United States District Court, N.D. Illinois, Eastern Division
September 15, 2005.
MANCARI'S CHRYSLER/JEEP, INC., Plaintiff,
UNIVERSAL AUTO LEASING, INC., a foreign corporation doing business in Illinois, HAIM GOLDENBERG, JOMARK, INC., an Illinois corporation, GREGORY M. GEISTLER, BRUNO MANCARI, JR. and GINA MANCARI, Defendants.
The opinion of the court was delivered by: SAMUEL DER-YEGHIAYAN, District Judge
This matter is before the court on Defendants' motion to
dismiss and on Defendants' motion for sanctions. For the reasons
stated below, we grant the motion to dismiss and deny the motion
Plaintiff Mancari's Chrysler/Jeep, Inc. ("MCJ") alleges that
Defendant Bruno Mancari, Jr. ("Bruno") worked for Plaintiff as
the used car manager in 1994. According to MCJ, Bruno used his position as the used car manager
to conspire to purchase used cars from MCJ at discounted prices
and to sell MCJ used autos to the other Defendants at
artificially inflated prices. Defendants Haim Goldenberg
("Goldenberg") and Gregory Geistler ("Geistler") allegedly used
their companies Universal Auto Leading, Inc. ("Universal") and
Haim Goldenberg, Jomark, Inc. ("Jomark") to facilitate the
conspiracy. Some of the proceeds of the alleged conspiracy were
allegedly funneled to Defendant Gina Mancari, Bruno's wife. MCJ
filed an amended complaint in this action alleging violations of
the Racketeer Influenced and Corrupt Organizations Act ("RICO"),
18 U.S.C. § 1961 et seq. Defendants Bruno and Gina Mancari
("Defendants') have brought the instant motion to dismiss and
motion for sanctions.
In ruling on a motion to dismiss, brought pursuant to Federal
Rule of Civil Procedure 12(b)(6) the court must draw all
reasonable inferences that favor the plaintiff, construe the
allegations of the complaint in the light most favorable to the
plaintiff, and accept as true all well-pleaded facts and
allegations in the complaint. Thompson v. Illinois Dep't of
Prof'l Regulation, 300 F.3d 750, 753 (7th Cir. 2002); Perkins
v. Silverstein, 939 F.2d 463, 466 (7th Cir. 1991). The
allegations of a complaint should not be dismissed for a failure
to state a claim "unless it appears beyond doubt that the
plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41,
45-46 (1957); See also Baker v. Kingsley, 387 F.3d 649, 664
(7th Cir. 2004) (stating that although the "plaintiffs'
allegations provide[d] little detail . . . [the court could not]
say at [that] early stage in the litigation that plaintiffs
[could] prove no set of facts in support of their claim that
would entitle them to relief."). Nonetheless, in order to
withstand a motion to dismiss, a complaint must allege the
"operative facts" upon which each claim is based. Kyle v. Morton
High School, 144 F.3d 448, 454-55 (7th Cir. 1998); Lucien v.
Preiner, 967 F.2d 1166, 1168 (7th Cir. 1992). Under current
notice pleading standard in federal courts a plaintiff need not
"plead facts that, if true, establish each element of a `cause of
action. . . .'" See Sanjuan v. American Bd. of Psychiatry and
Neurology, Inc., 40 F.3d 247, 251 (7th Cir. 1994) (stating
that "[a]t this stage the plaintiff receives the benefit of
imagination, so long as the hypotheses are consistent with the
complaint" and that "[m]atching facts against legal elements
comes later."). The plaintiff need not allege all of the facts
involved in the claim and can plead conclusions. Higgs v.
