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Iqbal v. Zafar

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

January 14, 2015

MIR S. IQBAL, et al., Plaintiffs,
v.
JAVAID ZAFAR, et al., Defendants.

MEMORANDUM OPINION AND ORDER

JOHN W. DARRAH, District Judge.

Plaintiffs Mir S. Iqbal; SF Fuel, LLC ("SF Fuel"); and Sunshine Group Travel Center ("Sunshine"), filed a Complaint against Defendants Javaid Zafar; Archer Bank; Metropolitan Development Firm, Inc. ("Metropolitan"); and Einteligencetech Corp. ("Einteligencetech"), alleging breach of contract, common law fraud, conversion, and violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO") § 1962(c). Defendants Zafar and Metropolitan move to dismiss Counts I and II pursuant to Federal Rules of Civil Procedure 12(b)(6).

BACKGROUND

The following is taken from the Complaint, which is assumed to be true for the purposes of a motion to dismiss. See Reger Dev., LLC v. Nat'l City Bank, 592 F.3d 759, 763 (7th Cir. 2010). Plaintiff Iqbal is an Illinois resident who owns the Illinois corporations SF Fuel and Sunshine. (Compl. at ¶ 7.) Defendant Zafar is an Illinois resident who owns the Illinois corporations Metropolitan and Einteligencetech. ( Id. at ¶ 8.) In May 2010, Plaintiff SF Fuel entered into a Property Management Agreement (the "Agreement") with Metropolitan to operate and manage a gas station, convenience store, and restaurant (the "Business") at 503 N. Oakwood Ave., Oakwood, IL 61858. ( Id. at ¶ 10.)

Zafar operated three enterprises for thirteen months: Sunshine, Metropolitan, and Einteligencetech. ( Id. at ¶ 18.) Under the Agreement, Zafar was required to reduce his monthly salary from $8, 000 to $4, 000 after the first four months if net profits did not reach a certain amount. ( Id. at ¶ 11). Zafar did not reduce his salary for thirteen months.[1] ( Id. ) Zafar did not disclose the details of $480, 000 in improvements and kept no records or verifications of the costs, even though he was required to do so by the Agreement. ( Id. at ¶12.) Zafar used business checks from Sunshine for personal use. ( Id. at ¶ 15.) The calculations of profit and loss for the Business failed to reflect Zafar's $8, 000 salary, failed to show the checks written from his company in a check kiting scheme, and underreported sales. ( Id. at ¶ 14.) Zafar also failed to report and pay the full sales taxes to the Illinois Department of Revenue. ( Id. )

Plaintiffs filed the present Complaint on March 9, 2012. (Compl.) Plaintiffs' motion for default judgment against Zafar and Metropolitan and to withdraw the claim against Einteligencetech was granted on May 2, 2013. (Dkt. 22.) Count III of the Complaint, alleging negligence against Archer Bank, was dismissed on October 9, 2013, after Archer Bank filed a Motion for Judgment on the Pleadings. (Dkt. 34.) Zafar and Metropolitan's Motion to Vacate the Default Judgment was granted on August 14, 2014. Zafar and Metropolitan filed a Motion to Dismiss Counts I and II of the Complaint for failure to state a claim on September 5, 2014. (Dkt. 59).

LEGAL STANDARD

Rule 12(b)(6) permits a defendant to move to dismiss a complaint for "failure to state a claim upon which relief can be granted." Fed.R.Civ.P. 12(b)(6). A complaint must allege enough facts to support a claim that is "plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 547 (2007). Facial plausibility exists when the court can "draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). All well-pleaded allegations are presumed to be true, and all inferences are read in the light most favorable to the plaintiff. Lavalais v. Village of Melrose Park, 734 F.3d 629, 632 (7th Cir. 2013). This presumption is not extended to legal conclusions, or threadbare recitals of the elements of a cause of action, supported by mere conclusory statements.' Alam v. Miller Brewing Co., 709 F.3d 662, 666 (7th Cir. 2013) (quoting Brooks v. Ross, 578 F.3d 574, 581 (7th Cir. 2009)). The complaint must provide a defendant "with fair notice' of the claim and its basis." Tamayo v. Blagojevich, 526 F.3d 1074, 1081 (7th Cir. 2008) (quoting Fed.R.Civ.P. 8(a)(2) and Twombly, 550 U.S. at 555).

ANALYSIS

Count I - RICO

Plaintiffs allege that Zafar violated RICO, specifically § 1962(c). Section 1962(c) provides:

It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt.

18 U.S.C. § 1962(c). "To state a claim under § 1962(c), a RICO plaintiff must show the (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.'" Richmond v. Nationwide Cassel L.P., 52 F.3d 640, 644 (7th Cir. 1995) (quoting Sedima, S.P.R.L. v. Imrex Co. Inc., 473 U.S. 479, 496 (1985)). In order for Plaintiffs to sue under RICO, they must show that any violations were not only a "but for" cause of an injury but also the proximate cause. See Anza v. Ideal ...


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