United States Court of Appeals for the Seventh Circuit · 1992-09-16
Case and law context
Role: applied; posture: civil; plaintiff appeals partial Rule 12(b)(6)/9(b) dismissal and later summary judgment for defendants on the (c) and (d) counts; defendants cross-appeal; result: claimant-lost; claim: (c),(d)
Instances and excluded annotation blocks
| Case | Element | Holding and scope | Variant | Exact source quotations |
|---|---|---|---|---|
| /f2d/976/1016-01 — United States Court of Appeals for the Seventh Circuit · 1992 | But-for and proximate causation ("by reason of", 18 U.S.C. § 1964(c)) | not_reached Excluded from merits counts applied / merits claim: (c),(d) | Unspecified variant | No source quotation recorded for this block. |
| /f2d/976/1016-01 — United States Court of Appeals for the Seventh Circuit · 1992 | Conduct or participate in the conduct of enterprise affairs (§ 1962(c) operation or management test) | not_reached Excluded from merits counts applied / merits claim: (c),(d) | Unspecified variant | No source quotation recorded for this block. |
| /f2d/976/1016-01 — United States Court of Appeals for the Seventh Circuit · 1992 | Conspiracy to violate § 1962(a), (b), or (c) (§ 1962(d)) | not Counted merits instance applied / merits basis: no-evidence; claim: (c),(d) | derivative-of-substantive-claim/no-pattern | A few loose ends: First, the § 1962(d) RICO conspiracy claim is also premised on the existence of a pattern of racketeering; therefore, we need not further address that issue or Grunfeld’s dismissal from the suit as a co-conspirator.Source: docroot/ir/caselaw/f2d_976.jsonl#/f2d/976/1016-01; Unicode character offsets [32241:32474] (end exclusive); SHA-256 ebc98ea70879c4cb40e7f64b87cbfd47e72732fe1a73dbca8733e49576748b79. |
| /f2d/976/1016-01 — United States Court of Appeals for the Seventh Circuit · 1992 | Enterprise (§ 1961(4)): legal entity or association-in-fact | not_reached Excluded from merits counts applied / merits claim: (c),(d) | Unspecified variant | No source quotation recorded for this block. |
| /f2d/976/1016-01 — United States Court of Appeals for the Seventh Circuit · 1992 | Civil RICO injury to business or property (18 U.S.C. § 1964(c)) | not_reached Excluded from merits counts applied / merits claim: (c),(d) | Unspecified variant | No source quotation recorded for this block. |
| /f2d/976/1016-01 — United States Court of Appeals for the Seventh Circuit · 1992 | Continuity of predicate acts (closed-ended or open-ended continuity) | not Counted merits instance applied / merits basis: no-evidence; claim: (c),(d); count: the diversion scheme (customers and employees moved from Midwest to U.S. Grinding); theory: closed-ended continuity; subject: count=the diversion scheme (customers and employees moved from Midwest to U.S. Grinding); theory=closed-ended continuity Single scheme, single victim, single injury, at most nine months (footnote: really three to four); hundreds of similar mailings do not add continuity. Summary judgment for defendants: plaintiff's evidence insufficient as a matter of law. | continuity/closed-ended-too-short | in June 1986, for example, Spitz fired or laid off Midwest’s entire night shift of six workers, several of whom mysteriously reappeared as employees of U.S. GrindingSource: docroot/ir/caselaw/f2d_976.jsonl#/f2d/976/1016-01; Unicode character offsets [2245:2410] (end exclusive); SHA-256 ebc98ea70879c4cb40e7f64b87cbfd47e72732fe1a73dbca8733e49576748b79.Here, the effort to divert Midwest’s customers and employees was a one-shot scheme that lasted, at most, nine months, from the time Spitz and Grun-feld began doing the groundwork to establish U.S. Grinding (December 1985) to the time Spitz resigned (August 1986).Source: docroot/ir/caselaw/f2d_976.jsonl#/f2d/976/1016-01; Unicode character offsets [24647:24910] (end exclusive); SHA-256 ebc98ea70879c4cb40e7f64b87cbfd47e72732fe1a73dbca8733e49576748b79.The predicate acts consisted primarily of hundreds