United States District Court, D. Minnesota
REPORT AND RECOMMENDATION
S. MAYERON United States Magistrate Judge.
above matter came before the undersigned on Defendants'
U.S. Bank National Association, Jacob vanBrandwijk and
Richard Hartnack (collectively, “U.S. Bank”)
Motion to Dismiss Counts One Through 10. [Docket No. 51].
Philip L. Guarino, Esq. and Michael Weidner, Esq. appeared on
Plaintiff's behalf. Brooks F. Poley, Esq., Reid Golden,
Esq. and Paige Fitzgerald, Esq. appeared on behalf of
defendants U.S. Bank, Jacob Vanbrandwijk and Richard
Hartnack. There was no appearance by or on behalf of
defendants United Credit Recovery, LLC, Leonard Potillo, or
Wilbur Tate, III.
matter has been referred to the undersigned Magistrate Judge
for a Report and Recommendation by the District Court
pursuant to 28 U.S.C. §636(b)(1)(A), (B), and Local Rule
72.1(c). [Docket No. 58].
TMT alleged that TMT was a customer of defendant U.S. Bank
and is in the business of purchasing debt from vendors, then
reselling the debt to third parties. Amended Complaint,
¶ 1 [Docket No. 22]. Pursuant to Federal regulations,
U.S. Bank was required to “charge off” its
delinquent Demand Deposit Accounts (“DDAs”).
Id., ¶ 12. U.S. Bank would realize a loss on
the accounts, but the consumer account holder had a
continuing obligation to repay the DDA. Id., ¶
13. To reduce its losses, U.S. Bank sold the DDAs to
third-party debt purchasers and assigned them the right to
collect on the charged-off accounts. Id., ¶ 14.
Each sale involved hundreds to thousands of individual
accounts, (“DDA Portfolios”), with the balance of
the DDAs often being in the millions of dollars.
Id., ¶ 15. Bids to purchase the debt were in
cents on the dollar of the book value of the DDAs.
Id., ¶ 16. The value of a DDA Portfolio
depended on the number of attempts made to collect the debt
by a collection agency. Id., ¶ 17. For example,
“one-agency” DDAs were more valuable than
“two-agency” DDAs because less effort had been
made to collect the debts. Id. From as early as
2008, U.S. Bank sold DDA Portfolios to defendant UCR.
Id., ¶ 18. Even though the DDA Portfolios were
to be sold through an open bidding process, UCR was the only
third party with which U.S. Bank did business between
January, 2008, and September, 2011. Id. U.S. Bank
sold the DDA Portfolios to UCR for less than four cents on
the dollar. Id.
September, 2009, TMT's banker with U.S. Bank, Todd
Loosbrock, asked a U.S. Bank employee to pass along TMT's
contact information to defendant Wilbur Tate, III, U.S.
Bank's Assistant Vice President in Consumer Lending,
Collections and Recovery. Id., ¶¶ 3, 19.
Tate and defendant Jacob vanBrandwijk, a Senior Vice
President and Director of U.S. Bank's Consumer Lending,
Collections and Recovery office in Cincinnati, Ohio, were
responsible for the DDA Portfolio bidding process and sales.
Id., ¶¶ 4, 20. From September, 2009
through July, 2010, TMT repeatedly attempted to contact Tate
to bid on DDA Portfolios, but Tate refused to respond.
Id., ¶¶ 21, 22. Tate refused to consider
TMT's purchase proposal, even though TMT was a U.S. Bank
client (UCR was not) and U.S. Bank had a policy that
supposedly favored bank clients. Id., ¶ 23.
around August, 2010, Tate told Loosbrook that UCR was bidding
less on DDA Portfolios than TMT was offering. Id.,
¶ 24. Tate finally told TMT that it could bid on the
September, 2010, DDA Portfolio and represented that U.S. Bank
would accept bids from TMT in the form of a certain number of
cents per dollar of book value of the DDA. Id.,
¶ 25. Tate told TMT that U.S. Bank employed an open bid
process in connection with the DDA Portfolios. Id.,
¶ 26. This representation was restated on April 15,
2011, and in May, 2011, by vanBrandwijk, and on May 9, 2011,
by defendant Richard Hartnack, now-retired Vice Chairman of
Small Business Banking for U.S. Bank. Id.,
¶¶ 5, 26.
submitted a bid of $0.055 for the September, 2010 DDA
Portfolio. Id., ¶ 27. The bid was initially
awarded to TMT but then was disallowed because, according to
Tate, U.S. Bank did not have on file a non-disclosure
agreement from TMT. Id., ¶ 28. Tate represented
that this non-disclosure agreement was required as part of
the bidding process - a representation reiterated by Tate and
vanBrandwijk through March, 2012. Id. U.S. Bank had
not previously told TMT that a non-disclosure agreement was a
prerequisite for bidding. Id., ¶ 29.
sent a non-disclosure agreement to U.S. Bank by e-mail on
November 23, 2010, copying Loosbrock on its correspondence.
