(1986) (party opposing summary judgment must identify specific facts showing that there is a
genuine issue for trial). Itis therefore disingenuous for Plaintiffs tonow complain, after they have
lost on the intent issue, that they were never given a chance to assert their position prior to the
Court's ruling. Indeed, Plaintiffs have not hesitated throughout this litigation to inundate the
Court with motion after motion. Thus, the Court is certain that if Plaintiffs truly believed the
Defendants raised the question of intent for the first time in their reply, Plaintiffs would have
quickly sought leave to file a sur-reply. Consequently, the Court finds no manifest error of law
on this point.
, IL.

Next, Plaintiffs argue that the Court, in analyzing intent, failed to consider whether the
Defendants acted recklessly, as opposed to with actual, specific intent. However, regardless of
whether the broader standard applies, Plaintiffs’ evidence is still insufficient to create an issue of
fact on intent. The Seventh Circuit has said that reckless indifference, for purposes of the federal
mail fraud statute, denotes “knowledge by the defendant that there was a high risk of harm to the
plaintiff coupled with a failure to take any feasible measure to counter the risk, either by
investigating further to see whether there really isa risk and how serious it is or by desisting from
the risky activity.” Desnick v. American Broad. Cos., Inc., 233 F.3d 514, 517 (7th Cir. 2000).

Plaintiffs contend the facts adduced here reveal that Defendants acted recklessly in causing
Santanna to promise to supply natural gas to customers at a low fixed rate at a time when the
market price of natural gas made it unprofitable for Defendants to honor that commitment.
(Plaintiffs’ Mot. for Relief from ]J., { 7). Plaintiffs point out that by the end of the 2000 enrollment
period, natural gas traded at a price only slightly lower than the fixed rate in their contracts, But

Plaintiffs fail to present evidence showing how Defendants’ willingness to contract in the face of

-4-


Finally, Plaintiffs argue that the Court should have retained jurisdiction over their state law
claims. Plaintiffs claim that it is unfair to force them to start over in state court, when their motion
for class certification and motion for summary judgment on the breach of contract claim sat
unadjudicated in this Court for so long. True, Plaintiffs moved for summary judgmentshortly after
filing the complaint in March 2001. However, Plaintiffs ignore the fact that the Court could not
rule on their motions until it first considered Defendants’ motions to dismiss. The Individual
Defendants challenged personal jurisdiction in Illinois, and then the Defendants collectively moved
to dismiss the complaint, including the RICO count, for failure to state a claim. Because federal
jurisdiction rested on the RICO claim against the Individual Defendants, the Courtcould not ignore
those jurisdictional challenges. Consequently, the Court issued separate rulings in October 2001,
and December 2001, explaining that although personal jurisdiction could be asserted over the
Individual Defendants, Plaintiffs had failed to plead a RICO claim.

In January 2002, Plaintiffs tendered a First Amended Complaint, which the Court accepted.
Once the initial complaint was extinguished, Plaintiffs’ motions for summary judgment and class
certification with respect to that complaint were mooted. Therefore, the Court allowed Plaintiffs
to refile their initial summary judgment motion‘as to the First Amended Complaint, and also
granted the parties an opportunity to file supplemental briefs. Defendants, who had not yet

answered the First Amended Complaint, indicated their intent to move for summary judgment on

the breach of contract and RICO counts. The Court then set reasonable briefing schedules, so as

to allow all motions to be fully briefed and considered at once. Contrary to Plaintiffs’ beliefs,

Moreover, this is nota complex case. Indeed, the Illinois state courts have already handled

7-


fraudulent intent.

The Court ultimately rested its summary judgment determination on Plaintiffs’ failure to
show racketeering activity, which requires a pattern of fraud, because there was not enough
evidence from which a reasonable jury could find.Defendants intended to defraud natural gas
consumers. Plaintiffs now maintain that their responsive argument focused solely on the third
element of a fraud claim, use of the mails and wires, and thus the Court sua sponte granted
summary judgment based on the second element, lack of intent. In Acequia, Inc. v. Prudential Ins.
Co. of America, 226 F.3d 798 (7th Cir. 2000), the Seventh Circuit ruled that “[a] district court is
permitted to enter summary judgment sua sponte if the losing party has proper notice that the court
is considering granting summary judgment and the losing party has a fair opportunity to present
evidence in opposition.” Id. at 807. Plaintiffs insist they were unaware that the Court was
considering the question of Defendants’ intent; however, it was the Plaintiffs who raised this issue
first by presenting over two pages of evidence. with respect to the Defendants’ purchasing
decisions and actions in continuing to sign up new customers in an attempt to show that
Defendants made promises they had no intention of keeping.

