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Amari Company, Inc., et al. v. John Burgess

July 11, 2011


The opinion of the court was delivered by: Elaine E. Bucklo United States District Judge


Many moons ago, plaintiffs filed a complaint alleging, inter alia, violations of the RICO statute, 28 U.S.C. § 1962. Now before me---several years, multiple amended complaints, and an incredible amount of motion practice later---is defendants' motion for summary judgment on the only remaining counts in the complaint, which assert violations of 18 U.S.C. §§ 1962(c) and (d). For the reasons that follow, their motion is granted in part.


To prevail under § 1962(c), plaintiffs must ultimately prove that defendants, being employed by or associated with the entities sometimes referred to in this litigation as the "Non-Party Corporations," which I will refer to collectively here as "IPA," conducted or participated in the conduct of those entities' affairs "through a pattern of racketeering activity." H.J. Inc. v. Northwestern Bell Telephone Co., 492 U.S. 229, 232-33 (1989). The essential elements of a this claim are "(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity." Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 496, 105 S. Ct. 3275 (1985). To prevail under § 1962(d), plaintiffs must further prove that defendants conspired to commit the foregoing violation.

The "racketeering activity" on which plaintiffs' complaint is premised is mail and wire fraud. See 18 U.S.C. §§ 1341, 1343. This type of RICO allegation requires plaintiffs to establish that defendants (1) have participated in a scheme to defraud and (2) have mailed or knowingly has caused to be mailed a letter or other material for the purpose of executing the scheme. Richards v. Combined Insurance Co. Of America, 55 F.3d 247, 249-50 (7th Cir. 1995). Although neither side's briefing is remotely helpful in elucidating whether plaintiffs' evidence is sufficient to raise a triable issue in view of the foregoing standards, my own review of the record---though the record, too, is utterly confused---minimally satisfies me that a jury could find in plaintiffs' favor.

Although each plaintiff recounts an individual tale of woe that is unique in some of its details, the basic story of plaintiffs' collective experience with IPA follows. Plaintiffs' first face-to-face contact with IPA was when a salesperson known as a Senior Area Manager ("SAM") showed up at their door, ostensibly (and sometimes, but not always, genuinely) for a previously scheduled appointment. The SAMs explained that IPA is a prominent and fast-growing business consulting firm endorsed by distinguished public figures, including three former Presidents of the United States, that specializes in consulting to small to medium-sized businesses. The SAMs then presented the panoply of services IPA provides and explained how each proceeds: The first step in any engagement is to have a Business Analyst ("BA") visit the client, obtain and review the company's financial and other relevant information, and provide a "comprehensive" diagnosis of how the company is performing and where improvements can be made. The SAMs explained that IPA's BAs are highly experienced business people generally, and that IPA assigns BAs to particular jobs based on the BA's expertise in the client's specific industry or field.

The SAMs then explained that during the BA's visit, he or she would collect substantial company information and communicate frequently with IPA's home office via phone and fax to consult with additional experts (including during the so-called "Council Calls," discussed below), and to access information for a comparative business analysis. At the conclusion of the business analysis (or "survey" as it is more frequently called), the BA would present his or her findings, which would reveal any deficiencies in how the client's business was run, and would propose recommendations that may or may not include hiring IPA's Consulting Services for a second engagement. The client would be billed for the survey but would only have to pay if it was satisfied with the results. All of the plaintiffs contracted for surveys, which all culminated in variations on the same, dire warning: the client's business was on the brink of imminent failure due to poor management controls. Luckily, however, the surveys also revealed a quick and efficient path to salvation: IPA's expert consultants could begin work the following day to turn the client's business around quickly and efficiently.

Plaintiffs all contracted for IPA's consulting services.*fn1

Within a day or two, a cadre of IPA employees (at least two and as many as four), billing by the hour, arrived at plaintiffs' businesses to begin their consulting projects. The consultants typically spent the first day gathering financial information and faxing it back to IPA's headquarters, and preparing an apparently customized "project plan," followed by a "Value Enhancement Program" with which to begin the project. The latter document typically provided a list of objectives, strategies, or improvements that were necessary to improve the client's business results.

Plaintiffs' descriptions of the consultants' concrete activities over the course of the following weeks are generally vague, but all plaintiffs assert that it became increasingly clear that little or no progress was being made with respect to the items identified in the Value Enhancement Program; that the supposed "experts" who performed the surveys had little to no experience in the relevant fields, and the consultants had no idea how to implement the recommended changes; that IPA could not substantiate either its endorsements by public figures or its claim to legions of satisfied customers; and that the bulk of the consultants' work product consisted of boilerplate "templates" that were not customized to address the problems identified in the surveys.*fn2

Plaintiffs later discovered, moreover, that a number of the representations made by the SAMs and the BAs, which plaintiffs had relied upon in deciding to engage IPA for consulting services, were misleading or untrue.


While plaintiffs' generally sloppy drafting and frequent citation to portions of the record not included in their exhibits in opposition to defendants' motion nearly led me to conclude that they had no chance of prevailing on their claims, their shortcomings were matched by defendants' failure to raise a single properly reasoned argument in support of their motion. The first argument defendants attempt is that plaintiffs cannot prove the predicate acts of mail and wire fraud. If properly supported, this argument would indeed sound the death knoll for plaintiffs' claim. But defendants' disordered pronouncements in putative support of their theory all miss the mark. For example, defendants insist that "there is no violation of RICO because defendants are engaged in a lawful business with legitimate business practices and a legitimate business model." This argument is unavailing because plaintiffs need not establish that IPA's entire business is unlawful or illegitimate; what they must show is that defendants engaged in a "pattern of racketeering activity" in conducting IPA's business. This means they must identify at least two related acts of mail and wire fraud that "amount to or pose a threat of continuing criminal activity." Corley v. Rosewood Care Center, Inc., 142 F.3d 1041, 1048 (7th Cir. 1998) (quoting H.J. Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 239 (1989)). A plaintiff may satisfy this requirement by showing "that the 'predicate acts or offenses are part of an ongoing entity's regular way of doing business.' Midwest Grinding Co., Inc. v. Spitz, 976 F.2d 1016, 1023 (7th Cir. 1992)(quoting H.J. Inc., 492 U.S. at 242-43).

None of defendants' arguments even purports to examine a) whether the conduct plaintiffs attribute to IPA employees constitutes mail or wire fraud, or b) whether the conduct constitutes a pattern.*fn3 On the first issue, "[i]t is well established that the crime of mail fraud does not encompass all the strict requirements of common law fraud." Richards, 55 F.3d at 251. Instead, "the words 'to defraud' in the mail fraud statute have the 'common understanding' of 'wronging one in his property rights by dishonest methods or schemes,' and 'usually signify the deprivation of something of value by trick, deceit, chicane or overreaching.'" Id. at 252 (quoting McNally v. United States, 483 U.S. 350, 358 (1987) (internal quotation marks and citation omitted)). The wire fraud statute has a similar focus, making it a crime to use the interstate wires in "any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises." 18 U.S.C. ...

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