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Niemi v. Lasshofer

United States Court of Appeals, Tenth Circuit

November 4, 2014


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Appeal from the United States District Court for the District of Colorado. (D.C. No. 1:12-CV-00869-RBJ).

Kevin D. Evans (Phillip L. Douglass with him on the briefs), Steese, Evans & Frankel, P.C., Denver, Colorado, for the Defendants - Appellants.

Michael Lee Bender (Robert N. Miller and Michael A. Sink, Perkins Coie LLP; Denver, Colorado, and Christopher W. Madel, Robins, Kaplan, Miller & Ciresi L.L.P., Minneapolis, Minnesota, on the briefs), Perkins Coie LLP, Denver, Colorado, for the Plaintiffs - Appellees.

Before LUCERO, O'BRIEN, and GORSUCH, Circuit Judges.


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LUCERO, Circuit Judge.

John Niemi, Robert Naegele, III, and Jesper Parnevik (" Plaintiffs" or " Appellees" ) claim that Erwin Lasshofer and three companies affiliated with him (the " Lasshofer Defendants" or " Appellants" ), along with other co-conspirators, perpetrated a fraudulent financing scheme that caused the collapse of Plaintiffs' large-scale real estate development project in Breckenridge, Colorado. The district court rejected the Lasshofer Defendants' challenges to standing, jurisdiction, and venue, and entered a default judgment of approximately $185 million in favor of Plaintiffs. Exercising jurisdiction under 28 U.S.C. § 1291, we affirm the district court's judgments with two exceptions. We reverse as to personal jurisdiction over Innovatis Immobilien GmbH. We also remand to the district court with instructions to vacate its contempt order.

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According to the Amended Complaint, Niemi began working with Fairmont Hotels and Resorts on a large-scale development project in Breckenridge, Colorado in 2006.[1] The project, which became known as the Fairmont Breckenridge, was a joint venture between Niemi, Naegele, and Parnevik, with Niemi acting as agent for the group. Niemi testified that a combination of debt and equity was used to purchase properties for the three primary components of the project, known as the Fairmont Shock Hill, Fairmont Residences on the River, and Fairmont River Lodge. Niemi also testified that Azco LLC and Azco II LLC (the " Azco entities" ) were the purchasers of these properties, and that the Azco entities rolled up into Mesatex LLC, of which he was the managing member.

Based on the success of Phase I of the project, Niemi sought $200-220 million in funding to pay off Phase I loans and complete the project in Phase II. He initially engaged in discussions with various potential financers. Defendants Lasshofer and Michael Burgess represented that their companies could secure the full amount needed for Phase II, but required Niemi to sign an agreement prohibiting him from seeking other funding before the due diligence process could begin. In September 2009, Niemi authorized a formal loan request. This document required that a $180,000 loan commitment fee be paid to Burgess' company, Prosperity International LLC (" Prosperity" ), and contained a confidentiality clause prohibiting Niemi from discussing the project with other potential lenders. After Prosperity issued a Commitment Letter, Niemi wired Prosperity the loan commitment fee. Negotiations regarding the potential loan took place via numerous emails, phone calls, and meetings. Following an extensive due diligence process, a Loan Agreement was executed on December 7, 2009. Plaintiffs provided a $2 million " upfront collateral deposit."

The promised loan proceeds never materialized. The defendants " engaged in an elaborate scheme to defraud Plaintiffs out of millions of dollars" by promising to fund the loan for Phase II without any intention of doing so, resulting in the collapse of the Fairmont Breckenridge project. During the first half of 2010, " Burgess sent dozens of emails explaining why loan proceeds would not be delivered as scheduled and promising their imminent release. Burgess repeatedly represented in these emails that he spoke for himself and for Lasshofer and/or that he was passing on information" from Lasshofer. In February 2010, Niemi traveled to Europe with Burgess to meet with Lasshofer and attempt to resolve any barriers to financing. At the meeting, Lasshofer and Burgess acknowledged the hardship caused by the delayed funding, and Lasshofer assured Niemi that funding would begin within five weeks. On March 9, 2010, the parties entered a Loan Modification Agreement which called for loan payments to begin later that month. The Amended Complaint also describes several documents sent to Niemi to assure Plaintiffs that the loan would be funded, including a Joint Venture Agreement (" JVA" ) between Lasshofer and Burgess indicating that they were working to fund the Fairmont Breckenridge and memoranda signed by Lasshofer authorizing transfers of loan funds.

