The opinion of the court was delivered by: Nordberg, District Judge.
MEMORANDUM OPINION AND ORDER
This action is before the court on joint motion of all
defendants to dismiss plaintiffs' Second Amended Complaint.
For the reasons set forth below, defendants' motion is granted
in part and denied in part.
Defendant Allnet Communication Services, Inc. ("Allnet") is
a provider of long distance telephone service. It is subject
to the Federal Communications Act of 1934, 47 U.S.C. § 201 et
seq., and to the rules, regulations, directions and orders of
the Federal Communications Commission ("FCC"). The individual
defendants, Michael P. Richer, Melvyn J. Goodman, Robert
F. Downing, and Julia A. Vinson, are executives, officers
and/or directors of Allnet. Plaintiffs, The Bruss Company and
Hinckley & Schmitt, Inc., are both former subscribers to
Allnet's long distance telephone service.
Plaintiffs have sued under various legal theories, on behalf
of themselves and others similarly situated, for alleged
overcharges by Allnet for long distance service. In Counts I
and II, plaintiffs allege alternate violations of the
Racketeer Influenced and Corrupt Organizations Act ("RICO"),
18 U.S.C. § 1961-1968. Count III alleges a cause of action
under the Federal Communications Act of 1934 ("Communications
Act"), 47 U.S.C. § 201 et seq. The remaining counts allege
state law claims for common law fraud (Count IV), violations of
the Uniform Deceptive Trade Practices Act, Ill.Rev.Stat. ch.
121 1/2, § 311 et seq. (Count V), and violations of the
Illinois Consumer Fraud & Deceptive Business Practices Act,
Ill.Rev.Stat. ch. 121 1/2, § 261 et seq. (Count VI).
All six counts are based on the same principal allegations
of overcharge and fraud. Plaintiffs essentially allege that
defendants charged plaintiffs and other long distance
subscribers rates in excess of the tariffs filed with the FCC.
These overcharges were allegedly accomplished in three ways:
(1) by inflating the distance in miles for "800 service"
calls, for which charges are based on the distance between the
network switching center and the place called; (2) by
inflating the mileage component for normal calls placed
through new switching centers, and (3) by billing calls to
cities in the Allnet systems, for which lower rates were to be
charged, at the higher rates for cities not within the Allnet
system. Plaintiffs allege that all the defendants conspired
together to conceive, and then implemented, the overcharge
system as a scheme to defraud class members.
The defendants have moved to dismiss all six counts of the
complaint on various grounds. In considering a Rule 12(b)(6)
motion to dismiss, a complaint should not be dismissed unless
it appears beyond doubt that the plaintiff can prove no set of
facts in support of his claim that would entitle him to the
relief requested. Cruz v. Beto, 405 U.S. 319, 323, 92 S.Ct.
1079, 1081, 31 L.Ed.2d 263 (1972); Conley v. Gibson,
355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957). The court
must accept as true all material facts well pleaded in the
complaint, and must make all reasonable inferences in the light
most favorable to the plaintiff. City of Milwaukee v. Saxbe,
546 F.2d 693, 704 (7th Cir. 1976). The court need not strain,
however, to find inferences available to the plaintiff which
are not apparent on the face of the complaint. Coates v.
Illinois State Board of Education, 559 F.2d 445, 447 (7th Cir.
In their original motion to dismiss, filed before the 7th
Circuit Court of Appeals issued its decision in Haroco, Inc. v.
American National Bank & Trust Company, 747 F.2d 384 (7th Cir.
1984), defendants argued that plaintiffs' RICO counts were
deficient for failure to allege a "RICO injury." The Haroco
decision squarely rejected any requirement of alleging a "RICO
injury," and defendants have since abandoned this argument.
Defendants also advance a number of other arguments for
dismissal of the RICO counts. They assert that plaintiffs have
failed to plead the fraud alleged against the individual
defendants with sufficient particularity to satisfy Rule 9(b)
of the Federal Rules of Civil Procedure. Rule 9(b) provides
In all averments of fraud or mistake the
circumstances constituting fraud or mistake shall
be stated with particularity. Malice, intent,
knowledge, and other conditions of mind of a
person may be averred generally.
