Phil Rosemann v. Martin Sigillito ( 2015 )

United States Court of Appeals
For the Eighth Circuit
___________________________
No. 14-2089
___________________________
Phil Rosemann
lllllllllllllllllllll Plaintiff - Appellant
v.
Martin Sigillito
lllllllllllllllllllll Defendant - Appellee
____________
Appeal from United States District Court
for the Eastern District of Missouri - St. Louis
____________
Submitted: January 15, 2015
Filed: May 4, 2015
____________
Before COLLOTON, BEAM, and KELLY, Circuit Judges.
____________
KELLY, Circuit Judge.
Phil Rosemann appeals the district court’s adverse grant of summary judgment
in this diversity action alleging legal malpractice against now-disbarred attorney
Martin Sigillito. We agree with the district court1 that in negligence cases like this
1
The Honorable Linda R. Reade, Chief District Court Judge for the Northern
District of Iowa, sitting by designation.
one, Missouri law requires expert-witness testimony about the duty of care owed.
Without providing an expert, Rosemann’s claim is invalid. Thus, we affirm the
judgment.2
I. Background
The following facts are construed in the light most favorable to Rosemann, the
non-moving party. Quinn v. St. Louis County, 653 F.3d 745, 750 (8th Cir. 2011).
Rosemann hired Sigillito in 2002 to help him invest millions of dollars from the sale
of Rosemann’s shares in a family business, after Sigillito falsely informed Rosemann
that he was an expert in international investments. Sigillito assured Rosemann that
there would be no risk in investing the money in a foreign company and that
Rosemann’s interest would be protected. As part of this investment, Sigillito charged
Rosemann $15,000 to incorporate Braithwaite Consulting Limited, a Belize company;
Braithwaite purportedly would invest the money to reduce taxes on the investment.
Rosemann was elected director and secretary of Braithwaite.
In January 2007, Rosemann received a $15.6 million buyout from the sales of
shares of his family’s company. Sigillito instructed Rosemann to loan $5 million of
the buyout to METAG Insaat Ticaret A.S., a Turkish contractor, referred to by both
parties as “Metis.” When Rosemann resisted, Sigillito told him “the loan was
guaranteed by [North Atlantic Treaty Organization] contracts and that Sigillito would
structure the deal to protect Rosemann and defer taxes.” Sigillito assured Rosemann
the NATO contracts could be seized if Metis did not repay the loan. Rosemann
transferred the entire $15.6 million to Sigillito, who then wrote a $5 million check to
Metis. For that service, Sigillito charged Rosemann $100,000. Sigillito took other
portions of the $15.6 million for his own use and loaned $10.8 million to another
party in England. Only approximately $2.75 million was repaid.
2
We have jurisdiction over this appeal under 28 U.S.C. § 1291.
-2-
Two years later, in January 2009, Metis defaulted on the loan. In
September 2009, Metis filed for bankruptcy protection in Turkey. Sigillito filed suit
against Metis but assigned Braithwaite’s interest to a St. Louis-based company owned
by Sigillito. The district court in St. Louis transferred that lawsuit to New York
because of venue problems. The suit eventually was dismissed. The loan remains in
default, and according to Rosemann, the total owed in principal and interest is
$7,464,041.
In April 2012, Sigillito was convicted of nine counts of wire fraud, four counts
of mail fraud, six counts of money laundering, and one count of conspiracy to commit
mail and wire fraud. He was sentenced to a total term of 480 months’ imprisonment.
See United States v. Sigillito, 759 F.3d 913, 922 (8th Cir. 2014).3 After Sigillito’s
convictions, Rosemann brought this suit against Sigillito for legal malpractice
regarding the handling of Rosemann’s investments.4
Rosemann alleged in his complaint that the NATO contracts do not exist, and
thus Rosemann was unable to recover the loaned $5 million. Rosemann says he
“justifiably relied” on Sigillito’s assurance that the contracts existed and that the
investment was risk-free. He says he would not have entered into the loan had he
3
Sigillito moved in this court to exclude any reference in Rosemann’s brief to
Sigillito’s criminal trial. We may take judicial notice of judicial opinions, especially
our own, and thus may reference the fact of Sigillito’s conviction and his sentence in
our consideration of this case. See Stutzka v. McCarville, 420 F.3d 757, 760 n.2 (8th
Cir. 2005). Because we need not rely on the challenged section of Rosemann’s brief
to consider the merits of this appeal, we dismiss Sigillito’s motion to strike as moot.
