Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-03-02283/USCOURTS-ca8-03-02283-0/pdf.json

Nature of Suit Code: 470
Nature of Suit: Civil (Rico)
Cause of Action: 

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United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 03-2283

___________

Regions Bank, *

*

Plaintiff - Appellant, *

* Appeal from the United States 

v. * District Court for the Eastern 

* District of Missouri.

J.R. Oil Company, LLC; Security *

Western Leasing Company; Jones *

Travel Mart, also known as Jones *

Travel Mart, Inc.; Jones Mart, also *

known as Jones Mart, Inc.; Northend *

Jones Mart; Piggot Jones Mart, also *

known as Piggot Jones Mart; Tank *

Management, Inc.; JFM, Incorporated; *

S.W. Jones Family Limited Partnership; *

Walcott Enterprises, Inc.; Northchase *

Development, Inc.; Larry Jack Taylor, *

jointly and severally; Steven W. Jones, *

jointly and severally; Marcella Jones, *

doing business as Piggot Jones Mart, *

also known as Piggot Jones Mart, doing *

business as Northend Jonesmart, also *

known as Northend Jones Mart, jointly *

and severally; Kelly B. Jones, jointly *

and severally; Jennifer Jones, jointly and *

severally; Tim Jones, jointly and *

severally, *

*

Defendants - Appellees. *

___________

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1

The Honorable Ralph R. Erickson, United States District Judge for the District

of North Dakota, sitting by designation.

2

The Honorable George Howard, Jr., United States District Judge for the

Eastern District of Arkansas.

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Submitted: March 11, 2004

Filed: October 14, 2004 

___________

Before RILEY and MELLOY, Circuit Judges, and ERICKSON,1

 District Judge.

___________

MELLOY, Circuit Judge.

Regions Bank appeals the district court’s2

 adverse grant of summary judgment

on its RICO claims against the various defendants. The RICO claims relate to alleged

fraud in the procurement of a loan and the subsequent transfer and use of the

collateral for the loan before and during a bankruptcy, culminating in a bankruptcy

sale. Because Regions Bank neither raised the issue of fraud during the bankruptcy

nor timely moved to set aside the bankruptcy sale, we find the current RICO claims

to be an impermissible collateral attack on the final judgment of the bankruptcy court.

In the alternative, we find that Regions Bank suffered no RICO injury and

therefore lacks standing to bring a RICO claim. Because Regions Bank’s security

interest in the collateral was inferior to the perfected security interest of another

lender, whose security interest completely encumbered the collateral, Regions Bank’s

security interest was of no value from its inception. Further, Regions Bank has not

alleged that other assets existed to satisfy unsecured creditors. Accordingly, any

injury to Regions Bank was complete when Regions Bank funded the loan. The

RICO injuries Regions Bank alleges in this case relate to the subsequent bankruptcy

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sale, use of the collateral, and diversion of income generated with the collateral. To

the extent there was an injury, it was injury to the third party, priority lienholder

whose priority lien fully encumbered the collateral and entitled it to the collateral

and/or the proceeds from the collateral. For this additional reason, we affirm the

district court’s dismissal of the RICO claims. In addition, we affirm the district

court’s dismissal of the supplemental state law claims for lack of federal jurisdiction.

I. Background

Through Jones Realty, Inc. (“Jones Realty”) and J.R. Oil Company, L.L.C.

(“J.R. Oil”) Steven Jones owned and operated various gas stations and convenience

stores. In April 2000, Steven Jones applied for a $400,000 loan from Regions Bank,

ostensibly to buy inventory for J.R. Oil to use in the operation of a truck stop in

Cameron, Missouri. Steven Jones submitted personal financial information as well

as financial information regarding J.R. Oil and Jones Realty. He represented to

Regions Bank that J.R. Oil held assets in excess of $2 million, Jones Realty was

worth over $7.6 million, and he and his wife, Marcella Jones, had a net worth in

excess of $6.4 million. In addition, he represented that Regions Bank would receive

a first lien on J.R. Oil’s accounts receivable, equipment, and inventory. Regions

Bank granted and funded the loan to J.R. Oil and Steven Jones. Jones Realty

provided a guarantee on the loan. Steven Jones executed a security agreement on

behalf of J.R. Oil that granted Regions Bank a lien on J.R. Oil’s accounts receivable,

equipment, and inventory.

