Court Opinion

ID: 2962015
Source: CourtListenerOpinion
Date Created: 2015-09-21 20:51:19.848447+00
Date Added: 2024-06-11T11:42:24.345579
License: Public Domain

USCA1 Opinion

	

          July 9, 1993          [NOT FOR PUBLICATION]                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                 ____________________        No. 92-2303                          MANUEL RODRIGUEZ-O'FERRAL, ET AL.,                               Plaintiffs, Appellants,                                          v.                          TREBOL MOTORS CORPORATION, ET AL.,                                Defendants, Appellees.                                 ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                           FOR THE DISTRICT OF PUERTO RICO                     [Hon. Carmen C. Cerezo, U.S. District Judge]                                             ___________________                                 ____________________                                        Before                                 Breyer, Chief Judge,                                         ___________                                    Selya and Cyr,                                   Circuit Judges.                                   ______________                                 ____________________             Luis  G. Rull n-Mar n  with whom  Zoraida Buxo  was on  brief for             _____________________             ____________        appellants.             Mari   del Carmen  Taboas  with whom  Heriberto J.  Burgos-P rez,             _________________________             __________________________        Fiddler,  Gonz lez &  Rodr guez,  Rafael  P rez-Bachs, and  McConnell,        _______________________________   ___________________       __________        Vald s,  Kelley,  Sifre,  Griggs  &  Ruiz-Suria  were  on  brief   for        _______________________________________________        appellees.                                 ____________________                                 ____________________                  Per  Curiam.    Plaintiffs Manuel  Rodriguez  O'Ferral, Edma                  Per  Curiam.                  ___________        Mirta Diaz,  and their  conjugal partnership,  appeal from  a district        court  judgment  dismissing their  civil  action  under the  Racketeer        Influenced  and  Corrupt   Organizations  Act   ("RICO"),  18   U.S.C.          1964(c), pursuant to  Fed. R.  Civ. P. 12(b)(6),  and denying  their        motion to certify a plaintiff class pursuant to Fed. R. Civ. P. 23(a).        Finding no error, we affirm.                                          I                                          I                                      BACKGROUND                                      BACKGROUND                                      __________                  We  review a Rule 12(b)(6)  dismissal de novo, accepting all                                                        __ ____        allegations in  the complaint,  and drawing all  reasonable inferences        favorable  to plaintiffs.  Heno v. Federal Deposit Ins. Corp., No. 92-                                   ____    __________________________        1936, slip op. at 2 (1st Cir. June 3, 1993);   Feinstein v. Resolution                                                       _________    __________        Trust Corp.,  942 F.2d 34,  37 (1st  Cir. 1991).   In September  1986,        ___________        appellants purchased  a new Volvo  from Trebol Motors  Corporation and        Trebol  Motors Distributor  Corporation  ("Trebol"),  exclusive  Volvo        distributors in Puerto  Rico.  Appellants,  who had planned  to buy  a        Volvo  240 DL  ("Volvo DL"),  were persuaded  by a Trebol  salesman to        purchase  a  Volvo  240 GLE  ("Volvo  GLE"),  a  more prestigious  and        expensive  model.    Thereafter,  appellants  discovered documentation        inside the  vehicle, listing its identification  number and describing        it as a Volvo DL.                  In  May  1991,  appellants  filed  a  civil  RICO  complaint        against,  inter alia,  Trebol, Volvo  Cars of  North America,  and the                  _____ ____        foreign  manufacturers,  Volvo  Car Corporation  and  Volvo Gothenburg        Sweden, see  18 U.S.C.    1964(c),1 alleging  that the  defendants had                ___        engaged  in a  seven-year  scheme  to  defraud Trebol's  customers  by        selling  Volvo DL  vehicles "doctored"  by Trebol  to look  like their        pricier  cousin     the  Volvo GLE.2    As the  predicate  "pattern of        racketeering  activity,"  see  18  U.S.C.    1961(1),  (5), appellants                                  ___        alleged  that  the defendants  committed  "millions"  of "public"  and                                        ____________________               1RICO   1964(c) provides:               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  the suit,  including  a               reasonable attorney's fee.          18 U.S.C.   1964(c).   