an enterprise within the meaning of § 1961(4). It further
alleges that each of the four defendants are persons within the
meaning of § 1961(3). Plaintiffs then allege that the four
defendants have been employed or associated with the enterprise
by a pattern of racketeering activity and each has conspired to
violate §§ 1962(b) and (c). Plaintiffs also allege that the
defendants committed at least two acts of mail fraud and wire
fraud in furtherance of their scheme to defraud plaintiffs. The
alleged fraudulent scheme was the defendants' creation of the
appearance of good faith contract negotiations supposedly aimed
at legitimately obtaining microcomputer technology while
failing to disclose that they had no interest in honoring any
agreement. The alleged objective of the fraudulent scheme was
to obtain the disclosure of valuable competitive information
without paying for it.
Defendants first attack Count VII on the ground that
plaintiffs' fraud allegations fail to state a claim because
plaintiffs merely allege reliance on statements regarding
future actions, not misrepresentations of past or present
fact. This court dismissed Trak's original fraud claim because
it merely alleged that Trak had relied on defendants'
statements regarding their future actions. Memorandum opinion
at p. 10.
The fraudulent scheme alleged in Count VII differs, however,
from the fraud count Trak alleged in its original complaint.
Plaintiffs now allege that defendants' false representations
of their intentions regarding their future conduct were the
scheme by which the defendants accomplished their fraud. As
such, the allegations fall within the scope of Carroll v.
National Bank of Lincolnwood, 413 F.2d 353, 358 (7th Cir.
1969), where the court recognized that even though false
representations regarding future conduct cannot state a cause
of action for fraud generally, they may sustain a cause of
action for fraud where the representations regarding future
conduct are claimed to be the scheme used to accomplish the
Defendants next assert that plaintiffs' allegations of mail
and wire fraud are not pled with the requisite particularity.
Plaintiffs specifically identify one mailing, the Stock
Purchase and Sale agreement, which was made pursuant to the
defendants' alleged scheme, and further identify the contents
of that mailing and the identity of the person from whom it
originated. In addition, plaintiffs allege that a number of
phone calls were made pursuant to the scheme. Plaintiffs
provide the general time frame in which these calls were made
and the nature of the content of the calls.
In order to hold an individual liable for mail fraud, it
must merely be shown that the defendant participated in a
scheme to defraud in which the use of the mails was
foreseeable. United States v. Hasenstab, 575 F.2d 1035, 1039
(2d Cir. 1978), cert. denied, 439 U.S. 827, 99 S.Ct. 100, 58
L.Ed.2d 120 (1979). Plaintiffs have met this standard with
respect to both their mail fraud and wire fraud allegations. In
addition, the plaintiffs' description of the fraudulent scheme
and their identification of the transactions by which the
scheme was accomplished put defendants on fair notice of the
time and place of the alleged false representations. See Haroco
v. American National Bank & Trust Co., 747 F.2d 384, 405 (7th
Cir. 1984), aff'd, ___ U.S. ___, 105 S.Ct. 3291, 87 L.Ed.2d 437
Defendants next argue that plaintiffs fail to adequately
allege an "enterprise" within the meaning of RICO. First,
defendants contend that a group of corporations cannot be an
"enterprise" within the meaning of § 1961(4). Section 1961(4)
provides that an "enterprise" "includes any individual,
partnership, corporation, association, or other legal entity,
and any union or group of individuals associated in fact
although not a legal entity. Although a group of corporations
associated in fact is not expressly listed in § 1961(4), that
section is not an exclusive list; it merely lists entities
which are included in the RICO definition of "enterprise."
Thus, a group of corporations can constitute a RICO
"enterprise." United States v. Huber, 603 F.2d 387,
393-94 (2d Cir. 1979), cert. denied, 445 U.S. 927, 100 S.Ct.
1312, 63 L.Ed.2d 759 (1980). See also Bunker Ramo Corp. v.
United Business Forms, Inc., 713 F.2d 1272, 1285 (7th Cir.
1983) (an enterprise includes the entities listed in § 1961(4)
or any combination of them).
