## In the



# U n ited S ta tes Co urt o f Ap p ea ls

F o rth eS e v e n th C ir cu it
N o. 07

- 3333 J OHN H. C R I CH T ON, J R ., on be h alf ofh im se lf an d all o the r s s i mi l a r l y s i t ua t e d, P laint if f-A ppell ant, v. G OLDE N R ULE I NSURANCE C OMPAN Y, D efend a nt-A pp ellee.

A pp eal from the United S t ates Di strictC our t fo r the S outhernDi stricto f Illino is. No . 06 C264

— G . Patri ckMu rp hy, Judg e.
A RG UE D M AR CH 31, 2008

— D ECI DE D A UGUS T 5, 2009

Befo re K ANN E , E VANS, a nd S YKES, C ircu it Judges . S YKES, Ci r c u i tJ udg e . J ohn Cri chton, J r. , sued Gol den Rule I nsurance Com pany ass er ti n g three fra ud

-base d cl ai m s. The di st r i ctc o ur t di smi ss ed o ne c l ai m wi thpr ej udi ce an d g av e Cr i ch to n an o ppo r tu ni ty to r epl ea d the othe r tw o. That e ff or t was unsuccess ful; the dist ri ct c o u r th e l d th a tth e a l l e g a t i o n s i n th e r e ma i n i ng t wo cl ai m s f ail ed t o s ta te a c l ai m f o rr el i efa nd di smi ss ed th e2 N o. 07

- 3333

ca se i n its ent i r ety . Cr i ch to n’ s appe alr equi r es us t o c o nsi derthr ee que st i o ns : ( 1) whethe rCr i ch to n h ad st an di ng to b r i nga c lai m u nde rthe I l l i no i s Con su m erF r au d a nd Decepti ve Bu si ness Pract i ces A ct ( “I CFA ”) , 81 5 I LL . C OM P . S T AT . 50 5/2 ( 20 06 ) , a nd s o m ewha t r el at edly, whethe rhe m ay m ai n ta in a cla i m under F l or i da’s anal og to that act, seeF LA . S T AT . A NN . § 501. 201 ( W est 2006 ) ; ( 2) w hether Cri chton a dequ ate l y pl eaded a c l ai m f orco m m on- l aw fr a ud ; a nd ( 3 ) whethe rCr i c ht o n a de qu a t e l y p l e a de d a RI CO ( Ra ck et ee rInfl ue nc ed an d Co r r uptOr gan i za ti o ns A ct) claim
. W e an sw er each qu estion “no” an d a ffirm the j ud gm ent o fthe dist ri ct c ourt
.
I . B a c kg r o und F l o r i da r es i den t J o hn Cr i ch to n b eg anpur ch as i ngg r o up heal th i nsurance fro m Gol den Ru l e in 1995 under a m ast er po l i c y o ffe r e d o nly t o memb e r s o f the F e de r a t i o n of A m er ica n C on su m er s a n d T ra ve ler s (“ th e F ed er at io n ” ), a nonprofi t o rg ani zati on that pr ovi ded i ts m em ber s with ( am ong othe r ser vi ces) di sco u nts o n i nsurance thro ugh gr oup-buyin g pow er . Cri chton r enewed hi s insurance ev ery y ea rthr o ug h 2 004. In 2 00 2 he fi l ed a co m pl aint aga i ns t Gol den Ru l e in the Cir cui t Cour t o fM adis on County, I l l i noi s, se eking to re p re sent a nat i onw i de cl ass ofFe derat ion m em ber s who bought i nsurance fro m Gol de n Ru l e . Hi s l a ws ui t a l l e g e d v i o l a t i o ns o f the I CFA and, i fhi s pro posed cl ass was cer ti fi ed, a hosto fo ther sta te consum er - fra ud st atute s. Cri chton l ate r am ended hi s su i tt o a d d th e F e d e r a t i o n a s a d e fe n d a n t
. T h e F e der ati on s ought and rec ei ved sum m ar y j ud gm en t i n i tsN o. 07

