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UNITED STATES COURT OF APPEALS

For the Fifth Circuit

No. 94-30126

IN RE: TAXABLE MUNICIPAL BOND SECURITIES LITIGATION.

LARRY ANDERSON,

Plaintiff-Appellant,

VERSUS

KUTAK, ROCK AND CAMPBELL, ET AL.,

Defendants,

KUTAK, ROCK AND CAMPBELL, ET AL., 

Defendants-Appellees.

Appeal from the United States District Court

for the Eastern District of Louisiana

(April 21, 1995)

Before POLITZ, Chief Judge, GARWOOD and BENAVIDES, Circuit

Judges.

BENAVIDES, Circuit Judge:

Plaintiff-Appellant Larry Anderson ("Anderson") appeals the

dismissal of his class action suit based on alleged violations of

Racketeer Influenced and Corrupt Organizations Act ("RICO"),
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Title IX of the Organized Crime Control Act of 1970, Pub.L. No.

91-452, 84 Stat. 922 (codified at 18 U.S.C. § 1961 et seq.). 

Finding that Anderson has no standing to bring the RICO claims,

we affirm the dismissal of Anderson's suit. 

FACTS AND PROCEDURAL HISTORY

MDL 863 (The Suit by Bondholders)

This appeal requires an understanding of the pertinent facts

and procedural history of a previously filed class action multidistrict litigation ("MDL") suit before the District Court for the

Eastern District of Louisiana. Accordingly, before we chronicle

the history of appellant Anderson's RICO claim, we review the facts

and procedural history of the previous claim in MDL 863.

In 1983, the Nebraska state legislature created the Nebraska

Investment Authority ("NIFA") to encourage agricultural and other

economic development. Neb. Rev. Stat. §§ 58-202, 58-207. On

October 27, 1986, NIFA enacted a resolution authorizing the

issuance of two series of taxable municipal bonds collectively

worth $200,000,000 ("NIFA Bonds"). On November 13, 1986, NIFA

issued the NIFA Bonds. According to the offering materials, the

bond proceeds would be used to establish a fund for the purchase of

agricultural loans from banks in Nebraska. 

Drexel Burnham Lambert & Co. ("Drexel") led an underwriting

syndicate that underwrote and initially sold the NIFA Bonds to the

public. After the underwriters' purchase of the bonds, the
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indenture trustee, defendant Norwest Bank, Minneapolis, N.A.

("Norwest"), used the proceeds to purchase Guaranteed Investment

Contracts ("GICs") from Executive Life Insurance Company ("ELIC").

ELIC in turn invested the proceeds from the sale of the GICs in

junk bonds, even though the bond offering materials did not

disclose such an investment. At the time the NIFA Bonds were

issued, Standard & Poor's assessed ELIC a claims paying rate of

AAA. After the collapse of the junk bond market in early 1989,

Standard & Poor's downgraded ELIC's rating, and the value of the

bonds declined. In April 1991, the California Insurance

Commissioner placed ELIC into conservatorship and stopped interest

payments under the GICs. The NIFA Bonds subsequently defaulted. 

The NIFA Bond issue was similar in structure to seven other

taxable municipal bond issues that came on the market between July

and November 1986 for purposes of establishing funds for the

purchase of housing or agricultural loans. The proceeds from each

of these bond issues were placed in ELIC GICs. Drexel led the

underwriting syndicates in six of these bond issues. The First

Boston Corporation led the underwriting syndicate in the seventh

bond issue. Otherwise, the issuers, indenture trustees and

underwriting groups for each of the bond issues varied. Together,

the total amount raised by these eight bond offerings was

$1,850,000,000. 

As the bonds from these eight issuances declined in value,

litigation ensued. As early as April 1990, before the

conservatorship of ELIC, holders of the NIFA Bonds and the seven
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other municipal bonds filed class action lawsuits alleging

securities fraud and RICO violations. On November 29, 1990, the

Judicial Panel on Multi-district Litigation ("JPMDL"), pursuant to

28 U.S.C. § 1407, transferred twelve putative class action

bondholder suits pending in seven federal districts to the Eastern

District of Louisiana for consolidated pretrial proceedings under

the caption In Re Taxable Municipal Bond Securities Litigation, MDL

863 ("MDL 863"). 

