Ann M. LaBarre v. Credit Acceptance , 175 F.3d 640 ( 1999 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
_____________
No. 98-3097
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Ann M. LaBarre, *
*
Appellant, *
*
v. *
* Appeal from the United States
Credit Acceptance Corporation, a * District Court for the District
Michigan corporation; Bankers & * of Minnesota.
Shippers Insurance Company, sued as *
"Bankers and Shippers Insurance *
Company", a foreign corporation; First *
Lenders Insurance Services, Inc., a *
foreign corporation, *
*
Appellees. *
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Submitted: March 10, 1999
Filed: April 28, 1999
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Before FAGG and WOLLMAN,* Circuit Judges, and WEBBER,** District Judge.
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*
The Honorable Roger L. Wollman succeeded the Honorable Pasco M. Bowman
as Chief Judge of the United States Court of Appeals for the Eighth Circuit at the end
of the day on April 23, 1999.
**
The Honorable E. Richard Webber, United States District Judge for the Eastern
District of Missouri, sitting by designation.
FAGG, Circuit Judge.
Ann M. LaBarre appeals the district court’s dismissal of her complaint against
Credit Acceptance Corporation (CAC), Bankers & Shippers Insurance Company
(Bankers), and First Lenders Insurance Services, Inc. (First Lenders). We affirm in
part, reverse in part, and remand for further proceedings.
LaBarre’s complaint alleges the following facts, which we assume to be true for
the purposes of LaBarre’s appeal. See Doe v. Norwest Bank Minnesota, N.A., 107
F.3d 1297, 1303-04 (8th Cir. 1997). When LaBarre purchased a used vehicle from a
Minnesota car dealer, she signed a retail installment contract that stated the dealer was
assigning the contract to CAC, a company which provides financing and collection
related services to car dealers. Because LaBarre bought the vehicle on credit, the
installment contract required LaBarre to maintain insurance on her car until the loan
was repaid and permitted LaBarre to fulfill this requirement by providing her own
insurance or by obtaining insurance through CAC. LaBarre directed CAC to purchase
limited physical damage (LPD) insurance on her behalf. From Bankers and First
Lenders, CAC had previously purchased vendor single interest/collateral protection
(VSI) insurance, which covered CAC for any loss in the amount of CAC’s interest in
the vehicles CAC financed. Rather than obtaining LPD insurance for LaBarre, CAC
simply billed LaBarre for its VSI insurance coverage on LaBarre’s car.
LaBarre filed this class action lawsuit against CAC, Bankers, and First Lenders,
alleging violations of the Racketeer Influenced and Corrupt Organizations Act (RICO)
and various state law causes of action. CAC, Bankers, and First Lenders filed motions
to dismiss LaBarre’s complaint for failure to state a claim upon which relief could be
granted, see Fed. R. Civ. P. 12(b)(6), and the district court dismissed LaBarre’s
complaint in its entirety. On appeal, we will affirm the district court’s dismissal of
LaBarre’s complaint only if it appears beyond a reasonable doubt that LaBarre can
prove no set of facts entitling her to relief. See Doe, 107 F.3d at 1304.
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LaBarre first contends the district court committed error in dismissing her RICO
claims against CAC, First Lenders, and Bankers. LaBarre alleges in her complaint that
CAC, First Lenders, and Bankers engaged in a scheme to defraud purchasers such as
LaBarre by obtaining “VSI insurance for CAC instead of the property insurance
contracted for in the [p]urchasers’ retail [i]nstallment [c]ontracts.” Compl. ¶ 66.
LaBarre contends CAC, First Lenders, and Bankers “share[d] in the insurance charges
and overcharges obtained from the sale of undisclosed higher-costing VSI [insurance]
that had not been contractually authorized by [LaBarre].” Compl. ¶ 62. LaBarre
alleges these activities constitute a pattern of racketeering activity involving mail fraud
and wire fraud in violation of RICO. See 18 U.S.C. §§ 1962(c), (d) (1994). The
district court concluded the McCarran-Ferguson Act barred all of LaBarre’s RICO
claims.
The McCarran-Ferguson Act states, “No Act of Congress shall be construed to
invalidate, impair, or supersede any law enacted by any State for the purpose of
regulating the business of insurance . . . unless such Act specifically relates to the
business of insurance.” 15 U.S.C. § 1012(b) (1994). In other words, the McCarran-
Ferguson Act bars the application of a federal statute if the federal statute does not
relate specifically to the business of insurance, a state statute has been enacted to
regulate the business of insurance, and the federal statute would invalidate, impair, or
supersede the state statute. See Humana Inc. v. Forsyth, 119 S. Ct. 710, 716 (1999);
Doe, 107 F.3d at 1305. Because RICO does not relate specifically to the business of
insurance and because Minnesota has enacted a comprehensive statutory scheme to
regulate the business of insurance, see Doe, 107 F.3d at 1306, the decisive question is
whether RICO’s application to the activities of CAC, First Lenders, and Bankers would
invalidate, impair, or supersede Minnesota’s insurance laws.
As to insurers First Lenders and Bankers, the answer to that question is yes, and
LaBarre’s arguments to the contrary are foreclosed by this court’s holding in Doe and
by the United States Supreme Court’s recent decision in Humana. The alleged
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activities of First Lenders and Bankers in scheming to sell LaBarre higher-priced VSI
insurance rather than LPD insurance are governed by Minnesota’s insurance law.
See Minn. Stat. § 72A.20 (1998). As we stated in Doe, Minnesota law permits only
administrative recourse for violations of § 72A.20 and, unlike RICO, does not provide
a private cause of action for violations of this provision. See Doe, 107 F.3d at 1306;
see also Morris v. American Family Mut. Ins. Co., 386 N.W.2d 233, 235-38 (Minn.
