DISCUSSION
Count I is brought under 18 U.S.C. § 1962(c). A claim under this section of
RICO must contain four elements: “(1) conduct (2) of an enterprise (3) through a

pattern (4) of racketeering activity.” Sedima, S.P.R.L. v. Imrex Co., 105 S.Ct. 3275,

3285 (1985). Stulp takes issue with the sufficiency of the complaint as to only one of
these elements: pattern. At bare minimum, a pattern of racketeering activity requires
two predicate acts of racketeering within a ten-year period. 18 U.S.C. §§ 1961(5). The
activities that can be considered predicate acts, listed in 18 U.S.C. § 1961(1), vary from
mail fraud to murder. In this case, the shareholders have alleged commercial bribery
and mail and wire fraud as predicate acts. Bribery is an activity listed among the
predicate acts, 18 U.S.C. § 1961(1)(A), and acts of commercial bribery as defined by
the Colorado statute can supply the foundation for a RICO claim. U.S. v. Gaudreau,
860 F.2d 357, 363 (10th Cir. 1988). However, the activities alleged within the
complaint do not amount to bribery, commercial or otherwise. To commit commercial
bribery under the Colorado statute, Stulp must have “accept[ed], or agree[d] to accept
any benefit as consideration for knowingly violating or agreeing to violate a duty of
fidelity...” Colo. Rev. Stat. 18-5-401(1). The shareholders do not allege that someone
gave Stulp something of value, which she then accepted in consideration for her
actions. Instead, they characterize her behavior as “theft,” “misappropriation,” or

“siphoning funds,” all indicating unilateral action. See, e.g., Complaint, J] 20, 39;

-4-


as well as telephone calls during which they claim Stulp made fraudulent statement
about the MAP deal.' A simple accounting of the number of instances of mail and wire

fraud is not determinative and can be merely happenstance. Ashland Oil, Inc. v.

Amett, 875 F.2d 1271, 1278 (7th Cir. 1989). The complaint describes only a few
isolated incidents spread out over a period of nine years of uninterrupted business
operation, connected to a single aspect of EMC’s business dealings. Even viewed in
the light most favorable to the shareholders, this is not the kind of frequent behavior
that would support an allegation of a habitual use of criminal activity within the
operations of the enterprise. See Pizzo v. Bekin Van Lines, 258 F.3d 629, 633 (7th Cir.
2001). It is sporadic and therefore cannot be construed as a “way of doing business.”

Compare Olive Can Co., Inc. v. Martin, 906 F.2d 1147, 1152 (7th Cir. 1990) and Lipin

v. Lee, 803 F.2d 322, 324 (7th Cir. 1986) with Liquid Air Corp. v. Rogers, 834 F.2d

1297, (7th Cir. 1987). In sum, the shareholders’ description of the events in this
dispute foreclose a conclusion that Stulp is engaging in open-ended racketeering

activity, and the shareholders’ argument to the contrary is unavailing.

The exact number of calls is unclear because of the vague allegations of { 40(c),
which obliquely refers to repeated reassurances Stulp purportedly made to Floyd during
telephone calls over a one-year period. Because this paragraph relates to a claim of
wire fraud, it is subject to the particularity requirements of Fed. R. Civ. Proc. 9(b). To
pass muster, it must give the “who, what, when, where, and how” of the events that
form its foundation. DiLeo v. Ernst & Young, 901 F.2d 624, 627 (7th Cir. 1990). An
amorphous allusion to a body of telephone calls, which does not attempt to identify
how many calls were involved or when they took place, does not supply a sufficient
degree of detail to support an allegation of wire fraud.

-7-


The shareholders filed suit that December against Stulp and EMC, alleging
violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”),
breach of contract, and common law fraud. The following February, they amended the
complaint, dropping EMC as a defendant and adding a claim for breach of fiduciary
duty. Stulp now moves to dismiss Count I, the RICO claim, pursuant to Fed. R. Civ.
P. 12(b)(6).

LEGAL STANDARD

The purpose of a motion to dismiss under Federal Rule of Civil Procedure
12(b)(6) is to test the legal sufficiency of a complaint. Triad Associates, Inc. v. Chicago
Hous. Auth., 892 F.2d 583, 586 (7th Cir. 1989), In ruling on a motion to dismiss, the
court must construe the allegations of the complaint in the light most favorable to the
plaintiff, and all well-pleaded facts and allegations in the complaint must be accepted
as true. Bontkowski v. First Nat'l Bank of Cicero, 998 F.2d 459, 461 (7th Cir. 1993).

