Michaels Bldg. Co. v. Ameritrust Co., N.A.
| Decision Date | 17 May 1988 |
| Docket Number | Nos. 86-4148,87-3157 and 87-3197,86-4149,s. 86-4148 |
| Parties | 1988-1 Trade Cases 68,013, RICO Bus.Disp.Guide 6939 MICHAELS BUILDING COMPANY, et al.; Barbara L. Abbe; and Joseph L. Sigler, etc., Plaintiffs-Appellants, v. AMERITRUST COMPANY, N.A., et al.; National City Bank of Akron, et al.; Centran Bank of Akron, et al.; Bank One of Akron, N.A., et al.; Harter Bank & Trust Co.; and the United National Bank & Trust Company, et al., Defendants-Appellees. |
| Court | U.S. Court of Appeals — Sixth Circuit |
Dale A. Bernard, Daniel J. McGown (argued), Alan G. Segedy, Akron, Ohio, for plaintiffs-appellants in Nos. 86-4148 to 86-4151.
John W. Solomon, Linda B. Kersker, Akron, Ohio, for Phoenix Nat. Bank and D. Jones.
Richard E. Guster, Douglas L. Talley, George Rooney, Jr. (argued), Roetzel & Andress, Akron, Ohio, for Bank One.
Sonia C. Vallorz, Roetzel & Andress, Akron, Ohio, for appellee-cross-appellant.
Dennis M. Kelly (argued), Jeffrey J. Baker, Jones, Day, Reavis & Pogue, Leslee W. Miralke, Matthew R. Goldman, Cleveland, Ohio, for Ameritrust et al.
Robert J. Hoerner (argued), Stephen Q. Giblin, Cleveland, Ohio, for National City Bank of Akron.
Dale A. Bernard, Andrew J. Michaels, Daniel J. McGown (argued), Akron, Ohio, for plaintiffs-appellants in Nos. 87-3157 and 87-3197.
S. Stuart Eilers, Thompson, Hine & Flory, Joseph J. Magri, Cleveland, Ohio, for other appellees.
Barbara J. Arison, Wm. J. Wallace, Roetzel & Andress, Akron, Ohio, for Soc. Bank of E. Ohio.
Thomas P. Mulligan, Kathleen B. Burke (argued), Susan Z. Haller, Jones, Day, Reavis & Pogue, Cleveland, Ohio, for Centran.
Edward P. Weber, Jr., Randolph L. Snow (argued), Black, McCuskey, Souers & Arbough, Canton, Ohio, for United Nat. Bank and Trust.
Before KEITH, MARTIN and RYAN, Circuit Judges.
This group of consolidated appeals involved a series of nearly identical rulings by the United States District Court for the Northern District of Ohio in a tetralogy of class actions asserting claims under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), the Sherman Act and Ohio law. Appellants challenge three of the district court's rulings: (1) the dismissal of their RICO and state fraud claims with prejudice, pursuant to Fed.R.Civ.P. 9(b) and 12(b)(6), for failure adequately to plead circumstances constituting fraud; (2) the dismissal of their Sherman Act claims with prejudice, pursuant to Fed.R.Civ.P. 12(b)(6), for failure adequately to state a claim; and (3) the dismissal of defendant Ameritrust, pursuant to Fed.R.Civ.P. 21, for misjoinder. Final judgments were entered under Fed.R.Civ.P. 54(b), thus conferring appellate jurisdiction upon this court. We agree with appellant that the district court erred in dismissing the fraud and Sherman Act claims, and therefore REVERSE with respect to those issues. We AFFIRM, however, the district court's decision to dismiss the Ameritrust defendants.
On April 30, 1984, plaintiffs-appellants, Michaels Building Company and Michaels Oil and Gas Company ("Michaels"), filed a class action complaint against six different banking groups 1 and fifty unnamed "John Doe" defendants employed by or associated with the banks. Michaels and the defendant banks had entered into certain loan agreements which obligated Michaels to pay an interest rate that was based on each bank's own stated "prime rate." Michaels argues that the term "prime rate" is generally understood to mean the variable rate which banks charge to their preferred commercial borrowers with the highest credit ratings. 2 Michaels claims that the defendant banks fraudulently exacted excessive interest payments by charging interest at an arbitrarily established "prime rate" in excess of the rate which the banks actually charged to their best commercial customers.
Michaels' complaint consisted of seven counts alleging that the defendants had defrauded the class borrowers in violation of state law and the mail fraud provision of RICO, 18 U.S.C. Secs. 1961 et seq. 3 Michaels also served extensive interrogatories and requests for documents upon each defendant bank. The banks each responded by filing motions to dismiss under Fed.R.Civ.P. 9(b), 11 and 12(b)(6) on the bases that Michaels' complaint failed to state the circumstances constituting fraud with particularity. 4 Michaels rejoined that Rule 9(b) requires only "notice" pleading, and that Michaels would be able to establish the factual bases for their fraud claims after discovery had been taken.