- 3333 3 f avo r and success fully defended that j ud gm en t on ap p ea l. Se eCr i ch t on v. Gol de n Rul eIns . Co. , 832 N
. E.2 d 843, 851- 54 ( I l l
. A p p . C t. 2005 )
. Cri chton’ s cl ai m s a gainst Gol den Ru l e were dism i sse d w i thout prej ud i ce b ase d on f or um non conve ni ens. ( Gol den Rule i s an I l l i noi s co rpor atio n w ith its p rin c ip al p lac e o f bu sin es s in Ind ian a.) C richto n n ex t pr o ce ede d t o the Di st r i ctCo ur t f o rthe S o uthe r n Di st r i cto fI l l i no i s wher e he fi l ed a co m pl aint aga i nst Gol de n R u le under the di ver si ty j uri sdic ti on o f 28 U
. S. C. § 1332( d). H e rea sse rt ed hi s cl ai m foran a l l ege d vi o l at i o n o fth e IC FA ( an d hi s cl as s cl ai m unde rthe consum er - fra ud st atute s o fo therst ate s) and al so al l ege d a c laim of co m m on - l a w fr au d . H e la te r am en d ed h is co m p la i ntt o i nc l ude a thi r d c o unt, a RI CO cl ai m . The gi st ofal lthr ee claim s w as that Gol den Ru l e had i nd uced hi m to p urchase insur ance by an ar ti fi ci al l y l ow int ro du ctory pre m ium and that Go lden Ru le f ail ed to inform hi m that the cos t of hi s re new alpre m i um s would e scal ate dr amat i ca l l y b ec au se o f Gol denRul e’ s pr ac ti ce o fc l o sing bl ock s o fi nsurance to new enr ol l ees . Gol den Ru l e m ove d to dism i ss Cri chton’ s a m ended com pla i nt under Rul e 1 2( b) ( 6) o fthe Federal R u le s of Civil P r o c e du re. T he di s t r i c tc o ur tg r a nt e d the mo t i o n wi th prej ud i ce o n the I CFA co unt b u t w i thout prej ud i ce o n the c om m on- l aw fr au d and RICO counts. Cri chton then filed h is s e c on d am en d ed co m p lain t, re p lea d in g h is com m on- l aw fra ud and RI CO al l ega ti ons (th is ti m e with gr eat erspeci fi ci ty i n an e ff or t t o m eett h e r equi re m ents ofFe deralRule o fCi vi lPro c ed u re 9(b) ) ; he a l so re p lea d ed , “for th e re c or d ,” th e IC FA cla im . G old en R u le4 N o. 07

- 3333

once aga i n m ove d to dism i ss. The di str i ct c ourtdi sm i sse d Cri chton’ s co m m on- l aw fra ud a n d RI CO cl ai m s with pr ej ud i c e f o rf a i l ur e t o s t ate a c l a i m, i g no r e d the a l r e a dy dism i sse d-with- prej ud i ce I CFA cl aim , and ente re d final j ud gm ent in f avo r ofGol den Ru l e.
I I . Discussi on W e r ev i ew the di st r i ctc ou r t’ s o r derdi smi ss i ng C ric h to n ’s c laim s d e n ov o. St. Joh n’s U nited C hu rch of C hrist v. C i ty of Chi cago , 50 2 F.3d 61 6, 62 5 (7th C ir. 20 07 ), an d w ill affi rm the dism i ssa li f h e d i d not pl ead “s uffi ci ent f actual m at te r, ac c ep te d as t r u e , t o ‘s ta te a c laim to relie f th at is pla usibl e o n i ts f ace, ’ ” Ash crof tv. Iq b al , 12 9 S
. Ct. 19 37, 19 49 ( 2009 ) ( quoti ng B el l A tl
. Co rp. v. Tw om bly, 550 U
. S. 54 4, 57 0 (2007)). In a d d iti on, Crich ton ’s frau d -based clai m s are subj ect to Rule 9( b) ’ s hei ghtene d plea ding re quir em ents, which mean s th atthe c i r cumst an ce s co ns ti tu tingthe fra ud m ust be pl eaded “w i th par ti c u lar ity. ” F ED . R. C IV . P. 9(b). As a n ini ti almatt er, the pa r ties d eb at e whethe rthe am ended or seco nd am ended com pla i nt i s the o perat i ve co m pl aintf or rev i ew. As we ha ve no te d, a fte rthe dist ri ct cour t dism i sse d the I CFA count i n the am en d ed c om p lain t w ith p rej u d ice , C ric h to n rep lea d ed it inh is se co nd a m en ded co m pl aint“ f o rthe r ec o r d, ” adding cer tain f acts and re ar ra ngi ng the natur e o fhi s ind i vi du al a nd c l a s s c l a i ms un de rthe F l o r i da s t a t ut o r y a na l o g . On appeal Gol den Ru l e a rgues that the fa cts Cri chton a dd ed i n the seco nd am ended com pla i nt ar e o ut o fbo und s o n our re vi ew o fthe ear l i erdi sm i sse d-with- prej ud i ceN o. 07

