The opinion of the court was delivered by: HOLDERMAN
JAMES F. HOLDERMAN, UNITED STATES DISTRICT JUDGE:
Plaintiffs Henrietta Armstrong, Charles Heard and Kanjaddie Heard (collectively referred to in this opinion as "plaintiffs") bring this action for damages under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq., various state statutes; and for breach of contract. One of the defendants, The Dartmouth Plan, Inc. ("Dartmouth"), has moved to dismiss the complaint against it on the ground that the court lacks subject matter jurisdiction over the claims against Dartmouth. In the alternative, Dartmouth moves to dismiss Counts II and III and, in part, Count VI for failing to state a claim upon which relief may be granted. For the following reasons, Dartmouth's motion to dismiss is denied.
Plaintiffs are consumers who assert that they have been victimized by a home repair fraud perpetrated by the defendants. According to the complaint, defendant Steven Edelson conceived of and initiated the allegedly fraudulent scheme by causing agents of two corporations within his control, defendants Chicago Lumber & Construction Company ("Chicago Lumber") and All American Aluminum & Construction Company ("All American"), to enter into "cash sales contracts" with consumers.
Plaintiffs assert that defendants conned the consumers into signing the contract by misrepresenting it as an estimate for repair work. The contract required the consumer to pay substantial penalties if the consumer cancelled the contract more than three days after signing it.
The complaint further alleges that, after the three-day period expired, Chicago Lumber and All American presented the customer with previously undisclosed financing terms. Agents of these construction companies coerced consumers into agreeing to the financing terms by threatening them with loss of their homes or lawsuits to recover the cancellation penalties. Once the consumer signed a financing agreement, Chicago Lumber or All American accepted payment from the customers or from financing entities. Defendants allegedly did no work or did defectively shoddy work under the contract in exchange for these payments.
Plaintiffs do not allege that Dartmouth was directly responsible for Chicago Lumber's alleged fraud on the Heards. Instead, the plaintiffs allege that Dartmouth is liable because it knew that the contracts initiated by Chicago Lumber were "tainted by fraud and improper business practices." (Amended Complaint, p. 14, para. 55).
The complaint imputes knowledge to Dartmouth on the grounds that Dartmouth itself had been the subject of both a civil complaint and a criminal investigation by the Attorney General of Connecticut and therefore was "on notice . . . that it had to investigate the character and business practices of the home improvement contractors selling contracts to it." Id. Finally, the plaintiffs complain that Dartmouth should have known that the installment contract was backdated because it had received applications for credit from the Heards with dates subsequent to December 1, 1986.
The plaintiffs' complaint does not assert a claim under any federal law against Dartmouth. Count I of the complaint seeks treble damages from "the defendants other than Dartmouth, jointly or severally," under Section 1962(a) of RICO. (Amended Complaint, p. 16) (emphasis added). Count II charges defendants Edelson, Chicago Lumber, All American, and their agents with violating Section 2 of the Illinois Consumer Fraud and Deceptive Business Practices Act ("Consumer Fraud Act"), Ill. Ann. Stat. ch. 121 1/2, para. 262 (Smith-Hurd, Supp. 1989), and charges Dartmouth with aiding and abetting these violations. Count III charges Dartmouth with violating the Illinois Sales Finance Agency Act ("Finance Agency Act"), Ill. Ann. Stat. ch. 17, para. 5202 et seq. (Smith-Hurd, 1981), by accepting the assignment of the Heard's contract. Count IV and V assert causes against defendants other than Dartmouth for breach of contract. Finally, Count VI alleges that the FTC language contained in the installment contract renders Dartmouth contractually liable for Chicago Lumber's alleged violations of RICO (Count I), the Consumer Fraud Act (Count II), and breach of contract (Count V).
A. Pendent Party Jurisdiction
Dartmouth has moved to dismiss this case on the grounds that this court lacks subject matter jurisdiction over the claims the plaintiffs assert against Dartmouth. Dartmouth notes that the plaintiffs' complaint asserts only state law causes of action against Dartmouth, and contends that this court therefore has subject matter jurisdiction over Dartmouth only through the doctrine of pendent party jurisdiction. Dartmouth argues vigorously that the allegations of the plaintiffs' complaint are not sufficient to invoke the pendent party jurisdiction of this court.
"Pendent party jurisdiction arises when a plaintiff brings a federal claim in federal court against one party, and brings a related state-law claim against another party."
Huffman v. Hains, 865 F.2d 920 (7th Cir. 1989). In Huffman, the Seventh Circuit described the factors which bear on a court's decision to exercise its pendent party jurisdiction:
Our cases have set forth a two-step analysis to determine whether pendent party jurisdiction exists in a particular case. First, the court must examine whether the constitutional power to exercise such jurisdiction exists. Second, the court must examine whether Congress has limited the court's power to exercise pendent party jurisdiction in the specific statutory provision conferring federal jurisdiction in that case. The constitutional power to exercise pendent party jurisdiction exists if the federal claim is not frivolous, the federal and state claims "'derive from a common nucleus of operative fact,'" and the federal and state claims are the kind that the plaintiff "'would ordinarily be expected to try . . . in one judicial proceeding.'" The statutory power to exercise pendent party jurisdiction depends upon whether "Congress in the [particular statutory grant at issue] has . . . expressly or by implication negated" pendent party jurisdiction.
Huffman, 865 F.2d at 922-23 (citations omitted). See also Citizens Marine National Bank v. United States Department of Commerce, 854 F.2d 223, 226-27 (7th Cir. 1988), cert. denied, 489 U.S. 1053, 109 S. Ct. 1312, 103 L. Ed. 2d 582 (1989); Zabkowicz v. West Bend Co., 789 F.2d 540, 547 (7th Cir. 1986); Vantine v. Elkhart Brass Mfg. Co., Inc., 762 F.2d 511, 519 (7th Cir. 1985); Bernstein v. Lind-Waldock & Co., 738 F.2d 179, 187-88 (7th Cir. 1984). The decision of whether to exercise pendent party jurisdiction is a matter of the court's ...