did to justify the fee charged. Roe also furthered the scheme by pressuring them during critical moments in the lawsuit and obtaining their consent through undue influence. It is also alleged that this is defendants' standard practice with divorce clients that they believe have neither the economic resources nor psychological independence to withstand such pressure.
Section 1964(c) of RICO provides that "any person injured in his business or property by reason of a" RICO violation may bring a civil suit for damages. Defendants argue Doe has not been injured in her business or property. Physical injury and mental suffering do not constitute RICO injury; there must be injury to business or property. See Rylewicz v. Beaton Services, Inc., 888 F.2d 1175, 1180 (7th Cir. 1989); Fleischhauer v. Feltner, 879 F.2d 1290, 1300 (6th Cir. 1989), cert. denied, 493 U.S. 1074, 107 L. Ed. 2d 1029, 110 S. Ct. 1122 (1990); McMurtry v. Brasfield, 654 F. Supp. 1222, 1224-25 (E.D. Va. 1987). Therefore, the personal injuries that Doe alleges cannot constitute RICO injury. Additionally, any injury to property must be proximately caused by the racketeering acts. Bastian v. Petren Resources Corp., 892 F.2d 680, 686 (7th Cir.), cert. denied, 496 U.S. 906, 110 L. Ed. 2d 270, 110 S. Ct. 2590 (1990); Reynolds v. East Dyer Development Co., 882 F.2d 1249, 1253-54 (7th Cir. 1989); Arzuaga-Collazo v. Oriental Federal Savings Bank, 913 F.2d 5, 7 (1st Cir. 1990). Plaintiff points to various allegations that she argues constitute injury to property.
In considering whether a loss of property has been adequately alleged, it will be assumed -- without deciding the issue -- that a pattern of racketeering activity including schemes to defraud constituting predicate acts of mail and wire fraud have been adequately alleged.
Plaintiff argues that the $ 7,500 retainer paid to Roe was, at least in part, a loss of property since she could have retained a less expensive attorney. Also, in switching to Roe, she incurred additional expenses since he had to duplicate some of the work she had already paid her first attorney $ 9,350 to perform. If Doe was fraudulently induced
into retaining Roe, all or, more likely, parts of these two payments would constitute a loss of property as a result of the RICO predicate acts. The actions of Roe allegedly constituting the scheme to defraud generally occurred after Roe had been retained and are alleged to cause injury other than the loss of the retainer fee and the payment to the first attorney. The only racketeering acts that are claimed to have caused the decision to retain Roe is Roe's failure to disclose in advance his intention to follow his regular practice of demanding sexual favors from clients such as Doe and his intention to seek to obtain a greater fee than the amount he initially promised to charge.
The alleged misrepresentations as to the actual fee Roe would charge cannot be considered a cause of the loss of the $ 7,500 or the amount paid to the first attorney. At the cost of $ 7,500, Doe was willing to retain Roe and discharge her first attorney. If Roe intended to collect money or sexual services beyond the $ 7,500 promised, there is no injury to property caused by the misrepresentations except to the extent that he collected money (or other property) in excess of the $ 7,500 retainer. Loss of the $ 7,500 retainer and the payment to the prior attorney cannot be considered to have been caused by the misrepresentations as to the full fee that would be charged; only additional charges could be considered a loss caused by the misrepresentations as to the fee to be charged. As is discussed below, the "charges" beyond the promised $ 7,500 fee did not result in injury to property.
Plaintiff claims that the scheme to defraud resulted in a loss of property in that Roe failed to adequately pursue her interests in the divorce litigation out of fear that Doe's husband would reveal Roe's relationship with Doe. Doe conclusorily alleges that this resulted in plaintiff failing to pursue payment of Doe's attorney's fees by her husband.
Although plaintiff alleges that Mary H. was told that Roe and Roe, in all cases where it is representing the wife, collects all fees, including the initial retainer, from the husband, the allegations as to Doe are clear that she was only told that "further" fees beyond the retainer fee would be paid by her husband. Amended Complaint paras. 10, 22. The complaint is read as alleging that, had he pressed further, Roe could have obtained a settlement or judgment requiring Doe's husband to pay Roe's fees beyond the amount of the retainer.
A recent Seventh Circuit opinion indicates that loss of a damages claim due to an attorney's malfeasance can constitute loss of property under RICO. See Hartz v. Friedman, 919 F.2d 469 (7th Cir. 1990).
If Doe had been deprived of having her husband compensate her for the $ 7,500 she actually paid out or if she had paid additional fees for which he did not compensate her, then the RICO injury to property requirement would be satisfied. Doe, however, was never required to make additional monetary payments. Although presented with bills for additional fees, she "paid" them off with sexual services, not money. Thus, the nonzealous representation resulted in further personal injury, not injury to property. Plaintiff argues that she was deprived of the payment from her husband, which was a loss of property enabling Roe to pressure her into further sexual relations due to a lack of financial resources to pay his bills. This characterization does not change the fact that Doe's actual injury was the personal injury of sexual servitude, not a loss of property. She was never required to pay the additional bills with additional property. For the same reason, the judgment for attorney's fees and placement of the lien on Doe's residence did not constitute injury to property since they were paid off with sexual services, not money or other property.
Plaintiff argues that the nonsexual companionship services that she provided to Roe are a property interest that she lost. Except possibly where there is an actual employment relationship, see, e.g., Curley v. Cumberland Farms Dairy, Inc., 728 F. Supp. 1123, 1140 (D.N.J. 1990), loss of compensation for services will not be considered injury to business or property under RICO.
Plaintiff argues that her missing work as a result of the harassment from Roe and her need to expend money for a security system constitute loss of property under RICO. However, economic aspects of personal injuries and injuries incidental to the racketeering acts are not compensable under RICO. See Rylewicz v. Beaton Services, Ltd., 698 F. Supp. 1391, 1396 (N.D. Ill. 1988), aff'd, 888 F.2d 1175, 1180 (7th Cir. 1989); Grogan v. Platt, 835 F.2d 844 (11th Cir.), cert. denied, 488 U.S. 981, 102 L. Ed. 2d 562, 109 S. Ct. 531 (1988); Local 355 v. Pier 66 Co., 599 F. Supp. 761, 765 (S.D. Fla. 1984).
In McNally v. United States, 483 U.S. 350, 97 L. Ed. 2d 292, 107 S. Ct. 2875 (1987), the Supreme Court held that violation of the mail fraud statute required that there be a scheme to obtain money or property; a scheme to deprive another of intangible rights such as honest services could not constitute mail fraud.
Plaintiff relies on Justice Stevens's dissent in which he stated that, even in light of McNally, "when a person is being paid a salary for his loyal services, any breach of that loyalty would appear to carry with it some loss of money to the employer -- who is not getting what he paid for." Id. at 377 n. 10 (Stevens, J., dissenting). Plaintiff argues this is particularly applicable when the offender is a private employee, not a government employee. The next term after McNally was issued, however, a unanimous Court indicated otherwise. In Carpenter v. United States, 484 U.S. 19, 98 L. Ed. 2d 275, 108 S. Ct. 316 (1987), the Court held that mail fraud violations include deprivations of intangible property, including intangible property such as confidential business information of a newspaper. The Court distinguished McNally stating, "The Journal, as Winans' employer, was defrauded of much more than its contractual right to his honest and faithful service, an interest too ethereal in itself to fall within the protection of the mail fraud statute, . . . ." Id. at 25. To the extent Roe committed fiduciary violations as part of a scheme to defraud, those violations would not constitute a loss of property.
Since plaintiff has not alleged an injury to business or property as required by 18 U.S.C. § 1964(c), her RICO claims must fail. Since the RICO claims must be dismissed, jurisdiction over the pendent state law claims will not be retained. While plaintiff may adequately state claims for breach of fiduciary duty
and intentional infliction of emotional distress, absent a basis for federal jurisdiction, those claims must be pursued in state court and the determination of the viability of those claims must be left for any such proceeding.
IT IS THEREFORE ORDERED that defendants' motion to dismiss is granted. The Clerk of the Court is directed to enter judgment in favor of defendants and against plaintiff dismissing Counts I and II of plaintiff's amended complaint with prejudice and dismissing Counts III, IV and V of plaintiff's amended complaint without prejudice for lack of subject matter jurisdiction.