
USCA1 Opinion

	




                            United States Court of Appeals                                For the First Circuit                                 ____________________        No. 95-1997                       PETER M. SCHULTZ AND PAMELA A. SCHULTZ,                               Plaintiffs, Appellants,                                          v.                             RHODE ISLAND HOSPITAL TRUST                             NATIONAL BANK, N.A., ET AL.,                                Defendants, Appellees.                                 ____________________        No. 95-2113                             BOWDOIN CONSTRUCTION CORP.,                                Plaintiff, Appellant,                                          v.                             RHODE ISLAND HOSPITAL TRUST                             NATIONAL BANK, N.A., ET AL.,                                Defendants, Appellees.                                 ____________________        No. 95-2172                          ALLENBY ENTERPRISES, INC., ET AL.,                               Plaintiffs, Appellants,                                          v.                             RHODE ISLAND HOSPITAL TRUST                             NATIONAL BANK, N.A., ET AL.,                                Defendants, Appellees.                                 ____________________                    APPEALS FROM THE UNITED STATES DISTRICT COURT                          FOR THE DISTRICT OF MASSACHUSETTS                     [Hon. Joseph L. Tauro, U.S. District Judge]                                            ___________________                     [Hon. Robert E. Keeton, U.S. District Judge]                                             ___________________                      [Hon. Patti B. Saris, U.S. District Judge]                                            ___________________                                 ____________________                                        Before                               Torruella, Chief Judge,                                          ___________                           Campbell, Senior Circuit Judge,                                     ____________________                              and Lynch, Circuit Judge.                                         _____________                                 ____________________            Edwin  A. McCabe,  with whom  McCabe Brown  Sutherland, Joseph  P.            ________________              ________________________  __________        Davis III, and  Lane, Altman &  Owens were on  brief, for  plaintiffs-        _________       _____________________        appellants.            Joseph  L.  Kociubes,  with  whom  Peter  Alley,  Denise Jefferson            ____________________               ____________   ________________        Casper, and Bingham,  Dana &  Gould were  on brief,  for Rhode  Island        ______      _______________________        Hospital Trust National Bank.            Allen N.  David, Elizabeth  Z. Holmes,  and Peabody  & Arnold,  on            _______________  ____________________       _________________        brief for Federal Deposit Insurance Corp. as receiver of Coolidge Bank        and Trust Co.            Robert D. Cultice, Louis J. Scerra, Jr., and Goldstein &  Manello,            _________________  ____________________      _____________________        P.C., on brief for Chrysler First Business Credit Corp.        ____                                 ____________________                                   August 22, 1996                                 ____________________                  LYNCH,   Circuit   Judge.      These   three   actions,                           _______________            consolidated for  appeal, arise out  of a failed  real estate            venture involving the  purchase and redevelopment of  the Sea            Crest Hotel in Falmouth, Massachusetts ("the Sea Crest").  In            a federally  registered public offering,  investors purchased            condominium unit deeds  and "pooled income" interests  in the            Sea  Crest  project.    One of  the  offering's  features, as            disclosed in the prospectus,  was that the offering would  be            terminated  and  all   investor  deposits  refunded  if   the            aggregate  amount of investments sold did not reach a minimum            subscription level  ("MSL") by  a set  deadline.   Plaintiffs            asserted that  Rhode  Island  Hospital  Trust  National  Bank            ("RIHT"), the lender that  financed the developer's  purchase            of the Hotel  and served as the escrow  agent responsible for            holding investor deposits, was liable to them for purportedly            failing to determine that the MSL requirement had not in fact            been satisfied  by the requisite  date.  The  district courts            concluded, as a  matter of law,  that the plaintiffs'  claims            against RIHT  for fraud, negligent  misrepresentation, breach            of contract, and  violations of the Racketeer  Influenced and            Corrupt  Organizations Act  ("RICO"),  18  U.S.C.    1961  et                                                                       __            seq.,  were all  deficient.   We agree  that plaintiffs  have            ____            established no legal basis for holding RIHT liable  for their            losses.  Accordingly, we affirm.                                         -3-                                          3                                          I.                                  Factual Background                                  __________________                  In the  mid-1980's, Eugene Marchand developed a plan to            purchase and  renovate the  Sea Crest  Resort and  Conference            Center, a large beach resort on Cape Cod.  Marchand sought to            revitalize  the hotel as a convention-oriented facility.  The            plan  involved converting the  Sea Crest into  a condominium,            and  then   selling  the  individual  condominium   units  to            investors, together with interests  in the pool of  income to            be generated  from the  resort.    The condominium  units and            these "pooled income" interests were to be sold as registered            securities  in  a  public  offering.    The  issuer  of   the            securities would  be Marchand's development  company, Laurel-            Sea  Crest Realty Sales  Corp. ("Laurel"), of  which Marchand            was  the  sole shareholder.    Laurel's purchase  of  the Sea            Crest, for $19.4 million, would be financed  through sales to            investors and a bank loan from RIHT.  With projected expenses            of $40.5 million and  total expected gross proceeds  from the            offering projected at $45 million, Laurel stood to make a net            profit of $4.5 million.                  On  September 12,  1986,  Laurel filed  a  registration            statement  and  prospectus  with   the  SEC,  describing  the            proposed  offering of 266 "condominium hotel interests."  The            prospectus stated that the offering would be conditioned upon            a minimum level of investor participation:                                         -4-                                          4                  Unless 60  Hotel Interests are subscribed  for by                  qualified   investors   ("Minimum    Subscription                  Level") within 60 days  of the effective date  of                  the   Registration   Statement  of   which   this                  Prospectus  is a part, but in no event later than                  December   31,  1986,   this  offering   will  be                  withdrawn  and   all  funds   will  be   returned                  promptly to subscribers.            The  prospectus  also  stated that  every  investor  would be            required to "pay a down payment of 10% of the purchase  price            of the Hotel Interest (the 'Escrow Deposit')," which would be            "deposited . . . in a segregated, federally insured, interest            bearing  account . . .  