United States Court of Appeals
For the First Circuit
____________________
No. 97-1049
ROBERT SALOIS AND DIANNE E. SALOIS, NINON R. L. FREEMAN, AND DAVID M.
LEARY AND LINDA SCURINI-LEARY, INDIVIDUALLY AND ON BEHALF OF OTHERS
SIMILARLY SITUATED,
Plaintiffs, Appellants,
v.
THE DIME SAVINGS BANK OF NEW YORK, FSB, HARRY W. ALBRIGHT, JR., JOHN
B. PETTIT, JR., WILLIAM J. MELLIN, WILLIAM J. CANDEE III, WILLIAM A.
VOLCKHAUSEN, JAMES E. KELLY, RALPH SPITZER, ROBERT G. TURNER, BRIAN
GERAGHTY, LAWRENCE W. PETERS, E. JUDD STALEY III, AND JOHN DOE
COMPANIES,
Defendants, Appellees.
_____________________
No. 97-1050
ROBERT SALOIS, ET AL.
Plaintiffs, Appellees,
v.
THE DIME SAVINGS BANK OF NEW YORK, ET AL.
Defendants, Appellants.
____________________
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Patti B. Saris, U.S. District Judge] ___________________
____________________
Before
Selya, Boudin, and Stahl,
Circuit Judges. ______________
____________________
Evans J. Carter with whom Hargraves, Karb, Wilcox & Galvani was ________________ __________________________________
on brief for appellants.
William S. Eggeling with whom Roscoe Trimmier, Jr., Darlene C. ____________________ _____________________ ___________
Lynch, Jane E. Willis, and Ropes & Gray were on brief for appellees. _____ ______________ ____________
____________________
November 3, 1997
____________________
STAHL, Circuit Judge. In the mid-1980s defendant STAHL, Circuit Judge. ______________
The Dime Savings Bank of New York, FSB ("Dime") made mortgage
loans to plaintiffs Dianne and Robert Salois, David M. Leary
and Linda Scurini-Leary, and Ninon R. L. Freeman. Plaintiffs
now appeal from the district court's dismissal on statutes of
limitations grounds of various federal and Massachusetts
statutory claims as well as common-law contract and fraud
claims arising from the mortgage transactions.1 Defendant
cross-appeals from the court's denial of its motion for Fed.
R. Civ. P. 11 sanctions against plaintiffs' attorneys. We
affirm the district court's ruling that statutes of
limitations barred all of plaintiffs' claims and uphold the
district court's denial of Dime's motion for Rule 11
sanctions because that denial was not an abuse of the court's
discretion.
____________________
1. The amended complaint alleges (1) violation of the
Racketeer Influenced and Corrupt Organizations Act (RICO), 18
U.S.C. 1961-1968, (2) violation of the federal Truth in
Lending Act (TILA), 15 U.S.C. 1601 et seq. and Regulation ______
Z, 12 C.F.R. pt. 226, (3) violation of the Real Estate
Settlement Procedures Act (RESPA), 12 U.S.C. 2601-2617 and
Regulation X, 24 C.F.R. pt. 3500, (4) violation of the
federal Alternative Mortgage Transaction Parity Act, 12
U.S.C. 3801-3806, (5) violation of the Massachusetts
Consumer Credit Cost Disclosure Act, Mass. Gen. Laws ch.
140D, (6) violation of the Massachusetts Consumer Protection
Act, Mass. Gen. Laws ch. 93A, (7) breach of contract, (8)
breach of the implied covenant of good faith and fair
dealing, (9) breach of fiduciary duty, (10) fraud, deceit,
and misrepresentation, (11) civil conspiracy, and (12)
negligent misrepresentation, negligent hiring and
supervision, and vicarious liability.
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I. __
BACKGROUND AND PRIOR PROCEEDINGS ________________________________
Because plaintiffs challenge the district court's
dismissal of their claims under Fed. R. Civ. P. 12(b)(6), we
recite the facts and reasonable inferences raised by the
facts in their favor. See Aybar v. Crispin-Reyes, 118 F.3d ___ _____ _____________
10, 13 (1st Cir. 1997).
