United States District Court, W.D. Kentucky, Louisville
DANIEL C. CADLE, Individually and Derivatively on Behalf of the Corporation and the Shareholders of iGate, Inc. PLAINTIFF
WILLIAM J. JEFFERSON, ANDREA G. JEFFERSON, THE ANJ GROUP, LLC, VERNON L. JACKSON and JOHN DOES 1-100 DEFENDANTS
Charles R. Simpson III, Senior Judge.
matter is before the Court on the motion of Plaintiff Daniel
C. Cadle, individuallyand derivatively on behalf of the
corporation and the shareholders of iGate, Inc.
(“iGate”) for partial summary judgment, ECF No.
113. Defendant Vernon L. Jackson responded, ECF No. 119.
Cadle replied, ECF No. 127. Defendant William J. Jefferson
also responded, ECF No. 122. Cadle replied, ECF No. 128.
filed a cross-motion for partial summary judgment, ECF No.
121. Cadle responded, ECF No. 126. Jefferson replied, ECF No.
131. Because these motions involve the same facts and legal
issues, the Court will address them in a single memorandum
opinion and order.
reasons stated below, the Court will grant in part and deny
in part Cadle's motion for partial summary judgment. The
Court will grant in party and deny in part Jefferson's
motion for partial summary judgment.
Summary Judgment Standard
moving for summary judgment must show that “there is no
genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” Fed.R.Civ.P.
56(a). The Court must determine whether there is a genuine
issue for trial. Anderson v. Liberty Lobby, 477 U.S.
242, 249 (1986). A genuine issue for trial exists when
“there is sufficient evidence favoring the nonmoving
party for a jury to return a verdict for that party.”
Id. The Court must draw all factual inferences in
favor of the nonmoving party. Matsushita Elec. Indus.
Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587
founded iGate, a telecommunications broadband business, in
1998. Trial Tr. 128, ECF No. 113-2. iGate's technology
allowed for high speed information-audio, data, and video-to
be simultaneously transmitted over copper telephone lines.
Id. In mid to late 2000, Jackson met Jefferson, who
was a Congressman at the time. Trial Tr. 128, ECF No. 113-2; Jefferson
Dep. 11, ECF No. 113-4. They met at a trade show in Chicago
where Jackson was displaying iGate's technology.
Id. Soon after, Congressman Jefferson introduced
Jackson to United States Army General James Hylton to promote
iGate's product for use in the United States Army. Trial
Tr. 136-37, ECF No. 113-2; Jefferson Dep. 12, ECF No. 113-4.
At that meeting, Congressman Jefferson told General Hylton
that iGate's product would save the government money and
that its product needed to be tested by the Army. Trial Tr.
137, ECF No. 113-2. Based on Congressman Jefferson's
suggestion, General Hylton agreed and decided that the Army
should test iGate's product. Id. at 137-38.
Testing began within two weeks. Id. at 141. This
testing enabled the government to purchase and use
iGate's product. Id. at 139. It was installed on
a trial basis at Fort Stewart in Georgia. Trial Tr. 240, ECF
the testing began, Congressman Jefferson approached Jackson
and told him that the Congressman “could no longer
spend the time with [Jackson] or work with [Jackson] on this
product and services.” Trial Tr. 141-42, ECF No. 113-2.
Congressman Jefferson told Jackson that iGate “needed a
company now to get with [Jackson] and market these products
to high-end decision makers in the corporate sector as well
as government people.” Id. at 142. Congressman
Jefferson suggested that Jackson work with Defendant The ANJ
Group, LLC (“ANJ”). Id. Congressman
Jefferson informed Jackson that ANJ was owned by the
Congressman's wife, Andrea Jefferson, and daughters.
Id. This information “sent up a red
flag” for Jackson, but Congressman Jefferson assured
Jackson that it would be permissible to do business with ANJ
because the Congressman had no interest in the company.
Jefferson then sent Jackson a draft contract offer from ANJ.