at the  Rhode  Island Hospital  Trust            National  Bank . . . on behalf  of Investor."  The prospectus            named RIHT as escrow agent for the offering.                  As Laurel waited for  the registration statement to  be            declared effective by  the SEC, it  secured the financing  it            needed to purchase the Sea Crest.  On November 14, 1986, RIHT            issued a  commitment letter  to Laurel  approving a  fourteen            million dollar first mortgage construction loan to be used by            Laurel  in acquiring and  renovating the Sea  Crest facility.            RIHT's commitment,  like the  offering, was  conditioned upon            the  "presale" of  a minimum  number of  Sea  Crest interests            prior  to December 29,  1986, the  expiration date  of RIHT's            commitment letter.1                                            ____________________            1.  RIHT's presale  requirement was, in fact,  more stringent            than  the MSL requirement.   The commitment  letter specified            that "[p]rior to closing, a minimum of 80 units must be under            written agreement  of purchase-sale with a 10% non-refundable            deposits [sic]," and that those 80 units must account for "no            less than $13.6 million" in gross proceeds.                                         -5-                                          5                  As of the date  that RIHT issued its  commitment letter            to  Laurel, however,  the  SEC had  yet  to approve  Laurel's            registration statement.  In fact, the  registration statement            was  not declared  effective by  the SEC  until December  12,            1986, leaving just two and a half weeks for Laurel to achieve            the  MSL set  in the  prospectus  and the  minimum number  of            presales required by  RIHT.  It was clear  that Laurel needed            more  time.   Laurel sought  to restructure the  offering and            obtain  a  new commitment  agreement  from RIHT,  with  a new            timetable  for meeting the minimum presale requirement.  RIHT            agreed to renegotiate.                  As  Laurel  and RIHT  neared  agreement on  a  new loan            commitment,  Laurel filed, on March 2, 1987, a post-effective            amendment  to  its  original  registration  statement.    The            amendment  established a new deadline  for Laurel to meet the            MSL requirement.   It  also restructured  the requirement  to            condition   the  offering  on  a  minimum  dollar  amount  of            aggregate sales, rather than a minimum  number of unit sales.            The amended prospectus explained:                  Unless   Hotel   Interests   of   $6,000,000   in                  aggregate purchase  price are  subscribed for  by                  qualified   investors   ("Minimum    Subscription                  Level")  within 120 days of the effective date[2]                  of  the  Registration  Statement  of  which  this                  Prospectus  is  a  part,  this  offering  will be                                            ____________________            2.  The 120th day after December 12, 1986, the effective date            of  the registration  statement  fell on  April  11, 1987,  a            Saturday.                                         -6-                                          6                  withdrawn  and   all  funds   will  be   returned                  promptly to subscribers.            The   amended   prospectus   left  unchanged   the   original            prospectus's  representation  that  each  investor  would  be            required to tender a down payment equal to ten percent of the            selling price  of the  unit to be  purchased, which  would be            deposited in an escrow account held by RIHT.                  RIHT  issued a new commitment letter to Laurel on March            30,  1987.  This  time, RIHT  agreed to  give Laurel  an 18.3            million dollar loan, conditioned upon the presale of  only 40            units  with a minimum aggregate  selling price of $6 million,            each presale  requiring a ten percent  nonrefundable investor            deposit.   Laurel was  required to  satisfy  the new  40-unit            presale  condition  by  no later  than  April  10, 1987,  the            expiration date of the new commitment letter.                  Apart  from RIHT's  lending  relationship with  Laurel,            the bank's only role in the Sea  Crest offering was to act as            escrow agent.  RIHT did  not sign the registration statement.            Nor did  it  participate  in  promoting the  offering  or  in            selling or soliciting subscriptions.  RIHT's duties as escrow            agent were  to  be governed  by  a written  escrow  agreement            between Laurel and  RIHT, addressed to the investor.   A copy            of  the  agreement,   annexed  as  an  exhibit   to  Laurel's            registration   statement,  was   to  be   provided   to  each            subscribing investor.   As will  be discussed, there  is some            dispute as to the particular form of agreement by whose terms                                         -7-                                          7            RIHT  agreed to be  bound.  It  is clear, however,  that RIHT            assumed at most a duty  to hold investors' deposits in escrow            until  "[Laurel]  shall   verify  to  the  Bank   that  . . .            $6,000,000 in  aggregate purchase price  for Hotel  Interests            have  been subscribed for and received  as required under the            Registration Statement . . . ."                  As the offering proceeded,  Laurel, through its selling            agent  (Broad Reach  Capital),  collected  purchase and  sale            agreements for individual Sea Crest  condominium units ("unit            sale   agreements").     Notwithstanding   the   prospectus's            representations  that investors would be required to tender a            ten percent non-refundable "escrow  deposit" upon subscribing            to  the offering,  Laurel and  Broad  Reach Capital  accepted            promissory notes for ten percent  of the purchase price -- in            ________________            lieu of  cash deposits --  from almost half of  the investors            who  signed unit sale  agreements prior to  the MSL deadline.            Such  cash deposits  as were  tendered by the  investors were            placed in an escrow account at RIHT.  But as the deadline for            meeting the MSL approached, only a total of some $309,000 had            been deposited into the RIHT escrow account.                  RIHT and Laurel conducted  their loan closing on  April            9,  1987, just  prior to  the  expiration date  of the  March            commitment letter.   At the  closing, RIHT was  provided with            copies of the  unit sale agreements  that had been  executed.            An officer of the bank  counted the sale agreements to verify                                         -8-                                          8            that there had been  at least 40  units sold (as required  in            RIHT's  loan  commitment letter)  and  tallied  the aggregate            amount of  sales to  verify that the  six million  dollar MSL            requirement had been  met (as set forth in  the agreement and            the prospectus).  No one  at RIHT undertook to verify whether            there  was a  ten percent  deposit  in escrow  for each  unit            subscription.    Having  satisfied itself  that  at  least 40            subscriptions  and $6  million in  aggregate  sales had  been            achieved, RIHT proceeded  to close its  loan with Laurel  and            thereafter released the escrowed investor deposits to Laurel.            Laurel purchased the  Sea Crest and separately  closed on its            sales of individual condominium units to investors.                  In May  1987, Laurel hired  Bowdoin Construction  Corp.            ("Bowdoin")  to serve  as  the  general  contractor  for  the            renovation  of the Sea Crest.  Pursuant to a letter of intent            from Laurel, Bowdoin began construction work and arranged the            necessary subcontracts.   Based  on a  decision by  Marchand,            Bowdoin  continued its  construction  work through  the  1987            summer season, causing  a fall-off in revenues to  the resort            and putting a wrinkle into Laurel's ongoing sales efforts.                  By  late  September  1987,   Laurel  was  under  severe            financial strain.  It had stopped making payments to Bowdoin,            even  though Bowdoin continued  construction.  On  October 1,            RIHT downgraded the credit status of its loan to Laurel.  The            stock  market crash later  that month only  worsened matters,                                         -9-                                          9            and  in November  1987, Laurel  defaulted  on the  RIHT loan.            Laurel and RIHT  discussed restructuring  or refinancing  the            loan.  Bowdoin inquired about the status of Laurel's funding.            After allegedly being  assured that it would  be paid through            new financing from RIHT, Bowdoin continued with construction.            In the  meantime, restructuring  negotiations between  Laurel            and RIHT had ended unsuccessfully.                  By   January   1988,   when   Bowdoin   finally  ceased            construction, it had  incurred unreimbursed expenses of  over            $1 million.  A month later, Laurel filed a Form 8-K  with the            SEC  disclosing  that   the  Sea  Crest  offering   would  be            indefinitely  suspended,  with  only  58  of  the  total  266            condominium units having been sold.  Soon afterward, a number            of lawsuits were filed.   In April 1988, RIHT sued Laurel  to            collect on its loan.   In July 1988, Bowdoin  filed an action            for breach of contract and  enforcement of a mechanic's  lien            in state  court, but  then voluntarily  dismissed the  action            based, allegedly,  on Laurel's representation  that doing  so            was Bowdoin's  best chance  of recovering any  of its  unpaid            debts.3  Ultimately, Bowdoin collected only a fraction of the            amount owed to it by Laurel.   Laurel, RIHT, and others  were                                            ____________________            3.  After  Bowdoin  dropped  the  state   court  lawsuit  and            discharged the lien, RIHT sold  its interest in the Sea Crest            loan, at a  $5.7 million loss, to  Coolidge Bank (who  had to            that point owned a participation interest in the loan).                                         -10-                                          10            named in  suits filed  by investors, as  well as  in a  newly            instigated action by Bowdoin.                                         II.                                Procedural Background                                _____________________            A.  District Court Proceedings            __  __________________________                  Three  separate  cases   have  been  consolidated   for            purposes of this appeal.   Two of the cases, Schultz  v. RIHT                                                         _______     ____            and  Allenby  Enterprises,  Inc.  v.  RIHT,  are  brought  by                 ___________________________      ____            investors  in  the  Sea Crest  offering.4    The third  case,            Bowdoin Constr.  Corp. v. RIHT,  is brought by Bowdoin.   The            ______________________    ____            Schultz  and  Allenby  plaintiffs  asserted  claims   against            _______       _______            Laurel, RIHT and several others for alleged violations of the            federal securities  laws and civil  RICO, and for  common law            fraud, negligent  misrepresentation, breach of  contract, and            breach of the covenant  of good faith and fair  dealing.  The            Bowdoin complaint asserted  claims against Laurel, RIHT,  and            _______            others for  violations of civil RICO, breach of contract, and            breach of the covenant of good faith and fair dealing.                  In  October  1993,   before  the  Schultz   action  was                                                    _______            scheduled to go to trial, the plaintiffs in all three actions                                            ____________________            4.  The plaintiffs in the Schultz action purchased a total of                                      _______            five  condominium  units in  April  1987  (prior to  the  MSL            deadline), at an aggregate purchase price of approximately $1            million.   There  are  38 plaintiffs  in the  Allenby action.                                                          _______            Collectively,  they  purchased  33  condominium units  at  an            aggregate purchase price  of some $5 million.   Approximately            $1.5 million of  the Allenby plaintiffs' purchases  were made                                 _______            after the MSL deadline (April 10, 1987) had passed.            _____                                         -11-                                          11            reached  a settlement  agreement with  Laurel, Marchand,  and            certain other affiliated  parties, and  dismissed all  claims            against  them, with prejudice.   In exchange,  the plaintiffs            received a promise from the  settling defendants to waive the            attorney-client privilege and to provide interviews and trial            testimony  as requested by the  plaintiffs.  No money changed            hands.                  The Schultz  action proceeded to trial against RIHT and                      _______            the  other  remaining  defendant (a  bank  that  had provided            financing to some  of the investors) in January  1994, before            Chief Judge Tauro.   The plaintiffs presented  twelve days of            testimony,  including the testimony  of Eugene Marchand.   At            the end  of the  plaintiffs' case,  the defendants  moved for            judgment as a matter of law.  In  its memorandum of decision,            the  district  court  concluded that  Central  Bank  v. First                                                  _____________     _____            Interstate  Bank, 511 U.S. 164 (1994), required the dismissal            ________________            of  the plaintiffs' claims for aiding and abetting securities            fraud under Section 10(b)  of the Securities Exchange  Act of            1934.   The  court also  concluded  that the  plaintiffs  had            failed to  present adequate evidence  on any of  their common            law claims  or their RICO  claim, and granted the  motion for            judgment as a matter of law.                  Thereafter,  Judges Keeton  and  Saris granted  summary            judgment motions  filed by  RIHT in  the Allenby and  Bowdoin                                                     _______      _______            actions, respectively.  In deciding the Allenby motion, Judge                                                    _______                                         -12-                                          12            Keeton, discerning no material  difference between the issues            in  Allenby  and Schultz,  followed  Judge  Tauro's decision,                _______      _______            based both on an independent assessment of the  case and as a            matter of stare decisis.   In Bowdoin, in which the plaintiff                      _____________       _______            asserted  RICO  violations  predicated  upon  allegations  of            aiding  and abetting  securities fraud,  Judge  Saris entered            summary judgment in  favor of RIHT, on the  dual grounds that            such a claim could not be viable after Central Bank, and that                                                   ____________            plaintiffs had,  in any  event, failed  to adduce  sufficient            evidence of a "pattern" of racketeering activity.            