Proof of intent was a crucial issue in this case’since Defendants maintained Plaintiffs were
improperly attempting to transform a breach of contract claim into fraud. As the Court explained
in its Opinion, what distinguishes a breach of contract claim, which involves a failure to honor a
promise, froma fraud claim, which involvesa plannot to keep one’s promises, is the specific intent
to defraud. Bell, 2002 WL 31269437, at*4-6. Plaintiffs took the opportunity to present to the Court
their spin on particular facts that they believed showed fraudulent activity on the part of the
Defendants, presumably to demonstrate an issue of material fact with respect to Defendants’ intent

and thus preclude entry of summary judgment. See Anderson v. Liberty Lobby, Inc., 477 US. 242,250

-3-



a razor-thin margin translates into the “high risk.of harm” required to demonstrate reckless
activity. Certainly Plaintiffs need not prove recklessness to defeat summary judgment; however,
tocreate a genuine issue of material fact Plaintiffs must come forward with enough evidence “such
that a reasonable jury could return a verdict for the nonmoving party.” Anderson, 477 USS. at 247.

Their attempt to demonstrate a triable issue falls short because the evidence they rely upon shows,

at best, that uncertainty existed with regard to the ability fo fulfill the contractual obligations, after
Santanna had already entered into the fixed rate contracts. Inanalyzing Plaintiffs’ fraud claim, the Court
looks for evidence suggesting no intent by Defendants at the time of the contract to honor those
terms, Bell, 2002 WL 31269437, at “4. Plaintiffs still have not provided a shred of support for their
contention that in 1999 and 2000 when Defendants were promising customers low fixed rates for
three years, they intentionally and/or recklessly disregarded a serious risk that natural gas prices
might escalate to unprecedented levels during the contractual period. Id. at *6.

While the Seventh Circuit has cautioned that issues of motive and intent should not be
resolved on sumunary judgment, it has also recognized that “where a plaintiff fails to produce
evidence raising a material question of fact regarding . . . the reckless or callous nature of the
defendant's actions,” summary judgment is nonetheless appropriate. Kyle v. Patterson, 196 F.3d
695, 698 (7th Cir. 1999). Plaintiffs have not come forward with enough evidence, under either a
theory of recklessness or actual intent, to create a triable issue of material fact. As such, the Court
finds no manifest error of law on this point.

TI.

Third, Plaintiffs argue that the Court failed to take into consideration Defendants’ alleged
admission that they had no intent to honor the fixed rate contracts. On August 6, 2002, Plaintiffs

filed a motion to deem facts admitted, contending, for the most part, that Defendants had refused

5.



several breach of contract cases against Santanna arising out of the modification of the fixed rate
contracts. Equities and justice therefore do not dictate that this Court should retain jurisdiction
over purely state law claims. Given that discovery is complete, the case should progress rapidly
through the state courts.

Accordingly, for all the foregoing reasons, Plaintiffs’ Rule 59(e) motion is DENIED.

IT IS SO ORDERED.

bE l Lee!

WILLIAM {/HIBBLER, DISTRICT JUDGE

DATED: ©. March 10,2603


Minute Order Form (06/97)

United States District Court, Northern District of Illinois

lame of Assigned Judge Wi 7 itti ii
wa Magistrate age William J. Hibbler “than henigned Judge
CASE NUMBER 01 C 2212 DATE March 10, 2003
CASE Bell Enterprises Venture, et al. v. Santanna Natural Gas Corp., et al.
TITLE

[In the following box (a) indicate the party filing the motion, e.g., plaintiff, defendant, 3rd party plaintiff, and (b) state

briefly the nature of the motion being presented.]#=

(41)

MOTION:
Plaintiffs’ Motion for Relief from Judgment
DOCKET ENTRY: :
169) oO Filed motion of [ use listing in “Motion” box above.]
(2) Oo Brief in support of motion due___.
(3) a Answer brief to motion due. . Reply to answer brief due.
4) o Ruling/ Hearing on setfor___at
6) o Status hearing [held/continued to] [set for/re-set for] on setfor_ at
(6) im] Pretrial conference [held/continued to] [set for/re-set for] on___ set for____at
(7) oO Trial [set for/re-set for] on__ at
(8) q {Bench/Jury trial] [Hearing] held/continued.to. at.
(9) o This case is dismissed [with/without] prejudice and without costs [by/agreement/ pursuant to]
OOFRCP4(m) (General Rule 21 CO FRCP41(a)(1) O FRCP41(a)(2).
(10) Ml [Other docket entry] Plaintiffs’ motion for relief from judgment [#172-1] is DENIED.

a [For further detail see order attached to the original minute order.]

No notices required, advised in open
court,

No notices required. number of notices

Notices mailed by judge's staff.
Notified counsel by telephone.
Docketing to mail notices.

Mail AO 450 form. “o
ayyisia’S in}

Copy to judge/magistrate judge. yynod iy

courtroom WU we SU date mailed notice
yHC deputy's 6islkd | Vaya

initials =
Dag enig=Gaidi 3 ting Squy ata



to respond to certain requests for admission because they related to Santanna’s website. On
August 8, 2002, the parties appeared before the Court, and after hearing from both sides, the
motion was denied. Specifically, the Court explained to Plaintiffs’ counsel that there were already
several pending summary judgment motions, and therefore, unless the facts Plaintiffs sought to
admit directly affected those motions, the Court would not consider the matter at that time.
Plaintiffs’ counsel stated that he believed the facts would affect summary judgment, but deferred
to the Court's judgment, indicating that he did not want to overburden the Court in terms of
motions. But now that Plaintiffs have lost on sumtithary judgment, they contend the Court erred
in refusing to consider their motion since Defendants, by not responding to the request to admit,
effectively admitted that they acted with the requisite fraudulent intent.

