. Customers generally did not give Enterprise any instructions to send the loan funds to Sigillito. Rather, Enterprise took instruction from Sigillito.

As custodian, Enterprise mailed Customers periodic account statements that purported to show the assets in their IRAs, periodic interest payments and other information. These statements “reinforced the belief that the loans were secure” because the statements “falsely showed that the money was sent to England and that the value of the accounts increased with yearly interest payments from England. Without the fraudulent account statements, the [Customers] would not have made, or rolled over (re-invested), their loans.” Id. ¶ 26. However, Enterprise sent the money to Sigillito, rather than to Smith or Distinctive Properties, and never confirmed whether Sigillito ultimately sent the money to Smith or Distinctive Properties. Additionally, Enterprise misrepresented “that the repayment of principle [sic] and interest [to the Customers] was made directly from Distinctive Properties.” Id. ¶ 144. “However, Enterprise never received any repayment directly from Distinctive Properties.” Id. ¶ 146. Enterprise also increased the value in Plaintiffs’ accounts with roll-over principal and interest, even when Enterprise never received such income. Id. ¶ 147.

In 2009, Enterprise sent an Acknowledgment and Indemnification Agreement to Customers, which provided: “I hereby release, indemnify, hold harmless and discharge Enterprise ..., as Custodian, from any and all claims, demands, damages, liabilities or other expenses in connection with the investments held in my IRA account.” Acknowledgment and Indemnification Agreement (docket no. 456-19) at 2.

D. Collapse of the BLP

On April 28, 2011, the government filed a twenty-two count Indictment against Sigillito, Brown and Smith, charging wire fraud, mail fraud, conspiracy to commit mail and wire fraud and engaging in and attempting to engage in money laundering transactions. See Indictment (docket no. 2), United States v. Martin T. Sigillito et al., 11-CR168-LRR (E.D. Mo. filed Apr. 28, 2011). On June 1, 2011, Enterprise notified the Customers that it was assigning a value of $0 for the loans that were part of the BLP. Complaint ¶ 174. Brown and Smith plead guilty to the charges against them in the Indictment. Sigillito proceeded to trial and, on March 19, 2012, a jury trial on Counts 1 through 22 of the Indictment commenced. On April 13, 2012, the jury returned guilty verdicts on Counts 1 through 13 and 16 through 22 of the Indictment.

VI. ANALYSIS

The court will consider each of Plaintiffs’ claims in the Complaint against Enterprise and determine whether summary judgment is appropriate. First, the court will consider whether summary judgment in favor of Enterprise is appropriate with respect to Counts I and II. Next, because Enterprise and Plaintiffs both moved for summary judgment on Counts III and IV, the court will consider whether summary judgment in favor of Plaintiffs or Enterprise is appropriate with respect to Counts III and IV.

The court will apply Missouri law to Plaintiffs’ state-law claims in Counts III and IV. The parties agree that Missouri law applies. In addition, the Custody Agreements provide that they “shall be governed by the laws of the State of Missouri.” Thomas Currier Custody Agreement at 5.

A. Count I

In Count I of the Complaint, Plaintiffs allege that Enterprise violated RICO, 18 U.S.C. § 1962(c). In Enterprise’s Motion, Enterprise argues that the court should grant summary judgment in its favor with respect to Count I because the alleged association-in-fact enterprise between Martin Sigillito & Associates and the British American Group is not a proper RICO enterprise because it is indistinguishable from the alleged pattern of racketeering. With respect to this argument, Enterprise further claims that, “[a]side from the operation of the Ponzi scheme, the association of [Martin Sigillito &] Associates and [the] British American Group does not exist as a stand-alone entity.” Brief in Support of Enterprise’s Motion at 6. Additionally, Enterprise argues that summary judgment in its favor is appropriate with respect to Count I because Enterprise did not participate in the operation or management of an identifiable enterprise.

In the Resistance to Enterprise’s Motion, Plaintiffs contend that summary judgment in Enterprise’s favor is not appropriate because the RICO association has an ascertainable structure because “[t]he Metis loan [that Sigillito negotiated] is outside the BLP and shows that the two corporations have a structure distinct from the predicate acts at issue in this case.” Resistance to Enterprise’s Motion at 18. Additionally, Plaintiffs contend that Enterprise “participated in the core money laundering activities” of the RICO enterprise and, therefore, in the operation and management of the enterprise. Id. at 22.

1. Violation of RICO, 18 U.S.C. § 1962(c)

Congress enacted RICO “to curb the infiltration of legitimate business organizations by racketeers.” Sinclair v. Hawke, 314 F.3d 934, 943 (8th Cir.2003) (quoting Atlas Pile Driving Co. v. DiCon Fin. Co., 886 F.2d 986, 990 (8th Cir.1989)) (internal quotation mark omitted). To this end, Congress created a private cause of action for those injured by racketeering activity. Pursuant to 18 U.S.C. § 1964(c):

Any person injured in his business or property by reason of a violation of [18 U.S.C. § ]1962 may sue therefor in any appropriate United States district court and shall recover threefold the damages he sustains and the cost of the suit, including a reasonable attorney’s fee, except that no person may rely upon any conduct that would have been actionable as fraud in the purchase or sale of securities to establish a violation of [§ ]1962.

18 U.S.C. § 1964(c). Under 18 U.S.C. § 1962(c), it is “unlawful 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 or collection of unlawful debt.” 18 U.S.C. § 1962(c). “Racketeering activity” includes the offenses of mail fraud, wire fraud and money laundering. 18 U.S.C. § 1961(1)(B).

To prove a violation of § 1962(c), a plaintiff must show: “(1) the existence of an enterprise; (2) conduct by the defendants in association with the enterprise; (3) the defendants’ participation in at least two predicate acts of racketeering; and (4) conduct that constitutes a pattern of racketeering activity.” In re Sac & Fox Tribe of the Miss. in Iowa/Meskwaki Casino Litig., 340 F.3d 749, 767 (8th Cir.2003); see also Nitro Distrib., Inc. v. Alticor, Inc., 565 F.3d 417, 428 (8th Cir.2009) (stating that a plaintiff must show “ ‘(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity’ ” (quoting Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985))).

2. Existence of an enterprise

a. Applicable law

In order to satisfy the first element of a claim under RICO, 18 U.S.C. § 1962(c), a plaintiff must establish “the existence of an enterprise.” In re Sac & Fox Tribe of the Miss, in Iowa/Meskwaki Casino Litig., 340 F.3d at 767. “An ‘enterprise’ is defined to include ‘any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity.’ ” Craig Outdoor Adver., Inc. v. Viacom Outdoor, Inc., 528 F.3d 1001, 1026 (8th Cir.2008) (quoting 18. U.S.C. § 1961(4)). An enterprise “is proved by evidence of an ongoing organization, formal or informal, and by evidence that the various associates function as a continuing unit.” United States v. Turkette, 452 U.S. 576, 583, 101 S.Ct. 2524, 69 L.Ed.2d 246 (1981).

“Three elements must be proven to show that a RICO enterprise existed: (1) a common purpose that animates the individuals associated, with it; (2) an ongoing organization with members who function as a continuing unit; and (3) an ascertainable structure distinct from the conduct of a pattern of racketeering.” United States v. Lee, 374 F.3d 637, 647 (8th Cir.2004). In light of the United States Supreme Court’s holding in Boyle v. United States, 556 U.S. 938, 129 S.Ct. 2237, 173 L.Ed.2d 1265 (2009), it is not necessary to show any structural elements of the enterprise beyond those that may be reasonably interpreted from the statute. See id. at 945-48, 129 S.Ct. 2237 (explaining that, although the existence of an enterprise is a separate element that must be proved and requires three structural features — “a purpose, relationships among those associated with the enterprise, and longevity sufficient to permit these associates to pursue the enterprise’s purpose” — a RICO enterprise is not limited to “business-like entities” and does not require a “hierarchal structure” or a “chain of command”).

“In deciding whether an alleged RICO enterprise has an ascertainable structure distinct from the pattern of racketeering activity, [the court] must ‘determine if the enterprise would still exist were the predicate acts removed from the equation.’ ” Crest Constr. II, Inc. v. Doe, 660 F.3d 346, 354-55 (8th Cir.2011) (quoting Handeen v. Lemaire, 112 F.3d 1339, 1352 (8th Cir.1997)); see also United States v. Bledsoe, 674 F.2d 647, 664 (8th Cir.1982) (“[A]n enterprise cannot simply be the undertaking of the acts of racketeering, neither can it be the minimal association which surrounds these acts.”). Whether the enterprise has a structure that is distinct from the pattern of racketeering activity turns on whether the enterprise would still exist if the conduct that constitutes the racketeering activity were absent. See Crest Constr. II, Inc., 660 F.3d at 354-55. “The focus of the inquiry is whether the enterprise encompasses more than what is necessary to commit the predicate RICO offense.” Diamonds Plus, Inc. v. Kolber, 960 F.2d 765, 770 (8th Cir.1992).

