U.S. Textiles, Inc. v. Anheuser-Busch Companies, Inc.

• Decision Date: 31 August 1990
• Docket Number: ANHEUSER-BUSCH,No. 89-1296,89-1296
• Citation: 911 F.2d 1261
• Parties: RICO Bus.Disp.Guide 7555 UNITED STATES TEXTILES, INC., Plaintiff-Appellant, v.COMPANIES, INC. and Busch Entertainment Corporation, Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1261

911 F.2d 1261

RICO Bus.Disp.Guide 7555

UNITED STATES TEXTILES, INC., Plaintiff-Appellant, v. ANHEUSER-BUSCH COMPANIES, INC. and Busch Entertainment

Corporation, Defendants-Appellees.

No. 89-1296.

United States Court of Appeals, Seventh Circuit.

Argued Dec. 12, 1989.

Decided Aug. 31, 1990.

Martin Gerber, Chicago, Ill., Jack R. Ormes, Encino, Cal., Larry E. Parrish, Memphis, Tenn., for plaintiff-appellant.

John T. Hickey, Jr., James P. Cusick, Kirkland & Ellis, Chicago, Ill., for defendants-appellees.

Before WOOD, Jr., CUDAHY, and KANNE, Circuit Judges.

KANNE, Circuit Judge.

Four years after the demise of its business relationship with Busch Entertainment Corp., United States Textiles, Inc. filed a fourteen-count complaint in the district court alleging seven violations of the civil provisions of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. Secs. 1961-1968, and seven violations of Tennessee common law. Judgment was entered in favor of Busch Entertainment through the district court's rulings on two separate motions for summary judgment. United States Textiles appeals from those decisions. We affirm.

I.

United States Textiles, Inc. ("UST") was in the business of manufacturing and screen-printing t-shirts and other accessory sportswear. Busch Entertainment, a subsidiary of Anheuser-Busch Companies, Inc., was in the business of operating Busch Gardens theme parks in various cities across the country. Beginning in late 1979 and continuing through November of 1980, Busch Entertainment ("Busch") hired UST under a "cut, make and trim" system to manufacture promotional t-shirts for use and sale at Busch's theme parks. Under this system, Busch would purchase the raw fabric and have it delivered to UST's plant/warehouse in Tennessee. UST would manufacture the raw fabric into t-shirts according to the specifications submitted by Busch and then ship the finished product to Busch. Because Busch owned the raw fabric under this system, UST was paid only for the labor costs incurred in the manufacturing process. Moreover, except for the individual purchase orders Busch would submit, no written contract governed this "cut, make and trim" system.

In September or October of 1980, Busch Entertainment informed UST that it wished to switch from the "cut, make and trim" system to a "finished goods" system. After discussing how the change would take place, the parties agreed that UST would purchase all of the raw fabric owned by Busch and stored at UST as of December 1, 1980. This purchase was necessary because, under the "finished goods" system, Busch would no longer own any inventory at UST's plant in Tennessee. Rather, UST would purchase the raw fabric, then Busch would pay UST for both the fabric and the labor associated with the manufacturing process. In anticipation of this switch, Busch advised UST that auditors would travel to UST's facility in Tennessee on December 1, 1980 to conduct a physical count of the fabric and to negotiate a price for its sale. The events which transpired during this December 1 meeting between the parties and the contract which precipitated therefrom serve as the foundation for UST's civil RICO and state common law allegations. Precisely what transpired both prior to and during this meeting, however, is not firmly established. ¹

According to UST, Busch began to experience inventory-control and accounting problems in mid-1980 which ultimately manifested themselves in inventory shortages throughout Busch's promotional and merchandising departments. The fact that Busch wished to alter its business relationship with UST from a "cut, make and trim" system to a "finished goods" system and the inventory count which that switch necessitated, according to UST, were simply the beginnings of a scheme by which Busch sought to force UST to assume the blame and financial responsibility for the perceived inventory shortages. Specifically, UST asserts that Busch was able, through a series of "sham audits" and by virtue of its superior bargaining position vis-a-vis UST, to place the blame for the inventory shortages on UST. The end result of Busch's activities was the December 4, 1980 contract, the terms of which required UST to make up the $2.55 million inventory deficit through a series of discounted t-shirt transactions. According to UST, Busch "convinced" them to enter into this contract by issuing an ultimatum to the effect that if UST did not accept this offer, Busch would withdraw all of its business.

