Wilcox Dev. Co. v. First Interstate Bank of Oregon
| Decision Date | 19 April 1984 |
| Docket Number | Civ. No. 81-1127-RE,81-1128-RE and 82-754-RE. |
| Citation | 590 F. Supp. 445 |
| Parties | WILCOX DEVELOPMENT COMPANY, Mid-Willamette Village Ore., Ltd., Glenn L. Wilcox and Lorraine Wilcox, individually, and on behalf of all others similarly situated, Plaintiffs, v. FIRST INTERSTATE BANK OF OREGON, N.A.; and First Interstate Bancorp, Defendants. A.C. DISTRIBUTING CO., INC., Arthur J. Cherry, Sr., and Arthur J. Cherry, Jr., individually, and on behalf of all others similarly situated, Plaintiffs, v. PACIFIC WESTERN BANK and Pacwest Bancorp, Defendants. James K. KUNKLE, an individual residing in the State of Nevada, Plaintiff, v. FIRST INTERSTATE BANK OF OREGON, N.A., a national banking association, and First Interstate Bancorp, a Delaware corporation, Defendants. |
| Court | U.S. District Court — District of Oregon |
COPYRIGHT MATERIAL OMITTED
Henry A. Carey, Henry A. Carey, P.C., John D. Ryan, John D. Ryan, P.C., Leslie M. Roberts, Kell, Alterman & Runstein, Portland, Or., for plaintiffs.
Wayne Hilliard, Spears, Lubersky, Campbell & Bledsoe, Portland, Or., Roland F. Banks, Jr., Schwabe, Williamson, Wyatt, Moore & Roberts, Portland, Or., for defendants.
These cases are presently before me on defendants' motions for summary judgment. Due to the similarity of the claims and arguments, I address the various motions in one Opinion.
Plaintiffs, Glen and Lorraine Wilcox, Wilcox Development Company (Wilcox) and Mid-Willamette Village Ore., Ltd. (Mid-Willamette), bring this action for damages and injunctive relief based on alleged violations of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961-1968, and section 1 of the Sherman Act, 15 U.S.C. § 1. The defendants are First Interstate Bank of Oregon, N.A. (FIOR) and its holding company, First Interstate Bancorp.
Wilcox is an Oregon corporation in the business of real estate development. Mid-Willamette is a limited partnership formed for the purpose of developing a residential planned unit development in Wilsonville, Oregon. Wilcox is a general partner of Mid-Willamette. Pursuant to a loan commitment dated December 23, 1977, Wilcox and Mid-Willamette executed their promissory note dated March 3, 1978 in the amount of $2.5 million for development of Mid-Willamette Village. To secure payment of the note, Wilcox and Mid-Willamette executed a mortgage on the real property. To further secure payment of the note, Glen and Lorraine Wilcox executed their guaranty of the note on February 8, 1978.
Plaintiffs defaulted on the loan and FIOR commenced foreclosure proceedings in state court in February 1980. A Clackamas County Circuit Court Judge granted summary judgment in FIOR's favor on the mortgage foreclosure suit on June 26, 1980.1 The mortgaged property was sold at a sheriff's sale on December 10, 1980 to FIOR who bid the amount of its debt and the costs of foreclosure. A deficiency in the amount of $55 remains outstanding.
Plaintiffs filed this action on December 4, 1981. The RICO claim alleges that FIOR calculated the interest on plaintiffs' loan at a rate based on FIOR's announced prime rate rather than its true prime rate. Plaintiffs contend that FIOR failed to disclose to plaintiffs that its announced prime rate was not in fact the most favorable interest rate offered by FIOR to its most credit-worthy commercial borrowers. Plaintiffs claim that during the years 1979 through 1982, FIOR made more than 2,500 sub-prime rate loans. The RICO claim alleges that FIOR's failure to disclose subprime lending and its charging plaintiffs more than its true prime rate was part of a scheme to defraud plaintiffs. According to plaintiffs, FIOR's use of the United States Postal Service to mail its notices of inflated interest charges to plaintiffs constitutes a racketeering activity within the meaning of RICO. Plaintiffs seek damages in the amount of the difference between FIOR's announced prime rate and its true prime rate. Plaintiffs also seek the difference between the value of the property foreclosed by FIOR and the price FIOR paid at the "distress sale" of the property.
Plaintiffs' antitrust claim alleges that FIOR conspired with Bank of America, United States National Bank of Oregon, and four First Interstate Bancorp subsidiaries to fix the prime rate at a common and non-competitive level. Plaintiffs seek damages in the amount of the difference between FIOR's announced prime rate and what the rate would have been had competition existed. Under both claims, plaintiffs seek treble damages and attorneys' fees.
