Opinion
No. 99 C 6894
June 14, 2000
MEMORANDUM OPINION AND ORDER
Plaintiff Dorothy Singleton has filed a complaint against defendants Montgomery Ward Credit Corp. ("Ward Credit") and Signature Corp. ("Signature"), alleging violations of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1961 et seq. (Count I). Defendants have filed a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6) and 9(b), to which plaintiff has not responded.
FACTS
For purposes of a motion to dismiss, the court accepts the factual allegations of the complaint as true and draws all reasonable inferences in favor of the plaintiff. See Travel All Over the World, Inc. v. Kingdom of Saudi Arabia, 73 F.3d 1423, 1428 (7th Cir. 1996). Plaintiff alleges that over seven years ago, defendants devised a scheme to sell credit insurance by deceptive means. According to plaintiff, Ward Credit encourages customers who open a credit account at Montgomery Ward Co., Inc. ("Wards") to sign up for credit insurance. If these customers refuse the initial offer to purchase insurance, as plaintiff did, Ward Credit mails monthly solicitations urging them to sign up for credit insurance and outlining the various limitations and exclusions of the insurance package. Plaintiff alleges that Signature and Ward Credit developed scripts to be used by telemarketers to solicit these reluctant customers by telephone. The customers are promised a valuable gift (such as a "Boomer Box" portable radio) if they agree to sign up over the telephone.
According to plaintiff, defendants conceal the details of the insurance policies from those customers they solicit by telephone. Plaintiff alleges that defendants do not inform these customers of the limitations and exclusions of the insurance package. Plaintiff also alleges that defendants fail to inform customers that credit insurance is not mandatory, and instead purposely lead customers, including plaintiff, to believe that such insurance is obligatory. Plaintiff further alleges that she was not told how to cancel the insurance or obtain a refund after she had signed up.
Plaintiff makes a number of general allegations without alleging that they apply to her. For example, plaintiff generally alleges that after a customer signs up for credit insurance, Ward Credit charges the credit insurance premiums to the customer's account. Consequently, Ward Credit has profited by assessing late payment charge penalties and interest, and the credit accounts of certain customers have been put into arrears.
LEGAL STANDARD
In ruling on a motion to dismiss for failure to state a claim, the court considers "whether relief is possible under any set of facts that could be established consistent with the allegations." Bartholet v. Reishauer A.G., 953 F.2d 1073, 1078 (7th Cir. 1992). A claim may be dismissed only if it is beyond doubt that under no set of facts would the plaintiff's allegations entitle him to relief. See Travel All Over the World, 73 F.3d at 1429-30. The purpose of a motion to dismiss is to test the sufficiency of the complaint, not to decide its merits. See Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir 1990).
DISCUSSION
To state a claim under § 1962(c), plaintiff much allege: (1) the existence of an enterprise affecting interstate commerce; (2) that defendants were employed by or associated with the enterprise; (3) that defendants participated in the conduct of the enterprise's affairs; and (4) that defendants participated through a pattern of racketeering activity. Williams Electronics Games, Inc. v. Barry, 42 F. Supp.2d 785, 790 (N.D. Ill. 1999).
Defendants argue that plaintiff fails to allege a pattern of racketeering activity. "A pattern of racketeering activity consists, at a minimum, of two predicate acts of racketeering committed within a ten-year time period." Goren v. New Vision Int'l Inc., 156 F.3d 721, 728 (7th Cir. 1998). Plaintiff appears to allege that defendants committed wire fraud by contacting her by phone and encouraging her to sign up for the insurance, and committed mail fraud by mailing her a free gift after she had agreed to sign up for the insurance.
Although wire and mail fraud are predicate acts under RICO, defendants correctly argue that plaintiff does not allege these acts with the requisite particularity. In order to satisfy the heightened pleading requirements of Fed.R.Civ.P. 9(b), which apply to RICO claims, "[t]he complaint must be specific with respect to the time, place, and content of the alleged false representations, the method by which the misrepresentations were communicated, and the identities of the parties to those misrepresentations." Lachmund v. ADM Investor Services, Inc., 191 F.3d 777, 784 (7th Cir. 1999). Needless to say, "because a RICO plaintiff must allege two predicate acts of fraud, she must satisfy the requirements of Rule 9(b) twice." Goren, 156 F.3d at 729. Plaintiff does not even satisfy these requirements once. As in Lachmund, plaintiff does not "identif[y] the specific content of any alleged false representations or the identities of the parties to those alleged communications. Nor does [plaintiff's complaint] contain references to the specific times or places of these alleged misrepresentations." Lachmund, 191 F.3d at 784. Plaintiff does not even clarify which of the alleged misrepresentations or omissions pertain to her specifically and which do not. Accordingly, Count I is dismissed for failure to plead 9(b) with requisite particularity.