Pursuant to the district court's pretrial orders, the

plaintiff bondholders in MDL 863 filed a separate class action

complaint asserting the RICO claims premised on an alleged scheme

to trick investors into thinking they were buying safe, low-risk

municipal bonds when they were actually buying junk bonds. The

plaintiff bondholders in MDL 863 alleged that Drexel, ELIC and

defendant Kutak, Rock & Campbell ("Kutak"), NIFA's counsel, devised

a plan to use the issuance of municipal bonds as a scheme to create

capital for ELIC. According to this theory, the defendants

portrayed the GICs as a credit enhancement, but in reality, the

GICs were a means of funneling the proceeds of the bond offerings

into ELIC for the life of the bonds. In order to ensure that the

bond proceeds remained under ELIC's control, the defendants

allegedly sought to make it virtually impossible to borrow from the

loan fund established by the bond proceeds, thereby preventing any

significant call on the funds invested with ELIC. 

To further this goal, the plaintiffs maintained, the

defendants found friendly entities to act as administrators of the
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loan programs. For the NIFA offering, Norwest, the indenture

trustee, allegedly agreed to act as administrator of the NIFA loan

program with knowledge that there would likely be no loans. Drexel

recruited municipalities and agencies with the legal authority to

float bond offerings. After recruiting a municipal agency, the

group would enlist other players such as the members of the

underwriting syndicate and a friendly trustee (Norwest for the NIFA

Bonds). 

Based on these facts alleged by the MDL 863 plaintiffs, the

RICO complaint alleged that the defendants participated in the

affairs of a RICO enterprise in violation of 18 U.S.C. § 1962(c)

and a conspiracy under 18 U.S.C. § 1962(d) to violate § 1962(c).

The MDL 863 plaintiffs asserted alternative RICO enterprise

theories. The complaint first alleged that the RICO defendants

formed an association-in-fact to issue taxable municipal bonds for

the fraudulent purpose of investing the proceeds in the junk bond

market. Alternatively, the MDL 863 plaintiffs alleged that each of

the municipal issuers constituted a separate RICO enterprise. The

defendants in MDL 863 moved to dismiss the plaintiff bondholders'

RICO class action complaint. In a May 18, 1992 order, the district

court rejected the plaintiffs' association-in-fact theory under §

1962(c). The district court, however, permitted the bondholder

plaintiffs to proceed with discovery on their alternative theory

that each municipal issuer constituted a separate RICO enterprise

and on their RICO conspiracy theory.

On August 27, 1993, the plaintiff bondholders, including the
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purchasers of NIFA Bonds except for Washington National Insurance

Company and Washington National Insurance Company of New York

(collectively "WNIC"), agreed to voluntarily dismiss the RICO class

action complaint in light of the Supreme Court's decision in Reves

v. Ernst & Young, 113 S. Ct. 1163 (1993). WNIC, however, refused

to dismiss its RICO claims based on its purchase of NIFA Bonds.

The defendants moved for summary judgment on WNIC's RICO claims.

WNIC opposed the defendants' motion and also sought to file an

amended RICO complaint. In a December 13, 1993 order, the district

court granted defendants' motion for summary judgment, dismissed

WNIC's RICO claims and refused to permit WNIC to file its proposed

amended complaint. 

Anderson's RICO Suit (The Farmers' and Ranchers' Claim)

On July 6, 1993, in the midst of the MDL 863 litigation and

after the district court rejected the bondholders' association-infact enterprise theory, Anderson, the plaintiff in the instant

case, filed a three-count RICO complaint in federal district court

in Nebraska, asserting that the NIFA Bonds were issued in 1986 as

part of a fraudulent scheme in violation of federal law. Anderson

is a Nebraska farmer who never purchased or owned NIFA Bonds. He

filed this action individually and on behalf of other small

Nebraska farmers and ranchers alleged to be unable to obtain

agricultural loans because of the defendants' actions. On November

17, 1993, Anderson amended his complaint as of right. On December

2, 1993, the JPMDL transferred Anderson's RICO claims against the
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defendants to the Eastern District of Louisiana as a tag-along

action because the claims involved common questions of fact with

the actions in MDL 863. 

The district court concluded that Anderson's complaint and the

MDL 863 RICO complaint were identical in all relevant respects.

The only distinction found by the district court was in the class

of plaintiffs purportedly represented: the MDL 863 plaintiffs were

the bond purchasers, whereas the Anderson plaintiffs were Nebraska

farmers allegedly unable to obtain loans. The first two counts of

Anderson's amended complaint allege violations of 18 U.S.C. §

1962(c) based on alternative allegations of a RICO enterprise. The

first count asserts an association-in-fact enterprise theory, and

the second count alleges that NIFA itself constitutes a RICO

enterprise. The third count alleges that, under either RICO

enterprise theory, the defendants conspired in violation of §

1962(d). 

