faced with the tricky task of determining what constitutes a "scheme.
Looking beyond the superficial distinctions between the alleged dumping of Fee Agreements III and IV, one finds that the sale of Fee Agreement IV did not constitute a discrete scheme, but was simply an afterthought folded into Salomon's sales pitch regarding Fee Agreement III. Indeed, the fact that the December 20, 1989 fax discussed both Fee Agreements III and IV corroborates the view that there was only one "scheme" going on. Finally, other than seeking separate damages for Fee Agreement IV in the amended complaint, something they failed to do in their earlier foray, plaintiffs have alleged no new facts directing us to find two schemes where we previously found only one.
Even if we determine that plaintiffs have alleged at least two distinct schemes, in order to find continuity, "the 'predicate acts' must 'extend over a substantial period of time'; 'a few weeks or months' is considered insubstantial." Midwest Grinding Co. v. Spitz, 976 F.2d 1016, 1024 (7th Cir. 1992) (quoting H.J., 109 S. Ct. at 2902). That is, without allegations that the multiple schemes lasted a "substantial amount of time, a court will be reluctant to conclude that they pose a threat of continued criminal activity. H.J., 109 S. Ct. at 2902.
We calculate the length of Salomon's alleged "scheme" or "schemes" without factoring in any cover-up or preparation activity. See, e.g., Midwest Grinding Co., 976 F.2d at 1024 ("even if we assume actions to hide Spitz's involvement with U.S. Grinding qualify as predicate acts, they do nothing to extend the duration of the underlying diversion scheme") (emphasis in the original); West Coast Video Enterprises, Inc. v. Ponce De Leon, 1991 U.S. Dist. LEXIS 1207 (N.D. Ill. Feb. 1, 1991) (same); Pyramid Sec. Ltd. v. IB Resolution, Inc., 288 U.S. App. D.C. 157, 924 F.2d 1114, 1117 (D.C. Cir. 1991), cert. denied, 502 U.S. 822, 112 S. Ct. 85, 116 L. Ed. 2d 57 (1991). This is a sensible approach, since cover-up and preparation activities, inevitable parts of any illicit operation, do not create a threat of extending a crime beyond its original scope, and are therefore not relevant to continuity. Accordingly, we gauge the length of the alleged scheme (or schemes) by measuring the duration of the relevant deceptive activity.
Plaintiffs contend that the Fee Agreement IV scheme began in the fall of 1988, when Salomon allegedly began searching for a buyer, and that it extended past December, 1989, since Salomon retained a 5% monitoring interest and continued to cover its misdeeds. Neither Salomon's alleged searching for a buyer nor its efforts to prevent discovery of any wrongdoing, however, can serve to stretch the life of the Fee Agreement IV scheme. Instead, the deception revolved around Salomon's transmission of allegedly false and misleading information to APT, first through a fax on December 20, 1989, and then through an inaccurate offering memorandum sent sometime in late December, 1989. Similarly, despite plaintiffs' efforts to portray the Portfolio and Fee Agreement III scheme as lasting more than a year, they have alleged no facts establishing any deceptive behavior prior to August 1, 1989. Instead, as the amended complaint makes clear, Salomon did not send misleading or false information to either the noteholders or APT until after August 1, 1989. See Amended Complaint at P 35. Like the sale of Fee Agreement IV, Fee Agreement III closed on December 22, 1989--just four months after the alleged deception began. Accordingly, the core deceptive activities connected to all of the possible schemes spanned, at most, only four months.
Four months, however, is not "a substantial period of time," and does not support a claim that Salomon was engaged in the sort of long-term criminal conduct targeted by RICO. Thus, plaintiffs, again, have failed to allege a RICO pattern, and we dismiss Counts IV through VII.
3. Breach of Contract Claim
Next, Salomon seeks to dismiss Count XI, which alleges a state law claim for breach of contract. Salomon charges that APT failed to identify any breach, a necessary element under both Illinois and New York law. See People ex rel. Hartigan v. E & E Hauling, Inc., 218 Ill. App. 3d 28, 47, 577 N.E.2d 1262, 1276, 160 Ill. Dec. 691 (1st Dist. 1991), 160 Ill. Dec. 691, aff'd in part and rev'd. on other grounds, 153 Ill. 2d 473, 607 N.E.2d 165, 180 Ill. Dec. 271 (1992) ("A complaint for breach of contract must allege the existence of a contract between plaintiffs and defendants, performance by plaintiffs of the conditions imposed on them by the contract, breach of the contract by defendants, and the existence of damages as a result of the breach."). See also Zaro Licensing, Inc. v. Cinmar Inc., 779 F. Supp. 276, 286 (S.D.N.Y. 1991) ("Such a pleading must, at a minimum, allege the terms of the contract, each element of the alleged breach and the resultant damages in a plain simple fashion.").
In their amended complaint, plaintiffs allege that Salomon made false warranties and representations in Fee Agreements III and IV, thereby breaching those contractual provisions.
Salomon correctly points out that plaintiffs neglect to identify what was false about the warranties listed. In response, plaintiffs assert that Salomon breached the covenant of good faith and fair dealing, which is implied in every contract in both Illinois and New York. See Chemical Bank v. Paul, 244 Ill. App. 3d 772, 614 N.E.2d 436, 185 Ill. Dec. 302 (1st Dist. 1993); Gallagher v. Lambert, 74 N.Y.2d 562, 549 N.E.2d 136, 549 N.Y.S.2d 945 (N.Y. 1989).
A brief review of Illinois law suggests that while a covenant of good faith and fair dealing is implied in every contract, it generally arises "in the context of imposing a limitation on the exercise of discretion vested in one of the parties to a contract." Carlson v. Carlson, 147 Ill. App. 3d 610, 498 N.E.2d 708, 101 Ill. Dec. 384, 387 (2nd Dist. 1986). See also Sinclair v. State Bank of Jerseyville, 207 Ill. App. 3d 430, 566 N.E.2d 44, 152 Ill. Dec. 516, 519 (4th Dist. 1991) (the implied covenant requires a contracting party vested with discretion to exercise that discretion reasonably); Capital Options Invest. Inc. v. Goldberg Bros. Commodities, Inc., 958 F.2d 186, 189-90 (7th Cir. 1992); Bane v. Ferguson, 707 F. Supp. 988, 994 (N.D. Ill. 1989), aff'd, 890 F.2d 11 (7th Cir. 1991). Stating a claim for breach of an implied covenant of good faith and fair dealing, then, differs from setting out a typical breach of contract claim, and requires allegations not contained in Count XI as it presently stands. Moreover, it is doubtful that the facts of this case warrant a claim for breach of the implied covenant since plaintiffs' grievance more closely resembles a garden variety fraud claim. Accordingly, we dismiss Count XI.
4. Unjust Enrichment Claim
In Count XII, plaintiffs attempt to set forth a claim for unjust enrichment. Like the plaintiffs in Charles Hester Enterprises, Inc. v. Illinois Founders Ins. Co., 137 Ill. App. 3d 84, 90-91, 484 N.E.2d 349, 354, 91 Ill. Dec. 790, 795 (5th Dist. 1985), aff'd, 114 Ill. 2d 278, 499 N.E.2d 1319, 102 Ill. Dec. 306 (1986), however, plaintiffs here appear to misunderstand the meaning of the term "unjust enrichment." As the court stated in Charles Hester,
the term 'unjust enrichment' is not descriptive of conduct that, standing alone, will justify an action for recovery. Rather, it is a condition that may be brought about by unlawful or improper conduct as defined by law, such as fraud, duress or undue influence, and may be redressed by a cause of action based upon that improper conduct.