According to the Regions Bank officer who signed the J.R. Oil security

agreement on behalf of Regions Bank, and according to a Regions Bank officer in

charge of “trouble loans,” Regions Bank did not complete its lien search until after

it funded the loan. The lien search revealed that Regions Bank held a secondary lien

position in the collateral. 

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In early summer 2000, Steven Jones and his wife, Marcella Jones, with the

financial assistance of Steven Jones’s friend, Larry Taylor, organized a new company,

Jones Travel Mart, Inc. (“JTM”). JTM assumed management of the truck stop in

Cameron, Missouri. Regions Bank contends that Jones Realty owned the real estate

associated with the truck stop and J.R. Oil owned the equipment, inventory, accounts

receivable, and other assets associated with operation of the truck strop. In addition,

Marcella Jones nominally assumed control of two other convenience stores owned

by Jones Realty and operated by J.R. Oil in Piggot and Paragould, Arkansas. After

assuming nominal control of these two other convenience store properties, she started

operating them as Piggot Jonesmart and Northend Jonesmart. There is no

documentation to memorialize any transfer of assets from J.R. Oil to Jones Realty,

Larry Taylor, JTM, Marcella Jones, Piggot Jonesmart, or Northend Jonesmart. J.R.

Oil claims that this omission in its records is due to the fact that J.R. Oil lost many

records when J.R. Oil failed to pay rent on storage buildings that housed the records.

Regions Bank claims that these persons and entities wrongly appropriated the assets

of J.R. Oil. Without explanation, after Regions Bank funded the $400,000 loan to

J.R. Oil, Elwood Bonner, the accountant for J.R. Oil, wrote off over $2 million of J.R.

Oil’s furniture, equipment, inventory and accounts receivable.

On the same day that Steven Jones organized JTM, J.R. Oil filed for

bankruptcy under Chapter 11. J.R. Oil included Regions Bank in its list of creditors.

Two days later, on July 27, 2000, Jones Realty filed for bankruptcy under Chapter 11.

Jones Realty did not list Regions Bank as a creditor. The first meeting of creditors

for both bankruptcies took place on September 8, 2000, at 2:00 p.m. in the Federal

Building in Jonesboro, Arkansas, in the same room. Counsel for Regions Bank,

Marie B. Miller, attended the meeting on behalf of Regions Bank and signed in as the

representative for Regions Bank on a sign-in sheet for the J.R. Oil bankruptcy.

Regions Bank did not intervene in the Jones Realty bankruptcy nor request notice of

proceedings in the Jones Realty bankruptcy. It is undisputed that Regions Bank knew

that the guarantor on the loan, Jones Realty, filed bankruptcy.

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According to J.R. Oil’s bankruptcy filings, loan documents, security

agreements, and UCC filings, J.R. Oil borrowed $900,000 from Enterprise Mortgage

Acceptance Corporation (“Enterprise”) in 1997. In 1998, J.R. Oil borrowed an

additional $3,202,000.00 from Enterprise. In 1997 and 1998, Enterprise perfected

continuing security interests over J.R. Oil’s assets, including accounts receivable,

inventory, and equipment at the Cameron, Missouri, and Piggott and Paragould,

Arkansas sites, among others. In 1999, Enterprise assigned its security interests to

LaSalleNational Bank (“LaSalle”). J.R. Oil, apparently, borrowed additional money

from Enterprise. When J.R. Oil filed for bankruptcy, J.R. Oil listed its debt to

Enterprise as $9,289,235.00. In its bankruptcy filings, J.R. Oil listed inventory as

collateral for the debt owed to Regions Bank, listed the value of the inventory as only

$2000, and listed the entire $400,000 of debt to Regions Bank as unsecured. Regions

Bank neither contested the information J.R. Oil provided to the bankruptcy court,

challenged the amount of indebtedness that J.R. Oil listed regarding Enterprise, nor

raised the issue of Bonner’s unexplained write-off of $2 million worth of furniture,

inventory, equipment, and accounts receivable. It is undisputed that Regions Bank

knew at the time of the J.R. Oil bankruptcy that Steven Jones had made

misrepresentations to induce Regions Bank to grant him the $400,000 loan.