In a February 2, 1994 order in connection with its dismissal

of the WNIC action, the district court considered the fate of the

Anderson tag-along action, even though the defendants had not

answered or moved to dismiss the Anderson complaint. The district

court recited the Pretrial Order governing tag-along actions

consolidated with MDL 863: 

In each pending case and in the subsequently filed, removed,

or transferred cases, the motions which the court has already

considered in one or more of the pending cases shall be deemed

filed on behalf of each party with interests similar to the

movant. This provision does not preclude a renewal or reargument of such motions based on particular circumstances of

an individual case. 
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The district court found that no special circumstances warranted

reargument and reiterated its finding that the Anderson allegations

were identical to the allegations in the MDL 863 RICO complaint,

which was dismissed on summary judgment. Therefore, in accordance

with the Pretrial Order, the district court concluded that the

"dismissal of the Anderson action is proper for the same reasons

dismissal of the RICO claims in MDL 863 was proper."

Anderson appeals the district court's ruling. 

STANDING TO PRESENT A RICO CLAIM

Although the district court did not address the standing issue

raised by appellees, we may determine this appeal on this issue

because "[s]tanding represents a jurisdictional requirement which

remains open to review at all stages of the litigation." National

Org. for Women, Inc. v. Scheidler, 114 S. Ct. 798, 802 (1994). 

The standing provision of civil RICO provides that "[a]ny

person injured in his business or property by reason of a violation

of section 1962 of this chapter may sue therefor . . . and shall

recover threefold the damages he sustains." 18 U.S.C. § 1964(c).

Anderson claims that his injury is the lost opportunity to obtain

an agricultural loan from the proceeds of the NIFA Bonds. Anderson

contends that the farmers and ranchers had a legal entitlement to

participate in a nonfraudulent loan program, as the Nebraska

legislature created and authorized NIFA to ameliorate the farmers'

economic difficulties. We disagree and find that Anderson has not
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fulfilled the standing requirements at two separate levels. 

I.

ELIGIBILITY FOR THE NIFA LOANS

Anderson is not representative of the class. Because he has

not shown how he could qualify under any NIFA loan program,

Anderson cannot show how he has become entitled to its benefits.

Anderson thereby does not share the same interests and has not

suffered the same harms as the class members he contends were

injured by the scheme. 

Although Anderson claims that the restrictions imposed by the

eligibility requirements were part of the fraudulent scheme,

Anderson has not shown how he qualifies under the requirements

imposed by the Nebraska legislature. In other words, even if there

had been no fraud and the NIFA Bond proceeds were used properly to

fund loans, Anderson has not shown his eligibility to receive the

loans. Under the Nebraska statute governing the NIFA Bond loan

program, "only those borrowers who are unable to obtain credit from

the conventional farm credit markets or other sources will receive

loans." Neb. Rev. Stat. § 58-244(10). Nowhere is it alleged that

Anderson was unable to obtain credit from other sources. In fact,

at the time of suit, Anderson had already obtained credit from

other sources, thereby making him ineligible for the loans.

Further, paragraphs 111 and 115 of Anderson's amended complaint

suggest that several putative class members have obtained credit
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from other agricultural lenders. Thus, they are ineligible to

participate in the NIFA Bond loan program and cannot claim injuries

stemming from not being able to obtain loans from the proceeds of

the NIFA Bonds. 

Anderson responds by arguing that, although some of the class

members are not eligible for the loans, the class as a whole is

entitled to the loans. Anderson, however, has not presented any

case law supporting his argument. Further, it is well-established

that 

[t]o have standing to sue as a class representative it is

essential that a plaintiff must be a part of that class, that

is, he must possess the same interest and suffer the same

injury shared by all members of the class he represents.

Schlesinger v. Reservists Comm. to Stop the War, 94 S. Ct. 2925,

2930 (1974). Because Anderson has not demonstrated how he cannot

obtain credit from other agricultural lenders, Anderson cannot

prove his eligibility for the NIFA Bonds and does not have standing

to bring suit in this action. 

II.

NO DAMAGES - NO INJURY

In the alternative, even if Anderson has properly alleged his

eligibility for the NIFA Bonds and is the proper representative of

the class, Anderson and the entire class of farmers and ranchers

have not suffered any damages. They have not been "injured" as a

result of the RICO violation, a necessity for standing under RICO.