The allegations ofa complaint should not be dismissed for failure to state a claim
"unless it appears beyond a doubt that the plaintiff can prove no set of facts in support
of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46
(1957). Nonetheless, in order to withstand a motion to dismiss, a complaint must allege
facts sufficiently setting forth the essential elements of the cause of action. Lucien v.
Preiner, 967 F.2d 1166, 1168 (7th Cir. 1992). With these principles in mind, we turn

to the instant motion.


Pl.’s Resp. at 4-6, 9. In other words, the shareholders seem to argue that Stulp
accepted bribes from herself. Needless to say, this is not an adequate allegation. While
we do not opine whether Stulp’s activities were illegal in some form or fashion, one
thing is certain: they were not connected with acts of commercial bribery.

The flaws in the allegations of bribery do not doom Count I; the shareholders
have also alleged several predicate acts of mail and wire fraud. To properly shape
these acts into the requisite pattern, the shareholders must establish that the predicate
acts are related and that they “amount to or pose a threat of continued criminal
activity.” H.J., Inc. v. Northwestern Bell Tel. Co., 109 S.Ct. 2893, 2900 (1989). The
continuity prong can be satisfied by either open-ended or closed-ended activity.
Vicom, Inc., v. Harbridge Merchant Servs., Inc., 20 F.3d 771, 779 (7th Cir. 1993). The
main difference between the two is the presence or absence of a natural endpoint for
the unlawful scheme, but the factors relating to each differ as well. Id.; Morgan v.
Bank of Waukegan, 804 F.2d 970, 975 (7th Cir. 1986).

Although continuity can be shown by either closed-ended or open-ended
activity, the shareholders do not assert that Stulp’s practices were a closed-ended
activity. Rather, they argue that because Stulp “continues to use EMC to fund MAP
and line her pockets with plaintiffs’ money,” she is conducting an open-ended activity.

Pls.’ Resp. at 7. Open-ended activity can be shown in three ways. Vicom, 20 F.3d at

782. The shareholders argue that its complaint fits two of the three possible scenarios.

-5-


In its essentials, the shareholders’ RICO claim is based on the alleged usurpation
of one business opportunity resulting in one injury to one set of victims. A single
fraudulent objective, the claimed misappropriation of a business opportunity, even
though supported by a series of similar and related acts, does not supply the requisite
“pattern of racketeering activity.” The complaint fails to satisfy the continuity element
imputed to the statute. Count I therefore cannot withstand Stulp’s 12(b)(6) challenge;

it must be dismissed.

CONCLUSION

Based on the foregoing analysis, Stulp’s motion to dismiss Count I is granted.

CPerBae Poe rea

Charles P. Kocoras
United States District Judge

Dated: May 23, 2002


Mite Order Form (06/97)

United States District Court, Northern District of Illinois

N: f Assigned Jud; Sitting Judge if Oth
igr Magistrate Judge Charles P. Kocoras than Asigned Judge
CASE NUMBER 01 C 9626 DATE §/23/2002
CASE Greer et al vs. Stulp et al
TITLE

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

MOTION: of the motion being presented.}

DOCKET ENTRY:

qd) a Filed motion of [ use listing in “Motion” box above.]

(2) oOo Brief in support of motion due

G3) o Answer brief to motion due. . Reply to answer briefdue___.

(4) oO Ruling/Hearing on___ set for at

(5) | Status hearing set for 6/10/2002 at 9:45 A.M..

(6) Qo Pretrial conference[held/continued to] [set for/re-set for] on set for at

(7) im Trial{set for/re-set for] on at

(8) im) [Bench/Jury trial] [Hearing] held/continued to at

(9) Oo This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]

COFRCP4(m) OGeneral Rule 21 COFRCP41(a\(1) OO FRCP41(a)(2).

(10) Mi (Other docket entry] Ruling held. ENTER MEMORANDUM OPINION: Stulp’s motion (Doc
13-1) to dismiss Count is granted. As the remaining counts are here on diversity, the oral dismissal order
issued in open court dismissing the remaining counts is hereby vacated. Counsel are directed to appear
at the June 10, 2002 status hearing at 9:45 a.m.

