Tafflin v. Levitt

Decision Date12 January 1989
Docket Number88-3020,Nos. 88-3019,s. 88-3019
Citation865 F.2d 595
PartiesFed. Sec. L. Rep. P 94,141, RICO Bus.Disp.Guide 7117 Francine TAFFLIN; Seymour Zuckerman; Eris Zuckerman; Renalee Selvin; Joan Zuckerman; Sylvia Zuckerman; Seymour Zuckerman, Executor of the Estate of Samuel Zuckerman; George R. Lyon; George C. Lyon; Peter M. Lyon; Bruce K. Lyon; Elizabeth A. Lyon; George R. Lyon; Mary G. Lathrop, Personal Representatives of the Estate of George M. Lyon; Kent H. Butcher; Stanley Z. Felsenberg, M.D., Personal Representative of the Estate of Minnie Felsenberg; Margaret Graves; Thurman L. Graves; Sandra L. Pletka; Gertrude Durso; Enterprise Equipment Co., Inc.; Carmen R. Goldings; Clelia S. Goldings; Ethan D. Goldings; Herbert J. Goldings, MD; Sarah M. Goldings; Doris Konig; Windell R. Carter; Catherine Carter; Mitchell W. Landy, Rio Grande Savings & Loan Assoc., Plaintiffs-Appellants, v. Jeffrey A. LEVITT; LCP Corporation; Allan H. Pearlstein; Jerome S. Cardin; Light Street Partnership; Allen Feinberg; Robert D. Pearlstein; Samuel Shoubin; Dennis E. Guidice; Karol Levitt; Rosemary Pearlstein; Old Court Savings & Loan, Inc.; Maryland Savings Share Insurance Corp.; Maryland Deposit Insurance Fund Corporation; Charles C. Hogg, II; Paul B. Trice, Jr.; George W. H. Pierson; Jerome F. Dolivka; Francis F. Anderson; Michael J. Dietz; Leonard Bass; John C. Donohue, Sr.; Henry R. Elsnic; John D. Faulkner, Jr.; James D. Laudeman; Terry L. Neifeld; Glass and Associates, P.A.; Cardin and Cardin, P.A., Venable, Baetjer & Howard; David Unlfelder, Defendants-Appellees, LCP Corporation, Defendant. Francine TAFFLIN; Seymour Zuckerman; Eris Zuckerman; Renalee Selvin; Joan Zuckerman; Sylvia Zuckerman; Seymour Zuckerman, Executor of the Estate of Samuel Zuckerman; George R. Lyon; George C. Lyon; Peter M. Lyon; Bruce K. Lyon; Elizabeth A. Lyon; George R. Lyon; Mary G. Lathrop, Personal Representative of the Estate of George M. Lyon; Gertrude Durso; Enterprise Equipment Co., Inc.; Carmen R. Goldings; Clelia S. Goldings; Ethan D. Goldings; Herbert J. Golding
CourtU.S. Court of Appeals — Fourth Circuit

M. Norman Goldberger (Brian P. Flaherty, Gary L. Leshko, Wolf, Block, Schorr and Solis-Cohen, Lawrence I. Weisman, on brief) for plaintiffs-appellants.

David B. Isbell (Charles F.C. Ruff, Carol Fortine, Covington & Burlington, on brief), Andrew H. Marks (Luther Zeigler, Elaine A. Panagakos, Crowell & Moring, Ralph S. Tyler, Asst. Atty. Gen., James P. Ulwick, Kramon & Graham, Paul D. Krause, Carol Ann Petren, Jayson L. Spiegel, Jordan, Coyne, Savits & Lopata, Aubrey M. Daniel, III, Williams & Connolly, Robert W. Hesselbacher, Jr., Laxalt, Washington, Perito & Dubuc, John H. Zink, III, Cook, Howard, Downes & Tracy, Ronald Shur, Anderson, Baker, Kill & Olick, Howard B. Possick, Arent, Fox, Kintner, Plotkin & Kahn, Jay I. Morstein, Frank, Bernstein, Conaway & Goldman, James A. Rothschild, Anderson, Coe & King, Daniel F. Goldstein, Brown & Goldstein, Andrew Radding, Blades & Rosenfeld, P.A., Francis S. Brocato, Brocato & Keelty, Stephen C. Winter, Winter & Associates, Ronald W. Fuchs, Eccleston & Seidler, Harold H. Burns; Thomas G. Bodie, Power & Mosner, on brief) for defendants-appellees.

Before WINTER, Chief Judge, and WIDENER and CHAPMAN, Circuit Judges.

HARRISON L. WINTER, Chief Judge:

These consolidated cases arise out of the failure of Old Court Savings & Loan, Inc. (Old Court), a state chartered savings and loan association, and the collapse of the Maryland Savings-Share Insurance Corporation (MSSIC), a state-chartered non-profit corporation created to insure the accounts in Maryland savings and loan associations that did not have federal deposit insurance.

Plaintiffs, all non-residents of Maryland, are purchasers and holders of certificates of deposit of Old Court which, together with the interest thereon, are unpaid. Defendants are (a) the former officers and directors of Old Court, (b) the former officers and directors of MSSIC, (c) the law firm of Venable, Baetjer & Howard, counsel to MSSIC and Old Court, (d) Old Court's accounting firm, and (e) State of Maryland Deposit Insurance Fund Corporation (MDIF), the state-created successor to MSSIC. 1 Plaintiffs allege causes of action arising under the Securities Exchange Act of 1934 and the Racketeer Influenced and Corrupt Organizations Act (RICO), as well as state law claims.

