United States District Court, N.D. Illinois, Eastern Division
June 20, 2005.
GAYLER COBBS, Plaintiff,
MICHAEL F. SHEAHAN, in his official capacity as Sheriff of Cook County, Illinois, et al., Defendants.
The opinion of the court was delivered by: JAMES MORAN, Senior District Judge
MEMORANDUM OPINION AND ORDER
Plaintiff Gayler Cobbs brought this action against defendants
alleging that they unlawfully retaliated against her when she
refused to support defendant Michael Sheahan's re-election
campaign for Cook County Sheriff, in violation of her First
Amendment rights and the Racketeer Influenced and Corrupt
Organizations Act (RICO), 18 U.S.C. §§ 1961-1968. Defendants seek
to dismiss plaintiff's action, arguing that she fails to state a
claim for relief. For the following reasons, defendants' motion
is granted in part and denied in part.
For purposes of defendants' motion to dismiss, the following
facts are viewed in plaintiff's favor. Jang v. A.M. Miller &
Assocs., 122 F.3d 480, 483 (7th Cir. 1997). Plaintiff began
working for the Cook County Sheriff's Department in 1985, and
rose through the ranks until July 11, 2001, when she was removed
from her position as the assistant director of the boot camp
program and assigned to the position of sergeant in the
Department of Corrections. Plaintiff believes that she was
demoted in retaliation for refusing to support defendant Citizens
for Sheahan, defendant Sheahan's political campaign committee.
She contends that sometime in early 2001 defendant Patrick Durkin, director of the boot camp
program, asked her to sell tickets for a fundraiser event, and
that defendant Thomas Dourdy, superintendent of that program,
asked her to buy fundraiser tickets, and that she refused both
requests. After she told Dourdy that she does not buy tickets,
Dourdy allegedly asked her, "where is your loyalty?" and told her
that the incident would not reflect well on her record. Plaintiff
then alleges that defendant James Ryan, director of operations at
the sheriff's department, ordered her demotion.
Seeking relief from the allegedly unlawful demotion, plaintiff
claimed that defendants violated section 1962(c) of RICO, her
right to contract under 42 U.S.C. § 1981, and her First Amendment
and equal protection rights under 42 U.S.C. § 1983. Defendants
sought to dismiss all counts, and in our memorandum opinion and
order dated April 14, 2004, we denied defendants' motion in its
entirety (Cobbs v. Sheahan, 319 F. Supp. 2d 865 (N.D. Ill.
2004)). Plaintiff then amended her complaint, adding counts under
§§ 1962(a) and (d) of RICO, and a count under 18 U.S.C. § 2 for
aiding and abetting violations of §§ 1962(a) and (c). She also
added class allegations, seeking to represent a class of
employees at the sheriff's department who refused to contribute
money or services to defendants and suffered negative
consequences. Plaintiff's amended complaint does not include the
right to contract and equal protection claims.
Defendants raise a host of arguments in support of their motion
to dismiss the amended complaint. First, they argue that
plaintiff lacks standing to bring the § 1962(a) claim because she
never made any campaign contributions and her injury does not
flow from defendants' investment of RICO income. They further
contend that plaintiff fails to state a § 1962(c) claim because
her injury was not caused by any predicate RICO activity.
Defendants argue that plaintiff has failed to show a pattern of racketeering activity
sufficient to support her RICO charges. Next, they argue that
there is no aiding and abetting liability for §§ 1962(a) and (c).
Defendants also assert that plaintiff's failure to state claims
under either § 1962(a) or (c) forecloses her § 1962(d) conspiracy
claim. Finally, defendants claim that plaintiff fails to state a
First Amendment retaliation claim.
