Cohen v. United American Bank

United States Court of Appeals,

Eleventh Circuit.

Nos. 95-2828, 95-2879.

Murray I. COHEN, Jane Cohen, Harold Gene Artrip, Margaret F.
Artrip, K.C.B. Industries, Inc., Plaintiffs-Counter-Defendants-
Appellants,

v.

UNITED AMERICAN BANK OF CENTRAL FLORIDA, Defendant-Counter-
Plaintiff-Appellee.

Murray I. COHEN, Jane Cohen, Harold Gene Artrip, Margaret F.
Artrip, and K.C.B. Industries, Inc., Plaintiffs-Counter-Defendants-
Appellees,

v.

UNITED AMERICAN BANK OF CENTRAL FLORIDA, Defendant-Counter-
Plaintiff-Appellant.

May 23, 1996.

Appeals from the United States District Court for the Middle
District of Florida. (No. 93-844-Civ-Orl-22), Anne C. Conway,
District Judge.

Before CARNES and BARKETT, Circuit Judges, and DYER, Senior Circuit
Judge.

DYER, Senior Circuit Judge:

This appeal arises from a partial summary judgment finding

that the Appellee did not violate the Bank Holding Company Act

Amendments of 1970, 12 U.S.C. §§ 1972 et seq. (1988), by

conditioning a loan on payment of a third party's loan. Because

there are no genuine issues of material fact and the Appellants

failed to meet their burden on summary judgment, we affirm.

I. BACKGROUND

Based on the record before the district court, we summarize

the following facts. Appellants Murray Cohen, Jane Cohen, Harold

Gene Artrip (collectively "the individual appellants"), and K.C.B.
Industries, Inc. ("KCB") filed this action seeking damages and an

injunction for violation of 12 U.S.C. § 1972 and various pendent

state claims. The complaint alleges that United American Bank of

Central Florida ("United American") orally agreed to lend

Appellants $500,000 on a line of credit, but reneged on the promise

by only advancing $125,000 and refusing to close the transaction

unless they caused a third party, Andrea Ruff, to make a $50,000

payment on her separate loan with United American.

Andrea Ruff was an attorney representing Lake Tech, Inc.,

d/b/a Lake Technologies, Inc. ("Lake Tech") in Chapter 11

bankruptcy. She approached the individual appellants about an

opportunity to purchase Lake Tech. Ruff explained that the company

had developed a market niche in supplying road signs, primarily to

governmental entities, but had cash flow problems and needed a

capital infusion to purchase inventory and proceed with bidding on

contracts. The individual appellants found the opportunity

attractive and negotiated an agreement with Ruff and the principal

of Lake Tech, Thomas Duffey ("Duffey"). The agreement provided for

the individual appellants to become stockholders in an existing

corporation in which Duffey's daughter, Keri, was a stockholder.

The "existing corporation" referred to in the agreement became KCB.

Jane Cohen, Margaret Artrip and Keri Duffey owned all of KCB's

stock, ostensibly for the purpose of qualifying for minority

bidding status. The parties agreed that KCB would bid on contracts

that otherwise would have been bid by Lake Tech. KCB would

subcontract to Lake Tech, retaining 10% and giving Lake Tech 90% of

the contract amount.
 Murray Cohen and Gene Artrip contacted Sidney Cash, the

president of United American, about obtaining a loan for KCB.

Cohen and Artrip explained that KCB had existing contracts to

provide signs, but that Lake Tech needed capital to purchase

inventory to fill the orders. Because Lake Tech was at risk of

being converted to a Chapter 7 liquidation, Cohen and Artrip were

unwilling to invest directly in Lake Tech, but rather planned for

KCB to extend specific capital loans to Lake Tech to finance the

manufacturing necessary to fill KCB's orders. Cohen and Artrip

suggested the bank could benefit by making the loan to KCB because

Lake Tech owed Ruff $175,000 in legal fees. Knowing of the bank's

problems with payment on Ruff's loans, they emphasized to Cash that

the loan to KCB would permit Lake Tech to continue operating,

thereby generating income with which to pay Ruff's outstanding

legal bills; Ruff would then have funds to repay her debt with

United American. In addition, Cohen and Artrip offered to have

2.5% of any loan advances disbursed directly to Ruff for immediate

reduction of her debt. By receiving the loan proceeds both

directly from Lake Tech and indirectly from KCB, Cohen and Artrip

pointed out that Ruff would be able to continue providing the legal

services that Lake Tech needed in its bankruptcy. In light of the

significant relatedness and business relationships between Ruff,

Lake Tech, Cohen and Artrip, Cash considered the benefits of

reducing Ruff's loan in the context of extending credit to Cohen,

Artrip and KCB. When Cash discussed the matter with Ruff, she

agreed to pay down her personal loan provided United American made

the loan Cohen and Artrip requested. In fact, Ruff sent Cash a
$50,000 check as payment on her loan conditioned upon the check

being held in escrow until United American funded KCB's loan.

