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D & S Auto Parts Inc. v. Schwartz

decided: February 4, 1988.


Appeal from the United States District Court for the Northern District of Illinois, Eastern Division, No. 82 C 5279 -- Susan Getzendanner, Judge.

Bauer, Chief Judge, Coffey, Circuit Judge, and Pell, Senior Circuit Judge.

Author: Pell

PELL, Senior Circuit Judge.

D & S Auto Parts (D & S), a retail auto parts dealer, purchased wholesale auto parts from defendant A. P. Walter Company, Inc. (Walter). Defendant Bernard Saul was the Walter salesperson assigned to the D & S account. Each week, Saul took inventory at the D & S warehouse and phoned in an order to Walter for needed parts. After delivery by common carrier, Walter mailed invoices to D & S, which D & S paid upon receipt.

In February 1982, D & S discovered that since July 1976, it had paid $155,445.20 for parts it never ordered or received. Saul had been taking parts from the Walter warehouse, ostensibly for delivery to D & S, and billing D & S for the parts. He actually sold and delivered the parts to defendants Sibley-Halsted Auto Parts, Ronald Duntz, David Much, and Robert Miller.

D & S's attorney promptly contacted Sheldon Schwartz, the president and principal owner of Walter. Upon hearing of the fraudulent invoices, Schwartz hired a private investigator. Following an investigation, Schwartz terminated Saul and informed the State's Attorney of Saul's activities. Saul, Much, and Duntz were indicted in October 1982. In February 1983, they were convicted of theft but acquitted of conspiracy.

D & S brought this action under 18 U.S.C. § 1961 et seq., the Racketeer Influenced and Corrupt Organizations Act (RICO) on August 25, 1982, against Saul, Walter, and Schwartz. The complaint was stricken pursuant to Rule 11, presumably because D & S's attorney did not sign it. D & S filed its first amended complaint on August 1, 1983, which was dismissed for failure to state a claim under RICO. The second amended complaint, filed December 1, 1983, was partially dismissed. D & S moved to amend the complaint, adding additional parties. On August 9, 1984, it filed a third amended complaint, naming for the first time defendants Ronald Duntz, David Much, Sibley-Halsted Auto Parts, and Austin Auto Parts. On January 22, 1985, D & S substituted defendant Robert Miller for Austin Auto Parts.

On September 10, 1984, the court dismissed all claims against Walter. On September 3, 1985, the court entered summary judgment in favor of Sheldon Schwartz on all counts. On August 29, 1986, the court granted summary judgment in favor of all defendants added in the third amended complaint, holding that the claims were untimely under Illinois' two-year statute of limitations for injuries to business or property.

The court entered final judgment under Rule 54(b) on November 21, 1986, as to the orders of September 10, 1984, September 3, 1985, and August 29, 1986.*fn1 D & S appeals that final judgment.

Appellant first argues that the district court erred in dismissing the claims against defendants named in the third amended complaint.*fn2 Appellant contends that the court should have applied a five-year rather than a two-year statute of limitations. Neither statute applies. Since the filing of briefs in this appeal, the Supreme Court has determined that the Clayton Act's four-year statute of limitations applies to all civil RICO actions.*fn3 Agency Holding Corporation v. Malley-Duff & Associates, Inc., 483 U.S. 143, 107 S. Ct. 2759, 2767, 97 L. Ed. 2d 121 (1987). The third amended complaint, filed August 9, 1984, was timely with respect to this cause of action, which arose in February 1982. Thus the district court's dismissal of the claims must be reversed.

The second issue arises in the RICO claims against Walter and Schwartz. Appellant asserts that the district court erred in dismissing its claim against Walter and granting summary judgment in favor of Schwartz because Saul's wrongdoing renders the corporation and Schwartz vicariously liable under RICO § 1962.

In arguing for liability, appellant does not distinguish between the employer corporation, Walter, and its president and owner, Schwartz. Appellant fails to advance any argument for "piercing the corporate veil," and instead simply conflates the issues of Walter's and Schwartz' potential liability. Absent any argument for disregarding the corporate status and imposing personal liability on its officer-shareholder, the district court correctly held that Schwartz is not personally obligated for any corporate liability. See Van Dorn Co. v. Future Chemical and Oil Corp., 753 F.2d 565, 570-71 (7th Cir. 1985).

Appellant bases its argument for Walter's liability on the principle of respondeat superior. Apparently conceding that the corporation was not involved in the fraudulent scheme, appellant asserts only that Walter is vicariously liable for the acts of Saul, its agent. This court has not directly addressed ...

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