See Stewart v. Prof’l Computer Ctrs., Inc., 148 F.3d 937, 940 n.3 (8th Cir. 1998).
4
This suit, filed only by Rosemann and against only Sigillito, was preceded by
a class-action suit by numerous plaintiffs, including Rosemann and Braithwaite,
against numerous defendants, including Sigillito. The district court consolidated the
cases for discovery purposes but not for trial purposes.
-3-
known that it was not guaranteed, and as a result of Sigillito’s negligence in
completing the loan, Rosemann suffered damages.
After discovery had concluded, Sigillito filed a motion in limine to exclude
various sections of Rosemann’s complaint, a trial brief, and a motion to strike
witnesses. Relevant to this appeal, Sigillito moved to exclude any evidence of his
alleged malpractice because, he asserted, Missouri law requires expert testimony to
establish a claim of legal malpractice, and Rosemann had failed to name an expert.
Because Rosemann had not named an expert to testify regarding Sigillito’s alleged
negligence in handling the $5 million loan to Metis, Sigillito concluded, any evidence
about that subject should be excluded.
The district court informed the parties that it planned to convert Sigillito’s three
filings collectively into a motion for summary judgment and ordered Rosemann to
respond with his own trial brief, addressing why Braithwaite was not a named
plaintiff and why he had not named an expert witness. The court also ordered
Rosemann to respond to the arguments in Sigillito’s motion in limine. Rosemann did
not object to the court’s proposed course of action.
The court held a telephone status hearing on Rosemann’s response and
Sigillito’s reply to the response and, one week later, issued a written order granting
summary judgment for Sigillito. Although Rosemann sought to add a claim for
negligent misrepresentation, the court rejected that new claim because Rosemann had
attempted to add the claim in his amended jury instructions, which were struck by the
court when Rosemann filed them past the deadline for proposed jury instructions.
Additionally, nothing in Rosemann’s complaint suggested he would “pursue separate
claims for negligent misrepresentation and legal malpractice.” Thus, the court
concluded, the “only possible claim in this case is a professional negligence claim.”
-4-
The district court reviewed the law on professional negligence in Missouri,
which governs in this diversity suit. See Payne v. Grinnell Mut. Reinsurance Co., 716
F.3d 487, 490 (8th Cir. 2013). With few exceptions, the court noted, “an expert
witness is generally necessary to tell the jury what the defendant should or should not
have done under the particular circumstances.” One relevant exception, the court
added, is when the alleged negligence is “clear and palpable.” But the court rejected
application of that exception because in cases allowing it, a jury of lay persons could
determine a party’s negligence without additional information. The court compared
that scenario with this case, in which an expert would be necessary to testify
regarding “whether Rosemann would have recovered the amount due on the loan if
not for Sigillito’s alleged negligence.”
In this case, the district court explained, Rosemann is not alleging a simple
situation of negligence: Rosemann is not saying that Sigillito was negligent because
he falsely told Rosemann the loan was guaranteed by the NATO contracts, which
acted as collateral. Instead, the court concluded, Rosemann is alleging that Sigillito
negligently advised him that the loan was a safe—i.e., not risky—investment because
there were assets that could be seized in case of a default. That second situation, the
court continued, raises a complex question, the answer to which requires a showing
(1) whether Sigillito exercised the appropriate standard of care when investigating
whether the collateral existed and when attempting to seize assets after Metis
defaulted, and (2) that Rosemann would have recovered on the defaulted loan but for
Sigillito’s negligence. That claim was not submissible to a jury, the court ruled,
because Rosemann failed to name an expert who would testify about the appropriate
standard of care. Thus, the court granted Sigillito summary judgment.
II. Discussion
On appeal, Rosemann argues that his complaint focuses on Sigillito’s false
representation that the Metis loan was guaranteed by the NATO contracts. An expert,
-5-
Rosemann asserts, is not required for that claim, which can be proven with
Rosemann’s testimony that he relied on Sigillito’s false advice. Thus, Rosemann
concludes, summary judgment improperly was granted to Sigillito, and the case
should have been presented to a jury.5
We review de novo the grant of summary judgment and may affirm the
judgment on any basis supported by the record. See Curtis Lumber Co. v. La. Pac.
Corp., 618 F.3d 762, 771 (8th Cir. 2010). Because this is a suit under diversity
jurisdiction, we apply the law of the forum state—here, Missouri. See Payne, 716
F.3d at 490 .
