Brandt v. Schal Associates, Inc.
| Decision Date | 05 August 1988 |
| Docket Number | Nos. 87-2691,88-1061,s. 87-2691 |
| Citation | 854 F.2d 948 |
| Parties | , 48 Ed. Law Rep. 805, RICO Bus.Disp.Guide 7018 William A. BRANDT, Jr., Plaintiff-Appellant, v. SCHAL ASSOCIATES, INC., Richard C. Halpern, Evans N. Spileos, and Northwestern University, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Seventh Circuit |
David L. Campbell, Campbell & Campbell, St. Louis, Mo., for plaintiff-appellant.
Jeff D. Harris, Foran, Wiss & Schultz, Chicago, Ill., for defendants-appellees.
Before BAUER, Chief Judge, WOOD Jr. and RIPPLE, Circuit Judges.
The appellant, William A. Brandt, is the assignee of Crescent Corporation (Crescent) under an assignment for the benefit of Crescent's creditors. Crescent, a construction company, served as a subcontractor on the construction of the Northwestern University Law School. The district court dismissed with prejudice Mr. Brandt's civil RICO claim against the defendant Northwestern University (Northwestern); it imposed a condition of the payment of costs on Mr. Brandt's voluntary dismissal without prejudice of the defendants Schal Associates (Schal), Richard Halpern and Evans Spileos (collectively the Schal defendants); and it taxed costs against Mr. Brandt in favor of the Schal defendants in the amount of $13,455.91. Mr. Brandt appeals all three rulings. We affirm.
Because Mr. Brandt appeals from the dismissal of his second amended complaint, we take as true the facts alleged in that complaint. In connection with the construction of the Northwestern University Law School, Northwestern retained Schal as construction manager. 1 Schal, in turn, subcontracted with Crescent for construction of the building's curtainwall. Schal also retained Crescent as a subcontractor on two other buildings, the One Magnificent Mile building (the OMM project) and the Chicago Board of Trade expansion (the CBOT project). Once Crescent began work on the Northwestern project, it discovered that there were several design defects in the building that would cause additional work. Mr. Brandt claims that Northwestern and Schal knew about these defects prior to contracting with Crescent, but that they intentionally withheld this information so that Crescent would accept the project. Once Crescent learned of these design defects, Northwestern and Schal told Crescent that it would pay Crescent for extra work that it performed. However, as the construction progressed, Schal and Northwestern filed twenty-six "backcharge" letters with Crescent. A backcharge is a charge against a construction company for increased costs caused by the company. 2 Mr. Brandt claims that these backcharges were fraudulent, and that they were filed to negate Crescent's demand for additional compensation on account of the extra work it performed. At the conclusion of its work on the curtainwall in 1984, Crescent claimed that Northwestern owed it more than $4 million over and above the contract price for extra work allegedly performed during the job because of the design defects. Northwestern refused to pay this amount. Its refusal was based in part on the backcharges.
Crescent sought to collect payment by filing a mechanic's lien foreclosure action in the Circuit Court of Cook County, Illinois. That action still is pending. Crescent also filed this action in the district court. The second amended complaint, the operative pleading at this stage of the litigation, alleged that the defendants' actions and consequent refusal to pay constituted a violation of civil RICO, 18 U.S.C. Sec. 1961 et seq. 3 The district court granted Northwestern's motion to dismiss on the ground that the complaint failed to allege a "pattern of racketeering activity." 18 U.S.C. Sec. 1962(a). However, the court denied the Schal defendants' motion to dismiss. The court concluded that, with respect to these defendants, the complaint did allege a pattern of racketeering activity because of Schal's alleged fraud on the OMM project and the CBOT project.
A few months later, Mr. Brandt requested that the case against the Schal defendants be dismissed without prejudice "at plaintiff's costs." R.227. After a hearing on September 25, 1987, the district court dismissed the claims against Schal, conditioned on Mr. Brandt's payment of "the Schal defendants' statutory costs." R.234. If Mr. Brandt failed to pay those costs, according to the court's ruling, dismissal would be converted into dismissal with prejudice. At that September 25 hearing, Mr. Brandt's counsel stated that he had no objection to making the payment of the Schal defendants' costs a condition of the dismissal. The conversation between the court and the parties went as follows:
Mr. Harris (counsel for Schal): Your Honor indicated a few minutes ago that this dismissal obviously is with costs?
