Case: 4:10-cv-01165-LRR Doc. #: 26 Filed: 09/16/10 Page: 1 of 11 PageID #: 134
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF MISSOURI
`EASTERN DIVISION
`
`ROSEMANN, et al.,
`
`Plaintiffs,
`
`vs.
`
`MARTIN SIGILLITO, et al.,
`
`Defendants.
`
`No. 10-CV-1165-LRR
`
`ORDER
`
`____________________
`
`I.
`
`II.
`
`III.
`
`IV.
`
`INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
`
`PROCEDURAL HISTORY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
`
`FACTUAL BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
`A. Players . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
`B. Alleged “Ponzi Scheme” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
`
`ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
`A.
`Applicable Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
`B.
`Motion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
`1.
`Choice of law and forum provisions . . . . . . . . . . . . . . . . . . 6
`2.
`Sigillito’s other reasons for dismissal
`. . . . . . . . . . . . . . . . . 9
`Alternative Request to Make More Definite and Certain . . . . . . . . . 9
`
`C.
`
`V.
`
`CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
`
`I. INTRODUCTION
`
`The matter before the court is Defendant Martin Sigillito’s “Motion to Dismiss
`
`Plaintiffs’ Complaint or in the Alternative, Motion to Make More Definite and Certain”
`
`(“Motion”) (docket no. 14).
`
`II. PROCEDURAL HISTORY
`
`On June 30, 2010, Phil Rosemann and twenty-three other named Plaintiffs filed a
`
`Complaint (docket no. 1). The Complaint alleges that Defendants Sigillito and Does 1
`
`through 50 violated the Racketeer Influenced and Corrupt Organizations Act (“RICO”) and
`
`

`
`Case: 4:10-cv-01165-LRR Doc. #: 26 Filed: 09/16/10 Page: 2 of 11 PageID #: 135
`
`seeks civil remedies under 18 U.S.C. § 1964(c). On August 10, 2010, Defendant filed the
`
`Motion. On August 12, 2010, Plaintiff filed a Resistance (docket no. 16). On August 25,
`
`2010, the court held a hearing (“Hearing”) on the Motion and reserved ruling on the
`
`Motion. The Motion is fully submitted and ready for decision.
`
`III. FACTUAL BACKGROUND
`
`Accepting all factual allegations in the complaint as true and drawing all reasonable
`
`inferences in favor of the nonmoving party, the facts are as follows:
`
`A. Players
`
`The Defendants are Sigillito, an individual and citizen of Missouri, and fifty
`
`unknown defendants referred to in the Complaint as Does 1 through 50. The twenty-four
`
`Plaintiffs named in the Complaint are: (1) Phil Rosemann, an individual and citizen of
`
`Nevada; (2) Hal and Jan Millsap, individuals and citizens of Arkansas; (3) David and
`
`Diane Caldwell, individuals and citizens of Arkansas; (4) William and Carol Phillips,
`
`individuals and citizens of Arkansas; (5) Edward Chunglo, an individual and citizen of
`
`Arizona; (6) Calvin Wright, an individual and citizen of Arizona; (7) Stan Kuhlo, an
`
`individual and citizen of Missouri; (8) Paul and Margaret Fancher, individuals and citizens
`
`of Arkansas; (9) Wanda and Carl Lavender, individuals and citizens of Arizona;
`
`(10) William Gaylor, an individual and citizen of Ohio; (11) Leonard Roman, an individual
`
`and citizen of Ohio; (12) Frank and Helga Costello, individuals and citizens of Michigan;
`
`(13) Kenneth and Shirley Potgeter;1 (14) Ronald Pastor, an individual and citizen of
`
`Michigan; (15) David Schultz, an individual and citizen of Michigan; (16) Brian Waffle,
`
`an individual and citizen of Michigan; and (17) Nina Blaylock, an individual and citizen
`
`of Arizona. Distinctive Properties (UK) Limited (“Distinctive Properties”), a non-party,
`
`is an England-based company owned by Derek Smith, who is also a non-party in this
`
`1The Complaint provides a Michigan address for Kenneth and Shirley Potgeter, but
`does not allege that they are individuals and citizens of Michigan.