This requirement of greater specificity is intended to protect
defendants from the harm that results from charges of serious
wrongdoing, and to give the defendants
notice of the conduct complained of. D & G Enterprises v.
Continental Illinois National Bank, 574 F. Supp. 263, 266-67
(N.D.Ill. 1983); Todd v. Oppenheimer & Co., Inc., 78 F.R.D.
415, 419 (S.D.N.Y. 1978), citing Segan v. Dreyfus Corp.,
513 F.2d 695, 696 (2nd Cir. 1975). As the court in D & G
Enterprises noted, complaints alleging fraud should seek
redress for a wrong, rather than attempt to discover unknown
wrongs. 574 F. Supp. at 266, citing Gross v. Diversified
Mortgage Investors, 431 F. Supp. 1080, 1087 (S.D.N.Y. 1977),
affirmed, 636 F.2d 1201 (2nd Cir. 1980).
However, Rule 9(b) must be read together with Rule 8, which
requires a plain and concise statement of the claim.
Tomera v. Galt, 511 F.2d 504, 508 (7th Cir. 1975). Therefore,
although a plaintiff must allege with particularity the
specific acts comprising the fraud, he need not plead detailed
evidentiary matters. The allegations should describe the
circumstances constituting the fraud, including the time, place
and contents of the false representations, as well as the
identity of the party making the misrepresentation. D & G
Enterprises, 574 F. Supp. at 267.
Moreover, when there are allegations of a fraudulent scheme
with multiple defendants, the complaint must inform each
defendant of the specific fraudulent acts which constitute the
basis of the action against each particular defendant.
Id.; Adair v. Hunt International Resources, 526 F. Supp. 736,
744 (N.D.Ill. 1981); Lincoln National Bank v. Lampe,
414 F. Supp. 1270, 1278-79 (N.D.Ill. 1976).
In this case, plaintiffs have made specific allegations of
the manner in which the alleged fraud or overcharges were
carried out by Allnet as a corporation. As noted above, the
complaint specifies the three ways in which Allnet allegedly
overcharged its customers. Viewing these allegations in light
of the standards under Rules 9(b) and 8 discussed above, the
court finds that these allegations plead fraud with sufficient
particularity with respect to Allnet. However, with respect to
the individual defendants, the complaint fails to include any
allegation as to how any individual defendant participated in
the fraud. The complaint merely alleges that Allnet and the
individual defendants schemed to defraud customers by
overcharging them, and then describes the types of
overcharges. Nowhere does the complaint specify any act by any
particular defendant through which the fraud was carried out.
The individual defendants are merely "lumped" together with
Allnet and accused of performing the same fraudulent acts.
Under Rule 9(b) and the cases discussed above, these
allegations are clearly insufficient to support claims of
fraud against the individual defendants.
Plaintiffs' response to their failure to plead any
individual acts by individual defendants is that defendants
have destroyed documents which would support their claim of
fraud, and otherwise hindered detection of their wrongdoing.
These unsupported allegations are insufficient to withstand
scrutiny under Rule 9(b). As the court in D & G Enterprises
noted, plaintiff should not make serious accusations of fraud
until they have ascertained what wrongs have been committed;
fraud should not be alleged in the hope of later discovering
some. 574 F. Supp. at 266.
The Seventh Circuit has relaxed the requirement of pleading
fraud with particularity in cases where matters are
particularly within the knowledge of the opposing party. In
these circumstances, allegations based "on information and
belief" may be sufficient, but the allegations must be
accompanied by a statement of facts upon which the belief is
founded. Duane v. Altenburg, 297 F.2d 515, 518 (7th Cir. 1962);
D & G Enterprises, 574 F. Supp. at 267. Thus, even when
particular facts are solely within the knowledge of the
defendant, the plaintiff must still make sufficient particular
allegations based "on information and belief," and submit a
statement of the facts upon which the belief is based.