The opinion of the court was delivered by: ASPEN
MEMORANDUM OPINION AND ORDER
MARVIN E. ASPEN, Chief Judge:
The plaintiffs in this case are the minority shareholders of Southeast Ohio Hockey Corp. (Southeast), a Subchapter S corporation which operates a minor league hockey team in Ohio. They allege that the majority shareholder, defendant Barnard H. Soskin, duped them into investing in an undercapitalized corporation by hiding the fact that he did not pay for his shares, entrenched himself as president, refused to allow them to inspect Southeast's books, misrepresented Southeast's finances to the tax authorities, stole money from Southeast, and hindered the success of Southeast by keeping it undercapitalized. Their second amended complaint will survive Soskin's motion to dismiss only if (1) they are the proper parties to bring this suit; and (2) their allegations state a claim of a violation of the Racketeer Influenced and Corrupt Organizations Act (RICO).
I. Individual Capacity Claims
Soskin believes that the harms alleged by the plaintiffs were actually suffered in the first instance by Southeast -- that is, that the plaintiffs have suffered only derivative harm -- and that they therefore should not be allowed to bring this suit in their individual capacities. It is unclear, however, by what means he should make this objection. Rule 12(b)(6) (stating a RICO claim) and 17(a) ("real party in interest") both seem like possibilities. Rule 12(b)(1) is not, however, for even though we will use the term "standing" to describe the plaintiffs' ability to bring this suit in their individual capacities, it is clear that the plaintiffs have standing in the constitutional sense, as they have alleged injury in fact. See Felzen v. Andreas, 134 F.3d 873, 876 (7th Cir. 1998); Frank v. Hadesman & Frank, Inc., 83 F.3d 158, 159 (7th Cir. 1996). We doubt that the choice of rule will matter much, however, and we take our cue from some of the Seventh Circuit decisions in this area and proceed with an examination of RICO itself. See generally Rylewicz v. Beaton Servs., Ltd., 888 F.2d 1175, 1178-79 (7th Cir. 1989) (affirming the dismissal of a RICO count).
Only a person who is "injured in his business or property by reason of a violation" of 18 U.S.C. § 1962 has standing to complain of a RICO violation. 18 U.S.C. § 1964(c). It is by now well understood that this means that "shareholders of a corporation do not have standing as individuals to bring a RICO action for diminution in the value of their stock caused allegedly by racketeering activities conducted against the corporation." Sears v. Likens, 912 F.2d 889, 892 (7th Cir. 1990); see also Rylewicz, 888 F.2d at 1179. Several of the injuries alleged in the second amended complaint are injuries to Southeast, and the plaintiffs therefore do not have standing to raise them when suing in their individual capacities. These include Soskin's stealing from Southeast, hindering the success of Southeast by keeping it undercapitalized, entrenching himself as President, and misrepresenting Southeast's finances to the tax authorities.
To this analysis the plaintiffs offer one objection: we should conduct it using the law of the state of incorporation (Ohio), and under Ohio law the plaintiffs, as minority shareholders of a close corporation complaining of breaches of fiduciary duty by the majority shareholder, may sue in their individual capacities. We agree with the second part, see Bagdon v. Bridgestone/Firestone, Inc., 916 F.2d 379, 383-84 (7th Cir. 1990) (discussing Crosby v. Beam, 47 Ohio St. 3d 105, 548 N.E.2d 217 (Ohio 1989)), but take issue with the first. While Kamen v. Kemper Fin. Servs., Inc., 500 U.S. 90, 97, 114 L. Ed. 2d 152, 111 S. Ct. 1711 (1991), teaches that whether a federal law claim may be brought directly or derivatively is a question of federal law for which state law should usually control, see 5 JAMES WM. MOORE ET AL., MOORE'S FEDERAL PRACTICE § 23.1.02[a] & n.7 (3d ed. 1997), it recognizes an exception when "express provisions in analogous statutory schemes embody congressional choices readily applicable to the matter at hand." Congress used a provision of the federal antitrust laws as its model for § 1964(c), and the Supreme Court relied on its decisions interpreting the former when interpreting the latter. See Holmes v. Securities Investor Protection Corp., 503 U.S. 258, 267-68, 117 L. Ed. 2d 532, 112 S. Ct. 1311 (1992) ("We may fairly credit the 91st Congress, which enacted RICO, with knowing the interpretation federal courts had given the words earlier Congresses had used . . . in the Clayton Act's § 4."); see also Carter v. Berger, 777 F.2d 1173, 1174 (7th Cir. 1985). We see no reason to think that RICO's standing provision, modeled on one borrowed from another area of federal law, should be interpreted with state law in mind. See 2 ARTHUR F. MATHEWS ET AL., CIVIL RICO LITIGATION § 8.04[C] (1992) (" Holmes. . . never suggests that its standing analysis is derived in any respect from . . . state law . . . .").