Plaintiff James K. Kunkle filed this action against FIOR and First Interstate Bancorp on June 14, 1982. On December 27, 1983, I granted First Interstate Bancorp's motion for summary judgment and dismissed this action as to it because venue was improper.2 Plaintiff Kunkle's action is thus solely against FIOR. Kunkle seeks treble damages and attorneys' fees for violations of section 1 of the Sherman Act and RICO. His RICO and antitrust theories are identical to those presented in Wilcox.3 In addition to the federal RICO and antitrust claims, plaintiff asserts the following state claims: rescission for misrepresentation and fraud; promissory estoppel; rescission for uncertainty; rescission for unilateral mistake; damages for deceit; and damages pursuant to the Oregon RICO statute, O.R.S. 166.715, et seq.4
Plaintiff's federal and the bulk of his state claims arise out of his July 9, 1980 construction loan agreement with FIOR. Pursuant to this agreement, plaintiff executed a promissory note and leasehold mortgage in the amount of $2,500,000. The loan was to finance construction of an air cargo facility at the Portland International Airport (the Building D project). The note provided for interest "at the rate of ONE percent (1%) per annum above bank's prime interest for 90 day commercial loans to substantial borrowers, in effect from time to time." FIOR declared the loan in default in August 1981. FIOR has counterclaimed in this action to foreclose the leasehold mortgage.
Plaintiffs A.C. Distributing Co., Inc., (A.C.), Arthur J. Cherry, Sr., and Arthur J. Cherry, Jr. bring this action for violations of RICO and breach of contract.5 A.C. is an Oregon corporation which operated as a warehouse distributor to the automotive industry until July 1980. The Cherrys are officers, directors and shareholders of A.C. Defendants are First State Bank, now known as Pacific Western Bank (PWB), and its holding company, PacWest Bancorp (PWBancorp). Both defendants have their principal place of business in Milwaukie, Oregon.
For many years prior to 1979, A.C. borrowed funds from PWB for use in the conduct of its auto parts business. In February 1979, PWB agreed to expand A.C.'s line of credit. The loan agreement provided for "interest on the unpaid balance of the Loan Account during the immediately preceding month at the rate of Prime + 2% per annum." In June 1980, PWB demanded payment in full of this loan within thirty days. A.C. received permission from PWB to control the sale of its receivables and inventory to repay the loan. A.C. retained a professional auctioneer to conduct the sale. On August 30, 1980, A.C. discharged its indebtedness to PWB from the proceeds of this sale.
Plaintiffs filed this action on December 4, 1981. Plaintiffs' RICO theory is identical to that presented in Wilcox. Plaintiffs allege that PWB breached its contract with plaintiffs by computing and charging interest based on its announced prime rate rather than its true prime rate.
Defendants have moved for summary judgment in their favor in each case. Federal Rule of Civil Procedure 56(c) allows for the granting of summary judgment if the court finds: (1) there is no genuine issue as to any material fact, and (2) the moving party is entitled to judgment as a matter of law. The moving party has the burden of establishing the absence of a genuine issue of material fact. Zoslaw v. MCA Distributing Corp., 693 F.2d 870, 883 (9th Cir.1982), cert. denied, 460 U.S. 1085, 103 S.Ct. 1777, 76 L.Ed.2d 349 (1983). All reasonable doubts as to the existence of a genuine issue of material fact should be resolved against the moving party. Hector v. Wiens, 533 F.2d 429, 432 (9th Cir.1976). In addition, the inferences to be drawn from the underlying facts must be viewed in the light most favorable to the party opposing the motion. United States v. Diebold, 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962). Where different ultimate inferences can be drawn, summary judgment is inappropriate. Sankovich v. Life Insurance Co. of North America, 638 F.2d 136 (9th Cir.1981). With these precepts in mind, I now address the merits of the motions for summary judgment.
Defendants seek summary judgment on this claim on the grounds that plaintiffs were not injured in their business or property and FIOR did not conspire with any other bank to fix the prime rate.
Courts should proceed with caution in considering summary judgment in antitrust cases. Poller v. Columbia Broadcasting System, 368 U.S. 464, 473, 82 S.Ct. 486, 491, 7 L.Ed.2d 458 (1962); Zoslaw, supra, 693 F.2d at 882.
Summary procedures should be used sparingly in complex antitrust litigation where motive and intent play leading roles, the proof is largely in the hands of the alleged conspirators, and hostile witnesses thicken the plot. It is only when the witnesses are present and subject to cross-examination that their credibility and the weight to be given their testimony can be appraised
Poller, supra, 368 U.S. at 473, 82 S.Ct. at 491. The Ninth Circuit has articulated the test for granting summary judgment in antitrust conspiracy cases.
Once the allegations of conspiracy made in the complaint are rebutted by probative evidence supporting an...
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