A Rule 12(b)(6) motion to dismiss tests the sufficiency of the
complaint and not the merits of the case. General Electric
Capital Corp v. Lease Resolution Corp., 128 F.3d 1074, 1080
(7th Cir. 1997); Gibson v. City of Chicago, 910 F.2d 1510,
1520 (7th Cir. 1990). We accept plaintiff's factual
allegations as true and draw all reasonable inferences in her
favor. Leatherman v. Tarrant County Narcotics Intelligence &
Coordination Unit, 507 U.S. 163, 164 (1993); Travel All Over
the World, Inc. v. Kingdom of Saudi Arabia, 73 F.3d 1423, 1428
(7th Cir. 1996). A claim survives a motion to dismiss if
"relief is possible under any set of facts that could be
established consistent with the allegations" (Bartholet v.
Reishauer A.G., 953 F.2d 1073, 1078 (7th Cir. 1992)), and is
dismissed only if it appears beyond a doubt that there exist no
facts to support the allegations. Conley v. Gibson,
355 U.S. 41, 45-46 (1957).
The court concluded in its April 14, 2004, order that plaintiff
stated a § 1962(c) claim, and denied defendants' arguments to the
contrary. In addition to finding that plaintiff adequately
alleged that defendants played roles in an enterprise, we noted
that "the alleged demand for a political contribution in return
for a patronage job" constituted extortion, which § 1961 lists as
a predicate RICO act. Cobbs, 319 F. Supp. 2d at 869-70. We also
rejected defendants' arguments to dismiss the First Amendment
claim because there existed factual issues that exceeded the
scope of the motion to dismiss. We review these points because plaintiff strenuously argues that the law of the case doctrine
bars defendants' arguments. Under the law of the case doctrine,
"a ruling made in an earlier phase of a litigation controls the
later phases unless a good reason is shown to depart from it."
Tice v. Am. Airlines, Inc., 373 F.3d 851, 853 (7th Cir.
2004); see also Payne v. Churchich, 161 F.3d 1030, 1037 n. 8
(7th Cir. 1998). The doctrine is not the impenetrable
barrier, as portrayed by plaintiff, with respect to the new
arguments plaintiff has presented in her amended complaint. The
doctrine prevents the reopening of issues decided earlier in the
litigation (Christianson v. Colt Indus. Operating Corp.,
486 U.S. 800, 815-16 (1988)), but several issues regarding
plaintiff's new claims are outstanding. See Roboserve, Inc. v.
Kato Kagaku Co., 121 F.3d 1027, 1032 (7th Cir. 1997) ("Law
of the case is limited insofar as it applies only to issues that
were decided in the former proceeding but not to questions which
might have been decided but were not."). We first turn to
defendants' arguments against the § 1962(a) claim.
Section 1962(a) Claim
Section 1962(a) makes it unlawful "for any person who has
received any income derived, directly or indirectly, from a
pattern of racketeering activity or through collection of an
unlawful debt . . . to use or invest, directly or indirectly, any
part of such income, or the proceeds of such income, in
acquisition of any interest in, or the establishment or operation
of, any enterprise which is engaged in, or the activities of
which affect, interstate or foreign commerce." Defendants argue
that plaintiff cannot raise the § 1962(a) claim because she
neither bought nor sold campaign fundraiser tickets. They base
that argument on the investment injury rule, which states that
"the use or investment of the racketeering income must
proximately cause the plaintiff's injury; injury caused by the
predicate racketeering acts is inadequate." Vicom, Inc. v.
