Brown v. Bochinski et al
Filing
108
MEMORANDUM OPINION. Signed by District Judge Anthony J Trenga on 9/25/12. (klau, ) Modified on 9/26/2012 copy mailed to Albert Gilner(klau, ).
UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
Alexandria Division
JEFFREY BROWN,
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Plaintiff,
v.
ALAN GILNER,*/ ai,
Defendants.
Case No. 1:10-cv-00980 (AJT/IDD)
MEMORANDUM OPINION
This case was tried without a jury on April 26,2012, following which the Court took the
matter under advisement and now issues its decision and findings of fact and conclusions of law
pursuant to Fed. R. Civ. P. 52.
In this action, plaintiff Jeffrey Brown ("Brown" or "Plaintiff'), claims that he was
defrauded in a Ponzi scheme by defendants Randi Bochinski and Alan Gilner. Brown alleged
four claims: (1) Fraud and Fraud in the Inducement (Count I); (2) Racketeering Influenced and
Corrupt Organizations Act ("RICO") (Count II); (3) Civil Conspiracy (Count III); and (4)
Intentional Infliction of Emotional Distress (Count IV). Defendant Gilner generally and
conclusorily responded to the Complaint in a letter, but otherwise never properly answered or
responded substantively to the allegations against him. Bochinski never answered the Complaint
and the Clerk entered default against him.1
The case against Gilner proceeded to trial without a jury, at which Gilner did not appear.
For the reasons stated herein, the Court concludes that defendant Gilner is liable under Counts I,
II, and III, and that judgment should be entered against him in the amount of $1,190,000 on
1Plaintiff filed a motion for defaultjudgment against Bochinski, which the Court denied pending
the outcome of the case on the merits against Gilner. [Doc. No. 104].
1
Count I, $6,555,000 on Count II, and $2,185,000 on Count III. The Court concludes that
Plaintiff failed to prove against defendant Gilner his claim for intentional infliction of emotional
distress, asserted in Count IV, or his claim for punitive damages.
I.
Introduction
On August 27, 2010, Brown, appearingpro se, filed a Complaint against Bochinski and
Gilner in this Court. (Doc. No. 1.) On December 6,2010, after his request for a default judgment
was denied based on the inadequacy of the Complaint, Plaintiff filed an Amended Complaint.
(Doc. No. 21.) Thereafter, Plaintiff moved for default judgment based on Defendants' failure to
appearor defend. On May 20, 2011, the Magistrate Judge recommended Plaintiffs motion for
defaultjudgment be denied because, again, the Amended Complaint, like the initial Complaint,
failed to set forth sufficient factual allegations to state a claim upon which relief may be granted.
(Doc. No. 40.) Plaintiff timely filed objections to the Magistrate Judge's Report and
Recommendation, which the Court overruled. (Doc. Nos. 41 and 47.)
On July 11, 2011, Plaintiff retained counsel. (Doc. No. 48, at 2.) On September 21, 2011,
Plaintiff filed his Second Amended Complaint seeking relief based on claims for fraud and fraud
in the inducement, RICO, civil conspiracy, and intentional infliction of emotional distress. (Doc.
No. 56.)2 On October 24,2011, Gilner filed a letter which the Court construed as an answer to
the Complaint for the purposes of avoiding a default. (Doc. No. 58.) Later, Gilner requested the
Court appoint him an attorney to defend the lawsuit, which the Court denied. (Doc. Nos. 69 and
84.) On March 15,2012, the Court held a final pretrial conference, which Gilner failed to attend.
The Court set a trial date at that conference for April 26, 2012. On April 26, the trial proceeded
and Gilner failed to appear. After receiving evidence, the Court took the matter under
2Forease of reference, the Court will refer to this filing as the "Complaint" because it is the
operative document.
advisement. At trial, the Court noted that Gilner's answer was "grossly inadequate" in that it
failed to admit or deny the allegations in the Complaint and merely made a general, two-page
denial. For this reason, the Court deemed the factual allegations in the Complaint as true. See
Fed. R. Civ. P. 8(b)(6) ("An allegation ... is admitted if a responsive pleading is required and
the allegation is not denied"). Based on that admission as well as the other evidence presented
at the trial, the Court now issues its findings of fact and conclusions of law.
