Filed: Mar. 24, 2004
Latest Update: Feb. 21, 2020
Summary: IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT _ No. 95-20368 Summary Calendar _ RED ROCK INVESTMENTS and OMNI REALTY PARTNERS, Plaintiffs, KELLY BUSTER, Intervenor-Plaintiff, TRIUMPH PARTS, INC., and TRUMAN HEDDINS, Plaintiffs-Appellants, VERSUS JAFCO LTD., INC GITA RAHASYA ASHRAMS, BANFINANZ LTD., KENNETH B. CARNESI, CARNESI & ASSOCIATES, and ROSS A. HAMPE, Defendants, MILTON Z. MENDE and BRITISH BANCORPORATION, LTD., also known as BBC, Intervenor-Defendants, BRITISH BANCORPORATI
Summary: IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT _ No. 95-20368 Summary Calendar _ RED ROCK INVESTMENTS and OMNI REALTY PARTNERS, Plaintiffs, KELLY BUSTER, Intervenor-Plaintiff, TRIUMPH PARTS, INC., and TRUMAN HEDDINS, Plaintiffs-Appellants, VERSUS JAFCO LTD., INC GITA RAHASYA ASHRAMS, BANFINANZ LTD., KENNETH B. CARNESI, CARNESI & ASSOCIATES, and ROSS A. HAMPE, Defendants, MILTON Z. MENDE and BRITISH BANCORPORATION, LTD., also known as BBC, Intervenor-Defendants, BRITISH BANCORPORATI a..
More
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_______________
No. 95-20368
Summary Calendar
_______________
RED ROCK INVESTMENTS and OMNI REALTY PARTNERS,
Plaintiffs,
KELLY BUSTER,
Intervenor-Plaintiff,
TRIUMPH PARTS, INC., and TRUMAN HEDDINS,
Plaintiffs-Appellants,
VERSUS
JAFCO LTD., INC GITA RAHASYA ASHRAMS,
BANFINANZ LTD., KENNETH B. CARNESI,
CARNESI & ASSOCIATES, and ROSS A. HAMPE,
Defendants,
MILTON Z. MENDE and BRITISH BANCORPORATION, LTD.,
also known as BBC,
Intervenor-Defendants,
BRITISH BANCORPORATI and ZENNICH NOHRIN ZENNICHI NORHRIN
KABUSHIKI KAISYA,
Defendants,
MITSUBISHI BANK,
Defendant-Appellee
* * * * * * * * * *
TRIUMPH PARTS, INC., and TRUMAN HEDDINS,
Plaintiffs-Appellants,
WOODROW W. ROARK,
Intervenor-Plaintiff,
VERSUS
BANFINANZ LTD., KENNETH B. CARNESI,
CARNESI & ASSOCIATES, and ROSS A. HAMPE,
Defendants,
MITSUBISHI BANK, LTD.,
Intervenor-Defendant-
Appellee,
ZEN-NICHI NOHRIN K. K.,
doing business as Jafco Ltd., and
GITA RAHASYA ASHRAMS,
Intervenors-Defendants.
_________________________
Appeal from the United States District Court
for the Southern District of Texas
_________________________
February 16, 1996
Before KING, SMITH, and BENAVIDES, Circuit Judges.
JERRY E. SMITH, Circuit Judge:*
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion
should not be published except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
2
Triumph Parts, Inc. (“Triumph”), and its principal, Truman
Heddins, appeal the dismissal with prejudice of their claims
against Mitsubishi Bank, Limited (“Mitsubishi”).1 Finding neither
error nor abuse of discretion, we affirm.
I.
Triumph and Heddins alleged a scheme by various persons to
defraud investors by falsely representing that certain Japanese
promissory notes2 were guaranteed by Mitsubishi. They further
alleged that these persons, who are defendants in related cases,
offered them one of the promissory notes as collateral for a
promised multi-million-dollar loan.
The note in question was issued by Zen-Nichi Nohrin Kabushiki
Kaisha, a Japanese corporation that also operated under the name
JAFCO, which had opened an account at one of Mitsubishi’s Tokyo
branches. Mitsubishi had verified JAFCO’s identity, legal
capacity, and financial condition pursuant to its internal
operating procedures.
