Daedalus Capital LLC v. Bradford Vinecombe

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[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 14-15571
Non-Argument Calendar
________________________
D.C. Docket No. 8:12-cv-02533-MSS-TBM
DAEDALUS CAPITAL LLC,
LOCKWOOD TECHNOLOGY CORPORATION,
Plaintiffs -
Counter Defendants -
Appellants,
INFRAX SYSTEMS, INC.
Plaintiff -
Counter Defendant,
versus
BRADFORD VINECOMBE,
BRUNO REIGL,
ADAM VINECOMBE,
ERIC VINECOMBE,
LOCKWOOD WORLDWIDE, INC.,
SWIFTSURE GROUP, LLC,
Defendants -
Counter Claimants -
Appellees
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CHERYL S. REED, et al.,
Defendants,
LOCKWOOD TECHNOLOGY CORPORATION NEVADA,
Defendant -
Counter Defendant -
Appellee.
________________________
Appeal from the United States District Court
for the Middle District of Florida
________________________
(September 4, 2015)
Before HULL, ROSENBAUM and BLACK, Circuit Judges.
PER CURIAM:
Appellants Daedalus Capital, LLC (Daedalus) and Lockwood Technology
Corporation (LTC) appeal the district court’s order granting partial summary
judgment in favor of Appellees Bradford Vinecombe (Vinecombe), former
president of LTC; Bruno Riegl (Riegl), former employee of LTC; Adam and Eric
Vinecombe, former employees of LTC and Vinecombe’s sons; Lockwood
Worldwide, Inc. (LWW), and Swiftsure Group, LLC (Swiftsure). Appellants
argue the district court erred in granting summary judgment as to their counts
based on (1) violations of the Racketeer Influenced and Corrupt Organizations
(RICO) Act, 18 U.S.C. §§1962(c) and 1964, as well as Florida’s Civil Remedies
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for Criminal Practices Act (the Florida RICO Act), Fla. Stat. § 772.103(3)-(4);
(2) fraud; (3) civil conspiracy; (4) breach of fiduciary duty; and (5) aiding and
abetting breach of fiduciary duty. 1 For the reasons below, we affirm. 2
I. BACKGROUND
Vinecombe created LTC in 1994. LTC originally performed two services:
(1) selling and developing asset tracking software and (2) providing asset tracking
services, such as physical inventory services. In 2003, Vinecombe created LWW.
Vinecombe’s intention in creating LWW was to give the business to his sons
Adam, Eric, and Craig. 3 His plan was for LWW to take over the physical
inventory services, while LTC would continue developing and selling asset
tracking software. LTC and LWW shared office space and often worked together
on projects.
1
More specifically, the district court granted partial summary judgment against
Appellants on their claims of (1) federal RICO, (2) federal RICO conspiracy, (3) Florida RICO,
(4) Florida RICO conspiracy, (5) fraud in the inducement, (6) common law fraud, (7) civil
conspiracy, (8) aiding and abetting breach of fiduciary duty, and (9) breach of fiduciary duty.
The analysis is the same with respect to each of the four RICO-based claims and with respect to
both fraud-based claims. For clarity purposes, we discuss the four RICO-based claims
collectively, as well as the two fraud-based claims.
2
After the district court granted partial summary judgment against all of Appellants’
federal claims, all that remained were some state law claims. On November 14, 2014, the district
court entered a final order dismissing the remaining state law claims without prejudice for lack
of subject matter jurisdiction and closing the case. Appellants timely appealed both orders.
Because we affirm the district court’s order granting partial summary judgment, we also affirm
its order dismissing the remaining state law claims.
3
Craig is not named as a party to this case.
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On May 8, 2009, Vinecombe entered into a stock purchase agreement with
Daedalus. Under the stock purchase agreement, Vinecombe sold 100% of LTC’s
preferred stock, convertible into a 70% ownership interest in LTC, to Daedalus for
a purchase price of $1,250,000. Of the purchase price, $250,000 was paid to
Vinecombe and the remaining $1,000,000 was invested in LTC. After the
transaction, Vinecombe retained a 30% ownership interest in LTC and remained
President and CEO of the company. In conjunction with the stock purchase
agreement, Vinecombe and Riegl also entered into two-year employment
agreements with LTC.
On May 29, 2009, Vinecombe, as President of LTC, and his son Adam, as
president of LWW, executed a Teaming Agreement. By its terms, the Teaming
Agreement was an “independent contractor teaming agreement.” The agreement
provided: “The rights, responsibilities and obligations of the parties shall be
deemed to be independent contractors; one party cannot bind the other, and the
employees of one party shall not be deemed to be employees of another party.”
The Teaming Agreement allowed one party to resell the services of the other party
under their own individual contracts, or for the parties to jointly bid on project
proposals.