Second, defendants argue that a RICO "enterprise" must be a
separate entity from the RICO defendants. In Haroco, the
Seventh Circuit recognized § 1962(c) required that the liable
person and the enterprise which has its affairs conducted
through a pattern of racketeering activity must be separate
entities. Haroco, 747 F.2d at 400. Plaintiff has pled as much.
The alleged enterprise is the association in fact of the four
corporate defendants and the alleged liable persons are each of
the four individual corporate defendants. Thus, the persons
allegedly liable for the § 1962(c) violation are distinct
entities from the alleged enterprise. This conclusion is
consistent with the Haroco court's observation that in the
association in fact situation, each participant in the
enterprise may be a person liable under RICO, whereas the
association itself cannot be liable. Id. at 401.
Defendants finally challenge plaintiffs' RICO claim on the
basis that it fails to allege a "pattern of racketeering
activity." As with many of the terms used in the RICO statute,
the statute itself provides a definition. Section 1961(1)
defines "racketeering activity" as any one of a number of
specified illegal acts, including mail fraud and wire fraud.
Section 1961(5) provides that "a pattern of racketeering
activity" requires at least two acts of racketeering activity,
one of which occurred after the effective date of the statute
and the last of which occurred within 10 years after the
commission of a prior act of racketeering activity.
Defendants ask this court to find that plaintiffs have
failed to allege "a pattern of racketeering activity" in light
of the rationale of National Trust Bank/O'Hare N.A. v. Inryco,
Inc., 615 F. Supp. 828 (N.D.Ill. 1985), wherein Judge Shadur
explored the "pattern" component of a RICO claim. Judge Shadur
began by examining language found in the recent Supreme Court
case of Sedima, S.P.R.L. v. Imrex Co., ___ U.S. ___, 105 S.Ct.
3275, 87 L.Ed.2d 346 (1985), where the Supreme Court suggested
that one of the reasons for the "extraordinary" uses to which
civil RICO has been put is the failure of the courts to develop
a meaningful concept of "pattern." Sedima, 105 S.Ct. at 3287.
The Court stated:
As many commentators have pointed out, the
definition of a "pattern of racketeering
activity" differs from the other provisions in
§ 1961 in that it states that a pattern "requires
at least two acts of racketeering activity," §
1961(5) (emphasis added), not that it "means" two
such acts. The implication is that while two acts
are necessary, they may not be sufficient. Indeed,
in common parlance, two of anything do not
generally form a "pattern." The legislative history
supports the view that two isolated acts of
racketeering activity do not constitute a pattern.
As the Senate Report explained: "The target of
[RICO] is thus not sporadic activity. The
infiltration of legitimate business normally
requires more than one `racketeering activity' and
the threat of continuing activity to be effective.
It is this factor of continuity plus relationship
which combines to produce a pattern." S.Rep. No.
91-617, p. 158 (1969) (emphasis added). Similarly,
the sponsor of the Senate bill, after quoting this
portion of the Report, pointed out to his
colleagues that "[t]he term `pattern' itself
requires the showing of a relationship. . . . So,
therefore, proof of two acts of racketeering
activity, without more, does not establish a
pattern. . . ." 116 Cong.Rec. 18940 (1970)
(statement of Sen. McClellan). See also id., at
35193 (statement of Rep. Poff) (RICO "not aimed at
the isolated offender"); House Hearings, at 665.
Significantly, in defining "pattern" in a later
provision of the same bill, Congress was more
enlightening: "criminal conduct forms a pattern if
it embraces criminal acts that have the same or
similar purposes, results, participants,
victims, or methods of commission, or otherwise
are interrelated by distinguishing
characteristics and are not isolated events."
18 U.S.C. § 3575(e). This language may be useful in
interpreting other sections of the Act. Cf.
Iannelli v. United States, 420 U.S. 770, 789, 95
S.Ct. 1284, 1295, 43 L.Ed.2d 616 (1975). Sedima,
105 S.Ct. at 3285 n. 14.
Based upon his reading of this language in Sedima, Judge
Shadur rejected the Seventh Circuit precedent which found the
"pattern" element of RICO to be satisfied by the presence of at
least two acts of "racketeering activity" taken in furtherance
of a single criminal end. See, e.g. United States v. Starnes,