The promised loan fell through, and Heddins claimed that he
lost ownership of Triumph as a result. Triumph and Heddins sued
1
This appeal originates from a dispute between several plaintiffs and
defendants. Multiple lawsuits were filed and subsequently were consolidated.
Not all of the parties are before us on appeal. For convenience, however, we
refer to Triumph and Heddins as “the plaintiffs,” to Mitsubishi as “the
defendant,” and to the defendants not before us as the “non-party defendants.”
2
This particular type of promissory note, called a yakusoku tegata, is a
unique Japanese financial instrument. Its closest American equivalent is a post-
dated check, as opposed to a certified check (as the plaintiffs once claimed).
The bank acts as the place of payment for these instruments, but will pay only
such funds as remain in the accounts of the person who drew the note.
3
the non-party defendants, but not Mitsubishi, in the Eastern
District of Texas. The district court there appointed a receiver,
who presented the note in question to Mitsubishi’s New York branch.
Mitsubishi refused to honor the note on the ground that JAFCO no
longer had any funds on deposit with the bank.
The receiver sued Mitsubishi, JAFCO, and one of the non-party
defendants for breach of contract, fraud, conspiracy, and
racketeering. Before being assigned to a discovery track, the
receiver’s suit was transferred to the Southern District of Texas
and consolidated with the related actions. Triumph and Heddins
substituted in as parties when the district court relieved the
receiver of his position (at his request).
The district court stayed discovery, requesting briefing on
the financial nature of the notes at issue in all of the
consolidated suits. Mitsubishi argued that the note in this appeal
was a promissory noteSSi.e., like a post-dated check as opposed to
a certified checkSSand that it created no legal obligation running
from Mitsubishi to the plaintiffs. Mitsubishi moved for summary
judgment, urging the district court that resolution of this issue
in its favor would dispose of the plaintiffs’ fraud, conspiracy,
and racketeering claims against Mitsubishi.
Triumph and Heddins admitted that (1) the note was like a
post-dated check rather than a certified check and (2) their
counsel had advised them that the note would have been treated like
a promissory note under Japanese law. Those admissions
notwithstanding, the plaintiffs argued that they were entitled
4
(1) to discover all documents relating to Mitsubishi’s relationship
with JAFCO and its Mitsubishi account; (2) to depose Mitsubishi’s
expert on Japanese law; and (3) to depose any Mitsubishi officer
who had dealt with JAFCO in opening the account. The plaintiffs
failed to establish with particularlity how such discovery would
raise a genuine issue of material fact.
The district court allowed the parties to supplement their
pleadings with regard to the nature of the notes in question. The
plaintiffs offered unsworn and unsupported assertions that they
needed full discovery of Mitsubishi’s relationship with JAFCO in
order to prove their claims of fraud, conspiracy, and racketeering.
They again failed to establish with particularity that such
discovery would raise a genuine issue of material fact.
The court ruled, on summary judgment, that the notes at issue
were like post-dated checks rather than certified checks, that
Mitsubishi had no obligations to the plaintiffs in that regard, and
that the plaintiffs had no claim for breach of contract. The court
then gave the plaintiffs another opportunity to identify a genuine
issue of material fact as to any claim that, if proven true, would
permit recovery under the law. The plaintiffs responded by filing
a motion for limited discovery under FED. R. CIV. P. 56(f), but they
merely reassertedSSin a general and conclusory fashionSSthat they
needed discovery to establish their claims. They once again failed
to establish with any particularity how such discovery would raise
a genuine issue of material fact.
Mitsubishi moved for summary judgment on the fraud,
5
conspiracy, and racketeering claims. The court noted that many of
Mitsubishi’s summary judgment arguments rested on the inadequacy of
the complaint, which the plaintiffs had not amended since the court
had held that the note was promissory note and not a certified
check. The court gave the plaintiffs thirty days to amend.
The plaintiffs did so, making several important changes. They
withdrew the breach of contract claim and all references to the
note as a certified check rather than as a promissory note, and
they also added claims of negligent misrepresentation and
negligence.
Mitsubishi moved for dismissal of the amended complaint under
FED. R. CIV. P. 12(b) or, in the alternative, for summary judgment
under rule 56. The plaintiffs renewed their discovery request.