Id. at 143. Jackson, as chairman and CEO of iGate,
entered into a personal services agreement (“the
Agreement”) with Andrea Jefferson as president of ANJ.
Id. at 151. Under the Agreement, iGate agreed to pay
ANJ $7, 500 per month, in addition to providing 1, 000, 000
stock options at a price of $2.50 per share. Agreement ¶
3, ECF No. 113-6.
soon noticed that he was still working with Congressman
Jefferson, even though he was purportedly working with ANJ.
Trial Tr. 164, ECF No. 113-2. As far as Jackson could tell,
Andrea Jefferson never performed under the contract.
Id. at 164-65. Jackson continued to pay ANJ
consulting fees, however, because he “realized the
congressman had actually been very effective and resourceful
in getting things done . . . . And [he] certainly did not
want to cross [Congressman Jefferson] in any way, shape, or
form.” Id. at 165. In other words, Jackson did
not want to alienate Congressman Jefferson by not paying on
the contract. Id. Jackson believed that he would not
have gotten a meeting with the Army Corps of Engineers, for
example, without Congressman Jefferson's help. Trial Tr.
28, ECF No. 113-7. And Jackson believed that Congressman
Jefferson helped him because he was paying the Congressman to
do so. Id. Jackson noticed that invoices from ANJ
were delivered to him either in person from Congressman
Jefferson or by facsimile. Id. at 25. At least one
of these invoices contained Congressman Jefferson's
handwriting. Id. at 38. In fact, wire transfers to
ANJ were being routed to an account listed in Congressman
Jefferson's name. Jefferson Dep. 47-50, ECF No. 113-4.
Altogether, between February 2001 and September 2004, iGate
paid ANJ $362, 500 in checks and wire transfers as follows:
February 15, 2001
April 11, 2001
May 7, 2001
June 18, 2001
July 27, 2001
June 2, 2003
January 23, 2004
July 26, 2004
September 23, 2004
Payments, ECF No. 113-17. After only two or three months
Jackson had accepted that, even though it was
“inappropriate” and “wrong, ” he was
paying Congressman Jefferson $7, 500 a month under the
Agreement to promote “iGate's products and services
from his congressional offices.” Trial Tr. 166-67, ECF
addition to the cash payments, Jackson also issued hundreds
of thousands of shares of iGate stock to ANJ. Stock Docs.,
ECF No. 113-8; Jefferson Dep. 22-30, ECF No. 113-4; Trial Tr.
178-80, 191-94, ECF No. 113-2. Although the Agreement set the
price of these shares at $2.50 per share, Jackson issued the
shares to ANJ for free. Jefferson Dep. 22-30, ECF No. 113-4;
Trial Tr. 178, ECF No. 113-2. Jackson issued them for free
because he felt that Congressman Jefferson was performing
services for the shares and because he did not want to
alienate the Congressman. Trial Tr. 178-79, 193-94, ECF No.
in 2003, Congressman Jefferson contacted Jackson and told
Jackson that he had met with a company in Africa called
Netlink Digital Television (“NDTV”) that was
interested in using iGate to get broadband services or
internet access in Nigeria. Id. at 195-96.
Congressman Jefferson invited Jackson to fly to London, where
Jackson met with members of the NDTV team. Id. at
196. Members of the NDTV team then came to the United States
to see a demonstration of iGate's products and services.
Id. at 219. During this trip, NDTV, iGate, and
Congressman Jefferson negotiated and reached an agreement for
services between NDTV and iGate. Id. at 219-20.
Jefferson then presented Jackson with a proposed amendment to
the Agreement between iGate and ANJ. Id. at 210. The
amendment increased ANJ's share of iGate's profits
from 5% to 35% for any business connected with Africa.
Id. at 211; Amendment, ECF No. 113-11. After this
amendment was agreed upon, Congressman Jefferson and Jackson,
accompanied by iGate personnel, went to Africa again, where
they promoted iGate in Cameroon. Jefferson Dep. 74, ECF No.
113-4; Trial Tr. 101, ECF No. 113-7. iGate paid for the
expenses incurred on this trip to Africa. Jefferson Dep.
