United States District Court, N.D. Illinois
April 12, 2004.
MANCUSO INVESTMENT CORP., et al
The opinion of the court was delivered by: PHILIP REINHARD, District Judge
MEMORANDUM OPINION AND ORDER
Plaintiff, Chester Shaw, filed this action against defendants, Mancuso
Investment Corp. ("MIC") and Dewey J. Mancuso, in the Southern District
of California, alleging a violation of the Racketeer Influenced and
Corrupt Practices Act ("RICO"), 18 U.S.C. § 1961 et seq. (Count I) and
breach of fiduciary duty and conflict of interest in violation 805 ILCS
5/8.60, a provision of Illinois' s Business Corporations Act (Count II).
The case was transferred to this court by order dated November 21, 2003.
Jurisdiction is proper under 28 U.S.C. § 1331 as to Count I and the court
has supplemental jurisdiction under 28 U.S.C. § 1367 over Count II.*fn1
Defendant's move to dismiss pursuant to Fed.R.Civ.P. 12(b)(6).
Plaintiff's claims against defendants arise from plaintiff's investment
in MIC in 1972 (Compl. ¶ 12). The crux of these claims is that Mancuso
made false and misleading representations to plaintiff to induce him to
invest in MIC (Id. ¶¶ 13-17) and has continued to make false and
misleading representations over the course of more than thirty years to
plaintiff and other investors in MIC concerning performance of MIC and
return on investment to shareholders (Id. ¶ 18).
Defendant argues that plaintiff has failed to state a RICO claim
because an amendment to the RICO statute effected by the Private
Securities Litigation Reform Act of 1995 ("PSLRA"), 18 U.S.C. § 1964
(c), bars securities fraud-based RICO claims. Plaintiff contends the
PSLRA amendment does not apply to actions taken prior to its enactment
date and, therefore, plaintiff's RICO claim is not barred.*fn2 Seventh
Circuit dicta indicates that unless a case was pending on December 22,
1995, the date of PSLRA's enactment, securities fraud-based RICO claims,
even if based on actions occurring before the enactment date, are
barred. Fujisawa Pharmaceutical Co., Ltd. v. Kapoor, 115 F.3d 1332,
1337-38 (7th Cir. 1997). The district courts that have considered this
matter directly "consistently have held that the PSLRA bars preenactment
conduct unless the plaintiff's action was pending prior to enactment,"
Scott v. Steingold, No. 97 C 7871, 1998 WL 704287, * 5 (N.D. Ill. Sept.
30, 1998) (Manning, J.) (collecting cases), as a basis for a securities
fraud-based RICO claim. "The plain text of § 1964(c), as amended, clearly
and unambiguously states that no person may rely on securities fraud as a
predicate act for purposes of RICO. Congress did not place a temporal
restriction on the PSLRA, nor, in light of the PSLRA's legislative
history [indicating an intent to prevent abuses of RICO by securities
litigants], did it even remotely intend to." Id. (internal quotation
marks and citations omitted). The PSLRA amendment applies to plaintiff's
claim, which is barred because the action was not pending on December
22, 1995. Count I is dismissed with prejudice.
Count II is a state law claim. Because all federal claims have been
disposed, the court declines to exercise supplemental jurisdiction over
this claim. See Contreras v. Suncast Corp., 237 F.3d 756, 766 (7th
Cir.), cert. denied, 534 U.S. 824 (2001).
For the foregoing reasons, plaintiff's RICO claim is dismissed with
prejudice. Plaintiff's state law claim is dismissed for lack of subject
matter jurisdiction without prejudice to being filed in state court.