Court Opinion

ID: 23733
Source: CourtListenerOpinion
Date Created: 2010-04-25 08:13:43+00
Date Added: 2024-06-11T15:04:16.194390
License: Public Domain

IN THE UNITED STATES COURT OF APPEALS

                       FOR THE FIFTH CIRCUIT

                   __________________________

                          No. 00-31154
                      (Summary Calendar)
                   __________________________

MARION DIXON, ET AL,
                                                         Plaintiffs,

MICHELLE JAMES ORSO;
LEROY PERRY;
KEVIN DUTHU,
                                               Plaintiffs-Appellants,

                                versus

FORD MOTOR CREDIT COMPANY;
CHRYSLER FINANCIAL CORPORATION;
NISSAN MOTOR ACCEPTANCE CORPORATION;
LOUISIANA DEALER SERVICES INSURANCE, INC.;
FIRST ASSURANCE LIFE OF AMERICA;
AMERICAN NATIONAL INSURANCE COMPANY,

                                               Defendants-Appellees.

-----------------------------------------------------------------

KEVIN WELLS, JR.; Etc; ET AL,

                                                          Plaintiffs,

                                versus

LOUISIANA DEALER SERVICES INC.;
FIRST ASSURANCE LIFE OF AMERICA;
CRESCENT CITY NISSAN EAST,

                                               Defendants-Appellees.

       ___________________________________________________
              Appeal from the United States District Court
                  for the Eastern District of Louisiana
                    (Nos. 98-CV-2456-J; 99-CV-1819-J)
          ___________________________________________________
                              April 2, 2001

Before HIGGINBOTHAM, WIENER, and BARKSDALE, Circuit Judges.

PER CURIAM:*

     Plaintiffs-Appellants (collectively “Dixon”), who purchased

credit life insurance from Defendants-Appellees lenders and credit

insurers        (collectively    “Ford”)       in    connection    with    automobile

financing, appeal the district court’s grant of summary judgment to

Ford on their federal RICO claims and dismissal without prejudice

of their pendent state-law claims.                  We affirm.

                                         I.

                              FACTS AND PROCEEDINGS

     In this consolidated action, Dixon brings claims against Ford

under     the    Racketeer    Influenced       and    Corrupt    Organizations      Act

(“RICO”)1       and   the   Louisiana   Motor        Vehicle     Sales    Finance   Act

(“LMVSFA”),2       seeking,     inter   alia,       treble   damages,      costs,   and

attorneys’ fees under the civil liability provisions of RICO.3                      The

gravamen of Dixon’s complaint is that Ford allegedly engaged in a

     *
      Pursuant to 5TH CIR. R. 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
     1
        18 U.S.C. § 1961 et seq.
     2
         La. Rev. Stat. 6:951 et seq.
     3
         See 18 U.S.C. § 1964(c).

                                           2
mail-fraud scheme involving the sale and financing of credit life

insurance,4 in connection with vehicle financing contracts, without

disclosing to the purchasers that (1) the credit life insurance

premium includes an additional amount of coverage for unearned

interest on the contracts, which interest is never owed, resulting

in the insurance of a non-existent risk; and (2) approximately 60

to 70 percent of the credit life insurance premium is “pocketed” by

the vehicle dealer.    Ford denies all liability.

     To say that this case has had “a long and tortured history,”

as the district court put it, would be an understatement; were we

to narrate this procedural odyssey in its entirety, our account

would include four transfers to three district court judges, two

dismissals from the district court accompanied by two forays into

state courts, two changes in the named plaintiffs, and four amended

complaints.   Only two recent episodes in this circuitous history,

however, are directly relevant to the issues that we must decide on

appeal today.

     First, in May 2000, the district court denied both Ford’s

motions to dismiss the fourth amended complaint for failure to

state a claim and its motion for summary judgment; the district

court    summarily   concluded   that   after   “considering   all   the

applicable law and standards, the Court does not believe this case

     4
      Credit life insurance is insurance on the life of the
debtor for the security of the creditor in connection with a loan
or other credit transaction.

                                   3
should be dismissed for failure to state a claim or for any other

reason, nor does it believe that summary judgment is appropriate

under all the facts and circumstances.”                        Although the district

court’s order reiterates the parties’ claims and defenses, it does

not explain the reasoning behind the ruling.

      Second, shortly after the district court made that ruling,

this case was transferred to another district court judge. In July

2000, the transferee judge, sua sponte, ordered the parties to

brief the questions “whether federal subject matter jurisdiction is

present in this case, and more specifically, whether plaintiff has

a   viable   RICO   claim.”         The    transferee          judge’s     directive    was

motivated by a concession made by Dixon’s counsel during oral

argument on     another     motion        that       “the   sole    basis    for    federal

jurisdiction in this matter is [the] alleged claim under RICO[.]”