Harbridge Merchant Servs., Inc., 20 F.3d 771, 778 n. 6 (7th
Cir. 1994). See also Vemco, Inc. v. Camardella, 23 F.3d 129, 132
(6th Cir. 1994) ("to state a claim under § 1962(a), a
plaintiff must plead a specific injury to the plaintiff caused by
the investment of income into the racketeering enterprise,
distinct from any injuries caused by the predicate acts of
racketeering."). In response, plaintiff asserts that her refusal
to join the enterprise led to her demotion and loss of money in
the form of reduced salary. Plaintiff also highlights sections of
the April 14, 2004, order in which the court found that plaintiff
adequately alleged that defendants attempted to obtain money from
Initially, defendants' interpretation of § 1962(a) improperly
narrows the scope of the statute because the fact that plaintiff
refused to buy and sell fundraiser tickets does not preclude her
from suing under that section. Section 1962(a) specifies that
income used or invested by an enterprise must be derived from
illegal racketeering activity or the collection of an unlawful
debt. The statute is silent as to the source of the income, and
it does not grant standing only to those who actually provide
income to a RICO enterprise. Indeed, it is the civil remedies
section of RICO that provides standing to "any person injured in
his business or property by reason of a violation of section
1962." 18 U.S.C. § 1964(c). Thus, standing to sue depends on the
injury caused by an enterprise's use or investment of the income,
and not by the plaintiff's investment of that income into a
defendant's enterprise. It is true, as defendants emphasize, that
in many cases arising under § 1962(a) the defendant dupes the
plaintiff into investing money in the defendant's organization,
but that common scenario is not invariably the case. See, e.g.,
Ideal Steel Supply Corp. v. Anza, 373 F.3d 251 (2d Cir. 2004).
Further illustrating why the injury and not the investment is
key, is the fact that even when the plaintiff supplies the income
no actionable § 1962(a) claim lies unless the plaintiff is
injured as a result of the defendant's use of that income.
Ultimately, defendants' construction of § 1962(a) finds no support in the plain language of the statute,
and it also unnecessarily constricts scope of the statute. See
Morgan v. Bank of Waukegan, 804 F.2d 970, 974 (7th Cir.
1986) (noting that the court of appeals "has consistently held
that RICO must be given the broad effect mandated by its plain
Having cleared the first hurdle set by defendants, plaintiff
now faces a more formidable obstacle in the form of the
investment injury rule. As discussed above, to state a § 1962(a)
claim plaintiff must allege that her injury was caused by
defendants' use or investment of income derived from racketeering
activity, and she cannot merely claim harm caused by predicate
racketeering acts. The Seventh Circuit has not adopted the
investment injury rule, but, in Vicom, the court expressed
accord with the majority of circuits that have adopted the
rule.*fn1 See Vicom, 20 F.3d at 778 n. 6. Following
Vicom, district courts in the Seventh Circuit have applied the
investment injury rule and have required the investment of income
to cause a plaintiff's injuries. See, e.g., Bd. of Trs. v.
Nationwide Life Ins. Co., 2005 U.S. Dist. LEXIS 6159, *22, 2005
WL 711977 (N.D. Ill. 2005); Vega v. Contract Cleaning Maint.,
Inc., 2004 U.S. Dist. LEXIS 20949, *40-42, 2004 WL 2358274 (N.D.
Ill. 2004); Carnegie v. Household Int'l, Inc., 220 F.R.D. 542,
546 (N.D. Ill. 2004) (stating that § 1962(a) "covers injuries
which are caused by the use or investment of racketeering
income"); Xinos v. Kappos, 270 F. Supp. 2d 1027, 1031 (N.D.
Ill. 2003) ("a plaintiff bringing a claim under Section 1962(a)
must allege that he was injured from the defendants' use or
investment of income that they derived from racketeering
activity"; Shapo v. O'Shaughnessy, 246 F. Supp. 2d 935, 965
(N.D. Ill. 2002) (collecting cases). Indeed, we have already
accepted the rule (Pinski v. Adelman, 1995 U.S. Dist. LEXIS 16550, *27-30, 1995 WL 669101, *8-9 (N.D. Ill.
1995)), and see no reason to change course.
Plaintiff fails to allege any injury caused by defendants'
investment or use of income derived from racketeering activity.
Plaintiff does state that she and the putative class members were
injured by both defendants' predicate racketeering acts and their
investment and reinvestment of income derived from those acts
into the enterprise (plf. cplt. ¶ 93). That statement suggests a
distinct investment injury, but plaintiff then submarines her §
1962(a) claim when she attributes her injury to the underlying
predicate act of extortion, claiming that she was demoted "for
failing to succumb to or comply with the demands of Sheahan's
Political Enterprise, which constitute an illegal extortionate
political campaign contribution scheme" (id. at ¶ 94). The
alleged extortion is a predicate racketeering act, not a §
1962(a) injury. Moreover, plaintiff's contention that defendants
used the investment income to support the enterprise does not
establish standing because the mere reinvestment of racketeering
proceeds into the enterprise does not create § 1962(a) standing.