Between August 1, 2000, and December 2001, JTM paid out approximately

$200,000 to Steven and Marcella Jones. Regions Bank alleges in its current RICO

claims that these payments were improper diversions of cash generated by assets that

JTM misappropriated from J.R. Oil during the time of the J.R. Oil bankruptcy.

Regions Bank further alleges that J.R. Oil should have been operating the Cameron

truck stop as the debtor-in-possession under Chapter 11. No defendant offered an

explanation for these payments from JTM to the Joneses. 

J.R. Oil moved to dismiss its Chapter 11 bankruptcy on December 19, 2000.

In this motion, J.R. Oil represented that it:

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. . . no longer ha[d] an operating business. Moreover, the remaining

property of the Debtor, to the extent any such property exists, is

encumbered by liens which secure debt in excess of the value of such

property. The remaining property of the Debtor is burdensome or of

inconsequential value so that there is nothing to administer for the

benefit of unsecured creditors.

Regions Bank does not allege that it failed to receive notice of the motion to dismiss.

Further, Regions Bank does not allege that it acted to prevent the dismissal, failed to

receive any documents associated with the J.R. Oil bankruptcy, or raised any claim

before the bankruptcy court regarding the purported misappropriation of J.R. Oil’s

assets by Jones Realty, JTM, Steven Jones, Marcella Jones, Larry Taylor, or any other

individual or entity. The bankruptcy court records show the J.R. Oil bankruptcy

closed as of February 27, 2001, with no outstanding objections.

On June 6, 2001, Regions Bank received a state court judgment in the state of

Arkansas against Steven Jones in the amount of $400,000 for the outstanding

principal on the 2000 note as well as $10,000 in attorneys fees. 

On July 2, 2001, Jones Realty filed a motion in the Jones Realty bankruptcy to

seek approval for the sale of real property and improvements at four sites in Missouri

and Arkansas to a company named Sierra Pacific Land Company (“Sierra”) or its

assigns. The sites included real property in Cameron, Missouri (property other than

the Cameron truck stop). LaSalle, the priority lienholder, objected. On September

6, 2001, after Jones Realty and Sierra worked out a settlement with LaSalle, the

bankruptcy court approved the sale of real property for $150,000, free and clear of all

liens. The bankruptcy court specifically found that Sierra or its assigns were

purchasers in good faith, the terms of the sale were fair and equitable, Jones Realty

exercised its best business judgment in connection with the sale, and the sale was in

the best interest of Jones Realty and its creditors. 

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Sierra assigned its rights under the September sale order to Northchase

Development, Inc. (“Northchase”), a company formed and owned by Steven Jones’

friend, Larry Taylor. On October 10, 2001, Northchase purchased the four parcels

of real property from Jones Realty in accordance with the September 6 order.

On December 6, 2001, Jones Realty filed a motion with the bankruptcy court

to seek approval for the sale of all “right, title, and interest in and to certain real and

personal property, free and clear of all liens, claims, and encumbrances of any kind

whatsoever[.]” (Emphasis added). The “certain real property” included the Cameron

truck stop and the Piggott and Paragould, Arkansas properties. The proposed buyer

was Larry Taylor’s company, Northchase. On January 17, 2001, the bankruptcy court

approved the sale, free and clear of all liens, for $1 million. The bankrupcty court

specifically found that Northchase was a purchaser in good faith, the sale was the

result of a fully negotiated, arms-length transaction, the terms of the sale were fair

and equitable, Jones Realty exercised its best business judgment in connection with

the sale, and the sale was in the best interest of the estate and Jones Realty’s creditors.