of invoices sent through the mails to former Midwest customers.Source: docroot/ir/caselaw/f2d_976.jsonl#/f2d/976/1016-01; Unicode character offsets [27087:27201] (end exclusive); SHA-256 ebc98ea70879c4cb40e7f64b87cbfd47e72732fe1a73dbca8733e49576748b79.There was only one victim (Midwest), see, e.g., J.D. Marshall, 935 F.2d at 819, one scheme (the diversion of customers and employees from Midwest to U.S. Grinding), see, e.g., Sutherland, 882 F.2d at 1204 (no pattern where defendant engaged in a “one-shot” effort to inflict injury), and one type of injury (loss of business).Source: docroot/ir/caselaw/f2d_976.jsonl#/f2d/976/1016-01; Unicode character offsets [28395:28721] (end exclusive); SHA-256 ebc98ea70879c4cb40e7f64b87cbfd47e72732fe1a73dbca8733e49576748b79.To satisfy the continuity element in a closed-ended case, the plaintiff must prove a series of related predicates enduring a “substantial period of time.”Source: docroot/ir/caselaw/f2d_976.jsonl#/f2d/976/1016-01; Unicode character offsets [19762:19916] (end exclusive); SHA-256 ebc98ea70879c4cb40e7f64b87cbfd47e72732fe1a73dbca8733e49576748b79.According to Mor gan, continuity is a function of the duration of time over which the predicate acts were committed, the number and variety of predicate acts, the number of victims, the presence of separate schemes, and the occurrence of distinct injuries.Source: docroot/ir/caselaw/f2d_976.jsonl#/f2d/976/1016-01; Unicode character offsets [24093:24349] (end exclusive); SHA-256 ebc98ea70879c4cb40e7f64b87cbfd47e72732fe1a73dbca8733e49576748b79.Although the sheer number of predicate acts might appear at first glance to prove continuity, when it comes to a pattern premised on acts of mail or wire fraud, the volume of mailings is not dispositive.Source: docroot/ir/caselaw/f2d_976.jsonl#/f2d/976/1016-01; Unicode character offsets [27202:27405] (end exclusive); SHA-256 ebc98ea70879c4cb40e7f64b87cbfd47e72732fe1a73dbca8733e49576748b79.This closed-ended scheme has none of the trappings of a long-term criminal operation that carries with it a threat to society; it is, in short, a run-of-the mill fraud case that belongs in state court.Source: docroot/ir/caselaw/f2d_976.jsonl#/f2d/976/1016-01; Unicode character offsets [28766:28967] (end exclusive); SHA-256 ebc98ea70879c4cb40e7f64b87cbfd47e72732fe1a73dbca8733e49576748b79. |
| /f2d/976/1016-01 — United States Court of Appeals for the Seventh Circuit · 1992 | Continuity of predicate acts (closed-ended or open-ended continuity) | not Counted merits instance applied / merits basis: no-evidence; claim: (c),(d); count: the diversion scheme; theory: open-ended continuity (threat of repetition after Spitz left Midwest); subject: count=the diversion scheme; theory=open-ended continuity (threat of repetition after Spitz left Midwest) Disloyal-insider scheme has a natural end point: once the insider resigns, competing is lawful, so no threat of future racketeering. | continuity/open-ended-no-threat-scheme-ended-with-employment | That reassurance notwithstanding, Spitz resigned from Midwest in August 1986 and immediately went to work for U.S. Grinding.Source: docroot/ir/caselaw/f2d_976.jsonl#/f2d/976/1016-01; Unicode character offsets [2905:3029] (end exclusive); SHA-256 ebc98ea70879c4cb40e7f64b87cbfd47e72732fe1a73dbca8733e49576748b79.As will later become relevant, Spitz’s relationship with Midwest was not governed by a non-competition or confidentiality agreement, which would have prevented him from competing with Midwest or soliciting its customers in the event he left its employ.Source: docroot/ir/caselaw/f2d_976.jsonl#/f2d/976/1016-01; Unicode character offsets [941:1193] (end exclusive); SHA-256 ebc98ea70879c4cb40e7f64b87cbfd47e72732fe1a73dbca8733e49576748b79.Such a threat of continuity exists when the plaintiff can show (1) a “specific threat of repetition,” (2) that the “predicate acts or offenses are part of an ongoing entity’s regular way of doing business,” or (3) that the