Wisdom v. First Midwest BankWisdom v. First Midwest Bank
- Reporters:
- Before:
- Hansen, Bright, Morris Sheppard Arnold
HANSEN, Circuit Judge.
I.
In reviewing a motion to dismiss for failure to state a claim, we view the facts in the light most favorable to the claimant, taking the facts as found in the complaint as true. See Duffy v. Landberg, 133 F.3d 1120, 1122 (8th Cir.), cert. denied, 119 S. Ct. 62 (1998). In May 1989, the Wisdoms borrowed $283,000 (Loan I) from First Midwest Bank to purchase Robert R. Wisdom Oil Co., Inc., using the proceeds to pay off the company‘s creditors. The loan was contingent on them also taking another $120,000 loan (Loan II), which they were unaware of until closing, on property foreclosed by a related bank, Carter County Bank. The Wisdoms allege it was too late to back out of Loan I because representatives of the creditors to be paid off were present at the closing.
In March 1992, when the Wisdoms sought to pay off the then balance of Loan I of $1,473, Dorton strongly suggested that they leave the loan on the books to make it harder for other creditors to attach the property securing the loan. In July, Dorton mailed a letter to the Wisdoms’ attorney, indicating that both notes could be released for $15,000. In August 1992, the bank mailed a notice of default, stating a balance due on Loan I of $51,375, and threatened foreclosure. Plaintiffs paid an additional $28,000 between September and December 1992 and arranged for their associate to assume the then $26,000 balance of Loan I. Because Loan II was still outstanding, defendants refused to release any collateral securing Loan II. Much of the collateral was subsequently stolen and vandalized.
The Wisdoms filed a pro se complaint alleging that the defendants participated in a pattern of racketeering activity in violation of
We review the dismissal of a complaint for failure to state a claim upon which relief could be granted de novo, affirming the district court if there is no provable set of facts that would entitle the plaintiff to the requested relief. See WMX Tech., Inc. v. Gasconade County, Mo., 105 F.3d 1195, 1198 (8th Cir. 1997). In so doing, we construe the complaint liberally, taking all factual allegations as true. Id. It is well settled that “we may affirm the district court‘s judgment on any basis supported by the record.” Stevens v. Redwing, 146 F.3d 538, 543 (8th Cir. 1998) (internal quotations and citations omitted).
A. RICO Claim
Section 1962(c) of the RICO Act makes it “unlawful for any person employed by or associated with any enterprise engaged in . . . interstate . . . commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise‘s affairs through a pattern of racketeering activity.” Subsection (d) criminalizes a conspiracy to violate one of the other subsections of § 1962. Section 1964(c) allows a private party, who has been injured in his property from a RICO violation, to sue for damages. To state a RICO claim, the Wisdoms must show “(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.” Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 496 (1985) (footnote omitted).
The pattern element “requires at least two acts of racketeering activity.”
In defining “racketeering activity,” § 1961(1) lists the predicate acts that will support a RICO claim. The Wisdoms’ pro se complaint alleges that the defendants’ racketeering activity included numerous instances of mail fraud, wire fraud, extortion, and violations of Truth In Lending. Acts indictable under the mail fraud, wire fraud, and extortion statutes are among the enumerated predicate acts. However, Truth In Lending violations are not on the list. See
When pled as RICO predicate acts, mail and wire fraud require a showing of: 1) a plan or scheme to defraud, 2) intent to defraud, 3) reasonable foreseeability that the mail or wires will be used, and 4) actual use of the mail or wires to further the scheme. See Murr Plumbing, Inc. v. Scherer Bros. Fin. Servs. Co., 48 F.3d 1066, 1069 & n.6 (8th Cir. 1995) (noting that a RICO claim does not require proof of misrepresentation of fact). Extortion is defined as “obtaining . . . property from another, with his consent, induced by wrongful use of actual or threatened force, violence, or fear, or under color of official right.”
Though mail fraud can be a predicate act, mailings are insufficient to establish the continuity factor unless they contain misrepresentations themselves. The court must look to the underlying scheme to defraud. See Primary Care Investors, Seven, Inc. v. PHP Healthcare Corp., 986 F.2d 1208, 1215 (8th Cir. 1993) (refusing to consider a letter containing no indications of fraud as the beginning mail fraud predicate act); Kehr Packages, Inc. v. Fidelcor, Inc., 926 F.2d 1406, 1414 (3d Cir.) (“[T]he continuity question should not be affected by the fact that a particular fraudulent scheme involved numerous otherwise ‘innocent’ mailings . . . .“), cert. denied, 501 U.S. 1222 (1991). Because the May 1991 settlement agreement did not amount to a fraudulent scheme, the mailing of the agreement is not a predicate act that can be used to establish a pattern.