`
`2
`
`

`
`Case: 4:10-cv-01165-LRR Doc. #: 26 Filed: 09/16/10 Page: 3 of 11 PageID #: 136
`
`action.
`
`B. Alleged “Ponzi Scheme”
`
`Sigillito, an attorney and American Anglican Bishop, organized and operated a
`
`fraudulent loan program that induced individuals to loan money to Distinctive Properties
`
`for purported land purchases in England. Sigillito and the co-defendants (collectively,
`
`“Defendants”) falsely represented to Plaintiffs that Smith had an excellent record of
`
`making money by optioning land and reselling the land for substantial profits. Defendants
`
`also falsely represented to Plaintiffs that Smith’s net-worth was $53,637,500, that
`
`“Distinctive Properties had an impeccable track record in England” and that Distinctive
`
`Properties had previously repaid many loans on time and as promised. Complaint at ¶ 31.
`
`Defendants promised Plaintiffs that they would receive a 16% to 23% annual return
`
`for making a one-year “asset line”-based loan to Distinctive Properties, personally
`
`guaranteed by Smith. Complaint at ¶ 8. However, many of the loan documents were not
`
`actually signed by Smith; instead, Sigillito assembled the loan documents in the United
`
`States by copying Smith’s signature from a loan document Smith signed several years
`
`earlier.
`
`Plaintiffs allege that Defendants used funds contributed by new investors to pay
`
`purported returns to earlier investors, defrauding over one-hundred individuals of more
`
`than $45 million. Of that $45 million, only $910,773.60 was sent to Distinctive Properties
`
`for the purchase of real estate. The remainder of the funds were either disguised as
`
`interest and paid to private lenders or diverted to Defendants’ bank accounts. Defendants
`
`told investors that the loans were used to acquire land and options and that the investments
`
`were performing as planned; however, Defendants knew these statements to be false.
`
`IV. ANALYSIS
`
`In the Motion, Sigillito asks the court to dismiss the Complaint for the following
`
`reasons: (1) Plaintiffs did not attach their loan agreements to the Complaint; (2) the
`
`3
`
`

`
`Case: 4:10-cv-01165-LRR Doc. #: 26 Filed: 09/16/10 Page: 4 of 11 PageID #: 137
`
`Complaint fails to allege specific dates when some of the loan agreements were made;
`
`(3) Plaintiffs wrongly allege that Brian Waffle signed a loan agreement with Sigillito, when
`
`decedent Larry Waffle was the actual lender and Brian2 Waffle is the representative of
`
`Larry’s estate; and (4) “many” of the loan agreements giving rise to the claims in the
`
`Complaint contained choice of law and forum provisions making England the proper forum
`
`for this suit, and divesting this court of jurisdiction over the action. Motion at ¶ 15.
