Summary
The Ninth Circuit affirmed summary judgment against First Pacific Bancorp, Inc. and First Pacific Bank on their civil RICO claim arising from proxy solicitations, a proposed shareholder derivative suit, and alleged threats. The court held that the alleged conduct did not establish qualifying RICO predicate acts, including securities fraud, mail fraud, wire fraud, or extortion. The court also rejected the plaintiffs’ challenges concerning discovery and damages, concluding that they had not shown actual injury.
Topics
Practice areas
Questions Presented
- Whether the district court properly treated the defendants' motion as one for summary judgment.
- Whether the district court abused its discretion by entering summary judgment before discovery was complete.
- Whether the alleged conduct constituted a pattern of RICO predicate acts.
- Whether the alleged failures to file proxy-related disclosures constituted fraud in the sale of securities under RICO.
- Whether the alleged mail fraud, wire fraud, or extortion supplied RICO predicate acts.
- Whether plaintiffs presented sufficient evidence of injury to business or property to maintain a civil RICO claim.
Holdings
- Summary judgment was procedurally proper because matters outside the pleadings, including depositions, were presented in connection with the motion.
- The district court did not abuse its discretion in entering summary judgment because discovery was substantially complete before judgment was entered.
- Although a single scheme may suffice when two related predicate acts are alleged and supported, plaintiffs failed to establish the required predicate acts here.
- Failure to comply with sections 13(d) and 14(a) of the Securities Exchange Act was not a RICO predicate act because those provisions did not involve fraud in the sale of securities and no sale occurred.
- Plaintiffs failed to establish mail fraud, wire fraud, or extortionate acts because the record lacked the required pecuniary-loss purpose, interstate wire communication, fear, or compelled corporate action.
- Summary judgment was proper because plaintiffs failed to make a showing sufficient to establish actual injury to business or property.
Key quotations
“We have concluded that one scheme or criminal episode suffices when two related "predicate acts" are alleged and supported.” (¶ 27)
“Neither proxy solicitation nor appellees' shareholder derivative suit constitutes a "sale" of securities.” (¶ 35)
“Absent a showing sufficient to establish the existence of actual injury, summary judgment is required.” (¶ 45)
Factual background
Several shareholders and former directors of First Pacific Bancorp and First Pacific Bank solicited proxies in 1984 for an alternative slate of directors and considered filing a shareholder derivative action. They allegedly failed to make filings required by sections 13(d) and 14(a) of the Securities Exchange Act, and plaintiffs characterized the solicitation, proposed derivative suit, and alleged threats as mail fraud, wire fraud, and extortionate acts under RICO. The proxies were disallowed, the derivative complaint was never filed or served, and the record contained no evidence that defendants' conduct caused corporate action, physical harm, or financial injury. Evidence of declining bank assets attributed the reductions to deliberate asset reduction and the sale of a branch.
Procedural history
Plaintiffs filed their complaint in April 1984, amended it in May 1985, and pursued discovery. The district court entered an order dismissing the RICO claim and specifying undisputed facts in December 1986, then entered final judgment in March 1987. The Ninth Circuit affirmed.