Source: https://casetext.com/case/snook-v-trust-co-of-ga-bank-of-savannah
Timestamp: 2019-07-19 16:45:44
Document Index: 126928472

Matched Legal Cases: ['§ 78', '§ 240', '§ 1961', '§ 1964', '§ 1962', '§ 1962', '§ 1962', '§ 1962']

Snook v. Trust Co. of Ga. Bank of Savannah, 859 F.2d 865 | Casetext
Snook v. Trust Co. of Ga. Bank of Savannah
859 F.2d 865 (11th Cir. 1988)
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Snookv.Trust Co. of Ga. Bank of Savannah
United States Court of Appeals, Eleventh CircuitNov 7, 1988
R.M. Guttshall, III, Guttshall Guttshall, Thomasville, Ga., for plaintiffs-appellants.
John B. Miller, Miller, Simpson Tatum, Savannah, Ga., William U. Norwood, Alexander Vann, Thomasville, Ga., John T. McTier, Tillman, McTier, Coleman, Talley, Newbern Kurrie, Valdosta, Ga., for defendants-appellees.
Before FAY and CLARK, Circuit Judges, and GUIN, District Judge.
Honorable J. Foy Guin, Jr., U.S. District Judge for the Northern District of Alabama, sitting by designation.
As mentioned above, shares in TPC constituted the bulk of the assets of the AKS Trust. TPC was a timber holding company, which owned large tracts of timberlands. These shares provided the primary source of income to the AKS Trust. However, income tax had to be paid on the profits from timber sales twice — first by TPC and then by either the AKS Trust or its beneficiaries. In order to eliminate this double taxation, a plan was devised whereby the AKS Trust would purchase the outstanding shares of TPC that it did not already own and then cause TPC to be liquidated. The result would be that the AKS Trust would own the timberlands formerly owned by TPC. Thereafter, income tax on the profits from the timber sales would be paid only once, either by the AKS Trust or by its beneficiaries.
In early 1985 a dispute arose between the plaintiffs and the trustees of the AKS Trust concerning the tax consequences of the liquidation. The attorney for plaintiffs Snook and Hinson, in a letter dated May 17, 1985, made several demands on the trustees. Among those demands was a request that the AKS Trust borrow an amount equal to the liquidating dividend and distribute the proceeds of that loan to the beneficiaries. The dispute between the plaintiffs and the trustees was not resolved and the plaintiffs instituted an action in the Superior Court of Chatham County, Georgia. The complaint included claims related to the trust accounting methods used in connection with the liquidation of TPC — one of the claims being that the funds used to purchase the shares of TPC should have come from trust principal rather than being paid out of trust income. Because the AKS Trust owned no extensive liquid assets, this amounted to demand that the Trust borrow the funds necessary to finance the liquidation. The state court action was dismissed voluntarily by the plaintiffs and on June 16, 1986 the original complaint in the instant action was filed.
In their amended complaint plaintiffs assert three federal causes of action. In Count I of their complaint the plaintiffs assert a securities fraud claim under Section 10(b) of the Securities Exchange Act of 1934 ( 15 U.S.C. § 78j(b)) and Rule 10b-5 of the Securities and Exchange Commission (17 C.F.R. § 240.10b-5). This claim arises out of the tender offer issued in connection with the liquidation of TPC. One of the allegations is that defendants Trust Company of Georgia Bank of Savannah, N.A. (hereinafter "Trust Company") and Alexander Sessoms, with intent to deceive, manipulate and defraud, caused to be sent by U.S. Mail to the plaintiffs a prospectus offering to purchase on behalf of the AKS Trust all minority shares of TPC for $5,000 per share. Plaintiffs allege that the prospectus failed to reveal that "the trustees, Trust Company and Alexander Sessoms, had in their possession information evaluating the shares in an amount in excess of $15,000 per share."
In Count II of their amended complaint, the plaintiffs assert a claim under the Racketeering Influenced and Corrupt Organizations Act (hereinafter "RICO"). 18 U.S.C. § 1961-1968. RICO provides for the recovery of treble damages for injury caused by reason of a violation of its substantive provisions. 18 U.S.C. § 1964(c). The plaintiffs claim that defendants Trust Company and Alexander Sessoms violated 18 U.S.C. § 1962(c), one of RICO's substantive provisions, by participating in the affairs of the AKS Trust, TPC, and the ESS Trust, which they allege engaged in a pattern of racketeering activity. The pattern of racketeering activity is alleged to arise by virtue of instances of securities fraud and mail fraud. Among the instances of alleged mail fraud are the mailing of the July 26, 1984 prospectus, the mailing of the proposed stipulation, and the mailing in January 1984 of a letter to plaintiffs' attorney seeking to seduce him from his representation of the plaintiffs.
