Opinion ID: 507140
Heading Depth: 2
Heading Rank: 1

Heading: The Michaels Case

Text: 2 On April 30, 1984, plaintiffs-appellants, Michaels Building Company and Michaels Oil and Gas Company (Michaels), filed a class action complaint against six different banking groups 1 and fifty unnamed John Doe defendants employed by or associated with the banks. Michaels and the defendant banks had entered into certain loan agreements which obligated Michaels to pay an interest rate that was based on each bank's own stated prime rate. Michaels argues that the term prime rate is generally understood to mean the variable rate which banks charge to their preferred commercial borrowers with the highest credit ratings. 2 Michaels claims that the defendant banks fraudulently exacted excessive interest payments by charging interest at an arbitrarily established prime rate in excess of the rate which the banks actually charged to their best commercial customers. 3 Michaels' complaint consisted of seven counts alleging that the defendants had defrauded the class borrowers in violation of state law and the mail fraud provision of RICO, 18 U.S.C. Secs. 1961 et seq. 3 Michaels also served extensive interrogatories and requests for documents upon each defendant bank. The banks each responded by filing motions to dismiss under Fed.R.Civ.P. 9(b), 11 and 12(b)(6) on the bases that Michaels' complaint failed to state the circumstances constituting fraud with particularity. 4 Michaels rejoined that Rule 9(b) requires only notice pleading, and that Michaels would be able to establish the factual bases for their fraud claims after discovery had been taken. 4 The court took the motions under advisement, and stayed discovery. On December 27, 1985, the court issued a RICO Case Standing Order. In part, the Order directed Michaels to: 5 5. Describe in detail the pattern of racketeering activity or collection of unlawful debts alleged for each RICO claim. A description of the pattern of racketeering shall include the following information: 6