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CASHCO OIL CO. v. MOSES

United States District Court, Northern District of Illinois, E.D


February 11, 1985

CASHCO OIL COMPANY, A DELAWARE CORPORATION, PLAINTIFF,
v.
EDWARD L. MOSES, JR., ETC., ET AL., DEFENDANTS.

The opinion of the court was delivered by: Shadur, District Judge.

MEMORANDUM OPINION AND ORDER

Cashco Oil Company ("Cashco") has filed a multi-count Complaint against Edward L. Moses, Jr. ("Moses") and a number of affiliated corporations and a Moses sole proprietorship, Pelican Mud ("Pelican"). Because the Complaint poses a number of problems on its face and no one's interests would be advanced by the delays inherent in a Fed.R.Civ.P. ("Rule") 12(b) motion and the required briefing on that motion, this Court is sua sponte ruling on some of the obvious defects in the Complaint.*fn1

Rule 17(b) looks to Illinois law to determine Pelican's capacity to be sued. As a sole proprietorship, it has no legal existence apart from Moses and is not separately suable under Illinois law. Accordingly, Pelican is dismissed as a defendant.

Complaint Count I is a RICO*fn2 count that reflects a number of the flaws this Court (speaking on the topic "A Judicial Perspective on Civil RICO") identified in the January 30, 1985 one-day institute sponsored by IICLE, devoted exclusively to civil RICO:

    1. Though Count I ¶ 8 asserts "Each of the
  defendants have [sic] transacted certain of their
  [sic] affairs in this district," only Moses himself
  is alleged to have negotiated and consulted here
  (Count I ¶ 11). No valid predicate has been
  asserted for venue here as to the corporate
  defendants.

    2. To sustain the conversion of a
  breach-of-contract (Count I ¶ 15) or
  breach-of-fiduciary obligation (Count I ¶¶ 14,
  15(f)) claim into a mail or wire fraud claim (the
  predicate offense for RICO purposes), Cashco must
  prove promissory fraud — knowingly false
  statements of future intentions (Count I ¶ 16).
  Rule 11 now imposes a more stringent standard on a
  party's or its lawyers' allegations than heretofore
  (In re Ronco, 46 B.R. 444, 446-448 (N.D.Ill.,
  1985)), and this Court expects such allegations to
  have the kind of factual and legal foundation the
  new standards require.*fn3

    3. Of course an entity can be both a "person"
  and an "enterprise" under Section 1961 (Count I ¶
  18). But it cannot fit both definitions for
  purposes of the same RICO claim. Haroco v. American
  National Bank and Trust Company of Chicago,
  747 F.2d 384, 399-401 (7th Cir. 1984), approving this
  Court's earlier analysis in Parnes v. Heinold
  Commodities, Inc., 548 F. Supp. 20, 23-24 (N.D.Ill.
  1982). That means:

      (a) Collectivizing "defendants" in the
    alleged pattern of racketeering activity (Count
    I ¶¶ 19-21) will not suffice. As to each
    defendant — a "person" in Section 1961 terms —
    the pattern and the involved "enterprise" must be
    identified. Only such an identified person,
    having the requisite statutorily-defined
    relationship with an enterprise, can be sued as a
    RICO defendant.

      (b) "Investing" income and proceeds in
    oneself (Count I ¶ 22) is an impermissible
    concept that does not track with Section 1962(a),
    for that would pose the same person-enterprise
    problems. Haroco, 747 F.2d at 402 permits those
    concepts to be mixed somewhat (and perhaps in a
    somewhat doubtful fashion), but not as Cashco has
    done. As for investing in others, the
    undifferentiated form of Count I ¶ 22's
    allegations cannot be sustained. Cashco must
    allege in particular, and must be prepared to
    prove, which defendant or defendants in fact
    invested in which other defendant or defendants.

      (c) Allegations of a Section 1962(d)
    conspiracy "as a result of the foregoing acts"
    (Count I ¶ 24) also improperly

    blurs the concepts under RICO. Again, once each
    "person" violating Section 1962(a) or (c) has
    been properly identified, the identity of the
    other alleged conspirator or conspirators as to
    each such person, and the means of implementing
    the conspiracy, must be alleged with reasonable
    particularity.

Count I is therefore dismissed (without prejudice of course to repleading in proper form).

Count II ¶ 9 says Cashco's claim for an accounting arises from Illinois-based activity by defendants "as more fully hereinafter alleged." But no such allegations are then made at all (except as to Moses, referred to in Count I ¶ 11 and reincorporated into Count II). Accordingly, Count II is dismissed as to all defendants save Moses. Moreover, Count II ¶ 21 is stricken (see Morrow v. L.A. Goldschmidt Associates, Inc., 126 Ill. App.3d 1089, 1093, 82 Ill.Dec. 152, 156, 468 N.E.2d 414, 418 (1st Dist. 1984)).*fn4

Finally, Count V is stricken in its entirety. Newman-Green, Inc. v. Alfonzo-Larrain, 590 F. Supp. 1083, 1085-88 (N.D.Ill. 1984). Unlike the other portions of this opinion, leave is not granted to replead this claim.

Counsel for Cashco are ordered to apprise counsel for defendants (if known to Cashco's counsel) of this order, to avoid needless work in answering the stricken portions of the initial Complaint. If defendants' counsel are not known, counsel for Cashco are ordered to mail copies of this order to defendants at their respective addresses for service of process.


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