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Burke v. Sterling Trust Company

United States District Court, D. Colorado

April 11, 2014

MARIA BURKE, both individually and on behalf of the Individual Retirement Account of Maria Burke, and DONNA GRAHAM, both individually and on behalf of the Individual Retirement Account of Donna Graham, Plaintiffs,
v.
STERLING TRUST COMPANY n/k/a EQUITY TRUST COMPANY d/b/a EQUITY INSTITUTIONAL, an Ohio Corporation, Defendant.

ORDER

R. BROOKE JACKSON, District Judge.

This matter comes before the Court through unfortunately circumstances. The two plaintiffs in this case, Ms. Burke and Ms. Graham, were allegedly persuaded to trust an unscrupulous investment advisor who cheated them out of their life savings. That investment advisor, Perry Sawano, is currently facing charges under the Colorado Securities Act and, as this Court understands it, his assets have been frozen. That may explain why the plaintiffs have chosen to sue the trust company that facilitated their investments instead of Mr. Sawano.

The Court would not, of course, wish to see these individuals left without recourse, especially considering the financial situation that now faces them. However, they filed their lawsuit in the wrong forum. Defendant objects, and the Court, exercising jurisdiction over this action under 28 U.S.C. §§ 1331 and 1332(a), agrees that the objection is valid. For the reasons set forth below, this case is dismissed without prejudice.

BACKGROUND

According to the allegations of the Complaint, Ms. Burke and Ms. Graham are retired individuals whose savings were held in self-directed IRA accounts. Sterling Trust Company (now owned by Equity International Trust Company) is a business that, for a fee, acts as custodian of IRA accounts under the provisions of Sections 401 through 409 of the Internal Revenue Code. It promotes itself as a custodian concentrating in "alternative investments."

It is unclear how Ms. Burke and Ms. Graham met Perry Sawano, or how he convinced them to invest with him. However, he did, and Sterling Trust was enlisted to serve as the custodian of the assets in which they invested on his advice. Specifically, Ms. Burke opened an account with Sterling Trust in 2010, and at Mr. Sawano's direction she invested $150, 000 in business entities he controlled. In 2011, Ms. Graham opened an account with Sterling Trust and at Mr. Sawano's direction she invested $570, 000 in business entities he controlled. In both cases, the plaintiffs claim that they did not know the relationship between Mr. Sawano and these business entities, or that he was running a Ponzi scheme. Due to Mr. Sawano's allegedly fraudulent conduct the plaintiffs' investments are now worthless.

Simply put, the plaintiffs (on Mr. Sawano's advice) directed Sterling Trust to invest their money in the aforementioned companies. The plaintiffs do not allege that Sterling Trust advised them to invest with Mr. Sawano, or that it knew of or was complicit in the Ponzi scheme Mr. Sawano was allegedly running. Instead, their claims against Sterling Trust primarily rely on tort and contract theories going to whether it had a duty to investigate the companies in which the plaintiffs invested, including conducting independent valuations of the companies. The plaintiffs assert a variety of complaints against Sterling Trust, including a federal RICO action. However, the issue facing this Court is whether the case must be dismissed for improper venue.

LEGAL ANALYSIS

The defendant has filed a motion to dismiss under Fed.R.Civ.P. 12(b)(6), citing a variety of defenses including forum non conveniens. [Doc. #10 at 1-3]. A motion to dismiss for improper venue is more properly filed under Fed.R.Civ.P. 12(b)(3). See K & V Scientific Co., Inc. v. Bayerische Motoren Werke Aktiengesellschaft, 314 F.3d 494, 497 (10th Cir. 2002) (citation omitted). Regardless, the issue here turns on the enforceability of a forum selection clause, specifically, clauses in its IRA Custodial Account Agreement and in its signed Direction of Investment Agreement that require that suits against Sterling Trust be brought in county court in Lorain County, Ohio. [ See e.g., Doc. #10-1 at 6, ¶ 8.15; Doc. #18-3 at 13, ¶ 8.15; Doc. #18-4 at 5, ¶ 15; Doc. #18-5 at 7, ¶ 8.15; Doc. #18-6 at 5, ¶ 15].

"[I]n general, a motion to dismiss should be converted to a summary judgment motion if a party submits, and the district court considers, materials outside the pleadings." Prager v. LaFaver, 180 F.3d 1185, 1188 (10th Cir. 1999). However, "the district court may consider documents referred to in the complaint if the documents are central to the plaintiff's claim and the parties do not dispute the documents' authenticity." Jacobsen v. Deseret Book Co., 287 F.3d 936, 941 (10th Cir. 2002). "To satisfy the requirement of authenticating or identifying an item of evidence, the proponent must produce evidence sufficient to support a finding that the item is what the proponent claims it is." Fed.R.Evid. 901(a).

The plaintiffs contend that the Court cannot consider these agreements because they are in dispute and, in the alternative, because their signatures on the agreements cannot be authenticated. They suggest that Mr. Sawano could have forged their signatures because he has been known to forge other clients' signatures.

The problem is that there is nothing about these documents that suggests that they are inauthentic or contain forgeries. Plaintiffs have not alleged that the agreements are not authentic or that their signatures were forged. The Court cannot entertain the argument that there is a genuine dispute as to the authenticity of these agreements without at least some indication that this might be the case. Put another way, the Court will not entertain speculation that signatures might be forged and put the parties to the expense of what might be a futile continuation of the lawsuit here if the plaintiffs are not willing even to assert that there is something amiss about the documents or their signatures.

The forum-selection clause in the IRA Custodial Account Agreement states:

Any suit filed against custodian arising out of or in connection with this Agreement shall only be instituted in the county courts of Lorain County, Ohio where custodian maintains its principal office and you agree to submit to such jurisdiction both in connection with any such suit ...

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