B.  Posture on Appeal            __  _________________                  The  parties informed us at oral argument that the only            remaining defendant in all three of these cases, at least for            purposes  of this  appeal, is  RIHT.5   We limit  our review,            therefore, to those  claims seeking to hold  RIHT responsible            for the plaintiffs' alleged injuries.                    In  each of  the three  cases,  we review  de novo  the                                                             _______            district  court's  entry  of judgment  as  a  matter of  law.            Because the appeals largely raise the same dispositive issues            (albeit on somewhat different  records), we distinguish  them            only as necessary.  We look to whether, viewing the record in            each case in the light  most favorable to the plaintiffs, any                                            ____________________            5.  Plaintiffs'  counsel   stated  at  oral   argument  that,            although  one  other  party nominally  remains  in  the case,            plaintiffs would  be content  to have  this court's  decision            turn solely upon a determination  of the merits of the claims            against RIHT.                                         -13-                                          13            reasonable jury  could find  in the plaintiffs'  favor.   See                                                                      ___            Fed.  R. Civ.  P.  50(a)  (Schultz); Fed.  R.  Civ. P.  56(c)                                       _______            (Allenby; Bowdoin).   Having assessed the  merits of each  of             _______  _______            the  plaintiffs' theories of liability under this standard of            review, we now affirm.6                                         III.                                  Breach of Contract                                  __________________                    RIHT's   only   relationship    with   the   investor            plaintiffs arose  out of the  bank's role as escrow  agent in            the Sea Crest  offering.  The Schultz and  Allenby plaintiffs                                          _______      _______            assert that RIHT failed in that capacity, acting in breach of            the  terms of the  written escrow arrangement,  in accordance            with which RIHT agreed to hold the deposits to be tendered by            investors.   More specifically,  the plaintiffs  contend that            RIHT  violated the  terms of  the escrow  agreement  when, on            April 9, 1987, it released all escrowed funds to Laurel, even                                            ____________________            6.  RIHT  broadly   argues,   as  a   basis  for   affirmance            independent of the  underlying merits of these  actions, that            the plaintiffs'  claims in  all three cases  are barred  as a            result of their settlement with, and prejudicial dismissal of            their  claims against, the  Laurel defendants.   RIHT further            contends that the  judgment entered by the  district court in            Schultz, if affirmed, constitutes res judicata in relation to            _______            the  plaintiffs' claims in  the Allenby and  Bowdoin actions,                                            _______      _______            and  that the  latter two actions  are barred on  a theory of            non-party  claim preclusion.   See Gonzalez v.  Banco Central                                           ___ ________     _____________            Corp., 27 F.3d 751, 755 (1st Cir. 1994); see also Becherer v.            _____                                    ________ ________            Merrill Lynch,  Pierce, Fenner &  Smith, Inc., 43  F.3d 1054,            _____________________________________________            1069-70 (6th Cir.), cert. denied, 116 S. Ct. 296 (1995).   We                                _____ ______            decline  the  invitation  to venture  into  this  complex and            unsettled area  of the  law, and rest  our affirmance  on the            merits of the three cases before us.                                         -14-                                          14            though,  allegedly, the  offering's MSL  requirement had  not            been satisfied.7                  There  is  a threshold  dispute  as  to the  particular            escrow  agreement that governs.  Plaintiffs contend that RIHT            was in breach of the terms of an agreement referred to by the            parties as the "long-form" escrow.   RIHT replies that it was            bound only by the terms of the so-called "short-form" escrow,            but argues, in the alternative, that  even if it was bound by            the long-form escrow,  the record establishes that  no breach            occurred.                  The short-form  escrow  agreement  was attached  as  an            exhibit  to the registration statement that Laurel filed with            the SEC in  September 1986,  and had been  signed by RIHT  in            November 1986.  The short-form provided, in pertinent part:                  TO  PROSPECTIVE PURCHASERS  OF HOTEL INTERESTS IN                  SEA CREST CONDOMINIUM                      Rhode  Island  Hospital Trust  National  Bank                  (the  "Bank") . . . having  been requested to act                                            ____________________            7.  The  district court in  the Schultz action  reasoned that                                            _______            only those investors whose funds were actually deposited into            the  escrow   account  had   standing  to   challenge  RIHT's            compliance with the  escrow agreement.  The record shows that            the two plaintiffs  in the Schultz action  did not pay a  ten                                       _______            percent  cash down payment, instead signing a promissory note            to  Laurel for that  amount.  Most  of the plaintiffs  in the            Allenby  case, on  the  other  hand, did  pay  a ten  percent            _______            deposit,  but a  number of  the units  -- representing  about            $975,000  in  aggregate sales  --  were sold  without  a cash            deposit  having  been  tendered.   Furthermore,  some  of the            Allenby  plaintiffs  purchased  their  units  after  the  MSL            _______                                       _____            deadline  had passed.   While  we find  the  district court's            point to  be forceful,  we need  not rely  on  it, given  our            disposition of the merits of the issue.                                         -15-                                          15                  as escrow agent ("Escrow Agent")  for deposits to                  be  made by  prospective purchasers  ("Buyer") of                  Hotel    Interests   in    the   above-referenced                  Condominium  from Laurel-Sea  Crest Realty  Sales                  Corp.  ("Seller") . . .  does hereby  accept such                  request and agrees to hold  deposits made payable                  to  the Sea Crest Condominium Escrow Account, and                  received  by it,  upon  the following  terms  and                  conditions to which  Buyer and Seller agree to be                  bound  by  executing  the   Unit  Sale  Agreement                  ("Agreement")  for  Buyer's  Hotel  Interest,  to                  which acopy of this escrowletter will be annexed.                      1.  The Bank agrees to maintain  such deposit                  (the "Deposit")  at its bank  for the  benefit of                  Buyer and Seller . . . .                      2.  