First Pacific Bancorp, Inc. v. Bro

• Decision Date: 23 May 1988
• Docket Number: No. 87-5778,87-5778
• Citation: 847 F.2d 542
• Parties: , Fed. Sec. L. Rep. P 93,773, RICO Bus.Disp.Guide 6948 FIRST PACIFIC BANCORP, INC.; First Pacific Bank, Plaintiffs-Appellants, v. L. William BRO; Morrie S. Sachs; Harry L. Fein; Sheldon Rabinoff; Alfred Spivak; Lowell T. Patton; Alfred K. Vallely; Donald R. Williams; Rifkind, Sterling & Levin, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 542

847 F.2d 542

56 USLW 2720, Fed. Sec. L. Rep. P 93,773,

RICO Bus.Disp.Guide 6948

FIRST PACIFIC BANCORP, INC.; First Pacific Bank Plaintiffs-Appellants, v. L. William BRO; Morrie S. Sachs; Harry L. Fein; Sheldon Rabinoff; Alfred Spivak; Lowell T. Patton Alfred K. Vallely; Donald R. Williams Rifkind, Sterling & Levin Defendants-Appellees.

No. 87-5778.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Jan. 6, 1988.

Decided May 23, 1988.

Peter L. Spinetta, Spinetta, Randick & O'Dea, Oakland, Cal., for plaintiffs-appellants.

Irving M. Gross, Robinson, Diamant, Brill & Klausner, and Douglas Day, Crowe & Day, Los Angeles, Cal., for defendants-appellees.

Appeal from the United States District Court for the Central District of California.

Before FERGUSON, BEEZER and LEAVY, Circuit Judges.

BEEZER, Circuit Judge:

First Pacific Bancorp, Inc. and First Pacific Bank ("Appellants") ¹ appeal summary judgment of their claim under section 1964 of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. Sec. 1961-1968 (hereinafter "RICO") in favor of L. William Bro, Morrie S. Sachs, Harry L. Fein, Sheldon Rabinoff, Alfred Spivak, Lowell T. Patton, Alfred K. Vallely, Donald R. Williams, and Rifkind, Sterling & Levin, a professional law corporation ("Appellees").

Appellants argue that summary judgment was not a proper basis for dismissal. ² They also argue that discovery was unfairly shortened, that sufficient damages were alleged, and that a sufficient "pattern" of RICO "predicate acts" was alleged to prevent summary judgment. Finally, they claim to have been denied the opportunity to adequately argue damages. We affirm.

I

Each appellee, with the exception of the Rifkind law firm, was a shareholder in First Pacific Bancorp, Inc. and First Pacific Bank of California (collectively "the Bank"). Appellees Bro, Sachs, Rabinoff, Fein and Spivak were members of the Board of Directors of the Bank from 1980 to 1984. Appellees Vallely, Patton and Williams were not.

As shareholders, appellees formed a group in early 1984 to solicit proxies for an annual shareholder meeting to be held April 2, 1984. This group apparently convened on discovering that certain appellees, then on the Board of Directors, were not slated for renomination by management.

The group decided to initiate a shareholders' derivative suit, in addition to soliciting proxies in favor of an alternative slate. The asserted purpose of these actions was to place a "watchdog" presence on the Board and/or to trigger a "buy-out of unhappy shareholders." The Rifkind firm served as counsel for the group during the proxy solicitation battle and the formative stages of the derivative suit.

The group solicited more than ten proxies, intending to vote them at the 1984 meeting. Appellees asserted that they had not been informed, prior to solicitation, of filing requirements under sections 13(d) of the Securities Exchange Act of 1934 ("the 1934 Act"), 15 U.S.C. Sec. 78m, and Sec.Reg. 240 240.13(d)-1, and 14(a) of the 1934 Act, 15 U.S.C. Sec. 78n and Sec.Reg. 240.14(a)-1. Appellees concede that they did not file such a statement under sections 13(d) or 14(a) of the 1934 Act.

The proxies did not pertain to purchase or to sale of Bancorp shares. Likewise, statements made to shareholders from whom proxies were sought did not relate to purchase or to sale of Bancorp shares.

Although a draft shareholders' derivative complaint was delivered to Bancorp's board of directors in March 1984, appellees subsequently decided not to file or to serve.

There is no indication in the record that during proxy solicitation appellees made any statements leading to the obtaining of money or property from appellants or from appellants' board of directors. There is no indication that appellees' proxy solicitation resulted in any corporate action or in any physical harm to a director.

At the 1984 Board meeting, all proxies solicited by appellees were disallowed. ³ Prior to the only shareholder meeting held thereafter, ⁴ appellees did not attempt to solicit proxies.

Appellants now seek treble damages under RICO, 18 U.S.C. Sec. 1962.

The Bank presented evidence that average deposits for 1985 decreased 21%, Bank loans decreased 38%, and average loans decreased 24%. In related bank documents, however, these reductions are expressly attributed to "deliberate asset reduction" and sale of the Bank's Santa Monica branch.

Appellants presented no other evidence of damages resulting from appellees' proxy solicitations, unfiled derivative suit, or alleged threats.