The only acts that could be construed to involve a fraudulent scheme surround the attempts to collect more than the agreed balance of the loans. Reading the complaint in the light most favorable to the Wisdoms, Dorton agreed to accept $15,000 in full payment of both loans in July 1992. However, later in August, First Midwest Bank mailed a default notice claiming a balance due of $51,375 and threatened foreclosure in the event of nonpayment. Facing foreclosure, the Wisdoms paid, and caused their associates to pay, an additional $54,000 between September and December 1992. Assuming these collection activities satisfy the initial showing of an underlying scheme to defraud, the predicate acts of mail and wire fraud occurred between July and December 1992. This six-month period is too short to satisfy the closed-ended analysis of the pattern requirement. See Primary Care, 986 F.2d at 1215 (holding that eleven months is insufficient to satisfy the closed-ended continuity requirement and noting that other Circuits consistently hold that schemes less than one year are too short). Assuming, arguendo, that the March 1992 “suggestion” to keep the loan with First Midwest Bank could amount to extortion, the predicate acts would still only cover a ten-month period, which likewise is too short to satisfy the closed-ended continuity requirement. Finally, there are no allegations that can be construed to show on-going criminal activity. We hold that the Wisdoms have failed to meet the pattern element and, thus, their RICO claim must fail. Consequently, we need not address the other RICO elements.
B. Implied Right of Action Under Criminal Statutes
A criminal statute may provide an implied private right of action if Congress so intended in enacting the criminal statute. See Thompson v. Thompson, 484 U.S. 174, 179 (1988) (holding that a private remedy will not be implied unless legislative intent can be inferred from statutory language or elsewhere). Whether
The Supreme Court reviewed the legislative history of the mail fraud statute in assessing the breadth of criminal activity within the statute‘s scope. See McNally v. United States, 483 U.S. 350, 356-57 (1987). The Supreme Court concluded that the sparse legislative history “indicates that the original impetus behind the mail fraud statute was to protect the people from schemes to deprive them of their money or property.” Id. at 356. It is not enough, however, that a statute intends to benefit a class of persons. See Transamerica Mortgage Advisors, Inc. v. Lewis, 444 U.S. 11, 17-18 (1979) (stating that although Congress clearly intended to benefit the plaintiff by placing fiduciary duties on the defendant, whether those duties were enforceable by a private action is another question). Congressional intent is the determining factor and is not merely to be weighed against the other Cort factors. See Thompson, 484 U.S. at 179. Though the legislative history according to McNally is not inconsistent with a private right of action, consistency is not enough. There is no clear indication that Congress intended to create such a right.
Other courts that have considered this issue have found no private right of action. See Ryan v. Ohio Edison Co., 611 F.2d 1170, 1178 (6th Cir. 1979) (finding the scant legislative history of the mail fraud statute to indicate an intent to punish dealers of fraudulent devices for using the United States mails but not an intent to create a private right of action); Bell v. Health-Mor, Inc., 549 F.2d 342, 346 (5th Cir. 1977) (finding no implied private remedy under mail fraud statute); Napper v. Anderson, Henley, Shields, Bradford & Pritchard, 500 F.2d 634, 636 (5th Cir. 1974) (same under wire fraud statute), cert. denied, 423 U.S. 837 (1975). Though a bare criminal statute does not necessarily preclude an implied private right of action, there should “at least [be] a statutory basis for inferring that a civil cause of action of some sort lay in favor of someone.” Cort, 422 U.S. at 79; see also Ryan, 611 F.2d at 1178. Neither the mail fraud statute nor its legislative history provides for any remedy other than criminal sanctions. Thus, we agree with the Fifth and Sixth Circuits and hold that Congress did not intend to create a private right of action in enacting either the mail or wire fraud statutes.
Though fewer courts have addressed the issue of a private right of action under the extortion statute, those that have have found it to be a bare criminal statute with no support for a private cause of action in the legislative history. See American Computer Trust Leasing v. Jack Farrell Implement Co., 763 F. Supp. 1473, 1497 (D. Minn. 1991) (finding no private right of action under extortion statute which is “purely criminal in nature“), aff‘d and remanded, American Computer Trust Leasing v. Boerboom Int‘l, Inc., 967 F.2d 1208, 1214 (8th Cir.) (“[W]e affirm the district court‘s order in all respects.“), cert. denied, 506 U.S. 956 (1992); Peterson v. Philadelphia Stock Exch., 717 F. Supp. 332, 336 (E.D. Pa. 1989) (finding no legislative intent from the statute or its legislative history to imply a private cause of action under
C. Amended Complaint
The Wisdoms filed a traverse to the defendants’ motion to dismiss, arguing that they should be allowed to amend their complaint to remedy its shortcomings. Though the Wisdoms did not file a formal motion to amend their complaint, that failure is not necessarily fatal as long as they show a willingness to amend the complaint. See Ferguson v. Cape Girardeau County, 88 F.3d 647, 651 (8th Cir. 1996). Generally, the denial of a request to amend a complaint is reviewed by this court for an abuse of discretion. See Frey v. City of Herculaneum, 44 F.3d 667, 672 (8th Cir. 1995). Because the district court‘s order is silent as to whether the request was even considered, we are unable to ascertain whether the district court denied the request or ignored it. Leave to amend a complaint should be freely given to promote justice.
The Wisdoms allege that the defendants violated the anti-tying provision of the Bank Holding Company Act,
The district court dismissed the pendant state fraud claim for failure to plead the claim with particularity as required by
III.
For the foregoing reasons, we affirm the district court as to the RICO claim, the mail and wire fraud claims, and the extortion claim. We vacate the district court‘s dismissal of the common law fraud claim and remand to the district court for consideration of the Wisdoms’ request to amend their complaint as to the Bank Holding Company Act claim and the Missouri common law fraud claim.
A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT