Biljac Associates v. First Interstate Bank

Citation267 Cal.Rptr. 819,218 Cal.App.3d 1410
Decision Date22 March 1990
Docket NumberA041783,Nos. A041024,s. A041024
Parties, 1990-1 Trade Cases P 69,009 BILJAC ASSOCIATES, Plaintiff and Appellant, v. FIRST INTERSTATE BANK OF OREGON, N.A. et al., Defendants and Respondents. Erwin C. NIELSEN et al., Plaintiffs and Appellants, v. FIRST INTERSTATE BANK OF OREGON, N.A. et al., Defendants and Respondents.
CourtCalifornia Court of Appeals Court of Appeals

Francis O. Scarpulla, Scarpulla & Scarpulla, Michael I. Spiegel, Charles M. Kagay, Spiegel Liao & Kagay, Guido Saveri, Saveri & Saveri, San Francisco, for plaintiffs and appellants.

Richard E. Sherwood, Betrand M. Cooper, Charles C. Lifland, O'Melveny & Myers, Los Angeles, Dennis M. Hauser, Brian J. Evans, George M. Duff, III, Boyden, Cooluris Hauser & Saxe, San Francisco, Shigeru Watanabe, Bruce L. Ishimatsu, Kelley, Drye & Warren, Los Angeles, A. James Robertson, II, Peter J. Busch, Howard, Rice, Nemerovski, Canady, Robertson & Falk, San Francisco, Raymond K. Denworth, Lawrence A. Nathanson, Drinker, Biddle & Reath, Philadelphia, Pa., Charles L. Marinaccio, Harry J. Kelly, Kelley Drye & Warren, John J. Gill, III, Michael F. Crotty, American Bankers Ass'n, Washington, D.C., for defendants and respondents.

SMITH, Associate Justice.

In consolidated appeals, we review summary judgments granted in favor of defendant banks and bank trade associations in actions brought by commercial borrowers, under the Cartwright Act (Bus. & Prof.Code, § 16700 et seq. [all further section references in this opinion are to that code unless otherwise specified] ) and unfair competition laws (§ 17200 et seq.), for conspiracy to set and manipulate variable interest rates on loans made to "middle market" commercial borrowers.

We will affirm.


Plaintiffs in these actions are BILJAC Associates, a California partnership involved in real estate investments, and Erwin C. Nielsen and Bonnie Nielsen, a married couple operating a cattle ranch. Each allegedly took out commercial loans from one or more of the various defendant banks named below and paid prime-rate-based interest on those loans. BILJAC Associates filed its first complaint in May 1984 (no. 824289), and the Nielsens filed theirs in September 1984 (no. 829062).

The cases were inspired by the initial success of consolidated federal district court actions in Wilcox Development v. First Interstate Bank of Or. (D.Ore.1985) 605 F.Supp. 592 (Wilcox I ), where a jury found in favor of plaintiffs alleging federal antitrust law violations by various banking institutions based on conspiracy to raise, fix and maintain "prime" interest rates at artificial and anticompetitive levels. Plaintiffs here relied heavily at first on the record developed in the Wilcox litigation. The victory in Wilcox was short lived, however, for the defendants were granted judgment notwithstanding the verdict (id., at pp. 593-594, 597), and that ruling was upheld in April 1987 by the Ninth Circuit Court of Appeals in Wilcox v. First Interstate Bank of Oregon, N.A. (9th Cir.1987) 815 F.2d 522 (Wilcox II ).

Meanwhile, after four amendments to the individual complaints, the cases below were consolidated, and a consolidated amended complaint was filed in December 1985. Named as defendants were six New York- and Chicago-based banking institutions and eight based in California or Oregon. Western defendants include First Interstate Bank of Oregon, N.A. (FIOR), and its holding company, First Interstate Bancorp (Bancorp), two of the respondents here. 1 The other respondents are banking These appeals concern summary judgments granted in favor of respondents on the first, second, third and eighth causes of action of the consolidated amended complaint, which alleged conspiracy violations against all defendants based on the following core set of alleged facts: From the 1930's into the 1970's, the term "prime rate" was understood to be the rate which banks charged to their most creditworthy corporate commercial borrowers. It was a fairly stable rate. Then, beginning in the 1970's, major commercial banks in the United States moved from this preferred borrowing rate to the concept of a "base" or "reference" rate, one which each bank publicly announced from time to time yet continued to disseminate to the borrowing public as a "prime interest rate."

industry trade association defendants: the American Bankers Association (ABA), Association of Reserve City Bankers (ARCB) and Robert Morris Associates (RMA). The parties inform us that the New York and Chicago banks settled after the judgments under review here were granted. Summary judgment was not granted as to the California banks due to other claims pending against them.