In 2009, 2010, and 2011, LTC contracted with the Connecticut State
Colleges and Universities (ConnSCU). LTC also contracted with a company
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called EMC in 2008 and 2010. LWW performed physical inventory work on these
projects under the LTC contracts. EMC and ConnSCU sent checks to LTC for
payment. The checks were made payable to LTC. Each check was endorsed
“Lockwood” and deposited directly into LWW’s bank account.
Near the end of 2010, LTC began running low on funds. Ken Baritz
(Baritz), a managing member of Daedalus, and Vinecombe discussed several
options for the company. These options included (i) immediately shutting down
LTC, (ii) terminating a software engineer, or (iii) having Daedalus invest more
money in LTC to give the company a chance to get by while Baritz searched for
another investor. Baritz agreed Daedalus would invest another $100,000 in LTC if
Vinecombe and Reigl would agree to defer half of their salaries during that time
period, to which they agreed.
In early 2011, an inquiry was received from Qatar University (QU)
regarding LTC’s asset tracking software. This agreement culminated in a three-
phase asset management project that included use and integration of LTC’s asset
tracking software. LWW paid LTC $100,000 for the use of LTC’s asset tracking
software on December 30, 2011.
Riegl resigned from LTC on April 30, 2011. Around that time, Riegl and
Vinecombe traveled to Qatar to begin the QU Project and were paid for their work
by LWW.
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In April 2011, Daedalus entered into a stock purchase agreement with Infrax
Systems (Infrax). Under this agreement, Daedalus received $1,650,000 worth of
stock in Infrax and warrants to buy 660,000 additional shares of Infrax stock. In
exchange, Infrax took control of LTC. Vinecombe resigned as president of LTC
on June 3, 2011, but agreed to continue helping LTC as an independent contractor.
On March 1, 2013, Appellants Daedalus and LTC sued Appellees
Vinecombe, Riegl, Adam, Eric, LWW, and Swiftsure alleging, in short, they were
unlawfully targeted and defrauded of their property.
II. STANDARD OF REVIEW
We review a district court’s grant of summary judgment de novo, construing
all inferences in favor of the nonmoving party. Leigh v. Warner Bros., 212 F.3d
1210, 1214 (11th Cir. 2000). Summary judgment is appropriate only when there
are no genuine issues of material fact. Id.III. DISCUSSION
1. Federal and State RICO
The district court did not err in granting summary judgment on Appellants’
federal and state RICO counts. To prove a RICO violation under both federal and
Florida law, a plaintiff must establish, among other things, “continuity.” See
Jackson v. BellSouth Telecomm., 372 F.3d 1250, 1264 (11th Cir. 2004) (explaining
that, in addition to showing two or more related predicate acts, federal RICO
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plaintiffs must show “the predicate acts demonstrate[] criminal conduct of a
continuing nature”); Lugo v. State, 845 So. 2d 74, 99 (Fla. 2003) (explaining
Florida RICO plaintiffs must establish “that a continuity of particular criminal
activity exists”). There are two types of continuity that may establish a RICO
claim: closed-ended continuity and open-ended continuity. H.J. Inc. v. Nw. Bell
Tel. Co., 492 U.S. 229, 241 (1989). Closed-ended continuity refers to “a closed
period of repeated conduct.” Id. Open-ended continuity refers to “past conduct
that by its nature projects into the future with a threat of repetition.” Id.Appellants cannot establish either form of continuity. They cannot show
closed-ended continuity because there is only one victim, LTC, and “only a single
scheme with a discrete goal” connecting the predicate acts—i.e., Appellees’
alleged scheme to divert business proceeds from LTC to LWW and themselves.
See Jackson, 372 F.3d at 1267 (“[W]here the RICO allegations concern only a
single scheme with a discrete goal, the courts have refused to find a closed-ended
pattern of racketeering even when the scheme took place over longer periods of
time.”); Sil-Flo, Inc. v. SFHC, Inc., 917 F.2d 1507, 1516 (10th Cir. 1990)
(affirming dismissal of RICO claim when a “closed-ended series of predicate acts
. . . constituted a single scheme to accomplish one discrete goal, directed at one
individual with no potential to extend to other persons or entities” (quotations
omitted)).
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Nor can they show open-ended continuity because there is no threat of
continuing criminal activity. See Jackson, 372 F.3d at 1265 (“In ‘open-ended’
cases that rely on alleging the threat of continuity, plaintiffs can meet their burden
by establishing either that the racketeering acts themselves include a specific threat
of repetition extending indefinitely into the future, or that the predicate acts or
offenses are part of an ongoing entity’s regular way of doing business.” (quotations
omitted)). We agree with the district court “[t]here is no threat that [Appellees’]
alleged pattern of racketeering activity will continue into the future because their
goal has been realized in the acquiring of the QU Project, and there is no longer a
working relationship between the two companies giving rise to the opportunity for
Defendants’ pattern of predicate acts to persist into the future.” See also Vicom,
Inc. v. Harbridge Merch. Servs., Inc., 20 F.3d 771, 782 (7th Cir. 1994) (“In
assessing whether a threat of continued racketeering activity exists, we have made
clear that schemes which have a clear and terminable goal have a natural ending
point. Such schemes therefore cannot support a finding of any specific threat of
continuity that would constitute open-ended continuity.”).