II.
Findings of Fact
At some point in time, Gilner advertised a "high yield investment program" in the Oxford
Club newsletter, which was an investor newsletter that was distributed throughout the United
States. Compl. H4. At some time prior to January 21,2005, Plaintiff contacted Gilner for more
information regarding the investment program advertised in the Oxford Club newsletter. Compl.
ffi 5-6. In response, Gilner emailed Plaintiff a document for him to sign, acknowledging his
interest in learning more about the investment program and agreeing to keep such information
confidential. Compl. ^ 6. Thereafter, Gilner and Plaintiff met. Compl. \ 7. At this initial
meeting, Gilner promised large returns on Plaintiffs investments and a 100% secured principal
amount, effectively inducing Plaintiff to invest in the program. Compl U7.3 After the initial
meeting, Gilner again contacted Plaintiff by email and telephone to encourage him to invest.
Compl. H8. Gilner represented that he was a part of the Old Navajo Foundation. Trial Transcript
19 ("Tr."); Compl. fll 7-8.
3More specifically, Gilner told Plaintiff thatall principal amounts would be keptsafe and remain
in an escrow account, which would be 100% secured by insurance and performance bonds.
Compl. H27. Plaintiff was further assured that the principal amounts would be returned to him
within one or two years, depending on the contract. Compl. ^ 27. Moreover, Plaintiff was told
that he would receive a guaranteed monthly return of 4% in interest on his investments. Compl. H
27.
On January 21,2005, Plaintiff wired $250,000 to Gilner to participate in the investment
program. Compl. U9. On April 1, 2005, Plaintiffwiredan additional $1,000,000 to Gilner,
which also was intended to be an investment in the Old Navajo Foundation. Compl. ^110; Ex. 6.
Plaintiff wired these funds with the understanding that Gilner would manage the funds and that,
as advertised, he would receive a monthly 4% return on his investment. Compl. ^ 10. After
wiring the funds, Plaintiff received an email from Gilner confirming receipt of the funds and
welcoming Plaintiff into the Old Navajo Foundation. Compl. U 11.
Later in 2005, Plaintiff was introduced to Bochinski by Gilner. Bochinski represented
that he was the principal of the Old Navajo Foundation. Compl. ^12. At Gilner's suggestion,
Plaintiff travelled to Vancouver to meet Bochinski. After that meeting, Bochinski solicited
additional funds from Plaintiff through email, telephone, and in-person, promising him higher
returns on additional investments. Compl. ffi| 12,14. Gilner also personally encouraged Plaintiff
to invest further with Bochinski. Tr. 28. Shortly thereafter, Plaintiff wired approximately
$945,000 directly to Bochinski for such investments. Compl. ^f 14.
Aside from the Old Navajo investments, Bochinski told Plaintiff that he was organizing a
$1,000,000 deal, which was referred to as "the Carlant Deal." Compl. J17. Bochinski
represented that the Carlant Deal would consist of four investors, each investing $250,000, and
that each would receive returns of between eight and ten times their principal within ninety days.
Compl. K17.4 Further, Plaintiff was told that no funds would be released from the escrow
account without his prior express authorization. Compl. ^ 17. On June 29,2005, after receiving
both verbal and written representations from Bochinski regarding this new deal, Plaintiff wired
4More specifically, "Bochinksi represented that the $1,000,000 total investment would be placed
in an escrow account and that the funds would be leveraged as collateral to secure loans, the
proceeds of which loans would be traded in international banks." Compl. ^ 17.
$50,000 to Bochinski to be included in the Carlant Deal. Compl. %18. Overall, Plaintiff sent
$995,000 directly to Bochinski.
Between March 2005 and May 2007, Gilner transferred Plaintiffs investment funds from
Old Navajo to bank accounts owned by Bochinski. Compl. U15. Plaintiff discovered the transfer
at some point, but was told the funds were transferred to Bochinski as the administrator of the
Old Navajo Foundation's investment program. Compl. ^ 13. However, after receiving Plaintiffs
funds, Gilner and Bochinski diverted the funds for uses other than the stated investments. Compl.
