The opinion of the court was delivered by: ASPEN
MARVIN E. ASPEN, Chief Judge:
Plaintiffs Bradley and Kimberly Hastings ("the Hastings") brought a seven count Complaint against Fidelity Mortgage Decisions Corporation ("Fidelity"), Robert Meriweather, Fidelity's President, and John Does 1-10, who are unidentified corporate officers and managers of Fidelity. The defendants have moved to strike the John Doe defendants and to dismiss the Complaint.
For the reasons set forth below, the motion to strike is denied and the motion to dismiss is granted in part and denied in part.
In August 1996, the Hastings sought to refinance their New Mexico residence. They hired the Superior Mortgage Company ("Superior") to help them obtain a mortgage loan and agreed to pay Superior a $ 2,800 "mortgage broker" fee. Compl. P 21. Superior represented that it would shop around and obtain the best possible interest rate for the Hastings, which it initially thought might be an adjustable rate mortgage starting at 6.5% with a cap of 11%. See id. PP 22, 24. Later that month, Superior arranged a loan for the Hastings with Fidelity. See id. P 25. Fidelity's proposal differed significantly from Superior's initial estimate in that it specified a fixed interest rate of 10.48%. See id. P 26.
When the Hastings arrived at the scheduled closing on September 13, 1996, they were disturbed by the unexpectedly high rate of interest, as well as by the inclusion of a $ 4,200 "loan discount" fee of which they were previously unaware. Id. P 28. The Hastings refused to close on the loan that day, and Mr. Hastings contacted Superior to inquire about these unanticipated changes. See id. PP 28, 30. John Snyder, Superior's President, indicated to Mr. Hastings that he would either "take care" of the $ 4,200 or pay it out of his own pocket. Id. P 28. Accordingly, the Hastings attended a second closing on September 16, which was completed successfully. See id. P 31. The terms of the new agreement provided for a fixed interest rate of 12.5%, but there was no "loan discount" fee charged to the Hastings. Id. The forms indicate, however, that Fidelity paid a $ 4,200 "broker premium" fee to Superior pursuant to the transaction.
Id. P 34 & Ex. C.
Neither Fidelity nor Superior ever explained to the Hastings the meaning of the "broker premium fee" paid by Fidelity to Superior, and the Hastings now allege that this fee was paid by Fidelity as a reward to Superior for closing the loan at an above-market interest rate. Id. PP 35-37. The Hastings contend that, given their good credit rating and high equity in their home, they could have obtained a mortgage loan at a lower interest rate if Fidelity and Superior had not secretly agreed to artificially inflate their rate and then divide the spoils between themselves. See id. PP 37, 40. The Hastings believe it is the policy and practice of Fidelity to make payments to mortgage brokers in return for referrals of loans at above-market rates of interest. See id. PP 11-13.
II. Motion to Dismiss Standard
Dismissal under Rule 12(b)(6) of the Federal Rules of Civil Procedure is improper "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957). For purposes of this motion, we take all of the well-pleaded factual allegations in the complaint as true, construe them in the light most favorable to the plaintiffs, and draw reasonable inferences on the plaintiffs' behalf. See Lanigan v. Village of E. Hazel Crest, 110 F.3d 467, 468 (7th Cir. 1997); Richmond v. Nationwide Cassel L.P., 52 F.3d 640, 644 (7th Cir. 1995).
There is no general prohibition against plaintiffs bringing claims against parties whose specific identities are unknown. See, e.g., Bivens v. Six Unknown Named Agents of Fed. Bur. of Narcotics, 403 U.S. 388, 390 n.2, 29 L. Ed. 2d 619, 91 S. Ct. 1999 (1971) (permitting a suit to go forward even though the defendant agents were not named in the complaint). The Federal Rules of Civil Procedure, however, impose a practical limitation on this practice: pleadings must be sufficiently detailed so as to provide notice to opposing parties of the claims against them. See Vicom v. Harbridge Merchant Servs., Inc., 20 F.3d 771, 775 (7th Cir. 1994); 5 CHARLES ALAN WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE & PROCEDURE § 1215 (2d ed. 1990). In light of this principle, an action may proceed against a party whose name is unknown only "if the complaint makes allegations specific enough to permit the identity of the party to be ascertained through reasonable discovery." Estate of Rosenberg v. Crandell, 56 F.3d 35, 37 (8th Cir. 1995). In this case, the John Doe defendants are identified as "corporate officers or managers of Fidelity who are personally knowledgeable and responsible for the fraudulent practices described [in the Complaint]." Compl. P 8. We think this description is sufficiently specific to satisfy the basic pleading of requirements of Federal Rule 8(a), and we therefore deny Fidelity's motion to strike the John Does from the Complaint.