The court took the motions under advisement, and stayed discovery. On December 27, 1985, the court issued a RICO Case Standing Order. In part, the Order directed Michaels to:
5. Describe in detail the pattern of racketeering activity or collection of unlawful debts alleged for each RICO claim. A description of the pattern of racketeering shall include the following information:
* * *
b. Provide the dates of the predicate acts, the participants in the predicate acts and a description of the facts surrounding the predicate acts;
c. If the RICO claim is based on the predicate offenses of ... mail fraud ... the "circumstances constituting fraud or mistake shall be stated in particularity." Fed.R.Civ.P. 9(b). Identify the time, place and contents of the alleged misrepresentations, and the identity of persons to whom and by whom the alleged misrepresentations were made ...
Joint Appendix ("J.A.") at tab 15, p. 2.
On January 15, 1986, Michaels filed a RICO Case Statement, and six days later, a "Supplemental" RICO Case Statement. Michaels' first Statement responded that:
(b) First Count:
During the six year period preceding the commencement of this action, Defendant Banks and Defendant Bank Holding Companies, despite contractual agreements with plaintiffs and the class providing that interest would be charged based on the prevailing "prime rate," i.e., the rate charged to "best commercial borrowers" or "best and most credit worthy customers," submitted to plaintiffs and class, through the mails, false and fraudulent statements charging interest in excess of the agreed upon rate.
Following a hearing on the motions in March, 1986, Michaels submitted an amended complaint. The complaint detailed all of Michaels' own "prime plus" loans, but did not identify the names of favored commercial borrowers who received loans during the period in question from any defendant bank at less than the bank's prevailing prime rate. The defendants renewed their motions to dismiss under Rules 9(b) and 12(b)(6).
At its second hearing on defendants' motions to dismiss, the court asked Michaels' counsel what facts the plaintiffs had "to tell the defendants that there may be some people out there that got a different treatment than [Michaels]." Counsel responded: " J.A. at tab 26, p. 7. In its September 15, 1986 Order, the court dismissed Michaels' claims with prejudice, finding that:
[T]he plaintiffs have failed to meet the specificity requirement of Rule 9(b) as to Counts I and V, which alleged misrepresentations concerning the "prime rate" used to calculate the interest rate on plaintiffs' loans. Even after the filing of a complaint, an amended complaint, a RICO case statement and an amended RICO case statement, the plaintiffs have been unable to identify any rate, loan or borrower to support their claim that they were charged interest based on a false or artificial prime rate. At the September 5, 1986 hearing, plaintiffs still were unable to identify this information. Plaintiffs have had sufficient opportunity to plead the factual basis for believing a fraud occurred as required by Rule 9(b), but have failed to do so. Thus, Counts I and V must be dismissed for failure to state a claim upon which relief can be granted, pursuant to Rule 9(b) and 12(b)(6).
District Court Order, J.A. at tab 3, p. 8. Final judgment was entered under Rule 54(b), and Michaels now appeals.
Defendant Ameritrust moved for dismissal pursuant to Rule 21 based on a misjoinder of parties. Finding that Michaels' remaining federal claims against the two defendants did not arise "out of the same transaction or occurrence or series of transactions or occurrences," the court dismissed Michaels' claims against Ameritrust without prejudice. District Court Order, J.A. at tab 4. Michaels has also appealed this ruling.
On September 14, 1984, four and one-half months after filing the class complaint in Michaels, Michaels' counsel filed a separate class complaint on behalf of plaintiffs-appellants Lowell Abbe, Barbara Abbe, and all other persons similarly situated. The complaint named as defendants Bank One (also named as a defendant in Michaels ), 5 Centran Bank of Ohio (also named as a defendant in Michaels ), Harter Bank and Trust Company, and thirty unnamed "John Does." The complaint contained the same RICO and state fraud claims as in Michaels, in addition to a Sherman Act antitrust claim, pursuant to 15 U.S.C. Sec. 1, et seq. The Abbe antitrust claim alleged that the defendant banks and certain unnamed co-conspirators engaged in a conspiracy to fix interest rates in violation of the Sherman Act. The Abbe plaintiffs also served discovery requests upon all of the defendants. The defendants moved to dismiss the claims under Rules 9(b), 11, 12(b)(1), and 12(b)(6). As it did in Michaels, the court stayed the Abbes' discovery request pending resolution of defendants' motions.
On February 21, 1985, the Abbes filed an amended complaint. The allegations in the filings in Michaels were reiterated in the Abbe complaint. On December 27, 1985, the same day that it issued its RICO Case...
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