Dime is a federally-chartered savings bank.
Between July 1, 1986, and December 31, 1989, Dime, through
its wholly owned subsidiary, Dime Real Estate Services --
Massachusetts, Inc. ("DRES-MA"), made over four thousand
(4,000) home mortgage loans on residential homes located in
Massachusetts, totalling over six hundred million dollars
($600,000,000). DRES-MA ceased to exist in 1990.2
Dime marketed to Massachusetts residential home
purchasers an adjustable rate loan product known as the
Impact Loan. In evaluating applications for Impact Loans,
Dime required only minimal verification of the employment
status, assets, and income of prospective borrowers, basing
its lending decisions instead on the value of the property
subject to the mortgage. Moreover, Dime loan officers
operated under instructions to push Impact Loans to the
virtual exclusion of other types of mortgage loans. This
____________________
2. It is unclear from the record whether DRES-MA was merged
into Dime or whether it was dissolved.
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effort was part of Dime's national campaign to expand rapidly
its home lending business.
A principal feature of an Impact Loan was an
initial "teaser" interest rate of 7.5 percent for the first
six months with a cap of 9.5 percent for the second six
months. Thereafter, the rate would adjust to conform to the
Cost of Funds Index plus three percent, with a cap of 13.9
percent. This arrangement was designed to result in negative
amortization, a situation in which monthly loan payments fall
short of the actual monthly interest due on the loan. The
unpaid interest, or "deferred interest," is then added to the
principal and begins to accrue interest itself, causing the
principal owed to increase despite the borrower's regular
payments. The terms of the Impact Loan provided that no
payments or portions of payments would apply to the principal
until all "deferred interest," or negative amortization, had
been paid. Once the principal balance reached 110 percent of
the original principal amount, the loan contracts required
mortgagors to make fully amortizing payments; that is,
mortgagors were required to increase their monthly payments
to cover the additional principal plus interest.
Plaintiffs secured residential Impact Loans from
DRES-MA in 1986 and 1987. To induce plaintiffs to enter the
loan contracts, Dime downplayed the negative amortization
feature of the Impact Loans, and discouraged plaintiffs from
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hiring their own attorneys by telling them that Dime
attorneys would "handle things" and "protect" them. Six
months into the loans, monthly statements revealed increases
in the owed principal, and, in the second year, deferred
interest began to appear on the statements. Although the
initial loan documents contained the information from which
plaintiffs could have discovered that their loan payments
would increase, plaintiffs contend that teasing this
information out of the documents would have required
computation skills, computer software, and a level of
sophistication that they did not, and could not have been
expected to, possess. In addition, plaintiffs argue that
Dime charged them excessive fees for closing the loan
contracts, serviced their loans improperly by providing
unsatisfactory responses to their queries about negative
amortization, and altered the Saloises' loan impermissibly by
requesting that the Saloises sign "corrective" documents that
lifted a two percent per month cap on the interest rate
applicable to the loan.
At the time of the complaint, plaintiffs Robert and
Diane Salois continued to hold their mortgage. Plaintiffs
David M. Leary and Linda Scurini-Leary had defaulted, and the
mortgage on their home was foreclosed on in 1991. Plaintiff
Ninon R. L. Freeman paid her loan in full in 1993. The
Saloises were alerted to their potential claims when they
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consulted an attorney about their financial situation in late
September, 1994, and Ms. Freeman and the Learys were
similarly advised in mid-1995. The Saloises filed this
action on September 1, 1995, in the United States District
Court for the District of Massachusetts, as a putative class
action on behalf of all persons who secured residential
mortgage loans from Dime in Massachusetts between July 1,
1986, and December 31, 1989. Dime responded on October 5,
1995, with a motion to dismiss the complaint as untimely. On
November 10, 1995, Dime further moved for Rule 11 sanctions,
alleging that there was no legal or factual basis for
plaintiffs' claims. The Saloises filed an amended complaint
on February 9, 1996, which added the Learys and Ms. Freeman
as plaintiffs. In a margin order dated November 6, 1996, the
district court denied the Rule 11 motion and, on November 13,
1996, dismissed the complaint on statutes of limitations
grounds. Because the court never acted on plaintiffs' motion
for class certification, no class was certified. This appeal
and cross-appeal followed.
