Empress Casino Joliet Corp. v. Balmoral Racing Club, Inc.

• Decision Date: 02 August 2016
• Docket Number: No. 15-2526,15-2526
• Citation: 831 F.3d 815
• Parties: Empress Casino Joliet Corp., et al., Plaintiffs–Appellees, v. Balmoral Racing Club, Inc. and Maywood Park Trotting Association, Inc., Defendants–Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

831 F.3d 815

Empress Casino Joliet Corp., et al., Plaintiffs–Appellees,

v.Balmoral Racing Club, Inc. and Maywood Park Trotting Association, Inc., Defendants–Appellants.

No. 15-2526

United States Court of Appeals, Seventh Circuit.

Argued January 12, 2016

Decided August 2, 2016

Robert Andalman, A & G Law LLC, Chicago, IL, for Plaintiffs–Appellees.

Jonathan W. Garlough, William J. McKenna, Jr., Attorneys, Foley & Lardner LLP, Chicago, IL, for Defendants–Appellants.

Before Wood, Chief Judge, and Williams and Hamilton, Circuit Judges.

Hamilton, Circuit Judge.

This appeal pits casinos against racetracks in our circuit's latest encounter with the Blagojevich corruption scandal in Illinois. In 2008, John Johnston, a horse racetrack executive, promised a $100,000 campaign contribution to then-Governor Rod Blagojevich in exchange for his signature on a bill to tax the largest casinos in Illinois for the direct benefit of the Illinois horseracing industry. After Blagojevich's corruption came to light, the casinos sued the racetracks, alleging a conspiracy to violate the federal Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1961 et seq., and state-law claims for civil conspiracy and unjust enrichment. A jury awarded the casinos $25,940,000 in damages, which was trebled under RICO to $77,820,000. The racetracks argue on appeal that plaintiffs failed to prove a RICO conspiracy, that the district court erred by allowing plaintiffs to add the state-law claims, and that other asserted errors warrant a new trial.

We affirm the district court in all respects except one: the jury did not have legally sufficient evidence to support a verdict finding a conspiracy to engage in a “pattern” of racketeering activity, as required for liability on a RICO conspiracy theory. The casinos are still entitled to the $25,940,000 in damages on the state-law claims, but not to have those damages trebled under RICO.

We first review the factual and procedural background of this case. Second, we examine the sufficiency of the evidence of an illegal agreement and a pattern of racketeering activity. Third, we address the late amendment to the complaint to add the state-law claims. Finally, we examine several claims of trial error.

I. Factual and Procedural Background

After Illinois legalized riverboat casino gambling in the early 1990s, see 230 ILCS 10/3, the Illinois horseracing industry wanted to make up for the business it claimed to have lost as a result. It turned to state government for help. In 2006, Illinois enacted H.B. 1918, which we refer to as the 2006 Act. It required the four largest casinos in the state (casinos earning more than $2 million in adjusted gross receipts in 2004) to pay three percent of their daily adjusted gross receipts into a trust fund for the benefit of the horseracing industry. 2006 Ill. Legis. Serv. P.A. 94-804 (H.B. 1918). The 2006 Act contained a “sunset” provision to expire at the end of May 2008.

This appeal focuses on the racetracks' effort to renew the law in what we call the 2008 Act. The Johnston family owns several businesses, including shares in the racetrack defendants Maywood Park Trotting Association, Inc. and Balmoral Racing Club, Inc. John Johnston was an executive at the two defendant racetracks and one of the beneficiaries of the family trust that partially owned the tracks. In May 2007, Johnston hired Alonzo Monk as a lobbyist for the racetracks. Monk had been a longtime aide to Governor Rod Blagojevich and had served as Blagojevich's chief of staff and campaign manager before starting his own lobbying and consulting business.

Monk worked to renew the 2006 Act's horseracing subsidy that was to sunset. The casinos allege that this effort involved a quid pro quo agreement between Blagojevich and Johnston to trade a $100,000 campaign contribution for the governor's signature on the 2008 bill. The primary evidence at issue in this appeal is a series of meetings and phone calls among Johnston, Monk, and Blagojevich. The federal government recorded many of the calls and conversations during a broader criminal investigation of Blagojevich. We lay out the details below in our discussion of the sufficiency of evidence. In broad terms, in April 2008, Johnston met with Blagojevich at the governor's campaign fundraising office. The two discussed the expiration of the 2006 Act. At the end of the meeting Blagojevich brought up Johnston's support for his campaign. There is no evidence that Johnston agreed to make a contribution at that time, and no payment was made then. That meeting did not succeed in securing the 2006 Act's renewal. At the end of May 2008, the 2006 Act expired.

