Cook v. Zions First Nat. Bank

• Decision Date: 06 August 1986
• Docket Number: Civ. No. C-85-0362W.
• Citation: 645 F. Supp. 423
• Parties: Alan R. COOK and Ray Cook, Plaintiffs, v. ZIONS FIRST NATIONAL BANK, Roy W. Simmons, John Langeland, F. Edward Bennett, and Noall Bennett, Defendants.
• Court: U.S. District Court — District of Utah

645 F. Supp. 423

Alan R. COOK and Ray Cook, Plaintiffs, v. ZIONS FIRST NATIONAL BANK, Roy W. Simmons, John Langeland, F. Edward Bennett, and Noall Bennett, Defendants.

Civ. No. C-85-0362W.

United States District Court, D. Utah, C.D.

August 6, 1986.

John T. Walsh, Earl S. Spafford, L. Charles Spafford, Salt Lake City, Utah, for plaintiffs.

Adam M. Duncan, R. Willis Orton, Salt Lake City, Utah, for defendants.

MEMORANDUM DECISION AND ORDER

WINDER, District Judge.

This matter is before the court on the defendants' motion to dismiss and for Rule 11 sanctions. A hearing on the motion was held on Friday, August 1, 1986. John T. Walsh represented the plaintiffs; and Adam M. Duncan and R. Willis Orton represented the defendants. At the conclusion of the hearing, the court took the matter under advisement. The court has reviewed and considered carefully the parties' oral arguments and memoranda, including pertinent authorities cited therein. Now being fully advised, the court renders the following memorandum decision and order.

Discussion

Defendants have moved to dismiss plaintiffs' claims in their Proposed Third Amended Complaint (hereinafter referred to as the "Complaint"), the operative pleading in this action. As the following discussion indicates, the court believes that each of plaintiffs' claims, except for the breach of contract claim against defendant Zions First National Bank ("Zions"), is fatally deficient and must be dismissed.

First Cause of Action: Breach of Contract Claims

In their first cause of action (Counts I and II), plaintiffs claim that they entered into a contractual relationship with Zions or that a contract arose by operation of law; that Zions subsequently breached its contractual obligations; and that plaintiffs suffered substantial damages. Defendants contend that plaintiffs' breach of contract claims should be dismissed because no contract has been pleaded, because the statute of frauds and the statute of limitations bar recovery, and because plaintiffs have not pleaded damages cognizable for breach of contract.

The court is of the opinion that plaintiffs have sufficiently alleged breach of contract claims in their Complaint and damages caused thereby. The court is of the further opinion that several questions of fact need to be addressed in connection with the breach of contract claims, such as whether and to what extent a contract existed between the plaintiffs and Zions; whether Zions breached its contractual obligations; and whether plaintiffs were damaged by the breach. In addition, whether or not the statute of frauds or the statute of limitations bars recovery is subject to certain factual determinations (such as the date the alleged breach occurred) that are inappropriate at this stage of the proceedings.

In view of the foregoing, the court believes that it would be inappropriate to dismiss plaintiffs' first cause of action at this time.

Second Cause of Action: Fraud and Deceit Claims

The court is of the opinion that plaintiffs' second cause of action should be dismissed because plaintiffs have again failed to plead its fraud and deceit claims with sufficient particularity. Although plaintiffs have had three tries to correct deficiencies in their complaint, plaintiffs' fraud allegations remain conclusory and legally insufficient. By not alleging fraud with specificity, plaintiffs have failed to comply with Rule 9(b), Fed.R.Civ.P., which states that "in all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity." See also Dahl v. Gardner, 583 F.Supp. 1262 (D.Utah 1984). This particularity requirement is especially important in cases involving multiple defendants, such as the present case, since each defendant is entitled to know precisely what it is the plaintiff claims he did wrong. In the present case plaintiffs have yet to allege specifically the factual bases upon which they charge each defendant with fraud. Plaintiffs have not set forth in specific terms the time, place, content, and manner of each defendant's alleged material misrepresentations or otherwise fraudulent conduct. And plaintiffs have not alleged that any specific defendant had specific intent to fraudulently misrepresent facts for the purpose of inducing plaintiffs to rely on the misrepresentations to their detriment.

Based on the plaintiffs' continued failure to comply with Rule 9(b), the court believes that plaintiffs' second cause of action should be dismissed with prejudice.

Third Cause of Action: Claim for Injunction

Even viewing the facts and inferences in a light most favorable to the plaintiffs, the court is of the opinion that plaintiffs have failed to state a claim for injunctive relief. Specifically, plaintiffs have failed to show that they will suffer irreparable injury unless they obtain injunctive relief at this time or that they do not have an adequate remedy of law. Further, plaintiffs have not yet shown a substantial likelihood or probability that they will eventually prevail on the merits of their claims. Koerpel v. Heckler, 797 F.2d 858 (10th Cir.1986). If plaintiffs can subsequently establish a need for an injunction and satisfy the requirements for obtaining one, they can come into court at that time and seek the appropriate redress. Plaintiffs' claim for injunction should therefore be dismissed without prejudice.

Fourth Cause of Action: RICO and RICE Claims

In their fourth cause of action, plaintiffs allege that defendants violated the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1962(a)-(d), and the Utah Racketeering Influences and Criminal Enterprise Act ("RICE"), Utah Code Ann. § 76-10-1603. The court is of the opinion, however, that plaintiffs' RICO and RICE claims should be dismissed for failure to plead the claims with specificity and for failure to plead the requisite "pattern of racketeering activity."

As mentioned above, Rule 9(b), Fed. R.Civ.P., requires that plaintiffs plead fraud with particularity. This requirement clearly applies to RICO and RICE claims that are premised on fraudulent conduct. Plaintiffs have attempted three times to correct the deficiencies in their complaint and plead their RICO and RICE claims with the requisite specificity. Plaintiffs have failed to do so. Plaintiffs' allegations of criminal conduct and a scheme or artifice to defraud or to obtain money and property by means of false or fraudulent pretenses are still conclusory and unsupported by specific factual allegations of fraud and criminal activity. Also, plaintiffs do not allege with any specificity how, when, and where each defendant actually committed fraud or participated in the alleged fraudulent scheme and criminal activity. Such detailed factual allegations are essential in RICO and RICE actions; each defendant must be specifically apprised of the fraudulent and criminal conduct in which plaintiffs claim he engaged. Furthermore, even taking the facts and inferences in the light most favorable to plaintiffs, this court believes that the facts, as pleaded, do not rise to the level of a scheme to defraud or the specific intent to commit fraud or theft by deception.

Additionally, plaintiffs have failed to plead a "pattern of racketeering activity," required to establish a RICO or RICE violation. In this regard, the court is of the opinion that a pattern of racketeering activity under RICO requires more than the mere commission of two or more predicate acts within ten years of each other. Similarly, a pattern of racketeering activity under RICE requires more than the mere commission of two or more episodes of racketeering conduct within five years of each other. To form a "pattern," the commission of predicate acts or episodes of criminality must be sufficiently continuous and interrelated. That is, a RICO or RICE "pattern" requires planned, ongoing, continuing crime and the threat of continuing criminal conduct, as opposed to sporadic, isolated criminal episodes or events.

The Supreme Court, in footnote 14 of Sedima, S.P.R.L. v. Imrex Co., ___ U.S. ___, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985), elaborated on the meaning of "pattern":

As many commentators have pointed out, the definition of a "pattern of racketeering activity" differs from the other provisions in § 1961 in that it states that a pattern "requires at least two acts of racketeering activity," § 1961(5) (emphasis added), not that it "means" two such acts. The implication is that while two acts are necessary, they may not be

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