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In June 2010, Burgess was indicted in the U.S. District Court for the Middle District of Florida in connection with frauds related to the Fairmont Breckenridge and other projects. He pled guilty to conspiracy to commit wire fraud and money laundering and was sentenced to 180 months' imprisonment. The court ordered Burgess to pay over $94 million in restitution, including $45,990,300 designated to Niemi. According to the Amended Complaint, Burgess admitted as part of his plea agreement that wire fraud proceeds were deposited in an account belonging to defendant Innovatis Asset Management, SA (" IAM" )--a company associated with Lasshofer, implicated Lasshofer as his co-conspirator, and stated that IAM was continuing to defraud investors. Even after Burgess' arrest, Lasshofer continued to reassure Plaintiffs that the loan would be funded. No funds were ever disbursed.

According to sworn declarations by the three plaintiffs, they held a conversation on August 2, 2010 to discuss how to recover from the fraud. During the conversation, Niemi, acting on behalf of the Azco entities and Mesatex, expressly assigned all causes of action and claims belonging to those companies to Parnevik, Naegele, and himself. During a preliminary injunction hearing, Niemi testified that Plaintiffs had " acceded" to any claims possessed by these companies.[2] Following that hearing, in July 2012, Plaintiffs signed a written Assignment Agreement memorializing the prior oral assignment.


In April 2012, Plaintiffs filed a Verified Complaint commencing the underlying lawsuit against Burgess, the Lasshofer Defendants, and others, in the U.S. District Court for the District of Colorado. The complaint explains the various defendants' identities and relationships. Lasshofer, a domiciliary of Austria, is described as the managing director and sole beneficial owner of defendants Innovatis GmbH and Innovatis Immobilien GmbH, which are registered in Austria, as well as a co-founder and board member of defendant IAM, a Panamanian company. The three companies are members of the Innovatis Group, " a collection of affiliated entities from around the world purporting to provide asset management and consulting services." Burgess was the manager of Prosperity, a now-dissolved Florida company that claimed to engage in real estate development and project financing. Burgess was also the secretary of Innovatis, Inc., and Lasshofer was its president, before that company's dissolution. Defendant Lexington Capital & Property Investments, LLC, represented itself as Prosperity's exclusive underwriter. Defendant Barry Funt, through a now-defunct corporation called Essex Investment Partners, LLC, purported to work as a loan administrator and escrow agent for Prosperity.[3]

The July 2012 Amended Complaint alleged seventeen claims for relief, including, as relevant to this appeal, a claim under the Colorado Organized Crime Control Act (" COCCA" ) against the Lasshofer Defendants (Claim 5) and a common law fraud claim against all defendants (Claim 12). We recount below the pertinent portions of the case's extensive procedural history.

After granting Plaintiffs' motion for an ex parte temporary restraining order (" TRO" ) to guard against dissipation of the Lasshofer Defendants' assets, the district

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court held a preliminary injunction hearing on March 25, 2012. At the hearing, the court found that it possessed personal jurisdiction over the Lasshofer Defendants and that venue was proper in the District of Colorado. In a written order issued June 1, 2012, granting a preliminary injunction, the district court reiterated its rulings on personal jurisdiction and venue. The order effectively froze the worldwide assets of the Lasshofer Defendants (with exceptions for business expenses) and ordered them to deposit $2.18 million in escrow in Colorado pending a final judgment. On September 6, 2013, this Court vacated the preliminary injunction on the ground that Plaintiffs had not established statutory standing under COCCA, upon which the injunction was based, and remanded the matter to the district court. Niemi v. Lasshofer, 728 F.3d 1252, 1257-58, 1263 (10th Cir. 2013) (" Niemi I" ).

While the interlocutory appeal of the preliminary injunction was pending, the district court ruled on several motions, asserting authority to do so under Colorado v. Idarado Mining Co., 916 F.2d 1486, 1490 (10th Cir. 1990). On June 15, 2012, the Lasshofer Defendants filed a Fed.R.Civ.P. 12(b) motion to dismiss, asserting improper service of process, lack of personal jurisdiction, and improper venue.[4] At a hearing on March 8, 2013, the district court denied a motion for default judgment filed by Plaintiffs because the Lasshofer Defendants had filed a motion to dismiss. The court then denied that motion to dismiss and ordered the Lasshofer Defendants to respond to the complaint or face default judgment. It also ordered the Lasshofer Defendants to show cause why they should not be held in contempt for failure to obey the TRO and preliminary injunction.