To state a claim for mail fraud under 18 U.S.C. § 1341 or for wire fraud under 18 U.S.C. § 1343, plaintiff must show: "(1) that [defendants] engaged in a scheme to defraud, (2) with the intent to defraud, and (3) that [they] used the mails or interstate wires in furtherance of that scheme." American Automotive Accessories, Inc. v. Fishman, 175 F.3d 534, 542 (7th Cir. 1999). To establish fraud, the plaintiff must demonstrate that the defendant made a false representation of material past or existing fact, which was known to be false when made. The misrepresentation must have been made intentionally to induce the plaintiff to act, and the plaintiff must justifiably rely on the misrepresentation. Finally, the plaintiff must be injured as a result of such reliance. Associates in Adolescent Psychiatry v. Home Life Ins. Co., 751 F. Supp. 727, 730 (N.D. Ill. 1990), aff'd, 941 F.2d 561 (7th Cir. 1991).
In the instant case, plaintiff alleges that defendants contacted her through a telemarketing scheme and fraudulently induced her to purchase credit insurance. Defendants argue that plaintiff has failed to allege that she was injured by their conduct Defendants are correct that plaintiff does not allege that she did not receive the insurance that she purchased, or that, due to fraudulent misrepresentations on defendants' part, the insurance did not cover an eventuality for which she thought she was covered. Plaintiff does allege, however, that she was charged for insurance that she did not want and that she and other customers were charged the concomitant penalties and interest payments.
According to plaintiff, the cost of the insurance is an expense she would not have incurred had defendants given her full and correct information. Plaintiff alleges that defendants fraudulently induced her to purchase the insurance because they failed to inform her of the price of the insurance or provide her with an explanation of the exclusions and limitations of the policies, and failed to tell her that her credit relationship would not be adversely affected if she did not purchase the insurance. Yet there are many things defendants did not say in pitching the insurance. Plaintiff fails to allege any obligation by defendants to state the obvious (that credit insurance was not obligatory). Although "a misleading omission, is actionable as fraud, including mail fraud if the mails are used to further it, if it is intended to induce a false belief and resulting action to the advantage of the misleader and the disadvantage of the misled," Emery v. American General Finance Inc., 71 F.3d 1343, 1348 (7th Cir. 1995), plaintiff fails to allege any practice by defendants that was intended to lead plaintiff or any other customer to believe that credit insurance was obligatory. Accordingly, plaintiff does not state a claim for fraud.
Defendants further argue that plaintiff fails to allege the existence of an enterprise, the first element of a § 1962(c) claim. "The hallmark of an enterprise is a `structure.' There must be a structure and goals separate from the predicate acts themselves." Richmond v. Nationwide Cassel, L.P., 52 F.3d 640, 645 (7th Cir. 1995) (internal citations and quotation marks omitted). In the instant case, plaintiff simply alleges that defendants joined together to sell credit insurance over the telephone. Plaintiff does not plead the existence of an enterprise with goals that are separate from the alleged predicate acts of telephoning customers and mailing free gifts. Moreover, merely alleging an agreement to commit one or more predicate acts does not plead a structure. See. e.g., Jennings v. Emry, 910 F.2d 1434, 1441 (7th Cir. 1990) ("The complaint may allege agreement; structure, however, it does not."). Plaintiff therefore fails to allege the existence of an enterprise as defined in § 1962(c).
Defendants argue that plaintiff likewise fails to state a conspiracy claim under § 1962(d). "[I]n order to state a viable claim under § 1962(d), [plaintiff] must allege (1) that each defendant agreed to maintain an interest in or control of an enterprise or to participate in the affairs of an enterprise through a pattern of racketeering activity and (2) that each defendant further agreed that someone would commit at least two predicate acts to accomplish those goals." Goren, 156 F.3d at 732. Because plaintiff does not appear to allege a conspiracy, and certainly does not allege a conspiracy with the particularity required by Fed.R.Civ.P. 9(b), the court holds that plaintiff has not stated a claim under § 1962(d). For the foregoing reasons, defendants' motion to dismiss Count I is granted.
Finally, defendants argue that plaintiff does not state a claim under the Illinois Consumer Fraud Act because she does not allege injury. Although plaintiff refers to a Count II in her jurisdictional statement, plaintiff does not include a Count II in her complaint. Defendants' motion to dismiss Count II is therefore denied as moot.