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Levy v. Pappas

July 13, 2006

CHARLES D. LEVY, REFUND RESEARCH ASSOCIATES, INC., PLAINTIFFS,
v.
MARIA PAPPAS, INDIVIDUALLY AND AS TREASURER OF COOK COUNTY; PETER KARAHOLIOS, INDIVIDUALLY AND AS FORMER COUNSEL FOR THE TREASURER OF COOK COUNTY; WILLIAM KORUKULIS, INDIVIDUALLY AND AS COUNSEL FOR THE TREASURER OF COOK COUNTY; JAMES P. CRAWLEY, INDIVIDUALLY AND AS COUNSEL FOR THE TREASURER OF COOK COUNTY; RICHARD A. DEVINE, INDIVIDUALLY AND AS STATE'S ATTORNEY OF COOK COUNTY, JAMES M. HOULIHAN, INDIVIDUALLY AND AS ASSESSOR OF COOK COUNTY; AND THE COUNTY OF COOK, A CORPORATE BODY POLITIC, DEFENDANTS.



The opinion of the court was delivered by: Judge George M. Marovich

MEMORANDUM OPINION AND ORDER

This is the second time the Court has considered dismissing a nearly-identical complaint in this case. The first time around, the Court dismissed most of plaintiffs' claims on jurisdictional and standing grounds. The plaintiffs proceeded to file a first amended complaint that is nearly identical to the original complaint. Before the Court are two motions. First, defendants Maria Pappas ("Pappas"), Peter Karaholios ("Karaholios"), Martha Mills ("Mills"), William Korukulis ("Korukulis"), James Houlihan ("Houlihan") and Richard Devine ("Devine") move to dismiss the complaint. Second, defendants James Crawley ("Crawley") and Cook County move to dismiss the claims against them for failure to serve them with a summons and complaint within 120 days after plaintiffs filed their complaint. For the reasons set forth below, the Court grants both motions.

I. Background

In his original complaint, plaintiff Charles D. Levy ("Levy") filed a complaint on behalf of himself and as an assignee of the rights and claims of Refund Research Associates, Inc. ("Refund Research"), the other plaintiff. Levy also sought to pursue claims "as an agent for various present and former Cook County taxpayers who were the clients of" Refund Research. In the original complaint, plaintiffs asserted two counts under 42 U.S.C. § 1983 for constitutional violations, three counts for violations of RICO, 18 U.S.C. § 1962 (a), (c) and (d), and state law claims for conspiracy, conversion and tortious interference with business relationship.

The six defendants who had been served filed a motion to dismiss, which the Court granted in part. First, the Court concluded that Levy lacked standing to pursue claims "as an agent for various taxpayers" and dismissed those claims without prejudice. The Court also concluded that most of plaintiffs' complaint was barred by the Tax Injunction Act and principles of comity. Specifically, the Court dismissed without prejudice Count II (one of plaintiffs' § 1983 claims) and Counts III through V (plaintiffs' RICO claims). The Court also concluded that most of Count I (another § 1983 claim) was barred by the Tax Injunction Act and principles of comity, but a small part of Count I was not barred. The part of Count I that was not barred was plaintiffs' claim that defendants launched a criminal investigation against them in retaliation for Levy's having filed a state-court lawsuit against Cook County, Edward J. Rosewell and defendant Pappas. On that claim, the Court concluded that only Levy had stated a claim and against only defendants Pappas and Karaholios in their individual capacities. Thus, the Court dismissed all of plaintiffs' federal claims except that small part of Count I.

With part of Count I the only remaining federal claim, the two remaining defendants (Pappas and Karaholios) moved to dismiss Count I on statute of limitations grounds. In lieu of a response, plaintiffs Levy and Refund Research filed a first amended complaint. The first amended complaint contains all of the allegations and claims that the Court ruled were barred by the Tax Injunction Act and principles of comity, all of the allegations the Court dismissed for failure to state a claim and a few additional allegations. The only thing missing from the original complaint was Levy's attempt to bring claims on behalf of Refund Research's clients. Defendants filed motions to dismiss plaintiffs' first amended complaint.

For purposes of these motions to dismiss, the Court takes as true the allegations in the first amended complaint. The Court also considers the exhibits attached to plaintiffs' first amended complaint. See Fed.R.Civ.P. 10(c). Because the Court outlined the allegations in its previous opinion, the Court will include only the essential allegations here.