On March 15, 2013, the Lasshofer Defendants filed a Rule 12(h)(3) motion to dismiss for lack of standing and subject-matter jurisdiction.[5] Following a hearing on March 26, 2013, the district court found the Lasshofer Defendants to be in contempt of its June 1, 2012, preliminary injunction order. It also denied their second motion to dismiss, along with Plaintiffs' motion for summary judgment. Shortly thereafter, the Plaintiffs and the Lasshofer Defendants made a joint submission to the court in which the Lasshofer Defendants declared that they would " not devote any more resources to this lawsuit at the District Court level," and that they would neither " be filing an answer to Plaintiff's Amended Complaint [nor] participating in discovery."

Based on its contempt finding, the district court ordered the Lasshofer Defendants to pay $10,000 per day in sanctions (to continue until they placed $2.18 million in an escrow account in Colorado). It later issued a bench warrant for Lasshofer's arrest. Because they stated that they would not answer the complaint or otherwise participate in the case at the district court level, the district court entered default judgment against the Lasshofer Defendants.

On June 7, 2013, the district court conducted a hearing to determine damages. Niemi testified and presented a report (the " Niemi Report" ). The Lasshofer Defendants

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called a licensed appraiser who contested the Niemi Report. On June 11, 2013, the court issued a default judgment in favor of Plaintiffs against the Lasshofer Defendants in the amount of $61,692,492. The default judgment order specified that Claims 5 and 12, against the Lasshofer Defendants, were severed pursuant to Fed.R.Civ.P. 54(b).

On July 17, 2013, the Lasshofer Defendants filed a notice of appeal. Because the order they sought to appeal did not appear to dispose of all claims against all parties or to provide sufficient analysis for a final appealable judgment under Fed.R.Civ.P. 54(b), and because several motions filed by Plaintiffs remained outstanding (including their motions to treble damages and for Rule 54(b) certification), this court tolled the appeal. On August 23, 2013, the district court issued a written final judgment as to Claims 5 and 12 against the Lasshofer Defendants. In its order granting final judgment as to these claims, the court reiterated that it found no just reason for delay. It also noted its view that despite the complaint's " assert[ion of] more claims . . . and nam[ing of] more defendants than what might be necessary . . . this lawsuit has been pursued as the three plaintiffs' attempt to establish what amount to statutory and common law fraud claims against Mr. Lasshofer and his entities." The final judgment trebled the $61,692,492 awarded on the COCCA claim (Claim 5) to $185,077,476, explaining that Plaintiffs could collect up to that amount on the COCCA claim and up to $61,692,492 on the common-law fraud claim (Claim 12) but not more than $185,077,476 total.


Before reaching the issues raised by Appellants, we must resolve several arguments challenging our authority to consider this appeal at this time. We conclude that the appeal is ripe, that the fugitive disentitlement doctrine does not mandate dismissal, and that Appellants are not required to post a bond.


This court's order tolling the appeal directed the parties to brief the issue of our appellate jurisdiction. In briefing submitted before the district court issued its August 23, 2012, written judgment, the Lasshofer Defendants argued that the district court had failed to comply with Rule 54(b). Because we remained concerned, even after lifting the abatement of this appeal, that the claims certified under Rule 54(b) in the district court's August 23, 2012, order were not separable from Plaintiffs' remaining unadjudicated claims, we issued an order directing Appellants to " file in this court a copy of an order of the district court dismissing the remaining claims with prejudice" or face dismissal of the appeal.

" When an action presents more than one claim for relief . . . or when multiple parties are involved, the court may direct entry of a final judgment as to one or more, but fewer than all, claims or parties only if the court expressly determines that there is no just reason for delay." Fed.R.Civ.P. 54(b). We review the district court's determination of finality de novo and its determination that there is no reason for delay for abuse of discretion. Okla. Tpk. Auth. v. Bruner, 259 F.3d 1236, 1242 (10th Cir. 2001). In Oklahoma Turnpike Authority, we held that Rule 54(b) certification is appropriate only if the district court determines " that the order it is certifying is a final order" and " that there is no just reason to delay review of the final order until it has conclusively ...

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