Hometowne Builders, Inc. v. Atlantic Nat. Bank

• Decision Date: 10 October 1979
• Docket Number: Civ. A. No. 79-481-N.
• Citation: 477 F. Supp. 717
• Parties: HOMETOWNE BUILDERS, INC., a Virginia Corporation and Robert H. Merriman, Plaintiffs, v. ATLANTIC NATIONAL BANK, Charles M. Reynolds, Jr., Levi E. Willis and G. Wesley Hardy, Defendants.
• Court: U.S. District Court — Eastern District of Virginia

477 F. Supp. 717

HOMETOWNE BUILDERS, INC., a Virginia Corporation and Robert H. Merriman, Plaintiffs, v. ATLANTIC NATIONAL BANK, Charles M. Reynolds, Jr., Levi E. Willis and G. Wesley Hardy, Defendants.

Civ. A. No. 79-481-N.

United States District Court, E. D. Virginia, Norfolk Division.

October 10, 1979.

Robert M. White, White & Selkin, Norfolk, Va., for plaintiffs.

Edward Delk, Delk, James & Jackson, Conrad M. Shumadine, Kaufman & Oberndorfer, Norfolk, Va., for defendants.

MEMORANDUM OPINION AND ORDER

CLARKE, District Judge.

The plaintiffs, Hometowne Builders, Inc. (hereinafter "Hometowne"), and Robert H. Merriman, President of Hometowne, filed a Complaint in this Court on April 27, 1979, against defendants, Atlantic National Bank (hereinafter "Atlantic"), Charles M. Reynolds, Jr., President of Atlantic, Levi E. Willis, an acting President of Atlantic at the time of certain alleged injurious actions, and G. Wesley Hardy, an officer of Atlantic. Hometowne is a Virginia corporation with its principal place of business in Virginia Beach, Virginia, and Atlantic is a bank organized under the federal banking laws with its principal place of business in Norfolk, Virginia. All other named individual defendants and plaintiff Merriman are residents of the State of Virginia. Jurisdiction of this Court is based upon 28 U.S.C. § 1331, as plaintiffs have alleged violations of 12 U.S.C. § 1972, thereby entitling them to sue for damages under 12 U.S.C. § 1975, and of 18 U.S.C. § 215, thereby subjecting defendants to potential civil liability under 12 U.S.C. § 503.

Specifically, Count One of the Complaint alleges that defendants violated 12 U.S.C. § 1972, a statute which prohibits certain tying arrangements by banks, namely that an extension of credit cannot be conditioned upon agreements to obtain additional credit, property, or service from the lending bank. Plaintiffs contend that Atlantic tied increases in mortgage loan commitments to plaintiff Merriman's sons, for which plaintiff Merriman had cosigned as surety, to the purchase of stock in Atlantic by both Hometowne and Merriman. Accordingly, plaintiffs have brought suit under 12 U.S.C. § 1975, which provides, in pertinent part: "Any person who is injured in his business or property by reason of anything forbidden in section 1972 of this title may sue therefor . . . and shall be entitled to recover three times the amount of the damages sustained . . .." Plaintiffs seek both treble damages ($3,000.00) and punitive damages ($250,000.00) for the alleged violation of 12 U.S.C. § 1972.

Count Two of the Complaint alleges that plaintiffs Hometowne and Merriman conducted a substantial amount of business with Atlantic during 1974, 1975, and 1976, and that at various times during this period defendants Willis and Hardy, as officers and directors of Atlantic, extracted certain illegal contributions from plaintiffs payable to Willis or Hardy or to corporations or organizations with which Willis or Hardy were connected. Plaintiffs contend that they made these contributions because they did not wish to endanger their existing and future loan transactions with Atlantic and because "plaintiffs were informed by the defendants that the aforesaid so-called donations were of a religious and charitable nature, and that such solicitation of funds was an entirely legal and normal practice of the defendant, Atlantic National Bank." Complaint at ¶ 24. The Complaint further claims that the aforesaid actions of defendants violated 18 U.S.C. § 215, a criminal statute, which reads:

Whoever, being an officer, director, employee, agent, or attorney of any bank, the deposits of which are insured by the Federal Deposit Insurance Corporation, of a Federal intermediate credit bank, or of a National Agricultural Credit Corporation, except as provided by law, stipulates for or receives or consents or agrees to receive any fee, commission, gift, or thing of value, from any person, firm, or corporation, for procuring or endeavoring to procure for such person, firm, or corporation, or for any other person, firm, or corporation, from any such bank or corporation, any loan or extension or renewal of loan or substitution of security, or the purchase or discount or acceptance of any paper, note, draft, check, or bill of exchange by any such bank or corporation, shall be fined not more than $5,000 or imprisoned not more than one year or both.