In  the event  the [Unit  Sale] Agreement                  is   consummated,   as   evidenced   by   Buyer's                  acceptance of  a deed  to the Hotel  Unit, or  by                  written statement  to that effect  executed by or                  on  behalf  of Buyer  and  Seller,  Escrow  Agent                  shall pay over the  Deposit to Seller, and  shall                  pay  such interest  as may  have accrued thereon,                  to Buyer. . . .            The long-form  escrow agreement was  filed with  the SEC  and            signed  by RIHT at some later time, the precise date being in            dispute.  The first paragraph of the  long-form agreement was            the  same  as  that  in  the short-form,  but  the  body  was            substantially different.   The long-form agreement  provided,            in relevant part:                      1.  The  Bank agrees to maintain such deposit                  (the "Deposit")  at its bank  for the  benefit of                  Buyer  and Seller  . . . .  The Deposit  shall be                  held by  the Bank until  the Seller  shall verify                  to  the Bank  that  (a) $6,000,000  in  aggregate                  purchase  price  for  Hotel Interests  have  been                  subscribed  for and  received  as required  under                  the   Registration   Statement   (the    "Minimum                  Subscription  Level")  and  thereafter  disbursed                  . . . or (b) such Minimum  Subscription Level has                  not  been   achieved  within  120   days  of  the                  effective  date  of  the  Registration  Statement                                         -16-                                          16                  with the Securities and Exchange  Commission.  In                  the event the  Minimum Subscription Level  is not                  achieved   within  such   120  day   period,  all                  deposits and  interest accrued  thereon shall  be                  promptly returned to Buyer.                      2.  In  the  event the  Minimum  Subscription                  Level is  achieved and the [Unit  Sale] Agreement                  is   consummated,   as   evidenced   by   Buyer's                  acceptance of  a deed to  the Hotel  Unit, or  by                  written statement to that  effect executed by  or                  on  behalf  of  Buyer  and Seller,  Escrow  Agent                  shall pay over the  Deposit to Seller, and  shall                  pay such interest  as may  have accrued  thereon,                  to Buyer. . . .            Both  the long- and  short-form escrow agreements  ended with            the following clauses:                      8.  Escrow  Agent assumes  no obligations  or                  responsibility  hereunder  other  than   to  make                  delivery   of  the   Deposit,  and  any  earnings                  thereon, as herein provided. . . .                      It is  understood and agreed  that a  copy of                  this instrument will  be annexed as an exhibit to                  the  [Unit  Sale]  Agreement.    Buyer  shall  be                  entitled  to  rely  upon this  escrow  agreement,                  with the  same force  and effect  as if the  Bank                  had contracted directly with Buyer. . . .                   The crucial difference between the two  agreements lies            in the description  of the  conditions that  were to  trigger            RIHT's duty  to release  any escrowed funds  to Laurel.   The            long-form  agreement linked RIHT's duty to release funds from            escrow upon the  meeting of the  MSL requirement; the  short-            form agreement did not.                  There  is no  dispute  that RIHT  at some  point signed            both the short-  and long-form agreements.   The question  is            ____            when.   The plaintiffs  argue that RIHT  became bound  by the                                         -17-                                          17            long-form agreement before  the April 1987 MSL  deadline, and            that  RIHT  therefore  had a  duty  of  "verif[ication]" with            respect to  the satisfaction  of the  MSL requirement  before            releasing  the funds  in escrow.   RIHT,  on the  other hand,            concedes  that  it  signed the  long-form  agreement  at some                                                                     ____            point, but not before June 1987.  Thus, RIHT asserts that, as            of April 1987, it was bound only by the short-form agreement,            which  makes no  mention  of  the  MSL  requirement.8    Even            accepting the plaintiffs'  rendition of the record,  however,            we conclude  that no rational  trier of fact could  find that            RIHT committed a breach.                  We  look first to  the express  terms of  the long-form            escrow agreement.9   Under that agreement, RIHT  was required            to  "hold deposits made payable to  the Sea Crest Condominium            Escrow Account,  and received  by it"  until "[Laurel]  shall            verify to the Bank that (a) $6,000,000  in aggregate purchase            price  for Hotel  Interests  have  been  subscribed  for  and                                            ____________________            8.  On   the  one  hand,  RIHT  has  provided  an  unrebutted            attestation that the only escrow agreement on record with the            SEC as  of April 1987 was  the short-form agreement.   On the            other hand, there is some evidence (albeit circumstantial) to            suggest that  RIHT had  agreed to be  bound by  the long-form            agreement prior to April  1987.  For  example, a copy of  the            long-form agreement  (lacking RIHT's signature)  was attached            to a letter from Marchand's  attorney to RIHT dated March 16,            1987, in which  the attorney  proposed to  RIHT a  particular            procedure for dealing with interest accruing to the Sea Crest            escrow account.            9.  The  parties  appear  to  agree  that  Massachusetts  law            governs.                                         -18-                                          18            received as  required under  the Registration  Statement (the            'Minimum   Subscription  Level') . . . ."     This   language            unambiguously  limits RIHT's obligations  as escrow  agent to            holding deposits  "received by it"  until Laurel "verifi[ed]"            that $6 million in subscriptions had been received.                  The record  before us  permits no genuine  dispute that            RIHT satisfied its limited duties  under the agreement.   The            evidence is  clear that RIHT  did not release any  funds that            had been deposited into the Sea Crest escrow account until it            had been provided by Laurel  (prior to the MSL deadline) with            copies of  executed unit  sale agreements  with an  aggregate            face value in excess of  $6 million.  Plaintiffs concede that            there is uncontradicted testimony to this effect.                  Plaintiffs' argument  is that  RIHT was required  to do            more.  They contend that  RIHT should have refused to release            funds in  escrow on April  9, 1987  on the grounds  that: (i)            many of the unit sales counted toward the MSL were not backed            by ten percent cash  deposits; (ii) Laurel had  pledged seven            Sea Crest units as collateral for a "bridge" loan that it had            obtained from Wedgestone Realty Investors Trust, the proceeds            of which were applied to  Laurel's purchase of the Sea Crest;            and (iii) the $6  million in unit sales that were  applied to            the MSL computation had not actually been received  by Laurel            before the MSL deadline.                                         -19-                                          19                  The  response  is  that  the  escrow  agreement  cannot            fairly be  read to  say that any  one of  these circumstances            created a  bar to  the  disbursement of  the escrowed  funds.            