Opinion ID: 410958
Heading Depth: 1
Heading Rank: 2

Heading: kleindienst's motion for summary judgment28

Text: 27 In granting Kleindienst's motion for summary judgment and denying plaintiffs' motion for reconsideration, the district court found that the plaintiffs had not discharged their burden under Fed.R.Civ.P. 56(e) after Kleindienst filed his affidavit in support of summary judgment. Our review of the district court's decision is, of course, guided by the admonition that we view the record in the light most favorable to plaintiffs and that we consider the record as it existed before the district court. 10 Wright & Miller, Federal Practice and Procedure Sec. 2716 (1973). If we find that there were genuine issues of material fact in the record before the district court, we must reverse. See Ed Houser Enterprises, Inc. v. General Motors Corp., 595 F.2d 366, 368 (7th Cir.1978) (per curiam). Fed.R.Civ.P. 56(e) provides in part: 28 ... When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of his pleading, but his response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If he does not so respond, summary judgment, if appropriate, shall be entered against him. [Emphasis supplied.] 29 Under subdivision (c) of Rule 56, summary judgment is appropriate if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. 30 In this case, the district court had before it on December 5, 1979, the plaintiffs' first amended complaint, Kleindienst's affidavit, and the depositions of Evans and Klekamp. The district court reasoned that summary judgment was appropriate since plaintiffs rested on their pleadings after Kleindienst filed his motion, supported by his affidavit and the depositions. In many instances, the district court would be fully justified in granting summary judgment to the moving party under such circumstances. See, e.g., McPherson v. St. Paul Fire & Marine Insurance Co., 350 F.2d 563, 566 (5th Cir.1965). But the court may not automatically award summary judgment when the non-moving party stands on his pleadings. As Judge Pell noted for this court in Kirk v. Home Indemnity Co., 431 F.2d 554, 560 (7th Cir.1970), the court need not grant summary judgment for apparent non-compliance with Rule 56(e) when the materials filed by the moving party appear[] to include those which ordinarily [the non-moving party] would have filed. Moreover, Rule 56(e) itself admonishes that summary judgment should be entered when the non-moving party rests on his pleading only if appropriate. The phrase if appropriate incorporates the general standard of subdivision (c) of Rule 56 which requires the absence of genuine issues of material fact. The drafters of Rule 56(e) made clear in their comments to the rule that [w]here the evidentiary matter in support of the motion does not establish the absence of a genuine issue, summary judgment must be denied even if no opposing evidentiary matter is presented. Advisory Comm. Notes to Rule 56 (1963 amendments) (emphasis added), reprinted in 83 S.Ct. at 74. This interpretation is also consistent with the principle that the initial and ultimate burden of persuasion in a summary judgment motion rests with the moving party. 31 These principles lead us to conclude that summary judgment for Kleindienst was improper, even based upon the record as it existed on December 5, 1979. Plaintiffs allege that Kleindienst conspired with others to defraud the Fund. In furtherance of the conspiracy, plaintiffs claim that Kleindienst knowingly misrepresented the status of Family Provider's account in the Provident Bank. Kleindienst countered these allegations with an affidavit generally denying knowledge or participation in any fraudulent acts. At least some of the materials plaintiffs might have been expected to file to refute the Kleindienst affidavit--the deposition testimony of Evans and Klekamp--were filed by Kleindienst himself. Moreover, plaintiffs here were not passive and silent as to the asserted issues of fact; they did not look only to the court to ascertain the issues. Rather, plaintiffs specifically pointed out the alleged issues and relied on them to oppose Kleindienst's motion for summary judgment. See Plaintiffs' Memo in Opposition, at 12-13 (Oct. 9, 1979). Thus, under the reasoning of Kirk, and since Kleindienst appears to have filed some material which the plaintiffs would ordinarily have filed, the district court should not have granted summary judgment merely as a sanction for plaintiffs' failure to file evidentiary material in addition to the complaint. 32 We must then decide whether, on the basis of the record evidence, genuine issues of material fact exist which preclude the entry of summary judgment in favor of Kleindienst. As a preliminary matter, we are always hesitant to grant summary judgment when subjective matters--here Kleindienst's knowledge with respect to the Family Provider bank account--are material to the case. See Conrad v. Delta Airlines, Inc., 494 F.2d 914, 918 (7th Cir. 1974); 10 Wright & Miller, Federal Practice and Procedure Sec. 1730 (1973). On the other hand, we are mindful that a court should not shrink from granting summary judgment, if authorized and appropriate, to avoid needless trials. Kirk v. Home Indemnity Co., 431 F.2d 554, 559-60 (7th Cir. 1970). But here the case for summary judgment seems to rest on a weak foundation, and justice demands a trial. 