69-74, 77-79, ECF No. 113-4; Trial Tr. 157-59, 190-92, ECF
No. 113-7. iGate paid Congressman Jefferson's American
Express credit card bill on June 16, 2004 in the amount of
$14, 888.95 to reimburse him for plane tickets to Cameroon.
Trial Tr. 158, ECF No. 113-7; Jefferson Dep. 77, ECF No.
113-4; Fraker Email, ECF No. 113-13. On July 30, 2004, iGate
again paid Congressman Jefferson's American Express
credit card bill in the amount of $14, 604.76 for travel
expense reimbursements. Fraker Email, ECF No. 113-13.
2004, iGate's relationship with NDTV “began to fall
apart.” Trial Tr. 75, ECF No. 113-7. Following this
falling out, Congressman Jefferson invited Jackson to his
congressional offices to meet Brett Pfeffer, a former
legislative assistant to the Congressman who was, at that
time, a consultant for various companies. Jefferson Dep. 95,
ECF No. 113-4; Trial Tr. 172, ECF No. 113-7. Pfeffer had
introduced Congressman Jefferson to Lori Mody, the CEO of W2,
LLC (“W2”), an international broadband services
company. Jefferson Dep. 95, ECF No. 113-4; Term Sheet 1, 3,
ECF No. 113-16. Congressman Jefferson, in turn, introduced
Jackson to Mody. Id. iGate, through Jackson, and W2,
through Mody, subsequently entered into an agreement to
provide broadband services in Nigeria. Term Sheet 1, ECF No.
113-16. These were the same products and services that iGate
had previously agreed to provide to NDTV. Trial Tr. 175, ECF
August 2, 2005, iGate rescinded 30 million shares of iGate
stock from ANJ, citing ANJ's “failure . . . to
provide the business opportunities it represented.”
Aug. 2, 2005 Rescission, ECF No. 119-2. In his affidavit,
Jackson stated that iGate would have rescinded all stock
issued to ANJ, but it believed that it could not legally take
that action because “the previously issued stock was
issued pursuant to a valid marketing agreement” with
ANJ and ANJ “successfully achieved certain performance
levels” under that agreement. Jackson Aff. ¶ 2,
ECF No. 119-1. Jackson's counsel later informed him that
the agreements between iGate and ANJ may have been illegal
and void. Id. ¶ 3. This would mean that
“any and all compensation paid to [ANJ] should be
returned to iGate.” Id. Thus, on January 25,
2010, Jackson made a notation to check with his counsel
regarding the rescission of the remaining 775, 000 shares
issued to ANJ. Id. ¶ 4. But through
inadvertence, Jackson failed to issue the rescission.
Id. ¶ 5. After reviewing Cadle's instant
motion for partial summary judgment, Jackson realized the
error and has executed a board resolution rescinding 775, 000
shares of iGate stock issued to ANJ, “effective as of
January 25, 2010.” Id. ¶¶ 5-6; Dec.
28, 2016 Rescission, ECF No. 119-3. Prior to this effective
date, however, in 2006, “iGate ceased its operations,
closed its headquarters in Louisville, Kentucky and
furloughed all of its employees.” Verified Compl.
¶ 41, ECF No. 1.
Jefferson and Jackson were both criminally prosecuted for the
above actions. On May 2, 2006, Jackson waived indictment and
pled guilty to (1) conspiracy to commit bribery of a public
official under 18 U.S.C. § 371 and (2) bribery of a
public official under 18 U.S.C. § 201. Plea Agreement 1,
ECF No. 113-18. On June 4, 2007, Congressman Jefferson was
indicted on sixteen criminal counts. Jefferson Indictment 1,
ECF No. 113-19. He stood trial, and on August 5, 2009 the
jury found him guilty on the following counts:
Count 1: 18 U.S.C. § 371 (Conspiracy to Solicit Bribes
by a Public Official, Deprive Citizens of Honest Services by
Wire Fraud, and Violate the Foreign Corrupt Practices Act)
Count 2: 18 U.S.C. § 371 (Conspiracy to Solicit Bribes
by a Public Official and Deprive Citizens of Honest Services
by Wire Fraud)
Counts 3 and 4: 18 U.S.C. § 201(b)(2)(A) (Solicitation
of Bribes by a Public Official)
Counts 6, 7, and 10: 18 U.S.C. §§ 1343 and 1346
(Scheme to Deprive Citizens of Honest Services by Wire Fraud)
Counts 12, 13, and 14: 18 U.S.C. § 1957 (Money
Count 16: 18 U.S.C. § 1962(c) (Racketeer Influenced
Corrupt Organization, Pattern of Racketeering Activity
Id.; Jefferson Jury Verdict, ECF No. 113-20.