H23. In some measure, Defendants used Plaintiffs funds to pay for their own business and
personal expenses. Compl. f 25. Bochinski also transferred the funds from the Carlant Deal to
his personal bank account without prior authorization from the investors. Compl. ffi| 19-20.
Unbeknownst to Plaintiff at the time, Gilner and Bochinksi were actually operating a
"Ponzi scheme," whereby they encouraged Plaintiff and others to invest into fraudulent highyield investment vehicles that never existed. Compl. ffi[ 24,43. As is typical of most Ponzi
schemes, Defendants solicited investment funds from Plaintiff and others, paying returns to old
investors with such new funds to create the appearance that the investments were legitimate and
profitable. Compl. U24. Under this false pretense, Plaintiffand others were lulled into investing
additional funds into such fraudulent investment vehicles. Compl. ^ 24. Gilner and Bochinksi
also regularly mailed and emailed Plaintiffconfirmations, account statements, and updates,
indicating that his investments were safe and making profits. Compl. ^ 28. At times, Plaintiff
would receive correspondence from a "Peter Carson"; however, Peter Carson is a "figment" and
all documents supposedly signed by him were actually forgeries committed by Bochinski.
Compl. U29. In fact, all the statements received by Plaintiff were intentional fabrications.
Compl. H29. While Plaintiff testified that he trusted Defendants because "payouts were
occurring on a regular basis," the only evidence of a payout was $60,000 that Plaintiff withdrew
in2005. See Tr. 25,32; Ex. 9.5 That payout came from the $1,000,000 investment he made at
Gilner's behest. See Tr. 25-26.
Eventually, Plaintiff discovered the fraud and confronted Defendants. Compl. J 37.
Either prior to or after such discovery, Bochinski emailed assurances to Plaintiff on October 10,
2007, October 12, 2007, November 1,2007, March 12,2010, and April 21, 2010 that his funds
would be returned to him shortly. Compl. ^ 27. However, Gilner and Bochinksi never returned
the funds. Additionally, on July 17,2009, in an attempt to further placate Plaintiff and to prevent
him from initiating legal action against Bochinski, Gilner offered to pay off Plaintiffs credit
cards and mortgage, but never did. Compl *[ 37. The funds that Plaintiff invested were never
returned to him. In all, Plaintiff invested $2,245,000 with Gilner and Bochinski, and received
only $60,000 in return.
On August 27, 2010, Plaintiff filed suit against Gilner and Bochinksi.6
III. Conclusions of Law
Plaintiff has alleged four separate causes of action based on these facts: Count I: Fraud
and Fraud in the Inducement; Count II: RICO; Count III: Civil Conspiracy; and Count IV:
Intentional Infliction of Emotional Distress. Plaintiff seeks statutory damages, compensatory
damages, punitive damages in the amountof $24,000,000, interest, and reasonable attorney's
fees and costs. The Court addresses each Count, and the relief sought, in turn.
5The Complaint is also unclear whether Plaintiff received any ofthe promised returns, and if so,
how much. Plaintiff alleges that "the promised returns were not consistently paid." Compl. H44.
This statement suggests that some returns were paid to Plaintiff, but no other mention is made
throughout the rest of the Complaint.
6Federal criminal charges are also currently pending against Defendants in the United States
District Court for the District of Massachusetts
Count I: Fraud and Fraud in the Inducement
To state a claim for actual fraud under Virginia law, Plaintiff must prove, by clear and
convincing evidence, the following six elements: "(1) a false representation, (2) of a material
fact, (3) made intentionally and knowingly, (4) with intent to mislead, (5) reliance by the party
misled, and (6) resulting damage to the party misled." Evaluation Research Corp. v. Alequin,
247 Va. 143, 148 (1994). Under these elements, a finding of actual fraud "requires clear and
convincing evidence that one has represented as true what is really false, in such a way as to
induce a reasonable person to believe it, with the intent that the person will act upon this
representation." Id. In Virginia, a claim of fraud "must relate to a present or pre-existing fact,
and cannot ordinarily be predicated on unfulfilled promises or statements as to future events."
McMillion v. Dryvit Sys., Inc., 262 Va. 463,471 (2001) (internal quotation marks omitted).
