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Inc. v. Girouard

United States District Court, N.D. Illinois, Eastern Division

November 21, 2014

FAITH CONSTRUCTION 4, INC., and ANNOINTED DEVELOPMENT INC., Plaintiffs,
v.
THOMAS W. GIROUARD, STEVEN T. CHO, FRANCES HOFBAUER, LISA L. FINLAY, and ALL-BRY CONSTRUCTION COMPANY, Defendants.

MEMORANDUM OPINION AND ORDER

MANISH S. SHAH, District Judge.

The Chicago Park District requires that a portion of the money it spends on construction contracts be awarded to minority-owned businesses. General contractors must report how much work has been and will be performed by minority-owned subcontractors, and how much those subcontractors have been and will be paid. Plaintiff Faith Construction 4, Inc., is a minority-owned subcontractor, and plaintiff Annointed Development Inc. is a joint venture between Faith and another company. Defendant All-Bry is a general contractor, and the individual defendants are All-Bry employees. On certain jobs for the Park District, plaintiffs worked as subcontractors for All-Bry.

In this suit, plaintiffs allege that All-Bry won contracts and obtained payments from the Park District by fraudulently inflating the amount of money it was paying to minority-owned subcontractors. Plaintiffs assert a claim under the Racketeer Influenced and Corrupt Organizations Act, and a claim under common-law fraud. In three separate motions, defendants move to dismiss. For the reasons below, the motions to dismiss are granted.

I. Legal Standards

Plaintiffs' complaint was filed in Illinois state court (in the Circuit Court of Cook County), before being removed to this court.[1] The Federal Rules of Civil Procedure apply "to a civil action after it is removed from a state court." Fed.R.Civ.P. 81(c)(1) (emphasis added). Neither side has argued for or against dismissal on the basis that Illinois pleading standards, as opposed to federal standards, should apply. In particular, plaintiffs acquiesce to the application of Federal Rules of Civil Procedure 12(b)(6) and 9(b), and federal case law interpreting those rules. [30] at 4-5, 11, 18. I therefore apply federal standards. See G&S Holdings LLC v. Cont'l Cas. Co., 697 F.3d 534, 537-38 (7th Cir. 2012) (declining to decide whether state pleading rules apply to a complaint removed to federal court, where the parties acquiesced to the application of federal rules).

In deciding whether to dismiss a claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure, I construe the complaint in the light most favorable to plaintiffs, accept as true all well-pleaded facts, and draw reasonable inferences in their favor. Yeftich v. Navistar, Inc., 722 F.3d 911, 915 (7th Cir. 2013). Statements of law, however, need not be accepted as true. Id. To avoid dismissal, the complaint must "state a claim to relief that is plausible on its face." Id. (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Yeftich, 722 F.3d at 915 (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)).

The complaint must include "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). The short and plain statement must "give the defendant fair notice of what the claim is and the grounds upon which it rests." Twombly, 550 U.S. at 555 (internal marks omitted). Where a claim for relief sounds in fraud, a heightened pleading standard applies. Cincinnati Life Ins. Co. v. Beyrer, 722 F.3d 939, 949-50 (7th Cir. 2013) (citing Fed.R.Civ.P. 9(b)). A party alleging fraud must state its claim with particularity, including the "who, what, when, where, and how" of the fraud. Beyrer, 722 F.3d at 950. Malice, intent, or knowledge may be alleged generally. Fed.R.Civ.P. 9(b).

II. Facts[2]

The Chicago Park District awards contracts to vendors for various services, including construction. Complaint ¶ 11. The Park District requires that at least 25% of the money it spends on any construction contract goes to one or more minority-owned businesses. Complaint ¶ 30. General contractors that bid for projects with the Park District are required to submit affidavits committing to comply with that policy. Complaint ¶ 54. General contractors must identify the specific minority-owned businesses that will provide goods or services for the project, and must submit letters of intent signed by representatives of those minority-owned businesses. Complaint ¶¶ 56-57. The letters of intent must specify the amounts to be paid for the goods or services. Complaint ¶ 57.

Defendant All-Bry is a general contractor, and the individual defendants are All-Bry employees. Complaint ¶ 4-9.[3] Plaintiff Faith is a minority-owned subcontractor. Complaint ¶¶ 1, 53. Plaintiff Annointed Development, whose purpose was to ensure that Faith had access to trucks when needed, was a joint venture between Faith and another company. Complaint ¶ 2.

All-Bry obtained contracts with the Park District by representing that Faith-a minority-owned business-would be given a certain amount of the work (and money). On those contracts, All-Bry sought payment from the Park District by representing that Faith had done a certain amount of work, and had been and would be paid accordingly. Plaintiffs allege that in order to obtain and retain its contracts, and to receive payments on those contracts, All-Bry lied to the Park District, inflating the amount of money being paid to minority-owned subcontractors. Plaintiffs allege that All-Bry did so by forging the signature of Faith's owner on documents submitted to the Park District.[4] By forging the owner's signature, All-Bry could obtain more money from the Park District than it would remit to Faith, and neither Faith nor the Park District would discover the inconsistency.[5] Plaintiffs contend that they have been damaged in an amount equal to the difference between (1) what All-Bry told the Park District it was paying plaintiffs and (2) what it actually paid them.

III. Analysis

A. Count I: RICO

In Count I, plaintiffs assert a civil claim under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961 et seq. The Supreme Court ...


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