Tenth Circuit says three defendants should be removed from RICO class action

By Kyla Asbury | Dec 10, 2014

DENVER (Legal Newsline) - An appeals court ruled that three defendants should be removed from a RICO class action lawsuit.

DENVER (Legal Newsline) - An appeals court ruled that three defendants should be removed from a RICO class action lawsuit.

The three-judge panel said as the class certification decision pertains to Florida law firm Broad and Cassel, Ronald Gache and Carl Romano, it reversed the district court's decision to certify a class against them. The panel affirmed the district court's decision to certify the class against the other defendants, according to the Dec. 8 opinion filed in the U.S. Court of Appeals for the Tenth Circuit.

Circuit judges Paul Joseph Kelly Jr., Timothy M. Tymkovich and Gregory A. Phillips voted in the majority, with Tymkovich authoring the opinion.

'This case requires us to consider the certification of a proposed class action to pursue claims under the Racketeer Influenced and Corrupt Organizations Act," the opinion states. "A class primarily composed of real estate borrowers sued a group of lenders, claiming the lenders conspired to create a fraudulent scheme to obtain non-refundable up-front fees in return for loan commitments the lenders never intended to fulfill."

The plaintiffs claimed the lenders misrepresented their ability and their objective to make good on the promises to meet certain financing obligations as part of a scheme to entice borrowers to pay the up-front fees.

"In addition, the class intends to offer generalized proof that the lenders concealed the financial history of Sandy Hutchens, the principal defendant, and his use of pseudonyms, to preserve the superficial integrity of the operation," the opinion said.

CGC Holding Company, Crescent Sound Yacht Club, Harlem Algonquin and James T. Medick filed the class action lawsuit on April 15, 2011, in the U.S. District Court for the District of Colorado.

An order to dismiss the class action RICO lawsuit was filed on July 19, 2013. An appeal was filed shortly after.

The lenders contend that each class member will have to demonstrate that it relied on the lenders’ misrepresentations or omissions to satisfy RICO’s causation element, making a single trial unwieldy and unworkable, according to the opinion.

"The lenders are wrong, but not because plaintiffs benefit from a legal 'presumption' of reliance as identified by the district court," the opinion states. "As we explain, RICO class-action plaintiffs are not entitled to an evidentiary presumption of a factual element of a claim."

The panel said it still agrees with the district court that a class can be certified in this context.

"Exercising jurisdiction under Rule 23(f), we affirm the class certification decision on modified grounds," the opinion states. "We also reverse the district court’s class certification decision as to the lenders’ law firm and lawyers, Broad and Cassel, Ronald Gaché and Carl Romano, and remand with instructions to dismiss the claims against those defendants."

The defendants in the suit include Sandy Hutchens; Tanya Hutchens; Jennifer Hutchens; H. Jan Luistermans; 1681071 Ontario Inc.; Northern Capital Investments Ltd; 2800 North Flagler Drive Units 106-107 LLC; Estate of Judith Hutchens; 129 Laren Street Inc.; 3415 Errington Avenue Inc.; 367-369 Howey Drive Inc.; 3419 Errington Avenue Inc.; 17 Serpentine Street Inc.; 720 Cambrian Heights Inc.; 331 Regent Street Inc.; 789 Lawson Street Inc.; 110-114 Pine Street Inc.; 15-16 Keziah Court Inc.; 193 Mountain Street Inc.; 625 Ash Street Inc.; 364 Morris Street Inc.; Santan Property Management Inc.; 101 Services Road Inc.; 146 Whitaker Street Inc.; Jbd Hutchens Family Holdings Inc.; JBD Holdings; 1697030 Ontario Inc.; 308 Elgin Street Inc.; 1539006 Ontario Inc.; First Central Holdings Inc.; First Central Mortgage Funding Inc.; Canadian Funding Corporation; Realty 1 Real Estate Services Ltd.; and Alvin Meisels.

The plaintiff is represented by John F. Head of Head & Associates PC in Denver.

The defendants are represented by James D. Kilroy and Jessica E. Yates of Snell & Wilmer LLP in Denver; Steven A. Klenda of Adroit Advocates LLC in Denver; and John M. Palmeri, Heather K. Kelly and Greg S. Hearing of Gordon & Rees LLP in Denver.

U.S. Court of Appeals for the Tenth Circuit case number: 13-1255

From Legal Newsline: Kyla Asbury can be reached at classactions@legalnewsline.com.

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