Opinion ID: 205792
Heading Depth: 2
Heading Rank: 4

Heading: Failure to State a Constructive-Trust Claim

Text: Finally, the racetracks argue that the casinos have failed to state a constructive-trust claim. This is actually a backdoor challenge to the sufficiency of the RICO allegations; the constructive-trust claim is not an independent basis for liability but instead seeks an equitable remedy for the underlying RICO violation to prevent the racetracks from being unjustly enriched. Balmoral and Maywoodthe racetracks Johnston ownsargue that we should affirm the dismissal of the constructive-trust claim because the conduct underlying the RICO count was not a proximate cause of the casinos' injury. The cause of the injury, they assert, is the drafting and enactment of the Racing Acts by the Illinois General Assembly, not any conspiracy among the RICO defendants. They made the same argument in the district court in support of their motion to dismiss the RICO count for failure to state a claim. The district court rejected it, and we agree. The casinos' allegations are sufficient to support RICO proximate cause. The Supreme Court has said that when evaluating proximate causation under RICO, the central question . . is whether the alleged violation led directly to the plaintiff's injuries. Anza v. Ideal Steel Supply Corp., 547 U.S. 451, 461, 126 S.Ct. 1991, 164 L.Ed.2d 720 (2006). A RICO plaintiff must show that the predicate offense not only was a `but for' cause of his injury, but was the proximate cause as well. Hemi Group, LLC v. City of New York, ___ U.S. ___, 130 S.Ct. 983, 989, 175 L.Ed.2d 943 (2010) (quotation marks omitted). What this means is that the link between the alleged RICO conspiracy and the plaintiff's injury must not be too remote, or purely contingent, or indirec[t]. Id. (citation omitted). The casinos allege the following: that the 2006 and 2008 Racing Acts were the product of a corrupt bargain between Blagojevich and Johnston; that Blagojevich solicited and Johnston paid large sums of money to the governor's campaign committee in exchange for the governor's influence in getting the Racing Acts passed and for signing them into law; that Blagojevich delivered on this agreement; and that by operation of these two corruption-tainted laws, they are forced to turn over 3% of their profits to the racetracks. These allegations state a direct line of causation. The casinos' injury is not too remote from the conspiracy; to the contrary, the object of the conspiracy was to put money in Blagojevich's pocket (or in his campaign committee's coffers) in exchange for the enrichment of the racetracks at the casinos' expense via the enactment and signing of the Racing Acts. The casinos' injury flowed directly from the conspiracy, or so a reasonable jury could conclude. Arlington, Fairmount, and Hawthorne make two separate arguments relating to the legal sufficiency of the constructive-trust claim. They contend that the constructive-trust claim was properly dismissed because (1) the constitutionality of the Racing Acts has already been upheld by the state courts; and (2) a constructive trust would be an impermissible attack on the state-court judgments. [12] These are variations on the preclusion arguments earlier discussed, and we reject them for reasons that are by now familiarnamely, that the state- and federal-court actions involve different claims and parties. A constructive trust is an equitable remedy imposed by a court to prevent the unjust enrichment of a party through actual fraud or breach of a fiduciary relationship. In re Liquidation of Sec. Cas. Co., 127 Ill.2d 434, 130 Ill.Dec. 446, 537 N.E.2d 775, 782 (1989). The casinos may prove that the racetracks were unjustly enriched by the RICO conspiracy without reference to the constitutionality of the Racing Acts. Their claim here is that the Acts are tainted by corruption, not that they are unconstitutional. In a different twist on the same argument, the racetracks maintain that the constructive-trust claim cannot proceed because the state courts have determined that the casinos must pay the surcharge and that they (the racetracks) are entitled to receive the proceeds from the Horse Racing Fund. The state-court orders do not speak quite so broadly. The state courts dismissed the casinos' suits under the Protest Monies Act and ordered the state treasurer to transfer the money to the Horse Racing Fund. From there the Racing Acts functionedand continue to functionnormally. An order from the district court in this case would not disturb these state-court judgments. A constructive trust would operate on the special escrow account now holding the money disbursed from the Horse Racing Fund. The TRO is structured so that it does not enjoin the Illinois Treasurer from performing actions prescribed by state law or required by state-court order. Finally, the racetracks suggest that a constructive trust would, in essence, repeal the Racing Actsan action a federal court obviously has no authority to take. [13] But a constructive trust on the disbursements received from the Horse Racing Fund would neither nullify the Racing Acts nor undo the state-court judgments. True, it would prevent the racetracks from receiving payments from the Fund, but only because the casinos will have proven that they were unjustly enriched by the RICO conspiracynot that the Racing Acts or any order entered by a state court was invalid. For the foregoing reasons, we REVERSE the district court's order denying Blagojevich's claim of legislative immunity and REMAND with instructions to dismiss him from the case. We also REVERSE the district court's order dismissing the constructive-trust claim for lack of jurisdiction, denying preliminary injunctive relief, and dissolving the TRO. The case is REMANDED for further proceedings consistent with this opinion. The TRO shall remain in effect.