Plaintiffs filed suit against Cook County and a number of its employees (each employee in his/her official and individual capacities). Defendant Pappas is the Treasurer of Cook County, and defendant Korukulis is the Deputy Treasurer of Cook County. Defendant Martha Mills ("Mills") is the Chief Counsel for the Treasurer of Cook County. Defendant James Crawley ("Crawley") is Counsel for the Treasurer of Cook County, and defendant Peter Karaholios was (during a period of time which is not clear from the complaint) Counsel for the Treasurer of Cook County. Defendant James M. Houlihan ("Houlihan") is the Assessor of Cook County. Defendant Richard H. Devine ("Devine") is the State's Attorney for Cook County.

Levy was the president and sole shareholder of Refund Research, which was engaged in the business of assisting taxpayers in obtaining real estate tax refunds. To that end, Refund Research/Levy compared tax records to determine which taxpayers were entitled to but had not received real estate tax refunds. Then, Levy attempted to contact such taxpayers in an effort to convince each taxpayer to enter into an agreement with Refund Research whereby Refund Research would agree to file for a refund on behalf of the taxpayer and the taxpayer would agree to pay Refund Research one third of any tax refund.

In February 1999, Levy filed a lawsuit (the "state-court case") in the Circuit Court of Cook County against Cook County, Pappas and Edward J. Rosewell ("Rosewell"), the former Treasurer of Cook County. Plaintiffs allege that after Levy filed the state-court case, the defendants retaliated against them. According to plaintiffs' first amended complaint, defendants retaliated against plaintiffs by instigating a criminal investigation against plaintiffs.

For example, Levy alleges that in or about the same month (i.e., February 1999) that Levy filed his state-court case, Karaholios told Levy that he had been a prosecutor and that he was going to put Levy out of business. Levy interpreted the comment as a threat to institute criminal charges. In October 2000, Levy was at the Treasurer's office. In the presence of Pappas, Crawley and Korukulis, Karaholios told Levy that Levy was "committing fraud by submitting refund applications using Refund Research's FEIN number instead of the taxpayer's social security number." Karaholios added that Pappas planned to submit the applications to and file a complaint with the State's Attorney. Pappas picked up the refund applications Levy had with him, waived them at Levy and said, "This is fraud. I'm going to take this to the State's Attorney."

Plaintiffs also allege that in April 2001, Amy Huang (a supervisor with the Financial Crimes Investigations Unit of the State's Attorney's office) sent letters to more than 500 clients of Refund Research. The letters stated, in relevant part:

Our office is currently conducting a Criminal Grand Jury investigation pertaining to a complaint received from the Cook County Treasurer's office.

According to records provided by the Cook County Treasurer's office, you filed a Certificate of Error Refund Application . . ., and designated Refund Research Associates, Inc. as Power-of-Attorney to complete the refund application process.

In order for this office to complete its investigation into said matter, please review the attached application and contact [us] if the information is incorrect. Our office would like to talk with you regarding the refund you have filed through Refund Research Associates, Inc.

At least once, a representative of the State's Attorney's office went to the home of a Refund Research client to ask the client to verify his signature, which he was able to do. In May 2001, a Refund Research client telephoned the Treasurer's office and spoke to Ilene Psarras (an employee). When the client asked about the status of her refund, Ilene Psarras told the Refund Research client that checks payable to Refund Research were not being released because Refund Research was being investigated for cheating clients out of their money.

Plaintiffs allege that the investigation continued into 2003 and 2004. In 2003, William Koehler ("Koehler") an investigator for the State's Attorney's office questioned Rosetta Willis ("Willis"), who had worked for Refund Research. Koehler asked Willis about Levy's conduct and business practices. In the spring of 2004, Koehler informed Levy that the State's Attorney would charge him with a criminal offense.

Plaintiffs also allege that investigators from the State's Attorney's Office interviewed French Rankin ("Rankin"), who once worked for Refund Research. The investigators appeared at Rankin's door and said they would read Rankin his rights. Rankin "refused to tell the investigators that plaintiff Levy was involved in any criminal wrongdoing." In June 2004, Rankin and his attorney met with representatives from the State's Attorney's office. The investigators informed Rankin that they had evidence that Rankin had notarized documents (thereby attesting to the signatures therein) for nineteen Refund Research "clients" who claim never to have signed the documents. Rankin stated that those clients had agreed by telephone to have Refund Research sign the documents for them "to expedite the processing of their refunds." The representatives of the State's Attorney's office allegedly told Rankin that he would be charged ...


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