Under   the terms of its escrow agreement, RIHT's role in the            Sea Crest offering  was a limited one, narrowly  defined in a            written agreement.   The escrow agreement  did not impose  on            RIHT  a generalized  duty to  police  the offering.   To  the            contrary, the agreement disclaimed any duty to the parties in            escrow "other than to make delivery  of the [escrowed funds],            and any earnings thereon."                  Thus, although  the fact that  Laurel sold a  number of            Sea Crest units without taking a ten percent deposit from the            purchaser was arguably at odds  with the prospectus, there is            no  language in the escrow agreement conditioning the release            of  any escrowed funds  upon RIHT's having  received deposits            totalling  a  full  ten  percent of  the  six  million dollar            minimum sales  amount.   Similarly, there  was nothing  about            Laurel's "bridge"  loan from Wedgestone  that obligated RIHT,            under the escrow agreement, to determine that the MSL had not            been met, or that funds  in escrow were otherwise required to            be returned to investors.                  Finally, the  plaintiffs' argument  that $6 million  in            actual funds had not been "received" prior to  RIHT's closing            of escrow goes nowhere.   To the extent that plaintiffs argue            that  RIHT itself was  required to  be in  receipt of  the $6                                         -20-                                          20            million,  the argument is  inconsistent with the  language of            the escrow agreement.   To the extent that  the agreement can            be read to  require that the $6 million  have been "received"            at  all, the  agreement plainly  envisions that  it would  be            Laurel who would receive the funds, and who  would thereafter            ______            verify the same to RIHT.                  In any  event,  RIHT's alleged  failure  to verify  the            satisfaction of the purported  "receipt" requirement does not            help  the  plaintiffs'   case.     The  purported   "receipt"            requirement is necessarily separate and distinct from the MSL            requirement, and satisfaction of the latter did not depend on            satisfaction  of  the   former.10    The   only  circumstance            specified in the escrow agreement as requiring RIHT to return            escrow deposits  to investors was  the failure to  attain the            MSL;  Laurel's alleged  non-receipt of  $6  million in  sales            proceeds did not require investor funds to be refunded or the                         ___            offering to be withdrawn.   At most, the logic of plaintiffs'            theory is that  RIHT released escrowed  funds too early,  and                                                              _____                                            ____________________            10.  The prospectus  itself states  that "[c]losings [on  the            individual  unit  sale  agreements]  will  commence once  the            Minimum  Subscription  Level  has   been  satisfied."    This            language clearly contemplates that the MSL would be satisfied            before the actual  consummation of the unit  sale agreements.            ______            And  because the proceeds from the  unit sale agreements that            were counted toward the MSL could not have been "received" by            Laurel until after  the closings on  those units, it  follows                         _____            that the satisfaction of the MSL could not have depended upon            any such "receipt."                                         -21-                                          21            not  that RIHT wrongfully  failed to call  for termination of            ___            the offering.11                    The question remains whether  RIHT, in its capacity  as            escrow agent, owed any duties  to plaintiffs other than those            spelled out in the agreement.   The Supreme Judicial Court of            Massachusetts has recently indicated that there is an absence            of  discussion  in  Massachusetts law  of  whether  an escrow            agent's duties may extend beyond satisfying the literal terms            of  the  escrow agreement.    See  In  re Discipline  of  Two                                          ___  __________________________            Attorneys,  421 Mass. 619,  626 (1996)  ("Massachusetts cases            _________            have  not discussed  whether an  escrow holder  has any  duty            beyond fulfilling the terms of  the escrow.").12  But we find            no support for  plaintiffs' broad arguments that  RIHT, which            is  not alleged to  have been in a  conflict of interest, was            required, in effect,  to actively root out fraud  of which it            had no  knowledge and to  police Laurel's conduct in  the Sea                                            ____________________            11.  This is not  a case involving the fabrication  of "sham"            transactions  designed to create the mere illusion that sales            had been  generated.  The  apparent absence of  some deposits            notwithstanding, there has been no suggestion that any of the            unit sale agreements that were counted toward the MSL in this            case were anything other than bona fide, binding contracts of            purchase and sale.            12.  But cf. Schmid v. National  Bank of Greece, 622 F. Supp.                 _______ ______    ________________________            704,   710  (D.  Mass.   1985)  ("The  escrow   agreement  or            instructions constitute  the full  measure of the  obligation            assumed by  the escrow  holder and  owing to  the parties."),            aff'd, 802 F.2d 439 (1st Cir. 1986) (tbl.).            _____                                         -22-                                          22            Crest offering.13   See  Two Attorneys, 421  Mass. at  626-27                                ___  _____________            (citing Maganas v. Northroup, 663 P.2d 565 (Ariz. 1983) (duty                    _______    _________            to disclose known fraud); Collins v. Heitman, 284 S.W.2d  628                        _____         _______    _______            (Ark. 1955)  (duty not  to engage  in self-dealing);  Kitchen                                                                  _______            Krafters, Inc. v. Eastside Bank of Mont., 789 P.2d 567 (Mont.            ______________    ______________________            1990) (duty to  disclose material facts relevant  to escrow),            overruled on other grounds by Busta v.  Columbus Hosp. Corp.,            _____________________________ _____     ____________________            916 P.2d 122 (Mont. 1996); American State Bank v. Adkins, 458                                       ___________________    ______            N.W.2d  807 (S.D.  1990)  (duty  to  avoid  self-dealing  and            conflicts of interest)).                                         IV.                               Other Common Law Claims                               _______________________            A.  Breach of Covenant of Good Faith and Fair Dealing            __  _________________________________________________                  The plaintiffs  have not pointed to any record evidence            that would permit a finding that RIHT's release of the escrow            funds to Laurel was done other than under a good faith belief            that the MSL requirement had  been satisfied, and that all of                                            ____________________            13.  Despite plaintiffs' contrary suggestion,  SEC Rule 10b-9            does not warrant the importation into the escrow agreement of            a generalized  duty to  ensure that the  offering as  a whole            complied with  the securities  laws.  