      After the parties filed their briefs, the district court

issued a ruling that dismissed Dixon’s RICO claims with prejudice

and dismissed pendent state-law claims without prejudice.                              In a

thorough, well-reasoned opinion, the district court concluded that

under Summit Properties, Inc. v. Hoechst, which we decided one

month after the earlier ruling by the previous judge on the motions

to dismiss, a plaintiff must plead detrimental reliance on the

predicate    mail   fraud     to    state        a    viable      RICO    claim.5     After

observing    that   Dixon     had    failed          to   plead    such    reliance,    the

      5
       See 214 F.3d 556, 562 (5th Cir. 2000).

                                            4
district court then went outside the pleadings to find that “[i]n

fact, the representative plaintiffs have testified in depositions

that they did not rely on any representations or omissions of the

defendants in deciding to purchase credit life insurance,” and

dismissed Dixon’s RICO claims with prejudice.                 The district court

also exercised its discretion to decline supplemental jurisdiction

over       Dixon’s   state-law      claims,     and   dismissed      them    without

prejudice.

       Dixon now appeals to us, contending, inter alia, that the

district court        (1)   erred    in   dismissing    the   RICO    claims    with

prejudice after considering evidence outside the pleadings but

without providing the required notice or opportunity to respond to

that evidence, (2) erred in declining to apply the law-of-the-case

doctrine to the previous judge’s earlier ruling on the viability of

the RICO claims, and (3) abused its discretion in declining to

exercise supplemental         jurisdiction       over   the   pendent       state-law

claims.      We shall address these issues seriatim.

                                          II.

                                      ANALYSIS

A.   Standard of Review

       We review a grant of summary judgment de novo, applying the

same standard as the district court.6             A grant of summary judgment

       6
      Morris v. Covan World Wide Moving, Inc., 144 F.3d 377, 380
(5th Cir. 1998). Although the district court styled its decision
as a dismissal for lack of subject matter jurisdiction, a reading
of the district court’s order discloses that the court properly

                                           5
is proper only if there is no genuine issue as to any material

fact.    The movant may demonstrate such a lack by pointing out the

absence    of   evidence    to   support   an   essential   element   of   the

nonmovant’s claim, as “a complete failure of proof concerning an

essential element of the nonmoving party's case necessarily renders

all other facts immaterial."7 In deciding whether summary judgment

is proper, we must view the facts and the inferences to be drawn

from them in the light most favorable to the nonmovant.8          We review

a district court’s decision to decline to exercise supplemental

jurisdiction     over      pendent   state-law     claims   for   abuse    of

exercised its federal-question jurisdiction and determined that
Dixon had failed to establish a claim under the federal statute
alleged in the complaint. We have long recognized that “[w]here
the existence of a cause of action is inextricably bound up with
the question of this court’s subject matter jurisdiction, we
treat the dismissal as one on the merits under Rule 12(b)(6) or
as a grant of summary judgment under Rule 56.” See Carpenters
Local Union No. 1846 v. Pratt-Farnsworth, Inc., 690 F.2d 489,
499-500 n.4 (5th Cir. 1982) (citation omitted). As the district
court considered material outside the pleadings in dismissing
Dixon’s federal claim with prejudice, we treat the dismissal as a
summary judgment and review it accordingly. See Federal Rule of
Civil Procedure 12(b) ("If . . . matters outside the pleading are
presented to and not excluded by the court, the motion shall be
treated as one for summary judgment and disposed of as provided
in Rule 56[.]"); see also Baker v. Putnal, 75 F.3d 190, 197 (5th
Cir. 1996) ("where a district court grants a motion styled as a
motion to dismiss but bases its ruling on facts developed outside
the pleadings, we review the order as an order granting summary
judgment”).
     7
        Celotex Corp. v. Catrett, 477 U.S. 317, 323-25 (1986).
     8
      Olabisiomotosho v. City of Houston, 185 F.3d 521, 525 (5th
Cir. 1999).

                                      6
discretion.9

B.   Summary Judgment on RICO Claims

      Dixon argues that the district court erred by granting summary

judgment sua sponte to Ford on the RICO claims without providing

Dixon notice   and   a   reasonable       opportunity   to   respond    to   the

evidence presented by Ford as required under Rules 12(b) and 56.

Ford counters that even if Dixon did not receive adequate notice,

the grant of summary judgment should nevertheless be upheld under

the harmless   error     standard   because     a   review   of   all   Dixon’s

additional evidence discloses that there is no genuine issue of

material fact.10   We agree.

      Under Summit, a plaintiff must demonstrate reliance on the

predicate mail fraud to establish the proximate causation required

under the RICO statute.11     Here, the district court concluded that

Dixon not only did not but also could not allege reliance, as “the

representative plaintiffs have testified in depositions that they

      9
      Batiste v. Island Records, Inc., 179 F.3d 217, 227 (5th
Cir. 1999).
      10
      See Nowlin v. Resolution Trust Corp., 33 F.3d 498, 504
(5th Cir. 1994).
      11
      See 214 F.3d at 561-62. Dixon unsuccessfully attempts to
evade the clear holding of Summit by distinguishing that case on
its facts: Summit, according to Dixon, involved
misrepresentations made to persons other than the plaintiffs, on
which the plaintiffs did not rely; here, Dixon claims,
“defendants directly participated in the transactions by which
[the plaintiffs] were damaged.” But Summit itself makes clear
that “any fraud during the sale of those products proximately
injured only those initial purchasers who relied on the alleged
misrepresentations[.]” Id. at 560.