defendant operates a “long-term association that exists for criminal purposes.”Source: docroot/ir/caselaw/f2d_976.jsonl#/f2d/976/1016-01; Unicode character offsets [20458:20760] (end exclusive); SHA-256 ebc98ea70879c4cb40e7f64b87cbfd47e72732fe1a73dbca8733e49576748b79.Absent a non-competition or confidentiality clause, Spitz owed no duty to Midwest; thus, the alleged scheme to fraudulently divert business and employees to U.S. Grinding ceased to exist in August 1986 when Spitz left Midwest.Source: docroot/ir/caselaw/f2d_976.jsonl#/f2d/976/1016-01; Unicode character offsets [22064:22290] (end exclusive); SHA-256 ebc98ea70879c4cb40e7f64b87cbfd47e72732fe1a73dbca8733e49576748b79.Second, Midwest has failed to present any evidence that the predicate acts here are part of the defendants’ “regular way of doing business,” or that Spitz and Grunfeld routinely raided competitors in this fashion.Source: docroot/ir/caselaw/f2d_976.jsonl#/f2d/976/1016-01; Unicode character offsets [22291:22504] (end exclusive); SHA-256 ebc98ea70879c4cb40e7f64b87cbfd47e72732fe1a73dbca8733e49576748b79. |
| /f2d/976/1016-01 — United States Court of Appeals for the Seventh Circuit · 1992 | Continuity of predicate acts (closed-ended or open-ended continuity) | not Counted merits instance applied / merits basis: no-evidence; claim: (c),(d); count: the litigation cover-up (false deposition testimony and mailed responses to requests to admit); theory: later concealment extends the duration of the scheme; subject: count=the litigation cover-up (false deposition testimony and mailed responses to requests to admit); theory=later concealment extends the duration of the scheme Predicate status of the cover-up acts assumed arguendo; later concealment does not lengthen a closed-ended scheme unless plotted in advance. Was [assumed]: what is assumed arguendo is only the predicate status of the cover-up acts (see racketeering.obstruction). The continuity ruling itself is summary judgment -- "not a trace of evidence" that concealment was plotted in advance. | continuity/cover-up-does-not-extend-scheme | For example, Spitz and Grunfeld denied under oath that they went to Michigan together to acquire machinery for U.S. Grinding.Source: docroot/ir/caselaw/f2d_976.jsonl#/f2d/976/1016-01; Unicode character offsets [16657:16782] (end exclusive); SHA-256 ebc98ea70879c4cb40e7f64b87cbfd47e72732fe1a73dbca8733e49576748b79.Midwest contends that the responses to their requests to admit, which were sent through the mails, constituted mail fraud and, therefore, can serve as predicate acts.Source: docroot/ir/caselaw/f2d_976.jsonl#/f2d/976/1016-01; Unicode character offsets [16914:17080] (end exclusive); SHA-256 ebc98ea70879c4cb40e7f64b87cbfd47e72732fe1a73dbca8733e49576748b79.A conspiracy ends when the design to commit substantive misconduct ends; it does not continue beyond that point “merely because the conspirators take steps to bury their traces, in order to avoid detection and punishment after the central criminal purpose has been accomplished.”Source: docroot/ir/caselaw/f2d_976.jsonl#/f2d/976/1016-01; Unicode character offsets [26383:26662] (end exclusive); SHA-256 ebc98ea70879c4cb40e7f64b87cbfd47e72732fe1a73dbca8733e49576748b79.even if we assume actions to hide Spitz’s involvement with U.S. Grinding qualify as predicate acts, they do nothing to extend the duration of the underlying diversion schemeSource: docroot/ir/caselaw/f2d_976.jsonl#/f2d/976/1016-01; Unicode character offsets [25848:26021] (end exclusive); SHA-256 ebc98ea70879c4cb40e7f64b87cbfd47e72732fe1a73dbca8733e49576748b79. |
| /f2d/976/1016-01 — United States Court of Appeals for the Seventh Circuit · 1992 | Relatedness of predicate acts (horizontal and vertical relatedness) | satisfied Counted merits instance applied / merits basis: conceded; claim: (c),(d) | relatedness/single-scheme-against-one-victim | We limit our discussion to the continuity prong of this test because all parties agree that the relationship prong is satisfied here.Source: docroot/ir/caselaw/f2d_976.jsonl#/f2d/976/1016-01; Unicode character offsets [19389:19522] (end exclusive); SHA-256 ebc98ea70879c4cb40e7f64b87cbfd47e72732fe1a73dbca8733e49576748b79. |