Nevertheless, "if a defendant makes a promise that, when made, he has no intention of
performing, that promise is considered a misrepresentation of present fact and may form the
basis for a claim of actual fraud." Supervalu, Inc. v. Johnson, 276 Va. 356, 368 (2008).
The Court finds that both Gilner and Bochinksi misrepresented the substance of the
investment that they solicited from Plaintiff and also lacked the intention of performing their
promises to invest Plaintiffs money as they said they would, because they knew that the
proffered investments did not even exist. See Station # 2, LLC v. Lynch, 280 Va. 166, 172
(2010); see also Albayero v. Wells Fargo Bank, N.A., No. 3:1 Icv201-HEH, 2011 WL 4748341,
at *4 (E.D. Va. Oct 05,2011). The Court further finds that Bochinski's and Gilner's statements
to Plaintiff were knowingly false and material, and relied upon by Plaintiff. For example, there
appears to have been no basis in fact for any statement that Plaintiffs nearly $2.2 million
investment in Old Navajo Foundation and related ventures would be safe because the principal
would be 100% secured by insurance and performance bonds, the principal would remain in an
escrow account, and the Plaintiff would receive a guaranteed monthly 4% return. See Tr. 15-18.
Likewise, the representations that Bochinski made related to the Carlant Deal—that any
investment would pay out between eight and ten times its principal and that any investments
would be placed in an escrow account—were false, material, knowing, and relied upon by
Plaintiff. Bochinski took those funds, including the $50,000 that Plaintiff provided, out of
escrow and used them elsewhere instead of investing them in the Carlant Deal, which itself never
existed as Plaintiff learned.
With respect to compensatory damages, the Court finds that Plaintiff invested as a result
of Defendants' fraud the sums of $250,000, $1,000,000, $945,000, and $50,000 and received one
$60,000 withdrawal from his $1,000,000 investment. Therefore, the Court concludes that
Plaintiff has suffered $2,185,000 inactual loss asa result ofDefendants' fraud.7 However, only
$1,250,000 can be attributable directly to Gilner's fraudulent conduct, less the $60,000
withdrawal, with the rest attributable to Bochinski's conduct, even though the two clearly
worked together, as discussed infra.
With respectto punitive damages, it is unclear whether Plaintiff seeks punitive damages
under his fraud claim, or merely under his intentional infliction of emotional distress claim. See
Tr. 43-44; Proposed Findings 18-19. In order to award punitive damages in a fraud action, the
Plaintiff must prove "malice." Jordan v. Sauve, 219 Va. 448,451-52 (1978); JobAmerican
Mgmt. Export Import -N.C., Ltd. v. Kaltone Petroleom Mktg. Corp., No. CIV. A. 4:99CV24,
1999 WL 33228367, at *6 (E.D. Va. Dec. 10, 1999). Malice is demonstrated by "ill will,
malevolence, grudge, spite, wicked intention or a conscious disregard of the rights of another."
7Plaintiffs counsel calculated the amount ofinvestment at $2,150,000. Tr. 44. After reviewing
the evidence presented, the Court independently calculates the amount at $2,195,000.
Lee v. Southland Corp., 219 Va. 23, 27 (1978); Kaltone, 1999 WL 33228367, at * 6; see also SitSet, A.G. v. UniversalJet Exchange, Inc., 141 F.2d 921,928 (4th Cir. 1984) ("Virginia does not
permit recovery of punitive damages except upon proof of a degree of aggravation in the critical
state of mind above the threshold level required to establish liability for compensatory relief").
The Court finds that there is insufficient evidence to support a claim for punitive damages
against Gilner and will award Plaintiff $1,190,000 against Defendant Gilner for the fraudulent
behavior that is directly attributable to Gilner.
Count II: RICO
The Plaintiff also brings a claim under RICO. Pursuant to RICO, 18 U.S.C. § 1964,
"[a]ny person injured in his business or property by reason of violation of § 1962 of this chapter
may sue therefor... and shall recover threefold the damages he sustains, and the cost of suit...
." 18 U.S.C. 1964(c). There are four sub-provisions under § 1962 that describe conduct that
constitutes a RICO violation. 18 U.S.C. §§ 1962(a)-(d). Plaintiff asserts that his claim arises
under § 1962(c), which states,
It shall be unlawful for any person employed by or associated with any enterprise
engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or
participate, directly or indirectly, in the conduct of such enterprise's affairs through a
pattern of racketeering activity or collection of unlawful debt.