                                      7
did not rely on any representations or omissions of the defendants

in deciding to purchase credit life insurance.”            Even though it is

generally true that leave should be liberally granted to amend

pleadings for failure to state a cause of action, under the instant

circumstances, when it appears beyond doubt that the plaintiffs can

prove no set of facts to support their RICO claims, the grant of

summary judgment to the defendants is proper.            This is true even if

we assume that the plaintiffs did not receive sufficient summary-

judgment notice.12     Accordingly, the district court did not err in

granting summary judgment to Ford on Dixon’s RICO claims.

C.   Law of the Case

      Dixon also contends that the law-of-the-case doctrine bars the

district court from holding that the plaintiffs’ RICO claims are

fatally defective.       More specifically, Dixon argues that the

district court’s prior ruling on Ford’s motions for dismissal and

summary judgment prior to the transfer of the case was “entitled to

substantial deference” and should not have been disturbed.

      Ford   responds,   correctly,       that   under   the   law-of-the-case

doctrine, a successor judge has the same discretion to reconsider

      12
      See Leatherman v. Tarrant County Narcotics Intelligence &
Coordination Unit, 28 F.3d 1388, 1398 (5th Cir. 1994) (“When
there is no notice to the nonmovant, summary judgment will be
considered harmless if the nonmovant has no additional evidence
or if all of the nonmovant's additional evidence is reviewed by
the appellate court and none of the evidence presents a genuine
issue of material fact.”) (internal punctuation and citations
omitted).

                                      8
an order as would the first judge, although the successor judge

should not overrule his predecessor’s order or judgment merely

because      the     successor        judge       would     have     decided      matters

differently.13        But the doctrine does not apply when the prior

decision was        erroneous,     is    no       longer    sound,   or   would    create

injustice.14        In the instant case, our decision in Summit, which

clarified that RICO plaintiffs must establish reliance on the

predicate mail fraud, was not available for consideration by the

predecessor        judge   in   ruling    on       Ford’s    motions.      Under   these

circumstances, the law-of-the-case doctrine erected no barrier to

the successor judge’s consideration of the plaintiffs’ ability to

state a viable RICO claim in light of Summit’s supervening clear

holding that RICO plaintiffs must allege and prove reliance on the

predicate acts of alleged mail fraud.

D. Dismissal of Pendent State-Law Claims

     In view of our decision that the district court providently

granted summary judgment to Ford on Dixon’s federal claims, we need

not linger long over Dixon’s contention that the district court

abused     its     discretion    in     declining      to     exercise    supplemental

jurisdiction over Dixon’s pendent state-law claims.                            Under 28

U.S.C. § 1367(c)(3), the district court “may decline to exercise

supplemental jurisdiction over a claim . . . if . . . the district

     13
          See United States v. O’Keefe, 128 F.3d 885, 891 (5th Cir.
1997).
     14
          See id.

                                              9
court      has   dismissed    all    claims     over   which   it    has    original

jurisdiction.”         In general, the dismissal of state-law claims is

favored when, as here, (1) the federal claims to which they are

pendent are dismissed and (2) the factors of judicial economy,

convenience, and fairness to litigants are not present.15

      In declining to exercise supplemental jurisdiction in the

instant case, the district court emphasized that (1) pretrial

preparation       “has     largely    been      limited   to    addressing       the

jurisdiction issue,” (2) the issue of class certification has yet

to be addressed, and (3) no trial dates or other deadlines have

been established.          In addition, the relevant provisions of the

Louisiana statute at issue here have yet to be interpreted by a

Louisiana court.16        Under these circumstances, the district court

prudently concluded that “in the absence of any valid federal

claims     and   any     justification   stemming      from    judicial     economy

concerns of issues of convenience or fairness to litigants, which

might be present if this litigation were more advanced,” it should

not     “needlessly        make     decisions     concerning        state    law.”17

      15
      See Guzzino v. Felterman, 191 F.3d 588, 594 (5th Cir.
1999) (citation omitted).
      16
      See 28 U.S.C. § 1367(c) (listing among the factors which a
court must consider in deciding whether to exercise supplemental
jurisdiction whether “the state claim raises a novel or complex
issue of State law”).
      17
      See also Guzzino, 191 F.3d at 594 (“Needless decisions of
state law should be avoided both as a matter of comity and to
promote justice between the parties, by procuring for them a
surer-footed reading of applicable law.”) (citation omitted).

                                         10
Accordingly, the district court did not abuse its discretion in

declining   to   exercise   supplemental    jurisdiction   over   Dixon’s

pendent state-law claims.

                                  III.

                               CONCLUSION

     For the reasons explained above, the district court’s grant of

summary judgment to Ford on Dixon’s RICO claims and its dismissal

without prejudice of Dixon’s pendent state-law claims are

AFFIRMED.

                                   11