Carter, 286 F.3d 437, 439 (7th Cir. 2002); Kyle,
144 F.3d at 455. However, any conclusions pled must "provide the defendant
with at least minimal notice of the claim," Id., and the
plaintiff cannot satisfy federal pleading requirements merely "by
attaching bare legal conclusions to narrated facts which fail to
outline the bases of [his] claims," Perkins,
939 F.2d at 466-67. The Seventh Circuit has explained that "[o]ne pleads a
`claim for relief' by briefly describing the events." Sanjuan,
40 F.3d at 251. DISCUSSION
Defendants argue that MCJ has failed to allege its fraud-based
RICO claims with particularity as is required under Federal Rule
of Civil Procedure 9(b) ("Rule 9(b)"). Defendants complain that
the allegations of wrongdoing in the amended complaint are too
general and that MCJ fails to refer to any specific actions or
transactions by Defendants.
Rule 9(b) provides that "[i]n all averments of fraud or
mistake, the circumstances constituting fraud or mistake shall be
stated with particularity." Fed.R.Civ.P. 9(b). The purpose of
Rule 9(b), in regards to fraud claims, "is to minimize the
extortionate impact that a baseless claim of fraud can have on a
firm or an individual" because, if a fraud claim is too vague
during discovery, the claim "will stand unrefuted, placing what
may be undue pressure on the defendant to settle the case in
order to lift the cloud on its reputation." Fidelity Nat. Title
Ins. Co. of New York v. Intercounty Nat. Title Ins. Co.,
412 F.3d 745, 748-49 (7th Cir. 2005). Rule 9(b) requires a
plaintiff to provide sufficient specificity to allow a defendant
accused of fraud to respond "swiftly and effectively if the claim
is groundless." Id.
Rule 9(b) applies to fraud-based RICO claims. Goren v. New
Vision Intern., Inc., 156 F.3d 721, 726 (7th Cir. 1998). To
plead a fraud-based RICO claim with particularity a plaintiff
must, at a minimum: 1) "describe the predicate acts [of fraud]
with some specificity," 2) state the time, place, and content of
the alleged fraudulent communications, 3) and notify each defendant of his or her role
in the alleged scheme. Id.
In the instant action, MCJ alleges that Defendants took part in
"a scheme devised by Defendants to defraud Plaintiff and to
procure secret profits from Plaintiff by failing to disclose
interests in transactions with Plaintiff." (A. Compl. Par. 1).
MCJ alleges that Bruno was the used car manager for MCJ beginning
in 1994. (A. Compl. Par. 15(g)). MCJ alleges that sometime in
2000, Bruno sought Defendant Haim Goldenberg ("Goldenberg") and
Defendant Gregory M. Geistler ("Geistler") to seek financing for
the fraud scheme. (A. Compl. Par. 15(a)). MCJ explains that Bruno
had the "authority to purchase and to sell used autos for
Plaintiff" and that "he had the authority to determine the prices
of what Plaintiff's used cars were brought and sold for on a
wholesale basis and t[o] whom or from whom they were brought and
sold." (A. Compl. Par. 15(b)(g)). The alleged scheme consisted of
certain components. As part of the scheme, Bruno would secretly
purchase underpriced used cars in Goldenberg's and Geistler's
names at a discount and resell them to MCJ at a profit. (A.
Compl. Pa. 15(c)). In addition, Goldenberg and Geistler, would
allegedly use their company Universal to purchase used cars from
MCJ at a discount price and resell them at a profit. MCJ also
alleges that another company run by Goldenberg and Geistler,
Jomark would sell automobiles to MCJ at an inflated price and buy
automobiles from MCJ at a "below wholesale price. . . ." (A.
Compl. Par. 15(o)). MCJ further alleges that Defendant Gina
Mancari, Bruno's wife, received some of the proceeds from the unlawful scheme through checks made
out to her personally and through checks made out to her by
Defendant Universal. The participants involved in the scheme and
their roles in the scheme are laid out in the amended complaint.
MCJ has not, however, provided the time and place of the alleged
fraudulent transactions. In Midwest Grinding Co., Inc. v.