February 12, 2007, Cadle, an iGate shareholder, filed suit
individually and derivatively on behalf of the corporation
and shareholders of iGate. Compl. 1, ECF No. 1. Cadle asserts
ten claims against Defendants: (1) breach of fiduciary duty
(Count I), (2) aiding and abetting breach of fiduciary duty
(Count II), (3) negligent and/or fraudulent misrepresentation
and/or omission (Count III), (4) unjust enrichment and/or
disgorgement (Count IV), (5) violation of Kentucky Revised
Statutes § 378.010 (Count V), (6) violation of Kentucky
Revised Statutes § 378.020 (Count VI), (7) civil
conspiracy and aiding/abetting civil conspiracy (Count VII),
(8) violation of 18 U.S.C. § 1962(c) (Count VIII), (9)
violation of 18 U.S.C. § 1962(b) (Count IX), and (10)
violation of 18 U.S.C. § 1962(d). Id. at 14-24.
This Court previously dismissed Counts V and VI of the
complaint, Order, ECF No. 78, as well as all of the claims to
the extent that they are pled by Cadle individually, Mem. Op.
4, ECF No. 77.
matter is before the Court on two motions for partial summary
judgment. Cadle moves for partial summary judgment. Cadle
Mot. Partial Summ. J., ECF No. 113. Cadle argues that he is
entitled to summary judgment against Congressman Jefferson on
Count II for aiding and abetting a breach of fiduciary duty,
Count IV for unjust enrichment, and Count VII for civil
conspiracy. Cadle Mem. Supp. Mot. Partial Summ. J. 13-25, ECF
No. 113-1. Cadle argues that he is entitled to summary
judgment against Jackson on Count VII for civil conspiracy.
Id. at 25- 27.
Jefferson also moves for partial summary judgment. Jefferson
Mot. Partial Summ. J., ECF No. 121. Congressman Jefferson
asserts two arguments: (1) he cannot be liable for any
damages to iGate, and (2) Cadle's unjust enrichment claim
cannot coexist with the breach of contract claims asserted
against him. Id. at 1-2. The Court will discuss
Congressman Jefferson's motion as it becomes relevant.
relies on offensive issue preclusion to establish many
elements of his claims. Id. at 11-13. Offensive use of
issue preclusion, otherwise known as collateral estoppel,
“occurs when the plaintiff seeks to foreclose the
defendant from litigating an issue the defendant has
previously litigated unsuccessfully in an action with another
party.” Parklane Hosiery Co. v. Shore, 439
U.S. 322, 326 n.4 (1979). “The doctrine has been
regularly employed by courts to preclude the litigation of an
issue in a civil action already addressed in an associated
criminal case.” Westport Ins. Corp. v. Mudd,
No. 1:08-CV-00034-R, 2010 WL 4638760, at *3 (W.D. Ky. Nov. 5,
2010) (citations omitted). Such use of collateral estoppel
may be applied against a defendant where four criteria are
(1) the precise issue must have been raised and actually
litigated in the prior proceedings;
(2) the determination of the issue must have been necessary
to the outcome of the prior proceedings;
(3) the prior proceedings must have resulted in a final
judgment on the merits; and
(4) the party against whom estoppel is sought must have had a
full and fair opportunity to litigate the issue in ...