particularity; that matters such as the time, the place, the
contents of the false representations be stated. Although not
stated by plaintiffs' in their complaint, the only apparent
potential for a fraud claim rests upon statements made in
letters which defendants allegedly knew were false. If this is
plaintiffs' theory, plaintiffs must set out the contents of
the letters and specify in what respect each of the statements
were false and misleading, and the factual basis for believing
that the defendants acted with an intent to defraud. E.g.,
Gross v. Diversified Mortgage Investors, 438 F. Supp. 190
(S.D.N.Y. 1977); see 5 Wright and Miller, Federal Practice and
Procedure § 1297 & n. 54 (1969 & Supp. 1983).
However, in the instant case, the most that can be drawn
from plaintiffs' allegations is a claim for breach of contract
— defendants did not provide the money though they promised
they would. Mere breach of business contract disputes do not
provide a basis for a RICO suit. Such allegations do not state
a violation of the mail fraud statute under state or federal
law upon which plaintiffs can predicate their RICO claim. Even
under the liberal pleading policy outlined in Schacht,
plaintiffs' allegations are insufficient. Moreover, plaintiffs
have failed to allege what is the enterprise and how the
activities of that enterprise are engaged in or affect
interstate commerce, essential elements to any RICO claim. See
United States v. Rone, 598 F.2d 564, cert. denied,
455 U.S. 946, 100 S.Ct. 1345, 63 L.Ed.2d 780 (9th Cir. 1979). Since
plaintiffs have failed to allege a federal or state law fraud
upon which to base their RICO claim or identify the enterprise
and how it affected interstate commerce, Count IV of the
complaint is dismissed.
Turning to Count V, plaintiffs' other federal claim, the
complaint alleges that defendants breached fiduciary duties by
violating 12 U.S.C. § 1461 et seq., the Homeowner's Loan Act of
1933 ("HOLA"). HOLA provides a comprehensive scheme for
regulation of federal savings and loan associations by the
Federal Home Loan Bank Board ("Board"). Section 1464(d)
provides for enforcement of HOLA and regulations promulgated
thereunder by the Board. Defendant contends that no private
right of action is implied under HOLA, and therefore Count V
must also be dismissed.
Although courts have not uniformly agreed that HOLA implies
a private right of action,*fn4 the Seventh Circuit has
recently indicated that a private plaintiff may seek judicial
enforcement of federal common law rights implied under HOLA.
Barany v. Buller, 670 F.2d 726 (7th Cir. 1982). However, courts
have permitted such private enforcement only after the
plaintiff has exhausted his administrative remedies with the
Board. Milberg v. Lawrence Cedarhurst Federal Savings and Loan
Association, 496 F.2d 523 (2d Cir. 1974); Murphy v. Colonial
Federal Savings and Loan Association, 388 F.2d 609, 614-25 (7th
Cir. 1967). Although the issue of whether exhaustion is
required prior to seeking judicial relief has not been
definitely resolved, People of the State of Illinois v. Home
Federal Savings and Loan Association, 521 F.2d 704 (7th Cir.
1975), the Seventh Circuit has indicated that exhaustion of
administrative remedies is proper before judicial relief is
sought. Goldman v. First Federal Savings and Loan Association
of Wilmette, 518 F.2d 1247, 1250 n. 6 (7th Cir. 1975); see also
Mortenson v. First Federal Savings & Loan Association, 79
F.R.D. 603 (D.N.J. 1978).
It appears from plaintiff's complaint that all acts that
plaintiffs complain of fall within HOLA regulations and the
power of the Board. Plaintiff, in fact, admits that
"substantially all of the breaches of fiduciary duty alleged
by plaintiff have been disclosed as a result of an
investigation and report made by the Board in 1976. (See
Exhibit to Plaintiffs' Response.)" (Plaintiffs' Response to
Motion to Dismiss Amended Complaint at Page 19). Plaintiff
argues that it need not bring the similar breaches alleged in
Count V before the Board since the Board's report indicated
that it knew of the violations but failed, to plaintiffs'
knowledge, to assert any of its regulatory or enforcement
powers under HOLA.
Examination of the entire case file in the instant case,
including "Exhibits to Plaintiffs' Response," reveals only one
Federal Home Loan Bank Board Report, dated April 14, 1976.
(See attached to Plaintiffs' Response to Motion to Dismiss
Complaint.) This report is subject to a protective order,
entered in the case of Lansing Federal Savings and Loan
Association v. St. Paul Fire & Marine Insurance, No. 78 C 4870
(N.D.Ill. 1980). Since the Board report covers investigations
made three years prior to any relationship between plaintiffs
and Lansing, such report cannot satisfy the Board review
required before judicial review of alleged HOLA violations
proceeds. Normally, under such circumstances, the action is
stayed, pending administrative determination by the Board.
Murphy v. Colonial Federal Savings and Loan Association,
388 F.2d 609 (2d Cir. 1967).
However, in the instant case, plaintiffs' HOLA count alleges
individual directors and officers of Lansing have
from time to time violated their fiduciary duties
under the Rules and Regulations promulgated by
the Board pursuant to the Homeowners Loan
Act. . . .
(Count V, par. 6). Plaintiffs pray for an accounting,
injunctive relief and compensatory and exemplary damages. As
it presently stands, the entire HOLA count is aimed at the
officers and directors of Lansing. On February 22, 1983, after
the filing of plaintiffs' First Amended Complaint, this court
granted leave to substitute First Savings and Loan Association
of Hegewisch as defendant, in lieu of Lansing Federal Savings
and Loan Association. (See note 1, supra). Thus, absent an
allegation that the officers and directors of Lansing succeeded
to positions at Hegewisch, the plaintiffs HOLA count is simply
moot to the extent it seeks injunctive relief. 13 Wright,
Miller & Cooper, Federal Practice and Procedure § 3533 (1975).
Although a damage claim will survive a mootness conclusion, the
plaintiffs' complaint does not state a viable claim for damages
based on HOLA violations. Plaintiffs apparently bring their
HOLA claim as depositors of Lansing. Yet plaintiffs fail to
allege that they were damaged as individual depositors by any
of the alleged HOLA violations. Alternatively, plaintiffs fail
to allege that they seek to maintain their HOLA claim under
Rule 23 of the Federal Rules of Civil Procedure as class
representatives. Under these circumstances, plaintiffs HOLA
count must also be dismissed. See Goldman v. First Federal
Savings and Loan Association of Wilmette, 521 F.2d 704 (7th
Cir. 1975). Therefore, proceedings related to Count V and the
pendent state claims are dismissed.
For the reasons stated in the foregoing opinion, Count IV
Count V and all of the pendent state claims are dismissed.
Plaintiff is hereby granted leave to file a Second Amended
Complaint within 28 days hereof.