Rule  10b-9 makes  it a            violation of Section 10(b) of  the Securities Exchange Act of            1934 for any person to  make a representation, in  connection            with an offering,  that securities are  being offered on  any            "basis whereby all or part  of the consideration paid for any            such security  will be  refunded to the  purchaser if  all or            some of the securities are  not sold," unless the offering is            structured in a specified way.  17 C.F.R.   240.10b-9.  Here,            however, there is no support for a finding that the Sea Crest            offering  did  not comply  with  Rule  10b-9  or,  even  more            basically,  that RIHT ever  made any "representation" covered            by the Rule.                                         -23-                                          23            the conditions  for releasing  the funds had  been met.   The            record supports no  conclusion that RIHT acted  with the sort            of  dishonest purpose or conscious wrongdoing necessary for a            finding of bad  faith or unfair dealing.   See Anthony's Pier                                                       ___ ______________            Four,  Inc. v.  HBC  Assoc., 411  Mass.  451, 471-72  (1991);            ___________     ___________            American Employers'  Ins. Co.  v. Horton,  35 Mass. App.  Ct.            _____________________________     ______            921, 923 (1993).  The district court did not err in summarily            disposing  of the  plaintiffs' claims  for the breach  of the            covenant of good faith and fair dealing.            B.  Fraud and Negligent Misrepresentation            __  _____________________________________                  Plaintiffs do  not seriously  argue that RIHT  made any            affirmative  material misrepresentations  to them  concerning            the Sea Crest  offering.  RIHT did not  sign the registration            statement,  and  there  is  no  evidence  that  RIHT had  any            involvement in the preparation  of the registration statement            or other offering  materials for the Sea Crest  project.  Nor            did  RIHT participate in Laurel's marketing or sales efforts.            The only communication between plaintiffs and RIHT appears to            have been through  the escrow agreement, which  was addressed            to investors  and was to have been  annexed to each unit sale            agreement.                  Absent  allegations  of affirmative  misrepresentations            or misstatements by  RIHT, the question becomes  whether RIHT            was guilty  of any  actionable omissions.   Absent a  duty to            speak,  RIHT's silence could  not have been  fraudulent.  See                                                                      ___                                         -24-                                          24            Royal Business Group,  Inc. v. Realist, Inc., 933  F.2d 1056,            ___________________________    _____________            1064 (1st Cir.  1991).   RIHT's role in  the offering was  to            hold  funds  deposited  with it  until  Laurel  verified that            certain conditions had been met.  Even assuming that RIHT, as            escrow agent, had a duty to  disclose known fraud on the part                                                  _____            of Laurel, see, e.g., Maganas, 663 P.2d at 565  (cited in Two                       ____ ____  _______                    _____ __ ___            Attorneys,  421  Mass.  at 626-27),  plaintiffs  point  to no            _________            evidence that  would show that  RIHT was aware  of fraudulent            conduct  by  Laurel  or  any  other  party  involved  in  the            offering.                  It is true  that RIHT might have had  reason to realize            that a  number of investors had provided  promissory notes in            lieu of  ten percent  cash deposits  upon execution  of their            unit sale agreements.  But there is no reason why RIHT should            have suspected  that this was  the result of fraud.   Indeed,                                                         _____            the plaintiffs do not allege  that the promissory notes  were            fraudulently made  or  procured; rather,  they were  facially            valid,  enforceable   instruments.     Furthermore,  Laurel's            acceptance  of  bona   fide  promissory  notes,   instead  of            deposits,  was  not  so   obviously  inconsistent  with   the            prospectus that  RIHT should have concluded that  a fraud was            being  perpetrated.  Finally,  plaintiffs fail to  argue that            any  nondisclosure by RIHT on this  issue would have affected            their decision  to invest; nor  do they explain how  any such            nondisclosure  could have  been the  cause  of their  losses.                                         -25-                                          25            See, e.g., Damon v. Sun Co., Inc., 87 F.3d 1467, 1471-72 (1st            ___  ____  _____    _____________            Cir. 1996) (elements  of fraud include proof  of reliance and            causation).            C.  Aiding and Abetting Fraud            __  _________________________                  The  plaintiffs'  common   law  claim  of   aiding  and            abetting fraud  fares no better.   To establish a  common law            cause of action for aiding  and abetting, plaintiffs must  at            least demonstrate some measure  of "active participation" and            the  knowing provision of  substantial assistance by  RIHT to            the  principal's (here, Laurel's) alleged fraud.  See Spinner                                                              ___ _______            v.  Nutt, 417  Mass. 549,  556 (1994).   Plaintiffs  point to                ____            nothing   in  the  record  that  would  satisfy  these  basic            elements.   Indeed, the evidence is to  the contrary.  In his            testimony in  the Schultz  trial, Marchand  himself expressly                              _______            disavowed  the existence of  any sort of  association between            Laureland RIHT otherthan anarm's lengthbusiness relationship.                                          V.                                   RICO Violations                                    _______________                  In order to  prevail on a RICO claim,  a plaintiff must            prove, inter alia,  that the defendant engaged  in a "pattern                   __________            of racketeering activity."  See 18 U.S.C.   1962.  Here, RIHT                                        ___            argues  that the district court correctly granted judgment in            its favor on plaintiffs' RICO claims, because plaintiffs have            failed  to establish that RIHT's  conduct falls within any of            the categories  of "racketeering activity"  described in  the                                         -26-                                          26            statute, see 18 U.S.C.   1961(1), and because plaintiffs have                     ___            failed  to  adduce  evidence of  the  requisite  "pattern" of            predicate  acts necessary to  trigger RICO liability,  see 18                                                                   ___            U.S.C.   1962(b)-(c).            A.  Establishment of a Predicate Act            __  ________________________________                  Plaintiffs argue  that, on the record, a rational trier            of  fact could find  that RIHT engaged  in three racketeering            predicates: (i)  aiding and  abetting securities  fraud; (ii)            mail fraud; and  (iii) wire fraud.  The  district court found            that  "aiding and abetting securities fraud" cannot be a RICO            predicate,  in light  of  the  Supreme  Court's  decision  in            Central Bank,  511 U.S.  at 164 (1994)  (no private  right of            ____________            action for  aiding and  abetting under  Section 10(b)  of the            Exchange Act),  and that the  record supports  no finding  of            mail or wire fraud by RIHT.                  