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Richmond v. Nationwide Cassel L.P.

April 11, 1995




Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 93 C 6107--Milton I. Shadur, Judge.

Before ESCHBACH, RIPPLE and ROVNER, Circuit Judges.

RIPPLE, Circuit Judge.



Adrienne Richmond brought an amended complaint against defendants Nationwide Cassel L.P. ("Cassel"), Nationwide Acceptance Corporation ("Nationwide Acceptance"), and N.A.C. Management Corporation ("NAC"). She alleged that they forced her to pay for excessive automobile insurance and therefore violated 18 U.S.C. sec. 1962(c) of the Racketeer Influenced and Corrupt Organizations Act ("RICO"). She now appeals the district court's dismissal of her claim. For the reasons presented in this opinion, we affirm the judgment of the district court.


A. Facts

Ms. Richmond purchased a 1984 Nissan Maxima from Let's Make A Deal Auto Sales. She traded in her old car, made a down payment of $500 in cash, and financed the remaining amount owed through a retail installment sales contract that set up twenty-one monthly payments of $187.28. The installment contract required Ms. Richmond to keep the car fully insured for the term of the contract. It authorized Ms. Richmond to furnish her own insurance if she so chose, but provided that the contract holder would purchase insurance for her at her expense if she did not provide it. *fn1 Ms. Richmond's installment contract was subsequently assigned to defendant Cassel by Let's Make A Deal.

Ms. Richmond did not purchase her own insurance for the financed car. On March 11, 1991, Cassel and Nationwide Acceptance sent a notice to her stating that the required insurance had been obtained on her behalf from Balboa Insurance Company, but that, "should you or your agent forward evidence that you currently have insurance which protects our collateral, we will cancel the attached insurance, effective the date of your policy." Ms. Richmond paid for the insurance procured by Cassel and Nationwide Acceptance. The cost of the insurance was added to her monthly payments for the remainder of the installment contract. Ms. Richmond then filed a class action against the defendants. The amended complaint alleged that the defendants fraudulently charged her for this "forced placed insurance."

B. The Amended Complaint *fn2

Ms. Richmond's amended complaint is comprised of four counts. Count I alleges a RICO violation under 18 U.S.C. sec. 1962(c). *fn3 The remaining counts are state law claims: violation of the Illinois Consumer Fraud Act (Count II); breach of contract (Count III); and violation of the Illinois Sales Finance Agency Act (Count IV). Because the dismissal of the amended complaint was based on failure to state a RICO claim, we focus on the allegations of Count I.

The factual basis for this complaint is summarized in the introductory allegation. *fn4 It alleges that Cassel and Nationwide Acceptance, without authorization under the contract, fraudulently required Ms. Richmond to purchase "forced placed insurance," insurance of the defendant's choosing that provided more coverage than she needed. The excessive coverage in the "forced placed insurance" included premiums based on the full outstanding balance, rather than on the remaining principal balance, and coverage against acts of default by the obligor. As a result of the conduct of Cassel and Nationwide Acceptance, Ms. Richmond claims that she suffered a loss of money, and that other members of her class also suffered creation of fictitious debt, repossession of vehicles, and injury to their credit. The amended complaint further alleges that, because they used the mails to demand payment for these unauthorized insurance premiums, the defendants violated the federal mail fraud and RICO statutes.

In paragraphs 6-13 this complaint describes each defendant. Cassel, a limited partnership, is a sales finance agency that purchases car retail installment contracts and enforces the contracts against consumers. NAC is the general partner and 1 percent owner of Cassel. Nationwide Acceptance, the other partner and 99 percent owner of Cassel, is also a sales finance agency. Cassel and Nationwide Acceptance, which present themselves to the public as indistinguishable entities, have ongoing relationships with certain car dealers from which they purchase motor vehicle retail installment contracts. The amended complaint also alleges that Cassel, Nationwide Acceptance and NAC are part of "Nationwide Group," a group of corporations and entities "associated in fact on an ongoing basis for the purpose of conducting business in selling and financing automobiles," warranties and insurance, and are under common control of the Lutz family. The group includes the Wix Auto Company, Total Financial American Life Insurance Company, Illinois Founders Insurance Company and Hercules Insurance Agency, L.P., and may also include several other companies.

Under Count I, the amended complaint alleges that there are two "enterprises" *fn5 in this case: the Nationwide Group (as described in paras. 14-17) and the "Nationwide Group and the car dealers with which it maintains relationships and from which it purchases retail installment contracts." Amended compl. at para. 44. Although this complaint does not identify which entities are "persons" within RICO, *fn6 it is the actions ...

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