The opinion of the court was delivered by: Aspen, District Judge:
MEMORANDUM OPINION AND ORDER
This is a "civil RICO" action,*fn1 filed under 18 U.S.C. § 1961
et seq. In brief, the complaint alleges that the
defendants Continental Bank ("Continental") and several bank
officials used a pattern of mail fraud to hide Continental's
use of trust income for its own benefit. The plaintiff Marshall
Spiegel ("Spiegel") is the sole income beneficiary of the
"Oscar Spiegel Trust" ("the Trust"), and he has sued on behalf
of a purported class of trust beneficiaries similarly defrauded
by Continental. Continental moved to dismiss the case as barred
by res judicata. In a minute order the Court previously
reserved decision on the res judicata issue and directed the
parties to file supplemental memoranda about whether the
complaint states a claim upon which relief can be granted. The
parties have done so. For the reasons stated below, the Court
grants Continental's motion to dismiss, basing the dismissal in
part on the doctrine of res judicata and in part on
Spiegel's failure to state a claim for relief under RICO.
The following undisputed history is taken from the complaint
and from the papers submitted by the parties.*fn2 In 1972
Spiegel's father Oscar created a trust which named Spiegel as
sole income beneficiary. Continental and a private individual
were named as Trustees. Spiegel was to become a trustee upon
reaching age 25, which he did in 1981. During that year Spiegel
stated that he wanted to act as sole trustee. Continental
refused to yield its position as corporate trustee, citing a
provision of the trust agreement requiring a corporate trustee.
This dispute spawned suits. In December 1981 Spiegel filed a
replevin action against Continental in the Circuit Court of
Cook County. Continental reacted by filing a suit in Circuit
Court, seeking a declaration that the Trust Agreement required
there to be a corporate trustee. The two suits were
consolidated, and Spiegel counterclaimed, alleging various
breaches of fiduciary duty by Continental. These alleged
breaches of fiduciary duty overlap the allegations of fraud in
The Circuit Court upheld Continental's position that the
Trust Agreement required a corporate trustee. Spiegel appealed,
lost, and the Illinois Supreme Court denied him leave to appeal
to that court. So far as we know, Spiegel's fiduciary duty
counterclaims are still pending in state court.
On June 15, 1983, while the state court appeal was pending,
Spiegel sued Continental in federal court ("Spiegel I"), basing
jurisdiction on RICO. Like the complaint in this case ("Spiegel
II"), the complaint there alleged that the defendants engaged
in a pattern of racketeering activity in violation of 18 U.S.C. § 1962(c).
Spiegel's theory was that the trustees, in effect,
converted trust funds for the benefit of Continental. They did
this by transferring trust income to principal quarterly.
During any given quarter, Continental would use this available
income for its own benefit. Spiegel charges that this scheme to
use such "float" money was not disclosed to him, and that when
he later learned of it, defendants made misleading statements
to cover up.*fn3
Spiegel I was heard by Judge Roszkowski, who granted
Continental's motion for summary judgment*fn4 on the basis
that the complaint failed to state a claim for relief under
RICO. Spiegel now concedes that Judge Roszkowski was right in
that respect. See Spiegel's Response to Memorandum in Support
of Motion to Dismiss at 4. In particular, the Court held that
had not alleged "a pattern of racketeering activity."*fn5
Spiegel's RICO claim was predictated solely on alleged
violations of the federal mail fraud statute, 18 U.S.C. § 1341.
The Court found that Spiegel had not alleged two or more acts
of mail fraud and thus had not satisfied RICO's requirement
that a violation be based on at least two acts of racketeering
activity within a ten-year period. See 18 U.S.C. § 1961(5). The
Court assumed that a letter written by defendant Paulsen,
concerning Continental's policy of reinvesting trust income
quarterly, was a predicate act of mail fraud, but held that
this act was the only one alleged.
After the Spiegel I complaint had been filed, counsel for
both parties had exchanged correspondence relating to the state
court suit, which we will detail later. Spiegel argued to Judge
Roszkowski that two of the letters penned by Continental's
counsel were predicate acts of mail fraud. The Court rejected
these arguments because the statements were not alleged in the
complaint. It added in dictum that false statements made
between attorneys in the context of pending litigation fall
outside the scope of the mail fraud statute. Spiegel I, slip
op. at 11.
On September 13, 1984, the court in Spiegel I denied
Spiegel's motion to reconsider the previous dismissal. Eight
days later, Spiegel filed Spiegel II. The complaint essentially
mirrors that of Spiegel I, except that it alleges two
additional predicate acts of mail fraud — the two letters
written by Continental's lawyer Scott Davis ("Davis").
Continental promptly moved to dismiss Spiegel II, claiming that
it was res judicata in light of the recent dismissal of Spiegel
Although this case does have an aura of deja vu about it, we
cannot agree with Continental that the complaint on its face is
barred by res judicata. Res judicata, or "claim preclusion,"
contains three elements: (1) the final judgment in the previous
case must have been "on the merits"; (2) the parties or their
privies to the two suits must be identical; (3) the causes of
action in both suits must be identical. See, e.g., Mandarino v.
Pollard, 718 F.2d 845, 849 (7th Cir. 1983), cert. denied, ___
U.S. ___, 105 S.Ct. 116, 83 L.Ed.2d 59 (1984); Green v.
Illinois Dept. of Transportation, 609 F. Supp. 1021, 1024
(N.D.Ill. 1985) (Aspen, J.). While the first and second
elements were met in this case,*fn6 the third one was not.
"`[A] cause of action consists of a single core of operative
facts which give[s] the plaintiff a right to seek redress for
the wrong concerned.'" Green, 609 F. Supp. at 1024, quoting Lee
v. City of Peoria, 685 F.2d 196, 200 (7th Cir. 1982). Res
judicata bars claims for relief which were actually raised in
the first suit and also claims which could have been raised.
However, the only thing sparing Spiegel II from clutches of
res judicata is the allegation of two new predicate acts of
mail fraud. In all other relevant respects, Spiegel II is a
reincarnation of Spiegel I and satisfies the three elements of
res judicata. As noted earlier, Judge Roszkowski remarked in
dictum that those two alleged predicate acts of mail fraud
could not be the basis of a mail fruad violation and, it
follows, a RICO claim. In light of that strong dictum, and of
the fact that this suit survives only by virtue of those two
alleged acts, we directed the ...