The district court granted defendants' motions to dismiss on the grounds that plaintiffs had failed to allege a claim under the Securities Exchange Act of 1934 and that the district court should abstain from deciding the other alleged causes of action since they were all raised in pending litigation in the Circuit Court for Baltimore City.

Plaintiffs appeal and we affirm.

I.

In Brandenburg v. Seidel, 859 F.2d 1179 (4 Cir.1988), we summarized the genesis of Maryland's savings and loan crisis, the steps taken by the Governor of Maryland and the General Assembly of Maryland to meet it, and the implementation of the legislative scheme by the designation of a single judge of the Circuit Court for Baltimore City to adjudicate all claims arising out of the conservator/receivership proceedings for failed savings and loan associations, including Old Court. Those facts need no repetition here.

Old Court, which was one of the first savings and loan associations to collapse, was placed into conservatorship on May 13, 1985 and withdrawals were immediately limited to no more than $1,000 for each consecutive 30-day period, with a few minor exceptions. On November 8, 1985 the conservatorship proceeding was converted into a receivership proceeding and MDIF was appointed receiver. MDIF has expressly stated that owners of certificates of deposit will not be compensated for interest accruing after November 8, 1985, and that for the period May 13 to November 8, 1985, interest will be paid at only the rates of 5 1/2% per annum rather the higher rates prescribed in the certificates.

Since MDIF was appointed receiver, it has sued the former officers, directors and controlling persons of Old Court in the Circuit Court for Baltimore City alleging misdeeds closely paralleling those alleged in the instant case. In addition there are two overlapping depositor class actions against Old Court and its principals pending in that court. Finally, since the decision of the district court in the instant case, plaintiffs have filed a class action suit against defendants in the Circuit Court for Baltimore City alleging RICO and common law causes of action.

Two questions are presented by this appeal. We must decide first whether the certificates of deposit issued by Old Court are "securities" within the meaning of the Securities Exchange Act of 1934 so as to give rise to a cause of action on the facts alleged by the plaintiffs. Then we must decide, at least with respect to plaintiffs' alleged RICO cause of action, if the district court correctly concluded to abstain from decision and to dismiss the complaints.

II.

The Securities Exchange Act of 1934, 15 U.S.C. Sec. 78a et seq., renders both unlawful and actionable fraudulent dealings in securities as alleged by plaintiffs. Jurisdiction is exclusively federal under the Act. The question here is whether the certificates of deposit issued by Old Court are "securities" within the meaning of that Act.

The Act defines "security" to mean, inter alia, "any note ... bond, debenture ... any collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit, for a security; or in general, any instrument commonly known as a 'security' ..." Sec. 78c(a)(10). Were we to confine ourselves to the statutory definition, we might well conclude that the certificates of deposit are "securities" as defined in the Act. However, as the Supreme Court has noted, these financial instruments "do not fit squarely within one of the enumerated specific kinds of securities listed in the definition." Landreth Timber Co. v. Landreth, 471 U.S. 681, 690 n. 4, 105 S.Ct. 2297, 2303 n. 4, 85 L.Ed.2d 692 (1985).

In Marine Bank v. Weaver, 455 U.S. 551, 102 S.Ct. 1220, 71 L.Ed.2d 409 (1982), the...

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  • Tafflin v. Levitt
    • United States
    • United States Supreme Court
    • January 22, 1990
    ...remedial purposes, concurrent jurisdiction will advance rather than jeopardize federal policies underlying the statute. Pp. 464-467. 865 F.2d 595 (CA4 1989), O'CONNOR, J., delivered the opinion for a unanimous Court. WHITE, J., filed a concurring opinion, post, p. 467. SCALIA, J., filed a c......
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    • United States
    • United States District Courts. 10th Circuit. United States District Court of Utah
    • October 26, 1992
    ...to marshal assets and by undermining previous orders of the state receivership court. Id. at 1191-92. See also Tafflin v. Levitt, 865 F.2d 595, 599-600 (4th Cir.1989) (upholding a similar abstention decision), aff'd as to unrelated issue, 493 U.S. 455, 110 S.Ct. 792, 107 L.Ed.2d 887 (1990).......
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    • United States
    • United States District Courts. 10th Circuit. United States District Court of Utah
    • October 17, 1989
    ...this issue, although the Supreme Court has granted certiorari on this point to resolve a conflict among the circuits. See Tafflin v. Levitt, 865 F.2d 595 (4th Cir.) (concurrent jurisdiction over civil RICO claims), cert. granted, ___ U.S. ___, 109 S.Ct. 2428, 104 L.Ed.2d 985 The federal Cir......
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    • United States
    • United States Courts of Appeals. United States Court of Appeals (3rd Circuit)
    • September 12, 1989
    ...v. Owen, 864 F.2d 1280, 1286 (6th Cir.1988). The Supreme Court has now granted certiorari to resolve this conflict. See Tafflin v. Levitt, 865 F.2d 595 (4th Cir.1989) (concurrent jurisdiction over civil RICO claims), cert. granted, --- U.S. ----, 109 S.Ct. 2428, 104 L.Ed.2d 985 In view of t......
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