Rosemann’s complaint frames the action as one of legal malpractice based on
negligence. To establish a claim of negligence under Missouri law, a plaintiff must
show, among other things, the existence of a legal duty and a breach by the defendant
of that duty. Freight House Lofts Condo Ass’n v. VSI Meter Servs., Inc., 402 S.W.3d
586, 597 (Mo. Ct. App. 2013). Missouri law also provides that in cases of
professional negligence, “the specific duty is defined by the profession, itself”; thus,
an expert witness is generally necessary to tell the jury what the
defendant should or should not have done under the particular
circumstances of the case and whether the doing of that act or the failure
5
Rosemann also contests the district court’s conversion of Sigillito’s three
filings (motion in limine, motion to strike, and trial brief) into a motion for summary
judgment. The court notified the parties two months in advance that it planned to
convert the filings into a motion for summary judgment and ordered Rosemann to
demonstrate why summary judgment would be improper, even though the time to file
a resistance to Sigillito’s motion had long since passed. In his response, Rosemann
did not object to the court’s proposed action. Though the conversion was unusual,
we see no error in the district court’s decision. See Madewell v. Downs, 68 F.3d
1030, 1048 (8th Cir. 1995).
-6-
to do that act violated the standards of care of the profession (and, thus,
constituted negligence).
Ostrander v. O’Banion, 152 S.W.3d 333, 338 (Mo. Ct. App. 2004). The negligent act,
therefore, is the act or failure to act, the standards for which must be presented by an
expert. Id. at 338–39; Parra v. Bldg. Erection Servs., 982 S.W.2d 278, 285 (Mo. Ct.
App. 1998). Expert testimony also is required in actions alleging legal malpractice.
See Roberts v. Sokol, 330 S.W.3d 576, 581 (Mo. Ct. App. 2011). “To establish that
an attorney was negligent, a plaintiff must show that he failed to exercise that degree
of skill and diligence ordinarily used under the same or similar circumstances by
members of the legal profession.” Id. at 580 (quotation omitted).
There are exceptions to this rule. Expert testimony is not required if the
negligence in question is “clear and palpable to a jury of laymen.” Zweifel v. Zenge
& Smith, 778 S.W.2d 372, 374 (Mo. Ct. App. 1989); see Hart v. Steele, 416 S.W.2d
927, 932 (Mo. 1967) (explaining exception to expert-testimony requirement applies
if “the want of skill or lack of care is so apparent as to be within the comprehension
of laymen and requires only common knowledge and experience to understand and
judge it”). A claim of legal malpractice would not require expert testimony if, for
example, a lawyer failed to file a claim within the statute of limitations or allowed
“some other time limit to pass.” See Zweifel, 778 S.W.2d at 374.
In his complaint, Rosemann alleged that Sigillito negligently prepared the
Promissory Note sent from Braithwaite—a Belize corporation—to Metis—a Turkish
contractor. That is not the same argument Rosemann proffered to this Court during
oral argument that Sigillito simply lied about the existence of the NATO contracts.
To determine whether Sigillito negligently handled the Note, a jury would need to
know what an attorney, “under the same or similar circumstances,” would have done
and why Sigillito’s actions were unacceptable. Roberts, 330 S.W.3d at 580. That
technical standard is similar to the standard allegedly not met by the attorneys in
-7-
Zweifel, who did not raise on appeal the trial court’s failure to instruct the jury about
excusable homicide. Both involve “somewhat arcane subjects to the ordinary juror,”
Zweifel, 778 S.W.2d at 374, subjects that go beyond the “common knowledge and
experience” of most lay persons, Steele, 416 S.W.2d at 932. Because the alleged lack
of care would not be “clear and palpable” to most lay persons in this case, this
exception does not apply.