Id., ¶ 31. TMT bid $0.055 for the November DDA
Portfolio, but lost out to UCR. Id. ¶ 32. After
this, TMT's principal learned that UCR was bribing Tate
to ensure UCR's purchases of the DDA Portfolios.
Id. ¶ 33. In January, 2011, TMT's principal
phoned Tate to ask about the bribes, and Tate hung up.
Id. ¶ 34. Tate resigned from U.S. Bank on
February 1, 2011, and thereafter, U.S. Bank directed TMT to
contact U.S. Bank Vice President Kirk Villaloboz regarding
future bids. Id., ¶ 35.
meeting with Villaloboz, Loosbrock and TMT in March, 2011,
Villaloboz agreed to enter into a five-year forward flow
agreement with TMT, which permitted TMT to purchase
DDA Portfolios on a going forward basis at the rate of
$0.055. Id., ¶ 36. At the meeting, U.S. Bank
also agreed to sell to TMT that quarter's DDA Portfolio
under those terms. Id., ¶ 37. About a week
later, Villaloboz reneged on the agreement, stating that
vanBrandwijk would not agree to the DDA Portfolio purchase or
the forward flow agreement. Id., ¶ 38.
April 11, 2011, TMT informed U.S. Bank by email that Potillo
and UCR were engaging in bribery to purchase DDA Portfolios.
Id., ¶ 39. At a meeting on April 15, 2011, TMT
told Loosbrock, vanBrandwijk and Villaloboz that UCR was
bribing Tate, to which vanBrandwijk responded that
“although it may be wrong, it is not illegal.”
Id., ¶ 42. At this meeting, vanBrandwijk also
stated that U.S. Bank did not allow forward flow DDA
contracts, despite the fact that Villaloboz had earlier
represented that it did, and TMT had heard from vanBrandwijk
and another U.S. Bank representative that U.S. Bank had a
forward flow agreement with UCR. Id., ¶ 43.
Additionally, at this meeting, vanBrandwijk falsely stated
that one of the reasons TMT had not won a bid was the lack of
a non-disclosure agreement. Id., ¶ 45.
vanBrandwijk directed TMT to deal with Villaloboz, and stated
that TMT should lower its bid from $0.055 to $0.045 and if it
did so, TMT would be awarded the April, 2011 DDA Portfolio.
Id., ¶ 46. No one could understand why
vanBrandwijk would want TMT to offer U.S. Bank less money.
$0.045 for the April, 2011 DDA Portfolio, but lost out to
UCR. Id., ¶ 48. vanBrandwijk told TMT that its
bid was the only one U.S. Bank received but nonetheless, UCR
won the bid because it had a forward flow contact with U.S.
Bank at a guaranteed price of $0.045. Id., ¶
49. This contract had a 30-day exit clause, which
vanBrandwijk had failed to timely invoke. Id.
vanBrandwijk stated that TMT could bid on the next DDA
Portolio. Id., ¶ 50. Villaloboz later confirmed
that TMT's was the only bid received for the April, DDA
Portfolio. Id., ¶ 51.
6, 2011, TMT e-mailed Hartnack and copied Loosbrock on the
email. Id., ¶ 52. TMT again raised concerns
that UCR and Potillo had been bribing U.S. Bank officers for
years to purchase DDA Portfolios. Id., ¶ 52.
Hartnack stated that he would look into the matter, but
instead of investigating, concluded that the accusations were
poorly documented and amounted to competitor disagreements.
Id., ¶¶ 54, 56.
13, 2011, vanBrandwijk told TMT that U.S. Bank offered DDA
Portfolios for sale quarterly and it would include TMT in the
bidding process, the bids would be open, and the terms of
each sale confirmed before the deal was consummated.
Id., ¶ 57. vanBrandwijk further stated that
each bidder that completed a non-disclosure agreement would
be offered a prospectus and an opportunity to examine the
file before bidding closed. Id.
11, 2011, TMT bid $0.045 for a DDA Portfolio of $30, 000,
000. Id., ¶ 58. Vincent Lorenzo, Outsourcing
Manager for U.S. Bank, told TMT the bid was insufficient, so
TMT increased its bid to $0.0525. Id. Even though
TMT submitted the highest bid, TMT again lost out to UCR
because UCR allegedly had a “first right of
refusal” and met and exceeded TMT's bid.
