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United States District Court, N.D. Illinois

January 6, 2004.

U.S. MARKETS, INC., Plaintiff,
WILLIAM A. IRVINE, et al., Defendants

The opinion of the court was delivered by: MILTON SHADUR, Senior District Judge


U.S. Markets, Inc. ("U.S. Markets") has filed a 38-page 20-count Complaint against William Irvine ("Irvine"), two other individuals and five limited liability companies,*fn1 as to each of which companies Irvine is alleged on information and belief to be either a member or manager or both (Complaint ¶ 15). Because all of the parties — both U.S. Markets and all defendants — share Illinois citizenship, diversity of citizenship jurisdiction is of course lacking. Hence U.S. Markets attempts to use the Complaint's one claim that it advances solely against Irvine under RICO (18 U.S.C. § 1962(c), "Section 1962(c)") as the federal jurisdictional foundation on which U.S. Markets hopes to rest its 19 state law claims (12 sounding in breach of fiduciary duty, six asserting unjust enrichment and one invoking the Illinois Trade Secrets Act) — some of which claims target Irvine and some of which target one or the other of his codefendants. Page 2

It is thus plain that U.S. Markets has sought to employ that one RICO claim to obtain entry to the door of this federal court so that it can address what is obviously, in principal part, a state law controversy. And although this Court will not require U.S. Markets' counsel to jump through all of the hoops that some federal judges have prescribed for those who seek to invoke RICO under what may be questionable circumstances (see attached Ex. 1), it will call upon counsel to speak to the Complaint's obvious difficulty in satisfying the "pattern of racketeering activity" requirement of Section 1962(c).

  In that respect Complaint Count III (the RICO count) is based upon what the count's caption refers to as the "De-Lage Laden Financial Services Inc. Transaction," which relates back to Irvine's allegedly having caused two of the One Source Companies to obtain financing — a business loan — through that De-Lage Laden company to purchase two lots of equipment valued at almost $5 million (Complaint ¶¶ 48-50). What Irvine then assertedly did was to cause U.S. Markets to pay for invoices that were directed to one of the One Source Companies, through the issuance of ten checks aggregating some $300,000 between April 27 and December 21, 2001 (Complaint ¶¶ 51-54).

  Those allegations, which must of course be accepted as true for purposes of testing the sufficiency of U.S. Markets' statement of a RICO claim, set out a "closed-ended" set of Page 3 actions. In that respect H.J. Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 240 (1989)(emphasis in original) holds that whether the claimed "pattern of racketeering activity" is closed-ended or open-ended (see id. at 241):

To establish a RICO pattern it must also be shown that the predicates themselves amount to, or that they otherwise constitute a threat of, continuing racketeering activity.
  On that score, the relevant caselaw from our Court of Appeals teaches consistently that a set of facts such as that presented here — the issuance of ten checks over a period of a bit less than eight months to implement one fraudulent scheme — does not provide the requisite continuity to constitute the "pattern" that might suffice to state a RICO claim — see, e.g., such cases as Midwest Grinding Co. v. Spitz, 976 F.2d 1016, 1024 (7th Cir. 1992); Uni*Quality, Inc. v. Infotronx, Inc., 974 F.2d 918, 922 (7th Cir. 1992); Vicom, Inc. v. Harbridge Merchant Servs., Inc., 20 F.3d 771, 780-81 (7th Cir. 1994); Corley v. Rosewood Care Ctr., Inc. of Peoria, 142 F.3d 1041, 1048-49 (7th Cir. 1998); and Pizzo v. Bekin Van Lines Co., 258 F.3d 629, 632-33 (7th Cir. 2001)). And it should be emphasized that both Vicom and Pizzo upheld the dismissal of such RICO claims on the pleadings.

  Based on what has been said here and the uniform teaching of the cited cases, it is plain that U.S. Markets and its counsel face a major hurdle before they can justifiably call upon Irvine and his codefendants to answer to their charges in this federal Page 4 forum, rather than in a state court where no such threshold problems would have to be faced. True enough, such state court litigation would not enable U.S. Markets to grab the brass ring of treble damages that may be seized by a successful rider on the RICO merry-go-round. But against that they must weigh what appears to be the near certainty of a dismissal of the RICO claim (and the consequent dismissal, without prejudice, of all of the state law claims for lack of a federal anchor — see 28 U.S.C. § 1367 (c)), to be followed by the time and expense required to seek to distinguish all of the cited cases and more in an appeal from such dismissal.

  Accordingly U.S. Markets' counsel are ordered to file in this Court's chambers on or before January 23, 2004 (with copies contemporaneously transmitted to defendants' counsel if known or, if not, to defendants themselves) a memorandum explaining how and why this Court should retain jurisdiction over this litigation — or, if they so choose, a voluntary dismissal of this action. This Court will then consider what if any further action is called for.

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