Rosemann alternatively argues that Sigillito’s negligence would be within the
“common knowledge” of the jury, thus invoking another potential exception to the
requirement of expert testimony in cases alleging professional negligence. But the
cases Rosemann cites in support of this argument are distinguishable because they
discuss a professional who did not adhere to a contract or guide, rather than a
particular standard of care. In Aetna Ins. Co. v. Hellmuth, Obata & Kassabaum, Inc.,
392 F.2d 472 (8th Cir. 1968), the alleged negligence concerned a contractor who
failed to supervise the filling of a sewer ditch, as was required under contract; to
correct misaligned forms used to retain and support a poured concrete wall; and to
recognize that a sewer pipe was improperly positioned and crooked. We held that a
jury could understand these “commonplace factual situations,” and thus no expert
witness testimony was needed. Id. at 478. Similarly, in Jaeger v. Henningson,
Durham & Richardson, Inc., 714 F.2d 773, 775 (8th Cir. 1983), an architect followed
the directions in a shop drawing to craft a steel landing pan with 14-gauge steel and
no angle stiffeners, even though earlier specifications required that the landing pad
be fabricated from 10-gauge steel with angle supports. We concluded that the action
against the architectural firm was one for negligent failure to supervise the shop
drawings; because a jury of laypersons alone could determine whether failure to
supervise an employee was negligent, the case did not require expert testimony on the
appropriate standard of care. Id. at 776; see also Bartak v. Bell-Galyardt & Wells,
Inc., 629 F.2d 523, 530 (8th Cir. 1980) (noting that action for negligence in
supervision of architects “come[s] within the ‘general knowledge’ exception” to
requirement of expert testimony).
-8-
Sigillito did not simply fail to follow instructions, a guide, or written
specifications. Instead, by Rosemann’s own words, Sigillito allegedly failed to
exercise “the reasonable degree of knowledge and skill that is ordinarily possessed
and exercised by attorneys in the preparation of a Promissory Note between two
foreign corporations.” Whatever knowledge or skill Sigillito allegedly should have
had to prevent the collapse of the loan and loss to Braithwaite of $5 million is not
obvious or common knowledge; rather, it is technical and based on the nature of the
deal and the profession. Whether Sigillito improperly followed that standard requires
the testimony of an expert in international law and/or international transactions.
We thus agree with the district court that Rosemann was required to name an
expert who would testify regarding the proper standard of care in this case.
Rosemann’s failure to name an expert, under Missouri law, rendered his claim of
professional negligence not submissible.6
Last, Rosemann asserts that his complaint contained a claim for negligent
misrepresentation, which would not require expert testimony regarding the standard
of care. Rosemann attempted to add this claim in his amended jury instructions,
which he filed almost two weeks after the district court’s imposed deadline for filing
jury instructions. The court struck Rosemann’s amended instructions and ordered the
parties to consult with each other to develop proper joint instructions. Rosemann
persisted in this claim, but the court concluded that any potential claim for negligent
misrepresentation was properly treated as a claim for professional negligence.
Under Missouri law, when liability depends on an attorney’s “negligent
performance of professional services” to a client, the claim must be treated as one for
6
Sigillito asserts Rosemann is not the proper plaintiff to bring this suit.
Because we affirm the district court’s judgment on a different basis, we, as the district
court did, decline to address this argument.
-9-
attorney malpractice (i.e. professional negligence). Beare v. Yarbrough, 941 S.W.2d
552, 557 (Mo. Ct. App. 1997) (citing Donahue v. Shughart, Thomson & Kilroy, P.C.,
900 S.W.2d 624, 629–30 (Mo. banc 1995)). In other words, a party may not clothe
an attorney-malpractice claim as a claim of breach of contract or breach of a fiduciary
duty. Donahue, 900 S.W.2d at 629–30; see also Klemme v. Best, 941 S.W.2d 493,
496 (Mo. banc 1997) (“If the alleged breach can be characterized as both a breach of
the standard of care (legal malpractice based on negligence) and a breach of a
fiduciary obligation (constructive fraud), then the sole claim is legal malpractice.”).
We agree with the district court’s conclusion. The basis for Rosemann’s claims
is that Sigillito mishandled the Promissory Note, failed to protect Rosemann from
risk, and otherwise committed legal malpractice. Rosemann labeled the headings in
his complaint “Pre-Loan Negligence” and “Post-Default Negligence”; nowhere is
“misrepresentation” discussed. Rosemann does allege that “Sigillito violated his
fiduciary obligation to Rosemann, with incompetent or negligent behavior.” But this
allegation of a breach of a fiduciary duty is based only on Sigillito’s alleged
“negligent behavior,” i.e. his malpractice. So although Rosemann characterizes the
alleged breach “as both a breach of the standard of care . . . and a breach of a
fiduciary obligation,” the only claim he can pursue, under Missouri law, is legal
malpractice. Klemme, 941 S.W.2d at 496.
III. Conclusion
For the reasons discussed above, we affirm the district court’s grant of
summary judgment in favor of Sigillito.
______________________________
-10-