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Burlando v. Geraci

July 21, 2010

GIUSEPPE BURLANDO, PLAINTIFF,
v.
DOMINICK GERACI, SAMUEL MACALUSO, JEFFORY TEAGUE, URBAN SERVICES ENTERPRISES, LLC, AND FEDERAL DEPOSIT INSURANCE CORPORATION, AS RECEIVER FOR NATIONAL BANK OF COMMERCE, DEFENDANTS.



The opinion of the court was delivered by: Judge Joan H. Lefkow

OPINION AND ORDER

Giuseppe Burlando filed a fourteen-count complaint*fn1 against Dominick Geraci, Samuel Macaluso, Jeffory Teague, Urban Services Enterprises, LLC ("USE") (collectively, "defendants"), and the Federal Deposit Insurance Corporation ("FDIC"),*fn2 as Receiver for National Bank of Commerce ("NBC"), arising from Geraci's alleged plan to divest Burlando of his interest in their limited liability company, Thalia LLC ("Thalia"), and effectively gain full control of the company and its assets. In Counts I & II, Burlando asserts claims under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), codified 18 U.S.C. § 1961 et. seq., which coupled with 28 U.S.C. §§ 1331, 1367, form the basis for federal jurisdiction. Defendants now move to dismiss under Federal Rule of Civil Procedure 12(b)(6), or in the alternative, under Rule 17(a).*fn3 For the following reasons, their motions [64, 67, & 69] are granted.

BACKGROUND

In April 2003, Burlando formed Thalia, a limited liability company based in Illinois, for the purpose of purchasing, owning, and improving Thalia Hall. Thalia Hall is a famous Chicago building located at 1225 West 18th Street, and includes a classical theater, retail space, and apartments. Thalia purchased Thalia Hall in July 2003 for $1.1 million and began renovating it the same year. At the time of purchase, Burlando controlled a 100% interest in the theater portion of Thalia Hall ("Class B shares") and a 50% interest in the retail and apartment spaces ("Class A shares"). Burlando's business partners, Spencer Volk and Kevin Berg, controlled the remaining 50% of the Class A shares.

In August 2004, Volk and Berg sold their interest to Geraci, who acquired 50% of the Class A shares, became a joint venture partner with Burlando, and agreed to carry on Thalia alongside him. Subsequent to their agreement, however, Burlando alleges that, "From at least the time Geraci acquired his interest in Thalia, he began to implement a plan to obtain Burlando's interests in Thalia, and to gain full control of Thalia and its assets." Compl. ¶ 20.

Over the next three years, Burlando alleges that Geraci implemented this plan, both on his own and with help from Macaluso, Teague, USE, and NBC. According to Burlando, Geraci extorted a portion of Burlando's Class B shares in Thalia, filed false police reports, and misappropriated property that rightfully belonged to Thalia, including bank funds deposited at NBC, equipment, and an investment tax credit for the Thalia Hall project. Burlando also alleges that Geraci collaborated with Macaluso, who owned and shared a financial interest in other entities Geraci owned, to fraudulently prepare tax returns for Thalia. Further, Burlando alleges that Geraci and Teague, a bank officer at NBC who assisted Geraci with withdrawing Thalia funds without Burlando's consent or knowledge, worked together to drive Thalia Hall into bankruptcy.

Specifically, Burlando alleges that in or around June 2006, "Geraci conceived a scheme to obtain Thalia Hall through a foreclosure by NBC" and planned to purchase the property "at a price far below its actual market value." Id. ¶ 58. To do so, Geraci allegedly took numerous steps to interfere with the Thalia Hall renovation, including shouting expletives at prospective tenants, falsely advertising defects in the property, and firing contractors. In 2007, while a foreclosure proceeding was ongoing, Burlando alleges that Geraci collaborated with NBC and Teague to obtain a $3.2 million loan to purchase Thalia Hall when it went up for sale at a judicial foreclosure auction. In October 2007, USE, a company controlled by Geraci, placed the winning bid and purchased Thalia Hall for $3.2 million with financing from NBC. Burlando alleges that the market value at the time was "not less than $5 million." Id. ¶ 78. Although Burlando acknowledges that Geraci succeeded in carrying out his alleged plan, he further alleges that "Geraci and Macaluso's criminal activity and misconduct has impacted interstate commerce, has continued over a number of years and, without court intervention, will likely continue indefinitely." Id. ¶ 88.

On September 10, 2009, Burlando filed his Second Amended Complaint ("complaint") against Geraci, Macaluso, Teague, USE, and the FDIC, alleging a violation of RICO, conspiracy to violate RICO, and numerous state law claims. On June 18, 2010, the FDIC was dismissed as a party to this suit with prejudice.

LEGAL STANDARD

A motion to dismiss under Rule 12(b)(6) challenges a complaint for failure to state a claim upon which relief may be granted. See Fed. R. Civ. P. 12(b)(6); Gen. Elec. Capital Corp. v. Lease Resolution Corp., 128 F.3d 1074, 1080 (7th Cir. 1997). In ruling on a 12(b)(6) motion, the court accepts as true all well-pleaded facts in the plaintiff's complaint and draws all reasonable inferences from those facts in the plaintiff's favor. Dixon v. Page, 291 F.3d 485, 486 (7th Cir. 2002). In order to survive a Rule 12(b)(6) motion, the complaint must not only provide the defendant with fair notice of the claim's basis, but must also establish that the requested relief is plausible on its face. Ashcroft v. Iqbal, - U.S. -, 129 S.Ct. 1937, 1949, 173 L.Ed. 2d 868 (2009); see also Bell Atl. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed. 2d 929 (2007).

DISCUSSION

I. RICO Violation

To state a civil RICO claim under 18 U.S.C. § 1961 et. seq., Burlando must allege that Geraci and Macaluso engaged in "(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity." Gamboa v. Velez, 457 F.3d 703, 705 (7th Cir. 2006) (citing Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496, 105 S.Ct. 3275, 87 L.Ed. 2d 346 (1985)). Geraci and Macaluso both move to dismiss Burlando's RICO claim pursuant to Federal Rule of Civil Procedure 12(b)(6), arguing that Burlando has not and cannot satisfy the third element of his claim.

To allege a pattern of racketeering activity, "the alleged acts of wrongdoing must not only be related, but . . . must 'amount to or pose a threat of continued criminal activity.'" Id. (quoting Corley v. Rosewood Care Ctr., Inc. of Peoria, 388 F.3d 990, 1002 (7th Cir. 2004)). This continuity requirement is the only element at issue and can be satisfied by either a close-ended or open-ended period of conduct. Roger Whitmore's Auto. Servs., Inc. v. Lake County, 424 F.3d 659, 672 (7th Cir. 2005) (citing H.J. Inc. v. N.W. Bell Tel. Co., 492 U.S. 229, 237, 109 S.Ct. 2893, 106 L.Ed. 2d 195 (1989)). Because Burlando's allegations amount to a closed period of continuity involving "a course of criminal ...


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