On January 31, 2002, Northchase purchased the property from Jones Realty in

accordance with the January 17 order. Larry Taylor and Marcella Jones transferred

their shares of JTM to Northchase, which in turn transferred the shares of JTM to a

company named Walcott Enterprises, Inc. (“Walcott”), run by Steven Jones’s son,

Kelly Jones. Regions Bank alleges that Kelly Jones was young, inexperienced in the

operation of gas station/convenience stores, and not creditworthy. Nevertheless,

before February 1, 2002, Northchase agreed to loan Walcott $700,000 under a

promissory note that Kelly Jones executed on behalf of Walcott. Northchase and

Larry Taylor, in turn, borrowed money from American Bank so that Northchase could

fund the note to Walcott. On February 1, 2002, Northchase leased the newly

purchased property to Walcott. Through a series of payments, Northchase, in fact,

funded the note to Walcott. In return, Northchase structured the lease payments due

from Walcott to mirror Northchase’s debt payments to American Bank. 

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Taylor received a payment of $125,000 from JTM that Regions Bank

characterizes as a “consulting fee” for Taylor’s role in the above-described,

bankruptcy-assisted reorganization. Regions Bank alleges that Kelly Jones is a

figurehead and Walcott is merely a shell to permit Steven Jones, his family, and Larry

Taylor to thwart creditors and hold and enjoy the benefit of the properties sold

through the Jones Realty bankruptcy.

On April 23, 2002, Regions Bank filed its complaint in the present case.

Regions Bank did not allege that any of the bankruptcy sales were for less than fair

value. Regions Bank alleged state law fraud, civil conspiracy, and breach of contract

claims. In addition, Regions Bank alleged three civil RICO claims. In its three RICO

claims, Regions Bank alleged that the “enterprise” was an association consisting of

Steven, Marcella and Kelly Jones, Larry Taylor, Walcott, and Northchase. In Count

I, Regions Bank alleged that these defendants “acquired and maintained interests in

and control of JTM through a pattern of racketeering activity” in violation of 18

U.S.C. § 1962(b). In Count II, Regions Bank alleged that these defendants “agreed

to and did conduct and participate in the conduct of the enterprise’s affairs through

a pattern of racketeering activity” in violation of 18 U.S.C. § 1962(c). In Count III,

Regions Bank alleged that these defendants conspired to commit the actions alleged

in Counts I and II in violation of 18 U.S.C. § 1962(d). As predicate acts, Regions

Bank alleged fraud in the procurement of the loan, bankruptcy fraud, and multiple

acts of wire and mail fraud that extended until early 2002 when Walcott obtained

control of J.R. Oil’s former assets through the Jones Realty bankruptcy sale. Regions

Bank alleged in the alternative close-ended and open-ended conspiracies. Under the

open-ended conspiracy theory, Regions Bank alleged as ongoing predicate acts the

use of the mails and wires to make ongoing lease payments from Walcott to

Northchase.

Larry Taylor and Northchase moved to dismiss Regions Bank’s original

complaint for failure to plead the alleged instances of fraud with sufficient

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particularity, as required under Federal Rule of Civil Procedure 9(b). Regions Bank

amended its complaint to add detail. Larry Taylor and Northchase, however, renewed

their motion. In addition, after some discovery, Larry Taylor and Northchase moved

for summary judgment. All other defendants joined in the summary judgment

motion. The defendants argued that the RICO claims failed as a matter of law and the

district court should not retain jurisdiction over the remaining state law claims. The

defendants specifically argued that Regions Bank failed to generate a genuine

question of material fact as to the “continuity” requirement of the RICO claims or the

requirement of a RICO injury to confer standing. Further, the defendants argued on

grounds of res judicata that Regions Bank’s RICO claims were nothing more than a

thinly veiled collateral attack on the judgment of the Jones Realty bankruptcy court

regarding the sales of assets to Northchase for fair value.

The district court treated the motions to dismiss as motions for summary

judgment, allowed Regions Bank adequate opportunity to respond, and ruled on the

outstanding motions in one order. The district court determined that Regions Bank

failed to allege sufficient predicate acts over a sufficient period of time to establish

the continuity prong of a RICO claim under either a close-ended or open-ended

scheme. The district court did not address other arguments that the defendants raised

in their motions.

