Brandenburg v. Seidel, No. 87-1116

CourtUnited States Courts of Appeals. United States Court of Appeals (4th Circuit)
Writing for the CourtBefore PHILLIPS and ERVIN; PHILLIPS
Citation859 F.2d 1179
Decision Date11 October 1988
Docket NumberNo. 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.

Page 1179

859 F.2d 1179
57 USLW 2251, 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.
No. 87-1116
United States Court of Appeals,
Fourth Circuit.
Argued May 3, 1988.
Decided Oct. 11, 1988.

Page 1180

Arthur M. Kaplan (Edward B. Rock, Fine, Kaplan and Black, Philadelphia, Pa. Andrew P. Goldstein, Washington, D.C.,

Page 1181

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.

Page 1182

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,

Page 1183

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...

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  • Sebago, Inc. v. Beazer East, Inc., C.A. No. 96-10069-MLW.
    • United States
    • United States District Courts. 1st Circuit. United States District Courts. 1st Circuit. District of Massachusetts
    • March 31, 1998
    ...1465, 1499 (11th Cir.1991); County of Suffolk v. Long Island Lighting Co., 907 F.2d 1295, 1311 (2nd Cir.1990); Brandenburg v. Seidel, 859 F.2d 1179, 1188 n. 10 (4th Cir.1988); Blount Financial Services, Inc. v. Walter E. Heller and Co., 819 F.2d 151, 152 (6th Cir. 1987); B.V. Optische Indus......
  • In re American Honda Motor Co. Dealerships Litig., Civil No. MDL-95-1069.
    • United States
    • U.S. District Court — District of Maryland
    • August 30, 1996
    ...that this injury was caused by the predicate acts of racketeering activity that make up the violation of § 1962." Brandenburg v. Seidel, 859 F.2d 1179, 1187 (4th Cir.1988); see also Mid Atlantic Telecom, Inc. v. Long Distance Servs., Inc., 18 F.3d 260, 263 (4th Cir.), cert. denied, ___ U.S.......
  • Jones v. Luthi, C.A. No. 6:06-2202-PMD.
    • United States
    • U.S. District Court — District of South Carolina
    • June 9, 2008
    ...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 variety of predicate acts an......
  • Kiddie Acad. Domestic Franchising, LLC v. Wonder World Learning, LLC, Civil Action No. ELH-17-3420
    • United States
    • United States District Courts. 4th Circuit. United States District Court (Maryland)
    • March 31, 2019
    ...H.J. Inc., 492 U.S. at 239. The Fourth Circuit has adopted a "flexible" approach to the "continuity" requirement. Brandenburg v. Seidel, 859 F.2d 1179, 1185 (4th Cir. 1989), overruled on other grounds by Quackenbush v. Allstate Ins. Co., 517 U.S. 706 (1996). Courts utilize a "case-by-case a......
  • Request a trial to view additional results
170 cases
  • Sebago, Inc. v. Beazer East, Inc., C.A. No. 96-10069-MLW.
    • United States
    • United States District Courts. 1st Circuit. United States District Courts. 1st Circuit. District of Massachusetts
    • March 31, 1998
    ...1465, 1499 (11th Cir.1991); County of Suffolk v. Long Island Lighting Co., 907 F.2d 1295, 1311 (2nd Cir.1990); Brandenburg v. Seidel, 859 F.2d 1179, 1188 n. 10 (4th Cir.1988); Blount Financial Services, Inc. v. Walter E. Heller and Co., 819 F.2d 151, 152 (6th Cir. 1987); B.V. Optische Indus......
  • In re American Honda Motor Co. Dealerships Litig., Civil No. MDL-95-1069.
    • United States
    • U.S. District Court — District of Maryland
    • August 30, 1996
    ...that this injury was caused by the predicate acts of racketeering activity that make up the violation of § 1962." Brandenburg v. Seidel, 859 F.2d 1179, 1187 (4th Cir.1988); see also Mid Atlantic Telecom, Inc. v. Long Distance Servs., Inc., 18 F.3d 260, 263 (4th Cir.), cert. denied, ___ U.S.......
  • Jones v. Luthi, C.A. No. 6:06-2202-PMD.
    • United States
    • U.S. District Court — District of South Carolina
    • June 9, 2008
    ...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 variety of predicate acts an......
  • Kiddie Acad. Domestic Franchising, LLC v. Wonder World Learning, LLC, Civil Action No. ELH-17-3420
    • United States
    • United States District Courts. 4th Circuit. United States District Court (Maryland)
    • March 31, 2019
    ...H.J. Inc., 492 U.S. at 239. The Fourth Circuit has adopted a "flexible" approach to the "continuity" requirement. Brandenburg v. Seidel, 859 F.2d 1179, 1185 (4th Cir. 1989), overruled on other grounds by Quackenbush v. Allstate Ins. Co., 517 U.S. 706 (1996). Courts utilize a "case-by-case a......
  • Request a trial to view additional results

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