Appellants alleged violations of   1962(a)          (to  "use  or   invest"  income  derived   from  a  "pattern   of          racketeering  activity"),    1962(b)  (to "acquire  or  maintain"          through a "pattern  of racketeering activity" an interest  in any          enterprise),    1962(c) (to  "conduct or  participate"  through a          "pattern  of  racketeering  activity"   in  the  conduct  of  any          enterprise), and    1962(d) (to "conspire" to  violate   1962(a),          (b), or (c)).               2Appellants alternatively allege that Volvo discontinued its          premium GLE model by 1984 (a material fact which Trebol allegedly          withheld from its Puerto Rico customers), or that if factory-made          GLEs  were still in production  at Volvo, Trebol  chose to import          the less expensive DL  models, which had been fitted  with $2,000          worth  of additional  options.   Trebol  sent  the Volvo  DLs  to          Showroom   Auto   Services,   Inc.,   which   replaced   the   DL          identification "badge" on  the automobile with  a GLE badge,  and          removed  all   other  documentary   evidence  of  the   DL  model          classification.  Trebol listed the disguised DLs as GLEs at $7000          over  the price for  its standard  DL models,  a price  which far          exceeded the  cost of the  $2000 option  package incorporated  in          each car.  The alleged "scheme" resulted in net damages of $5,000          to each Trebol customer.                                          3        "private" acts of  mail, wire, and bank fraud, see  18 U.S.C.    1341,                                                       ___        1343, 1344, in furtherance of their GLE scam.  The predicate "private"        acts allegedly consisted of an  unspecified number of telephone, wire,        and  mail communications  among  the various  defendants.   Appellants        asserted  that  further  discovery  of defendants'  internal  business        records  would  be  necessary to  enable  them  to  specify the  exact        contents and participants  in these communications.   See New  England                                                              ___ ____________        Data Servs.,  Inc.  v.  Becher, 829  F.2d  286, 291  (1st  Cir.  1987)        __________________      ______        (favoring liberal pre-dismissal discovery to permit RICO plaintiffs to        allege  "scheme to  defraud"  by obtaining  information regarding  the        time,  place,  and  contents  of  confidential  communications  within        defendants'  exclusive control).   On  the other  hand, the  predicate        "public"  acts allegedly consisted  of Trebol's  commercial advertise-        ments and  direct promotional mailings enticing  customers into Trebol        to purchase Volvo GLEs during the  period from 1984 to 1991.  Attached        to  their complaint were photocopies  of nine ads  and eight mailings,        all dated after July 1989.  Appellants  themselves allegedly sustained                  _____        property damage in  the amount  of $5,000, the  net cost  differential        between  the  Volvo DL  and the  pseudo-Volvo  GLE, and  sought certi-        fication  of a plaintiff  class, estimated at  15,000 Trebol customers        who purchased GLEs from 1984 to 1991, holding aggregate  claims of $75        million trebled ($225 million).                  The   district  court   stayed  further   discovery  pending        disposition of defendants' Rule 12(b)(6) motion and appellants' motion        for  certification under  Rule 23(a).   Meantime,  the  court directed                                          4        appellants to submit  a more  particularized statement  of their  RICO        claim, fleshing out  the factual underpinnings for the  allegations in        their  complaint.3  In September 1992, based on the unmended vagueness        of  appellants' particularized seventy-nine page RICO-claim statement,        the court denied  their motion for class  certification, and dismissed        the  complaint  for failure  to allege  predicate  acts of  fraud with        sufficient particularity  under Fed.  R. Civ.  P. 9(b).4   Thereafter,        the court denied plaintiffs' motion to amend the complaint.  See infra                                                                     ___ _____        note 8.                                          II                                          II                                      DISCUSSION                                      DISCUSSION                                      __________                  We  have  imposed  a   threshold  requirement  that  a  RICO                                        ____________________               3Far  from particularizing appellants'  complaint, the RICO-          claim  statement provides  general  statistical  data  concerning                                     _______          Trebol's  total television and newspaper advertising expenses for          the years 1988-1991.  Appellants also alleged that they had found          that  15 more  Trebol advertisements  were published  in  a local          newspaper  during August and September 1986, at or about the time          they purchased their Volvo GLE.  No photocopies of these ads were          appended.  As described by appellants, however, these ads  merely          "offer[ed]  for sale  a Volvo  240 GLE,"  but contained  no other          representations   by  Trebol.     