The opinion of the court was delivered by: JAMES B. MORAN
Plaintiffs Dudley Enterprises, Inc. (Dudley) and Elizabeth Simon (Simon) bring this action under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1961, et seq., against defendants Palmer Corporation (Palmer), Palmer Video Corporation (PVC), Peter Balner (Balner), Peter Margaritondo, aka Peter Margo, (Margo), Charles Arrington (Arrington), Joseph Berger (Berger), Calvin Winick (Winick), Harvey Dossick (Dossick), Susan Baar (Baar), Dominick Romano (Romano), Pater Grassi (Grassi), Kathy Passucci (Passucci), Gert Elster (Elster), and Stan Simms (Simms), alleging that defendants sold plaintiffs a franchise program as part of a scheme to defraud (counts I and II). In addition, plaintiffs allege that defendants committed the following state law violations: (1) violation of the Illinois Franchise Disclosure Act of 1987 (the Act) (count III); (2) Intentional Infliction of Emotional Distress (count IV); (3) Malicious Interference with Business or Occupation (count V); (4) Tortious Breach of Duty of Good Faith and Fair Dealing Arising Out of Contract (Count VI); and (5) Fraud (count VII). Before us now is defendants' motion to dismiss plaintiffs' complaint. Federal subject matter jurisdiction is based on 28 U.S.C. § 1331 (federal question) and 28 U.S.C. § 1332, the parties being of diverse citizenship and the controversy exceeding $ 50,000. For the reasons stated below, defendants' motion is granted in part and denied in part.
PVC, a New Jersey Corporation, is a franchisor that grants franchisees the right to operate stores under the name "Palmer Video Stores." The video stores sell and rent video cassettes and other products associated with the video trade. Some or all of the shares of stock of PVC are owned by Palmer Corporation. The other named defendants are current or former employees of PVC and/or Palmer, who were in some way involved in the PVC franchise operation.
On December 20, 1988, Simon entered into an agreement whereby she (and subsequently Dudley) became a franchisee of PVC. Simon opened her video store in Niles, Illinois. Dudley, an Illinois corporation, apparently was formed by Simon for the purpose of operating the Palmer Video franchise.
Simon is the principal stockholder and the chief executive officer of Dudley.
In their complaint plaintiffs go into great detail about their contacts with PVC and/or its employees, subsequent to their entering into the franchise agreement (plf.cplt. PP 38-61). Although we consider each of these allegations when reviewing defendants' motion, we decline to recount each element of the complaint in this opinion. To summarize, plaintiffs refer to numerous conversations with and/or letters sent by individual defendants that, according to the plaintiffs, constituted misrepresentations regarding PVC's expertise in operating a national franchise, and programs and other benefits available to a PVC franchisee.
According to defendants, plaintiffs refused to pay the royalties and/or fees that were due the franchisor in accordance with the franchise agreement. PVC terminated plaintiffs' franchise in or around August 1991; nevertheless, plaintiffs continue to operate the video store.
Defendants move this court for dismissal of plaintiffs' complaint in its entirety and for sanctions under Rule 11 of the Federal Rules of Civil Procedure. Defendants maintain that plaintiffs' RICO and fraud claims (counts I, II and VII) should be dismissed because (1) plaintiffs have failed to plead those fraud allegations with particularity, as required by Fed.R.Civ.P. 9(b); (2) plaintiffs have named PVC and Palmer as both the "enterprise" and the "person" in violation of § 1962(c) and, therefore, no cause of action can exist as to those corporate defendants; (3) plaintiffs' allegations as to the predicate RICO offenses are insufficient under § 1962(d); and (4) plaintiffs have failed to allege a "pattern" of racketeering activity. Defendants contend that count III, violation of the Illinois Franchise Disclosure Act, should be dismissed because it is time-barred. As to counts IV and V, defendants maintain that plaintiffs failed to state claims upon which relief can be granted because they did not plead the necessary elements to properly set out the respective causes of action, and further claim that count IV is time-barred. Defendants maintain that because plaintiffs have not sued for breach of contract they cannot state a claim for tortious breach of duty of good faith and fair dealing arising out of contract and, therefore, argue that count VI should be dismissed. Finally, defendants contend that plaintiffs' complaint should be dismissed since it violates Rule 8 of the Federal Rules of Civil Procedure because it does not contain "a short and plain statement of the claim."
We find it especially difficult to make out the basis of plaintiffs' RICO claims. For example, in the section of the complaint entitled "Facts Common to all Counts," plaintiffs recite over the course of 14 pages many of their encounters with PVC employees, as well as letters and/or documents received from the defendants over the course of a three-year period. Many of those facts may be relevant, but the complaint gives no guidance concerning which of those allegations, if any, are supposed to constitute predicate acts under RICO. In paragraphs 70(F)-(H) of the complaint plaintiffs refer generally to conversations and meetings with, and documents received from, PVC's employees, and state that those events occurred "as at least partially specified in this complaint." In order to ascertain what acts plaintiffs are referring to (and to determine whether those allegations have been properly pled), the reader must flip back to the fact section of the complaint in an attempt to pinpoint the corresponding facts. It is not enough for plaintiffs to make such general references to previously stated facts; they must specify what facts they are relying on.
Rule 9(b) applies to both common law fraud and RICO claims, and requires that "in all averments of fraud or mistake, the circumstances constituting the fraud or mistake shall be stated with particularity." The complaint must set forth the circumstances of fraud, including the time and place of the fraud, the contents of the omissions or misrepresentations and the identity of the party perpetrating the fraud. In re Olympia Brewing Co. Securities Litigation, 674 F. Supp. 597, 619 (N.D.Ill. 1987). Although we will not discuss every deficiency in plaintiffs' complaint, we point out that many of plaintiffs' allegations fail to meet the "who, what, when, and where" pleading requirement for fraud. For example, when multiple defendants are involved it is not enough for plaintiffs to allege that "defendants" committed fraudulent acts.
Id. at 620 (noting that plaintiff cannot group allegations for 9(b), but must specify how individual defendants participated in the fraud). In addition, plaintiffs often fail to allege the contents and/or the time and place of the fraud in their complaint.
Finally, we remind plaintiffs that statements expressing an opinion relating to future or contingent events, expectations or probabilities, generally do not constitute an actionable misrepresentation.
Vaughn v. ...