18 U.S.C. § 1962(c). A plaintiff bringing claims under § 1962(c) must prove that defendants
were persons who (1) conducted an enterprise (2) through a pattern (3) of racketeering activity
(4) and that such conduct caused injury to plaintiffs business or property. Palmetto State Med.
Ctr., Inc. v. Operation Lifeline, 117 F.3d 142,148 (4th Cir. 1997).
With respect to the first element, the plaintiff must "show an enterprise, which is defined
as an ongoing organization, formal or informal, in which the various associates function as a
continuing unit." Palmetto, 117 F.3d at 148 (citing UnitedStates v. Turkette, 452 U.S. 576, 583
(1981)); see also 18 U.S.C. § 1961(4) (defining "enterprise"to include "any individual,
partnership, corporation, association, or other legal entity, and any union or group of individuals
associated in fact although not a legal entity."). As such, the "enterprise must be distinct from
the persons alleged to have violated 1962(c)." Palmetto, 117 F.3d at 148. Plaintiffcontends that
the Old Navajo Foundation and Carlant Deal were two enterprises and that Gilner and
Bochinski are the persons "employed by or associated with" those enterprises. See 18 U.S.C. §
1962(c). Though Gilner and Bochinski are themselves the operators of the Old Navajo
Foundation and the Carlant Deal, they are being sued in their individual capacities; Plaintiff is
not alleging a RICO claim against the "enterprises" themselves. See, e.g., New Beckley Mining
Corp. v. Int'l Union, United Mine Workers ofAm., 18 F.3d 1161, 1163-66 (4th Cir. 1994)
(affirming dismissal of a RICO claim where the plaintiff alleged that the defendant union was
both the "person" and the "enterprise."). Therefore, the Court concludes that Plaintiff has
adequately proven this element.
The second and third elements require a showing that "at a minimum, each RICO
defendant committed two acts of racketeering activity within a ten-year period." Palmetto, 117
F.3d at 148. "Racketeering activity" is defined to include, among other activities, mail fraud and
wire fraud. 18 U.S.C. § 1961(1)(B). The Fourth Circuit has explained that "[t]he offenses of
mail and wire fraud require use of the mails or wires with the intent to defraud." Morley v.
Cohen, 888 F.2d 1006, 1010 (4th Cir. 1989). The key issue, in the context of a RICO claim, "is
whether the communication occurred 'for the purpose of executing the scheme.'" Id. (quoting
Kann v. United States, 323 U.S. 88, 94 (1944)). Here, the evidence shows that Defendants
mailed documents to Plaintiff as well as emailed with Plaintiff many times. See Ex. 1 (newsletter
mailed to Plaintiff advertising the investment opportunity); Ex. 2 (email from Gilner confirming
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deposit of $250,000); Ex. 3 (letter from "Peter Carson" confirming deposit of $250,000); Ex. 5
(fax from Gilner with attached tax-related document); Ex. 6 (email from Gilner confirming
deposit of $1,000,000); Ex. 7 (letter from "Peter Carson" confirming deposit of $1,000,000); Ex.
9 (letter from "Peter Carson" outlining interest earned on investment); Ex. 10 (email from
Gilner). These correspondence, both over wire and mail spanned from 2005 to 2009. And,
importantly, "it is settled that each mailing or wire transmission in furtherance of the fraud
scheme constitutes a separate offense, and it may be separately punished." UnitedStates v.
Jefferson, 674 F.3d 332, 367 (4th Cir. 2012). Therefore, Gilner committed many acts of mail
and wire fraud.