Because other creditors had forced Steven Jones into involuntary bankruptcy

by the time of the district court’s ruling, Steven Jones enjoyed the protection of the

automatic stay associated with his personal, involuntary bankruptcy. The district

court ruled that the automatic stay did not require a stay of the claims against the

other defendants. Accordingly, the district court’s final order in this case disposed

of the RICO claims against all defendants other than Steven Jones. 

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II. Discussion

We review the district court’s grant of summary judgment de novo and view

the facts in a light most favorable to the non-moving party. Terry A. Lambert

Plumbing, Inc. v. Western Sec. Bank, 934 F.2d 976, 979 (8th Cir. 1991). Regions

Bank argues that our review is strictly limited to the legal issue that the district court

chose to address, namely, the continuity requirement under RICO. It is clear,

however, that the defendants properly raised numerous other grounds for relief before

the district court. It is well settled that we are not constrained by a district court’s

choice of legal theories among those that parties set forth for disposition of a case.

Rather, we may decide a case on any grounds supported by the record and not waived

by a moving party. See Lane v. Peterson, 899 F.2d 737, 742 (8th Cir. 1990) (“We

may affirm a judgment on any ground supported by the record even if not relied upon

by the district court.”); Blum v. Bacon, 457 U.S. 132, 137 n.5 (1982) (“[W]ithout

filing a cross-appeal or cross-petition, an appellee may rely upon any matter

appearing in the record in support of the judgment below.”). Here, those issues

include Regions Bank’s standing under RICO and the defendants’ characterization

of Regions Bank’s RICO claim as an impermissible collateral attack on the

bankruptcy court’s final judgment.

II.A. RICO Standing

To have standing to bring a civil RICO claim, a plaintiff must have suffered

injury “by reason of” a RICO violation. 18 U.S.C. § 1964(c) (“Any person injured

in his business or property by reason of a violation of section 1962 of this chapter

may sue therefor in any appropriate United States district court and shall recover

threefold the damages he sustains and the cost of suit, including a reasonable

attorney’s fee . . . .”). The phrase “by reason of” as used in § 1964(c) means

causation under the traditional tort “requirements of proximate or legal causation, as

opposed to mere factual or ‘but for’ causation.” Bieter Co. v. Blomquist, 987 F.2d

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1319, 1325 (8th Cir. 1993); see also Newton v. Tyson Foods, Inc., 207 F.3d 444, 446-

47 (8th Cir. 2000) (“Plaintiffs have standing in a civil RICO case only if the RICO

violations both factually and proximately caused injury to the plaintiffs’ business or

property.”). Further, “a showing of injury requires proof of concrete financial loss,

and not mere injury to a valuable intangible property interest.” Steele v. Hosp. Corp.

of Am., 36 F.3d 69, 70 (9th Cir. 1994) (internal citations and quotation marks

omitted); see also Price v. Pinnacle Brands, Inc., 138 F.3d 602, 607 (5th Cir. 1998)

(“Injury to mere expectancy interests or to an ‘intangible property interest’ is not

sufficient to confer RICO standing.”) (quoting Anderson v. Kutak (In re Taxable

Mun. Bond Sec. Litig.), 51 F.3d 518, 523 (5th Cir. 1995)). 

Taking the facts in a light most favorable to Regions Bank, we must assume

that Steven Jones, perhaps with the assistance of his accountant, Edward Bonner,

committed fraud in the procurement of the $400,000 loan from Regions Bank.

Regions Bank’s own failure to adequately research the status of prior liens against

J.R. Oil’s assets, coupled with this presumed fraud, clearly caused injury to Regions

Bank, both factually and proximately. Further, the $400,000 that Regions Bank

actually gave to J.R. Oil under the loan cannot be viewed as an “intangible property

interest.” 