Id., ¶ 59. U.S. Bank told TMT that if it had
stayed with its original numbers, it would have been awarded
the purchase. Id. Yet TMT only lowered its bid based
on U.S. Bank's advice. Id. U.S. Bank had never
previously disclosed that UCR had a right of first refusal.
Id., ¶ 60. After losing this bid, TMT's
banker, Loosbrock, e-mailed Hartnack to complain about U.S.
Bank's treatment of TMT and noted that U.S. Bank had lost
over $2.0 million on DDA Portfolio sales over the past four
quarters by rejecting TMT's bids. Id.,
¶¶ 62, 63. But what Loosbrock
“undoubtedly” did not know was that UCR was
paying U.S. Bank significantly more than the DDA Portfolios
were worth, which UCR could afford to do because it was
defrauding third-party purchasers by reselling the DDA as
zero-agency paper when in reality it was two-agency paper.
Thus, U.S. Bank was benefitting by selling its two-agency
paper at a premium. Id., ¶ 64.
September 14, 2011, TMT emailed vanBrandwijk and notified him
of a personal relationship between Potillo, Tate and UCR and
of the existence of a misleading affidavit signed by Tate.
Id., ¶¶ 66, 67. TMT had previously
provided vanBrandwijk with false affidavits by UCR and Tate.
Id., ¶ 67.
September, 2011, TMT successfully bid on what it believed was
zero-agency debt for $0.0515. Id., ¶ 69. TMT
also based its bid on vanBrandwijk's August 19, 2011
false representation that UCR's bid was in excess of
$0.045 and U.S. Bank wanted to “shake some more out of
the DDA agency returns.” Id., ¶ 69.
Almost immediately, UCR and Potillo retaliated by posting a
comment in a public forum that TMT's recent purchase was
of two-agency paper, while UCR had zero-agency paper.
Id., ¶ 71. TMT shared its concerns about this
posting with vanBrandwijk, who responded that
“whomsoever posted the comment has a problem with the
facts.” Id., ¶ 72. TMT paid U.S. Bank the
purchase price for the DDA Portfolio of $1, 667, 242 on
October 3, 2011. Id., ¶ 74. The next day,
Villaloboz informed TMT for the first time, and contrary to
vanBradnwijk's representations, that the DDA Portfolio
TMT had just purchased was two-agency paper. Id.,
¶ 75. Much later, on May 21, 2012, Villaloboz sent
another letter on U.S. Bank letterhead, retracting the
statements he made in his October 4, 2011, letter and stating
that he had lacked authority to send the letter.
Id., ¶ 76. TMT pled on information and belief
that the May 21, 2012, letter was fabricated and forged.
March, 2012, TMT successfully bid $0.0495 for U.S. Bank's
first quarter DDA Portfolio - an overbid based on
vanBrandwijk's August 19, 2011, false statement that UCR
was bidding in excess of $0.045, and U.S. Bank was trying to
increase the amount it realized from DDA Portfolio sales.
Id., ¶ 77. In reality, UCR had been bidding
much less than $0.040 on the dollar. Id. TMT paid
the purchase price of $1, 154, 715 on March 26, 2012.
Id., ¶ 79. Afterwards, TMT asked U.S. Bank to
complete a seller survey. Id., ¶ 80. One of the
survey questions asked U.S. Bank to state how many agencies
had collected on the accounts “after your
purchase.” Id. U.S. Bank responded
“[i]ndicated in Offering or additional declaration
Document.” Id. This response was false, as no
offerings or additional documents were ever provided to TMT.
TMT alleged that it bid on DDA Portfolios six times: (1)
September, 2010 (unsuccessful, purportedly due to the lack of
a non-disclosure agreement); (2) November, 2010
(unsuccessful, without explanation by U.S. Bank); (3) April,
2011 (unsuccessful because of the purported forward flow
agreement between U.S. Bank and UCR); (4) July, 2011
(unsuccessful because UCR had a “first right of
refusal” and had met and exceeded TMT's bid); (5)
September, 2011 (successful bid of $0.0515 for fourth
quarter, 2011 Portfolios); (6) March, 2012 (successful bid of
$0.0495). Id., ¶¶ 27-35, 47-51, 57-60,
8, 2013, U.S. Bank, through Kent Stone, a U.S. Bank Vice
Chairman, agreed to sell TMT at least $200, 000, 000 of U.S.
Bank DDA Portfolios for $0.03 cents on the dollar.