Most   importantly,  appellants          implicitly concede in  their complaint  that Trebol's  advertise-          ments  and mailing  did not  lure them  into buying a  GLE, since          appellants arrived on the Trebol lot in 1986 intent on purchasing                     _______          a Volvo DL.            ________               4Rule  9(b) requires that,  "[i]n all averments  of fraud or          mistake,  the  circumstances constituting  the  fraud or  mistake          shall be stated with particularity."  Fed. R. Civ. P. 9(b).  Rule          9(b)  disqualifies conclusory  factual allegations  which  do not          afford sufficient notice of the fraud  claim to enable defendants          to  prepare  their  defense,  with  a  view  to   minimizing  the          reputational harm caused by the filing of pretextual or frivolous          fraud claims.  See New England Data, 829 F.2d at 289.                         ___ ________________                                          5        complaint "state facts sufficient to portray (i) specific instances of                                                         ________ _________        racketeering activity within the reach of the RICO statute and                                           6        (ii)  a  causal nexus  between that  activity  and the  harm alleged."                 ______ _____        Miranda v.  Ponce Fed. Bank, 948 F.2d 41, 44 (1st Cir. 1991) (emphasis        _______     _______________        added); see also  Figueroa-Ruiz v. Alegria, 896 F.2d 645, 648 n.3 (1st                ___ ____  _____________    _______        Cir. 1990) (delineation of predicate acts of  fraud under RICO must go        beyond "vague references"); supra note  4.  We turn first to  the con-                                    _____        spicuous  temporal impediments  underlying appellants'  "causal nexus"        allegations.                  Appellants  concede  that Trebol's  seventeen advertisements        and mailings, none of which preceded their own 1986 Volvo purchase and        most  of which (with one  exception) were not  directed to appellants,        could not  have been the proximate cause of their injury. See Arzuaga-                                                                  ___ ________        Collazo v.  Oriental Fed.  Sav. Bank,  913 F.2d 5,  7 (1st  Cir. 1990)        _______     ________________________        (defendants' misrepresentations took  place after plaintiffs'  injury,                                                    _____        sustained at the  time they  moved into the  defective homes);  McEvoy                                                                        ______        Travel Bureau, Inc. v.  Heritage Travel, Inc., 904 F.2d 786,  792 (1st        ___________________     _____________________        Cir.)  (illegal payments  occurred  after  RICO  defendant  terminated                                            _____        contract),  cert. denied, 498 U.S. 992 (1990);  see also supra note 3.                    _____ ______                        ___ ____ _____        They argue, nonetheless, that recovery under RICO may be predicated on        what they characterize  as an  "indirect" section 1962  injury.5   For                                        ____________________               5Appellants argue that Holmes v. Securities Investor Protec-                                      ______    ___________________________          tion Corp., 112 S. Ct. 1311 (1992), and Sedima, S.P.R.L. v. Imrex          __________                              ________________    _____          Co., 473 U.S. 479 (1985), support the view that specific allegat-          ___          ions  that other  Trebol customers probably  were induced  to buy                     _____          Volvo GLEs as a result of particular acts of mail and wire fraud,          and that those customers  incurred "section 1961 injuries" (i.e.,                                                                      ____          damages  directly traceable  to  predicate acts  of fraud)  would          suffice to establish Trebol's continuing "scheme to defraud."  It          follows, say appellants,  that they need not allege  with further          specificity any particular predicate  act of fraud which directly                          __________                               ________                                          7        the reasons discussed below, we need  not reach appellants' circuitous        "causal nexus" argument.                  Even  assuming  their  argument  had  merit,  their  alleged        "section  1962  injury" would  be actionable  under  RICO only  if the        predicate  acts  alleged  in  the complaint  constitute  "racketeering        activity" or, in other  words, were "indictable" under the  mail, wire        or bank  fraud  statutes.   See 18  U.S.C. 1961(1).   