II. ___
DISCUSSION __________
A. Plaintiffs' Claims ______________________
On appeal, plaintiffs contend that the district
court erred in dismissing their actions on statutes of
-7- 7
limitations grounds, arguing that the claims are subject to
equitable tolling and thus are timely. They further contend
that their claims warrant relief on the merits. We begin
with the statutes of limitations issue because, if plaintiffs
claims in fact are time-barred, that finishes the case.
Arguing for equitable tolling, plaintiffs draw on
federal and Massachusetts law providing that fraud,
fraudulent concealment, and wrongs resulting in inherently
unknowable injuries toll limitations periods, and on
Massachusetts law providing that limitations periods may be
tolled by the existence of and breach of a fiduciary duty.
The heart of plaintiffs' allegations is that Dime
fraudulently concealed the fact that their loans would
definitely, rather than only possibly, go into negative __________
amortization and accrue deferred interest. Plaintiffs assert
that this information became available only after they
consulted a knowledgeable attorney who was able to decipher
the meaning of the facts and figures contained in their loan
documents. Further, plaintiffs contend that issues of fact
relating to the propriety of tolling should have precluded
the district court from dismissing their claims based on the
pleadings alone. We are not persuaded.
As an initial matter we note that plaintiffs' TILA,
RESPA, and Parity Act claims are subject to one-year statutes
-8- 8
of limitations.3 Thus, these claims must have accrued no
earlier than September 1, 1994. The claims for breach of
fiduciary duty; fraud, deceit, and misrepresentation; civil
conspiracy; and negligent misrepresentation, negligent hiring
and supervision, and vicarious liability are governed by a
three-year limitations period.4 These claims must therefore
have accrued no earlier than September 1, 1992. Plaintiffs'
claims under RICO and the Massachusetts Consumer Credit Cost
Disclosure and Consumer Protection Acts are subject to four-
year limitations periods.5 Thus, these claims must have
____________________
3. The TILA states that "[a]ny action under this section may
be brought . . . within one year from the date of the
occurrence of the violation." 15 U.S.C. 1640(e). The
RESPA provides that "[a]ny action pursuant to the provisions
of section . . . 2607 . . . of [Title 12] may be brought . .
. within 1 year . . . from the date of the occurrence of the
violation." 12 U.S.C. 2614. The Parity Act states that
"[a]ny violation of this section shall be treated as a
violation of the Truth in Lending Act." 12 U.S.C. 3806(c).
We note that one other court of appeals has held that the
RESPA is not subject to tolling doctrines. See Hardin v. ___ ______
City Title & Escrow Co., 797 F.2d 1037, 1041 (D.C. Cir. _________________________
1986). We need not address the correctness of this ruling
because, for reasons we shall explain, equitable tolling is
not warranted on the facts of this case.
4. Massachusetts law provides that "actions of tort . . .
shall be commenced only within three years next after the
cause of action accrues." Mass. Gen. Laws ch. 260, 2A.
5. Massachusetts law provides that "[a]ctions arising on
account of violations of any law intended for the protection
of consumers, including but not limited to . . . chapter
ninety-three A . . . [and] chapter one hundred and forty D .
. . whether for damages, penalties or other relief and
brought by any person . . . shall be commenced only within
four years next after the cause of action accrues." Mass.
Gen. Laws ch. 260, 5A.
-9- 9
accrued no earlier than September 1, 1991. Finally,
plaintiffs' claim for breach of contract is governed by a
six-year limitations period.6 Thus, the contract cause of
action must have accrued no earlier than September 1, 1989.
A cause of action generally accrues at the time of
the plaintiff's injury, or, in the case of a breach of
contract, at the time of the breach. See Cambridge Plating ___ _________________
Co., Inc. v. Napco, Inc., 991 F.2d 21, 25 (1st Cir. 1993) _________ ___________
(discussing Massachusetts law). Therefore, plaintiffs'
claims arose when Dime allegedly induced them to sign loan
contracts by misrepresenting and/or omitting facts about the
terms of the mortgage, charged them excessive closing fees,
and serviced their loans improperly by giving inadequate
answers to telephone inquiries about negative amortization
and by having the Saloises sign corrective documents that
improperly altered their loan.