Id., ¶¶ 84, 85. TMT arrange to sell the
May, 2013 DDA Portfolio to a third party for $0.0775 cents on
the dollar, but thereafter U.S. Bank failed to sell the DDA
Portfolio to TMT. Id., ¶ 86. In July, 2014,
vanBrandwijk left U.S. Bank. Id., ¶ 87.
was arrested on February 27, 2013, and charged with
conspiracy to commit bank bribery. Id., ¶ 88;
Amended Complaint, Ex. A (Criminal Complaint against Tate in
the United States District Court, District of Connecticut).
The criminal complaint against Tate stated that he was in
charge of outsourcing collection accounts to collection
agencies, including Oxford Collection Agency
(“Oxford”). Id., ¶ 87. Executives
of Oxford pled guilty to conspiracy to commit wire fraud,
bank fraud and money laundering in December, 2012, and told a
Special Agent that they had been bribing Tate with $2, 500 to
$5, 000 per month in cash. Id., ¶ 90. An
Information was filed against Tate and a separate Information
was filed against Oxford executives. Id., ¶ 91;
Amended Complaint, Ex. B (Information filed against Tate).
Tate pled guilty on November 22, 2013, and as detailed in the
Information, Tate used both the mails and wires.
Id., ¶¶ 93-95.
4, 2014, Potillo was indicted in the U.S. District Court for
the Middle District of Florida on 33 counts of wire fraud,
bribery of a bank official and unlawful monetary
transactions. Id., ¶ 96; Amended Complaint, Ex.
C (Indictment against Potillo). As part of his scheme,
Potillo represented to investors that they were purchasing
zero-agency or one-agency debt that UCR had purchased from
U.S. Bank, when, in fact, it was two-agency debt.
Id., ¶ 99. Potillo created false affidavits
from U.S. Bank officers falsely “confirming” the
quality of the debt. Id., ¶ 99. Potillo paid
Tate more than $1.0 million in bribes to enable UCR to
purchase DDA Portfolios for $31.0 million, or less than four
cents on the dollar. Id., ¶ 100. Potillo used
wires and the mail to effectuate transfers of funds to
purchase luxury vehicles, real estate and to bribe Tate.
Id., ¶¶ 101-103. UCR continued bribing
Tate after he left U.S. Bank on February 1, 2012, and the
bribes continued well into 2012. Id., ¶ 104.
The indictment stated that Tate received over $1.0 million in
bribes when he was employed by U.S. Bank. Id.,
alleged that as a result of this fraudulent scheme and U.S.
Bank's misrepresentations as to the DDA being zero-agency
paper, TMT overpaid for its purchases of DDA Portfolios in
September, 2011 and March, 2012. Id., ¶ 105.
Additionally, TMT was denied the opportunity of purchasing
eleven U.S. Bank DDA Portfolios, which were sold to UCR as
part of the fraudulent scheme. Id., ¶ 106.
Absent the scheme, TMT was or would have been the highest
bidder on the DDA Portfolios and could have resold them to
third party purchasers. Id. Also as a result of the
scheme and misrepresentations, the sale of U.S. Bank DDA
Portfolios was suspended from the second quarter of 2012
through 2013 and TMT lost its ability to bid on, purchase,
and resell DDA Portfolios during this time and lost over $9.0
million in profits. Id., ¶ 107. As a result of
U.S. Bank's breach of its agreement to enter into a
five-year forward flow agreement, TMT suffered damages in
excess of $13.0 million. Id., ¶ 108. As a
result of U.S. Bank's breach of its May 8, 2013 agreement
to sell to TMT the DDA Portfolio, TMT suffered damages in
excess of $9.0 million. Id., ¶ 109. In all, TMT
claimed $70, 000, 000 in damages, of which it contended over
$48, 000, 000 had to be trebled due to U.S. Bank's RICO
and antitrust violations. Id., ¶ 110.
on these facts, TMT alleged the following causes of action.
Counts One and Two, TMT alleged civil RICO claims and
conspiracy to violate RICO under 18 U.S.C. § 1962(c) and
(d) against all defendants except Hartnack, and sought
damages in excess of $48.0 million. Id.,
Three alleged that UCR and U.S. Bank violated Section One of
the Sherman Act (15 U.S.C. § 1) by conspiring to fix the
price at which U.S. Bank would sell DDA Portfolios to UCR and
conspiring to assure that “no parties such as TMT would
be able to successfully bid on U.S. Bank DDA Portfolios,
thereby allocating the entire market of all U.S. Bank DDA
Portfolio sales to UCR.” Id., ¶¶
168, 169. TMT alleged that such conduct by UCR and U.S. Bank
was a per se violation the Sherman Act, for which
TMT sought in excess of $48.0 million actual damages.