Their  complaint                                    ___        alleged that the defendants  "falsely represented to customers willing                                      _______ ___________        to purchase motor vehicles  that they have available for  sale factory                                                                       _______        made models  (such as the  Volvo 240 GLE), which  were models distinct        ____        and  allegedly superior to the  other models then  manufactured by the        company (such as  the Volvo 240 DL)," and that  plaintiffs "relied on,                                                                    ______ __        and  accepted as  true[,] the representations  [that] . . .  they were        actually purchasing a superior automobile, a so-called  'international        classic', factory built and inherently more expensive motor vehicle."                  _______ _____                  Although we  have  combed  the entire  record,  we  find  no        indication  that Trebol ever  falsely represented that  it was selling        "factory made" Volvo  GLEs, as  plaintiffs assert.   On the  contrary,        during its  twenty-fifth anniversary sale at  least, Trebol advertised        for  sale its  own  customized versions  of the  Volvo  GLE ("ha  sido        preparado especialemente para  conmemorar") apparently configured with                                        ____________________          caused  them  to  buy their  1986  Volvo,  provided  their injury          proximately resulted from Trebol's sale  of a disguised Volvo DL,          or in other  words, as an  integral part of  the same "scheme  to          defraud."   See 18 U.S.C.    1964(c) ("Any person  injured in his                      ___          business or property  by reason  of a violation  of section  1962                                __ ______  __          . . . .") (emphasis added).                                          8        optional  equipment  in essentially  the same  fashion as  the vehicle        plaintiffs  purchased.     Moreover,   appellants  never  alleged   or        demonstrated that the nominal  classification "GLE", whether generated        at the factory or elsewhere along the distributional chain, invariably        connotes a fixed set of features or options of determinate value,  nor        have appellants  suggested  that  defendants  misled them  as  to  the        options  or features actually incorporated  in the Volvo  240 GLE they        purchased.   Rather,  these ads  and mailings  suggest, at  most, that        plaintiffs  presumed  too much     namely,  that  all Volvo  GLEs were        monolithic  and  immutable assemblages.    Although  various types  of        "deceptive  conduct"  other  than  affirmative  misrepresentations may        amount to  a "scheme to defraud"  under the mail, wire,  or bank fraud        statutes, see United  States v. Brien,  617 F.2d 299, 307  (1st Cir.),                  ___ ______________    _____        cert. denied, 446  U.S. 919 (1980); see also United States v. Fontana,        _____ ______                        ___ ____ _____________    _______        948 F.2d  796, 806 (1st Cir.  1991) (mail fraud); McEvoy,  904 F.2d at                                                          ______        791 (mail  fraud and  RICO), we think  the requirements  of Rule  9(b)        demand greater  particularity than  plaintiffs provided here,  even in        the liberal environs of Rule 12(b)(6).                  Appellants' complaint asserts that, even  if defendants made        no misrepresentations or misleading  statements, the scheme to defraud        was perpetuated  "through their nondisclosure . . .  of material facts                                        _____________           ________ _____        involved  in the purchases, namely,  the non-existence of  the 240 GLE        . . .  or the  fact  that  they  were  making  minor  and  inexpensive        modifications to the less expensive models in order for them to appear        to be  more expensive  models and/or the  fact that these  models were                                          9        modified  in  situ and  were not  built  at the  manufacturing plant."        (Emphasis added.)   They argue that  their civil RICO  claim need  not        depend  on an allegation that the defendants were under an affirmative        duty  to  disclose.    We  do  not agree.    Especially  when  alleged        violations  of the  mail,  wire,  or  bank  fraud  statutes  form  the        predicate acts relied on in a civil RICO complaint, mere nondisclosure        will  not  defeat   a  Rule  12(b)(6)  motion  absent  a  demonstrated        affirmative  duty  to  disclose,  or  some  special  circumstance  not        presented here.   See, e.g., Reynolds v. East Dyer  Dev. Co., 882 F.2d                          ___  ____  ________    ___________________        1249, 1252 (7th Cir.  1989) (absent some statutory or  fiduciary duty,        affirmative   misrepresentations,   "half-truths,"  or   elaborate  or        deliberate acts  of concealment, mail  and wire fraud  statutes cannot        form  predicate  for  RICO  violation).6    Absent  such  a  threshold        requirement,  civil RICO could be  invoked for the  redress of routine        "consumer  protection" and "breach of contract"  claims.  