Then, by virtue of 12 U.S.C. § 503, the named officers and directors would be civilly liable in their individual capacities for the alleged violations of 18 U.S.C. § 215, and plaintiffs seek compensatory ($880.00) and punitive ($750,000.00) damages.

This matter now comes before the Court on defendants' Motion to Dismiss filed pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. Defendants have asserted two grounds for dismissal: (1) Plaintiffs are not entitled to claim punitive damages over and above the treble damages authorized by 12 U.S.C. § 1975; consequently, the claim for punitive damages in Count One should be dismissed. (2) Plaintiffs lack standing under 12 U.S.C. § 503 to assert their private cause of action, and all of the claims in Count Two should be dismissed. The Court has heard oral argument, has reviewed the briefs submitted with the authorities cited therein, and will now address separately defendants' grounds for dismissal.

Count One: Punitive Damages

It is important to note initially that plaintiffs have not alleged in Count One any facts which constitute a cause of action under the common law, as the common law did not prevent tying the sale of one product or service to the sale of another. Rather, plaintiffs specifically rely upon their statutory cause of action in 12 U.S.C. § 1975 because of the violation of 12 U.S.C. § 1972, which latter section does prohibit certain tying arrangements by banks and bank holding companies. Defendants do not challenge in their current motion plaintiffs' standing to assert the cause of action in Count One or the applicability of 12 U.S.C. § 1972 to the facts of this case; however, they do challenge plaintiffs' claim for punitive damages under this statutory cause of action.

Since the common law cannot provide a basis for claiming punitive damages, it is necessary to examine the statute to determine if plaintiffs can maintain such a claim. The statute specifically provides for recovery of treble damages and a reasonable attorney's fee but makes no reference to punitive damages of any kind. Therefore, it is necessary to examine the legislative history of 12 U.S.C. § 1972 et seq. to determine whether plaintiffs have any implied right to recover punitive damages under these sections. The legislative history does not mention punitive damages, with the only comment on damages being: "Private parties are given the right to sue for injunctive relief as well as treble damages when they have sustained damages, or are threatened by loss or damage, by reason of a violation of this section's prohibitions." Senate Report No. 91-1084, 91st Cong., 2d Sess., reprinted in 1970 U.S.Code Cong. & Admin.News, pp. 5519, 5536. The absence of any discussion of punitive damages in excess of treble damages is a strong indication that such damages were not contemplated by Congress and were not implied in the statute.

Moreover, the legislative history of 12 U.S.C. § 1972 et seq. clearly demonstrates that these sections were considered additions to the antitrust laws. In "The Supplementary Views of Messrs. Bennett, Tower, Percy, and Packwood" to Senate Report No. 91-1084, supra, these senators pointed out that the Senate Banking and Currency Committee was "writing new antitrust" law in the tying arrangement provision. Id. at 5546. These senators also argued that the Senate version of the tying arrangement provision made certain legitimate banking practices "per se violations of antitrust law." Id.

In his supplementary views, Senator Brooke discussed the antitrust nature of the proposed tying provisions. He cited Standard Oil Co. v. United States, 337 U.S. 293, 69 S.Ct. 1051, 93 L.Ed. 1371 (1949), an antitrust tying case, in his analysis and quoted extensively from a letter containing the views of the Antitrust Division of the Justice Department as set forth by Assistant Attorney General Richard W. McLaren. Senate Report No. 91-1084, supra at 5558-61. This letter indicated that the Justice Department considered the tying arrangement proposal a "most valuable supplement" to the antitrust laws. Furthermore, the Justice Department suggested a four-year statute of limitations, rather than the proposed seven-year period, for "consistency with Section 4b of the Clayton Act." Id. at 5561. Thus, the legislative history of 12 U.S.C. § 1972 et seq. indicates that Congress designed these sections as part and parcel of the antitrust laws.

The question then becomes whether there is any implied right to recover punitive damages under 12 U.S.C. § 1972 et seq. as part of the antitrust laws. In Hansen Packing Co. v. Armour & Co., 16 F.Supp. 784 (S.D.N.Y.1936), the district court addressed the issue of the availability of punitive damages under the antitrust laws as follows: "In trebling the amount of actual damages, it seems indisputable that the statutes carry their own symbol of punishment. The plaintiff can recover only what the statutes give him." 16 F.Supp. at 788. The court then struck the claim for punitive damages.

Similarly, in John Mohr & Sons, Inc. v. Jahnke, 55 Wis.2d 402, 198 N.W.2d 363 (1972), the Supreme Court of Wisconsin addressed the question of whether punitive damages were recoverable under § 133.01 of the Wisconsin Antitrust Act. This section was a substantial reenactment of § 1 of the Sherman Act. The Supreme Court of Wisconsin denied punitive damages on dual grounds. First, the court ruled that the recovery of both treble damages and punitive damages amounted to the "double recovery of a penalty" in violation...