Kenty v. Bank One, Columbus, N.A.
| Decision Date | 19 September 1996 |
| Docket Number | No. 93-4211,93-4211 |
| Citation | 92 F.3d 384 |
| Parties | Barbara KENTY, et al., Plaintiffs-Appellants, v. BANK ONE, COLUMBUS, N.A., and Transamerica Premier Insurance Company, Defendants-Appellees. . Re |
| Court | U.S. Court of Appeals — Sixth Circuit |
Michael P. Malakoff (briefed), Ellen M. Doyle (argued), Malakoff, Doyle & Finberg, Pittsburgh, PA, Howard A. Specter, Joseph N. Kravec, Jr., Pittsburgh, P.A., for Plaintiff-Appellant.
David S. Cupps (argued and briefed), Vorys, Sater, Seymour & Pease, Cleveland, OH, Michael J. Betts, Betts & Perry, Pittsburgh, PA, for Bank One, Columbus, N.A.
Joel Mirman, Benesch, Friedlander, Coplan & Aronoff, Columbus, OH, Mark P. Ladner (argued and briefed), Morrison & Foerster, New York City, NY, for Transamerica Premier Ins. Co.
John J. Gill (briefed), American Bankers Ass'n, Washington, DC, for amicus curiae.
Before: MERRITT, Chief Judge; KEITH and BOGGS, Circuit Judges.
MERRITT, C.J., delivered the opinion of the court, in which KEITH, J., joined. BOGGS, J. (pp. 395-96), delivered a separate concurring opinion.
Plaintiffs in this class action suit appeal the grant of summary judgment for the defendants by the district court. Each plaintiff contracted with Bank One for a loan to purchase an automobile. The terms of the loan required the plaintiffs to acquire collision and comprehensive automobile insurance, or in the alternative authorized the Bank to purchase the insurance for the plaintiffs. Each of the plaintiffs did not purchase insurance themselves, and the Bank purchased it for them from Transamerica Premier Insurance Company, a co-defendant in this case. The plaintiffs contend that the Bank breached the loan agreement and bought not only the insurance authorized by the agreement, but other coverage as well. Although they do not bring a breach of contract action, the plaintiffs do argue that the Bank violated three federal statutes: the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1962(c); the National Bank Act, 12 U.S.C. § 85; and the anti-tying provisions of the National Bank Holding Company Act, 12 U.S.C. § 1972. The plaintiffs also claim that Transamerica violated RICO. The district court granted summary judgment for the defendants on all of these claims. We affirm the district court's rulings with respect to all claims.
The plaintiffs in this case individually contracted with the Bank for an automobile loan. The loan contract, which was identical in each case, provided that each plaintiff would purchase collision and comprehensive insurance coverage for the automobile they purchased with the loan proceeds. In the alternative, if a plaintiff did not purchase insurance the agreement provided that the Bank could take out an insurance policy on behalf of that plaintiff and add the charges to the balance of the loan. Specifically the Notice of Requirement to Provide Insurance executed by the plaintiffs stated:
I understand that the terms of my loan require that:
(a) I provide property insurance against loss or damage (subject to a maximum deductible of $250) on the collateral securing my loan, in an amount sufficient to cover the outstanding balance on my loan, plus any existing liens on the collateral. This coverage is commonly referred to as collision or comprehensive insurance ...
and
(b) The insurance policy contained a loss payable clause endorsement naming BANK ONE as the holder of a lien on the collateral.
....
I understand that I may obtain the insurance from any agent or company of my choice; if I fail to obtain the required insurance, BANK ONE, at its option but without any obligation to do so, may apply in my name at my expense to purchase limited insurance for the protection of only Bank One for the amount of my loan. I authorize Bank One to add such insurance premiums, and finance charges thereon, to my loan balance. I understand that Bank One will retain a security interest in the collateral securing my loan until the entire balance, including any premiums and finance charges, is paid.
Each of the plaintiffs in the class did not purchase the insurance against loss or damage of their automobile, and the Bank purchased insurance for them from Transamerica.