Anderson has not shown how the RICO scheme has injured farmers
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and ranchers. He has not shown that the farmers and ranchers

applied for the NIFA Bond loans and were refused. Nonetheless,

Anderson argues that the plaintiffs have suffered damages in the

amount of the difference between the low interest rate of the NIFA

bond loans and the higher interest rates now being paid by the

farmers and ranchers on other credit. However, the very fact that

such farmers and ranchers are paying higher interest rates on other

loans makes them ineligible for the NIFA Bond loans, as such

farmers and ranchers have necessarily been able to obtain other

credit and are ineligible for the NIFA loans. They have suffered

no injury from not receiving what they were ineligible to receive.

Anderson's contention that he has sustained a lost

"opportunity" to obtain a NIFA loan by itself is too speculative to

constitute an injury. We are not persuaded by Anderson's argument

of a RICO injury based on his reliance on Standardbred Owners Ass'n

v. Roosevelt Raceway Assocs., L.P., 985 F.2d 102 (2d Cir. 1993).

In Standardbred, the defendant purchased a horse racing facility

with financing from bonds issued by a municipality, id. at 103. In

its application for financing, the defendant stated that it

intended to continue racing operations at the facility. Id. The

defendant also gave assurances to the plaintiffs that racing would

continue. Id. at 103-04. The defendant, however, discontinued

racing on the property. Id. at 104. The court held that the

plaintiffs had standing to bring a RICO action, as "in the

fraudulently induced belief that racing would continue, plaintiffs

purchased, relocated and reconstructed capital equipment for use at
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the track, and designed their purchases and training of horses with

the intent to race them at the track." Id. at 104-05. In

contrast, there is no allegation in the instant case that the

farmers and ranchers acted in any way in reliance upon a

representation by the defendants that the bond proceeds would be

used to finance low interest agricultural loans. 

Anderson also contends that the plaintiffs have a legal

entitlement to the benefits of the NIFA Bond proceeds because the

Nebraska legislature authorized the creation of NIFA to benefit the

plaintiffs. In support of his proposition, Anderson cites Jackson

Dist. Library v. Jackson County #1, 380 N.W.2d 112 (Mich. Ct. App.

1985), in which a library was allowed to sue for tax revenues that

voters had specifically approved for the library, id. at 113-14.

Jackson did not concern a RICO action or damages under RICO, but

the question of whether the library was an "eligible authority"

under Michigan law and thus entitled by state statute to a share of

the tax revenues. The case is clearly not on point. Anderson also

cites AAMCO Transmissions, Inc. v. Marino, Nos. 88-5522, 88-6197,

1992 WL 38120 (E.D. Pa. Feb. 20, 1992), which held that lost

profits were recoverable under RICO, id. at *5-*6. Here, however,

Anderson has not alleged lost profits. Rather, he only alleges a

lost opportunity to borrow at a low interest rate. 

Even if Anderson was eligible and had shown how the

opportunity to borrow at a low interest rate would have benefited

him, Anderson's claimed damages would have required extensive

speculation and would not simply entail a calculation of present,
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actual damages. Such speculative damages are not compensable under

RICO, Hecht v. Commerce Clearing House, Inc., 897 F.2d 21, 24 (2d

Cir. 1990) (holding that "injury in the form of lost business

commissions . . . is too speculative to confer standing, because

Hecht only alleges that he would have lost commissions in the

future, and not that he has lost any yet"), and the legal

entitlement claim that Anderson brings is precisely the type of

"intangible property interest" that RICO does not protect, Steele

v. Hospital Corp. of Am., 36 F.3d 69, 70 (9th Cir. 1994) (holding

that, for RICO standing, the plaintiffs must prove a "concrete

financial loss," an actual loss "of their own money," and "not mere

`injury to a valuable intangible property interest'"). Anderson

has not alleged that the plaintiffs have ever lost any money as a

result of the RICO scheme. Oscar v. University Students Co-op.

Ass'n, 965 F.2d 783, 786 (9th Cir.), cert. denied, 113 S.Ct. 655

(1992) and 113 S.Ct. 656 (1992), (holding that the plaintiff had

not alleged any financial loss necessary for RICO standing because

"[t]he only injury she has alleged is a `decrease in the value of

her property,'" and not "any out-of-pocket expenditures as a direct

or indirect result of the" RICO scheme). 

At best, Anderson's suit shows only a lost opportunity to

obtain a NIFA loan. Such lost opportunity by itself does not

constitute an injury that confers standing to bring a RICO cause of

action. Likewise, because the alleged injury is speculative and

does not show a conclusive financial loss, we hold that Anderson's

RICO suit fails for lack of standing. 
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CONCLUSION

Because Anderson and the Nebraska farmers and ranchers

described in Anderson's class action suit have no standing to bring

the instant RICO action, we AFFIRM the district court's action in

dismissing Anderson's claims.