See Vicom, 20 F.3d at 779 n. 6; Wagh v. Metris Direct,
Inc., 348 F.3d 1102, 1110 (9th Cir. 2003).
Plaintiff also argues that she has standing as a result of
losing her salary, but that argument only reinforces the absence
of a § 1962(a) claim. Plaintiff lost her salary due to her
demotion, and she alleges that she was demoted because she
refused to participate in defendants' alleged scheme. Plaintiff
acknowledges that the predicate act (extortion), and not the
investment of any income, caused her loss of salary.*fn2
Thus, plaintiff fails to allege how the investment of income harmed her, and instead admits that she was
injured by the predicate act of extortion. Having failed to state
any distinct investment injury, plaintiff's § 1962(a) claim is
Section 1962(c) Claim
Under § 1962(c) it is "unlawful for any person employed by or
associated with any enterprise engaged in, or the activities of
which affect, interstate or foreign commerce, to conduct or
participate, directly or indirectly, in the conduct of such
enterprise's affairs through a pattern of racketeering activity
or collection of unlawful debt." Under § 1964(c), plaintiff must
show that she was demoted "by reason of" defendants' extortionate
scheme. Defendants argue that the § 1962(c) claim must be
dismissed because plaintiff fails to allege that her injury was
caused by the predicate racketeering act of extortion. However,
in the court's April 14, 2004, order, we found plaintiff's
allegations of causation survived defendants' 12(b)(6) motion.
Discussion of defendants' arguments reinforces that finding.
Defendants rely on Reddy v. Litton Indus., Inc.,
912 F.2d 291, 294 (9th Cir. 1990), and in that case the defendant
fired the plaintiff after he raised concerns about defendant's
illegal activity (bribery to obtain lucrative foreign contracts).
Plaintiff then brought a RICO action, citing the bribery as
predicate racketeering activity. The court dismissed that action
after concluding that plaintiff's termination was not caused by
the bribery, which accords with the general rule that an employee
who is terminated for refusing to participate in illegal
activities may not sue under RICO, because the harm is not caused
by the predicate acts but is, instead, caused by reason of the
employee's refusal to participate in the activities. See
Kramer v. Bachan Aerospace Corp., 912 F.2d 151, 154-55 (6th
Cir. 1990); Hecht v. Commerce Clearing House, 897 F.2d 21,
22-24 (2d Cir. 1990). The general rule typically applies when the
plaintiff is a witness to the defendant's illegal activity and is then
fired for reporting or complaining about the defendant's
conduct.*fn3 In contrast, plaintiff was a target of
defendant's illegal racketeering activity, and was allegedly
demoted by reason of that activity, not because of any complaints
made about that illegal conduct. The court has previously noted:
"We read plaintiff's complaint as alleging that defendants
explicitly condition employment decisions within the office on
campaign contributions." Cobbs, 319 F. Supp. 2d at 871.
Plaintiff has adequately alleged a causal link between the
predicate act and her demotion, unlike Reddy, in which an
intervening act stood between the predicate act and the injury.
Further, because we interpret plaintiff to allege that her
demotion was by reason of the extortionate scheme and not by an
overt act in furtherance of that scheme, defendants' reliance on
Beck v. Prupis, 529 U.S. 494 (2000), is misplaced.*fn4
Defendants' motion to dismiss the § 1962(c) claim is denied.
Pattern of Racketeering Activity
Defendants also claim that plaintiff has failed to establish a
pattern of racketeering activity. In the April 14, 2004, order
the court concluded that plaintiff adequately alleged a pattern
of racketeering activity based on the defendants' conditioning of
employment decisions on political campaign contributions.
