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CLARK v. ROBERT W. BAIRD CO. INC.

May 14, 2001

VINCENT CLARK, PLAINTIFF,
v.
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.

I.

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.

II.

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. Id.

III.

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).

A.

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. ...


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