Busch disputes UST's version of the events which preceded the December, 1980 contract. According to Busch, UST was informed that Anheuser-Busch auditors would travel to UST's facilities on December 1, 1980 to conduct a physical count of the Busch fabric and to negotiate a price at which UST would purchase that fabric. Busch maintains, however, that prior to its auditors' arrival on that date, UST removed from its plant several hundred thousand dollars worth of Busch's raw fabric. This inventory shortage, according to Busch, was discovered only after the auditors had begun counting the fabric. Moreover, the exact amount of the inventory shortage was never known, according to Busch, because UST prematurely ordered Busch to stop counting the inventory. Although UST never confirmed Busch's allegation that it had stolen the missing inventory, UST did negotiate a written contract with Busch--the December 4, 1980 contract--whereby UST committed itself to making up the alleged inventory deficiency through $2.55 million in future discounts of 40% on t-shirt orders.

Busch ordered t-shirts from UST under this December 4, 1980 contract until early 1982. The last of the discounted t-shirts, together with the UST invoice showing the discount and the net amount due from Busch, were sent from UST to Busch on March 26, 1982. These final discounted invoices were paid by Busch on April 25, 1982.

Busch continued to purchase t-shirts from UST until September of 1982. However, because the $2.55 million deficit had been recovered under the prior discounted purchases, Busch paid the full price for the t-shirts ordered after April of 1982. According to UST, Busch was obligated to make these purchases (and apparently an unknown number of additional purchases) pursuant to an oral contract which the parties had entered into at the time of the December, 1980 contract. Under the terms of this alleged oral contract, Busch obligated itself to purchase 2,000 dozen t-shirts per week from UST for an indefinite period of time once the $2.55 million inventory deficit had been recovered. Busch denies that such an oral contract ever existed.

During this entire period--from late 1979 through May, 1982--UST had a contract with Barclays-American Bank under which Barclays "factored" UST's accounts receivable. Under this arrangement, UST would send Barclays a copy of all of its invoices which evidenced sales and shipments of t-shirts to its customers. Upon receipt of those invoices, Barclays would extend immediate cash or credit to UST at a discounted amount. In return, UST's customers were instructed by UST to send their invoice payments to Barclays. According to Busch, UST began in late 1981 to bill Busch and other customers (through Barclays) for goods that had not been shipped. Specifically, Busch contends that UST sent Barclays fictitious accounts receivable for $450,000 representing goods that had never been sent to Busch. Moreover, according to Busch: this alleged scheme was uncovered in February of 1982; Barclays investigated and, as a result, stopped factoring UST's invoices; and, UST soon thereafter ceased its operations. UST does not deny that Barclays served as its factor, but does deny the allegations regarding the fictitious accounts receivable.

UST did not file this action in the district court until April 22, 1986, more than four years after the last shipment of discounted t-shirts had been sent and just under four years from the date that Busch paid the discounted invoices on that last shipment. The complaint alleged federal civil RICO violations in Counts 1 through 7. As predicate acts to support its RICO claims, UST alleged that Busch committed extortion in violation of the Hobbs Act and Travel Act when it forced UST to enter into the December, 1980 contract. UST also alleged mail fraud and wire fraud. These latter allegations, although not pleaded with particularity, refer to the manner in which Busch used the interstate mail and wires over the following two years to order and receive the discounted t-shirts. Counts 8 through 14 of the complaint alleged violations of state common law. Those common law counts which are on appeal, Counts 8 and 14, alleged a "conspiracy to injure business" and "economic duress" respectively. ²

After the close of discovery, Busch filed its first motion for summary judgment on each of the fourteen counts of the complaint. The district court, on March 29, 1988, granted Busch's motion on all of the state common law claims. With respect to the civil RICO counts, the district court held that RICO's four-year statute of limitations, see Agency Holding Corp. v. Malley-Duff & Assocs., Inc., 483 U.S. 143, 107 S.Ct. 2759, 97 L.Ed.2d 121 (1987), barred UST from recovering for damages which were incurred or caused by predicate acts which occurred prior to April 22, 1982. Since there was no showing of mail or wire fraud after April 21, 1982, UST was left only with the potential for recovery on the allegations of extortion in violation of the Hobbs Act and Travel Act. Because each shipment of t-shirts was a separate use of the interstate facilities and, as such, a separate Travel Act violation, see United States v. Raineri, 670 F.2d 702, 715 n. 9 (7th Cir.), cert. denied, 459 U.S. 1035, 103 S.Ct. 446, 74 L.Ed.2d 601 (1982), and because Hobbs Act extortion encompassing multiple payments is a continuing offense, see United States v. Hedman, 630 F.2d 1184, 1199 (...