The district court examined each of plaintiffs'
claims and concluded that virtually all federal causes of
action accrued when plaintiffs entered their respective loan
____________________
With regard to RICO claims, the Supreme Court has
held that "the federal policies that lie behind RICO and the
practicalities of RICO litigation make the selection of the
4-year statute of limitations for Clayton Act actions, 15
U.S.C. 15b, the most appropriate limitations period for
RICO actions." Agency Holding Corp. v. Malley-Duff & Assoc. ____________________ ____________________
Inc., 483 U.S. 143, 156 (1987). ____
6. Massachusetts law provides that "[a]ctions of contract .
. . shall . . . be commenced only within six years next after
the cause of action accrues." Mass. Gen. Laws ch. 260, 2.
-10- 10
contracts7 and, in any event, no later than mid-1988, when
the Saloises signed the corrective documents. The district
court also concluded that, with the exception of plaintiffs'
claims based on Mass. Gen. Laws ch. 167E, see infra, the ___ _____
state claims accrued no later than either the point at which
the corrective documents were signed or the point at which
plaintiffs called Dime and were provided inaccurate answers
about deferred interest. Although there may be a dispute as
to when, exactly, some of the causes of action accrued,8
plaintiffs do not dispute that their claims accrued outside
the relevant limitations periods. Accordingly, the viability
of plaintiffs' claims depends on whether principles of
equitable tolling apply.
____________________
7. The Freemans and the Learys entered into their loan
contracts with Dime no later than November 18, 1986, and
April 15, 1987, respectively; the Saloises executed a note
and mortgage on June 16, 1987, and executed corrective notes
on February 29, 1988, and June 1, 1988. Plaintiffs
telephoned Dime sometime in the second year of their loans
when deferred interest began to appear on their monthly
statements. This must have occurred no later than mid-1989.
See infra note 8. ___ _____
8. Although the district court concluded that the events
giving rise to plaintiffs' claims all must have taken place
no later than mid-1988, we conclude that the phone calls may
have taken place as late as mid-1989. Construing facts in
the light most favorable to plaintiffs, we assume that it was
the Saloises who placed the calls, and that it was the end of ________ ___
the "second year of their loan" when they did so, which means
the calls may not have been made until June 16, 1989. Even
using this later date as the benchmark, however, plaintiffs'
causes of action accrued at least six years and almost three
months prior to the date plaintiffs filed their original
complaint.
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1. Federal Claims __________________
Although, under federal law, equitable tolling is
applied to statutes of limitations "to prevent unjust results
or to maintain the integrity of a statute," King v. ____
California, 784 F.2d 910, 915 (9th Cir. 1986), courts have __________
taken a narrow view of equitable exceptions to limitations
periods, see Earnhardt v. Puerto Rico, 691 F.2d 69, 71 (1st ___ _________ ___________
Cir. 1982). Indeed, equitable tolling of a federal statute
of limitations is "appropriate only when the circumstances
that cause a plaintiff to miss a filing deadline are out of
his hands." Heideman v. PFL, Inc., 904 F.2d 1262, 1266 (8th ________ _________
Cir. 1990), cert. denied, 498 U.S. 1026 (1991). _____ ______
The federal doctrine of fraudulent concealment
operates to toll the statute of limitations "where a
plaintiff has been injured by fraud and 'remains in ignorance
of it without any fault or want of diligence or care on his
part.'" Holmberg v. Armbrecht, 327 U.S. 392, 397 (1946) ________ _________
(quoting Bailey v. Glover, 88 U.S. (21 Wall.) 342, 348 ______ ______
(1874)); see Maggio v. Gerard Freezer & Ice Co., 824 F.2d ___ ______ __________________________
123, 127 (1st Cir. 1987). For plaintiffs to be successful in
their argument, we must determine that "(1) sufficient facts
were [not] available to put a reasonable [borrower] in
plaintiff[s'] position on inquiry notice of the possibility ___________
of fraud, and (2) plaintiff[s] exercised due diligence in
attempting to uncover the factual basis underlying this
-12- 12
alleged fraudulent conduct." Maggio, 824 F.2d at 128. Thus, ______
allegations of fraudulent concealment do not modify the
requirement that plaintiffs must have exercised reasonable
diligence. See Truck Drivers & Helpers Union v. NLRB, 993 ___ ______________________________ ____
F.2d 990, 998 (1st Cir. 1993) ("Irrespective of the extent of
the effort to conceal, the fraudulent concealment doctrine
will not save a charging party who fails to exercise due
diligence, and is thus charged with notice of a potential
claim."). In simpler terms, fraud may render reasonable a
plaintiff's otherwise unreasonable conduct, but there are
limits: plaintiffs must still exercise reasonable diligence
in discovering that they have been the victims of fraud.