Id., ¶¶ 170, 171.
Four alleged that U.S. Bank and UCR violated Minnesota
Chapter 325D (Restraint of Trade) by conspiring to fix the
rate at which U.S. Bank DDA Portfolios would be sold to UCR
and by refusing to deal with TMT and others seeking to
purchase U.S. Bank DDA Portfolios, thereby diminishing
competition. Id., ¶¶ 174-176. TMT sought
in excess of $48.0 million actual damages. Id.,
Five alleged respondeat superior against U.S. Bank based on
allegations that TMT had notified U.S. Bank employees
Loosbrock, vanBrandwijk, Hartnack and Villaloboz that UCR was
bribing Tate so UCR could purchase the DDA Portfolios.
Id., ¶¶ 179-189. U.S Bank did nothing to
stop its officers' wrongful actions and instead directed
TMT to work with the “same corrupt individuals that
U.S. Bank had knowingly entrusted with the sale of its DDA
Portfolios.” Id., ¶ 190. TMT alleged that
U.S. Bank was vicariously liable for the wrongful conduct of
its officers under the doctrine of respondeat superior, and
for all damages for violations of the Clayton Act, Minnesota
Chapter 325D and its state law claims. Id., ¶
Six and Seven alleged intentional and negligent
misrepresentation against U.S. Bank, Tate, vanBrandwijk and
Hartnack, (id., ¶¶ 193-219), including
eighteen specific examples of what TMT alleged were false
representations made by U.S. Bank employees on U.S.
Bank's behalf, including defendants Tate, vanBrandwijk
and Hartnack. Id., ¶ 204. TMT alleged that U.S.
Bank intended TMT to rely and TMT reasonably and justifiably
relied on these statements, and was damaged in excess of
$48.0 million. d., ¶¶ 205-213, 216, 219.
Eight alleged breach of contract against U.S. Bank based on
two separate contracts. Id., ¶¶ 221-226.
First, TMT alleged that on March 17, 2011, it entered into a
five-year forward flow contract with U.S. Bank for the
purchase of DDA Portfolios at the rate of $0.055.
Id., ¶ 221. U.S. Bank breached this agreement
when it did not allow TMT to purchase the 2011 second quarter
DDA Portfolio at the rate of $0.055, and TMT was damaged in
excess of $13.0 million. Id., ¶¶ 222, 223.
Second, on May 8, 2013, U.S. Bank, through Stone, entered
into an agreement for the purchase by TMT of $200, 000, 000
of U.S. Bank DDA Portfolio at $0.03 as a one-time
transaction. Id., ¶ 224. TMT arranged to sell
this Portfolio to a third party for $0.0775 on the dollar but
then U.S. Bank breached its agreement and TMT was damaged in
excess of $0.0 million. Id.
Nine alleged unjust enrichment against U.S. Bank and TMT
sought damages in excess of $1.1 million. Id.,
¶¶ 228-233. TMT claimed that it overpaid for what
it believed was zero-agency debt (which was actually
two-agency debt) and U.S. Bank knowingly received the benefit
of TMT's overpayment. Id., ¶¶ 229,
230. Moreover, TMT paid more than fair value because U.S.
Bank falsely told TMT that UCR was paying $0.045.
Id., ¶ 229.
Ten alleged negligent supervision against U.S. Bank for which
TMT sought damages in excess of $70.0 million. Id.,
¶¶ 235-237. TMT alleged that U.S. Bank had a duty
to use reasonable care to supervise the bank officers acting
on its behalf and failed to exercise that reasonable care
regarding Tate, vanBrandwijk, Hartnack and “others at
U.S. Bank” knowing that the officers were in a position
where they could harm TMT. Id., ¶
U.S. Bank's Motion to Dismiss and TMT's
Bank, vanBrandwijk and Hartnack (hereafter collectively
referred to as “U.S. Bank”) moved to dismiss the
Amended Complaint pursuant to Rule 12(b)(6) of the Federal
Rules of Civil Procedure on numerous grounds. For starters,
and before addressing the specific counts of the Amended
Complaint, U.S. Bank argued that TMT pled no actionable facts
regarding vanBrandwijk and Hartnack, and no facts to support
any claim that U.S. Bank was aware of Tate's illegal
activities while he was employed by U.S. Bank. U.S. Bank
Memorandum in Support of Motion to Dismiss (“U.S. Bank
Mem.”), pp. 5-7 [Docket No. 55]. For example, the only
statement regarding any alleged criminal activity by
vanBrandwijk was contained in paragraph 134 of the Amended
Complaint, which stated that he “conducted and/or
participated, directly or indirectly, in the affairs of the
RICO enterprise through a pattern of racketeering activity.
