Brandenburg v. Seidel

Citation859 F.2d 1179
Decision Date11 October 1988
Docket NumberNo. 87-1116,87-1116
Parties, RICO Bus.Disp.Guide 7046 John P. BRANDENBURG; John P. Huffman, as custodian for Robert F. Coon, a minor; Baikunth K. Singh; Mridulah Singh, custodian for Anup Singh, a minor, and Alka Singh, a minor; Frank J. Talbot, Plaintiffs-Appellants, v. Julian SEIDEL; Frank J. Calcara; David P. Cole; Robert Corletta; Edward A. Dacy; Michael Finci; Ronald Freudenheim; Alan S. Kerxton; Benjamin Maisel; Gloria Meyers; James Porter; Anne Sherman; Charles C. Hogg, II; Frances F. Anderson; Leonard Bass; Dennis B. Berlin; Michael J. Dietz; Jerome F. Dolivka; John C. Donohue, Sr.; Henry R. Elsnic; John D. Faulkner, Jr.; James D. Laudeman; Terry L. Neifeld; George W.H. Pierson; Baltimore County Savings and Loan Association, Inc.; Chevy Chase Savings and Loan Association, Inc.; Cowenton Savings and Loan Association; Fairmount Savings and Loan Association; Madison and Bradford Savings and Loan Association; Parkville Savings and Loan Association; Paul B. Trice, Jr., Defendants-Appellees, v. MARYLAND SAVINGS & LOAN DEPOSITORS COMMITTEE; First Maryland Depositors Association, Amici Curiae.
CourtU.S. Court of Appeals — Fourth Circuit

Arthur M. Kaplan (Edward B. Rock, Fine, Kaplan and Black, Philadelphia, Pa. Andrew P. Goldstein, Washington, D.C Kieron F. Quinn, Robert B. Kershaw, Thomas Minton, Quinn, Ward and Kershaw, P.A., Baltimore, Md., on brief), for plaintiffs-appellants.

Lawrence Greenwald (William D. Gruhn, Gordon, Feinblatt, Rothman, Hoffberger & Hollander, Baltimore, Md., on brief), Andrew H. Marks (David B. Siegel, Luther Zeigler, Sara C. Jones, Crowell & Moring, Washington, D.C., Thomas Bodie, Power & Mosner, Towson, Md., Francis S. Brocato, Harold H. Burns, Jr., Baltimore, Md., David J. Cynamon, Thomas M. Brownell, Shaw, Pittman, Potts & Trowbridge, Washington, D.C., Jerold Oshinsky, New York City, Nancy A. Markowitz, Anderson, Baker, Kill & Olick, Howard B. Possick, Arent, Fox, Kintner, Plotkin & Kahn, Washington, D.C., Michael J. Travieso, Gallagher, Evelius & Jones, Alva P. Weaver, III, Baltimore, Md., Stephen C. Winter, Ridgely, Hanley & Winter, John H. Zink, III, Cook, Howard, Downes & Tracy, Towson, Md., on brief), for defendants-appellees.

H. Robert Erwin, Jr. (Pretl & Erwin, P.A., Baltimore, Md., on brief), for amici curiae.

Before PHILLIPS and ERVIN, Circuit Judges, and RAMSEY, United States District Judge for the District of Maryland, sitting by designation.

PHILLIPS, Circuit Judge:

Plaintiffs, depositors in the insolvent First Maryland Savings and Loan Association (First Maryland), appeal the dismissal of their action against certain former officers, directors, and senior management personnel of First Maryland (the First Maryland defendants), as well as certain former officers and directors of the Maryland Savings-Share Insurance Corporation (MSSIC) and the individual savings and loan institutions with which those individuals were affiliated during their tenure at MSSIC (the MSSIC defendants). Their amended complaint contained two counts based on the civil provisions of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. Secs. 1961-1968, as well as several pendent state law claims. The district court dismissed the action prior to trial. The court dismissed the civil RICO count against the MSSIC defendants for failure to state a claim and declined to exercise its discretionary jurisdiction over the pendent state claims against those defendants. It then dismissed the claims--both federal and state--against the First Maryland defendants on abstention grounds, in deference to the ongoing state receivership proceedings. We affirm, though on somewhat different grounds as to the MSSIC defendants.