- 3333 5 I CFA cl ai m , ci ti ng Trico ntin enta l Ind ustries, Ltd . v. P ricewate rhous e Coope rs , LL P , 475 F.3d 824 (7th C ir. 2007). I n Tri co nt i ne nt al , the de fen dan ts move d t o di smi ss the pla i nti ff s’ am ended com pla i nt, and w hi l e that m oti on was pend i ng, the pla i nti ff s s ought and obta i ned l eav e to fi l e a se co nd a m en d ed co m pl ainta ddi ngt wo n ew c l ai m s. The p lain tiffs ’ se c on d am en d ed co m p lain t, h ow ev er , no t o n ly add ed the propos ed new cl ai m s but al so supp l em ented th e al l eg at i o ns i n the o r i g i na lc l ai m s. In di smissing th e cl ai m s a sse r te d i n the pl aint i ff s’ a m en ded co m pl aint, the dist ri ct c ourtdecl i ned to consi der the supple m ental al l ega ti ons i n the seco nd am ended com pla i nt be cause l eave to r epl ead tho se or i gi nalcl ai m s had notbeen g r a n t e d
. T h e c o u r tl a t e rd i s mi s s e d th e a d d i t i o n a lc l a i ms i n th e s e c o n d a me n d e d c o mpl a i n t
. O n a p p e a lwe co nfi ne d o urr ev i ew o fthe di smi ss ed claims fr o m the fi r sta m en ded co m pl aintt o the a l l eg at i o ns i n t hatc o mp lain t, rej ec t in g t h e p lain tiffs ’ arg u m en t t h at w e s h ou ld co ns i derthe s uppl ement ala l legati o ns c o nt aine d i n the se c on d am en d ed co m p lain t. Id. at 838 n. 8. W e re aso ned that because the dist ri ct c ourthad onl y g ra nted l eave to ad d tw o n ew cla im s, n otto rep lea d th e o rig in al c laim s, it wo ul d be ina pp r o pr i a t e t o c o ns i de ro n a pp e a lthe s up ple m entalal l ega ti ons conta i ned i n the seco nd am ended c om p lain t. Id. T his case i s sim il ar. T he I C FA clai m i n C richton ’s am ended com pla i nt was dis m i sse d w i th prej ud i ce; Crichto n was g r an te d l ea ve t o r epl ea d o nl y hi s co m m o nl aw fr au d a nd RI CO cl ai m s. Re pl ea di ng (an d a tt empti ng t o b o l s t e r ) h i s I C F A c l a i m in th e s e c o n d a me n d e d c o m-6 N o. 07

- 3333 pl aint“ f o rthe r ec o r d” was thus g r atui to us , a nd the di s t r i c t c o ur t wa s wi thin i t s di s c r e t i o n t o i g no r e i t
. Ac c o r di ng l y, we wi l lr e v i e w the c omm o n- l a w fr a ud a nd R I CO al l eg at i o ns c o nt aine d i n the s ec o nd a m en d ed co m pl aint an d c o nfi ne o urr e v i e w o fthe I CF A c l a i m t o the a l l ega ti ons i n the am ended com pla i nt.

A. St andi ng undert he I CFA T he d i st r i ctc o ur t di smi ss ed Cr i ch to n’ s cl ai m unde rthe I CFA bec ause Cri chton

— a r e s i de nto fF l o ri da

— l acke d stan d ing to sue un d er the Il lino is st atu te. T he cou rt ap p li ed the tes t ann ou nc ed by the I llin ois Sup rem e C ou rt i n Ave ry v. S t at eF ar m M u t u alAu t omob i l eIn s u ran c eCo ., 83 5 N
. E. 2d 80 1 ( I ll
. 2 00 5) , whi chs ev er ely l i m i te d the ex tr at er rit or ial re a c h o ft h e IC FA . Th e c ou rth eld in Ave ry th atno nr es i den t plaint i ff s m ays ue unde rthe I CFA o nl y i fthe ci rcum sta nces r elati ng to the al l ege d fra ud ule nt t ra n sact i on o ccurr ed m ost l y in I l l i noi s. 83 5 N
. E.2 d at 8 52- 53. M or e s peci fi cal l y, the I l l i noi s S up re m e Cour t hel d that th e I CFA di d no t create a c au se o fa ct i o n fo rfr au dul en t acts thathad l i ttl e o r no co nnecti on t o the s tat e o fI l l i noi s. Id. Ac c o r di ng l y, f o ra n o nr e s i de ntp l a i nt i fft o h a ve st an di ngunde rthe Act, the c o ur t r equi r ed th at“ th e ci rcum sta nces that re l ate to the dispute d tra nsacti on occurp ri m ar i l y and substanti al l y in I l l i noi s. ” Id. at 853- 54. The c o ur t ac k no wl edg ed tha t t hi s was no t a br i g ht

- l i ne r ul e butr athe ra hi g hl y f ac t-bo und inq uir y i n whi chno sin gle fac to r w ou ld be d isp os itiv e. Id. at85 4.N o. 07