Accordingly, the district court did not err in granting summary judgment to
Appellees on the federal and Florida RICO counts.
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2. Fraud
The district court did not err in granting summary judgment to Appellees on
Appellants’ two fraud-based counts.
a. Fraud in the Inducement
Appellants assert the evidence in this case supports a claim of fraud in the
inducement. As the district court found, however, Appellants failed to argue a
claim for fraud in the inducement in responding to Appellees’ summary judgment
motion, instead arguing the elements of a conspiracy to defraud. Because
Appellants failed to carry their burden, the district court did not err in granting
summary judgment on their claim of fraud in the inducement. A & M Stores, Inc.
v. Hiram Walker, Inc., 427 F.2d 167, 168 (5th Cir. 1970)4 (affirming summary
judgment because “plaintiff failed to meet its burden of responding to defendants’
motions for summary judgment by setting forth specific facts showing that there is
a genuine issue for trial” (quotations omitted)).
b. Common Law Fraud
With regard to Appellants’ claim for common law fraud, we agree with the
district court that “[Appellants] advance no specific facts . . . that would establish a
claim of common law fraud.” Appellants’ broad assertion that “[t]he record in this
4
In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc), this
Court adopted as binding precedent all decisions of the former Fifth Circuit handed down prior
to the close of business on September 30, 1981.
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case details the criminal or fraudulent acts committed by each of the Defendants”
is insufficient to create a genuine issue of fact. See Martin v. Commercial Union
Ins. Co., 935 F.2d 235, 238 (11th Cir. 1991) (“The party opposing the motion [for
summary judgment] must present specific facts in support of its position and
cannot rest upon allegations or denials in the pleadings.”). Accordingly, the
district court did not err in granting summary judgment on the common law fraud
claim.
3. Civil Conspiracy
The district court did not err in granting summary judgment to Appellees on
the civil conspiracy claim. Appellants’ brief broadly asserts Appellees agreed to
divert LTC’s business opportunities to LWW and to have LTC’s incoming revenue
from the QU contracts deposited into LWW’s financial account. However, as with
the claim for common law fraud, Appellants have not identified specific facts or
evidence substantiating their allegations. Furthermore, Appellants have not
explained how this conduct, even if true and supported by evidence, satisfies the
elements of a civil conspiracy. In particular, Appellants have not explained how
LWW’s cashing of checks constituted an independent wrong or tort. See Blatt v.
Green, Rose, Kahn & Piotrkowski, 456 So. 2d 949, 951 (Fla. 3d DCA 1984) (“[A]
cause of action for civil conspiracy exists . . . only if the basis for the conspiracy is
an independent wrong or tort which would constitute a cause of action if the wrong
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were done by one person.” (quotations omitted)). Accordingly, the district court
did not err in granting summary judgment on the civil conspiracy claim.
4. Breach of Fiduciary Duty
The district court did not err in granting partial summary judgment to
Appellees on the breach of fiduciary duty claim. Specifically, the district court did
not err in concluding “[Appellees] are entitled to summary judgment to the limited
extent that they did not owe any fiduciary duties to LTC beyond their respective
dates of resignation from the company.” See Gregg v. U.S. Indus., Inc., 715 F.2d
1522, 1541 (11th Cir. 1983) (“[O]nce Gregg was removed as president and chief
operating officer of his former companies and made only a consultant he no longer
had fiduciary duties . . . .”); Renpak, Inc. v. Oppenheimer, 104 So. 2d 642, 644 (2d
DCA 1958) (“After there has been a severance of official relationship, either
because of resignation or removal, generally a director or officer occupies no
relation to the corporation of trust or confidence and deals with it thereafter like
any other stranger; and he is not precluded from engaging in a competing
business.”). Additionally, the district court did not err in concluding Reigl was
entitled to partial summary judgment “to the limited extent that any breach of
fiduciary duty is asserted against him in relation to the ConnSCU contracts and
checks.” As the district court explained, there is no evidence Reigl was involved
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in those transactions. Therefore, the district court did not err in granting partial
summary judgment to Appellees on the breach of fiduciary duty claim.
5. Aiding and Abetting Breach of Fiduciary Duty
Finally, the district court did not err in granting partial summary judgment to
Appellees to the limited extent summary judgment was granted to Appellees on the
claim of fiduciary duty discussed above. See Wiand v. Wells Fargo Bank, N.A.,
938 F. Supp. 2d 1238, 1244 (M.D. Fla. 2013) (“A cause of action for aiding and
abetting requires [among other things] an underlying violation on the part of the
primary wrongdoer . . . .” (quotations omitted)).
IV. CONCLUSION
For the foregoing reasons, we affirm the district court’s order granting
partial summary judgment on the federal claims and dismissing the remaining state
claims.
AFFIRMED.
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