Murr Plumbing, Inc. v. Scherer Bros. Financial Services Co.

Citations: 48 F.3d 1066; 1995 WL 78043Docket: No. 94-2363

Court: Court of Appeals for the Eighth Circuit; February 27, 1995; Federal Appellate Court

Lead Opinion SummaryLead Opinion Original

EnglishEspañolSimplified EnglishEspañol Fácil

Murr Plumbing, Inc. appealed the dismissal of its second amended RICO complaint, which was found to lack the requisite specificity in alleging mail and wire fraud as mandated by Rule 9(b) of the Federal Rules of Civil Procedure. The district court determined that Murr’s allegations were conclusory and did not meet the specificity requirements, leading to an affirmation of the dismissal. Background details include Scherer Brothers Lumber Co. forming a subsidiary, Scherer Brothers Financial Services Co. (SBFSC), to finance developers, while also providing building materials at inflated prices. Murr, as a plumbing subcontractor, worked on fourteen construction projects for undercapitalized developers, ultimately losing its mechanic's lien due to SBFSC's foreclosure on the mortgages. Murr's initial RICO complaint involved twenty-two defendants and twenty-four homes, leading to multiple hearings and opportunities to amend. However, after filing a second amended complaint with expanded claims, Scherer successfully moved for summary judgment on the RICO count, citing insufficient pleadings and a lack of supporting evidence for the alleged fraudulent scheme. The court also declined to exercise supplemental jurisdiction over related state law claims, prompting Murr to file a timely appeal. Summary judgment was deemed appropriate since there were no material facts in dispute and the moving party was entitled to judgment as a matter of law. Murr identified three claimed errors in its appeal.

Murr contends that the district court improperly required specific details of false representation for its RICO claim, incorrectly dismissed its second amended complaint despite prior denials of motions to dismiss its original complaint, and argued that a Rule 9(b) challenge should not have been considered. The court found these arguments meritless. 

Regarding the specificity of mail and wire fraud allegations under Rule 9(b), it is established that such allegations must detail the time, place, contents of the misrepresentations, the identity of the misrepresentor, and what was obtained. Although Murr is correct that a RICO claim does not necessitate proof of misrepresentation, the court clarified that Murr's complaint was dismissed not for failing to allege common law fraud but for lacking the required specificity in fraud allegations. 

On the second point, Murr's reliance on the "law of the case" doctrine, claiming that previous denials of motions to dismiss equated to a finding that its amended complaint complied with Rule 9(b), was flawed both factually and legally. The court noted that the prior orders merely allowed Murr the opportunity to amend its complaint and did not affirm compliance with Rule 9(b). Thus, the dismissal of Murr’s RICO action was upheld due to insufficient pleading of mail and wire fraud specifics.

The excerpt outlines a case involving the application of Rule 9(b) in the context of RICO mail and wire fraud claims, referencing multiple court decisions. The First Circuit in New England Data Servs. Inc. v. Becher established a two-step evaluation for challenges under Rule 9(b). In contrast, Varnberg v. Minnick resulted in summary judgment due to a lack of specific fraud allegations, while Nagle v. Merrill Lynch indicated a willingness to permit amendments if the court were to decide on that issue.

Judge Rosenbaum's comments during hearings indicated dissatisfaction with the sufficiency of the complaint, suggesting that the denial of the motion to dismiss did not reflect a judgment on the merits. It was emphasized that such rulings are interlocutory, allowing the district court the authority to reconsider them before a final judgment. The discussion further confirms that the district court appropriately treated Scherer’s motion, which included matters outside the pleadings, as a summary judgment motion.

Murr argued a lack of notice regarding the summary judgment; however, the record shows Murr had sufficient notice of Scherer's arguments concerning Rule 9(b) compliance. The district court concluded that Murr's allegations were conclusory and failed to meet the specificity required by Rule 9(b), leading to the dismissal of the complaint. The decision was deemed proper and within the district court's authority, affirming that the Rule 9(b) issue was appropriately before the court. The case also involves several other defendants, but the focus remains primarily on Scherer and related parties.

Scherer has responded to Murr's initial complaint, which claims damages related to labor and materials provided on fourteen properties, although a fifteenth property is also mentioned without explanation. The appeal is decided based on Rule 9(b), avoiding consideration of the district court's alternative rulings or issues with the complaint, as well as Murr's Rule 56(f) argument presented for the first time on appeal. The mail and wire fraud statutes address both misrepresentations and non-misrepresentation frauds. In cases of non-misrepresentation fraud, four elements must be established: a scheme to defraud, intent to defraud, reasonable foreseeability of mail or wire use, and actual use of mail or wires in furtherance of the scheme. The orders from March 26 and May 20 addressed motions to dismiss the original complaint and do not automatically apply to the second amended complaint. It is assumed for decision purposes that the two complaints are sufficiently similar, allowing the final judgment on the original complaint's sufficiency to impact the second amended complaint under the law of the case doctrine.