Brown v. Cameron-Brown Co.
Brown v. Cameron-Brown Co.
Opinion of the Court
Plaintiffs, a group of Virginia mortgagors, sued defendants, a group of Virginia lending institutions, alleging violations of the antitrust statutes with respect to the handling of escrow accounts. Specifically they complain that thirty-five of the thirty-eight defendants required borrowers to make, in addition to payments of the interest and principal on their mortgages, monthly escrow payments to pay property taxes, insurance premiums and other assessments owed to third parties; and that these defendants neither account to plaintiffs or other borrowers for any profit earned on the escrow deposits between the time such sums are paid by the borrowers and the time that they are paid out by the lenders for their intended purpose nor do defendants “capitalize" these payments, i. e., credit the escrow payments to the unpaid balance of the principal of the mortgage pending their use for their intended purpose, thereby reducing the total amount of interest payable on the mortgages. This pattern of conduct is alleged to have resulted from an illegal conspiracy.
After suit was instituted, the district court deferred discovery on the merits of the litigation for an indefinite period but permitted discovery to proceed with reference to plaintiffs’ request for class certification. An initial motion to dismiss on behalf of all defendants was denied, but plaintiffs were directed to file particularized allegations of fact concerning the existence of a conspiracy with respect to thirty-five defendants (“non-dealing defendants,” not coterminous with the group of thirty-five defendants who required escrows) which had not had any direct dealings with plaintiffs and which did not hold mortgages on
We conclude that the district court correctly ruled that plaintiffs had alleged enough to demonstrate their standing to sue the non-dealing defendants and that their complaint was not subject to dismissal under Rules 11 and 41(b). We disagree that the district court had authority under Rule 83 to dismiss what it deemed a meritless lawsuit. We therefore reverse the judgment of dismissal and remand the case to the district court for further proceedings consistent with this opinion.
I.
We are in full accord with the district court .that when plaintiffs alleged injury as a result of a conspiracy in which the non-dealing defendants participated, plaintiffs have alleged standing to sue the non-dealing defendants. Simon v. Eastern Kentucky Welfare Rights Organization, 426 U.S. 26, 45—46, 96 S.Ct. 1917, 1927-28, 48 L.Ed.2d 450 (1976); Warth v. Seldin, 422 U.S. 490, 500-02, 95 S.Ct. 2197, 2205-07, 45 L.Ed.2d 343 (1975); Bogosian v. Gulf Oil Corp., 561 F.2d 434, 447-48 (3 Cir. 1977) cert. denied, 434 U.S. 1086, 98 S.Ct. 1280, 55 L.Ed.2d 791 (1978). We also agree for the reasons assigned by the district court in its memorandum opinion that plaintiffs were in violation of neither Rule 11 nor of Rule 41(b) so as to warrant dismissal of the complaint. In these respects the judgment of the district court is affirmed.
II.
A more troublesome question is the district court’s ruling that it had authority under Rule 83 to dismiss what it considered a meritless lawsuit. The provisions of the rule are:
Each district court by action of a majority of the judges thereof may from time to time make and amend rules governing its practice not inconsistent with these rules. Copies of rules and amendments so made by any district court shall upon their promulgation be furnished to the Supreme Court of the United States. In all cases not provided for by rule, the district courts may regulate their practice in any manner not inconsistent with these rules, (emphasis added)
It is the italicized sentence on which the district court relied for the action that it took.
From the language of the rule, there are two limitations on the authority of a district court to take action thereunder. First, the matter must be one “not provided for by rule,” and, second, the action taken must not be “inconsistent with these rules.” When the Federal Rules of Civil Procedure are considered in their entirety, it is at once
While defendants concede the availability of the remedies contained in Rules 12 and 56, they argue that the district court correctly treated Rule 83 as an additional source of authority for summary disposition of a frivolous lawsuit, and they argue further that resort to Rule 83 is proper to avoid the burden and expense of discovery which might be required to make Rule 56 effective. For the reasons which follow, we are not persuaded.