| /f2d/976/1016-01 — United States Court of Appeals for the Seventh Circuit · 1992 | Mail or wire fraud predicate (18 U.S.C. §§ 1341, 1343) | not Counted merits instance applied / merits basis: pleaded; claim: (c),(d); count: the undercharging scheme (invoices to Cardinal Metals, 1985-86); subject: count=the undercharging scheme (invoices to Cardinal Metals, 1985-86) No dates for the allegedly false invoices although plaintiff held the records; leave to amend a third time properly denied. Removing this scheme shortened the alleged pattern from 35 months. | rule-9b-particularity/no-who-what-when-where-how | According to Midwest, Spitz and Grunfeld maintained a secret 50% stake in Cardinal and, as part of the scheme to defraud Midwest, Spitz routinely undercharged Cardinal for metal grinding services via invoices sent through the mails (the undercharging scheme).Source: docroot/ir/caselaw/f2d_976.jsonl#/f2d/976/1016-01; Unicode character offsets [4095:4354] (end exclusive); SHA-256 ebc98ea70879c4cb40e7f64b87cbfd47e72732fe1a73dbca8733e49576748b79.Second, Midwest, not the defendants, had peculiar access to the invoices on which the undercharging scheme was based: Spitz sent those invoices while employed at Midwest and Midwest presumably retained those business records.Source: docroot/ir/caselaw/f2d_976.jsonl#/f2d/976/1016-01; Unicode character offsets [11708:11933] (end exclusive); SHA-256 ebc98ea70879c4cb40e7f64b87cbfd47e72732fe1a73dbca8733e49576748b79.the complaint must, at minimum, describe the predicate acts with some specificity and “state the time, place, and content of the alleged communications perpetrating the fraud.”Source: docroot/ir/caselaw/f2d_976.jsonl#/f2d/976/1016-01; Unicode character offsets [9815:9991] (end exclusive); SHA-256 ebc98ea70879c4cb40e7f64b87cbfd47e72732fe1a73dbca8733e49576748b79.First, the specificity standard, at minimum, requires a plaintiff to identify the time and place of the alleged predicate acts, see Graue Mill, 927 F.2d at 992; accord Feinstein v. Resolution Trust Corp., 942 F.2d 34, 42 (1st Cir.1991) (dismissing RICO complaint for failure to plead predicate acts with specificity), and Midwest failed to do so here.Source: docroot/ir/caselaw/f2d_976.jsonl#/f2d/976/1016-01; Unicode character offsets [11356:11707] (end exclusive); SHA-256 ebc98ea70879c4cb40e7f64b87cbfd47e72732fe1a73dbca8733e49576748b79. |
| /f2d/976/1016-01 — United States Court of Appeals for the Seventh Circuit · 1992 | Obstruction of justice / witness tampering predicate (18 U.S.C. §§ 1503, 1512) | not_reached Excluded from merits counts rule-announced / merits claim: (c),(d); count: the litigation cover-up; subject: count=the litigation cover-up | perjury-as-predicate/only-via-mail-fraud-or-section-1503 | For starters, we know that telling a lie or committing perjury is not per se a RICO predicate act for one simple reason: it is not included among the list of predicate acts in 18 U.S.C. § 1961(1).Source: docroot/ir/caselaw/f2d_976.jsonl#/f2d/976/1016-01; Unicode character offsets [14743:14939] (end exclusive); SHA-256 ebc98ea70879c4cb40e7f64b87cbfd47e72732fe1a73dbca8733e49576748b79.We need not decide that issue because, as we discuss more fully below, even assuming the defendants’ deeds qualify as predicate acts, Midwest still fails to show the requisite pattern of racketeering.Source: docroot/ir/caselaw/f2d_976.jsonl#/f2d/976/1016-01; Unicode character offsets [17495:17695] (end exclusive); SHA-256 ebc98ea70879c4cb40e7f64b87cbfd47e72732fe1a73dbca8733e49576748b79. |
Court interpretations recorded from this case
interpretation
To satisfy the continuity element in a closed-ended case, the plaintiff must prove a series of related predicates enduring a “substantial period of time.”