Mitsubishi argued that discovery was unnecessary because of defects
in the complaint; it argued in the alternative, if the motion was
to be treated as a motion for summary judgment, that the plaintiffs
had failed to meet their rule 56(f) burden to justify discovery.
The district court noted that Mitsubishi had already given the
plaintiffs the material they had asked for in their document
production requests to MitsubishiSSi.e., documents concerning
Mitsubishi’s knowledge of (1) JAFCO, (2) JAFCO’s intended use of
the promissory note forms, and (3) JAFCO’s financial condition and
business. The court found that the plaintiffs had failed to
specify what further information they needed and how that
information would help them defend against summary judgment. The
court also concluded that no hypothetical discovery could help the
6
plaintiffs, because of the defects in their pleadings.
The district court then dismissed all of the plaintiffs’
claims against Mitsubishi with prejudice. Having done so, and
having severed the claims of the plaintiffs against Mitsubishi, the
court entered final judgment for Mitsubishi under FED. R. CIV. P.
54(b).
II.
We review the dismissal of the plaintiffs’ claims de novo.
The plaintiffs alleged six causes of action in the district court:
(1) fraud; (2) conspiracy to defraud; (3) pattern of racketeering;
(4) racketeering conspiracy; (5) negligent misrepresentation; and
(6) negligence.
The plaintiffs claimed that Mitsubishi defrauded them and
conspired to defraud them. The court found that the plaintiffs had
failed to allege that Mitsubishi, as distinguished from the non-
party defendants, had made any representations to the plaintiffs.
None of the documents allegedly used to defraud the plaintiffs was
prepared by Mitsubishi.
The plaintiffs have thus failed to allege a necessary element
of fraud. See South Hampton Co. v. Stinnes Corp., 733 F.2d 1108,
1120 (5th Cir. 1984) (citing Stone v. Lawyers Title Ins. Corp.,
554
S.W.2d 183, 185 (Tex. 1977), and Oilwell Div., U.S. Steel Corp. v.
Fryer,
493 S.W.2d 487, 491 (Tex. 1973)); Eagle Properties, Ltd. v.
Scharbauer,
807 S.W.2d 714, 723 (Tex. 1990). By failing to allege
any misrepresentation by Mitsubishi, the plaintiffs also failed to
7
allege a concerted action to defraud, a necessary element of a
conspiracy to defraud. See Schlumberger Well Surveying Corp. v.
Nortex Oil & Gas Corp., 435 S.W.2d 854, 857 (Tex. 1968); Bayou
Terrace Inv. Corp. v. Lyles,
881 S.W.2d 810, 815 (Tex. AppSSHouston
[1st Dist.] 1994, no writ).
Furthermore, the plaintiffs’ allegations failed to allege
fraud and conspiracy to defraud with sufficient particularity to
escape FED. R. CIV. P. 9(b)’s pleading standard for those offenses.
The plaintiffs’s allegations, as amended, were general and did not
state the time, place, or content of any misrepresentation by
Mitsubishi to the plaintiffs, or the identity of the person making
the misrepresentation. They therefore did not satisfy rule 9(b).
See Tel-Phonic Servs., Inc. v. TBS Int’l, Inc., 975 F.2d 1134, 1138
(5th Cir. 1992) (citations omitted); Unimobil 84, Inc. v. Spurney,
797 F.2d 214, 217 (5th Cir. 1986).
The plaintiffs also asserted that Mitsubishi had engaged in a
pattern of racketeering in violation of the Racketeer Influenced
and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1962(a), (c),
and (d) (West 1984 & Supp. 1995). They further claimed that
Mitsubishi conspired with JAFCO and an unrelated defendant to
violate § 1962.
Once again, the plaintiffs have failed to allege a necessary
element of their claims. Specifically, they failed to allege with
particularity that Mitsubishi had engaged in a single predicate act
of racketeering, let alone enough acts to establish a pattern.
They did claim generally that Mitsubishi had engaged in mail and
8
wire fraud, which are predicate acts under RICO. See 18 U.S.C.