In this case, the inquiry is over before it begins.
Regardless whether negative amortization was inevitable with
Impact Loans, the documents contained all of the information
necessary to determine the interaction of Dime's formula with
prevailing interest rates. It was attorney consultation,
rather than newly-discovered information, that prompted
plaintiffs' lawsuit. Therefore, sufficient facts -- indeed,
all the facts -- were available to place plaintiffs on ___
inquiry notice of fraudulent conduct. Moreover, even if we
regard plaintiffs' consultation with an attorney as
"discovered" information that revealed Dime's alleged
concealment, it cannot be said that plaintiffs were
reasonable in waiting until 1994 to consult an attorney, when
-13- 13
it was clear as early as 1988 that their loans had begun to
accrue deferred interest.9 As the district court observed,
"The loan documents notified plaintiffs of the possibility of
negative amortization, when it would apply, and how it would
work," so that even "[i]f [Dime] had misrepresented the
nature of the loans, the loan documents plaintiffs signed
would have put them on notice of the fraud." Salois v. Dime ______ ____
Savings Bank, No. 95-11967-PBS, slip op. at 14 (D. Mass. Nov. ____________
13, 1996).10
Plaintiffs argue that whether they were reasonably
diligent in ascertaining their claims is a matter of fact to
be determined by a jury. Even if we accept all facts as
____________________
9. Once deferred interest began to accrue, after the first
year of the repayments, the bases of all of the plaintiffs'
present claims had come to their attention. That they did
not seek legal advice in 1988 (or, in any event, before the
running of the relevant statutes of limitations) seems to be
more a matter of happenstance than lack of relevant
information. We think the district court stated the issue
well: "No facts are alleged as to what prompted plaintiffs to
consult an attorney, if not their loan documents and monthly
statements. . . . If the plaintiffs' loan documents and
statements prompted them to consult an attorney in 1994 and
1995, unprompted by any new disclosure, there is no reason
they could not have consulted an attorney several years
earlier." Salois v. Dime Savings Bank, No. 95-11967-PBS, ______ __________________
slip op. at 15 (D. Mass. Nov. 13, 1996).
10. In addition, we note that, under Massachusetts law, "one
who signs a writing that is designed to serve as a legal
document . . . is presumed to know its contents." Hull v. ____
Attleboro Savings Bank, 33 Mass. App. Ct. 18, 24 (1992); see ______________________ ___
Lerra v. Monsanto Co., 521 F. Supp. 1257, 1262 (D. Mass. _____ _____________
1981); Connecticut Jr. Republic v. Doherty, 20 Mass. App. Ct. ________________________ _______
107, 110 (1985). Thus, as a matter of Massachusetts law,
plaintiffs were on notice of their claims when they signed
their loan documents in 1986 and 1987.