I

The Maryland Savings-Share Insurance Corporation (MSSIC) was a quasi-public non-profit corporation established by the Maryland legislature in 1962 to insure accounts in state-chartered savings and loan associations. MSSIC was given substantial regulatory control over its member institutions, which by 1985 numbered approximately 100. 1 In May 1985, rumors of financial instability at two savings and loans insured by MSSIC--Old Court and Merritt--triggered a general run on MSSIC-insured thrifts. The resulting panic threw MSSIC itself into financial peril and threatened to lead to the collapse of the state's savings and loan industry. In response, the Governor of Maryland declared a state of public crisis, issued an Executive Order limiting withdrawals from all MSSIC-insured institutions to a maximum of $1,000 per account per month, and called the Maryland General Assembly into emergency session. In special sessions held in May and October-November of 1985, the General Assembly passed a package of legislation designed to deal comprehensively with the crisis in the state's savings and loan industry. See 1985 Md.Laws, 1st Sp.Sess., ch. 1-11; 1985 Md.Laws, 2d Sp.Sess., ch. 3-6. Further refinements were added in the legislature's regular session in 1986. See 1986 Md.Laws, ch. 11-12.

This legislative effort had two principal components. First was the creation of a state-operated deposit insurance fund, the Maryland Deposit Insurance Fund (MDIF), to replace the ruined MSSIC. MDIF was given all of MSSIC's powers, duties, and responsibilities and assumed all of its assets and liabilities, including its insurance obligations to depositors at member institutions. See generally Md.Fin.Inst.Code Ann. Secs. 10-101 to 10-121 (establishing and defining structure and powers of MDIF). Second, and of particular importance here, was the establishment of a comprehensive framework for the administration of conservatorship and receivership proceedings for insolvent savings and loan associations. See Md.Fin.Inst.Code Ann. Secs. 9-701 to 9-712. Section 9-709 gave MDIF the right to be appointed conservator or receiver of any savings and loan association insured by it. Section 9-710 gave the state court administering the conservatorship or receivership of such an institution "exclusive and plenary jurisdiction over all claims, actions, and proceedings that are brought by any person and that are related to the assets, property, powers, rights, privileges, duties and liabilities" of that institution or of MDIF in its capacity as conservator or receiver. 2 To implement this comprehensive scheme, the Maryland Court of Appeals appointed a single judge, Judge Joseph Kaplan of the Circuit Court for the City of Baltimore, to adjudicate all claims arising out of the conservatorship/receivership proceedings for the failed savings and loan associations.

First Maryland was a state-chartered savings and loan association formerly insured by MSSIC. In November 1985, Judge Kaplan found First Maryland to be in an impaired condition and appointed MDIF as its conservator. The conservatorship order froze the interest rates on most First Maryland accounts at 5 1/2% per annum. But First Maryland's financial problems proved insurmountable, and on June 19, 1986, Judge Kaplan formally placed First Maryland in receivership, appointing MDIF receiver and giving it total control over First Maryland's assets. The receivership order terminated the continuing accrual of interest of all First Maryland accounts as of that date. No appeal was taken from that order.

In carrying out its statutory duty as receiver to consolidate First Maryland's assets for distribution to its depositors and other creditors, MDIF has filed actions in state court against various parties believed to have participated in the misappropriation of the institution's assets. Chief among these is an action against First Maryland's former officers and directors seeking $45 million in compensatory and punitive damages for their wrongful depletion of the thrift's assets, based on theories of fraud breach of fiduciary duty, conspiracy, negligence, gross negligence, waste, and conversion. MDIF v. Seidel, No. 13408 (Cir.Ct. of Mont.Co). MDIF has also instituted a state court action against certain former directors of MSSIC, seeking damages for their alleged complicity in the fraud perpetrated by the former directors of First Maryland and other insolvent thrifts. MDIF v. Hogg, No. 113102 (Cir.Ct. Anne Arundel Co.).

To date, MDIF has distributed over $110 million in First Maryland assets to the institution's depositors. In July 1986, MDIF returned up to $5,000 of principal to each depositor, depending on the amount in his or her account. In December 1986, MDIF distributed another $41 million generated through the sale of First Maryland's assets to its depositors. As additional assets are collected and liquidated, MDIF will distribute the proceeds to the depositors. MDIF estimates, however, that the depositors may not be repaid the entire principal of their accounts until 1990 or thereafter, and that they may never be compensated for the interest lost on their accounts during First Maryland's insolvency.

Not satisfied with MDIF's efforts, the plaintiffs filed this action in federal court on behalf of themselves and a class consisting of all persons who had money deposited in First Maryland as of August 23, 1985. 3 Named as defendants are First Maryland and a number of its former officers, directors, and senior management personnel (the First Maryland defendants), as well as 12 former officers and directors of MSSIC and the various savings and loan associations with which those individuals were affiliated during their tenure at MSSIC (collectively, the MSSIC defendants). In this action, the plaintiffs seek damages to compensate them for being deprived of the use of their savings--and of the interest thereon--during the period in which First Maryland has been in conservatorship or receivership.