In Stephens, Inc. v. Geldermann, Inc., 962 F.2d 808 (8th Cir.1992), the Eighth Circuit Court of Appeals considered whether an alleged association-in-fact enterprise had a structure distinct from the pattern of racketeering activity. Id. at 815. There, the plaintiff brought a RICO claim against a commodities-futures merchant, seeking to recover trading losses. Id. at 810-11. The plaintiff alleged the existence of an association-in-fact enterprise. Id. at 815. The Eighth Circuit held that the plaintiff failed to allege a proper RICO enterprise distinct from the alleged pattern of racketeering activity because “[t]his group ... had no structure independent of the alleged racketeering activity” and “[t]he only common factor that linked ... the parties together and defined them as a distinct group was their direct or indirect participation in [the] scheme to defraud [the plaintiff].” Id. at 815-16 (emphasis added). The Eighth Circuit further stated that, although each member of the enterprise “carried on other legitimate activities, these activities were not in furtherance of the common or shared purpose of the enterprise and, thus, were not acts of the enterprise.” Id. at 816. Thus, in Stephens, the Eighth Circuit found that the plaintiffs RICO claim could not stand because, “[a]bsent the predicate acts of wire and mail fraud, the association-in-fact enterprise which [the plaintiff] alleged had no form or structure.” Id.

b. Application

In the Complaint, Plaintiffs allege the existence of an association-in-fact enterprise between Martin Sigillito & Associates and the British American Group, which “functioned as an informal association” and engaged in activities which affected “both interstate and foreign commerce.” Complaint ¶ 206. Enterprise contends that such enterprise is “indistinguishable from the alleged pattern of racketeering activity” and, thus, is “not a proper RICO enterprise.” Brief in Support of Enterprise’s Motion at 5. In the Resistance to Enterprise’s Motion, Plaintiffs contend that the association-in-fact between Martin Sigillito & Associates and the British American Group qualifies as a RICO enterprise because the association “providefs] international business consulting services, like the $5 million Turkish loan to Metis for Phil[lip] Rosemann.” Resistance to Enterprise’s Motion at 18. “The Metis loan is outside the BLP and shows that the two corporations have a structure distinct from the predicate acts at issue in this ease.” Id.

The court finds that Plaintiffs’ argument is without merit. The Complaint fails to point to any activity of the alleged enterprise that is distinct from the racketeering activity at issue. In the Resistance to Enterprise’s Motion, the only non-racketeering activity that Plaintiffs point to is the loan between Metis, a Turkish company, and Braithwaite, a Belize corporation incorporated by Sigillito for Phillip L. Rosemann, a Plaintiff in the instant case, as a vehicle to reduce Rosemann’s taxes and limit his liability. Sigillito drafted, negotiated, reviewed and approved the note between Braithwaite and Metis. On October 22, 2012, the court granted Metis’s motion to dismiss for lack of subject matter jurisdiction. October 22, 2012 Order at 25. In the October 22, 2012 Order, the court noted that “[tjhere is no allegation that Metis was in any way involved with ... the BLP, and there is no evidence that the money involved in the dispute between Metis and Braithwaite was involved in the Ponzi scheme.” Id. at 11. In addition, the court held that “[t]he fact that Sigillito was associated with the agreement between Metis and Braithwaite and also played a role in the alleged RICO violations” was not a sufficient connection to allow the court to exercise supplemental subject matter jurisdiction over Plaintiffs’ claims against Metis. Plaintiffs have alleged no additional facts to show how the alleged enterprise, rather than Sigillito, was involved with the Metis loan. There is nothing in the record to suggest that the British American Group was involved with the Metis loan. Thus, the Metis loan does not qualify as a non-racketeering activity of the alleged enterprise.

Furthermore, even if Sigillito “carried on other legitimate activities, these acts were not in furtherance of the common or shared purpose of the enterprise and, thus, were not acts of the enterprise.” Stephens, 962 F.2d at 816. Thus, any legitimate activities carried on by Martin Sigillito & Associates or the British American Group individually are not sufficient to show a structure beyond that inherent in the pattern of racketeering activity because “[t]he only common factor that linked” Martin Sigillito & Associates with the British American Group “and defined them as a distinct group was their direct or indirect participation in [the] scheme to defraud [Plaintiffs].” Id. at 815-16 (emphasis added). Therefore, the court finds that Plaintiffs have not shown that the alleged association-in-fact of Martin Sigillito & Associates and the British American Group has any structure distinct from the alleged racketeering activities and, accordingly, have failed to show the existence of a RICO enterprise.