Defendants do stress that plaintiff cannot establish a pattern by
using another sheriff's department employee, Denis Micnerski, who
apparently contributed money to defendants' enterprise and was
subsequently demoted. However, it is apparent that plaintiff uses class allegations not reference to
Micnerski or his case to help establish a pattern of
racketeering activity, and those allegations bolster plaintiff's
complaint. As is the case with plaintiff's § 1962(c) claim, there
is no need to revisit and revamp the court's prior conclusions on
Aiding and Abetting Under Sections 1962(a) and (c)
In Count II plaintiff alleges that defendants violated
18 U.S.C. § 2 by aiding and abetting violations of §§ 1962(a) and
(c). Having dismissed plaintiff's § 1962(a) claim, the only
remaining issue is whether plaintiff can state a claim for aiding
and abetting a § 1962(c) violation. Defendants contend that
plaintiff cannot state a claim, arguing that § 1962(c) does not
provide for aiding and abetting liability, and that even if
plaintiff could state a claim, she has failed to meet the
applicable Rule 9(b) pleading standards. Without specifically
addressing many of defendants' cases, plaintiff claims that she
has adequately pled the elements of aiding and abetting.
Congress enacted 18 U.S.C. § 2 as a criminal
aiding-and-abetting statute, and "has not enacted a general civil
aiding and abetting statute either for suits by the Government
. . . or for suits by private parties." Central Bank of Denver,
N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164, 182
(1994). Civil statutes that enable a private person to sue a
private defendant for damages do not automatically yield a
"general presumption that the plaintiff may also sue aiders and
abettors." Id. Instead, a statute must specifically provide for
aiding and abetting liability. Id. In Central Bank, the Court
held that section 10(b) of the Securities Exchange Act did not
provide for aiding and abetting liability, and it refused to
imply a private right of action. Id. at 191. The Court specifically
noted that despite numerous decisions that recognized aiding and
abetting liability in section 10(b) actions (see, id. at 192-93
n. 1 (Stevens, J., dissenting)), the absence of the words "aid"
and "abet" from the statutory text indicated that Congress did
not intend to impose aiding and abetting liability. Id. at
Many courts have applied the logic of Central Bank to RICO
and concluded that § 1962(c) does not provide for aiding and
abetting liability. See, e.g., Jubelirer v. Mastercard Int'l,
68 F.Supp.2d 1049, 1054 (W.D. Wis. 1999); Touhy v. Northern
Trust Bank, 1999 U.S. Dist. LEXIS 7967, *8-9, 1999 WL 342700
(N.D. Ill. 1999) ("Thus, even though this court must construe
RICO liberally . . . this court cannot ignore the clear
indication by Congress in failing to reference 18 U.S.C. § 2 in
the language of § 1962(c) as well); Sorrano v. New York Life
Ins. Co., 1999 U.S. Dist. LEXIS 1963, *21-24, 1999 WL 104403
(N.D. Ill. 1999); In re Lake States Commodities,
936 F.Supp. 1461, 1475 (N.D. Ill. 1996); Pennsylvania Ass'n of Edwards Heirs
v. Rightenour, 235 F.3d 839, 843-44 (3d Cir. 2000); Rolo v.
City Investing Co. Liquidating Trust, 155 F.3d 644, 656-57 (3d
Cir. 1998); Ling v. Deutsche Bank, AG, 2005 U.S. Dist. LEXIS
9998, *11-12, 2005 WL 1244689 (S.D.N.Y. 2005); Hayden v. Paul,
Weiss, Rifkind, Wharton & Garrison, 955 F.Supp. 248, 256
(S.D.N.Y. 1997) ("Following the reasoning in Central Bank, this
Court declines to create a private right of action for aiding and
abetting a RICO violation. Nowhere in the text of Section 1962 is
there any indication that Congress intended to impose aiding and
abetting liability for a violation of the RICO statute."); Dep't
of Econ. Dev. v. Arthur Andersen & Co., 924 F.Supp. 449, 475-77
(S.D.N.Y. 1996); Wuliger v. Liberty Bank, N.A., 2004 U.S. Dist.