Spitz, 976 F.2d 1016 (7th Cir. 1992), the Seventh Circuit
was reviewing a district court's decision to dismiss a
fraud-based RICO claim due to a failure to plead with
particularity. Id. at 1017-18. In Midwest, the plaintiff
"accused defendants of committing hundreds of acts of mail and
wire fraud. . . ." Id. at 1019. The plaintiff in Midwest
argued that "it was unnecessary to list the date of each
[pertinent] transaction because to do so would violate
Fed.R.Civ.P. 8, which instructs plaintiffs to limit claims in
pleadings to a `short and plain' description." Id. at 1020. The
plaintiff also argued that "in cases involving a lengthy period
of fraud, the exact date and time of each fraudulent act need not
be specifically alleged" and that the plaintiff could not be held
to as stringent a pleading standard because the defendant
possessed the pertinent necessary information. Id.
The Court in Midwest explicitly rejected all of the above
arguments made by the plaintiff. Id. The Court reiterated a
plaintiff's obligation to "identify the time and place of the
alleged predicate acts" and noted that the information at
question should have been in the possession of the plaintiff.
Id. Similarly, in the instant action, although MCJ explains the
general aspects of the alleged fraudulent scheme, MCJ does not provide the time or place of the alleged improper
transactions. MCJ states only generally that the scheme was
ongoing and "continuous?" from 2000 to August of 2004. (A.
Compl. Par. 4, 15(n)). Absent from the amended complaint are
references to the specific transactions that were part of the
scheme. Neither can MCJ's failure to provide the necessary
information be excused because, according to MCJ, Defendants were
the only parties to have access to the information. If MCJ truly
believes, as it asserts in its amended complaint, that certain
transactions involving the purchase and sale of used autos by MCJ
were part of the scheme, then MCJ should have ample documentation
of its own transactions and should have been able to produce the
dates of the transactions that MCJ believes were part of the
scheme. Instead, MCJ alleges only generally that the scheme was
"continuous?." (A. Compl. Par. 4). MCJ alleges that the alleged
scheme began "in or about 2000" and thus MCJ provides the
Defendants only with notice of possible year that the alleged
scheme began and does not even provide Defendants with notice of
the month that MCJ believes that the alleged scheme began. (A.
Compl. Par. 15(h)).
MCJ argues that they "have provided plaintiffs with copies of
records of transactions by and between defendants. . . ." (Ans.
3). However, the inquiry before us at this juncture relates to
the allegations in the complaint rather than what documents have
been produced by MCJ to Defendants. MCJ also argues that the
amended complaint "contains the fist [sic] known example of a
predicate act by the two Defendants. . . ." (Ans. 3). The
complaint does refer specifically to one transaction involving a 1998 Lexus that was allegedly purchased
by Bruno on behalf of MCJ on August 2, 2004. (A. Compl. Par.
15(r)). However, even if we were to consider that limited
reference to the 2004 transaction, it falls far short of MCJ's
sweeping allegations that there was a "continuous?" scheme from
2000 to 2004. In addition, as MCJ acknowledges in its answer, for
a RICO claim a plaintiff must show "an enterprise . . . through a
pattern . . . of racketeering activity." Midwest Grinding Co.,
Inc., 976 F.2d at 1019; (Ans. 1). Even if we were to consider
the one isolated incident referenced in the amended complaint, it
would not be a pattern of activity. Therefore, we conclude that
MCJ has not plead sufficient facts to plead its claims with
particularity and we grant the motion to dismiss.
Defendants have also filed a motion for sanctions pursuant to
Rule 11 of the Federal Rules of Civil Procedure. The main thrust
of Defendants' motion for sanctions is that MCJ wasted
Defendants' time by forcing them to respond to a complaint that
lacked the requisite specificity and had other deficiencies.
Defendants have not shown that MCJ's filing of an amended
complaint was done in bad faith or that it was a frivolous filing
and we conclude that sanctions are not warranted. Therefore, we
deny Defendants' motion for sanctions. CONCLUSION
Therefore, based on the foregoing analysis, we grant
Defendants' motion to dismiss and deny Defendants' motion for
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