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
MEMORANDUM OPINION AND ORDER
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.
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
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
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.