- 3333 7 The f acts o fAve ry he l p i l l us tr at e the t es t’ s o per at i o n. T h e r e , th e n o n r e s i d e n tp l a i n t i ff s we r e c o n s u me r s who alle ge d th at th eir au to m ob ile in su re r h ad en ga ge d in fra ud ule nt act s bysupplying subs ti tute parts o n i nsured re p air s. A l t h o u gh th e in su re r h ad its h ea d q u ar te rs in I l l i noi s, the cour t hel d that the c on su m er s co uld not av ail th em se lve s o ft h e IC FA ba se d on th at fac t a lon e. Id. M o sto fthe rel ev an t ci r cumst an ce s unde r l y i ngthe al l eg ed fr au dul en t ac ti vi tyi n A very had no c onnecti on t o I l l i noi s: The consum er s did not re si de ther e; th ey re cei ved r epai r est i m ate s in thei r hom e s tat es; tho se re p air s w er e m ad e e lse w h er e; th e a lleg ed d e c e p t i on its elf took p lace in s t a t e s other th an I ll inois; and the p lai nt iffs c om m u n ica te d w ith loc al a ge n ts , no t th e h om e o ffice in Illino is. Id. Ph i l l ip s v . Ba l l yTo t a l F i t n e s s Ho l d i n gC o rp. , 8 65 N
. E.2 d 31 0 ( I l l
. A pp . Ct. 20 07) , pro vi des ano therexam ple o fhow the Ave ry test op erates. Th ere, tw o non reside nt plaintiff s a l leg ed th at a h ea lth -c lu b ch ain h ea d q u ar te re d in Illin ois h a d v i o l a t e d th e A c t b y r e fu s i n g t o c a n c e l th e i r me mbe r sh i ps. Buta s i n Avery , t h e locat ion of th e hea lth club ’s h ea d q u ar te r s w as n otd isp os itiv e. Id. at 315- 16. Because th e pl aint i ffs res i ded el se wher e, pur ch as ed th ei rc l ub m embe r sh i ps an d us ed f ac i l i ti es i n the i rho m e st at es , a nd d ealt w ith coll ection age n c ies ou tsid e I ll inois, the cou rt h eld th ey lac ke d st an d in g t o s u e u n d er th e IC FA
. Id. W e r each the sa m e co ncl usi on here. Cri chton r esi des inFlor id a, re c eiv ed p ro m ot ion al in s u r an c e m at er ials ther e, ent er ed i nto and rene w ed hi s insurance ther e, subm i tte d cl ai m s ther e, and w as al l ege dlydecei ved ther e.8 N o. 07

- 3333 Gol den Ru l e’ s p rinci pal p l ace ofbu si ness i s in I nd i ana, not Illino is; an d alt h ou gh it m ain ta in s a “h om e o f f i c e ” in I l l i noi s, fro m wh i ch i t i ssues i nsurance pol i ci es, that alone is not en ou gh, un d er A very, to c o nferno nr es i den t st a n d i n g o n C r i c h t o n t o s u e u n d e r th e I C F A. O n t he to ta l i tyo fthe f ac ts a l l eg ed he r e, w e agr ee wi ththe di s t r i c tc o ur ttha tthe c i r c ums t a nc e s o fthe a l l e g e d fr a ud

u len t a c tiv ity d id n otoc c u r “p rim ar i l y a n d su b st an tia lly i n I l l i no i s. ” Acco r di ng l y, Cr i ch to n l ac k s st an di ngto sue u n d e rth e I C F A. The dis tr i ct c ou rt al so hel d that t o the e xtent that C richton w as asse rting a clai m un d er Fl orida’s con su m erfra ud st atute , the cl ai m m ust be d i sm i sse d because that sta tute does not perm i t s uit s a gainsti nsurer s. SeeF LA . S T AT . A NN . § 501. 212( 4) ( W est 2006 ) ( “This part d oe s n ot apply to
. . . ( 4) [ a] ny perso n or acti vi ty re gu lat ed u n der l aw s a dm i ni ste re d by .
. . ( a) [ t] he Offi ce o fInsurance R eg u lat ion of th e F in an c ial Se rv ice s C om m iss ion ; . . . o r( d) [ a ] n y p e r s o n o ra c t i v i t y r e g u l a t e d u n d e rth e l a ws ad m inistered by the f o r m er De p artm en t of I ns urance . . . . ”)
. This d et er m i nati on was m ani fest l y c or re ct; G old en R u le i s an in su re r u n d er Flor id a la w . W
. S. B adcock Corp
. v. M yers , 6 9 6 S o . 2 d 7 7 6 , 7 8 2