In order to prove that related mail and wire frauds constitute a sufficient "pattern of
racketeering activity," a plaintiff must show more than simply two violations in a ten-year
period. RICO is "a unique cause of action that is concerned with eradicating organized, long
term, habitual, criminal activity." USAirline Pilots, Ass'n v. Awappa, LLC, 615 F.3d 312, 317
(4th Cir. 2010) (quoting Gamboa v. Velez, 457 F.3d 703,705 (7th Cir. 2006)). Therefore, to
demonstrate a sufficient "pattern" of racketeering activity, a plaintiff must show 'continuity plus
relationship,' i.e. 'that the racketeering predicates are related, and that they amount to or pose a
threat of continued criminal activity.'" Id. (quoting H.J. Inc. v. NW Bell Tel. Co., 492 U.S. 229,
239 (1989)). Here, the various mail and wire frauds in this case are related;8 the only issue is
whether those acts (1) amount to continued criminal activity or (2) pose the threat of continued
criminal activity. This "continuity" sub-element "is both a closed- and open-ended concept,
referring either (1) to a closed period of repeated conduct, or (2) to past conduct that by its nature
The Supreme Court has explained that relatedness requires proof that the racketeering acts
"have the same or similar purposes, results, participants, victims, or methods of commission, or
otherwise are interrelated by distinguishing characteristics and are not isolated events." H.J. Inc.,
492 U.S. at 240. The evidence clearly demonstrates that the various acts of mail and wire fraud
satisfy this definition.
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projects into the future with a threat of repetition." Id. (quoting H.J. Inc., 492 U.S. at 239)
(numbers added). Defendants' conduct falls within the definition of a "pattern" with closed-end
continuity.
Closed-end continuity occurs when "the series of related predicates extend[s] over a
substantial period of time." Id. (quoting H.J. Inc., 492 U.S. at 242). In finding a pattern based on
closed-end continuity, courts must be "cautious about basing a RICO claim on predicate acts of
mail and wire fraud because it will be the unusual fraud that does not enlist the mails and wires
in its service at least twice." Al-Aboodex rel Al-Abood v. El-Shamari, 217 F.3d 225,238 (4th
Cir. 2000). It is therefore important "to preserve a distinction between ordinary or garden-
variety fraud claims better prosecuted under state law and cases involving a more serious scope
of activity." Id. Central to this analysis is whether there was no evidence or allegations of other
individuals harmed by the RICO conduct. Id. (holding that a fraud-based RICO action was
inappropriate when there was only one victim of the scheme, though the schemespanned several
years, because such a scheme is insufficient to establish a "pattern"); Flip Mortg. Corp. v.
McElhone, 841 F.2d 531, 538 (4th Cir. 1988) (same); Foster v. Wintergreen Real Estate Co., 363
F. App'x 269, 274 (4th Cir. 2010). In short, a RICO claim fails if it does not "rise above the
routine, and does not resemble the sort of extended, widespread, or particularly dangerous
pattern of racketeering which Congress intended to combat with federal penalties." Flip, 841
F.2d at 538. Here, the evidence shows that Defendants' scheme goes far beyondjust the
Plaintiff; the scheme affected otherinvestors and victims, including Plaintiffs friends, making a
RICO claim against Defendants appropriate. See Tr. 36-39
The last element requires a showing of damages. Here, the Court has already determined
that Plaintiff has suffered a total of $2,185,000 in damages due to Defendants' fraudulent
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activities. For the same reasons, the Court concludes that Plaintiff sustained compensatory
damages in the amount of $2,185,000 as a result of defendants' RICO violation. Nevertheless,
the Court must consider whether Plaintiff should also be awarded treble damages. See 18 U.S.C.
§ 1964(c) ("Any person injured in his business or property by reason of a violation of section
1962 of this chapter... shall recover threefold the damages he sustains and the cost of the
suit."); USAirline Pilots, 615 F.3d at 317 ("The Supreme Court has described the penalties
authorized by RICO as 'drastic'... [A] successful plaintiff may recover not only costs and
attorney's fees, but also treble damages."). No further showing is required for this purpose and
pursuant to RICO's specific authorization of treble damages, Plaintiff is entitled to $6,555,000.
The Court will abstain from ruling on any attorney's fees at this time, as there is no evidence
currently before the Court that would permit an adjudication of that issue.
Count III: Civil Conspiracy
Plaintiffnext asserts the tort of civil conspiracy. "A common law conspiracy consists of
two or more persons combined to accomplish, by some concerted action, some criminal or
unlawful purpose or some lawful purpose by a criminal or unlawful means." Country of Vintner,
Inc. v. Louis Latour, Inc., 272 Va. 402, 412 (2006) (quoting Commercial Bus. Sys. v. BellSouth
Servs., 249 Va. 39,48 (1995)).9 "The foundation ofa civil action ofconspiracy is the damage
caused by the acts committed in furtherance of the conspiracy." BellSouth, 249 Va. at 48.