-14- 14
plaintiffs present them, however, nothing in the record
supports the conclusion that plaintiffs exercised reasonable
diligence as a matter of law. Cf. Sleeper v. Kidder, ___ _______ _______
Peabody & Co., 480 F. Supp. 1264, 1265 (D. Mass. 1979) ______________
(noting that although the issue of reasonable diligence is
factually based, it may be determined as a matter of law
where the underlying facts are admitted or established
without dispute), aff'd mem., 627 F.2d 1088 (1st Cir. 1980). __________
Thus, the district court's dismissal of plaintiffs' claims
was proper.11
2. State Claims ________________
The foregoing analysis likewise disposes of
plaintiffs' argument for tolling on the basis of state _____
fraudulent concealment doctrine. Massachusetts law provides
that, "[i]f a person liable to a personal action fraudulently
conceals the cause of such action from the knowledge of the
person entitled to bring it, the period prior to the
discovery of his cause of action by the person so entitled
____________________
11. Plaintiffs also contend that there are issues of fact
regarding whether Dime was a fiduciary to plaintiffs and
whether Dime fraudulently concealed information, and that the
existence of such factual issues precludes dismissal. To
this we note that, first, simply alleging fraudulent
concealment or the existence of a fiduciary duty does not
suffice to avoid dismissal. See General Builders Supply Co. ___ ___________________________
v. River Hill Coal Venture, 796 F.2d 8, 12 (1st Cir. 1986). ________________________
Second, plaintiffs' claims may be dismissed without
determining these issues because, even if plaintiffs'
allegations regarding fraud and fiduciary duties are true,
plaintiffs still fail the ultimate test, that of
reasonableness in discovering and pursuing their claims.
-15- 15
shall be excluded in determining the time limited for the
commencement of the action." Mass. Gen. Laws ch. 260, 12.
Specifically, a statute of limitations may be tolled "if the
wrongdoer, either through actual fraud or in breach of a
fiduciary duty of full disclosure, keeps from the person
injured knowledge of the facts giving rise to a cause of
action and the means of acquiring knowledge of such facts."
Maggio, 824 F.2d at 131 (emphasis omitted) (quoting Frank ______ _____
Cooke, Inc. v. Hurwitz, 10 Mass. App. Ct. 99, 106 (1980)). ___________ _______
Here, an analysis of whether Dime concealed the means of
acquiring the facts giving rise to their claims would
parallel a reasonable diligence inquiry, which, as we have
already concluded, plaintiffs fail. Yet we need not rely on
that analysis because, again, Dime did not conceal from
plaintiffs the facts themselves and therefore cannot be said
to have kept plaintiffs from acquiring the requisite
knowledge.
But plaintiffs persist, focusing on the possibility
of a fiduciary relationship between themselves and Dime and
arguing that Massachusetts limitations periods should be
tolled because Dime's breach of an alleged fiduciary duty to
them is sufficient to constitute fraud. Although plaintiffs
do not develop this line of analysis, presumably their
argument is that, even if Dime did not actively conceal
information, it nonetheless committed fraud because it owed
-16- 16
plaintiffs a special duty of disclosure. Under this theory
as well, however, "[a] plaintiff must be able to show not
only that crucial facts were withheld by defendants owing a
duty of full disclosure, but also that he lacked the means to
uncover these facts." Maggio, 824 F.2d at 131. If a ______
plaintiff has failed to "undertake even a minimal effort to
pursue the investigative opportunities available to him[,
then] not even the combination of fiduciary duties and
section 12 are sufficient to excuse a delay in bringing
suit." Id. In this case, we need not determine whether Dime ___
was a fiduciary to plaintiffs because, even if such a
relationship existed, the fact remains that no revelation of
information occurred subsequent to plaintiffs' discovery of
negative amortization in 1988. Because plaintiffs had the
"means to uncover" the relevant facts as early as 1988, and,
indeed, possessed the facts themselves in 1988, their state
law claim based on the existence of a fiduciary duty in
combination with fraudulent concealment fails.