(il) @f [For further detail see order attached to the original minute order.]

No notices required, advised in open court.

No notices required

Notices mailed by judge’s staff.

Notified counsel by telephone.

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First, they claim that the situation involves a specific threat of repeated criminal
activity. Second, they assert that the predicate acts of mail and wire fraud constitute
Stulp’s regular way of conducting business. Id.

The instant complaint contains one allegation that hints at the threat of repeated
misconduct: “Stulp’s misappropriation of funds would continue indefinitely, but for the

”

commencement of this action.” Complaint, ] 42. However, “bald assertions” of
continued racketeering activity are insufficient to show open-ended activity. Id. at 783.
In addition, the complaint states that, in May 2001, Stulp informed the plaintiffs that
she did not intend to effect the promised transfer of an interest in MAP, bringing
whatever misrepresentations she may have made to a close. Moreover, in July 2001,
five months before the shareholders filed suit, Stulp revealed to them the extent of
MAP’s financial obligations to EMC. In short, the facts in the complaint do not add
up to a threat of indefinite continued wrongdoing. On the contrary, the shareholders
have alleged that as of July 2001, Stulp had come clean and the fraud was at an end.
The complaint’s description of the endpoint of Stulp’s purported scheme disallows any
inference that Stulp would engage in continued criminal activity, assuming that her acts
would rise to that level in the first place.

As for the second scenario, the shareholders argue that Stulp’s acts evince a

routine that amounts to a regular way of doing business. The acts to which the

shareholders look are three mailings of financial statements over a three-year period

-6-


UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

CARL GREER, THOMAS A. FLOYD,
HERBERT A. VANCE, JR., THE
ARTICLE 9 TRUST OF JOYCE M.
HAMPTON, and THE ARTICLE 9 TRUST
OF MELINDA SULLIVAN,

01 C 9626

pecKETeS

MAY 2.4 2002

)

)

)

)

)

)
Plaintiffs, )
)

vs. )
)
PATTY STULP, )
)
Defendant. )

MEMORANDUM OPINION

CHARLES P. KOCORAS, District Judge:

This matter comes before the court on a motion to dismiss Count I of the
amended complaint. For the reasons set forth below, the motion is granted.

BACKGROUND

Plaintiffs Carl Greer (“Greer”), Thomas Floyd (“Floyd”), Herbert Vance, the
Article 9 Trust of Joyce M. Hampton, and the Article 9 Trust of Melinda Sullivan
(collectively referred to as “the shareholders”) are investors in a closely held Colorado
corporation called Ethanol Management Company (“EMC”). Defendant Patty Stulp
(“Stulp”) is the president of EMC as well as a shareholder. In late 1992 or early 1993,

Stulp proposed the purchase of a company called E & R Trucking to Greer. The two

|


decided that either EMC would purchase the company or the shareholders collectively
and Stulp individually would each purchase a 50% interest in the venture.
According to the shareholders, Stulp then proceeded to purchase the company
herself and set up a venture called MAP Trucking. She supposedly used EMC funds
to purchase and fund MAP, without obtaining shareholders’ authorization to do so. In
April 1993, Stulp informed Greer and Floyd of what she had done; Greer then
requested that she transfer the 50% interest discussed when Stulp first brought up the
purchase of E&R Trucking as well as certain financial data and other documentation
of the transaction. In December 1993, without the shareholders’ knowledge or consent,
Stulp allegedly created a revolving line of credit agreement that enabled MAP to
borrow as much as $540,000 from EMC. The shareholders contend that from that
point on, Stulp continually sank EMC resources into MAP operations, ultimately
running up a tab of $551,532. Throughout the intervening eight years, Stulp
purportedly misrepresented the relationship between EMC and MAP in telephone
conversations as well as mailing the shareholders incomplete and deceptive financial
information. In May 2001, Stulp informed Greer that she did not intend to transfer
50% of her interest in MAP to the shareholders as was agreed in the first meeting the
parties had regarding the acquisition. Finally, in July 2001, Floyd received a financial

statement from Stulp that indicated the full extent of MAP’s debt to EMC.