There is ample evidence that Gilnerand Bochinski worked together. Plaintifffirst
worked with Gilner to begin investment in the Old Navajo Foundation, who then introduced
Plaintiffto Bochinski; Plaintiff later discovered that Bochinski was in charge of the Old Navajo
9In his Proposed Findings, Plaintiffcites to Firestone v. Wiley, 485 F. Supp. 2d 694,703-04
(E.D. Va. 2007) as the basis for his conspiracy claim. That case discussed a common-law
conspiracy as opposed to a statutory conspiracy under Virginia law. Proposed Findings 15.
Therefore, the Court will analyze this claim as a common-law conspiracy.
13
Foundation. Tr. 26-27. Plaintiff invested his money through both Gilner and Bochinski and,
when the investments were not paid back, Gilner tried to persuade Plaintiff not to file suit against
Bochinski, offering to be the "facilitator" of a settlement between the two. Tr. 34-35; Ex. 10.
Based on all the evidence and the reasonable inferences therefrom, the Court finds and concludes
that Defendants entered into an agreement for an unlawful purpose, the defrauding of investors,
that Gilner knowingly participated in the conspiracy, and that Plaintiff was defrauded as a result
of the conspiracy. See Almy v. Grisham, 273 Va. 68, 80 (2007) ("[I]n Virginia, a common claim
of civil conspiracy generally requires proof that the underlying tort was committed."); Terry v.
SunTrust Banks, Inc., Nos. 11-1704,11-1707,2012 WL 2511066, at *9 (4th Cir. July 2,2012)
("The 'unlawful act' element requires that a member of the alleged conspiracy have 'committed'
an 'underlying tort.'"). As to damages, the Court finds and concludes, for the reasons previously
stated, that Plaintiff suffered damages as a result of the conspiracy in the amount of $2,185,000.
As a participant in the conspiracy, those damages are assessable against Gilner, whether caused
directly by Bochinski's statements and conduct or his own.
Count IV: Intentional Infliction ofEmotional Distress
Finally, Plaintiff seeks to hold Gilner liable for the tort of intentional infliction of
emotional distress ("IIED"). To state a claim, Plaintiff must allege "1) the wrongdoer's conduct
was intentional or reckless; 2) the conduct was outrageous or intolerable; 3) there was a causal
connection between the wrongdoer's conduct and the resulting emotional distress; and 4) the
resulting emotional distress was severe." Ogunde v. Prison Health Servs., Inc., 274 Va. 55,65
(2007) (internal quotation marks and citation omitted); see also Womack v. Eldridge, 215 Va.
338, 342 (1974). Virginia courts have, however, repeatedly emphasized that the tort of IIED is
"not favored" in the law. Supervalu, 276 Va. at 370 (citing Almy, 273 Va. at 77); Harris v.
14
Kreutzer, 271 Va. 188,203-04 (2006); Russo v. White, 241 Va. 23,26 (1991); Ruth v. Fletcher,
237 Va. 366, 373 (1989)). This is because "there are inherent problems in proving a claim
alleging injury to the mind or emotions in the absence of accompanying physical injury." Id. A
claim for IIED requires proof by clear and convincing evidence. Supervalu, 276 Va. at 370.
The first "element is satisfied where the wrongdoer had the specific purpose of inflicting
emotional distress or where he intended his specific conduct and knew or should have known
that emotional distress would likely result." Womack, 215 Va. at 342. Although there is no direct
evidence that Gilner or Bochinksi had the specific intent to cause Plaintiff emotional distress,
given their intent to defraud, the long-term relationship that Gilner had with Plaintiff, and the
amount of money that Plaintiff lost, Gilner should have known that emotional distress would
likely result.
The second element requires Plaintiff to show that Gilner's conduct was "so outrageous
in character, and so extreme in degree, as to be regarded as atrocious, and utterly intolerable in a
civilized community." Ostolaza-Diaz v. Countrywide Bank, N.A., 360 F. App'x. 504, 507 (4th
Cir. 2010) (quoting Russo, 241 Va. at 26). Mere tortious or criminal conduct is not enough.
