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COBBS v. SHEAHAN

June 20, 2005.

GAYLER COBBS, Plaintiff,
v.
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.

BACKGROUND

  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.

  DISCUSSION

  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 her.

  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 language.").

  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 ...


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