LEXIS 27353, 2004 WL 3377416 (N.D. Ohio 2004); In re Mastercard
Int'l Inc., 132 F.Supp.2d 468, 494-95 (E.D. La. 2001) ("Thus,
without further guidance from the higher court, this Court finds
that aiding and abetting liability under § 1962(c) was eliminated by the Court's holding in Central
The Seventh Circuit has not yet resolved whether aiding and
abetting liability applies in a § 1962(c) RICO action. See Am.
Automotive Accessories, Inc. v. Fishman, 175 F.3d 534, 543
(7th Cir. 1999). The majority of district courts in this
circuit have responded in the negative. See Jubelirer,
supra; Touhy, supra; Sorrano, supra; Lake States,
supra. The one decision that approved the aiding and abetting
liability for § 1962(c), is Am. Automotive, Accessories, Inc. v.
Fishman, 1996 U.S. Dist. LEXIS 12207, 1996 WL 480369 (N.D. Ill.
1988). In Fishman, the court noted that § 1962(c) prohibits
"directly or indirectly" participating in illegal activity, and
concluded that "[t]he language of Section 1962(c), especially
that forbidding `indirect participation,' appears to permit aider
and abettor liability."*fn6 Id. at *18. The court's
analysis is thin and difficult to square with Central Bank,
which expressly rejected the notion that the language "directly
or indirectly" established aiding and abetting liability.
Central Bank, 511 U.S. at 176. See also Touhy, 1999 U.S.
Dist. LEXIS 7967, *9. The logic supporting the majority position
is far more persuasive than that presented by Fishman. Under
Central Bank, we turn to the language of § 1962(c) and find no
evidence that Congress intended to permit aiding and abetting
liability. See Lake States, 936 F. Supp. at 1475. This
analysis should involve more than a hunt for the magic words
"aiding and abetting," but all the signs point against implying a
right of action here. Defendants motion to dismiss Count II is
granted. Section 1962(d) Claim
In Count I plaintiff claims that defendants violated § 1962(d)
by conspiring to violate §§ 1962(a) and (c). Under § 1962(d) it
is "unlawful for any person to conspire to violate any of the
provisions of subsection (a), (b), or (c)" of § 1962. Defendants
argue that plaintiff cannot state a § 1962(d) claim because her
§§ 1962(a) and (c) claims fail. They are correct with respect to
subsection (a), but not in regard to subsection (c). In Beck,
the court held "that injury caused by an overt act that is not an
act of racketeering or otherwise wrongful under RICO . . . is not
sufficient to give rise to a cause of action under § 1964(c) for
a violation of § 1962(d)." Beck, 529 U.S. at 505. As discussed
above, plaintiff has adequately alleged that her demotion was
caused by the extortionate scheme, and not by a subsequent overt
act taken in furtherance of the racketeering conspiracy. Thus,
defendant's motion to dismiss the § 1962(d) claim is granted as
to the subsection (a) claim, but denied for the subsection (c)
First Amendment Claim
In the April 14, 2004, order, the court concluded that
plaintiff stated a claim for retaliation based on speech.
Plaintiff adequately connected her demotion to her refusal to
sell and buy campaign fundraiser tickets, and that dispute
amounted to a public concern. The court further noted that many
of defendants' arguments implicated detailed factual questions
that could not be resolved at the motion to dismiss stage.
Defendants again seek to dismiss plaintiff's First Amendment
claim, and contend that plaintiff's introduction of a class
allegation in her amended complaint entitles them to attack
plaintiff's claim. But defendants' arguments do not differ in any
substantial measure from those that they previously raised, and
the court's position on this matter has not changed. Defendants'
motion to dismiss plaintiff's First Amendment claim is denied. CONCLUSION
For the foregoing reasons, the court grants defendants' motion
to dismiss plaintiff's § 1962(a) claim and Count II, denies the
motion to dismiss plaintiff's § 1962(c) and First Amendment
claims, and grants in part and denies in part the motion to
dismiss the § 1962(d) claim.