Our conclusion that state law does not govern questions arising under § 1964(c) does not necessarily answer what we take as the plaintiffs' underlying contention: as minority shareholders of a closely-held corporation they suffered direct injury from the majority shareholder's alleged breaches of fiduciary duty.
See generally DEBORAH A. DEMOTT, SHAREHOLDER DERIVATIVE ACTIONS LAW AND PRACTICE § 2:01(2) (1994 & Supp. 1997). Holmes does not discuss any exception to the derivative rule for closely held corporations, however, and the Seventh Circuit has exhibited some hostility to the idea. See Bagdon, 916 F.2d at 383-84; cf. Rylewicz, 888 F.2d at 1179 (declining to reach the question); Mid-State Fertilizer Co. v. Exchange Nat'l Bank of Chicago, 877 F.2d 1333, 1340 (7th Cir. 1989) (Ripple, J., concurring) (arguing for a narrow exception for closely held corporations which is not applicable here). We are unaware of any case in this circuit embracing it, and in the absence of any argument from plaintiffs on the subject, we decline to be the first.
This leaves two alleged direct injuries, namely that Soskin duped the plaintiffs into investing in an undercapitalized corporation by hiding the fact that he did not pay for his shares and that he refused to allow them to inspect Southeast's books. But here it becomes necessary to distinguish between the plaintiffs. Plaintiff Anthony Esposito received his stock in mid-December, 1996, in exchange for his release of claims against Soskin stemming from an unrelated venture. All of acts of racketeering activity alleged in the complaint, however, were committed before then,
so it is not possible that Anthony Esposito was injured in his individual capacity "by reason of" any RICO violation by Soskin. See Marshall & Ilsley Trust Co. v. Pate, 819 F.2d 806, 809-810 (7th Cir. 1987) (plaintiff must be injured by at least one instance of racketeering activity). We therefore dismiss his individual RICO claims.
Plaintiffs Augustine Esposito, Lawrence Malone, and Steven Rossa all bought their stock in early 1991. As part of the sale, however, only Augustine Esposito alleges that he was the victim of what is known as a "predicate act", one of the racketeering activities specified in 18 U.S.C. § 1961(1), in this case, wire fraud. The most the remaining plaintiffs can complain of is common law fraud in connection with the sale, see Compl. P 19, and common law fraud is not a predicate act, see 18 U.S.C. § 1961(1). Since Soskin's refusal to allow the plaintiffs to examine Southeast's books did not involve any predicate act, see id. P 23, this means that neither Malone nor Rossa was ever directly injured by Soskin's commission of a predicate act. Again, this is fatal, see Marshall, 819 F.2d at 809-810, so we dismiss their individual RICO claims. Augustine Esposito alone was directly injured by Soskin's commission of a predicate act, and he alone is entitled to press RICO claims in his individual capacity. See Ceribelli v. Elghanayan, 990 F.2d 62, 64 (2d Cir. 1993) (allowing a direct RICO action for mail fraud in connection with the sale of stock).
The second amended complaint also contains allegations intended to allow the plaintiffs to sue Soskin derivatively (i.e. as shareholders on behalf of Southeast) for the same RICO and common law fraud violations of which they complained in their individual capacities. Soskin has moved to dismiss these counts of the second amended complaint, arguing that they do not meet the requirements of Rule 23.1.
We have a more fundamental objection to these claims: they evince a fundamental misunderstanding of derivative suits. Rule 23.1 allows shareholders to enforce rights of the corporation which the corporation itself has declined to enforce. Accordingly, the rule requires that the shareholders either (1) ask the board of directors to enforce the right (generally known as making a demand on the board) and describe why the board declined to do so, or (2) explain why making that demand would be futile. See FED. R. CIV. P. 23. 1; see also Drage v. Procter & Gamble, N.E.2d , 1997 Ohio App. LEXIS 1157, No. C-960227, 1997 WL 842954, at *1-2 (Ohio App. Mar. 26, 1997) (Ohio law); Kamen, Inc., 500 U.S. at 108 (state law governs demand requirements). Implicit in this, of course, is that if the board votes to proceed with the suit, a shareholder derivative suit is prohibited. See Drage, 1997 WL 842954, at *2; see also ROBERT CHARLES CLARK, CORPORATE LAW 640 (1986).
At least according to the allegations of the second amended complaint, Southeast's board of directors actually did approve this suit. The second amended complaint alleges that three of the plaintiffs are three of Southeast's five directors and thus "constitute a majority of the Company's Board of Directors and have the authority to pursue this action on behalf of the corporation." 2d Am. Compl. P 11; see also OHIO REV. CODE ANN. § 1701.62. It further alleges that the Close Corporation Agreement (attached as Exhibit A to the second amended complaint) "provided that all decisions of the Company's Board of Directors 'shall be made without the necessity of a meeting by a majority vote of the Directors.'" Id. P 12 (quoting id. Ex. A P 4); see also OHIO REV. CODE ANN. § 1701.61. ...