He engaged in wire and mail fraud to further the scheme of
fraud and to make false representations, and accepted bribes,
all so as to prevent TMT from purchasing U.S. Bank DDA
Portfolios and assure they would be sold to UCR.”
Amended Complaint, ¶ 134. According to U.S. Bank, this
allegation was conclusory and unsupported by any facts that
vanBrandwijk engaged in any criminal activity or that U.S.
Bank had any knowledge of such activity. U.S. Bank Mem., p.
TMT alleged that Tate resigned on February 1, 2011, and that
TMT did not inform U.S. Bank of his acts of bribery until
months later. Id., pp. 6-7. Consequently, but for
its conclusory claims of knowledge, TMT pled no facts to
support any claims that U.S. Bank was aware of Tate's
misconduct while he was employed at U.S. Bank. Id.,
Further, U.S. Bank contended that TMT alleged no actionable
conduct by Hartnack. Id., p. 7. TMT's claims
that it informed Hartnack on April 15, 2011, that it had been
“mislead and totally blown off” by vanBrandwijk,
(Amended Complaint, ¶ 53), even if true, neither
constituted racketeering activity under RICO, nor was
otherwise unlawful. Id. TMT also alleged no facts
that it had apprised Hartnack of any mail or wire fraud or
that it was accusing vanBrandwijk of fraud, bribery, or any
other unlawful activity. Id. (citing Amended
Complaint, ¶ 42; Ex. B at 2-3.).
to the specific counts, U.S. Bank contended that TMT's
RICO claims (Counts One and Two), must be dismissed because
of numerous fatal pleading errors. First, TMT failed to
distinguish between a RICO person and RICO enterprise and
failed to plead a RICO enterprise distinct from the alleged
pattern of racketeering activity. Id., pp. 8-10.
Second, the four-year statute of limitations had run on
TMT's RICO claims, based on an email from TMT's
president, Mark Bugni, to U.S. Bank, which showed that TMT
was aware of the alleged RICO violation over three years
before the 4-year statute of limitations had begun to run.
Id., pp. 10-13 (citing Affidavit of Brooks Poley in
Support of Motion to Dismiss (“Poley Aff.”), Ex.
A). Third, to the extent that TMT was alleging a RICO claim
in connection with the March, 2012, DDA Portfolio, the
one-year contractual limitation in the purchase agreement
barred TMT's action. Id., pp. 13-14. Fourth, the
Amended Complaint failed to plead facts establishing U.S.
Bank's participation in any purported RICO scheme.
Id., pp. 14-16. Lastly, TMT's RICO conspiracy
claim (Count Two) failed because its underlying RICO claims
failed. Id., p. 16.
Bank asserted that the federal and state antitrust claims
(Counts Three and Four) must be dismissed because TMT did not
plead an actionable restraint of trade (e.g., price
fixing or boycotting) and the alleged restraints of trade
were permissible vertical agreements, which “are almost
never illegal per se.” Id., pp.
17-21. Moreover, TMT did not allege a viable violation of
Section 1 of the Sherman Act under the rule of reason.
Id., pp. 22-24. As TMT's state law antitrust
claim was factually identical with its federal antitrust
claims and TMT had failed to plead a viable federal claim,
its state law claim also had to be dismissed for failure to
state a claim. Id., p. 25.
Count Five alleging respondeat superior, U.S. Bank contended
that TMT failed to plead sufficient facts showing that U.S.
Bank was responsible for the alleged actions of Tate and
vanBrandwijk, including the factual predicates necessary to
meet the high standards required for a finding of vicarious
liability under RICO and a RICO conspiracy, and for any state
law claims. Id., pp. 34-39. Besides, U.S. Bank could
not be held liable for any statements Tate may have made
after he was no longer a bank employee. Id., p. 36.
Bank submitted that TMT's intentional and negligent
misrepresentation claims (Counts Six and Seven) failed
because TMT failed to allege facts to establish reliance or
causation. Id., pp. 26-29. Additionally, U.S. Bank
allegations regarding the September, 2011, DDA Portfolio were
vague and “overstated, ” there were no actionable
misrepresentations regarding the March, 2012 DDA Portfolio
and, at any rate, any claims arising out of the March, 2012,
DDA Portfolio purchase were barred by the one- year statute
of limitations contained in the purchase agreement.