Plaintiffs concede, though, that the Individual Defendants adopted Santanna’s responses
to the Requests to Admit, and that subject to two objections, Santanna denied this particular
request to admit. Nevertheless, Plaintiffs argue this denial was insufficient, and thus the failure
to properly respond constitutes a binding admission. Even if that is so (and the Court does not
believe it is), Plaintiffs’ argument comes too late, _If Plaintiffs thought there were particular
favorable facts the Court should consider on summary judgment, then they should have
specifically identified those contentions in their summary judgment papers. See Northern District
of Illinois Local Rule 56.1. Atthe hearing on the discovery motion, the Court expressed a willingness
to consider any information that related to the pending requests for summary judgment, but
Plaintiffs presented the Court with nothing specific until after the motions were decided against
them. The Court need not waste judicial resources adjudicating a discovery dispute that Plaintiffs
made no real attempt to show was relevant to the motions under consideration. As such, the

Court finds no manifest error of law on this point.

-6-


IN THE UNITED STATES DISTRICT COURT Hf
FOR THE NORTHERN DISTRICT OF ILLINOIS DOCKETED

EASTERN DIVISION MAR I 2 2003
BELL ENTERPRISES VENTURE )
and HTP AMERICA, INC., )
)
Plaintiffs, )
) NO. 01 C 2212
v. )
) JUDGE WILLIAM J. HIBBLER
SANTANNA NATURAL GAS CORP., )
T. WAYNE GATLIN and JESSE D. SMITH, )
)
Defendants. )

MEMORANDUM OPINION AND ORDER

On October 8, 2002, the Court issued a Memorandum Opinion and Order granting the
motion for summary judgment filed by Individual Defendants T. Wayne Gatlin and Jesse D. Smith
with respect to Plaintiffs’ civil RICO claim.’ Because the RICO count provided the sole basis for
federal jurisdiction, the Court dismissed Plaintiffs’ remaining state law claims pursuant to 28 U.S.C.
§ 1367. On October 23, 2002, Plaintiffs filed a motion seeking relief from judgment under Fed. R.
Civ. P. 60(b). However, because Plaintiffs’ motion was filed within ten days of entry of judgment,
as computed in accordance with Fed. R. Civ. P. 6(a), the Court treats the motion as a request to alter
or amend judgment under Fed. R. Civ. P. 59(e). See. Romo v. Gulf Stream Coach, Inc., 250 F.3d 1119,
1121 n.3 (7th Cir. 2001) (collecting cases). The only grounds for granting Rule 59(e) relief are “newly
discovered evidence, an intervening change in.the controlling law, and manifest error of law.”
Cosgrove v. Bartolotta, 150 F.3d 729, 732 (7th Cir. 1998).

Plaintiffs maintain the Court committed the following manifest errors of law: (1) entered

a sua sponte grant of summary judgment; (2) used animproper standard for analyzing scienter; and

"Bell Enter. Venture et al. v. Santanna Natural Gas Corp., et al., 2002 WL 31269437 (N.D. Ill.
Oct. 9, 2002).



(3) refused to rule on their previously filed motion,to deem facts admitted. Plaintiffs also ask the
Court, in the interests of judicial economy and fairness, to retain jurisdiction over their state law
claims. Because the Court finds no merit in any of Plaintiffs’ contentions, their Rule 59(e) motion
is denied.
Il

First, Plaintiffs argue, they had no notice.that the Court intended to grant summary
judgment on the basis that Defendants” did not possess the requisite intent to defraud. Claims of
mail and wire fraud, which is what Plaintiffs alleged here, require proof of three elements: (1)
participation in a scheme to defraud; (2) intent to.defraud; and (3) use of the mails or wire in
furtherance of the fraudulent scheme. Bell, 2002 WL 31269437, at *4. Defendants moved for
summary judgment on the grounds that Plaintiffs had no evidence of fraudulent conduct engaged
in by either of them, and that Plaintiffs could not identify mailings that induced them to act or
interstate wire communications. Plaintiffs responded by identifying the relevant incidents of
alleged “wire” and mail activity, and arguing that the mails and wires had been used in connection
with a scheme to defraud. In addition, Plaintiffs spent almost three pages (in a section of the
“Facts” entitled “Defendants’ Intentional and/or Reckless Acts of Wrongdoing”), pointing out
evidence in the record that Defendants had not raised in their summary judgment papers, which,
Plaintiffs argued, demonstrated “deliberate and/or fraudulent activity” by Defendants and thus
distinguished this case from the “run-of-the-mill breach of contract” action. Defendants, in their

reply, contended that the facts Plaintiffs relied upon were insufficient to show that they acted with

>For simplicity sake, the Court refers to Individual Defendants Gatlin and Smith as
“Defendants,” except when necessary to distinguish between Defendant Santanna and the
individuals.

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