This tangible injury to Regions Bank was complete, however, when Regions

Bank funded the loan. Nothing that occurred subsequent to the funding of the loan

proximately caused any harm to Regions Bank. It is undisputed that other parties’

security interests fully encumbered the collateral that J.R. Oil and Steven Jones

pledged to Regions Bank. It is also undisputed that J.R. Oil did not hold assets

sufficient to satisfy the debt owed to the priority lienholders, EMAC and LaSalle,

much less assets sufficient to satisfy any claims of unsecured creditors, or

undersecured creditors second in line to EMAC and LaSalle. Accordingly, nothing

that Steven Jones, Marcella Jones, Larry Taylor, Walcott, or Northchase did in the

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course of the alleged RICO scheme of bankruptcy irregularities and corporate shell

games worsened Regions Bank’s position.

Importantly, Regions Bank set forth no evidence, by affidavit or otherwise, to

support an inference that the isolated allegation of fraud in the loan application

process was related to the alleged RICO enterprise. Regions Bank alleged a RICO

enterprise of purported bankruptcy abuses and corporate maneuvering undertaken by

Steven, Marcella and Kelly Jones, Larry Taylor, Walcott, and Northchase. However,

Regions Bank granted and funded the loan based on representations that Steven Jones

made on behalf of himself, J.R. Oil, and Jones Realty, and based on financial reports

that accountant Edward Bonner prepared regarding Steven and Marcella Jones, J.R.

Oil, and Jones Realty. No evidence suggests that the other alleged members of the

RICO enterprise had anything to do with the loan from Regions Bank, or that any

activities related to the pre-bankruptcy planning or bankruptcy-related transactions

contributed to Steven Jones’s and J.R. Oil’s indebtedness to Regions Bank (or their

indebtedness to any of the other lenders affected by the J.R. Oil bankruptcy). 

The facts that might support a connection between the Regions Bank loan and

the subsequent bankruptcy-related activities provide only a basis for speculation.

These facts are: (1) the close proximity in time between the loan application and the

bankruptcy filing; (2) Larry Taylor’s admission that he spoke with Steven Jones

regarding Steven Jones’s financial problems in the spring of 2000; and (3) the fact

that Marcella Jones is married to Steven Jones and that Kelly Jones is his son. These

facts, however, are insufficient for a reasonable jury to conclude that a RICO

enterprise existed at the time of the loan application, or that the alleged RICO

enterprise had anything to do with the loan from Regions Bank. See Anderson v.

Liberty Lobby, Inc., 477 U.S. 242, 249-250 (1986) (stating it is the judge’s function

“to determine whether there is a genuine issue for trial[,]” and that “[i]f the evidence

is merely colorable or is not significantly probative, summary judgment may be

granted” (internal citations omitted)).

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Regions Bank actually argued broader theories of harm that require little

discussion. Regions Bank argued at oral argument that there is something inherently

wrong when a bankrupt debtor solicits the aid of family, friends, or business

associates to purchase assets out of bankruptcy for fair value and subsequently return

those assets to the bankrupt debtor or hold those assets for the benefit of the bankrupt

debtor and/or his family. Such a position is clearly without merit. Where assets are

sold for fair value with the approval of the court, it doesn’t matter if the purchaser is

an insider or a stranger. The subsequent use of those assets is wholly the prerogative

of the bankruptcy sale purchaser, who obtains clean title. Similarly there is nothing

inherently wrong with pre-bankruptcy planning that may lead to such sales.

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Turning, then, to allegations concerning the RICO enterprise, Regions Bank

claims, in essence, three possible sources of harm3

: (1) J.R. Oil’s possibly wrongful

transfer of assets to JTM in the summer of 2000 when J.R. Oil declared bankruptcy;

(2) JTM’s possibly wrongful payment of proceeds from those assets to Steven and

Marcella Jones or Larry Taylor when operating the Cameron truck stop after J.R. Oil

filed bankruptcy; or (3) J.R. Oil’s or JTM’s possibly wrongful transfer of assets to