- 8 3 ( F l a . Di s t
. Ct
. App
. 1996 ) ( ci ti ng P rof

’l Len s P la n, Inc. v. D ep’t o f Ins. , 38 7 So
. 2d 548, 550 (F la. Dis t. Ct. A pp . 19 80) and re quir i ng tha t a n i nsurance provi der hav e “ ( 1) [ a] n i nsurabl e inter est; (2) [ a] risk ofl oss; ( 3) [ a]n assu m p tion of th e risk by th e insu r[er] ; ( 4) [ a] g en er al sc he m e to di st r ibut e th e l o ss amongthe l a r g e rg r o up o fp e r s o ns b e a r i ngs i mi l a rr i s k s ; [ a nd ] ( 5) [ t] he paym en t o fa prem i um f orthe ass um pti on of ris k” ). C ric h to n ’s s ta tu to ry c o n su m er -fra u d cla im

—N o. 07

- 3333 9

Co nfli ct s-o f

- law analysi s und er I ll inoi s law

— whic h i s the 1 ap p ro priat e s ub st anti ve law of the dis tr ic t c ourt’ s f orum s tat e, s e e Er i e R. R. Co. v. To mpk i ns , 30 4 U .S. 6 4 , 71 -8 0 (19 3 8 ); seeal so Kl a x o n Co
. v . S t e nt o rEl e c . M f g . C o. , 3 1 3 U.S. 487, 496 ( 1941) ( appl yi ng E rie to co nflicts of l aw s)

— m i g h ts u g g e st th a tF l o r i d a ’s c om m on l aw s houl d appl y t o thi s c l ai m be c aus e Fl or i da ha s the m o st sig n ific a n t rel a tio n sh ip to t h e t r a n sa ct io n . SeeIngerso l l v. K lein , 26 2 N .E.2d 593 , 59 5-96 ( Ill. 197 0) ( ad op ting a m osts i gni fi c ant
- c ont ac t s r ul e i n I l l i noi s aft erd i s c ar di ng the doc t ri ne o f lex loc i delicti )
. Th er e is , how ever, no confli ctbetween F lorid a an d Illinois law in this are a; the d ist r i c t c ou rt p ro p erly c hose to apply I l l i noi s c om m on l aw, the l aw ofthe f or um sta te
. See, e . g. , Int ’ l A dm ’ rs, Inc . v . L i f e Ins . Co
. o

f N. Am. , 753 F .2d 13 7 3 , 13 7 6 n .4 (7 th C ir . 19 8 5 ). un de rthe I CF A o ri t s F l o r i da a na l og

— w as p ro p er ly di s mi s s e d.

B . C o mmo n- L a w Fr a ud The dist ri ct c ourtal so proper l y c oncl ud ed that Cri chton f a i l e d t o s t a t e a n a c t i o nab l e c l a i m ofco mm o n- l a w fr a ud
. 1 Cri chton a l l eg ed t h at G old en R u le sh oul d have disc l ose d that the r enewal prem i um s on its gr oup heal th p lan s w ou ld rat c h etu p w ar d th ro u gh ou t t h e l i f e o f h is po l i cyb ec au se o fi ts unde r wri tingpr ac tice o fc l o sing b lo c k s o f insu ran ce to ne w enrollees and that i ts fai lure to do so was fra ud ule nt. These all ega ti ons am ount t o a c l a i m o f fr a ud ule nt co nceal m ent o r f ra ud

- bynondisc l osur e; such a cl ai m r equi re s a duty to d i scl ose o n th e p ar t o f a d ef e n d a n t
. Se e, e . g. , Conni ckv. Su zukiM ot or10 N o. 07

- 3333 Co. , 675 N .E .2d 58 4, 59 3 (Ill. 19 96 ); AM PA T/M i dwe s t, Inc
. v. Il l. To o l Wo rks Inc. , 89 6 F
. 2d 1035 , 10 40 ( 7th Ci r. 19 90) ( apply i ngI l l i no i s l aw)
. W he re , a s he r e, the r e i s no fi du ci ar y r el ati onshi p between the parti es , s e eN i e l s e n v . U nite d Servs. A uto. Ass’ n , 612 N
. E.2 d 5 26, 53 1 ( I l l
. A pp . Ct. 1993 ) ( “I n I l l i noi s, ther e i s no fi du ci ar y r el ati onshi p betw ee n an ins u r a n c e c om p an y a n d an ins u re d .”); O verbey v. Il l
. Fa r m e rs Ins . Co. , 52 5 N
. E.2 d 1 07 6, 1084 ( I l l
. A pp . Ct. 1988 ) ( sam e) , a du ty to disc l ose m ay ar i se und er I l l i noi s l aw i fthe d efendant m ake s a n affi rm ati ve sta tem en t th ati t pas se s o ffa s th e whole truth whi l e o m i tt i ng m aterial facts th at rend er the sta tem en t a m isl ead ing “h alf