3. Conduct in association with the enterprise

a. Applicable law

In order to satisfy the second element of a claim under RICO, 18 U.S.C. § 1962(c), a plaintiff must show “conduct by the defendants in association with the enterprise.” In re Sac & Fox Tribe of the Miss. in Iowa/Meskwaki Casino Litig., 340 F.3d at 767. The Supreme Court has held that a plaintiff must show that the defendant “has participated in the operation or management of the enterprise itself.” Reves v. Ernst & Young, 507 U.S. 170, 183, 113 S.Ct. 1163, 122 L.Ed.2d 525 (1993). “In order to ‘participate, directly or indirectly, in the conduct of such enterprise’s affairs,’ one must have some part in directing those affairs.” Id. at 179, 113 S.Ct. 1163 (quoting 18 U.S.C. § 1962(c)). “[I]t is not necessary that a RICO defendant have wielded control over the enterprise, but the plaintiff ‘must prove some part in the direction ... of the enterprise’s affairs.’” Handeen, 112 F.3d at 1348 (quoting United States v. Darden, 70 F.3d 1507, 1543 (8th Cir.1995)).

“An enterprise is ‘operated’ not just by upper management but also by lower rung participants who ... are under the direction of upper management.” Reves, 507 U.S. at 184, 113 S.Ct. 1163; see also id. at 184 n. 9, 113 S.Ct. 1163 (declining to decide how far RICO liability may extend down the ladder of an enterprise’s operation because the defendant was not liable because he was not acting under the direction of the enterprise). Additionally, an enterprise may be operated or managed by “outsiders” who are associated with the enterprise “who exert control over it as, for example, by bribery.” Id. at 184-85, 113 S.Ct. 1163. “ ‘[Outsiders’ may be liable under § 1962(c) if they are ‘associated with’ an enterprise and participate in the conduct of its affairs-that is, participate in the operation or management of the enterprise itself.” Id. at 185, 113 S.Ct. 1163.

The Supreme Court’s use of bribery as an example of an outsider’s act that may qualify as “operation or management” of the enterprise suggests that it is difficult to find an outsider liable under § 1962(c). See, e.g., Abbott v. Chem. Trust, No. 01-2049-JWL, 2001 WL 492388, at *15 (D.Kan. Apr. 26, 2001) (dismissing the plaintiffs’ RICO claim against a bank that was an outsider to the enterprise operating a Ponzi scheme, stating that “simply providing] goods or services that ultimately benefit the enterprise does not mean that one becomes liable under RICO as a result” (alteration in original) (quoting BancOklahoma Mortg. Corp. v. Capital Title Co., 194 F.3d 1089, 1102 (10th Cir.1999)) (internal quotation marks omitted)); Dep’t of Econ. Dev. v. Arthur Andersen & Co. (U.S.A.), 924 F.Supp. 449, 467 (S.D.N.Y.1996) (stating that the Supreme Court’s bribery example “emphasizes how difficult it is to hold an outsider liable under § 1962(c) after Reves ”); De Wit v. Firstar Corp., 879 F.Supp. 947, 965-66 (N.D.Iowa 1995) (dismissing a § 1962(c) claim where the “defendants’ conduct was one step removed from management of the RICO enterprise itself,” after reasoning that “even provision of services essential to the operation of the RICO enterprise itself is not the same as participating in the conduct of the affairs of the enterprise”).

“Furnishing a client with ordinary professional assistance, even when the client happens to be a RICO enterprise, will not normally rise to the level of participation sufficient to satisfy the Supreme Court’s pronouncements in Reves.” Handeen, 112 F.3d at 1348. Thus, “an attorney or other professional does not conduct an enterprise’s affairs through run-of-the mill provision of professional services.” Id.

Appreciation for the unremarkable notion that the operation or management test does not reach persons who perform routine services for an enterprise should not, however, be mistaken for an absolute edict that an attorney who associates with an enterprise can never be liable under RICO. An attorney’s license is not an invitation to engage in racketeering, and a lawyer no less than anyone else is bound by generally applicable legislative enactments. Neither Reves nor RICO itself exempts professionals, as a class, from the law’s proscriptions, and the fact that a defendant has the good fortune to possess the title “attorney at law” is, standing alone, completely irrelevant to the analysis dictated by the Supreme Court.