Finally, the district court dismissed one of
plaintiffs' claims based on the Massachusetts Consumer
Protection Act, Mass. Gen. Laws ch. 93A, on the basis that,
although Dime may have been in violation of Mass. Gen. Laws
ch. 167E, 2(B)(9) and (10) -- which prohibit the
alteration of a payment amount more than once a year and the
alteration of the interest rate more than every six months --
-17- 17
plaintiffs had not alleged that Dime was subject to
regulation by the Massachusetts Commissioner of Banks.12 The
court was correct. Dime, a federally-chartered bank, is
regulated by the federal Office of Thrift Supervision, and
DRES-MA, a non-bank subsidiary, was incorporated under New
York law. The Massachusetts statutes on which plaintiffs
rely apply only to Massachusetts-chartered banks. See Mass. ___
Gen. Laws ch. 167E, 1.13
B. Dime's Motion for Rule 11 Sanctions _______________________________________
Dime argues that the district court erred in
denying its motion for sanctions against plaintiffs'
attorneys, and that the court should have, at a minimum,
____________________
12. The district court noted that plaintiffs' ch. 93A claim
based on Dime's alleged violation of Mass. Gen. Laws ch. 167E
2(B)(9) was not time-barred if the owed monthly payment
amount had changed more than once during any of the four
years prior to the date plaintiffs brought this action.
Plaintiffs' complaint did not foreclose this issue. The
court observed as well that the claim based on Dime's alleged
violation of Mass. Gen. Laws ch. 167E 2(B)(10) was not
time-barred because the interest rate changed five times in
1995.
13. Plaintiffs argue in addition that DRES-MA, as a non-
banking corporation, was prohibited under Mass. Gen. Laws ch.
167, 37, from engaging in banking activity, regardless
whether DRES-MA was a foreign or domestic corporation. This
argument fails because DRES-MA was a real-estate subsidiary, ___________
not a banking subsidiary. As such, although it would
presently be subject to regulation under Mass. Gen. Laws ch.
255, 2, that statute was not in force at the time
plaintiffs' claims arose.
-18- 18
conducted a hearing to determine whether plaintiffs made
reasonable inquiries prior to bringing their claims.14
Rule 11 calls for the imposition of sanctions on a
party "for making arguments or filing claims that are
frivolous, legally unreasonable, without factual foundation,
or asserted for an 'improper purpose.'" S. Bravo Sys. v. ______________
Containment Tech. Corp., 96 F.3d 1372, 1374-75 (Fed. Cir. ________________________
1996) (citing Conn v. Borjorquez, 967 F.2d 1418, 1420 (9th ____ __________
Cir. 1992)). In reviewing the district court's denial of
defendant's Rule 11 motion, we apply an abuse of discretion
standard. See Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, ___ _____________ ______________
405 (1990). As we have noted before, our review of denials
of Rule 11 motions "calls for somewhat more restraint than
review of positive actions imposing sanctions and shifting
fees." Anderson v. Boston Sch. Comm., 105 F.3d 762, 769 (1st ________ _________________
Cir. 1997). The trial judge should be accorded not only
"additional deference in the entire area of sanctions," but
also "extraordinary deference in denying sanctions." Id. at ___
768.
It would have been preferable for the district
court to have more extensively set forth its rationale. See ___
____________________
14. The district court disposed of Dime's motion in two
sentences: "While I agree that the action should be
dismissed, plaintiffs amended the complaint to eliminate the
frivolous claims. Moreover, while the claims are time-
barred, the breach of contract claims and the [Mass. Gen.]
Laws ch. 93A claims were colorable at least in part."
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Figueroa-Ruiz v. Alegria, 905 F.2d 545, 549 (1st Cir. 1990). _____________ _______
Nonetheless, "although the rationale for a denial of a motion
for fees or sanctions under Rule 11 . . . should be
unambiguously communicated, the lack of explicit findings is
not fatal where the record itself, evidence or colloquy,
clearly indicates one or more sufficient supporting reasons."
Anderson, 105 F.3d at 769. ________
Here, the record contains adequate rationale for
the denial of the motion. The court noted that plaintiffs'
breach of contract and Massachusetts Consumer Protection Act
claims were time-barred but nonetheless "colorable at least
in part." Although we reiterate that district courts should
provide specific findings in support of Rule 11 rulings, we
conclude that, in light of the record, the court did not here
abuse its discretion by holding that plaintiffs' claims were
not without foundation in law or in fact.
Affirmed. ________
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