The district court held on these undisputed facts that even if

United American required Ruff to reduce her loan as a condition of

extending credit to the appellants, such a requirement was not a

"tying" as a matter of law because it was not "anticompetitive,"

and that the requirement was not "anti-competitive" because of the

relatedness of Ruff and the appellants. There being no violation

of 12 U.S.C. § 1972, the district court granted summary judgment on

the anti-tying claims, and dismissed the pendent claims without

prejudice. A motion for rehearing was denied. The court entered

final judgment for United American. Following the judgment, United

American filed a motion for attorney fees based on the specific

language of several loan agreements, which the court denied. On

appeal we review the orders de novo and affirm both, although we

hold United American is entitled to summary judgment for a

different reason than the district court.

II. DISCUSSION

A. Section 1972 Claim

A motion for summary judgment should be granted when "the

pleadings, depositions, answers to interrogatories and admissions

on file, together with the affidavits, if any, show that there is

no genuine issue of material fact and that the moving party is

entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c).

"The party seeking summary judgment bears the initial burden of

identifying for the district court those portions of the record

"which it believes demonstrate the absence of a genuine issue of
material fact.' " Cox v. Administrator United States Steel &

Carnegie, 17 F.3d 1386, 1396 (11th Cir.1994) (quoting Celotex Corp.

v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265

(1986)). There is no genuine issue for trial unless the non-moving

party establishes, through the record presented to the court, that

it is able to prove evidence sufficient for a jury to return a

verdict in its favor. See Anderson v. Liberty Lobby, Inc., 477

U.S. 242, 249, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). "With

regard to issues on which the non-moving party bears the burden of

proof, the moving party need not support its motion with evidence

"negating the opponent's claim.' " Cox, 17 F.3d at 1396.

Appellants contend that by tying their loan to a payment on

Ruff's loan, United American required an additional service in

violation of 12 U.S.C. § 1972(1)(C). That section prohibits

certain tying arrangements, stating in relevant part that "[a] bank

shall not in any manner extend credit ... on the condition or

requirement ... that the customer provide some additional credit,

property, or service to such bank, other than those related to and

usually provided in connection with a loan, discount, deposit, or

trust service...." 12 U.S.C. § 1972(1)(C) (1988). A § 1972

plaintiff must prove that the condition placed on the loan is 1) an

unusual banking practice; 2) an anticompetitive tying arrangement;

and 3) a practice that benefits the bank. Parsons Steel, Inc. v.

First Alabama Bank of Montgomery, N.A., 679 F.2d 242, 245 (11th

Cir.1982). Accord Palermo v. First Nat'l Bank & Trust Co., 894

F.2d 363, 368 (10th Cir.1990); Sanders v. First Nat'l Bank & Trust

Co., 936 F.2d 273, 278 (6th Cir.1991). To survive summary
judgment, a plaintiff "must present evidence sufficient to create

a fact issue regarding whether the conditions placed on the loan

were unusual in the banking industry." Gulf States Land & Dev.

Inc. v. Premier Bank, N.A., 956 F.2d 502, 506-07 (5th Cir.1992).

We find Appellants failed to present evidence to prove their

claim. They did not supplement the allegations of the complaint

with affidavits, file a memorandum in opposition to the motion for

summary judgment, or otherwise comply with Rule 56(e) on a timely

basis so there is no genuine dispute on the record as to the

material facts set forth above. Moreover, Appellants did not

provide any evidence that conditioning KCB's loan on a reduction of

Ruff's loan is an unusual banking practice. We thus find United

American entitled to final summary judgment as a matter of law and

affirm the district court.

B. Attorney's Fees

United American argues that the § 1972 action, particularly

the request to enjoin enforcement of the promissory note, is

"directly and inescapably related to" the counterclaim seeking

enforcement of the promissory note. Because both the claim and the

counterclaim are "related to" the loan agreement which provides for

an award of attorney's fees, they contend they are entitled to a

fee award for successfully defending against the § 1972 claims. We

disagree because Florida law requires each claim and permissive

counterclaim to be assessed individually. Cf. Triefler v. Barnett

Bank of South Florida, N.A., 588 So.2d 240, 242

(Fla.Dist.Ct.App.1991) (denying bank attorney's fees for defending

a permissive counterclaim for slander where original action was to
collect balance due on promissory note) and Vistaco, Inc. v.

Prestige Properties, Inc., 559 So.2d 744 (Fla.Dist.Ct.App.1990)

(plaintiff awarded fees for defending compulsory counterclaim

arising from the contract).

Appellants' § 1972 claim addresses the formation of the

promissory note and does not arise out of the contract. The

counterclaim is permissive because it is a separate and distinct

action on the contract itself. The fee provision in the contract,

therefore, does not apply to permit United American to recover

attorney's fees for successfully defending the original claim that

was not predicated on the contract. We affirm the district court's

order denying attorney's fees to United American.