Nordic Bank PLC v. Trend Group, Ltd.

Citation619 F. Supp. 542
Decision Date17 September 1985
Docket NumberNo. 83 Civ. 9107 (GLG).,83 Civ. 9107 (GLG).
PartiesNORDIC BANK PLC, Plaintiff, v. The TREND GROUP, LTD., Lease Trend Company, William Klein, Chase Manhattan Bank, N.A., First National Bank of Louisville, Provident National Bank, the Connecticut Bank and Trust Co., N.A., General Motors Acceptance Corporation, Ultra Funding Corporation, Northeastern Bank of Pennsylvania, Ford Motor Credit Company and Citibank, N.A., Defendants. The TREND GROUP LTD., formerly Conn-Trend Leasing Corporation and Lease Trend Corp., Lease Trend Company, formerly Flourtown Leasing, Inc., Serv Trend, N.V. and Moss Vend, Ltd., Plaintiffs, v. NORDIC BANK PLC LONDON, Nordic American Banking Corporation, Svenska Handelsbanken, Den Norske Creditbank, Copenhagen Handelsbank A/S, Kansallis Osake Pankki, Jan E.H.M. Ekman, John Sclater, John R. Nelson, Michael S. Mathews, Hans Ostergaard, Erling Naper, Olli Kaila, Nordic Finance Limited, Nordic Leasing Limited, and Stewart G. Smith, Defendants.
CourtU.S. District Court — Southern District of New York

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Kraver & Martin, New York City, for plaintiffs; Richard M. Kraver, Lewis S. Fischbein, of counsel.

Butler, Fitzgerald & Potter, P.C., New York City, for defendants Nordic Bank PLC, Nordic American Banking Corp., Svenska Handelsbanken, Kansallis Osake Pankki, Jan E.H.M. Ekman, Olli Kaila, John Sclater, John R. Nelson, Michael S. Mathews, Nordic Finance Limited, Nordic Leasing Limited, Stewart G. Smith; Stuart Potter, Susan A. Glover, Joyce H. Young, of counsel.

Davis, Polk & Wardwell, New York City, for defendants Copenhagen Handelsbank A/S, Den Norske Creditbank, Hans Ostergaard, and Erling Naper; Richard E. Nolan, Christian J. Mixter, Julia L. Brickell, of counsel.

OPINION

GOETTEL, District Judge:

On December 5, 1983, Nordic Bank PLC London ("NBL"), a London bank, brought an action ("the Nordic action") in the United States District Court for the Eastern District of Pennsylvania naming the Trend Group Limited ("Trend"), Lease Trend Company ("Lease Trend"), William H. Klein and nine financial institutions as defendants. The action sought to cut off the security interests that the nine financial institutions allegedly had in automobile and equipment leases pledged to NBL by Trend and to recover monetary damages that arose from Trend's alleged default on certain promissory notes assigned to NBL.

On December 6, 1983, Trend, Lease Trend, and two of their affiliates, Serv Trend, N.V. ("Serv Trend") and Moss Vend Limited ("Moss Vend"), filed a fourteen count complaint in this Court against the plaintiff in the earlier action and against various related parties ("the Trend action").1 On December 15, 1983, the Nordic action was transferred to this Court. The Nordic and Trend actions were subsequently consolidated.

On February 22, 1984, all of the defendants in the Trend action moved to dismiss that action. Before the motions could be heard, the Trend plaintiffs filed an amended complaint adding several counts and restating others. This complaint alleges seventeen causes of action. Seven arise under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961-65 (1982). The complaint also states separate claims under the Bank Holding Company Act of 1970, 12 U.S.C. § 1972(1) (1982) ("BHCA") and under Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1 (1982). The remaining counts in the complaint state common law claims.

After the filing of the amended complaint in the Trend action, the parties to that action stipulated to extend the defendants' time to move or to answer for several months. As expected, the defendants again moved to dismiss a variety of claims on both substantive and jurisdictional grounds. Those motions are now before us.

I. Background
A. The Parties

Trend is a Delaware corporation that has its principal place of business in Valley Forge, Pennsylvania. On July 11, 1978, Trend purchased the assets and name of Flourtown Leasing Company, which became Lease Trend. Plaintiff, Serv Trend, another wholly owned subsidiary of Trend, is a limited liability company organized under the laws of the Netherlands Antilles. Plaintiff, Moss Vend, is Trend's nominee in the United Kingdom.