The crux of the conspiracy alleged in the first two counts as unfair competition and violating the Cartwright Act is that defendants conspired over time, through an exchange of information and ideas, to move from the traditional prime rate to the new, more volatile base rate, which the banks themselves controlled. They agreed to fix, raise, maintain and stabilize that rate, using it as a "benchmark" for commercial loans to so-called "middle-market" borrowers, and thereby suppress or eliminate competition between themselves. Forecasting the onset of world-wide inflation and rises in commercial interest rates, which might depress their profits, they conspired to raise and standardize the spread (points charged above the new base rate) for commercial borrowers, to move away from fixed-rate loans toward "floating" (variable-rate) loans referenced to the new "prime," and to base those rates on fluctuations in short-term commercial paper rates. This reduced bank competition and led to noncompetitive, high rates for middle-market borrowers while allowing banks to make below-"prime" loans to their preferred, multi-national corporate borrowers and thus prevent those larger borrowers from entering the commercial paper market themselves. The conspiracy was furthered in part through meetings held under the auspices of industry trade associations.

The third cause of action alleges unfair competition in that defendants conspired to reduce borrowing alternatives by choreographing simultaneous rises in rates. Eastern banks announce upward rate changes before business hours on the East Coast, transmit that information to banks in more western time zones (who announce almost identical rises) and thereby prevent borrowers from shopping for lower rates. Again, because larger borrowers borrow at below-"prime" rates, this harms only smaller commercial borrowers, for whom interest rates are maintained at "supra-competitive" levels.

The eighth cause of action charges unfair competition against the bank defendants only, alleging that they stand in a superior bargaining position to commercial borrowers, exact the disclosure of "intimate financial and personal information" in the loan application process, offer "adhesion contracts" which leave borrowers no alternative but to accede to "unreasonable, oppressive and unconscionable" rates referenced to a controlled "prime rate," and do so without disclosing anticipated rising or falling rates during the loan term.

The bank defendants had jointly moved for summary adjudication of the antitrust and related conspiracy issues some months prior to the consolidated amended complaint being filed. Plaintiffs were granted several continuances, before and after the new pleading, to conduct further discovery. To organize the pending motion and related evidence, the court (Hon. Stuart R. Pollak) denied the motion without prejudice in February 1987, deemed the matter resubmitted, ordered that separate motions and supporting Judge Pollak heard the motions as scheduled, took them under submission and, in an order of June 30, 1987, granted them on the first three causes of action. Bank defendants then moved for summary judgment and/or summary adjudication of issues on various other causes of action, of which only the eighth affected FIOR and Bancorp.

papers be filed, and set a hearing for May 7.

At about the same time, trade association defendants moved for summary judgment on the first three causes of action, the only ones affecting them. The court (Hon. Lucy Kelly McCabe) granted the motions and entered judgment in their favor on January 11, 1988. Plaintiffs filed a timely notice of appeal the next day, and that appeal is number A041024 in our docket.

By an order of March 14, 1988, Judge McCabe granted the bank defendants' motions for summary adjudication on the eighth cause of action and, there being no further causes of action against FIOR and Bancorp, ruled them entitled to summary judgment. Judgment in their favor was entered August 9, 1988. Plaintiffs prematurely appealed from the March 14 order (as to FIOR and Bancorp), but we construe the notice of appeal as applying to the later judgment (Cal. Rules of Court, rule 2(c)).

I **

Under our summary judgment statute, supporting and opposing affidavits or declarations "shall be made ... on personal knowledge, shall set forth admissible evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated therein." (Code Civ.Proc., § 437c, subd. (d)). Evidentiary objections "not made either in writing or orally at the hearing" are deemed waived (subd. (b)), and the court, in ruling on summary judgment, may not consider matters "to which objections have been made and sustained by the court" (subd. (c)). (See also Cal. Rules of Court, rules 343 and 345, requiring page-and-line citations to objectionable matters and that specific grounds for the objections be stated.)

Plaintiffs filed voluminous evidentiary objections and a request that the court give written rulings on all objections. Judge Pollak declined, however, explaining that while he found merit to some of the objections on both sides and...

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