`
`Sigillito does not specify what Federal Rule of Civil Procedure he is invoking to
`
`seek dismissal of the claims in the Complaint. Sigillito relies in large part upon the alleged
`
`“choice of forum” provisions in the loan agreements for the proposition that “the entire
`
`Complaint be dismissed for lack of jurisdiction.” Motion at ¶ 17. There is presently
`
`disagreement in the Circuit Courts of Appeal as to whether Rule 12(b)(1), 12(b)(3) or
`
`12(b)(6) should be applied in motions to dismiss based upon forum selection clauses, see
`
`Sucampo Pharm., Inc. v. Astellas Pharma, Inc., 471 F.3d 544, 547-48 (4th Cir. 2006)
`
`(listing cases), and the Eight Circuit Court of Appeals has not yet decided the issue, see
`
`Rainforest Café, Inc. v. EklecCo, L.L.C., 340 F.3d 544, 546 n.5 (8th Cir. 2003). Because
`
`the result in this case is the same regardless of which Federal Rule of Civil Procedure
`
`properly governs a motion to dismiss based upon a forum selection clause, the court need
`
`not decide the issue. See Rainforest Café, 340 F.3d at 546 n.5 (declining to decide the
`
`issue because moving party raised both Rule 12(b)(3) and 12(b)(6) as bases for dismissal);
`
`see also Haynsworth v. The Corporation, 121 F.3d 956, 961 (5th Cir. 1997) (“As the
`
`parties do not raise it, we . . . need not reach the . . . enigmatic question of whether
`
`motions to dismiss on the basis of forum selection clauses are properly brought as motions
`
`under Fed. R. Civ. P. 2(b)(1), 12(b)(3), or 12(b)(6)[.]”). However, because Sigillito
`
`raises other grounds for dismissal which appear to frame arguments that Plaintiffs failed
`
`2Sigillito also appears to assert Brian is actually spelled “Bryan,” however, the court
`will refer to the individual as Brian for purposes of this Order.
`
`4
`
`

`
`Case: 4:10-cv-01165-LRR Doc. #: 26 Filed: 09/16/10 Page: 5 of 11 PageID #: 138
`
`to state a claim or sufficiently plead claims in the Complaint, the court will discuss those
`
`standards below.
`
`A. Applicable Standards
`
`Federal Rule of Civil Procedure 12(b)(6) provides for dismissal of a claim when it
`
`fails “to state a claim upon which relief can be granted.” When ruling on a Rule 12(b)(6)
`
`motion, the court must accept as true all of the factual allegations in the complaint, “no
`
`matter how skeptical the court may be.” Ashcroft v. Iqbal, 556 U.S. ___, 129 S. Ct.
`
`1937, 1959 (2009). To survive a Rule 12(b)(6) motion, “a complaint must contain
`
`sufficient factual matter . . . to ‘state a claim to relief that is plausible on its face.’” Iqbal,
`
`556 U.S. at ___, 129 S. Ct. at 1949 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544,
`
`570 (2007)); accord B&B Hardware, Inc. v. Hargis Indus., Inc., 569 F.3d 383, 387 (8th
`
`Cir. 2009). Stated differently, “a complaint must contain factual allegations sufficient ‘to
`
`raise a right to relief above the speculative level[.]’” Parkhurst v. Tabor, 569 F.3d 861,
`
`865 (8th Cir. 2009) (quoting Bell Atl., 550 U.S. at 555); see also Killingsworth v. HSBC
`
`Bank Nev., N.A., 507 F.3d 614, 618 (7th Cir. 2007) (examining federal pleading
`
`standards).
`
`Where, as here, Plaintiffs’ claims under RICO are based entirely upon the predicate
`
`acts of mail and wire fraud, Plaintiffs’ “substantive RICO allegations must comply not only
`
`with the plausibility criteria articulated in [Bell Atl.] and Iqbal but also with Fed. R. Civ.
`
`P. 9(b)’s heightened pleading standard[.]” American Dental Ass’n v. Cigna Corp., 605
`
`F.3d 1283, 1291 (11th Cir. 2010); see also Abels v. Farmers Commodities Corp., 259
`
`F.3d 910, 919 (8th Cir. 2001) (noting a heightened pleading standard applies to allegations
`
`of mail fraud and wire fraud when used as predicate acts for a RICO claim). Pursuant to
`
`Rule 9(b), “[i]n alleging fraud or mistake, a party must state with particularity the
`
`circumstances constituting fraud or mistake.”
`
`5
`
`

`
`Case: 4:10-cv-01165-LRR Doc. #: 26 Filed: 09/16/10 Page: 6 of 11 PageID #: 139
`
`1.
`
`Choice of law and forum provisions
`
`B. Motion
`
`The court has before it only two of the many loan agreements at issue in this case.