Defendant, Nordic American Banking Corporation ("NABC"), is an investment company organized under Article 12 of the Banking Law of the State of New York, N.Y. Banking Law §§ 507-20 (McKinney 1971). Until August 31, 1979, NABC was wholly owned by defendant, Svenska Handelsbanken ("SHB"), a Swedish bank. On or about September 1, 1979, SHB sold 75% of its stock in NABC in equal shares to defendants Den Norske Creditbank ("DnC"), the largest commercial bank in Norway; Copenhagen Handelsbanken A/S ("CHB"), one of the largest banks in Denmark; and Kansallis Osake Pankki ("KOP"), a Finnish bank. Until approximately August 15, 1983, SHB, DnC, CHB, and KOP were also equal owners of defendant NBL, an international bank with its principal place of business in London, England. On August 15, 1983, DnC obtained control over all of the voting securities of NBL. NBL owns all of the stock of defendants Nordic Leasing Limited ("NLL") and Nordic Finance Limited ("NFL"), British limited liability corporations engaged in the equipment leasing business.

The complaint also names a number of individual defendants. These include Jan E.H.M. Ekman ("Ekman"), president of SHB and a Swedish citizen; Hans Christian Ostergaard ("Ostergaard"), a Danish citizen who, until December 31, 1980, was managing director of CHB; Erling Naper, ("Naper"), general manager of DnC and a Norwegian citizen; and Olli Kaila ("Kaila"), a Finnish citizen and a former executive vice-president of KOP. Commencing in September 1979, these four individuals served as directors of NABC. Ekman was Chairman of the Board until April 20, 1983. Naper and Ekman remain directors. Ostergaard resigned from the Board on April 3, 1981; Kaila did so in April 1983. John R. Nelson ("Nelson") and Michael S. Mathews ("Mathews"), NABC's president and the senior vice president, respectively, are also named as defendants. John R. Sclater ("Sclater"), a British citizen who is NBL's managing director and Steward G. Smith ("Smith"), its associate director, are similarly named.

B. The Allegations of the Amended Complaint

The amended Trend complaint relates the following claimed pertinent facts.

1. The Flourtown Loans

On July 3, 1978, NABC loaned Trend $800,000 so that Trend could purchase the assets of the Flourtown Leasing Company ("Flourtown"), an automobile and equipment leasing company. On October 25, 1978, NABC loaned Trend an additional $600,000 for use as working capital. Between November 15, 1978 and May 10, 1979, NABC made nine loans aggregating $8,250,000 to Trend (or Flourtown) to finance automobile and equipment leases. NABC allegedly made several representations to Trend regarding these so-called "Flourtown Loans." NABC allegedly represented that Trend would only have to pay interest on the loans. Payments of principal would be due when the collateral was sold unless substituted collateral was pledged. NABC would charge interest at its prime rate, the rate charged its most credit-worthy customers. NABC also allegedly represented that its charter and the laws of New York authorized such loans and that the interest charges were lawful under New York law. Trend charges that each of these representations was false and known to be so when made.

In exchange for each Flourtown loan, Trend signed a full recourse, demand promissory note. On or about the time that NABC issued the last of the loans, it superseded the demand notes with partial recourse notes. NABC backdated these instruments to the dates of the original demand notes. The partial recourse notes obligated the lessees of the leases securing the loans. Trend asserts that NABC altered the structure of the loans so that it could represent that it had loaned funds to a variety of lessees instead of to Trend. In that way, NABC could avoid violating New York state's bank lending limits.

2. The Northern Telecom Portfolios

Beginning in March 1979, NABC financed Trend's purchase of several portfolios of operating leases from Data 100, a subsidiary of the Northern Telecom corporation ("Northern Telecom"). Trend completed the purchase of the first and second portfolios on March 20, and May 5, 1979, respectively. Although Trend signed full recourse demand instruments in exchange for the loans from NABC that financed these purchases, NABC allegedly represented that the loans would be partial recourse like the Flourtown loans.

On June 20, 1979, NABC agreed to finance Trend's purchase of an additional $30 million of Northern Telecom operating leases. In reliance on these assurances, Trend agreed to purchase at least $30 million of additional operating leases from Northern Telecom. In September 1979, SHB, NABC, NBL, and Trend met in Stockholm, Sweden, to discuss their continuing relationship. At those meetings, SHB, NABC, and NBL represented to Trend that they would organize a syndicate to finance Trend's purchase of $40 million of Northern Telecom operating leases, instead of the $30 million they had originally agreed to finance. NABC firmly committed to this undertaking. The syndication was to finance Trend's purchase of eight Northern Telecom lease portfolios. NABC, with the assistance of SHB and NBL, eventually supplied the financing for four such portfolios. However, portfolios numbered 7-10, valued at $22 million, which Trend had committed to purchase from Northern Telecom, remained to be financed.

During a meeting at NABC's offices in New York City on December 3, 1979, Nelson represented to Trend that if Trend agreed to waive NABC's firm commitment to complete the $40 million syndication, NABC would exercise its "best efforts" to complete the syndication and would attempt to enlist NBL's...

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