§ 1961(1)(B) (West Supp. 1995). Their specific allegations of mail
and wire fraud, however, referred only to one of the non-party
defendants, and not to Mitsubishi.
The plaintiffs thus have failed to meet rule 9(b)’s
particularity requirement, which applies to the pleading of fraud
as a predicate act in a RICO claim. See Tel-Phonic, 975 F.2d at
1138. This failure to allege a predicate act at all is also fatal
to the claim of a racketeering conspiracy, because it prevents
plaintiffs from successfully alleging an agreement to commit
predicate acts. See
id. at 1140-41.
The plaintiffs have also failed to allege a necessary element
of their negligent misrepresentation claim. They have failed to
establish justifiable relianceSSindeed, any reliance at allSSon
information supplied by Mitsubishi. See Rosenthal v. Blum, 529
S.W.2d 102, 104 (Tex. App.SSWaco 1975, writ ref’d n.r.e.); Blue
Bell v. Peat, Marwick, Mitchell & Co.,
715 S.W.2d 408, 411 (Tex.
App.SSDallas 1986, writ ref’d n.r.e.). The only allegations of
reliance they put forward are instances of reliance on information
supplied by non-party defendants. The first contact they allege
between themselves and Mitsubishi is when the receiver presented
the note in question to Mitsubishi for payment.
Finally, the plaintiffs alleged negligence on the part of
Mitsubishi in failing to investigate JAFCO’s financial condition
and its use of the note forms. A bank, however, owes no legal duty
of care to investigate or disclose its customers’ conduct or intent
9
to third parties with whom the bank’s customers do business. See
Inglish v. Union State Bank, 911 S.W.2d 829, 834-35 (Tex.
App.SSCorpus Christi 1995, no writ). This claim therefore fails as
a matter of law.
In sum, the plaintiffs’ pleadings are defective with respect
to every claim they allege. The district court granted them
several opportunities to remedy the defects, and the plaintiffs
still failed to do so.
III.
The plaintiffs claim that they needed discovery in order to
defend their claims against a motion for summary judgment. We
review a decision to deny further discovery for abuse of
discretion. The district court did not abuse its discretion in
denying such discovery.
Despite plaintiffs’ protestations to the contrary, we have
held that “[r]ule 56 does not require that any discovery take place
before summary judgment can be granted; if a party cannot
adequately defend his motion, Rule 56(f) is his remedy.”
Washington v. Allstate Ins. Co., 901 F.2d 1281, 1285 (5th Cir.
1990) (citations omitted). Additionally, a plaintiff must allege
specific facts that explain his inability to defend the motion for
summary judgment; he cannot rely on general assertions that
discovery will produce unspecified but necessary facts. See
id.
With respect to the claims of fraud and conspiracy to defraud,
the court noted that Mitsubishi had already produced documents
10
responsive to the plaintiffs’ document production requests. The
court found that the plaintiffs had failed to specify what further
information was required and how such material would help them
defend against the motion for summary judgment. See Krim v.
BancTexas Group, Inc., 989 F.2d 1435, 1443 (5th Cir. 1993).
Moreover, no discovery could remedy the plaintiffs’ failure to
allege a misrepresentation by Mitsubishi, a necessary element of
the fraud and conspiracy to defraud claims.
With respect to the RICO claims, the court found that the
plaintiffs once again had failed to specify what information they
needed and how such information would assist them in opposing
summary judgment. And, once again, no discovery could remedy the
plaintiffs’ failure to allege a predicate act in support of their
RICO claims.
With respect to the negligent misrepresentation claim, the
plaintiffs did not need any discovery from Mitsubishi to remedy
their failure to allege justifiable reliance on information
supplied by Mitsubishi. Knowledge of such reliance is entirely
within the control of the plaintiffs, yet they still failed to
allege it after several opportunities to amend. Finally, because
Mitsubishi owed no legal duty of care to the plaintiffs regarding
its relationship with JAFCO, the plaintiffs’ requested discovery
cannot, as a matter of law, uncover facts relevant to a claim of
negligence against Mitsubishi.
We agree with the district court that the plaintiffs’
pleadings were defective and that they were not entitled to further
11
discovery prior to the entry of summary judgment. Accordingly, we
AFFIRM.
12