The policy which the Bank purchased from Transamerica included endorsements which protected the automobiles (the Bank's collateral) from theft and damage that could diminish the value of the automobile. The plaintiffs do not contest these endorsements. In addition, however, the policy purchased from Transamerica also insured the Bank against malfeasance by the plaintiff-borrower and against losses that could be incurred by the Bank even when an automobile was repossessed in undamaged condition ("additional insurance"). For example, in the insurance policy taken out for the class representative, the coverage included protection against "borrower conversion, embezzlement and secretion of the vehicle"; expenses included in "repossessing the vehicle with a prior mechanics lien"; payments for a "loaned insurance premium if borrower defaults and vehicle is repossessed"; "repossession expenses"; "repossessed storage expenses"; "additional coverage to insure vehicle ... after insurance certificate has been cancelled while the vehicle is being repossessed"; and "waiver of Actual Cash Value to permit recovery of actual amount owed on loan." While the plaintiff was required to provide insurance only against "loss or damage," the Bank argues that these additional types of coverage were permitted under the clause allowing it to buy "limited insurance."
Although each plaintiff received notice that the Bank had purchased insurance from Transamerica in his or her name, the notice they received did not explain that the coverage included any additional coverage beyond protection against "loss or damage." In the case of the class representative, the notice only mentioned "extra endorsements" by number listing "CSI-1, 2, 3, 4, 5, 6, 7, 9, 10, 12, 13, 15." Subsequent notices sent to the plaintiffs included no further suggestion that the insurance coverage included protection of the Bank's loan beyond the value of the collateral in the undamaged automobile. All of the notices included a statement that "This Insurance Protects in the Interest of the Lender in the Vehicle."
Each of the premiums were added to the balances on the plaintiffs' loans with the Bank. But, according to the plaintiffs, the Bank received rebates from Transamerica that were not reflected in the price each plaintiff was charged. Thus the Bank did not pass on the rebates to the plaintiffs, and therefore overcharged them for the insurance.
While the case was pending in district court, the plaintiffs filed a similar claim in state court in Ohio on a breach of contract theory, and related state-law grounds. The Ohio Court of Appeals dismissed all the plaintiffs' claims. Recently, however, the Ohio Supreme Court overruled that decision and held that the plaintiffs did state a cause of action under Ohio law sufficient to survive summary judgment. As we read that decision, the Ohio Supreme Court also interpreted Ohio contract law to hold that the Bank breached its contracts with the plaintiffs when it purchased the additional insurance. Kenty v. Transamerica Premium Ins. Co., 72 Ohio St.3d 415, 650 N.E.2d 863 (1995). Nonetheless, as there is now no final judgment in the Ohio state courts, we are not barred from considering this case under res judicata or collateral estoppel. See State ex rel. Kirby v. S.G. Loewendick & Sons, Inc., 64 Ohio St.3d 433, 437, 596 N.E.2d 460, 463 (1992) ().
We review the district court's grant of summary judgment de novo, using the same standard as that used by the district court. See Moore v. Philip Morris Cos., 8 F.3d 335, 339 (6th Cir.1993). In deciding upon a motion for summary judgment, we must view the factual evidence in the light most favorable to the non-moving party and draw all reasonable inferences in favor of the non-moving party. United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962).
The plaintiffs assert that the Bank and Transamerica violated RICO in two respects. First, plaintiffs argue that the purchase of the additional coverage beyond loss and damage insurance violated RICO. Second, plaintiffs contend that the "kickbacks" that the Bank received from the insurance company also violated RICO.
A violation of RICO under 18 U.S.C. § 1962(c) requires (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity. Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985). In order to establish "racketeering activity" the plaintiffs must allege a predicate act. Mail fraud, which the plaintiffs have alleged in this case, is a predicate act. 18 U.S.C. § 1961(1)(B).
Mail fraud consists of "a scheme or artifice to defraud and a mailing for the purpose of executing the scheme." Bender v. Southland Corp., 749 F.2d 1205, 1215-16 (6th Cir.1984). A scheme to defraud consists of "[i]ntentional fraud, consisting in deception intentionally practiced to induce another to part with property or to surrender some legal right, and which accomplishes the designed end." Id. at 1216. To allege intentional fraud, there must be "proof of misrepresentations or omissions which were 'reasonably calculated to deceive persons of ordinary prudence and comprehension.' " Blount Fin. Servs., Inc. v. Walter E. Heller & Co., 819 F.2d 151, 153 (6th Cir.1987) (citation omitted). Thus, the plaintiffs must allege with particularity a "false statement of fact made by the defendant which the plaintiff relied on." The plaintiff must also allege...
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