Jones Realty before Jones Realty sold those assets under the authority of the

bankruptcy court in January of 2002. Any potential RICO violations surrounding the

bankruptcy and corporate reshuffling caused harm, if any, to the only parties who

held valuable rights to recovery in the J.R. Oil bankruptcy, namely the priority

lienholders. Regions Bank, as a secondary lienholder in a bankruptcy where the

priority lienholders held complete claims over the only assets, has no RICO standing

to contest the alleged irregularities. Simply put, analysis of proximate causation

requires identification of actual, not hypothetical harm, and any impact of the

bankruptcy proceedings on Regions Bank interest was purely hypothetical since the

security interest and the right to repayment from J.R. Oil were without value from

their inception. Newton, 207 F.3d at 447 (denying RICO standing for lack of

proximate causation where injury was too attenuated); Hamm v. Rhone-Poulenc

Rorer Pharm., Inc., 187 F.3d 941, 952 (8th Cir. 1999) (denying RICO standing to the

employee-plaintiffs of a pharmaceutical company where they were not the intended

targets of the alleged racketeering activity directed towards hospitals and physicians);

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In re Taxable Muni. Bond Sec. Litig., 51 F.3d at 522 (stating in the context of RICO

standing that “[a plaintiff’s] contention that he has sustained a lost ‘opportunity’ to

obtain a [state-subsidized] loan by itself is too speculative to constitute an injury”).

Finally, even if the alleged bankruptcy irregularities and misappropriation of

assets had harmed Regions Bank’s position as a bankruptcy creditor, that harm would

have been harm to Regions Bank’s secondary security interest or contractual right to

repayment under the $400,000 note. Injury to these “intangible property interests”

is not injury that may support standing to bring RICO claims. See Price, 138 F.3d

at 607 (“Injury to mere expectancy interests or to an ‘intangible property interest’ is

not sufficient to confer RICO standing.”); Steele, 36 F.3d at 71 (holding that patients

lacked standing to bring RICO claims for allegedly fraudulent health care billings

where insurance companies rather than patients suffered the actual financial harm

from the alleged RICO violations); Berg v. First State Ins. Co., 915 F.2d 460, 464

(9th Cir. 1990) (denying RICO standing where there was no showing of actual

financial loss caused by alleged RICO violations, but rather, plaintiffs alleged merely

an “injury” related to the loss of certain insurance policies based on "both the

protection [the policies] afforded against potential financial loss in the future and the

present peace of mind that flows from such protection") (alteration in original).

In summary Regions Bank lacks RICO standing because it suffered no injury

to a tangible interest by reason of RICO violation. Although Regions Bank suffered

an injury to a tangible property interest, that injury was not “by reason of” a RICO

violation, rather, it was by reason of alleged bank fraud not shown to be related to the

alleged enterprise. Further, no alleged RICO violation proximately caused an injury

to Regions Bank because the intangible property interest that Regions Bank

possessed at the time of the alleged RICO violations was without value from its

inception. Finally, even if the alleged RICO violations had caused an injury to

Regions Bank, the only interest Regions Bank possessed at the time of the alleged

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RICO violations was an intangible property interest, injury to which cannot support

a RICO claim. 

II.B. Impermissible Collateral Attack

In the alternative, even if Regions Bank had standing to raise RICO claims, we

would find the present claims barred as a collateral attack on the final judgments of

the bankruptcy court. Claims related to the Jones Realty bankruptcy sale are barred

as impermissible collateral attacks because the bankruptcy sale conferred rights good

as against the world, not merely rights good as against parties to the sale. Claims

related to the alleged misappropriation of assets from J.R. Oil are barred under normal

principals of res judicata.

Res judicata normally only applies against parties who participated in the prior

proceedings and “had a full and fair opportunity to litigate the matter in the

proceeding that is to be given preclusive effect.” Costner v. URS Consultants, Inc.,

153 F.3d 667, 673 (8th Cir. 1998) (explaining that a final judgment bars any

subsequent suit where “(1) the first suit resulted in a final judgment on the merits; (2)

the first suit was based on proper jurisdiction; (3) both suits involve the same parties

(or those in privity with them); and (4) both suits are based upon the same claims or

causes of action”). Here, Regions Bank was not a party to the Jones Realty

bankruptcy which produced the final orders approving the sales of collateral to

Northchase. Accordingly, normal principles of res judicata do not bar Regions

Bank’s claim as against a final judgment in the Jones Realty bankruptcy. This is true

even though Regions Bank clearly had notice of the Jones Realty bankruptcy, and

failed to intervene, because a “party is not . . . required to intervene voluntarily in a

separate pending suit merely because it is permissible to do so.” Black Clawson Co.

v. Kroenert Corp., 245 F.3d 759, 764 (8th Cir. 2001); see also, Chase Nat’l Bank v.