By its terms Rule 83 is the source of authority for judicial action only when other rules are inapplicable. Rule 56 provides a remedy for summary disposition of a frivolous claim, and Rule 56 is not made ineffective or unduly burdensome by the other rules providing for discovery. In a motion for summary judgment supported by affidavits under Rule 56(e), the opposing party “may not rest upon the mere allegations or denials of his pleading” but must instead “set forth specific facts showing that there is a genuine issue for trial.” If the opposing party is unable to present facts essential to survive the motion, the court may allow discovery under Rule 56(f) to enable the opposing party to attempt the requisite showing. In First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968), one of the defendants in an antitrust conspiracy case moved for summary judgment under Rule 56(e). The district court permitted limited discovery under Rule 56(f) to the plaintiff, and subsequently granted summary judgment against him. The Supreme Court affirmed, stating:
While we recognize the importance of preserving litigants’ rights to a trial on their claims, we are not prepared to extend those rights to the point of requiring that anyone who files an antitrust complaint setting forth a valid cause of action be entitled to a full-dress trial notwithstanding the absence of any significant probative evidence tending to support the complaint.
391 U.S. at 290, 88 S.Ct. at 1593. The Court also ruled that the district court can closely circumscribe the discovery permitted under Rule 56(f). Id. at 298, 88 S.Ct. at 1597.
Rule 56 therefore provides fully adequate procedures for disposing of claims lacking merit without the undertaking of massive discovery by the parties. It is noteworthy in this case that the defendants failed to file the affidavits that would have enabled them to avail themselves of Rule 56(e). Discovery to make Rule 56 effective need not be unbounded; and if the depositions, interrogatories, requests for production of documents or requests for admissions become unduly burdensome or expensive or oppressive, annoying or embarrassing, the district court has ample authority under Rule 26(c) to enter protective orders, inter alia, to limit or terminate discovery in addition to its authority under Rule 56(f).
We are aware of no authority which would afford to Rule 83 the broad grant of authority claimed under it by the district court. In support of their argument, defendants rely on Link v. Wabash Railroad Co., 370 U.S. 626, 630-31, 82 S.Ct. 1386, 1388-89, 8 L.Ed.2d 734 (1962). The district court also relied on Van Bronkhorst v. Safeco Corp., 529 F.2d 943 (9 Cir. 1976), but we are not persuaded that either case is authority for the action taken here. Rather
In this case, the district court was not faced with an unusual or interstitial problem, as were the courts in Link and Van Bronkhorst. Instead, it recognized that Rule 12(b)(6) would not justify dismissal of this case, and, erroneously, it concluded that Rule 56 would similarly not justify dismissal except after costly discovery. As we have shown, discovery in general and discovery for purposes of Rule 56 need not be an instrument of oppression. Thus, there are simply no valid reasons that those generally applicable rules would not be a source of appropriate relief in this case. No occasion arose therefore for the district court to fashion a new rule. Cf. Roadway Express, Inc. v. Piper, 447 U.S. 752, 764-67, 100 S.Ct. 2455, 2463-64, 65 L.Ed.2d 488 (1980) (sanctions implemented through assessment of attorneys’ fees).
The judgment of the district court is reversed and the case is remanded for further proceedings in accordance with the views expressed herein.
REVERSED AND REMANDED.