Id., p. 29-34. U.S. Bank pointed to an email it
claimed demonstrated that TMT was told the September, 2011
DDA Portfolio was two-agency debt before TMT's purchase.
Id., p. 30 (citing Affidavit of Brooks Poley, Ex.
Bank moved to dismiss Count Eight asserting a breach of
contract claim, contending that as to the supposed March,
2011, oral agreement to enter into a five-year forward flow
contract, this claim was barred by the statute of frauds
because the contract could not be performed within one year.
Id.. p. 40. Furthermore, TMT did not sufficiently
allege that U.S. Bank and TMT formed a valid contract in May,
2013, for the sale of $200, 000, 000 worth of DDA Portfolios.
Id., pp. 40-41. According to U.S. Bank, there was no
agreement as to quantity or price and therefore, no
enforceable agreement was ever formed. Id.
Bank moved to dismiss Count Nine asserting unjust enrichment,
contending that TMT was not eligible for this equitable
relief where it had also alleged that written contracts
governed the parties' rights. Id., p. 41.
as to Counts One through Seven and Nine collectively, U.S.
Bank argued that these counts were based on TMT's flawed
theory that but for U.S. Bank's fraudulent scheme, it
would have been able to purchase certain DDA portfolios; yet,
TMT failed to allege sufficient factual content to permit the
Court to infer that was the case. Id., p. 42. As a
result, all claims based on this theory of
“causation” had to be dismissed. Id.,
opposed the motion, arguing generally that it had properly
pled its causes of action, and that U.S Bank was vicariously
liable for the misconduct of its high-level officers because
the it had written notice of Tate's criminal behavior,
the officers' misrepresentations occurred during the
scope of their employment, and the actions of the bank's
high level officers benefitted the bank. TMT's Memorandum
in Opposition to Motion to Dismiss (“TMT's
Mem.”), pp. 6-12 [Docket No. 63].
rejected U.S. Bank's argument that it pled no actionable
facts regarding vanBrandwijk and Hartnack, and no facts to
support any claim that U.S. Bank was aware of Tate's
illegal activities while he was employed by U.S. Bank.
Id., pp. 23-26. According to TMT, it pled
“scores” of specific facts showing that
vanBrandwijk was involved in the “fraudulent scheme,
pattern of racketeering activity and anti-competitive
behavior of U.S. Bank.” Id., p. 24 (citing
Amended Complaint, ¶¶ 17, 38, 43, 46, 48, 66, 67,
75, 81, 82). The Amended Complaint stated that vanBrandwijk
misrepresented the quality of the DDA Portfolios, the
requirement for a non-disclosure agreement prior to bidding,
U.S. Bank's failure to receive a non-disclosure agreement
from TMT, the terms and conditions for the purchase of DDA
Portfolios, the amount being bid by UCR for the DDA
Portfolios, and the bidding process was fair and open.
Id. (citing Amended Complaint, ¶ 149). TMT
further argued that it had alleged that vanBrandwijk accepted
bribes to prevent TMT from purchasing DDA Portfolios.
Id., p. 25 (citing Amended Complaint, ¶¶
127, 134). TMT told vanBrandwijk numerous times about the
bribery and other fraudulent acts, yet vanBrandwijk did
nothing, leading a reasonable finder of fact to conclude that
he was also accepting bribes. Id., p. 25. As to
Hartnack, TMT noted that Hartnack is not a RICO defendant,
although he also misrepresented facts to TMT. Id.
(citing Amended Complaint, ¶¶ 52-54, 196, 204).
its RICO claims, TMT asserted that it had properly alleged
the requisite distinctions between a RICO enterprise and RICO
persons, and between a RICO enterprise and a pattern of
racketeering. Id., pp. 12-19. Regarding the former,
TMT maintained that the “association-in-fact
enterprise” consisted of “U.S. Bank, two of its
high-level officers, an outside company (UCR) and its
principal (Potillo). U.S. Bank is a separate legal entity
distinct from the alleged association-in-fact enterprise, . .
. .” Id., p. 13. Regarding the latter, TMT
submitted that the “enterprise engaged in conduct
distinct and apart from the predicate acts of
racketeering” such as “acts necessary to close
sales, obtain closing proceeds, and provide post-sale
services (e.g. providing bills of sale, U.S. Bank
affidavits of correctness/assignment, and records relating to
loans sold [ ]), ” and “undoubtedly engaged in
certain legitimate sales of U.S. Bank DDA Portfolios outside
of defendants' pattern of racketeering.”