`
`One of the loan agreements contains the following provision:
`
`16
`
`Governing law and jurisdiction
`
`16.1 This agreement shall be governed by and construed in accordance
`with the Laws of England applicable to contracts wholly to be
`performed therein.
`
`16.2 It is irrevocably agreed for the exclusive benefit of the lender that the
`courts of England are to have jurisdiction to settle any disputes which
`October arise out of or in conjunction with this agreement and that
`accordingly any suit, action or proceedings arising out of or in
`connection with the agreement October be brought in such courts.[3]
`
`16.3 Nothing in this clause shall limit the Lender’s right to take
`proceedings against the Borrower in any other court of competent
`jurisdiction, nor shall the taking of proceedings in one or more
`jurisdictions preclude the taking of proceedings in any other
`jurisdiction, where concurrently or not.
`
`Defendant’s Exhibit 1 (“Exhibit 1”) (docket no. 14-1) at ¶ 16. Sigillito contends this
`
`provision is an enforceable choice of law and forum provision, and as a result, Plaintiffs’
`
`claims in this case may only be brought in England.
`
`In the Resistance, Plaintiffs claim the choice of law and choice of forum provision
`
`in the loan agreement need not be considered because Plaintiffs’ claims arise out of RICO
`
`and not out of breach of contract claims. However, several United States Courts of Appeals
`
`have held that choice of law and choice of forum provisions remain applicable in claims
`
`under RICO. See, e.g., Stroitelstvo Bulgaria Ltd. v. Bulgarian-Am. Enter. Fund, 589 F.3d
`
`417, 421-26 (7th Cir. 2009); Yavuz v. 61 MM, Ltd., 576 F.3d 1166, 1172-83 (10th Cir.
`
`3 It is unclear why the word “October” is used twice in section 16.2. The parties
`have not explained the relevance of the word, and for purposes of this Order, the court
`ignores its presence.
`
`6
`
`

`
`Case: 4:10-cv-01165-LRR Doc. #: 26 Filed: 09/16/10 Page: 7 of 11 PageID #: 140
`
`2009); Richards v. Lloyd’s of London, 135 F.3d 1289, 1294 (9th Cir. 1998); Bonny v. Soc.
`
`of Lloyd’s, 3 F.3d 156, 159-62 (7th Cir. 1993); Roby v. Corp. of Lloyd’s, 996 F.2d 1353,
`
`1360-66 (2d Cir. 1993) (holding American Plaintiffs who brought suit for violations of
`
`RICO and federal securities statutes were bound by the forum selection and choice of law
`
`provisions in their underlying contracts).
`
` For purposes of the court’s choice of law and choice of forum analysis only, the
`
`court will assume, without deciding, that this particular loan agreement is binding. In the
`
`United States, “[a] general maxim in interpreting forum-selection clauses is that ‘an
`
`agreement conferring jurisdiction in one forum will not be interpreted as excluding
`
`jurisdiction elsewhere unless it contains specific language of exclusion.’” IntraComm, Inc.
`
`v. Bajaj, 492 F.3d 285, 290 (4th Cir. 2007) (quoting John Bourari & Son, Wines & Spirits,
`
`S.A. v. Attiki Imp. & Distrib., Inc., 22 F.3d 51, 53 (2d Cir. 1994)); See Dunne v. Libbra,
`
`330 F.3d 1062, 1064 (8th Cir. 2003); Cent. National-Gottesman, Inc. v. M.V. “Gertrude
`
`Oldendorff”, 204 F. Supp. 2d 675, 678 (S.D.N.Y. 2002) (“For a forum selection clause
`
`to be deemed mandatory, jurisdiction and venue must be specified with mandatory or
`
`exclusive language.”). Applying this general maxim to the loan agreement, the required
`
`language demonstrating the intent of the parties to make England the exclusive forum for
`
`suit on any claim “arising out of or in connection with the agreement” is notably absent.
