Pizzo v. Bekin Van Lines Co.

Decision Date20 July 2001
Docket NumberNo. 00-2750,00-2750
Citation258 F.3d 629
Parties(7th Cir. 2001) Josephine Pizzo, Plaintiff-Appellant, v. Bekin Van Lines Company, et al., Defendants-Appellees
CourtU.S. Court of Appeals — Seventh Circuit

Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 99 C 4595--Charles R. Norgle, Sr., Judge. [Copyrighted Material Omitted]

Before Posner, Kanne and Rovner, Circuit Judges.

Posner, Circuit Judge.

The plaintiff sued the defendants under RICO, the Carmack Amendment, and Illinois consumer protection law and now appeals from the dismissal of her suit for failure to state a federal claim. As is customary, having dismissed the federal claims before trial the judge relinquished jurisdiction over the state claims (which we'll call Pizzo's "state-law fraud claim"), leaving the plaintiff free to refile them in state court.

The implausible allegations of the complaint are the only facts we have to go on, so we suppress our skepticism and assume their truth. Josephine Pizzo, the plaintiff, lives in southern Illinois. From a retail furniture store in a Chicago suburb owned by Mr. and Mrs. Reznikoff, two of the defendants, Pizzo bought a nine-piece bedroom set, to be imported from Italy. The set was not on display but Pizzo was shown color photos of the pieces and told that the furniture was made of solid walnut. The price was $16,200, to be paid (and it was paid) before delivery. The furniture arrived in the store and from there was trucked to Pizzo's home by the moving-company defendants. It arrived in damaged condition. "The cartons containing the furniture were ripped and torn"--we are quoting from the complaint--and "several pieces of the furniture were outside of the cartons." What is more, "it was also readily apparent to Ms. Pizzo that the furniture was not, in fact, made of wood"--of "solid walnut, or any other natural wood. It appears to be made of some sort of aerated foam product, similar to (albeit heavier than) styrofoam . . . . Foam furniture is unsuitable for use in Ms. Pizzo's home, and is worth far less than genuine wood furniture. In the absence of Ms. Reznikoff's misrepresentation that the furniture was made of solid wood, Ms. Pizzo would not have purchased it." But, the complaint continues, since the "furniture cost $16,200 and was a total loss . . . , the minimum jurisdictional amount of $10,000 for a Carmack Amendment claim is satisfied."

Pizzo refused to accept delivery, and the furniture was carried away, apparently to a storage facility of one of the moving-company defendants, where it remains awaiting the outcome of this suit. The furniture store mailed Pizzo a copy of the bill of sale, which states that no refunds or exchanges will be made; this mailing is alleged as mail fraud and related mailings or telecommunications are alleged as mail and wire fraud, the various frauds being the "predicate acts"--the "racketeering"- - required for liability under the RICO statute. The Reznikoffs are alleged to have conducted the "enterprise" consisting of their furniture store by a "pattern" of this "racketeering," the pattern being demonstrated by a complaint made by another customer of the store. He claimed that he had bought from them a sofa and chair, both with coil springs, to be imported from Germany, and that the sofa arrived damaged, with no coil springs and with indications that it hadn't been made in Germany, and that Mrs. Reznikoff used the mails (or wire communications) to stop payment on the check she gave him in response to his demand that she refund his money. There is no indication of how the complaint was resolved.

If Pizzo has succeeded in stating a claim under RICO there probably isn't a retail store in the United States that can't be sued successfully under RICO, and thus branded as a "racketeer" and exposed to liability for treble damages, by a disgruntled customer. All the customer has to do, if Pizzo's RICO claim can survive a Rule 12(b)(6) motion, is allege a misrepresentation by a salesman that induced him to buy a product that he otherwise wouldn't have bought, the use of the mails or of wire communications in connection with the sale or the ensuing dispute, and that another customer was similarly victimized.

The RICO claim fails, although the "enterprise" allegations are sufficient, Cedric Kushner Promotions, Ltd. v. King, 121 S.Ct. 2087 (U.S. 2001); McCullough v. Suter, 757 F.2d 142, 144 (7th Cir. 1985), and we'll assume that the "racketeering" allegations are as well. Mail and wire fraud, 18 U.S.C. sec.sec. 1341, 1343, are predicate acts specified by RICO, 18 U.S.C. sec. 1961(1); Stachon v. United Consumers Club, Inc., 229 F.3d 673, 675 n. 1 (7th Cir. 2000), and we'll not quibble over whether they've been alleged with the particularity required of fraud allegations, Fed. R. Civ. P. 9(b); Emery v. American General Finance, Inc., 71 F.3d 1343, 1348 (7th Cir. 1995), though as a matter of fact, while the place and content of the misrepresentations are specified, the time is not, as the cases also require. Slaney v. International Amateur Athletic Federation, 244 F.3d 580, 599 (7th Cir. 2001); Vicom, Inc. v. Harbridge Merchant Services, Inc., 20 F.3d 771, 777 (7th Cir. 1994). What dooms the RICO claim in any event is that two complaints by dissatisfied customers do not add up to a pattern.