In order to state a RICO claim, a plaintiff must show: "'(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.'" Richmond, 52 F.3d at 644 (quoting Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496, 87 L. Ed. 2d 346, 105 S. Ct. 3275 (1985)). The conduct in question must be perpetrated by a "person" who is distinct from the "enterprise." See 52 F.3d at 646-47. Fidelity argues that the Hastings did not adequately allege any of these elements.
RICO defines "racketeering activity" as any act indictable under certain specified federal statutes. 18 U.S.C. § 1961(1)(B); see also Reynolds v. East Dyer Dev. Co., 882 F.2d 1249, 1251 (7th Cir. 1989). A RICO plaintiff must allege that the defendant violated at least one of the enumerated statutes--such offenses are known as "predicate acts." The Hastings suggest that the defendants committed two predicate acts: commercial bribery in violation of the Travel Act, 18 U.S.C. § 1952, and mail fraud in violation of 18 U.S.C. § 1341.
See Compl. P 50. Fidelity contends that neither has been sufficiently plead.
The Hastings allege that the defendants violated the Travel Act, which prohibits "travel in interstate or foreign commerce or use of the mail . . . with intent to (1) distribute the proceeds of any unlawful activity; or . . . (3) otherwise promote, manage, establish, [or] carry on . . . any unlawful activity." 18 U.S.C. § 1952(a)(1), (3). "Unlawful activity" is a term of art, which the statute defines as including "extortion, bribery, or arson in violation of the laws of the State in which committed . . . ." 18 U.S.C. § 1952(b). The Hastings suggest that the defendants engaged in the requisite "unlawful activity" by violating Illinois's commercial bribery statute, which states: "A person commits commercial bribery when he confers . . . any benefit upon any employee, agent, or fiduciary without the consent of the latter's employer or principal, with intent to influence his conduct in relation to his employer's or principal's affairs." 720 ILCS 5/29A-1.
Fidelity clearly conferred a benefit on Superior (the yield spread premium payment), and arguably did so without the consent of the Hastings, which brings us to a question critical to several of the claims in this case: have the Hastings adequately alleged that Superior was their "agent?"
Two courts in this district have denied dispositive motions challenging allegations of agency very similar to those presented here. See Johnson v. Rohr-Ville Motors, Inc., 1996 U.S. Dist. LEXIS 11089, No. 95 C 1032, 1996 WL 447261 (N.D. Ill. Aug. 2, 1996); Fairman v. Schaumburg Toyota, Inc., 1996 U.S. Dist. LEXIS 9669, No. 94 C 5745, 1996 WL 392224 (N.D. Ill. July 10, 1996). In Fairman, for example, the defendant was an auto dealer who had promised to obtain the best loan terms available for the plaintiff, who had purchased one of its cars. See Fairman, 1996 WL 392224, at *1. The plaintiff alleged that this promise created an agency relationship and that the dealer had breached its agency duties by arranging a loan with an inflated interest rate in order to obtain a secret kick-back from the lender. See id. at *1-2. The court found these allegations sufficient to permit the plaintiff's theory of agency liability to survive a motion to dismiss. See id. at *4-5; see also Johnson, 1996 WL 447261, at *6 (denying a motion for summary judgment).
Both Johnson and Fairman resolve the agency question with little discussion,
but we believe it to be a difficult one. An agency relationship has two components: "(1) the principal has the right to control the manner and method in which the agent performs the work for her, and (2) the agent has the power to subject the principal to personal liability." Peterson v. H & R Block Tax Servs., Inc., 971 F. Supp. 1204, 174 F.R.D. 78, 1997 WL 399231, at *7 (N.D. Ill. 1997); see also Knapp v. Hill, 276 Ill. App. 3d 376, 657 N.E.2d 1068, 1071, 212 Ill. Dec. 723 (Ill. App. Ct. 1995); RESTATEMENT (SECOND) OF AGENCY §§ 1 (1957); id. § 12 (stating that an agent "holds a power to alter the legal relations between the principal and third persons"). The facts alleged in the Complaint do not firmly establish either of these elements. First, there is no clear indication that the Hastings retained any ability to control the "manner and method" by which Superior would obtain their loan; one reading of the Complaint suggests that they simply asked Superior to get them the best loan available and then left them to achieve this goal by whatever means Superior thought prudent. See Compl. P 22. On the other hand, the Hastings' request that Superior negotiate for better terms after they rejected Fidelity's first offer might be indicative of some degree of control. See id. P 28.
In sum, we believe that the plaintiffs have adequately (though barely) alleged that the defendants conferred a benefit upon their agent without their consent and with the intent to influence their agent's conduct toward them, and this states a claim under the Illinois commercial bribery statute. This claim serves as a predicate for a violation of the Travel Act, which in ...