`
`Exhibit 1 at ¶ 16.2. Thus, were this court to apply United States federal law to interpret
`
`the loan agreement, this particular provision would be deemed a mere “permissive forum
`
`selection clause,” which does not prohibit suit in other courts. Dunne, 330 F.3d at 1064.
`
`However, the loan agreement contains a choice of law provision which states that the
`
`“agreement shall be governed by and construed in accordance with the Laws of England[.]”
`
`Exhibit 1 at ¶ 16.1. Once again, assuming, without deciding, that the choice of law
`
`provision is enforceable, the court will consider the choice of forum provision in light of
`
`English law. English law is apparently contrary to U.S. federal law on the issue of how
`
`7
`
`

`
`Case: 4:10-cv-01165-LRR Doc. #: 26 Filed: 09/16/10 Page: 8 of 11 PageID #: 141
`
`to interpret forum selection clauses. An oft cited principle in English law is:
`
`If the parties [to a contract], one or more of whom is domiciled
`in a Member State, have agreed that a court or the courts of a
`Member State are to have jurisdiction to settle any disputes
`which have arisen or which may arise in connection with a
`particular legal relationship, that court or those courts shall
`have jurisdiction. Such jurisdiction shall be exclusive unless
`the parties have agreed otherwise.
`
`Council Regulation (EC) No 44/2001 of December 2000 on jurisdiction and the recognition
`
`and enforcement of judgments in civil and commercial matters, Article 23, cited in
`
`Astrazeneca UK Ltd. v. Albermarle Int’l Corp, [2010] EWCH (Comm) 1028, [43], 2010
`
`WL 1649015 (Eng. Dec. 5, 2010). Thus, a contract provision granting jurisdiction in a
`
`particular forum is deemed to be a grant of exclusive jurisdiction absent an agreement to
`
`the contrary.
`
`Despite this general principle, however, the court cannot find the forum selection
`
`clause in section 16.2 of the loan agreement to be a mandatory forum selection clause when
`
`read in light of the other applicable language in the loan agreement. Under English law,
`
`a “contract must be read as a whole and every effort should be made to give effect to all
`
`of its clauses.” Ace Capital Ltd. v. CMS Energy Corp., [2008] EWCH (Comm) 1843, [70],
`
`2008 WL 2976535 (Eng. July 30, 2008). Section 16.2 of the loan agreement cannot be
`
`construed to confer exclusive jurisdiction to the courts of England because section 16.3 of
`
`the loan agreement provides, “Nothing in this clause shall limit the Lender’s right to take
`
`proceedings against the Borrower in any other court of competent jurisdiction, nor shall the
`
`taking of proceedings in one or more jurisdictions preclude the taking of proceedings in any
`
`other jurisdiction, where concurrently or not.” Exhibit 1 at ¶ 16.3. Reading the loan
`
`agreement as a whole, and giving effect to all clauses therein, the court finds section 16.2
`
`of the loan agreement is a permissive choice of forum provision under both federal law and
`
`English law. Such a provision is “an affirmative conferral of personal jurisdiction by
`
`8
`
`

`
`Case: 4:10-cv-01165-LRR Doc. #: 26 Filed: 09/16/10 Page: 9 of 11 PageID #: 142
`
`consent, and not a negative exclusion of jurisdiction in other courts.” Autoridad de Energia
`
`de Puerto Rico v. Ericsson Inc., 201 F.3d 15, 19-20 (1st Cir. 2000).4
`
`2.
`
`Sigillito’s other reasons for dismissal
`
`Sigillito also asks the court to dismiss the Complaint because Plaintiffs did not attach
`
`their loan agreements to the Complaint; the Complaint fails to allege specific dates when
`
`some of the loan agreements were made; Plaintiffs wrongly allege that Brian Waffle signed
`
`a loan agreement with Sigillito when the loan agreement was actually signed by Larry
`
`Waffle, who is deceased, and Brian Waffle is the representative of Larry’s estate; and
`
`“misstatements similar to the Waffle loan” are made in the Complaint regarding many of
`
`the other loan agreements. Motion at ¶ 10.