In Count III of their amended complaint plaintiffs allege that defendants Trust Company, Donald R. Correll, and Alexander Sessoms conspired to violate 18 U.S.C. § 1962(c). This claim is based on 18 U.S.C. § 1962(d) which makes it unlawful for any person to conspire to violate the provisions of 18 U.S.C. § 1962(c).
In reviewing a district court's grant of summary judgment, this court's review is "plenary and is to be conducted utilizing the same legal standards as those imposed upon the district court." WSB-TV v. Lee, 842 F.2d 1266, 1269 (11th Cir. 1988). The Supreme Court has recently addressed the standards for granting motions for summary judgment. In Celotex Corp. v. Catrett, the Court addressed the burden to be placed on the nonmoving party as follows:
This court has often noted that summary judgment should not be granted until the party opposing the motion has had an adequate opportunity for discovery. E.g., Littlejohn v. Shell Oil Co., 483 F.2d 1140, 1145 (5th Cir. 1973) (en banc), cert. denied, 414 U.S. 1116, 94 S.Ct. 849, 38 L.Ed.2d 743 (noting the high fatality rate of summary dispositions at a time before the facts have been fully developed); Alabama Farm Bureau Mutual Casualty Co. v. American Fidelity Life Insurance Company, 606 F.2d 602, 609 (5th Cir. 1979), cert. denied, 449 U.S. 820, 101 S.Ct. 77, 66 L.Ed.2d 22 ("Summary Judgment should not, therefore, ordinarily be granted before discovery has been completed."); Murrell v. Bennett, 615 F.2d 306, 310 (5th Cir. 1980) (citing Alabama Farm Bureau). The party opposing a motion for summary judgment has a right to challenge the affidavits and other factual materials submitted in support of the motion by conducting sufficient discovery so as to enable him to determine whether he can furnish opposing affidavits. Parrish v. Board of Commissioners of the Alabama State Bar, 533 F.2d 942, 948 (5th Cir. 1976). If the documents or other discovery sought would be relevant to the issues presented by the motion for summary judgment, the opposing party should be allowed the opportunity to utilize the discovery process to gain access to the requested materials. Id. Generally summary judgment is inappropriate when the party opposing the motion has been unable to obtain responses to his discovery requests. Cowan v. J.C. Penney Company, Inc., 790 F.2d 1529, 1532 (11th Cir. 1986).
The issue of inadequate discovery was called to the district court's attention by the parties in their briefs addressed to the motion to compel. In their response to the plaintiffs' motion to compel, defendants asserted that a ruling in their favor on the pending motion to dismiss or for summary judgment would render moot any discovery issue. Plaintiffs responded to this assertion by reminding the district court that "motions for summary judgment are premature and should not be granted until the party opposing such a motion is permitted to make discovery essential to his case." Therefore, the district court should have been aware of the plaintiffs' contention that they had not been able to obtain, through discovery, evidence essential to their opposition to the motion for summary judgment. The discovery requested was clearly relevant to the pending motion for summary judgment, both as to the securities fraud and RICO counts.
If the district court had treated the motion as one to dismiss the complaint for failure to state a claim, this assertion might be true. However, the court considered factual matters outside the pleadings submitted by the defendants. Therefore, the procedures governing motions for summary judgment were invoked. See Rule 12(b), Federal Rules of Civil Procedure.
Parrish, 533 F.2d at 948. By failing to rule on the motion to compel, the district court deprived the plaintiffs' of their right to utilize the discovery process to discover the facts necessary to justify their opposition to the motion. It is clear that many of the documents requested are relevant to the issues raised by the defendants' motion for summary judgment. It is also clear that many of the requested documents are discoverable. Accordingly, the entry of summary judgment and dismissal of the pendent state law claims was improper and must be reversed. On remand the district court should consider the plaintiffs' motion to compel in light of the rules governing discovery and should order the requested documents produced as appropriate. Once there is an adequate record, the district court may again consider the defendants' motion for summary judgment.
B. Propriety of the District Court's Denial of Preliminary Injunction