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GALLAGHER v. CANON U.S.A.
July 24, 1984
PATRICK J. GALLAGHER, PLAINTIFF,
CANON U.S.A., INC., DEFENDANT.
The opinion of the court was delivered by: Shadur, District Judge.
MEMORANDUM OPINION AND ORDER
Patrick Gallagher (Gallagher") has moved pursuant to
Fed.R.Civ.P. ("Rule") 12(b) to dismiss the Amended Counterclaim
of Canon U.S.A., Inc. ("Canon"). Gallagher contends Canon has
failed (1) to allege standing to sue under the Racketeer
Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961-1968,
and (2) to plead fraud with sufficient particularity
as required by Rule 9(b). For the reasons stated in this
memorandum opinion and order, Gallagher's motion is granted and
Canon's Counterclaim is dismissed without prejudice.
Gallagher's Complaint alleges Canon orally agreed to make
Gallagher an authorized dealer of Canon office equipment, then
breached that agreement, causing Gallagher to go out of business
after he had spent over $250,000 opening a dealership. Canon
assertedly breached its agreement by refusing to permit its
majority-owned subsidiary Ambassador Office Equipment, Inc.
("Ambassador") to sell Gallagher Canon office equipment.
Gallagher seeks not only reliance damages but also more than $1
million in lost profits and appreciation.
After this Court granted Gallagher's motion for a more definite
statement of the original Counterclaim, Canon filed an Amended
Counterclaim. Canon's Amended Counterclaim charges Gallagher
participated in a pattern of racketeering activity in violation
of RICO, alleging:
1. Gallagher formed and is responsible for the
operation of various business enterprises engaged in
interstate commerce, including Command Duplicating
Services, Inc. in Illinois and Command Duplicating
Services, Inc. in Nevada (Amended Counterclaim ¶¶
2. Gallagher and other agents of Gallagher's
enterprises "unlawfully caused the transfer of
substantial amounts of equipment and other assets of
CANON or Ambassador to said business enterprises
without reasonable compensation therefor and with the
intent to defraud CANON and Ambassador" (id. ¶ 8).
3. Gallagher and other agents of Gallagher's
enterprises "unlawfully received cash payments,
reimbursements for personal expenses and other
valuable benefits from Ambassador without CANON's
knowledge or consent which were not related to any
legitimate business purpose all with the intent to
defraud CANON and Ambassador" (id. ¶ 9).
4. That scheme to defraud described in Amended
Counterclaim ¶¶ 8-9 "was accomplished through the use
of the United States mails in violation of
18 U.S.C. § 1341 and the wires in violation of
18 U.S.C. § 1343" (id. ¶ 10).
5. That scheme to defraud also "included the
knowing transportation or receipt in interstate
commerce by the above-stated business enterprises of
photocopying machines and other goods and equipment
belonging to CANON or Ambassador having a value in
excess of Five Thousand Dollars ($5,000.00), in
violation of 18 U.S.C. § 2314 and 2315" (id. ¶ 11).
6. Canon suffered damages in excess of $2 million
because "Ambassador's ability to function as an
effective dealer of Canon office equipment was
seriously impaired, which has resulted in substantial
damage to CANON in the form of lost sales of Canon
brand office equipment, injury to CANON's business
reputation and good will in the Chicago area, and a
decline in the value of shares of Ambassador stock
held by CANON" (id. ¶ 13).
Canon urges it can bring a RICO claim because it is a "person
injured" under 18 U.S.C. § 1964(c) ("Section 1964(c)"). Where
however Canon seeks RICO standing simply as a shareholder of an
injured corporation, it stretches RICO far beyond standing
notions employed for any other type of action. Accordingly, the
Amended Counterclaim does not survive unless it can be recast to
allege only ...
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