`
`The court finds that the Complaint is not subject to dismissal for any of the above
`
`stated reasons under either Federal Rule of Civil Procedure 12(b)(6) or Rule 9(b). The
`
`Complaint sets forth the names and addresses of each of the twenty-four Plaintiffs,
`
`summarizes the number of loans each Plaintiff made and provides a dollar amount that
`
`indicates the total each Plaintiff loaned Defendants. The Complaint also provides a detailed
`
`description of the alleged “ponzi scheme.” The Complaint sets forth each element of the
`
`RICO statutes Defendants allegedly violated and provides a description of specific activity
`
`Defendants engaged in to violate those elements. Thus, the Complaint is plead with
`
`particularity under Rule 9(b) and does not fail to state a claim under Rule 12(b)(6).
`
`C. Alternative Request to Make More Definite and Certain
`
`Alternatively, Sigillito seeks a more definite statement regarding several of the
`
`allegations in the Complaint. Specifically, Sigillito seeks (1) “the specific language in each
`
`of the fifty-eight loan agreements that allow suit to be brought in this Court,” Motion at
`
`4Because the court concludes the choice of forum provision is permissive, the court
`need not consider Plaintiffs alternative arguments that the choice of law provision was
`induced by fraud, or that suits against Sigillito, a non-party, are not covered by the
`underlying contract.
`
`9
`
`

`
`Case: 4:10-cv-01165-LRR Doc. #: 26 Filed: 09/16/10 Page: 10 of 11 PageID #: 143
`
`¶ 18; (2) the identity of Sigillito’s alleged co-conspirators; (3) the specific
`
`misrepresentations “made to each Plaintiff as to each loan, and by whom,” Motion at ¶ 20;
`
`and (4) specific dates of each of the interstate telephone calls Sigillito allegedly made and
`
`the specific representations made therein. Much of the information Sigillito seeks in the
`
`Motion can be obtained through discovery. A Federal Rule of Civil Procedure 12(e)
`
`motion for a more definite statement is not to be used as a general discovery device. See,
`
`e.g., Mitchell v. E-Z Way Towers, Inc., 269 F.2d 126, 132 (5th Cir. 1959); see also
`
`Zamora v. Massey-Ferguson, Inc., 336 F. Supp. 588, 592 (S.D. Iowa 1972) (finding the
`
`matters sought were subject to the broad rules of discovery, and “[w]hen this is true,
`
`motions for more definite statement are not favored”). Further, Sigillito admits in the
`
`Motion that he “contemplates additional motions to dismiss based on failure to state a claim,
`
`but until the Complaint is made more definite and certain . . . , he cannot file his motions.”
`
`Motion ¶ 22. A Rule 12(e) motion for a more definite statement should be used to assist
`
`a litigant in preparing a responsive pleading, and it is improper to use a Rule 12(e) motion
`
`to prepare for a motion to dismiss. 61A Am. Jur. 2d Pleading § 424 (2010).
`
`The language of Rule 12(e) makes clear that a motion for a more definite statement
`
`is to be used when a pleading “is so vague or ambiguous that the party cannot reasonably
`
`prepare a response.” Fed. R. Civ. P. 12(e). The court has already concluded that the
`
`Complaint satisfies the heightened pleading standard in Rule 9(b), and it is axiomatic that
`
`the Complaint is sufficiently definite and certain to allow Sigillito to draft a responsive
`
`pleading. Therefore, the court shall deny Sigillito’s request for a more definite statement.
`
`In light of the foregoing, the Motion (docket no. 14) is DENIED.
`
`V. CONCLUSION
`
`IT IS SO ORDERED.
`
`DATED this 16th day of September, 2010.
`
`10
`
`

`
`Case: 4:10-cv-01165-LRR Doc. #: 26 Filed: 09/16/10 Page: 11 of 11 PageID #: 144
`
`11