City of Norwalk, 291 U.S. 431, 441 (1934) (“Unless duly summoned to appear in a

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legal proceeding, a person not a privy may rest assured that a judgment recovered

therein will not affect his legal rights.”). 

Normal principals of res judicata, however, are not necessary for the judgment

in the Jones Realty bankruptcy to bar Regions Bank’s claims to the extent those

claims relate to the sale of the collateral. The bankruptcy court in the Jones Realty

bankruptcy approved the sale and found the sale to be in good faith, for fair value,

and in the best interest of Jones Realty and its creditors. A bankruptcy sale under 11

U.S.C. § 363, free and clear of all liens, is a judgment that is good as against the

world, not merely as against parties to the proceedings. As the Seventh Circuit has

held:

[I]nsofar as [a] fraud suit is . . . on behalf of nonparties to the sale

proceeding . . . it is not barred by res judicata. But it is barred. A

proceeding under section 363 is an in rem proceeding. It transfers

property rights, and property rights are rights good against the world,

not just against parties to a judgment or persons with notice of the

proceeding.

Gekas v. Pipin (In the Matter of Met-L-Wood Corp.), 861 F.2d 1012, 1017 (7th Cir.

1988). The judgment, therefore, is shielded from collateral attack not by res judicata,

but by virtue of the nature of rights transferred under 11 U.S.C. § 363.

Finally, Regions Bank was a party to the J.R. Oil bankruptcy proceeding.

Accordingly, Regions Bank is barred from raising claims or causes of action that

were, or should have been, raised in that proceeding. We have interpreted the phrase

“the same claims or causes of action” to mean claims that arise out of the same

nucleus of operative facts. See Costner, 153 F.3d at 673 (“Regarding the ‘same

claims or causes of action’ element of claim preclusion, we have stated that whether

a second lawsuit is precluded turns on whether its claims arise out of the ‘same

nucleus of operative facts as the prior claim.’”) (quoting United States v. Gurley, 43

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F.3d 1188, 1195 (8th Cir.1994)) (in turn quoting Lane v. Peterson, 899 F.2d 737, 742

(8th Cir.1990)). Here, at the time Regions Bank funded the loan to J.R. Oil and

Steven Jones, it believed J.R. Oil held millions of dollars worth of inventory,

equipment, and accounts receivable. When J.R. Oil filed for bankruptcy and claimed

to the bankruptcy court that it did not hold such assets, Regions Bank knew that

Steven Jones had misrepresented J.R. Oil’s position or that J.R. Oil had somehow

disposed of its assets. Regions Bank, however, took no action to challenge the

allegations in J.R. Oil’s bankruptcy filings or put the bankruptcy court on notice of

potentially missing assets or potential fraud. Subsequently, when J.R. Oil sought and

received voluntary dismissal of the bankruptcy based on the purported absence of

assets and the absence of a reorganization plan, J.R. Oil again failed to object. On

these facts, Regions Bank is barred from raising in subsequent RICO claims

allegations of injury caused by fraud or the misappropriation of assets that Regions

Bank failed to raise before the bankruptcy court.

In light of our decision to affirm the district court’s grant of summary judgment

on the RICO claims, we must review the district court’s decision to decline the

continued exercise of supplemental jurisdiction over Regions Bank’s state law claims

under 28 U.S.C. § 1367(c)(3). Our review is for abuse of discretion. See Eddings v.

City of Hot Springs, 323 F.3d 596, 600 (8th Cir. 2003). Finding no abuse of

discretion, and no arguments on this issue that merit further discussion, we affirm.

The judgment of the district court is affirmed.

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