1986) (no private cause of action for § 72A.20 violation). Accordingly, we held in Doe
that the McCarran-Ferguson Act barred the application of RICO to an insurer which
allegedly violated § 72A.20 because “the extraordinary remedies of RICO would
frustrate, and perhaps even supplant, Minnesota’s carefully developed scheme of
regulation.” Doe, 107 F.3d at 1308. The Supreme Court applied similar analysis in
Humana and stated the McCarran-Ferguson Act precludes the application of RICO
when RICO directly conflicts with a state’s insurance statutes, frustrates any declared
state policy, or interfere’s with a state’s administrative regime. See Humana, 119 S.
Ct. at 717. Thus, guided by our decision in Doe, the district court correctly concluded
that the McCarran-Ferguson Act barred LaBarre’s RICO claims against First Lenders
and Bankers.
We disagree with the district court, however, that LaBarre’s RICO claims
against CAC should be dismissed. Taking the factual allegations in LaBarre’s
complaint as true, LaBarre asserts CAC, a financial services company, participated in
the scheme by purchasing insurance for itself from First Lenders and Bankers to protect
its own security interest and by then passing the cost of this insurance coverage on to
LaBarre without LaBarre’s authorization. As pleaded, CAC’s alleged activities are not
governed by Minnesota’s insurance statutes, see Minn. Stat. §§ 72A.17-.32 (1998), and
do not involve the business of insurance within the framework of the McCarran-
Ferguson Act, see Securities & Exchange Comm’n v. National Sec., Inc., 393 U.S.
453, 459 (1969) (“The McCarran-Ferguson Act was an attempt . . . to assure that the
activities of insurance companies in dealing with their policyholders would remain
subject to state regulation”); Kenty v. Bank One, Columbus, N.A., 92 F.3d 384, 393
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(6th Cir. 1996) (McCarran-Ferguson Act did not protect bank from RICO action when
bank purchased insurance to protect its own security risk and then passed those costs
on to plaintiffs). Thus, based on the allegations in LaBarre’s complaint, the McCarran-
Ferguson Act does not prohibit LaBarre’s RICO claims against CAC, and the district
court should not have dismissed these claims. Additionally, we disagree with CAC’s
assertion that LaBarre failed sufficiently to plead the predicate offenses of mail fraud
and wire fraud. See Murr Plumbing, Inc. v. Scherer Bros. Fin. Servs. Co., 48 F.3d
1066, 1069 (8th Cir. 1995).
Next, LaBarre contends the district court improperly dismissed her state law
claims against CAC for the car dealer’s alleged breach of contract, violation of the
Minnesota Motor Vehicle Retail Installment Sales Act (MVRISA), and breach of
fiduciary duty. As required by the Federal Trade Commission (FTC), see 16 C.F.R.
§ 433.2 (1998), LaBarre’s installment contract contained the FTC’s Holder Rule, which
provides in relevant part, “Any holder of this consumer credit contract is subject to all
claims and defenses which the debtor could assert against the seller of goods or
services obtained pursuant hereto or with the proceeds hereof.” Id. (capitalization
omitted). Based on this language, LaBarre alleges in her complaint that CAC, as the
designated assignee in the installment contract, is liable for the car dealer’s breach of
contract, MVRISA violations, and breach of fiduciary duty. See Compl. ¶¶ 78, 86, 90,
95. We disagree.
Although the Holder Rule allows consumers to assert sale-related claims and
defenses against any holder of a consumer contract, see 40 Fed. Reg. 53,524 (1975),
“[t]he words ‘Claims and Defenses’ . . . are not given any special definition by the
[FTC]. The phrase simply incorporates those things which, as a matter of other
applicable law, constitute legally sufficient claims and defenses in a sales transaction.
Appropriate statutes, decisions, and rules in each jurisdiction will control. . . .” 41 Fed.
Reg. 20,023-24 (1976). Minnesota law subjects any assignee of a consumer credit
contract to all of the consumer’s claims and defenses against the seller arising from the
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sale, but also limits the consumer’s rights, allowing those rights to be asserted only as
a “defense to or set off against a claim by the assignee.” Minn. Stat. § 325G.16, subd.
3 (1998). Thus limited, LaBarre could not affirmatively bring these state law causes
of action against CAC as the assignee of the dealer. Instead, LaBarre could only raise
these claims as a defense in an action brought against her by CAC, and the district
court properly dismissed these causes of action against CAC.
Finally, LaBarre contends the district court committed error in dismissing her
claim that CAC, Bankers, and First Lenders tortiously interfered with her contractual
relationship with the car dealer. Again, we disagree. To establish a tortious
interference with contract claim, LaBarre must show the existence of a contract, the
alleged wrongdoers’ knowledge of the contract, their unjustified and intentional
procurement of its breach, and resulting damages. See R.A., Inc. v. Anheuser-Busch,
Inc., 556 N.W.2d 567, 570 (Minn. App. 1996). We believe the district court correctly
dismissed this claim because, at best, LaBarre pleaded that CAC, First Lenders, and
Bankers intentionally procured the breach of their own contracts with LaBarre to
provide her with LPD insurance. See Bouten v. Richard Miller Homes, Inc., 321
N.W.2d 895, 900-01 (Minn. 1982) (a party cannot tortiously interfere with its own
contract).
We affirm the district court’s dismissal of LaBarre’s claims against Bankers and
First Lenders and LaBarre’s tortious interference, breach of contract, MVRISA, and
breach of fiduciary duty claims against CAC, but we reverse the district court’s
dismissal of LaBarre’s RICO claims against CAC and remand for further proceedings
consistent with this opinion.
A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
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