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TMT Management Group, LLC v. U.S. Bank National Association

United States District Court, D. Minnesota

January 4, 2016

TMT MANAGEMENT GROUP, LLC, Plaintiff,
v.
U.S. BANK NATIONAL ASSOCIATION, et. al., Defendants.

          REPORT AND RECOMMENDATION

          JANIE S. MAYERON United States Magistrate Judge.

         The 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.[1]

         This 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].

         I. BACKGROUND

         A. Amended Complaint

         Plaintiff 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.

         In 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.

         In or 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.

         TMT 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.

         TMT 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.

         At a meeting with Villaloboz, Loosbrock and TMT in March, 2011, Villaloboz agreed to enter into a five-year forward flow agreement[2] 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.

         On 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. Id.

         TMT bid $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.

         On May 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.

         On May 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.

         On July 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.[3] 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.

         On 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.

         In 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. Id.

         In 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. Id.

         In sum, 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, 68-80.

         On May 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.

         Tate 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.

         On June 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., ¶ 103.

         TMT 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.

         Based on these facts, TMT alleged the following causes of action.

         In 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., ¶¶ 111-166.

         Count 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.

         Count 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., ¶ 177.

         Count 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., ¶ 191.

         Counts 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.

         Count 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.

         Count 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.

         Count 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., ¶ 236.[4]

         B. U.S. Bank's Motion to Dismiss and TMT's Response[5]

         U.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. 6.

         Likewise, 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.).

         Proceeding 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.

         U.S. 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.

         As to 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.

         U.S. 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. E).[6]

         U.S. 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.

         U.S. 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.

         Finally, 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., pp. 42-43.

         TMT 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].

         TMT 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).

         As for 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 [ ]), ”[7] 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 (1982)).[8]

         TMT 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. Id.

         Finally, TMT contended that as it had properly pled its RICO claim, there was no basis to dismiss its RICO conspiracy claim. Id., p. 23.

         Regarding 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. 42-43.

         Regarding 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.

         As to 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).

         As for 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 ...


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