truth, ” seeHei derv. Le ewards Creat ive C rafts, Inc. , 61 3 N
. E
. 2d 805, 811 (I ll
. A p p . C t. 1993 ); Apot ex Corp. v. M e r ck& Co. , 229 F.R.D. 142, 149 (N
. D
. I ll
. 2005). H er e , Cr i c ht o n a l l e g e d tha tGo l de n Ru l e ma de s e v e ra l st at ement s th athe c l ai m s qua l i fy a s decep tiv e ha l f

- truths gi vi n g ris e t o a duty t o disc l ose : I t r efer re d to i ts i nsurance as “gr ou p ” insur ance whil e f ai l i ng to di scl ose the e ffe c to fi t s p r a c t i c e o fp e r i o di c a l l y c l o s i ngb l ock s of in su ra n c e t o n e w m em b er s; it iss u ed ins u ra n c e c er tifica te s ex pl ai ni ngthe c o nne ct i o n b etwee n c l ai m s co st s an d th e a m ou n t o f tim e a n i n su ra n c e c er tific at e h as be en in pla ce, but did notdi scl ose i ts und er w ri ti ng p ra c tice o f cl o singb l o ck s o fi ns ur an ce ; a nd i t s en t l et te r s anno unc i ng prem i um i ncre ase s without e xplaini ng tha t the “r eal re aso n” f ortho se i ncre ase s was the cl osur e ofbl ock s o f insu ran ce to ne w enrollees. Criticall y, how ever, Cricht on’s al l ega ti ons do not re m ote l y sugge st that any of t h ese com m unica ti ons fro m Gol den Ru l e purported to be an ex pl an at i o n o fa l lo fthe unde r wri tingf ac to r s th at m i g htN o. 07

- 3333 11 affect Cri chton’ s insura n ce pr em i um s. By l abel i ng i ts i nsurance as “gr oup” i nsurance, offer i ng a sum m ar y o fi ts cl ai m s pr ac ti ce s, a nd a nno unc i nga nnua lpr emi um i nc re as es , G old en R u le d id n otp u rp or t to ex p lain th e “ w h ole tr u th ” o f its u n d er w rit in g p ra c tic es . See A po tex , 2 2 9 F
. R. D. at 149 ( noting th at “ a sum m ar y i s j ust that, a sum m ar y” and hol ding that such a sum m ar y “ does not sugge st fra ud ”)
. That i s, none ofth ese al l ege d stat em ents to ce r ti fi ca te
- ho l der s was r epr es en ted to b e a co m pr eh en sive exp lanation of allf acto rs affec t in g Go lden Ru le’ s i nsurance prem i um s. A ccor dingl y, ther e a re n o al l ega tions giving ri se to a du ty to d isclose, and Crich ton ’s c o mm o n- l a w fr a ud c l a i m was p r o pe r l y di s mi s s e d.

C . R ICO Claim Finally, th e d istri ct court p rop erly d ism issed Crich ton ’s cl ai m u nd erthe RI CO st atute , 18 U
. S. C. §§ 1961

- 1968
. RI CO prohibi ts “any perso n em plo yed b y oras soc i ate d w i th any e nter pri se . . . to co nd uct o r parti ci pate, di re ctl y o r ind irectly, i n th e con d uc t of su ch ente rp rise’s affai rs thr o ugh a pa t t e r n o fr a c k e t e e r i nga c t i v i t y . ” 1 8 U. S
. C. § 1962 (c). W e ha ve hel d tha t “ [ a] RI CO compl aintmusti den ti fy the enter pri se. ” Ri c h mon d v . Na t i o n wi d eC a s s e l L
. P. , 52 F. 3d 640, 64 5 ( 7th Ci r . 1 99 5)
. Cr i ch to n i den ti fi es th e en te r pr i se a s th e Feder ati on. A l ternati vel y, Cri chton a l l ege s that G ol den R u le a n d th e F e d e r at ion, tog et h er , as t w o p er so n s a ss oc iat ed in fa c t, see 1 8 U. S
. C. § 1 9 6 1 ( 4 ) , ma de u p the R I CO en terp rise. A n ass ociation-in-f act en terp rise th eory r equi r es tha t th e as so ci at i o n- i n- f ac t “e nt er pr i se ” an d the12 N o. 07