Id. at 1349. Many other courts have also acknowledged the principle that merely furnishing a client with ordinary professional assistance will not generally rise to the level of participation in an enterprise that is sufficient to satisfy the operation or management test. See Reves, 507 U.S. at 185, 113 S.Ct. 1163 (applying the operation or management test and holding that the defendant-accounting firm’s conduct was insufficient to impose RICO liability when the accounting firm prepared audits, reviewed transactions, certified records as fair representations of the enterprise’s financial status and presented reports to the enterprise’s directors and shareholders); Walter v. Drayson, 538 F.3d 1244, 1248-49 (9th Cir.2008) (holding that an attorney’s provision of services did not satisfy the operation or management test); Goren v. New Vision Int’l, Inc., 156 F.3d 721, 727-28 (7th Cir.1998) (finding a doctor and two other defendants not liable because “simply performing services for an enterprise, even with knowledge of the enterprise’s illicit nature, is not enough to subject an individual to RICO liability under § 1962(c)”); Nolte v. Pearson, 994 F.2d 1311, 1317 (8th Cir.1993) (holding that the defendant-attorneys’ conduct was insufficient to impose RICO liability when the attorneys prepared an opinion letter and accompanying memorandum advising investors of federal income tax consequences, a defense letter agreeing to render legal assistance to investors and two documents explaining whether changes in federal tax laws would have a material effect on an investor’s income taxes).

However, attorneys and other professionals may be liable under § 1962(c) “when [they] cross[ ] the line between traditional rendition of [professional] services and active participation in directing the enterprise.” Handeen, 112 F.3d at 1349, 1350 (reversing the district court’s dismissal of the plaintiffs claim under 18 U.S.C. § 1962(c) against a law firm because the allegations that the firm assisted in the manipulation of the bankruptcy process to obtain a discharge for the plaintiff, if true, would justify a finding that the attorneys “ ‘participated in the core activities that constituted the affairs of the [estate]’” and, thus, that the attorneys “participated in the conduct of the alleged RICO enterprise”) (alteration in original) (quoting Napoli v. United States, 32 F.3d 31, 36 (2d Cir.1994), aff'd on reh’g, 45 F.3d 680 (2d Cir.1995)); MCM Partners, Inc. v. Andrews-Bartlett & Assocs., Inc., 62 F.3d 967, 978-79 (7th Cir.1995) (reversing the district court’s dismissal of a RICO claim because the exhibition contractors were not “outsiders” when they acted at the direction of upper management and “were vital to the achievement of the enterprise’s primary goal” and, thus, the plaintiffs allegations were sufficient to establish the defendants’ participation in the operation or management of a RICO enterprise); Napoli 32 F.3d at 35-36 (affirming attorneys’ convictions for RICO violations where they “played some part in directing the affairs of the charged enterprise,” “participated in the [enterprise’s] core activities” and “dis charged their responsibility through a pattern of illegal acts”); In re Am. Honda Motor Co., Dealerships Relations Litig., 941 F.Supp. 528, 559-60 (D.Md.1996) (finding allegations that attorneys “were paid directors with a full voice on American Honda” and “handled Honda’s internal investigations and assisted in covering up the scheme” sufficiently alleged the attorneys participated in a RICO enterprise); Tribune Co. v. Purcigliotti 869 F.Supp. 1076, 1097 (S.D.N.Y.1994) (finding that a complaint sufficiently alleged that a doctor participated in the operation or management of the enterprises where he “ ‘participated in the core activities that constituted the affairs’ of the enterprises by performing inaccurate audiograms and falsely certifying these audiograms” (quoting Napoli 32 F.3d at 36)), aff'd on other grounds sub nom. Tribune Co. v. Abiola, 66 F.3d 12 (2d Cir.1995); Clark v. Milam, 847 F.Supp. 409, 417 (S.D.W.Va.1994) (declining to dismiss allegation that accountants “knowingly concealed the activity of other defendants who exercised day-to-day control over the enterprise” because the concealment was “integral to the continuing operation of the RICO enterprise”), aff'd on other grounds sub nom. Clark v. Allen, 139 F.3d 888 (unpublished table decision), Nos. 95-2487, 96-1116, 96-1276, 1998 WL 110160 (4th Cir.1998) (per curium).

b. Application

In the Complaint, Plaintiffs claim that Enterprise “exercised a significant degree of direction over the affairs of the [association of [Martin] Sigillito [& Associates] [and][the] British American [Group].” Complaint ¶ 211. Plaintiffs’ allegations in Count I suggest that Enterprise may have assisted the alleged RICO enterprise; however, there is no evidence suggesting that Enterprise directed the enterprise, exerted substantial control over its affairs or managed its basic structure. Rather, Plaintiffs’ allegations suggest that Enterprise provided its regular, custodial services to Plaintiffs and did nothing beyond engaging in the operation or management of its own affairs.