See Arzuaga-                                                                  ___ ________        Collazo, 913 F.2d at 5, 6-7 (suggesting that RICO claims which  reduce        _______        to ordinary  "consumer protection"  claims, based on  sellers' nondis-        closure of  material information, are  best left to  remediation under                                        ____________________               6See also United States v. Biesiadecki, 933 F.2d 539, 542-43                ___ ____ _____________    ___________          (7th Cir. 1991)  (distinguishing Reynolds as  nondisclosure case,                                           ________          noting  that nondisclosure  may serve  as evidence of  fraud when          coupled with affirmative misrepresentations); Kehr Packages, Inc.          _______                                       ___________________          v. Fidelcor, Inc., 926  F.2d 1406, 1416 (3d Cir.),  cert. denied,             ______________                                   _____ ______          111 S.  Ct. 2839  (1991); California Architectural  Bldg. Prods.,                                    _______________________________________          Inc.  v. Franciscan Ceramics, Inc., 818 F.2d 1466, 1472 (9th Cir.          ____     _________________________          1987), cert. denied, 484 U.S. 1006 (1988).                 _____ ______                                          10        state law).7                  Even if further particularization  of the alleged  "private"        predicate acts  might arguably await additional  discovery, appellants        have  failed to allege even one "public"  predicate act    that is, an                                    ___        act of  misrepresentation or actionable nondisclosure  by Trebol which        satisfies the specificity requirement  of Fed. R. Civ.  P. 9(b).   See                                                                           ___        New England Data, 829 F.2d  at 291 (liberal discovery allowed only  if        ________________        RICO complaint "otherwise  alleges detailed facts")  (emphasis added).                        _________        Were  these RICO  plaintiffs  licensed to  launch  a belated  "fishing        expedition"  on the brink of a Rule 12(b)(6) dismissal, without having        made  at least one manifest  allegation of actionable  fraud, we would                           ________  __________        invite commonplace abuse  of civil  RICO and routine  deferral of  the        particularized pleading required by Rule 9(b).  The district court ap-        propriately  concluded that  additional discovery  would amount  to an        unwarranted and "expensive fishing expedition," and properly dismissed                                        ____________________               7As  newfound grounds  for asserting  that defendants  had a          duty  to disclose,  appellants ask  this court  to take  judicial          notice of the Disclosure of Automobile Information Act, 15 U.S.C.             1231-1233, and  its Commonwealth  analog, P.R. Laws  Ann. tit.          13,   7351, which purportedly proscribe the removal of automobile          manufacturers'  labels  disclosing new-vehicle  model classifica-          tions.    Neither statute  was cited  or  argued to  the district          court.   Issues raised  for the first  time on appeal  are deemed          waived.   See Arzuaga-Collazo,  913  F.2d at  7 (RICO  plaintiffs                    ___ _______________          cannot rely  on Thrift  Institutions Restructuring Act  on appeal          from a  Rule 12(b)(6)  dismissal if  they did  not assert  a TIRA          claim "either before or  after judgment was entered"  in district          court); see also Goldman v. First Nat'l Bank, 985 F.2d 1113, 1116                  ___ ____ _______    ________________          n. 3 (1st Cir.  1993); Miller v. United States  Postal Serv., 985                                 ______    ___________________________          F.2d 9, 12 (1st Cir. 1993).                                          11        the complaint for failure to state a claim.8                  Affirmed.                  Affirmed.                  ________                                        ____________________               8Appellants  moved to  amend their  complaint  following its          dismissal.   The  motion identified,  for the  first time,  a few                                                ___ ___  _____ ____          other members of  the proposed plaintiff  class (persons who  had          bought Volvo GLEs from Trebol), and adverted to additional Trebol          advertisements  published just  prior to  appellants' 1986  Volvo          purchase.   For the reasons previously  stated, neither amendment          would have cured the  essential deficiency in their complaint              the failure to allege even one affirmative misrepresentation or a          duty  to  disclose  material   facts.    See  Correa-Martinez  v.                                                   ___  _______________          Arrillaga-Belendez,  903 F.2d 49, 59 (1st Cir. 1990) (no abuse of          __________________          discretion  where  RICO  complaint  was so  vague  that  proposed          amendment would be "futile").                                          12