In August or September 2008, Johnston agreed to make a $100,000 contribution to Blagojevich's campaign, but he did not pay immediately. A number of conversations followed involving Monk, Johnston, Governor Blagojevich, and his brother Rob.

On November 20, 2008, the legislature passed the 2008 Act, which was presented to Governor Blagojevich on November 24 for his signature. The governor did not sign immediately, but there followed a number of conversations among Blagojevich, Monk, and Johnston. As we explain below, on December 3, 2008, according to Monk's testimony, the quid pro quo agreement was pinned down and Johnston committed to make the contribution in return for the governor's signature.

Blagojevich was arrested on December 9. On December 15, while on pretrial release and before he was impeached and removed from office, he signed the 2008 Act. Johnston never made the promised contribution. Monk pled guilty to conspiring with Blagojevich to solicit a bribe from Johnston. Johnston received immunity from prosecution and testified before a grand jury and at Blagojevich's criminal trials.

The casinos subject to the tax sued Johnston, Balmoral, Maywood, and other defendants no longer involved in the case (for convenience we refer to defendant-appellants as “the racetracks”). The casinos alleged that the racetracks had violated 18 U.S.C. § 1962(d) by conspiring to violate RICO. In 2013, the district court granted summary judgment in favor of the racetracks, concluding that the casinos had not offered evidence sufficient to show that the racetracks' alleged bribes proximately caused the casinos' losses pursuant to the 2006 and 2008 tax legislation. Empress Casino Joliet Corp. v. Blagojevich , No. 09 C 3585, 2013 WL 4478741 (N.D. Ill. Aug. 19, 2013).

We affirmed summary judgment regarding the 2006 Act but reversed regarding the 2008 Act. Empress Casino Joliet Corp. v. Johnston , 763 F.3d 723, 728 (7th Cir.2014) (Empress Casino III ).¹ We held that the racetracks had not presented evidence sufficient to survive summary judgment that campaign contributions to Blagojevich had proximately caused the legislature's passage of the 2006 Act or that the racetracks bribed Blagojevich to sign the 2006 Act. Id. at 729, 731. But on the 2008 Act, we held there was sufficient evidence that the racetracks formed a quid pro quo agreement with Blagojevich that caused him to sign the Act. Id. at 731–33. In allowing claims on the 2008 Act to go forward, we stressed that the only RICO element we were deciding was the issue of proximate cause, noting in particular that the pattern requirement remained open. Id. at 734–35.

After we reversed summary judgment on the 2008 Act, the district court allowed plaintiffs to amend their complaint, over defendants' objections, to add state-law claims for civil conspiracy and unjust enrichment. The court also denied defendants' motion for summary judgment focusing on the RICO pattern requirement.²

The jury found for the casinos on all counts and awarded them $25,940,000 in damages, which was trebled under RICO's civil damages provision to $77,820,000. See 18 U.S.C. § 1964(c). This appeal followed, challenging the sufficiency of the evidence supporting the RICO count and the district court's grant of leave to amend the complaint, and arguing that various alleged errors warrant a new trial.³

II. Sufficiency of the Evidence

The racetracks appeal the district court's denial of their Rule 50(b) renewed motion for judgment as a matter of law. They argue that the evidence presented at trial cannot support several aspects of the verdict that they engaged in a racketeering conspiracy in violation of 18 U.S.C. § 1962(d). We review de novo the denial of a Rule 50(b) motion. Lawson v. Sun Microsystems, Inc. , 791 F.3d 754, 761 (7th Cir.2015). We construe the trial evidence “strictly in favor of the party who prevailed before the jury.” Passananti v. Cook County , 689 F.3d 655, 659 (7th Cir.2012). We look to see whether a reasonable jury would have “a legally sufficient evidentiary basis to find for the party on that issue.” Fed. R. Civ. P. 50(a)(1) ; Lawson , 791 F.3d at 761.

The statute defines RICO conspiracy by reference to a direct RICO violation. 18 U.S.C. § 1962(d). A direct RICO violation under § 1962(c) requires “(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.” Sedima, S.P.R.L. v. Imrex Co. , 473 U.S. 479, 496, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985) (footnote omitted). As with any conspiracy, a RICO conspirator “must intend to further an endeavor which, if completed, would satisfy all of the elements of a substantive criminal offense, but it suffices that he adopt the goal of furthering or facilitating the criminal endeavor.”

Sali nas v. United States , 522 U.S. 52, 65, 118 S.Ct. 469, 139 L.Ed.2d 352 (1997).

A RICO conspiracy requires proof “that (1) the defendant[s] 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) the defendant[s] further agreed that someone would commit at least two predicate acts to accomplish these goals.” Empress Casino III , 763 F.3d at 734–35 (internal quotation marks and citations omitted; alteration in original). Courts have further fleshed out...