The Eighth Circuit addressed the distinction between a defendant managing an enterprise’s affairs and a defendant merely managing its own affairs in Dahlgren v. First National Bank of Holdrege, 533 F.3d 681, 688 (8th Cir.2008). In Dahlgren, cattle investors and corn producers sued a bank for, among other things, damages under § 1962(c). Id. at 686. The plaintiffs alleged that the bank “misled them into continuing to do business with [a cattle company and RICO enterprise] by concealing [the cattle company’s] increasing financial weakness to protect the [b]ank’s substantial interest as [the cattle company’s] creditor.” Id. A jury found the bank liable and the district court denied the bank’s post-trial motion for judgment as a matter of law. Id. The Eighth Circuit reversed. Id.

The Eighth Circuit concluded that, “[w]ith one possible exception, all of the [b]ank’s actions that [the] plaintiffs eite[d] as evidence of the [b]ank’s control of [the cattle company] [fell] into the category of a creditor conducting its own affairs.” Id. at 690. The Eighth Circuit summarized the bank’s conduct by noting that the bank allowed the commingling of funds from different entities, honored substantial overdrafts that effectively increased the cattle company’s line of credit, allowed notes due to the bank to remain past due, honored insufficient checks to investors, encouraged another bank to participate in the lines of credit, recommended the cattle company to other bank customers and required the cattle company owner to take particular actions to get a loan approved. See id. The Eighth Circuit noted that “simply because a bank allows a heavily indebted customer to take actions such as overdrafts and late note payments that the bank might prevent by exercising its formidable rights as creditor is not evidence that the bank controlled the customer’s operations and management.” Id. (emphasis omitted). The Eighth Circuit then discussed the one transaction that may have crossed the line into control and held that this one “isolated incident” was insufficient to demonstrate a pattern of racketeering activity. Id. at 690-92. Thus, the Eighth Circuit concluded that the plaintiffs failed to establish that the bank directed the operation or management of the cattle company. Id. at 692.

The court finds that Plaintiffs have failed to make the requisite showing that Enterprise directed the operation or management of the association-in-fact enterprise. The court notes that on October 31, 2011, it dismissed Count I of the Amended Complaint (docket no. 40) against Enterprise, finding that Plaintiffs failed to allege “that Enterprise participated in the operation or management” of the RICO enterprise. October 31, 2011 Order (docket no. 220) at 31. In the October 31, 2011 Order, the court noted that the Amended Complaint alleged, with respect to Enterprise’s participation in the RICO enterprise, that:

Enterprise had a continuing relationship with Paul Vogel; Defendants transferred all of the IRA loans to Enterprise for custody and supervision; the individual IRA lenders entered into custody agreements with Enterprise; each IRA lender paid at least $1,250 per year for Enterprise’s “safekeeping” of the IRA loans; the custody agreements indicated that the loans were securities; Enterprise sent Plaintiffs periodic account statements that falsely represented the amount of [principal] and interest of each loan; Enterprise sent the IRA loan funds directly to Sigillito in the form of checks made payable to Martin Sigillito & Associates; and Enterprise did not receive any written documentation or confirmation that Smith or Distinctive Properties ultimately received the loan funds.

Id. at 30. The court went on to find that, “[although these allegations are troublesome, they do not suggest that Enterprise directed the operation or management of [the alleged RICO enterprise].” Id. The court granted Plaintiffs leave to amend the Amended Complaint and, on January 1, 2012, Plaintiffs filed a Second Amended Complaint (docket no. 252). On September 12, 2012, Plaintiffs filed a Third Amended Complaint (docket no. 420) and, on October 11, 2012, Plaintiffs filed the instant Complaint. In each of these amended complaints, Plaintiffs realleged Count I against Enterprise. However, the court finds that Plaintiffs have still failed to show that Enterprise participated in the operation or management of the enterprise. Plaintiffs have not alleged any additional facts supporting their assertion that Enterprise was sufficiently involved with the enterprise’s affairs to impose liability under § 1962(c), beyond those alleged in the Amended Complaint. Plaintiffs claim that Enterprise was willfully ignorant of the criminal nature of the BLP and that Enterprise actively worked to conceal the true state of the BLP from Plaintiffs. These allegations, if true, suggest that Enterprise may have assisted with the enterprise; however, such allegations do not show that Enterprise was involved in the operation or management of the enterprise. See Dahlgren, 533 F.3d at 689-90 (finding that, even in light of the plaintiffs’ allegations that the defendant-bank induced the plaintiffs to invest with the alleged RICO enterprise by concealing the enterprise’s financial weakness, the bank acted as “a creditor conducting its own affairs,” with one exception, and, thus, the allegations were not sufficient to conclude that the bank was engaged in the operation or management of the enterprise).