Id., pp. 16-18 (citing Amended Complaint, ¶ 122
(“The enterprise and its members conducted other
business wholly separate and apart from the pattern of
racketeering activity”)). In any event, TMT urged that
“discovery undoubtedly will reveal that there were
certain U.S. Bank DDA Portfolio sales where it was
unnecessary to commit RICO predicate acts in order for UCR to
be awarded the DDA Portfolios.” TMT's Mem., p. 18.
Alternatively, TMT claimed that “even if the
association-in-fact enterprise were a wholly criminal
association, . . . the facts alleged demonstrate that it had
a distinct structure and an organizational pattern or system
of authority and planning beyond that which was necessary to
perpetrate the predicate crimes, including but not limited to
a division of the gains reaped through the pattern of
racketeering activity.” Id., p. 19. Therefore,
“an enterprise separate and distinct from the pattern
of racketeering has been alleged.” Id. (citing
United States v. Bledsoe, 674 F.2d 647, 665 (8th
Cir. 1982), cert. denied, 459 U.S. 1040
denied that the statute of limitations had run on its RICO
claims. Id., pp. 19-20. According to TMT, nothing in
the April 11, 2011, email cited by U.S. Bank in support of
this argument would have put TMT on notice that Potillo was
bribing U.S. Bank years later. Id., p. 20. Nor would
the fact that Tate had informed TMT in August of 2010, that
“UCR was bidding substantially less for U.S. Bank DDA
Portfolios than the $0.055 (on the dollar) that TMT was
offering, ” (Amended Complaint, ¶ 24), have put
TMT notice that Tate or others at U.S. Bank were being
bribed. Id., pp. 20-21. Additionally, there was
ample evidence to support tolling of the statute of
limitations, because TMT had asked whether U.S. Bank officers
were engaged in criminal conduct, and the bank had concealed
the fact that it was occurring. Id., p. 21. TMT also
rejected U.S. Bank's argument that the one-year statute
of limitations in the DDA Portfolio purchase agreement had
any bearing on its RICO claims. Id., p. 22. TMT
noted that it was not asserting a claim for breach of the
purchase agreement and, at any rate, TMT's RICO claims,
were controlled by the four-year statute of limitations.
TMT contended that as it had properly pled its RICO claim,
there was no basis to dismiss its RICO conspiracy claim.
Id., p. 23.
its antitrust claims, TMT submitted that U.S. Bank fixed bids
so that all horizontal competition was destroyed, a per
se violation of Section 1 of the Sherman Act.
Id., pp. 27-41. As for U.S. Bank's argument
regarding the rule of reason, TMT argued that it should be
permitted to amend its Amended Complaint to plead the
illegality of U.S. Bank's conduct under a rule of reason
analysis. Id., p. 41. In addition, TMT's
antitrust claims were viable under Minn. Stat. §
325D.53, which makes it per se illegal to refuse to
deal with another party, allocate markets, allocate customers
or fix or control the price of commodities. Id., pp.
its contract claims, TMT rejected U.S. Bank's statute of
frauds argument, noting that the statute does not require
that a contract be fully performed within a year; only that
it be commenced within a year, as was the case here.
Id., pp. 43-44. But even if the statute of frauds
did apply, TMT contended that U.S. Bank should be estopped
from asserting it where its dealings with TMT in connection
with its contractual commitments were all “part and
parcel” of U.S. Bank's pattern of racketeering
activity. Id., pp. 44-45. Additionally, discovery
may reveal the existence of a writing in U.S. Bank's
possession that would satisfy the statute of frauds.
Id., p. 45.
the contract dated May 8, 2013, TMT contended that it was an
enforceable oral agreement and contrary to U.S. Bank's
position, agreement on the material terms of price ($0.03
cents on the dollar for every dollar of DDA) and quantity
($200, 000, 000) had been reached. Id., pp. 45-46
(citing Amended Complaint, ¶ 224).
U.S. Bank's arguments regarding causation and reliance,
TMT asserted that each time a false misrepresentation was
made regarding why it did not win a bid, TMT relied on that
misrepresentation to continue bidding, working with U.S. Bank
and “entering into broken contracts with U.S. Bank and
suffering injury.” Id., p. 47. Similarly, TMT
countered U.S. Bank's argument that it did not change its
position based on the misrepresentation by stating that it
the misrepresentations caused TMT to continue dealing with
U.S. Bank and the misrepresentations “contributed
to” TMT not being awarded bids. Id. In
response to U.S. Bank's challenge regarding how TMT could
have reasonably relied on the false representation that it
would be awarded a bid if it lowered its bid price, TMT
submitted that in ...