Appellants allege that the proxy solicitation involved wire fraud, mail fraud, and "extortive acts" constituting RICO "predicate acts."

Appellants filed their complaint on April 27, 1984. The complaint was dismissed in February 1985. An amended complaint was filed in May 1985. In June 1986, the court ordered a discovery cut-off of October 31, 1986, setting trial for February 1987. Appellants noticed at least eight depositions between August and October 1986.

Of eight appellees, five were deposed before October 22, 1986. On this date, appellees sought summary judgment. Shortly thereafter, three remaining depositions were commenced.

In December 1986, the court entered an "Order Dismissing Claim for Relief and Specifying Facts That Appear Without Substantial Controversy." In March 1987, the court entered final judgment, confirming summary judgment for appellees on the RICO claim.

Appeal is timely from the March 1987 order. We have jurisdiction pursuant to 28 U.S.C. Sec. 1294.

II

Appellants argue that summary judgment was procedurally improper.

If "matters outside the pleading are presented to and not excluded by the court, [a motion to dismiss for failure to state a claim] shall be treated as one for summary judgment." Fed.R.Civ.P. 12(b). See Darring v. Kincheloe, 783 F.2d 874 (9th Cir.1986). Pleadings in this case were accompanied by depositions. Summary judgment was procedurally proper.

III

We review a district court's rulings governing discovery for abuse of discretion. Hatch v. Reliance Ins. Co., 758 F.2d 409, 416 (9th Cir.), cert. denied, 474 U.S. 1021, 106 S.Ct. 571, 88 L.Ed.2d 555 (1985). Appellants argue that they were unable to complete discovery. Prior to summary judgment, a majority of defendant-appellees were deposed. Prior to the motion for reconsideration, all appellees' depositions had been taken. ⁵

Appellants fail to provide a satisfactory explanation for failure to depose other witnesses during the two-and-one-half years between filing of the complaint and summary judgment. Other statements by appellants appear to overstate the number of witnesses required or scheduled for depositions ⁶ and to confirm that all or most relevant depositions were complete by the date of summary judgment. ⁷ Appellants stated in district court, prior to summary judgment, that "all [of appellants' depositions are] now set [,] with the concurrence of witnesses and previous counsel and the parties[,] to be completed in October, 1986...." The summary judgment hearing was held November 24, 1986. The summary judgment was not entered until December 8, 1986. Thus, discovery was substantially complete prior to entry of summary judgment.

IV

Appellants argue that there remain genuine issues of material fact.

Summary judgment is reviewed de novo in determining whether a genuine issue of material fact exists. Fidelity Financial Corp. v. Federal Home Loan Bank, 792 F.2d 1432, 1437 (9th Cir.1986), cert. denied, --- U.S. ----, 107 S.Ct. 949, 93 L.Ed.2d 998 (1987); Jewel Cos. v. Payless Drug Stores Northwest, 741 F.2d 1555, 1564 (9th Cir.1984). Summary judgment may be upheld on a different ground from the ground on which the district court relied. Id. at 1564; Calnetics Corp. v. Volkswagen of America, Inc., 532 F.2d 674, 682 (9th Cir.), cert. denied, 429 U.S. 940, 97 S.Ct. 355, 50 L.Ed.2d 309 (1976).

A

Appellants assert that the district court erred in requiring more than one "scheme" to establish a "pattern of racketeering." While we do not dispute that one "scheme" is sufficient, we uphold the district court's finding on a different ground.

We acknowledge that the allegations required to establish a pattern of racketeering have recently been the focus of considerable debate in federal courts. See, e.g., Medallion Television Enters, Inc. v. SelecTV, 833 F.2d 1360 (9th Cir.1987); Sun Sav. & Loan Ass'n v. Dierdorff, 825 F.2d 187, 191-92 (9th Cir.1987) (collecting cases); California Architectural Bldg. Prods., Inc. v. Franciscan Ceramics, Inc., 818 F.2d 1466, 1469 n. 1 (9th Cir.1987) (collecting cases); Beck v. Manufacturers Hanover Trust Co., 820 F.2d 46, 51 (2d Cir.1987), cert. denied, --- U.S. ----, 108 S.Ct. 698, 98 L.Ed.2d 650 (1988).

RICO states that a "pattern of racketeering" requires "at least two acts of racketeering activity." 18 U.S.C. Sec. 1961(5). Until recently, we shared the prevailing uncertainty as to whether the two requisite acts could appear within one scheme or were required to appear in more than one scheme. We have concluded that one scheme or criminal episode suffices when two related "predicate acts" are alleged and supported. Sun Savings, 825 F.2d at 193-94; California Architectural, 818 F.2d at 1469; Medallion, 833 F.2d 1360. ⁸

Here, the acts alleged may have been part of one "scheme," but we conclude that the requisite "predicate acts" required to establish a "pattern of racketeering" are absent.

B

Appellants assert that the district court erred by not finding evidence of RICO "predicate acts."

Title 18, U.S.C. Sec. 1964(c) provides that "[a]ny person injured in his business or property by reason of a violation of section 1962 of this chapter may sue therefor...."

Title 18, U.S.C. Sec. 1962(c) 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...