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Estate of Lynott v. Luckovich

United States District Court, W.D. Washington, Seattle

January 22, 2018

ESTATE OF FRANK B. LYNOTT, by and through BRUCE R. MOEN, personal representative, Plaintiff,
v.
LAURIE A. LUCKOVICH, et al., Defendants.

          ORDER GRANTING IN PART DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

          ROBERT S. LASNIK UNITED STATES DISTRICT JUDGE

         This matter comes before the Court on “Defendants Daryl Trevor Reiche and Debra K. Campbell's Motion for Summary Judgment of Dismissal.” Dkt. # 273. Plaintiff alleges that defendants Reiche and Luckovich engaged in a scheme to defraud Frank Lynott, now deceased, by using his money to purchase and remodel eight properties without compensation and that defendant Campbell breached her duties to Frank Lynott as the Designated Broker and/or agent on the transactions. Reiche and Campbell seek summary judgment on all of the claims against them.

         Summary judgment is appropriate when, viewing the facts in the light most favorable to the nonmoving party, there is no genuine issue of material fact that would preclude the entry of judgment as a matter of law. The party seeking summary dismissal of the case “bears the initial responsibility of informing the district court of the basis for its motion” (Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)) and “citing to particular parts of materials in the record” that show the absence of a genuine issue of material fact (Fed. R. Civ. P. 56(c)). Once the moving party has satisfied its burden, it is entitled to summary judgment if the non-moving party fails to designate “specific facts showing that there is a genuine issue for trial.” Celotex Corp., 477 U.S. at 324. The Court will “view the evidence in the light most favorable to the nonmoving party . . . and draw all reasonable inferences in that party's favor.” Krechman v. County of Riverside, 723 F.3d 1104, 1109 (9th Cir. 2013). Summary judgment should be granted where the nonmoving party fails to offer evidence from which a reasonable jury could return a verdict in its favor. FreecycleSunnyvale v. Freecycle Network, 626 F.3d 509, 514 (9th Cir. 2010).

         Having reviewed the memoranda, declarations, and exhibits submitted by the parties, [1] the Court finds as follows:

         For purposes of this motion, the Court will assume that defendant Luckovich was engaged in a multi-year scheme to separate Frank Lynott from his money by convincing him to invest in properties that Ms. Luckovich would remodel and sell at a profit. Instead, Ms. Luckovich made only limited efforts to renovate or remodel the properties, used the rest of the money for her own personal uses, and sold the properties for a loss.

         A. Daryl Trevor Reiche

         Mr. Reiche acknowledges that he oversaw the remodel, renovation, and landscaping activities at a number of the properties that Mr. Lynott and Ms. Luckovich purchased together. He denies any wrongdoing, however, and demands that plaintiff come forward with admissible facts giving rise to an inference of fraud on his part. Plaintiff has failed to do so.

         Plaintiff argues that Mr. Reiche must have been involved in defendant Luckovich's assumed scheme based on the following facts: (1) Mr. Reiche and Ms. Luckovich were (and potentially are) in an intimate relationship, (2) Mr. Reiche renovated many of the properties Ms. Luckovich purchased with Mr. Lynott, (3) Ms. Luckovich gave Mr. Reiche money so that he could pay the employees, subcontractors, and vendors who worked on the projects, and (4) Mr. Reiche was extremely knowledgeable about the work performed and expenses incurred at each project.[2] None of the things of which Mr. Reiche is accused are illegal or unlawful, however, and they are all entirely consistent with Mr. Reiche providing project management services for purchasers who were flipping houses. Plaintiff offers no evidence that Mr. Reiche knew, must have known, or even should have known that Ms. Luckovich was allegedly swindling Mr. Lynott on the projects. If Ms. Luckovich were engaged in a Ponzi scheme or were siphoning off funds for personal use, such malfeasance involved financing and record keeping -- activities in which Mr. Reiche was not involved -- and would not be readily apparent to the person managing the actual remodels.

         In addition to the innocuous facts set forth above, plaintiffs rely heavily on the expert opinions of Patrick C. Jerns and Linda L. Saunders to show that Mr. Reiche was a knowing participant in Ms. Luckovich's assumed fraud. Plaintiff's reliance on these experts is, for the most part, misplaced and unavailing. An expert can opine only within his or her area of expertise. Thus, the only admissible opinions offered by Mr. Jerns have to do with the professional obligations and standards applicable to real estate brokers, managing brokers, and real estate companies. Dkt. # 290 at 19. The only admissible opinions offered by Ms. Saunders involve tracking the flow of money related to Mr. Lynott's financial investments and/or comparing Ms. Luckovich's accounting methods with generally applicable standards.