- 3333

C ri c ht on not es thatthe di s t ri c tc our tdi d notr ea ddre s s this 2 the or y i n i t s s ec ond o rde r. Gol den Rule r esponds thatthe d istrict cou rt d id no t d o so b eca u se it had alrea d y r e je c t ed this theory i n it s fir storder. True, but th e d ist ri ctcourt dism is se d this claim w itho u t pr ejud ice, allow ing C rich ton to rep lead it. The d is tr ic t c ourt’ s f ail ure t o revis itthi s the o ry ofpotenti al RI C O l i a b i l i t y i n i t s s e c o n d o r de r d o e s n o ta ffe c to ur r e v i e w, h o w ev er ; w e m a y a ffirm o n an y b a sis in th e r ec o rd
. E.g. , S la n ey v . In t’l A m a te u r A th let ic F ed ’n , 2 4 4 F .3d 580, 597 ( 7th Cir
. 2 0 0 1 ). perso n sought to be he l d l i abl e be suffi ci entl y di stinct. See Haroco, Inc. v. Am
. Nat’l Ba nk & Tru st C o. of Chi. , 74 7 F
. 2d 38 4, 40 1-0 2 (7 th C ir. 19 84 ); s e eal s o Ri ch m ond, 52 F. 3d at 647. Thi s i s be ca us e RI CO “ l i ab i l i tyde pen ds o n s ho wi ng th atthe de fen dan ts c o nducte d o rpa r ti ci pat ed i n the c o nd uc t o f the ‘ ent erpris e’s aff airs, ’ not j us t the ir own aff ai rs . ” Rev e s v. Er ns t& Young, 507 U
. S. 170, 185 (1993 ). A s t o the fi rs t o fthes e theor i es, th e p arti es debate on 2 appe alwhethe rCr i ch to n’ s al l eg at i o ns a r e su ffi ci en t to sta te a cl ai m thatGol den Ru le “co nd uct[ ed] or parti ci pat[ ed]
. . . i n th e co nd uct o f[ the F edera ti on’ s] aff ai r s. ” I fno t, the r e i s no ne ed to a ddr es s th e r emai ni ng ele m en ts of a R IC O cla im u n d er § 19 62 (c ). See Se di m a, S. P.R. L. v. Im r ex Co. , 47 3 U. S
. 4 79 , 4 96

- 97( 19 85 ) ( r equi r i ng “( 1) co nd uct ( 2) o fan e nter pri se ( 3) thr ough a p at te rn (4 ) of r acke teering ac tivity” to prove a viol ation of§ 1962(c)); see also Goren v . N ew Visi on Int’ l, Inc. , 15 6 F
. 3d 721, 72 7 (7th C ir. 1998) (sam e). C ric h to n alleg es th at G old en R u le c on d u c te d an d p ar tic ipated i n the Feder ati on ( th e a l l ege d RICO enter pri se) byN o. 07

- 3333 13 h elp in g t h e F ed er at ion d ra ft n ew by l a w s , ass ist in g it in se tt in g t h e d u es th at G old en R u le w ou ld su b se q u e n t ly c olle c t fro m ce rt ifica te -h old er s o n it s b eh alf, an d co n tr oll i ng t he mar k e t i ng i nf o r mat i o n di s s e minate d by the F edera ti on about Gol den Ru l e’ s hea l th- i nsurance products. These al l ega ti ons ar e insuffi ci ent t o sta te a RI CO cl ai m . The st at u te does not penal i ze tange nti al i nv o l ve m en t i n a n e nt er pr i se ; a pl aint i ffm us t ple ad an d pr o ve tha t a d efen dan t to o ks o m e par t i n di r ec ting or co n d u c tin g t h e a lleg ed “e n te rp ris e” su c h th at it “pa r ti ci pat e[ d] i n the o per at i o n o rmana g emento fthe enter pri se i tse l f
. ” R eves , 50 7 U.S
. at18 5; s e e also G o ren , 15 6 F. 3d at 727. A l l eg at ion s that a defendant had a business re l ati onshi p w i th the putati ve RI C O e n ter pri se orthata defe nd ant per f or m ed servi ces f orthatente rpri se do not su ffice
. S l an ey v. In t ’ l Amat e u rAthl e t i cF ed’n , 24 4 F
. 3d 58 0, 59 7 (7 th C ir. 20 01 ); G o ren , 15 6 F
. 3d at 727. H er e, Cri chton has done l i ttl e m or e than ple ad f acts su gg es tin g t h e e x ist en c e o ft h e m ar ke tin g re lat ion sh ip b et w ee n th e F ed er at ion an d G old en R u le. A ss ist in g in th e se ttinga nd c o l l ec ti o n o fmem be r sh i p due s o n the F e d e r a t i o n ’ s b e h a l fa n d c o n t r o l l i ng th e c o n t e n to fi t s o wn i ns ur an ce pr o m o ti o na lmate r i al s ar e ac ti vi ti es c o ns i st en t wi ththe e xi st en ce o fa b us i ne ss pa r tn er sh i p, no t th e pr o to ty pi ca lRI CO v i o l at i o n in w hi chthe de fen dan t sei zes co ntrol of an ente rpri se to acco m pli sh an i l l ega l pu rpos e byusi ng the ente rpri se’ s re sour ces, co ntacts , an d ap p e ar an c e o f legit im ac y. Fi tzge r al d v
. Chrys l e rCorp. , 116 F. 3d 22 5, 227 ( 7th Ci r. 19 97)
. Li kewis e, thatGol den R u le is a lleg ed to h av e a ss i s t e d th e F ed er at ion in re d ra ftin g its by law s s u gg es ts on ly th at G old en R u le14 N o. 07