The fact that Pizzo alleges several violations of the mail and wire fraud statutes growing out of her single tiff with the furniture store (ordering the furniture, arranging to deliver it, and mailing the contract--a fourth alleged violation, that "the mails . . . and wires were used . . . [in that] the furniture was delivered via interstate carrier," makes no sense, since the furniture was not mailed, nor, of course, wired) does not help her to make out the requisite pattern. The Reznikoffs had only a single dispute with her and likewise a single dispute with the other dissatisfied customer, making a total of only two "acts" relevant to whether the defendants' behavior can be characterized as patterned. As explained in Ashland Oil, Inc. v. Arnett, 875 F.2d 1271, 1278 (7th Cir. 1989), "[RICO] plaintiffs are mistaken to emphasize the raw number of mail and wire fraud violations. Some of the present uncertainty over the pattern element stems from such arguments which depend upon the unusual nature of these two most commonly alleged RICO predicate acts . . . . In mail and wire fraud, each mailing or interstate communication is a separate indictable offense, even if each relates to the same scheme to defraud, and even if the defendant did not control the number of mailings or communications. United States v. Aldridge, 484 F.2d 655, 660 (7th Cir. 1973). See Badders v. United States, 240 U.S. 391, 393 (1916). Thus, the number of offenses is only tangentially related to the underlying fraud, and can be a matter of happenstance." See also Vicom, Inc. v. Harbridge Merchant Services, Inc., supra, 20 F.3d at 781.

And so it is here. There were only two disputes that have given rise to the charge of a pattern of racketeering. And from two disputes five months apart (cf. id. at 780-81, and cases cited there; Pik-Coal Co. v. Big Rivers Electric Corp., 200 F.3d 884, 890 n. 10 (6th Cir. 2000); Hughes v. Consol-Pennsylvania Coal Co., 945 F.2d 594, 611 (3d Cir. 1991)), and no evidence that would enable a trier of fact to extrapolate from them a danger of recurrence, no inference can be drawn that the Reznikoffs are engaged in a pattern of fraudulent activity. We are sure that not all retail stores in the United States are violating RICO; yet we imagine that almost every retail store in the United States has had at least two customers mad enough at it to cry fraud.

The requirement of proving "pattern" is central to the statute. As the Supreme Court explained in H.J. Inc. v. Northwestern Bell Telephone Co., 492 U.S. 229, 242 (1989), "Congress was concerned in RICO with long-term criminal conduct." Unless the requirement of proving a pattern of criminal activity is taken seriously, isolated wrongdoing by employees of a firm would expose it, and perhaps its owners and executives as well, to the heavy sanctions that the statute imposes on violators. A criminal enterprise, as distinct from a normal enterprise that gets into trouble with the law from time to time, is an enterprise that habitually resorts to illegal methods of doing business. It is an enterprise whose disposition, whose bent, is criminal--as shown by its illegal acts composing a pattern from which such a disposition can be inferred, in much the same way that an individual's generous disposition is inferred from a pattern of generous acts, acts frequent enough and similar enough to enable such an inference. The customer complaints against the Reznikoffs are similar ("related," in the language of the cases), but lack the frequency ("continuity," in the lingo of the RICO cases) necessary to ground an inference that the Reznikoffs habitually use their furniture store as an engine of fraud. See, e.g., id. at 237; Vicom, Inc. v.Harbridge Merchant Services, Inc., supra, 20 F.3d at 779-84; GE Investment Private Placement Partners II v. Parker, 247 F.3d 543, 549 (4th Cir. 2001). So clear is this from the complaint itself that the RICO claim was properly dismissed on the pleadings, as in Vicom and Pik-Coal.

We are not impressed by Pizzo's argument that with pretrial discovery she might discover additional frauds. If the defendants were busy defrauding their customers, Pizzo could have obtained evidence of that without discovery by consulting the Better Business Bureau and the FTC, or by advertising for persons complaining of being defrauded by the defendants. The defendants should not be put to the burden of litigating a RICO suit beyond the pleadings by allegations as thin as in this case.

So much for the RICO claim. The Carmack Amendment to the...

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