         Neither expert has offered an opinion within their area of expertise regarding Mr. Reiche. Instead, the experts attempt to establish underlying facts by fiat. Mr. Jerns declares, for example, that Mr. Reiche is not a licensed contractor, but provides no evidence of that fact or any indication that he did an appropriate records search. Dkt. # 290 at 27. Ms. Saunders states that Mr. Reiche purchased or was given a truck using money Mr. Lynott invested on March 16, 2012, but makes no effort to explain how an October 2011 vehicle title registered to one of Ms. Luckovich's companies supports such a statement. Dkt. # 291 at 3 and 42. The experts also draw inferences, make credibility findings, and offer opinions on legal liability. Their reports, if accepted, would displace both the fact finder and the Court, offering opinions that require no expertise at all or, at other points, offering opinions for which the necessary expertise is entirely lacking. Ms. Saunders, for example, opines that Ms. Luckovich and Mr. Reiche will likely be “jointly and severally liable for all intentional and unintentional wrongful acts taken by either of them.” Dkt. # 291 at 17. Mr. Jerns concludes that the scope of Ms. Luckovich's alleged fraud shows that it could have existed only with the knowing participation of Mr. Reiche. Dkt. # 290 at 32. Shorn of the inadmissible conjecture and supposition contained in the reports, the actual facts regarding Mr. Reiche cannot reasonably support a finding of liability in this action.

         B. Debra K. Campbell

         Ms. Campbell is the “Designated Broker” for defendant Investors Choice Real Estate, LLC, one of Ms. Luckovich's companies. She was also the real estate agent or, along with Ms. Luckovich, a co-agent on five of the listings for properties in which Mr. Lynott had invested. Plaintiff maintains that Ms. Campbell negligently supervised Ms. Luckovich, which allowed the alleged scheme to continue for an extended period of time and increased the resulting damage. See Dkt. # 290 at 23.[3] It is not entirely clear what duty Ms. Campbell is accused of having violated, however. In its complaint, plaintiff cites to whole chapters of the Revised Code of Washington. The legal argument portion of plaintiff's response memorandum merely challenges Ms. Campbell's factual contentions regarding the number of transactions in which she was involved and causation. Dkt. # 280 at 21-22. No. statutory or regulatory duties are identified. The fact section of the memorandum cites a number of statutory provisions, but relies on Mr. Jerns' expert report to explain how those provisions were violated in this case. For his part, Mr. Jerns identifies a long list of statutes and regulations that govern real estate brokers in Washington. Because he specifically asserts that Ms. Campbell breached duties owed under RCW 18.85.285 and RCW 18.86.030, the Court will analyze those provisions. Dkt. # 290 at 28.

         RCW 18.85.285(1) requires real estate brokers to submit complete copies of their transactions to their firms and places the burden on the firm's Designated Broker to keep adequate records of those transactions including “an itemization of receipts and disbursements with each transaction.” A common sense reading of the statute suggests that the Designated Broker's duty to maintain the records arises when the broker submits them to the firm. See RCW 18.85.275(2). Plaintiff has not shown that Ms. Campbell destroyed or otherwise failed to maintain records submitted by Ms. Luckovich in connection with the properties purchased and sold for Mr. Lynott. Rather, plaintiff argues that Ms. Campbell should have insisted on the submission of additional records and/or should have questioned the way certain investments were recorded. No. breach of Ms. Campbell's Designated Broker duties under RCW 18.85.285(1) has been shown.

         RCW 18.85.285(1) and RCW 18.86.030 impose duties on the real estate brokers, defined as anyone acting on behalf of a real estate firm that offers or performs real estate brokerage services. Those duties, which undoubtedly apply to Ms. Campbell, include the duty to exercise reasonable care, the duty to deal honestly and in good faith with all parties, the duty to disclose all material facts known by the broker that would not be apparent to or readily discernable by a party, the duty to account for all money and property received, and the duty to submit complete copies of their transaction files to their firms. Plaintiff suggests that, because Ms. Campbell was identified as a co-agent on listings for five of the subject properties, Ms. Luckovich's alleged breaches of these duties should be imputed to Ms. Campbell. Plaintiff makes no effort to show that Ms. Campbell had any actual involvement with these properties beyond being identified on the listing, that she dealt with Mr. Lynott or the purchasers at all, much less dishonestly, or that she had material facts and/or transaction files but failed to disclose them. Plaintiff's claim seems to be that Ms. Campbell breached her duty to exercise reasonable care by not scrutinizing Ms. Luckovich's activities more closely. As written, the duties imposed by these statutes are personal to the individual real estate ...


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