We reserve to another day the issue of  whether Central                                                                  _______            Bank necessarily implies that aiding and  abetting securities            ____            fraud  cannot be a "racketeering activity" within the meaning            of    1961(1).    Even  assuming  that  aiding  and  abetting            securities fraud  can be  a RICO predicate  act, we  find the                              ___            record support for such a claim to  be lacking, as we do with            respect to the  plaintiffs' allegations that RIHT  engaged in            mail or wire fraud.                  As  for the  aiding and  abetting allegation,  we agree            with  the  district  court  that the  record  contains  not a                                         -27-                                          27            scintilla  of  evidence  that  would  support  the  requisite            finding  that  RIHT  "consciously  shared" in  the  principal            wrongdoer's  (Laurel's)  specific   intent  to  defraud   the            plaintiffs.  See United States  v. Loder, 23 F.3d 586, 590-91                         ___ _____________     _____            (1st Cir. 1994)  (describing the elements of  criminal aiding            and abetting).  The lack  of evidence of fraudulent intent on            the part of RIHT similarly dooms plaintiffs' allegations that            the bank committed  mail or wire fraud.  There is no basis in            the record from which a rational trier of fact could conclude            that  the  mailings  or  wires  by  RIHT  (described  in  the            plaintiffs'  brief in  only  a fleeting  fashion) constituted            communications  "in  furtherance" of  a  scheme "intended  to                                                             ____________            deceive another, by  means of false or  fraudulent pretenses,            _______________            representations,  promises,  or   other  deceptive  conduct."                                                     __________________            McEvoy Travel Bureau, Inc. v. Heritage Travel, Inc., 904 F.2d            __________________________    _____________________            786, 791 (1st Cir.) (emphases added), cert.  denied, 498 U.S.                                                  _____________            992 (1990).                  We  conclude  that  the  record  contains  insufficient            evidence  to  raise  a  triable  issue  as  to  whether  RIHT            committed  any of  the  RICO predicate  acts  alleged by  the            plaintiffs.                                         -28-                                          28            B.  The "Pattern" Requirement            __  _________________________                  The  plaintiffs'  RICO claims  fail for  an additional,            independent reason.  For the plaintiffs to prevail, they must            establish  not only that  RIHT engaged in  some "racketeering            activity,"  but  that   the  bank's  conduct   constituted  a            "pattern" of  such activity.   See  18 U.S.C.    1962(b)-(c).                                           ___            The RICO  statute  by its  terms specifies  that a  "pattern"            entails  at least  two predicate  racketeering acts.   See 18                                                                   ___            U.S.C.    1961(5).   However, while  two  predicate acts  are            necessary   to  form  a  RICO  "pattern,"  they  may  not  be            sufficient unless they  are both "related" and  "amount to or            pose a threat of continued criminal activity."  See H.J. Inc.                                                            ___ _________            v. Northwestern Bell  Tel. Co., 492 U.S.  229, 239-40 (1989);               ___________________________            Fleet  Credit Corp.  v. Sion,  893  F.2d 441,  444 (1st  Cir.            ___________________     ____            1990).    "In   other  words,  a  RICO  pattern  consists  of            'continuity plus relationship.'"  Sousa v. BP Oil, Inc., 1995                                              _____    ____________            WL 842003,  *13 (D.  Mass. 1995) (quoting  H.J., 492  U.S. at                                                       ____            239).                  This  court has  remarked upon  the elusiveness  of any            helpful,  talismanic definition  of a  RICO  "pattern."   See                                                                      ___            Apparel Art  Int'l Inc. v.  Jacobson, 967 F.2d 720,  722 (1st            _______________________     ________            Cir.  1992).    But, as  then-Chief  Judge  Breyer explained,            courts  have consistently  held that  a  "single episode"  of            criminal  behavior, even  if it  involves  the commission  of            multiple related acts, does not constitute a  "pattern."  See                                                                      ___                                         -29-                                          29            id.  at  723.   Instead,  courts  have  tended to  find  RICO            ___            "patterns"  only  where the  defendant's conduct  consists of            "multiple  criminal episodes" extending  over long periods of            time.  Id. at 724; see also H.J., 492 U.S. at  242 ("Congress                   ___         ________ ____            was concerned in RICO with long-term criminal conduct.").                  Here,  the  alleged instances  of  wrongful  conduct by            RIHT all  constituted part of  a single "episode."   Like the                                             ______            multiple predicate acts that were described in Apparel Art as                                                           ___________            "compris[ing] a single effort" to achieve one goal (obtaining            and keeping a  Defense Department contract), see 967  F.2d at                                                         ___            723, the alleged racketeering acts attributed to RIHT in this            case, "taken  together, . . .  comprise a  single effort"  to            facilitate a  single financial  endeavor:   the purchase  and            renovation of the Sea Crest resort.  Id.                                                 ___                  If  the  mailings and  wires  RIHT  transmitted in  the            course  of its involvement  in the  Sea Crest  offering could            amount  to a  RICO  "pattern,"  then  virtually  every  claim            asserted  under the  federal securities  laws  could spawn  a            companion   RICO  cause  of  action,  because  "[i]n  today's            integrated  interstate economy,  it is  the  rare transaction            that does not somehow rely on  extensive use of the mails  or            the telephone."   Roeder v. Alpha Indus., Inc.,  814 F.2d 22,                              ______    __________________            31 (1st Cir. 1987) (internal quotation omitted).  We conclude            that the instances of RIHT's conduct identified by plaintiffs            as constituting RICO predicate acts did not  form a "pattern"                                         -30-                                          30            of   racketeering  activity   and  are   more  "appropriately            characterized  as  separate  parts  of a  single  [allegedly]            criminal episode."  Apparel Art, 967 F.2d at 723.                                ___________                                         VI.                                      Conclusion                                      __________                  The three  separate judgments entered  by the  district            court in these consolidated cases are affirmed.                                                  ________                                         -31-                                          31
