In that case, it was clear that the plaintiff could not have alleged that the parent was the person and the subsidiary alone was the enterprise because the activities were not clearly distinct. Yet, all that the plaintiff had done was to allege that the parent was the person and the parent-subsidiary group was the enterprise, without alleging that the enterprise was in some meaningful way different from either the parent or the subsidiary individually. The court, therefore, dismissed the RICO claim.
The situation in the instant case is similar. Plaintiff has been unable to allege that the activities of AGFC are in any meaningful way different from those of the subsidiary AGFI, or the group of corporations together. Indeed as discussed previously, the complaint alleges that the corporations are "operated centrally without regard to their nominal existence." Accordingly, the court concludes that the complaint fails to allege that AGFC has participated in the affairs of an enterprise distinct from itself through a pattern of racketeering activity.
There are numerous other deficiencies in the complaint as well. For example, defendant argues that plaintiff has failed to plead that it personally conducted or participated in the affairs of any alleged enterprise. It is clear that liability under RICO is limited to persons who have "personally committed" at least two predicate acts of racketeering. Dudley Enterprises, Inc. v. Palmer Corp., 822 F. Supp. 496, 502 (N.D. Ill. 1993). There is no vicarious liability under RICO. SK Hand Tool Corp. v. Dresser Industries, Inc., 852 F.2d 936, 941 (7th Cir. 1988).
In the instant case, it is AGFI that is a alleged to have solicited plaintiff and made the misrepresentations or omissions. AGFC's only alleged involvement is that AGFI acted at its direction and pursuant to its policies. According to paragraph 64 of the complaint, AGFC devised and implemented the scheme to repeatedly solicit existing loan customers to request additional funds from AGFI and other AGFC subsidiaries. AGFC is not alleged to have actually committed any of the frauds, mailed any of the misleading flyers, or received any of the loan payments through the mail. It is not clear to this court that such bare bones allegations of fraud comply with Fed. R. Civ. P. 9(b), which requires that fraud be pled with particularity. Moreover, if all that AGFC has done is devise the scheme implemented by AGFI, that is consistent with the court's determination that AGFC is merely conducting its own affairs, not those of a distinct enterprise. If, however, AGFI's actions are distinct from AGFC's, then it appears that plaintiff is seeking to hold AGFC liable on a respondeat superior basis, which is clearly impermissible.
Finally, it is also clear that the complaint fails to allege a pattern of racketeering activity as required by the Seventh Circuit. Plaintiff's original complaint failed to plead a pattern of racketeering activity because it failed to set forth specific details of dates and other transactions involving any customer besides Emery. To eliminate this defect, plaintiff has added details surrounding the transactions involving two other AGFI customers. The complaint fails to allege, however, that either of these customers received a misleading solicitation through the mail, or even made their own payments through the mail. Therefore, it fails to allege more than one instance of mail fraud, and thus fails to allege a pattern of racketeering activity.
It may be that plaintiff will be able to demonstrate that defendant's alleged "loan flipping" sinks beneath the "sleazy sales tactics," that troubled the majority of the appellate panel, to the level of fraudulent behavior. That would not, however, equate with a violation of the RICO statute, which is directed towards conduct far more pervasive than fraud alone. Plaintiff's remedy, if any, lies in the capable hands of the state courts.
For the reasons set forth above, the court concludes that plaintiff has failed to allege a RICO enterprise separate and distinct from the RICO person; seeks to impose respondeat superior liability; and fails to allege a pattern of racketeering activity. Accordingly, the court dismisses Count I. Because Count I was the sole basis of federal jurisdiction, Count II is also dismissed.
ENTER: August 28, 1996
Robert W. Gettleman
United States District Judge