33 Although Kleindienst denies in conclusory terms any knowledge of the encumbrance on the funds in the Family Provider bank account, Kleindienst's claim is contradicted, at least at one point, by Evans' deposition testimony filed with the motion for summary judgment. Evans reluctantly testified that he recalled objecting to Kleindienst's suggestion that the Provident Bank tell Trimble that the Family Provider account was unencumbered. But Kleindienst has neither specifically admitted nor specifically denied that the claimed conversation with Evans took place in which he allegedly requested Evans--and Evans refused--to send a telegram to Trimble representing that Family Provider's Provident Bank account was unencumbered. Evans' recollection may be suspect, as Kleindienst now argues on appeal, but the testimony speaks for itself; its credibility or plausibility vis a vis Kleindienst's general claim is an issue to be resolved by the trier of fact. Kleindienst's failure to address in his affidavits the specifics of Evans' statement only serves to highlight what we believe are material issues of fact in the record. 34 Moreover, Kleindienst's affidavit does not even mention the meeting that was held in his office when, according to the deposition testimony of Evans and Klekamp, the encumbrance on the Family Provider account was created; he merely asserts, in an oblique but obvious reference to this meeting, that he had no knowledge of the letters drafted by Evans and Klekamp. See note 11 supra. We are aware that plaintiffs have not cited any specific evidence (if there is any beyond Kleindienst's recollection) to indicate that Kleindienst was actually present when the encumbrance was created or that he was aware of the letters drafted at the meeting creating the encumbrance. 29 But, by the same token, Kleindienst's conclusory, broad-sweeping denial of knowledge of the letters creating the encumbrance does not resolve all factual issues in the face of a reasonable evidentiary inference that the participants in the meeting, especially the attorneys representing the corporate parties, were aware of what purportedly happened at the meeting. Kleindienst does not even clearly acknowledge (or specifically deny) that the meeting took place in his office, nor has he offered any explanation of his role at this asserted meeting which might dispel this inference. Given this state of the record, we are left in doubt about what occurred at the asserted meeting in Kleindienst's office on May 20. We are also left in doubt about Kleindienst's role in this meeting, and about whether Kleindienst was aware of the encumbrance placed upon Family Provider's bank account as a result of this meeting. We do not believe that, under these particular circumstances, Kleindienst is entitled to summary judgment when his affidavit fails to respond directly and specifically to these matters so as to eliminate issues of material fact. 35 If plaintiffs' allegations are true, they may demonstrate Kleindienst's complicity in a scheme to misrepresent facts to Trimble, which, according to plaintiffs, is apparently part of a larger scheme to defraud the Fund. It is not clear what additional specific facts could have been adduced by plaintiffs in opposition to summary judgment since the ultimate issue is one of Kleindienst's state of mind. Because Kleindienst's affidavit does not eliminate factual questions concerning his knowledge of crucial facts, we must reverse the grant of summary judgment. 36 Even if the evidence before the court as of December 5, 1979 might support summary judgment, we believe that the addition of Kleindienst's affidavit from Baker, which was presented to the district court by plaintiffs on motion for reconsideration, decidedly tips the balance against the entry of summary judgment below. The Baker affidavit sets out in detail Kleindienst's involvement with Family Provider and Great Pacific. The affidavit raises further questions about Kleindienst's alleged misrepresentations to Trimble, including Kleindienst's May 24 statement, and raises the additional issue whether he knew on June 11 that Family Provider would transfer money to another Hauser-controlled company to fund the purchase of NALICO, contrary to representations made to Trimble. Moreover, that affidavit also fails to specifically address the claim by Evans that he told Kleindienst on May 21 that Family Provider's Provident Bank account was encumbered. Kleindienst also apparently denies in this affidavit--contrary to the deposition testimony of Evans and Klekamp--that there was a meeting on or about May 20 in his office when the agreements were reached which created the encumbrance; at least Kleindienst denies participating in such a meeting. See Kleindienst's Baker Aff. at 10 (Nov. 17, 1979). 30 Finally, Kleindienst's efforts, as part of the alleged conspiracy, to hide from Trimble the true dealings between Family Provider and Great Pacific may be further evidenced by his receipt, upon request, of a legal opinion from an Arizona law firm on the question of how firms in the position of Family Provider and Great Pacific could escape from regulation under the Arizona insurance laws ... and ... accomplish a 'withdrawal' with as little as possible participation by the Insurance Department. Office Memo from Shimmel, Hill, Bishop & Gruender to Richard G. Kleindienst, June 14, 1976, at 1 (attached to Kleindienst's Baker Affidavit). We believe that the district court abused its discretion in not granting plaintiffs' motion for reconsideration after being presented with very troubling evidence which does not remove from doubt Kleindienst's alleged participation in the scheme to defraud the Fund. 31 37