Russo, 241 Va. at 27. "The question whether the defendant's conduct is so extreme and
outrageous as to permit recovery is a question of law for the court." Hatfill v. New York Times
Co., 416 F.3d 320, 336 (4th Cir. 2005) (citing Womack, 215 Va. at 342). This element reduces to
whether Defendants' fraud scheme is extreme and outrageous in the context of this disfavored
tort. As the SupremeCourt of Virginia has explained within the context of a defrauded business,
the "tort is directed at prohibiting conduct intended to cause personal, emotional damage to an
individual, rather than conduct intended to cause economic damage to a business." Supervalu,
276 Va. at 371. And "[although a person may be so closelyassociated with the operation of a
15
business that economic damage to that business may result in damage to the individual's
emotional state, the tort of intentional infliction of emotional distress does not encompass such
personal consequences of business conduct." Id. While Gilner and Bochinski no doubt intended
to swindle Plaintiff via their fraudulent investment vehicles, that conduct is not the type of
personal economic damage that the tort is intended to target. Gilner and Bochinski engaged
Plaintiff in business dealings and not personal attacks, and therefore their conduct does not
qualify as "outrageous" under the tort's standard.
However, even if Plaintiff could establish the second element, the third and fourth
elements, requiring severity of the distress caused by the Defendants' actions, have not been
established by clear and convincing evidence. As examples of his severe emotional distress,
Plaintiff alleged in the Complaint that he has lost all of his life savings, he lost the
companionship of friends and family whom he encouraged to also invest and who now blame
him for their losses, he is struggling to keep his house from being foreclosed on, his marital life
has been negatively impacted, he suffers from severe depression, stress, nervousness,
sleeplessness, and inability to concentrate, and that he has experienced exacerbation of back and
neck pain severe enough to put him on disability. Compl. ffl[ 67-70. Essentially, "[e]very aspect
of Plaintiffs life has been severely altered" due to the emotional distress caused by Defendants'
conduct. Compl. f 70. Plaintiffs testimony confirmed these symptoms and, in his testimony, he
testified further that because of Defendants' actions, he no longer exercises regularly, now
weighs 50 pounds more than before, and has high blood pressure. He also testified that he
"snaps" at his family members and prefers to be alone.
The Virginia Supreme Court has emphasized that liability for intentional infliction of
emotional distress "arises only when the emotional distress is extreme, and only where the
16
distress inflicted is so severe that no reasonable person could be expected to endure it." Russo,
241 Va. at 27. See also Harris, 271 Va. at 205 (citing Russo, 241 Va. at 28) ( "[A] plaintiff
complaining of nervousness, sleep deprivation, stress and its physical symptoms, withdrawal
from activities, and inability lo concentrate at work failed to allege a type of extreme emotional
distress that is so severe that no reasonable person could be expected to endure it."). Without
minimizing the impact that Defendants* conduct has had on Plaintiff, the Court does not find the
evidence sufficient to establish the required degree of severity by clear and convincing evidence.
Plaintiff presented no medical or mental health evidence or any other corroborating evidence.
No other witnesses testified to the impact claimed by Plaintiff, and the Court had the opportunity
to observe Plaintiff and was impressed with his demeanor, which did not reflect any emotional
instability.10
IV.
Conclusion
For the reasons stated herein, the Court finds in favor of Plaintiff and against Defendant
Gilner as to Counts I, II, and III, and awards damages as to Count I in the amount of $1,190,000,
Count 11 in the amount of $6,555,000, and Count III in the amount of $2,185,000. The Court
finds in favor of Defendant Gilner as to Count IV.
The Court will issue an appropriate Order.
Anthony J. Trenga
United States District Judge
September 25, 2012.
Alexandria. Virginia
10 The evidence was equivocal in other respects. For example, with respect to his weight gain
and high blood pressure, plaintiff admitted that he stopped exercising and seemed to indicate that
this was one of the reasons for his weight gain and his high blood pressure. Tr. 37. As for his
allegations of back and neck pain, he testified that those injuries began with a car accident in
1999. Tr. 30.
17
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