of Saco. One of these practices was known as "motherlotting," by which a permanent set of conforming goods was repeatedly submitted to the government for inspection and then later switched with nonconforming goods. Another practice was "salting," by which nonconforming goods were positioned in a lot so as to hide them from government inspectors. A third practice, which the parties call the "orange card" system, involved tagging products which did not conform to specifications in some minor way not affecting form or function and delivering them to the government in their defective condition. None of these "practices" were disclosed to Chamberlain either before or at the time of its purchase of Saco.
When Chamberlain learned of the problems, it hired outside counsel and conducted an investigation of Saco's practices. On December 22, 1988, Duchossois Industries, Inc. (Chamberlain's parent corporation), Chamberlain and Saco made an oral voluntary disclosure to the Office of the Inspector General of the Department of Defense ("DoD-IG") and sought admission into the Department of Defense's Voluntary Disclosure Program. At the same time, Chamberlain informed Maremont by letter that it was investigating these alleged deficiencies in Saco's production of 30mm gun barrels and that it might seek remedies against Maremont, including but not limited to indemnification under the purchase agreement. On March 31, 1989, Duchossois, Chamberlain, and Saco submitted a written voluntary disclosure report to the DoD-IG. On April 27, 1992, they entered into a settlement agreement with the government pursuant to which they paid the government $ 2,376,700.00.
Chamberlain filed this action on December 10, 1990. In its Revised Second Amended Complaint, which is currently pending, it brought a RICO claim under section 1962(c) against Maremont (Count I), which is still pending; a RICO claim under section 1962(c) against Arvin, Maremont's parent corporation (Count II), on which we have already granted Arvin summary judgment; a RICO claim under section 1962(a) against Maremont (Count III), on which we have already granted Maremont summary judgment; a common law fraud claim against Maremont (Count IV), which is still pending; a common law fraud claim against Arvin (Count V), on which we have already granted Arvin summary judgment; a breach of contract claim against Maremont (Count VI), which is still pending; and an indemnification claim against Maremont (Count VII), which is also still pending.
I. Motion for Leave to File Amended Answer and Counterclaim
Maremont seeks leave to file an amended answer and counterclaim on the grounds that Saco assigned any claims it may have against Maremont to Chamberlain in a written assignment executed in May 1995 (the "assignment"). According to Maremont, the assignment means that Chamberlain is not longer suing merely on its own behalf to recover damages that it alone allegedly incurred, but rather that Chamberlain is also suing as Saco's assignee for damages incurred by Saco. Maremont contends that, as a result of the assignment, it now has available to it defenses and claims against Saco that it could not have asserted previously against Chamberlain. Specifically, Maremont asserts that it did not know of Saco's fraud upon the government, and that if Maremont is liable to Chamberlain for failing to disclose that fraud, then Maremont is entitled to indemnification from Saco in the same amount.
Chamberlain responds that the assignment is much ado about nothing. It expressly states that it is not suing as Saco's assignee and is not asserting any claims that Saco may have against Maremont. In fact, at oral argument on this motion, Chamberlain's counsel acknowledged that Saco most likely has no claims against Maremont. Maremont responds that, even without the assignment, the items Chamberlain has identified as its damages are largely expenses which Saco, not Chamberlain, incurred as a consequence of the government's investigation of the nonconforming gun barrels and the subsequent settlement, and that Chamberlain may not recover expenses paid by Saco. Moreover, according to Maremont, in representing to Chamberlain that there had been no fraud upon the government, it relied upon Saco's representation to it; in other words, Maremont insists that it is as much a victim of Saco's fraud as is Chamberlain. Therefore, it reasons, to the extent that it is liable to Chamberlain because of the misrepresentations in connection with the sale of Saco, then Saco is liable to Maremont in the same amount. In essence, Maremont seeks indemnification from Saco if Maremont is found liable to Chamberlain.
The flaw in Maremont's argument is that its liability to Chamberlain, if any, would be based upon its own conduct, not Saco's, and therefore it has no legal recourse against Saco. Chamberlain is seeking to hold Maremont directly liable for fraud, which it may do only if it can show that Maremont participated in the fraud. Esmark, Inc. v. National Labor Rel. Bd., 887 F.2d 739, 755-56 (7th Cir. 1989) (parent corporation may be held liable for subsidiary's wrongful conduct where parent directly participated). It is Maremont's own conduct, not Saco's, which will provide the basis for Maremont's liability to Chamberlain if Chamberlain wins this case. Obviously, Maremont may not seek indemnification from Saco for Maremont's own misconduct, for Saco has no legal liability for that.
If Maremont is right that Saco pulled the wool over its eyes, its relief lies not in its ability to seek indemnification from Saco, but in its ability to defend itself successfully on Chamberlain's claims against it. In other words, if Maremont successfully shows that Saco defrauded the government without Maremont's knowledge and then lied to Maremont in connection with the sale to Chamberlain, then Maremont will be found not liable to Chamberlain, for Chamberlain will have failed to prove that Maremont participated in the fraud. And so Maremont will not need to be indemnified by Saco.
Because Chamberlain is not asserting any claims Saco might have against Maremont (of which there apparently are none), and because Maremont has no legal basis for seeking indemnification from Saco if Maremont is found liable to Chamberlain, Maremont's motion for leave to file an amended answer and counterclaim is denied.
II. Motion for Summary Judgment
Rule 56(c) of the Federal Rules of Civil Procedure allows us to grant summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." In considering the evidence submitted by the parties, we do not weigh it or determine the truth of asserted matters. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). We are to view all facts and draw all reasonable inferences in the light most favorable to the non-moving party. Transamerica Ins. Co. v. South, 975 F.2d 321, 327 (7th Cir. 1992). "If no reasonable jury could find for the party opposing the motion, it must be granted." Hedberg v. Indiana Bell Tel. Co., 47 F.3d 928, 931 (7th Cir. 1995) (citing Anderson, 477 U.S. at 248).
Maremont seeks summary judgment on Count I on the grounds that Chamberlain has failed to allege and cannot prove that the RICO "person" is sufficiently distinct from the RICO "enterprise." Section 1962(c) of RICO, under which Count I is brought, makes it unlawful for "any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity." 18 U.S.C. § 1962(c) (1984). Chamberlain claims that Maremont was the 'person" and that Maremont and Saco, its wholly-owned subsidiary, were the "enterprise." (Chamberlain refers to this Maremont-Saco grouping as an association-in-fact.) Chamberlain specifically alleged that:
From on or about January 1, 1985, to on or about May 15, 1987, Maremont, being associated with an enterprise . . . that is, an association-in-fact of Maremont and Saco . . . knowingly and intentionally, conduct and participate, directly and indirectly, in the conduct of the enterprise's affairs through a pattern of racketeering activity . . . .
(Rev. Sec. Am. Compl., P 41.) Chamberlain's pattern of racketeering activity consisted of two separate schemes: one to defraud the government by manufacturing and selling non-conforming weapons and the other to defraud Chamberlain by concealing the fraud upon the government when Chamberlain purchased Saco from Maremont.
In its original motion for summary judgment, Maremont argued that the "person" (Maremont) was not sufficiently distinct from the "enterprise" (Maremont and Saco), violating the "distinctiveness" requirement of section 1962(c). In denying the motion, we held,
Certainly, Maremont, Arvin
and Saco are distinct from one another as legal entities. They are also distinct from the collective association in fact of Maremont and Saco as pled in the Revised Second Amended Complaint.