On Appeal from the United States District Court for the Northern District of Illinois, Eastern Division.
No. 93 C 3541--Charles P. Kocoras, Judge.
Before ESCHBACH, RIPPLE and ROVNER, Circuit Judges.
ARGUED SEPTEMBER 20, 1994
Barry and Karen Richards and other plaintiffs (collectively "plaintiffs") brought this action against defendant Credit Life Insurance Company of Ohio ("Credit Life") and its parent corporation, Combined Insurance Company of America ("Combined"). They alleged that the defendants had a practice of keeping unearned insurance premiums that should have been refunded after the plaintiffs had made early loan payoffs or otherwise had terminated their policies. The district court granted summary judgment in favor of the defendants. The plaintiffs now appeal that judgment. For the reasons set forth below, we affirm.
When the plaintiffs *fn1 obtained loans from the finance company Advanced Financial Services, Inc. ("Advanced"), they were required to purchase credit life and disability insurance coverage for the term of the loan. The insurance offered to them by Advanced was issued by the defendant Credit Life. At the time plaintiffs procured their loans, they paid the entire premium for the insurance. Several days later, they received an insurance certificate from Credit Life which stated the terms of their insurance coverage. *fn2 This certificate provided that the company would promptly refund any unearned premium if the loan was paid off early. *fn3 However, the insurance certificate did not state or require that the insured file any notification in order to receive a refund of the unearned premium. The plaintiffs allege that many borrowers did not receive a credit or rebate of their unearned premiums. *fn4
The plaintiffs' complaint *fn5 alleged that the defendants maintained a system which permitted them to retain for long periods of time, or to keep altogether, the refund money to which they had no claim. They asserted that an insurance business that fails to make refunds to consumers with the expectation that many will not notice and claim their money is engaging in dishonest conduct. They further alleged that the defendants made extensive use of the mail and wire services to execute such a scheme and practice of unlawfully withholding unearned credit insurance premiums after the loan was paid off early, in violation of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. sec. 1962(c). *fn6 paras. 113-118. The complaint also included state law counts alleging violations of the Illinois Consumer Fraud Act, common law fraud, breach of contract, and unjust enrichment.
B. RICO: The Relevant Statutory Provisions
To succeed in establishing a cause of action under sec. 1962(c), the plaintiffs were required to establish "(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity." Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 (1985); McDonald v. Schencker, 18 F.3d 491, 494 (7th Cir. 1994); Haroco, Inc. v. American Nat'l Bank & Trust Co., 747 F.2d 384, 386 (7th Cir. 1984), aff'd, 473 U.S. 606 (1985) (per curiam). The definition of "racketeering" provided in the statute includes a number of state and federal offenses, among which are wire and mail fraud. 18 U.S.C. sec. 1961(1). The required "pattern" can be established by proof of at least two acts of racketeering activity within a ten-year period. 18 U.S.C. sec. 1961(5). "[T]o prove a pattern of racketeering activity a plaintiff or prosecutor must show that the racketeering predicates are related, and that they amount to or pose a threat of continued criminal activity." H.J. Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 239 (1989) (citations omitted). The remedy for an injury to business or property caused by violation of sec. 1962 is a civil one: the recovery of treble damages plus costs and reasonable attorney's fees. 18 U.S.C. sec. 1964(c). Proof of liability is by a preponderance of the evidence. Midwest Grinding Co. v. Spitz, 976 F.2d 1016, 1019 (7th Cir. 1992); Liquid Air Corp. v. Rogers, 834 F.2d 1297, 1303 (7th Cir. 1987), cert. denied, 492 U.S. 917 (1989); Appley v. West, 832 F.2d 1021, 1027 (7th Cir. 1987).
The racketeering activity on which plaintiffs' complaint was premised was mail and wire fraud. See 18 U.S.C. secs. 1341, 1343. Such a RICO allegation requires that the plaintiffs establish that the defendant (1) has participated in a scheme to defraud and (2) has mailed or knowingly has caused to be mailed a letter or other material for the purpose of executing the scheme. McDonald, 18 F.3d at 494. To support their RICO claim, therefore, these plaintiffs must demonstrate that Combined and Credit Life committed mail and wire fraud by establishing that the defendants knowingly schemed to defraud plaintiffs ...