The amended federal complaint, which is the subject of this appeal, contains seven counts. Count I asserts a civil RICO claim against both the First Maryland defendants and the MSSIC defendants,...

To continue reading

Request your trial
182 cases
  • Davis v. Hudgins
    • United States
    • U.S. District Court — Eastern District of Virginia
    • August 2, 1995
    ... ... of a RICO pattern, holding instead that the issue is a `matter of criminal dimension and degree' to be decided on a case-by-case basis." Brandenburg v. Seidel, 859 F.2d 1179, 1185 (4th Cir.1988) (quoting Zepkin, 812 F.2d at 155). The court may consider a number of factors: "the number and ... ...
  • Tafflin v. Levitt
    • United States
    • U.S. Supreme Court
    • January 22, 1990
    ... ... See Brandenburg v. Seidel, 859 F.2d 1179, 1181-1183 (CA4 1988) (reviewing history of Maryland's savings and loan crisis). Petitioners are nonresidents of Maryland ... ...
  • State v. Ball
    • United States
    • New Jersey Superior Court — Appellate Division
    • August 6, 1993
    ... ... Other Circuits resorted to more elaborate tests in response to Sedima 's suggestion that two predicate acts may not suffice. See Brandenburg v. Seidel, 859 F.2d 1179, 1185 (4th Cir.1988) (identifying numerous factors in determining existence of a RICO pattern such as the number and variety ... ...
  • Rodriguez v. Banco Cent.
    • United States
    • U.S. District Court — District of Puerto Rico
    • November 27, 1989
    ... ... We read this to require some nexus between the financier's actions and the predicate acts causing plaintiffs' injuries. See Brandenburg v. Seidel, 859 F.2d 1179, 1188-90 (4th Cir. 1988); see also Bhatla v. Resort Development Corp., 720 F.Supp. 501 (D.C.W.Pa. 1989) (dismissing ... ...
  • Request a trial to view additional results
4 books & journal articles
  • Intellectual Property Crimes
    • United States
    • American Criminal Law Review No. 60-3, July 2023
    • July 1, 2023
    ...Cir. 2008) (holding the “private gain” element of mail fraud does not require gain to defendant). 127. See, e.g. , Brandenburg v. Seidel, 859 F.2d 1179, 1187 (4th Cir. 1988) (“[I]ndictable acts of mail or wire fraud may be proven without any proof of detrimental reliance by, hence of injury......
  • Finding the Right Insurance Policy: a Uniform Set of Guidelines for Applying the Burford Abstention Doctrine in Cases Involving State Insurance Insolvency Proceedings
    • United States
    • Emory University School of Law Emory Bankruptcy Developments Journal No. 34-1, November 2017
    • Invalid date
    ...Clark v. Fitzgibbons, 103 F.3d 1049 (5th Cir. 1997); Lentz v. Trinchard, 730 F. Supp. 2d 567 (E.D. La. 2010); cf. Brandenburg v. Seidel, 859 F.2d 1179, 1191 (1988) (the risk of disrupting a complex state scheme for the insolvency of state-charted savings and loan associations "presents a cl......
  • CHAPTER 14.01. General
    • United States
    • Full Court Press Delaware Commercial Real Estate Finance Law and Practice Title Chapter 14 Lender Liability
    • Invalid date
    ...discussion of the Delaware Consumer Fraud Act is beyond the scope of this publication.[26] 18 U.S.C. 1962(c)[27] Brandenburg v. Seidel, 859 F.2d 1179, 1188-90 (4th Cir. 1988); Bhatla v. Resort Dev. Corp., 720 F. Supp. 501 (Pa. W.D. 1989).[28] 42 U.S.C. § 9601(20)(F). See supra Section 5.05[......
  • Establishing injury "by reason of" racketeering activity: a critical analysis of the 11th Circuit's per se detrimental reliance requirement and its impact on RICO class actions.
    • United States
    • Florida Bar Journal Vol. 77 No. 3, March 2003
    • March 1, 2003
    ...921 F.2d at 1497. (57) Prosser & Keeton on the Law of Torts, [section] 42, p. 272 (5th ed. 1984). (58) Brandenberg v. Seidel, 859 F.2d 1179, 1189 (4th Cir. 1988) (citing to Restatement (Second) of Torts, [section] 548A comments a,b), overruled on other grounds by Quackenbush v. Allstate......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT