to the franchise operation), and because they were not isolated events.
Defendants contend, however, that plaintiffs have failed to establish the continuity element. Since H.J. Inc., it has been very difficult for plaintiffs to satisfactorily demonstrate continuity. Midwest Grinding, 769 F. Supp. at 1464 (pointing out that in each case since H.J. Inc., the Seventh Circuit has not found the necessary continuity to establish a pattern of racketeering). Continuity exists where either there has been repeated conduct over a closed period of time, or where the racketeering activity by its nature projects into the future with a threat of repetition. H.J. Inc., 492 U.S. at 241. The Supreme Court and the Seventh Circuit, however, have been careful to recognize the purpose of RICO -- to "reach activities that amount to or threaten long-term criminal activity" -- when evaluating the continuity requirement and therefore have generally not applied RICO when the threat is an individual one, rather than a significant threat to society. H.J. Inc., 492 U.S. at 243 n.4; U.S. Textiles, Inc. v. Anheuser-Busch Companies, 911 F.2d 1261, 1267 (7th Cir. 1990); Midwest Grinding, 769 F. Supp. at 1470 .
With this in mind, we examine plaintiffs' allegations to determine whether continuity has been established. In order to perform this continuity analysis we turn to four factors which the Seventh Circuit has considered relevant when examining the pattern requirement: (1) the number and variety of acts and length of time over which they are committed; (2) the number of victims; (3) the presence of separate schemes; and (4) the occurrence of distinct injuries. Triad Associates, Inc. v. Chicago Housing Authority, 892 F.2d 583, 594 (7th Cir. 1989), cert. denied, 112 L. Ed. 2d 97, 111 S. Ct. 129 (1990); Midwest Grinding, 769 F. Supp. at 1463.
The first factor concerns the number of acts and the period of time over which they occurred. Plaintiffs allege a scheme that lasted for several years and involved a considerable number of instances of fraud -- mostly mail and wire fraud. Although this would seem to tip the scale in favor of finding a pattern, the Seventh Circuit has noted that mail and wire fraud are "unique among predicate acts" and may be "no indication of the requisite continuity of the underlying fraudulent activity." U.S. Textiles, Inc., 911 F.2d at 1268 (citation omitted). As in U.S. Textiles, each of plaintiffs' fraud allegations refers to the same event -- their becoming and remaining a franchise operation. Furthermore, the scheme had a definite conclusion since the franchisor-franchisee relationship was terminated in August 1991. Midwest Grinding, 769 F. Supp. at 1467 (noting that a factor to consider when determining if a pattern exists is whether there is a definite conclusion to defendant's conduct).
Second, we look to the number of victims. Although plaintiffs have not specifically referred us to other victims, they have stated that the fraud involves numerous victims and "continued over many years both as to plaintiffs and other franchisees" (plf.resp. at 12). It is certainly reasonable to infer from plaintiffs' allegations that defendants' alleged fraudulent practice has affected, or could affect in the future, other franchisees.
The third factor refers to the number of schemes that defendants allegedly engaged in. Plaintiffs refer to the number and types of allegations made in their complaint and maintain that they have alleged "that the defendants devised and executed a number of schemes which were intended to defraud existing and potential franchisees." We disagree. Plaintiffs' allegations refer to one scheme: that they were fraudulently induced into becoming and remaining a Palmer Video franchise. The alleged activities essentially concern business relations between plaintiffs and defendants, and matters regarding plaintiffs' individual franchise operation.
Finally, we look to the fourth factor, the occurrence of distinct injuries. Plaintiffs have not alleged, nor can we find, the occurrence of distinct injuries. The economic injury felt by plaintiffs stems from their entering into the franchise agreement and remaining a franchise operation.
Based on the facts and circumstances of this case, plaintiffs may have difficulty in establishing a pattern of racketeering activity sufficient to support a RICO claim. While their allegations would probably provide sufficient bases for common law claims, such as a contract claim or business fraud, they are not the type of allegations at which the RICO statute was aimed, at least so long as the focus of the case is the relationship between plaintiffs and defendants.
U.S. Textiles, 911 F.2d at 1269 (stating that the scheme, which related to a single contract, was not an appropriate RICO claim since there was no significant societal threat); Midwest Grinding, 769 F. Supp. at 1470 (noting that where defendant's conduct threatens plaintiff and was not a societal threat, then RICO should not apply and plaintiff should consider other common law claims).
III. Common Law Claims
Since we have dismissed plaintiffs' complaint we need not address each of defendants' arguments concerning the common law claims at this time -- we will address those items if plaintiffs decide to amend their complaint. Nevertheless, we will deal with the statute of limitations issues raised by defendants as to counts III and IV.
A. Illinois Franchise Disclosure Act
Defendants argue that count III of plaintiffs' complaint, alleging violations of the Illinois Franchise Disclosure Act, must be dismissed because plaintiffs made their claim after the limitations period of the Act. Section 1727 of the Act provides that any action brought thereunder must be made before the expiration of whichever of the following first occurs: (1) 3 years after the act or transaction constituting the violation upon which it was based; (2) one year after the franchisee becomes aware of facts or circumstances reasonably indicating that he may have a claim for relief; or (3) 90 days after delivery to the franchisee of written notice disclosing the violation. Defendants maintain that because plaintiffs' claim was based on their being "duped into entering the franchise agreement," the pertinent acts that constitute the violation of the Act must have occurred prior to December 1988 (the date the franchise agreement was signed) and, therefore, argue that the statute of limitations period expired three years later, in December 1991. Although we disagree with defendants' reasoning, we agree with their conclusion, at least with respect to plaintiffs' § 1706 claim. Section 1706 concerns fraudulent practices that occur in "connection with the offer or sale of any franchise." Thus, the "act or transaction constituting the violation" upon which a § 1706 claim is based, is the sale or offer of the franchise to the franchisee. Plaintiffs entered into a franchise agreement in December 1988 and, therefore, plaintiffs' § 1706 claim is timebarred because it was filed in April 1992, which is beyond the Act's three-year statute of limitations period.
However, plaintiffs also have included a claim under § 1719 of the Act. Under § 1719, it is a violation for a franchisor to terminate a franchise without "good cause." Defendants argue that plaintiffs cannot maintain this claim because "even a cursory reading of Section 26 of the Act" informs the reader that private plaintiffs cannot maintain a private cause of action under § 1719. We disagree with defendants' reading of § 1726 and hold that plaintiffs are permitted to bring a private cause of action under § 1719 of the Act. Original Great American Chocolate Chip Cookie Company, Inc. v. River Valley Cookies, Limited, 970 F.2d 273, 279 (7th Cir. 1992) (addressing private party's civil claim under § 1719 of the Act). Plaintiffs' § 1719 claim is not time-barred since the complaint was filed in April 1992, which is within one year of when the franchise was terminated and meets even the strictest of the statute of limitations conditions under the Act.
B. Intentional Infliction of Emotional Distress
Defendants move to dismiss plaintiffs' claim for intentional infliction of emotional distress pursuant to the Illinois two-year statute of limitations provision. Defendants argue that the acts which allegedly inflicted emotional distress upon plaintiffs are those related to plaintiffs becoming a franchisee and that such actions occurred prior to December 1988. In the alternative, defendants argue that the statute of limitations expired two years after plaintiffs knew or should have known of the claim, and maintain that plaintiffs knew of the alleged fraudulent representations as early as March 1990. Defendants maintain, therefore, that the limitations period expired either in December 1990 or, at the latest, in March 1992.
We disagree with defendants' arguments and hold that count IV is not time-barred. Plaintiffs' allegations relate to defendants' conduct and representations both prior to their entering into the franchise agreement and after the entering into of the agreement. Plaintiffs argue that because the injury resulted from a continuing course of conduct the two-year limitations period was not a bar and, therefore, maintain that their cause of action did not accrue until the last act was committed. We agree. In Illinois, where a tort involves a continuing or repeated injury, the statute of limitations does not begin to run until the date of the last injury or when the tortious acts cease. Ganousis v. E.I. Du Pont De Nemours & Co., 803 F. Supp. 149, 153 (N.D.Ill. 1992); Hyon Waste Management Services v. Chicago, 214 Ill. App. 3d 757, 158 Ill. Dec. 335, 338 (Ill.App. 1991). Although the continuing tort doctrine does not apply to situations where there is one act from which subsequent damages flow, that is not the case here. Id. Plaintiffs have alleged that Balner committed several tortious acts over the course of three years.
When we consider a motion to dismiss we must accept the plaintiffs' allegations as true, and view them, along with any reason inferences drawn from them, in the light most favorable to plaintiffs. We therefore conclude that defendants' alleged misrepresentations and tortious conduct were continuous, and hold that plaintiffs' action is not time-barred.
JAMES B. MORAN,
Chief Judge, U.S. District Court
February 3, 1993.