- 3333 perf or m ed a s er vi ce forthe Feder ati on. These al l ega tions, tak en i nd i vi du al ly or t og ether, ar e insuffi ci ent t o sta te a cl ai m tha t G ol denRul e co nt r o l l ed th e o per at i o n o rmanag emento fthe F ede r at i o n. F o rs i m i l arr ea so ns , Cr i ch to n’ s al l eg at i o ns unde rthe alternat ive theory of an assoc iation-i n-fact en terp r is e are al so in su ffi ci ent. A s we have note d, an as soc i ati on- i n-f act en te r pr ise m us t be mean i ng ful l y di st i nc t fr o m the enti ti es that com pri se i t s u c h t hat the ent i ty soughtto be hel d l i abl e can b e s ai d to have contr ol l ed and conducted the e nter pri se rath erthan m er el y i ts own aff ai rs . See R eves , 5 0 7 U. S
. a t18 5 ; Haroco , 74 7 F
. 2d at 401- 02; Ric hm ond, 52 F. 3d at 647. H er e, C ric ht o n h as do ne no mor e th ande sc r ibe the or dinar y o perat i on o fa gar den-va ri etym ar ket i ng ar ra ngem en t b et w ee n G old en R u l e an d th e F ed er at ion . H is alle ga tio n s o f th e F e d e ra tio n ’s ro le s u gg es t itw as m er ely a c on d u it for th e s ale of G old en R u le’s ins u ra n c e. T h is is n otw h at R IC O p en aliz e s . SeeFitzgerald, 11 6 F
. 3d at 227. W hat Cri chton a l l ege s her e i s a fra u d per petra ted by Gol den Ru l e, nota n ass oci ati on- i n-f act enter pri se d irected and cont roll ed by G olden Ru le. Th at is, Crich ton ’s c l a i m “ b e g i n s a n d e n d s ” w i th th e fr a u d a l l e g e d l y c o mm i tte d by Gol den Ru l e. Ri chm ond, 52 F.3d at64 7. T h is i s insu fficie nt to st ate a RI CO cl ai m bas ed on a n ass oci ati on- i n-f act enter pri se. W e a l so note thatCri chton f ai l ed to ad eq u atel y pl ead an as soc i ati on- i n-f act ente rp ri se because he ha s no t p l e a d e d a n o r g a n i z a t i o n a ls t r u c t u r e o rh i e r a r c h y f o rthe alle ge d as so c iat ion -in -fac t e n te rp ris e. Sta ch o n v . U nitedN o. 07

- 3333 15 C onsum ers C lub, Inc. , 229 F.3d 673 , 675-77 (7th C ir. 2000); R i ch m ond, 5 2 F
. 3 d a t6 4 5

- 4 6
. Hi s a l l e g a t i o ns de s c ribe nothi ng m or e than the ter m s o fan a gr eem ent b etween G olden Ru le and the Fed eration to m ark e t G olden Ru le’ s he a l th i ns ur a nc e t o the F e de r a t i o n’ s me mbe r s . A R I CO e n t e r p r i s e i s mo r e th a n a c o mb i n a t i o n o f p e r s o n s who com m i t a l l ege d predic ate act s o fr acke tee ring; “there m ust b e ‘an or gani zati on with a s tr ucture and goa l s s epara te fro m the predi cate act s them sel ves. ’ ” St ac hon , 2 29 F. 3d at 675 (q u ot ing U nited Sta tes v. M a sters , 92 4 F
. 2d 1362 , 13 67 ( 7 th Ci r . 1 9 9 1 ) )
. Al l e g a t i o ns o fthi s s o r ta r e mi s s i ngh er e. A ccor dingl y, the dist ri ct c ourtwas ri ght t o d ism i ss C r i c h t o n ’ s R I C O c l a i m. A FFI RMED .

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