The Court: Yes. Indeed, plaintiff's own motion stated that.
Mr. Harris: My question to you is whether the payment of costs is a condition of the dismissal without prejudice? Clearly that is something that is within your discretion. And quite honestly, Judge, what I am concerned about is a situation where we file a bill of costs and plaintiff thumbs his nose at us, if you will. It seems to me under the circumstances, and within the discretion of your Honor, that should be listed in the order as a condition of the dismissal without prejudice.
The Court: Let me inquire of Mr. Banks [counsel for Mr. Brandt]. Mr. Banks, as you know, both documents filed by Mr. Campbell --the one that was purportedly an uncontrolled dismissal, and the other one the motion for dismissal--stated that [the dismissal] was to be at plaintiff's costs. So that I am not imposing a condition in any respect that was not specifically built in and invited by the plaintiff's filing, and the plaintiff's motion in each instance. The only question that arises is whether counsel's request that the condition of nonprejudice be attached to plaintiff's compliance with the condition that the plaintiff himself had invited. It seems to me that's not something that can be quarreled with.
Mr. Banks: I have no argument with that, your Honor.
Tr. of Sept. 25, 1987 at 14-15 (emphasis supplied).
Mr. Brandt filed his notice of appeal on October 15, 1987. That notice listed in detail the various orders from which Mr. Brandt was appealing. With respect to the September 25 order, the notice simply recited that he was appealing from the order "dismissing the defendant Northwestern University with prejudice." R.240. 4 This notice said nothing about the district court's order of September 25 allowing Mr. Brandt to voluntarily dismiss the Schal defendants without prejudice. Mr. Brandt also filed with the district court on October 15, 1987, pursuant to Federal Rule of Appellate Procedure 10(b)(3), a statement of issues to be raised on appeal. This statement set forth only one issue to be appealed regarding the Schal defendants. In pertinent part, the statement read:
Whether plaintiff has pleaded the existence of a pattern of racketeering activity as to defendants Schal Associates, Inc., Richard C. Halpern, and Evans N. Spileos, where plaintiff alleged the involvement of said defendants in a scheme to defraud, and the participation of said defendants in a series of separate and distinct acts of mail and wire fraud and violations of the Travel Act over a period of more than 4 years with respect to two separate construction projects over which defendants exercised management and control.
R.242. Consistent with the notice of appeal, this statement of issues did not indicate that Mr. Brandt was appealing from the district court's imposition of conditions on the voluntary dismissal of the Schal defendants.
On October 26, 1987, the Schal defendants filed with the district court their bill of costs requesting that $13,455.91 be taxed as costs against Mr. Brandt. Mr. Brandt filed objections to those costs. At a hearing on December 29, 1987, the district court rejected Mr. Brandt's objections and awarded the Schal defendants $13,455.91 in costs. Mr. Brandt then filed a notice of appeal from the judgment assessing costs against him in that amount. This court then consolidated Mr. Brandt's two appeals.
Mr. Brandt's two appeals raise three different issues. The first issue relates to the district court's judgment dismissing Northwestern on the ground that it had not engaged in a pattern of racketeering activity. Mr. Brandt suggests that Northwestern engaged in a wide variety of acts that caused separate injuries to Crescent, and that those acts constituted a pattern. Mr Brandt also contends that the district court erred when it imposed the condition that he pay the Schal defendants' costs when the court granted his motion to dismiss those defendants without prejudice. His final contention is that the amount of costs that the court taxed against him was excessive. We address each of these contentions in turn.
The district court dismissed Mr. Brandt's RICO claim against Northwestern because the complaint failed to allege a pattern of racketeering activity. Brandt v. Schal Assocs., 664 F.Supp. 1193 (N.D.Ill.1987). The court noted that the question of "pattern" in civil RICO cases necessarily involves a fact-specific inquiry. After reviewing Mr. Brandt's complaint, the court determined that the business relationship between Northwestern and Crescent had involved only a single transaction and a single victim, and that the backcharges filed by Northwestern did not constitute separate injuries. Rather, assuming the truth of the complaint, the court concluded that Id. at 1198....
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