/f2d/976/1016-01 — United States Court of Appeals for the Seventh Circuit · 1992
To satisfy the continuity element in a closed-ended case, the plaintiff must prove a series of related predicates enduring a “substantial period of time.”Source:
docroot/ir/caselaw/f2d_976.jsonl#/f2d/976/1016-01; Unicode character offsets [19762:19916] (end exclusive); SHA-256 ebc98ea70879c4cb40e7f64b87cbfd47e72732fe1a73dbca8733e49576748b79."Continuity" is both a closed- and open-ended concept: either a closed period of repeated conduct extending over a substantial period of time (typically >1 year, evaluated with multi-factor tests in single-victim/single-scheme fraud cases), or past conduct that by its nature projects into the future with a threat of repetition.
interpretation
Such a threat of continuity exists when the plaintiff can show (1) a “specific threat of repetition,” (2) that the “predicate acts or offenses are part of an ongoing entity’s regular way of doing business,” or (3) that the defendant operates a “long-term association that exists for criminal purposes.”
/f2d/976/1016-01 — United States Court of Appeals for the Seventh Circuit · 1992
Such a threat of continuity exists when the plaintiff can show (1) a “specific threat of repetition,” (2) that the “predicate acts or offenses are part of an ongoing entity’s regular way of doing business,” or (3) that the defendant operates a “long-term association that exists for criminal purposes.”Source:
docroot/ir/caselaw/f2d_976.jsonl#/f2d/976/1016-01; Unicode character offsets [20458:20760] (end exclusive); SHA-256 ebc98ea70879c4cb40e7f64b87cbfd47e72732fe1a73dbca8733e49576748b79."Continuity" is both a closed- and open-ended concept: either a closed period of repeated conduct extending over a substantial period of time (typically >1 year, evaluated with multi-factor tests in single-victim/single-scheme fraud cases), or past conduct that by its nature projects into the future with a threat of repetition.
interpretation
According to Mor gan, continuity is a function of the duration of time over which the predicate acts were committed, the number and variety of predicate acts, the number of victims, the presence of separate schemes, and the occurrence of distinct injuries.
/f2d/976/1016-01 — United States Court of Appeals for the Seventh Circuit · 1992
According to Mor gan, continuity is a function of the duration of time over which the predicate acts were committed, the number and variety of predicate acts, the number of victims, the presence of separate schemes, and the occurrence of distinct injuries.Source:
docroot/ir/caselaw/f2d_976.jsonl#/f2d/976/1016-01; Unicode character offsets [24093:24349] (end exclusive); SHA-256 ebc98ea70879c4cb40e7f64b87cbfd47e72732fe1a73dbca8733e49576748b79."Continuity" is both a closed- and open-ended concept: either a closed period of repeated conduct extending over a substantial period of time (typically >1 year, evaluated with multi-factor tests in single-victim/single-scheme fraud cases), or past conduct that by its nature projects into the future with a threat of repetition.
interpretation
the complaint must, at minimum, describe the predicate acts with some specificity and “state the time, place, and content of the alleged communications perpetrating the fraud.”
/f2d/976/1016-01 — United States Court of Appeals for the Seventh Circuit · 1992
the complaint must, at minimum, describe the predicate acts with some specificity and “state the time, place, and content of the alleged communications perpetrating the fraud.”Source:
docroot/ir/caselaw/f2d_976.jsonl#/f2d/976/1016-01; Unicode character offsets [9815:9991] (end exclusive); SHA-256 ebc98ea70879c4cb40e7f64b87cbfd47e72732fe1a73dbca8733e49576748b79.Most common civil RICO predicate; subject to Rule 9(b) particularity and resistance from courts where plaintiffs attempt to dress up an ordinary breach of contract as mail/wire fraud.
interpretation
For starters, we know that telling a lie or committing perjury is not per se a RICO predicate act for one simple reason: it is not included among the list of predicate acts in 18 U.S.C. § 1961(1).
/f2d/976/1016-01 — United States Court of Appeals for the Seventh Circuit · 1992
For starters, we know that telling a lie or committing perjury is not per se a RICO predicate act for one simple reason: it is not included among the list of predicate acts in 18 U.S.C. § 1961(1).Source:
docroot/ir/caselaw/f2d_976.jsonl#/f2d/976/1016-01; Unicode character offsets [14743:14939] (end exclusive); SHA-256 ebc98ea70879c4cb40e7f64b87cbfd47e72732fe1a73dbca8733e49576748b79.Perjury or discovery misconduct alone is not a predicate act unless it constitutes indictable obstruction of justice under § 1503 or witness tampering under § 1512.