In addition, the Statement of Material Facts in Support of Enterprise’s Motion supports the court’s finding that Enterprise did not participate in the operation or management of the enterprise. In the Statement of Material Facts in Support of Enterprise’s Motion, Enterprise asserts that it “did not direct, operate, or manage the British Lending Program, Martin Sigillito [&] Associates, [the] British American Group, or any association of those entities.” Statement of Material Facts in Support of Enterprise’s Motion ¶ 6. As discussed above, Plaintiffs did not properly respond to the Statement of Material Facts in Support of Enterprise’s Motion and, thus, such facts are considered undisputed. See Fed.R.Civ.P. 56(e)(2) (“If a party ... fails to properly address another party’s assertion of fact as required by Rule 56(c), the court may ... consider the fact undisputed for purposes of the motion....”); E.D. Mo. L.R. 4.01(E) (“All matters set forth in the statement of the movant shall be deemed admitted for purposes of summary judgment unless specifically controverted by the opposing party.”). Therefore, the court finds that Plaintiffs have failed to show that Enterprise participated in the operation or management of the alleged RICO enterprise.

4. Summary

In light of the foregoing, the court finds that there is no genuine issue of material fact as to whether Enterprise is liable under 18 U.S.C. § 1962(c). The court finds that Plaintiffs’ claim against Enterprise in Count I fails because: (1) Plaintiffs have not shown the existence of a RICO enterprise because the alleged association-in-fact enterprise has no ascertainable structure distinct from the alleged racketeering activities; and (2) Plaintiffs have not shown that Enterprise participated in the operation or management of the alleged RICO enterprise. Accordingly, the court shall grant Enterprise’s Motion to the extent that it requests that the court grant summary judgment in Enterprise’s favor on Count I.

B. Count II

In Count II of the Complaint, Plaintiffs allege that Enterprise conspired to violate RICO, 18 U.S.C. § 1962(c), in violation of 18 U.S.C. § 1962(d). In Enterprise’s Motion, Enterprise argues that the court should grant summary judgment in its favor on Count II because “there is no evidence that [Enterprise] knew of the alleged conspiracy to operate a Ponzi scheme, nonetheless any evidence that [Enterprise] agreed to join the conspiracy.” Brief in Support of Enterprise’s Motion at 9. Enterprise further contends that “[o]ne cannot negligently or unknowingly join a RICO conspiracy” and, therefore, a showing of willful blindness is not sufficient to satisfy Plaintiffs’ burden. Id. at 10. Additionally, Enterprise’s argument with respect to Count I, that a proper RICO enterprise did not exist, is also relevant to Count II.

In the Resistance to Enterprise’s Motion, Plaintiffs argue that Enterprise was willfully blind to the affairs of the enterprise and, thus, Enterprise had the requisite knowledge to establish a conspiracy. Further, Plaintiffs contend that they have alleged a proper RICO enterprise.

1. Conspiracy to violate RICO, 18 U.S.C. § 1962(d)

Pursuant to 18 U.S.C. § 1962(d), it is “unlawful for any person to conspire to violate any of the provisions of subsection (a), (b), or (c) of this section.” 18 U.S.C. § 1962(d). The prevailing law in the Eighth Circuit is that, in order “[t]o establish the charge of conspiracy to violate the RICO statute,” a party must prove: (1) that an enterprise existed; (2) that the enterprise affected interstate or foreign commerce; (3) that the defendant associated with the enterprise; and (4) “that the defendant ‘objectively manifested an agreement to participate ... in the affairs of [the] enterprise.’ ” Darden, 70 F.3d at 1518 (alterations in original) (quoting United States v. Bennett, 44 F.3d 1364, 1374 (8th Cir.1995)) (internal marks omitted).

