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CLARK v. ROBERT W. BAIRD CO. INC.
May 14, 2001
VINCENT CLARK, PLAINTIFF,
ROBERT W. BAIRD CO., INC. AND KENNETH FOX, DEFENDANT.
The opinion of the court was delivered by: Elaine E. Bucklo, U.S. District Judge.
MEMORANDUM OPINION AND ORDER
Vincent Clark, a professional football player and resident of Ohio,
sues his brokerage company, Robert W. Baird Co., Inc., a Wisconsin
corporation ("Baird"), and its Illinois agent, Kenneth Fox, for alleged
breach of contract (count I), breach of fiduciary duty (count II), fraud
(count III) and for civil violations of the Racketeer Influenced and
Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq. (count
IV). The defendants move to dismiss the complaint as barred by the
statute of limitations, or in the alternative, for failure to state a
claim, or for failure to satisfy the heightened pleading requirements of
Fed. R. Civ. P. 9(b). The motion is granted in part.
The facts of this case are somewhat difficult to discern from Mr.
Clark's complaint, but the essence of his claim appears to be that Mr.
Fox and Baird, Mr. Fox's employer, together with Michael Weisberg, an
accountant and investment advisor, defrauded him in some way. Mr. Clark
claims that he entered into a contractual relationship with Baird in
which Baird would manage his personal investment accounts, and that Mr.
Fox promised him that Baird would make all investment decisions about his
buying and selling from his account in consultation with him and that he
would have "sole control" over his investment accounts at Baird. He
claims that these promises induced him to invest with Baird.
However, Clark says, the defendants did not keep these promises, and
had no intention of keeping them. Instead, the defendants "allowed [Mr.]
Weisberg to instruct [them] with respect to the buying and selling of
hundreds of thousands of dollars of investment securities on behalf of
[Mr.] Clark from approximately June of 1991 until August of 1994." Mr.
Weisberg has referred several professional athlete clients like Mr. Clark
to Baird. In exchange,
Baird gave Mr. Weisberg reduced fee transactions
in his own personal accounts with Baird. They took his instructions on
the other professional athletes' accounts, too. The defendants allegedly
engaged in frequent buying and selling of securities, churning
transaction fees for themselves, which is a securities fraud. At the
instruction of Mr. Weisberg, the defendants also allegedly withdrew
$440,000 from Mr. Clark's account between 1991 and 1994 without informing
Mr. Clark. They turned this money over to Mr. Weisberg directly or
invested it in Mr. Weisberg's business ventures.
On a motion to dismiss, I accept all well-pleaded factual allegations
of the plaintiff and draw all reasonable inferences in his favor. Colfax
Corp. v. Illinois State Toll Highway Auth., 79 F.3d 631, 632 (7th Cir.
1996). Dismissal is only appropriate if it appears beyond doubt that the
plaintiff can prove no set of facts which would entitle him to relief.
Defendants argue that Mr. Clark fails to plead his RICO claim with
particularity as required by Fed. R. Civ. p. 9(b), and that he fails to
state a claim for a civil RICO violation. Mr. Clark brings his claim
under the "enterprise" prong of RICO, 18 U.S.C. § 1962 (c). To state
a claim for a § 1962 violation, a plaintiff must allege that (1) the
defendants were employed by or associated with an "enterprise" that was
engaged in activities that affect interstate commerce, and (2) the
defendants conducted or participated in the conduct of the enterprise
through a "pattern of racketeering activity." Haroco v. American Nat'l
Bank & Trust Co. of Chicago, 747 F.2d 384, 387 (7th Cir. 1984). Civil
RICO claims that rely on fraud claims must comply with the particularity
pleading requirement of Fed. R. Civ. P. 9(b). Goren v. New Vision Int'l,
Inc., 156 F.3d 721, 726 (7th Cir. 1998).
Mr. Clark pleads on information and belief that the defendants issued
checks from his account and from the other professional athletes'
accounts, without the knowledge or authorization of the account holders,
to bank accounts controlled by Weisberg, and that they did so by
electronic transfer or use of the U.S. Mail. He also alleges that the
defendants wrote two checks, attached to his Amended Complaint, from his
account directly to Mr. Weisberg. He also alleges that the defendants
wrote several checks, totaling in excess of $440,000 to a Harris Bank
account in Mr. Clark's name that was controlled by Mr. Weisberg.*fn1
Finally, he says that they wrote a $25,000 check out of his account
payable to a business associated with a golf course investment of Mr. Fox
and Mr. Weisberg, but he does not attach this check or identify the date
of the transaction.
Rule 9(b) requires the plaintiff to plead "the who, what, when,
where, and how [of fraud]: the first paragraph of any newspaper story."
DiLeo v. Ernst & Young, 901 F.2d 624, 627 (7th Cir. 1990). Mr. Clark does
not identify the dates, parties or circumstances of any alleged acts of
wire fraud, so his claims of wire fraud are insufficient to constitute
predicate acts of racketeering. In addition, Mr. Clark has alleged that
there were at least eleven
other professional athlete clients at Baird
who were victims of Baird's "churning," but securities fraud is not
actionable under civil RICO. See § 1964(c).
Mr. Clark's allegations of mail fraud against the other professional
athlete clients also fall short of the particularity requirements of Rule
9(b). For the "who" in a case with multiple defendants, the plaintiff
must specify which defendants were responsible for specific statements or
actions. Vicom, Inc. v. Harbridge Merchant Servs., Inc., 20 F.3d 771, 778
(7th Cir. 1994). For the "when," it is not enough to merely allege a
period of months or years, or the duration of the activity. Servpro
Indus., Inc. v. Schmidt, No. 94 C 5866, 1997 WL 361591, at *8 (N.D. Ill.
June 20, 1997) (Ashman, M.J.). Although Mr. Clark attaches signed and
dated checks for the claims of mail fraud that he alleges the defendants
committed against him, he does not sufficiently identify the alleged
transactions that defrauded the other clients. Mr. Clark says only that
"the defendants" wrote and mailed checks from the accounts of the other
professional athlete clients, and he does not identify any time period for
the transactions from the accounts of the other clients, but only alleges
that it continued for a period in excess of twelve months. The only
transactions that are described with sufficient specificity to be
predicate acts for a civil RICO claim are the ones from Mr. Clark's
account for which he attaches checks.*fn2
A "pattern of racketeering activity" requires at least two predicate
acts of racketeering within a ten year period. § 1961(5). Mr. Clark
alleges that the defendants committed mail fraud, 18 U.S.C. § 1341,
by mailing checks from his account to Mr. Weisberg. It is not enough
merely to allege two predicate acts; a plaintiff must show that the
criminal activity is continuous (or that there is a threat of continuity)
and that the predicate acts are related. Hartz v. Friedman, 919 F.2d 469,
472 (7th Cir. 1990). The Seventh Circuit evaluates the "pattern"
requirement with reference to four factors: "(1) the number and variety
of predicate acts and the length of time over which they were committed;
(2) the number of victims; (3) the presence of separate schemes; and, (4)
the occurrence of distinct injuries." Id. (citations omitted). The raw
number of acts alleged is not determinative of whether a "pattern" of
racketeering activity exists, particularly when the only predicate acts
alleged are mail or wire fraud. Id. at 473. Moreover, the Seventh Circuit
is reluctant to recognize a pattern where there is only one victim. Id.
Mr. Clark was the only victim of the alleged mail fraud involving checks
from his account. Although he arguably suffered a distinct injury from
each transfer of funds from his Baird account, the injuries are all of
the same type — the loss of money from his account — and all
of the acts of mail fraud relate to. the same one scheme to defraud him
of his money. ...