Dixon v. Ford Motor Credit Co ( 2001 )

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.
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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this opinion should not be published and is not precedent except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