2. Application

As discussed above, the court finds that Plaintiffs have failed to show the existence of a RICO enterprise with a “structure distinct from that inherent in a pattern of racketeering.” Atlas Pile Driving Co., 886 F.2d at 995. Because a showing of the existence of a RICO enterprise is a necessary element of a claim under 18 U.S.C. § 1962(d) as well as 18 U.S.C. § 1962(c), the court finds that Plaintiffs cannot prove that Enterprise conspired to violate 18 U.S.C. § 1962(c). In light of this finding, the court finds it unnecessary to address the parties’ additional arguments with respect to Count II. See Nolle, 994 F.2d at 1317. Accordingly, the court shall grant Enterprise’s Motion to the extent that it requests that the court grant summary judgment in Enterprise’s favor on Count II.

C. Count III

In Count III of the Complaint, Plaintiffs allege that Enterprise breached Sections 1, 4, 5 and 26 of the Custody Agreements “by not providing safekeeping of IRA assets,” Complaint ¶ 251; distributing Plaintiffs’ IRA funds without receiving instruction from Plaintiffs to do so; taking instruction from Sigillito regarding the distribution of Plaintiffs’ IRA funds; paying for the Distinctive Properties notes prior to receipt of any loan agreement; and failing to buy and sell assets through a “brokerage firm,” Thomas Currier Custody Agreement at 7, for accounts with a designated investment advisor.

Section 1 of the Custody Agreements provides that Enterprise “agrees to hold and keep safely all securities and other property ... which Customer shall elect to deposit in the Account.” Id. at 1. “[T]hereafter[,] [Enterprise] shall be responsible for such Assets only until such time as they have been transmitted to and received by another person or entity....” Id.

Section 4 of the Custody Agreements provides, in relevant part, that “Enterprise ... shall make distributions from the Account as directed, in writing, by customers.” Id. at 2. Plaintiffs contend that, pursuant to Section 4, “Enterprise could only purchase a loan (pay cash), or accept a rollover for payment of the loan (remove an asset), by written and not oral approval of the customer, and only the customer.” Brief in Support of Plaintiffs’ Motion at 4.

Section 5 of the Custody Agreements provides:

On receipt of Instructions, Enterprise ... shall purchase additional securities in the Account, and shall charge the Account an amount that will cover the cost of the securities purchased plus all related charges.... Such payment shall be made only upon receipt by Enterprise ... of the securities so purchased in such form as is satisfactory to Enterprise ....

Thomas Currier Custody Agreement at 2.

Section 26 of the Custody Agreements provides an optional space for the Customer to designate a broker or investment advisor, upon whose instruction Enterprise “is directed to accept and to fully rely upon ... with respect to the purchase and sale of, and other transactions in securities, ... with the brokerage firm of Investment Advisor’s choosing, and no further authorization by Customer shall be required.” Thomas Currier Custody Agreement at 7.

1. Applicable law

Under Missouri law, in order to allege breach of contract, a plaintiff must show: “(1) the making and existence of a valid and enforceable contract between [the plaintiff] and [the defendant]; (2) the right of [the plaintiff] and the obligation of [the defendant] thereunder; (3) a violation thereof by [the defendant]; and (4) damages resulting to [the plaintiff] from the breach.” Trotter’s Corp. v. Ringleader Rests., Inc., 929 S.W.2d 935, 941 (Mo.Ct.App.1996); see also Keveney v. Mo. Military Acad., 304 S.W.3d 98, 104 (Mo.2010) (en banc) (listing the essential elements of a breach of contract claim).

a. Causation requirement

“General principles of contract law impose a causation requirement on the recovery of damages.” Monarch Fire Prot. Dist. of St. Louis Cnty., Mo. v. Freedom Consulting & Auditing Servs., Inc., 678 F.Supp.2d 927, 941-42 (E.D.Mo.2009) (applying Missouri law to a breach of contract claim); see also Abbott v. Haga, 77 S.W.3d 728, 733 (Mo.Ct.App.2002) (holding that a breach of contract claim failed when the respondent could not prove that his damages resulted from the appellant’s breach). Under a breach of contract, the breaching party is liable for “damages naturally and proximately caused by the breach.” Guidry v. Charter Commc’ns, Inc., 269 S.W.3d 520, 533 (Mo.Ct.App.2008); see also Gateway W. Ry. Co. v. Morrison Metalweld Process Corp., 46 F.3d 860, 862 (8th Cir.1995) (noting that under Missouri contract law, the doctrine of proximate cause limits the breaching party’s liability). “Proximate cause is a question of fact for the jury” and a “plaintiff must be able to show by clear, admissible evidence