Reference
- Full Case Name
- Edward L. BROWN, Sr., Individually and on Behalf of All Members of a Class of Borrowers Similarly Situated Julius and Esther Collins, Individually and on Behalf of All Members of a Class of Borrowers Similarly Situated Thomas G. and Shirley Dillard, Individually and on Behalf of All Members of a Class of Borrowers Similarly Situated Elish Lake, Individually and on Behalf of All Members of a Class of Borrowers Similarly Situated William L. and Hilda McNeely, Individually and on Behalf of All Members of a Class of Borrowers Similarly Situated Percy Vandeleeuw, Individually and on Behalf of All Members of a Class of Borrowers Similarly Situated James A. and Sheila White, Individually and on Behalf of All Members of a Class of Borrowers Similarly Situated George M. Jr. and Constance Wyatt, Individually and on Behalf of All Members of a Class of Borrowers Similarly Situated v. CAMERON-BROWN COMPANY Century Mortgage Company, Inc. Colonial Group, Inc. Colonial Mortgage Corporation of D. C. Colonial Mortgage Service Company Countrywide Funding Corporation Finney Mortgage Corporation First Colonial Investors Corporation The Lomas & Nettleton Company Metropolitan Mortgage Fund, Inc. First Mortgage Corporation United Virginia Mortgage Corporation VNB Mortgage Corporation Virginia Investment and Mortgage Corporation Weaver Brothers, Inc. Western Pacific Financial Corporation of Maryland Citizens Trust Bank Dominion National Bank Fidelity American Bank (now known as Central Fidelity Bank) First Virginia Bank of Tidewater Peoples Bank of Chesapeake Virginia National Bank United Virginia Bank/Seaboard National Atlantic Permanent Savings and Loan Association Chesapeake Savings and Loan Association First American Savings and Loan Association of Virginia First Federal Savings and Loan Association (now known as First Savings & Loan Association of Suffolk) Life Federal Savings and Loan Association Mutual Federal Savings and Loan Association Peninsula Savings and Loan Association Pennamco, Inc. Berkley Citizens Mutual Savings and Loan Association, Inc. Seaboard Savings and Loan Virginia Beach Federal Savings and Loan Association Allstate Enterprises Mortgage Appellees Edward L. BROWN, Sr., Individually and on Behalf of All Members of a Class of Borrowers Similarly Situated Julius and Esther Collins, Individually and on Behalf of All Members of a Class of Borrowers Similarly Situated Thomas G. and Shirley Dillard, Individually and on Behalf of All Members of a Class of Borrowers Similarly Situated Elish Lake, Individually and on Behalf of All Members of a Class of Borrowers Similarly Situated William L. and Hilda McNeely, Individually and on Behalf of All Members of a Class of Borrowers Similarly Situated Percy Vandeleeuw, Individually and on Behalf of All Members of a Class of Borrowers Similarly Situated James A. and Sheila White, Individually and on Behalf of All Members of a Class of Borrowers Similarly Situated George M. Jr. and Constance Wyatt, Individually and on Behalf of All Members of a Class of Borrowers Similarly Situated v. CAMERON-BROWN COMPANY Century Mortgage Company, Inc. Colonial Group, Inc. Colonial Mortgage Corporation of D. C. Colonial Mortgage Service Company Finney Mortgage Corporation The Lomas and Nettleton Company Metropolitan Mortgage Fund, Inc. First Mortgage Corporation United Virginia Mortgage Corporation Weaver Brothers, Inc. Western Pacific Financial Corporation of Maryland Citizens Trust Bank Dominion National Bank Fidelity American Bank (now known as Central Fidelity Bank) First Virginia Bank of Tidewater Peoples Bank of Chesapeake Virginia National Bank United Virginia Bank/Seaboard National Atlantic Permanent Savings and Loan Association Chesapeake Savings and Loan Association First American Savings and Loan Association of Virginia First Federal Savings and Loan Association (now known as First Savings & Loan Association of Suffolk) Life Federal Savings and Loan Association Peninsula Savings and Loan Association Pennamco, Inc. Berkley Citizens Mutual Savings and Loan Association, Inc. Seaboard Savings and Loan Association Virginia Beach Federal Savings and Loan Association Allstate Enterprises Mortgage and Countrywide Funding Corporation First Colonial Investors Corporation VNB Mortgage Corporation Virginia Investment and Mortgage Corporation Mutual Federal Savings and Loan Association
- Cited By
- 11 cases
- Status
- Published