Court Opinion

ID: 2999349
Source: CourtListenerOpinion
Date Created: 2015-09-24 19:53:15.35459+00
Date Added: 2024-06-11T12:42:52.446189
License: Public Domain

UNPUBLISHED ORDER
                           Not to be cited per Circuit Rule 53

           United States Court of Appeals
                              For the Seventh Circuit
                              Chicago, Illinois 60604

                              Argued November 9, 2005
                               Decided July 21, 2006

                                         Before

                           Hon. RICHARD A. POSNER, Circuit Judge

                           Hon. ILANA DIAMOND ROVNER, Circuit Judge

                           Hon. DIANE P. WOOD, Circuit Judge

No. 04-3719
                                                  Appeal from the United States
KEITH MCFARLAND,                                    District Court for the
              Plaintiff-Appellant,                  Southern District of Illinois.

      v.                                          No. 03-CV-0433-MJR

PAUL WEIL, MARSHALL & STEVENS,                    Michael J. Reagan, Judge.
INC., CARL HOGAN, JR., et al.,
              Defendants-Appellees.

                                       ORDER

       Keith McFarland sued his former employer, Marshall & Stevens, Inc. (M&S); the
law firm of Bryan Cave LLP; a Bryan Cave attorney, Paul Weil; and three relatives of
former Bryan Cave client Carl G. Hogan, Sr., alleging a conspiracy to violate various
provisions of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18
U.S.C. §§ 1962 (c)-(d),1964(c); violation of the Hobbs Act, 18 U.S.C. § 1951; and two
state law claims for tortious interference with contract and slander. The district court
dismissed McFarland’s federal claims with prejudice for failure to state a claim upon
which relief could be granted, see Fed. R. Civ. P. 12(b)(6), and declined to exercise its
supplemental jurisdiction over his state law claims, see 28 U.S.C. § 1367(c)(1), which
No. 04-3719                                                                      Page 2

it dismissed without prejudice. McFarland appealed, and we now affirm.

       We review de novo the dismissal of McFarland’s complaint under Rule 12(b)(6),
accepting the following factual allegations as true and drawing all reasonable
inferences in favor of McFarland. See Albany Bank & Trust Co. v. Exxon Mobil Corp.,
310 F.3d 969, 971 (7th Cir. 2002). On January 14, 2001, Carl G. Hogan, Sr., died.
Acting as co-executors of his estate, Hogan’s three sons, defendants Carl G. Hogan, Jr.,
Brian J. Hogan, and David Hogan, hired Weil, a Bryan Cave attorney, to prepare a
federal estate tax return. According to McFarland, Hogan’s sons and Weil conspired
to generate fraudulent federal tax returns for Hogan’s estate by providing false
information about the estate’s assets and accounting records to cooperating appraisal
firms.

       At some point after the alleged conspiracy began, Bryan Cave engaged M&S, a
national valuation firm, for assistance in preparing Hogan’s federal estate tax return.
McFarland, who worked as the Appraisal Director for M&S’s St. Louis office, was
assigned the task of completing an appraisal report for the Hogan Real Estate
Development Partnership, one of the Hogan estate’s assets. McFarland alleges that
upon submitting his draft appraisal report, the Hogans, Weil, and various senior M&S
appraisers, under the influence of Bryan Cave attorneys, attempted to persuade him
to alter his conclusions. When he refused to modify his report, they threatened to
contact every law firm in the St. Louis area in an effort to prevent him from working
as an appraiser in the future. On at least two occasions, McFarland contacted M&S’s
CEO to inform him about the fraud and to recommend that M&S withdraw from the
project; both attempts proved futile. In his complaint, McFarland alleges that after
M&S renegotiated its fee with Bryan Cave, M&S and the other defendants agreed that
McFarland posed a risk to their scheme. At that point, M&S removed McFarland from
the Hogan Estate working group; later, it terminated him. McFarland also claims that
the defendants agreed to destroy his draft appraisal report; the final report reflected
values based on the false information that McFarland refused to include.

       Shortly after his termination, McFarland filed a one-count complaint in federal
court alleging that the defendants conspired to violate RICO. See 18 U.S.C. § 1962(d).
Defendants promptly filed motions to dismiss the complaint, and McFarland sought
leave to amend, which the district court granted. On November 19, 2003, the district
court held an off-the-record status conference during which it informed McFarland and
his counsel of the heightened pleading requirements for RICO claims. The district
court then granted McFarland leave to file a second amended complaint, which the
defendants again moved to dismiss pursuant to Rule 12(b)(6). In an order dated
September 21, 2004, the district court granted defendants’ motions to dismiss
McFarland’s RICO claim. It reasoned that McFarland lacked standing under the
Supreme Court’s decision in Beck v. Prupis, 529 U.S. 494 (2000), because he was not
No. 04-3719                                                                         Page 3

injured by an act of racketeering. (The district court’s order granting Defendants’
motions to dismiss does not specifically mention Weil. We were assured at oral
argument, however, that this omission was an oversight by the district court and that
the case against Weil is also over.)

       The district court correctly concluded that McFarland’s RICO claim is foreclosed
by Beck. In Beck, under a set of facts indistinguishable in all material respects from
this case, the Court held that “a civil conspiracy plaintiff cannot bring suit under RICO
based on any act in furtherance of the conspiracy that might have caused the plaintiff
injury,” “[r]ather...a RICO conspiracy plaintiff [must] allege injury from...an act that
is independently unlawful under RICO.” 529 U.S. at 505-06 (emphasis added).
McFarland attempts to distinguish Beck by arguing that, unlike Beck, he was the
actual target of racketeering activity because the Defendants needed his work product,
namely the appraisal report, to carry out their scheme; this argument, however, is
irrelevant to the RICO standing analysis. In fact, Beck itself provides a stronger
example of a plaintiff who was “specifically targeted” for unlawful activity, given that
Beck alleged that the defendants in his case created an independent scheme for the
sole purpose of firing him, which included hiring an independent insurance company
to falsify reports against him and provide cause for his termination. The Supreme
Court has made it clear that a RICO plaintiff has standing to recover only “to the
extent that, he has been injured in his business or property by conduct constituting the
violation,” Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 (1985), which in this case
would be the Defendants’ alleged efforts to defraud the government by filing false tax
documents.

        There is no doubt that the injuries about which McFarland complains and the
corresponding relief that he seeks (namely, payment for loss of income and past and
future pecuniary losses), were proximately caused by his termination, which, wrongful
or otherwise, is not an act of racketeering for purposes of RICO. See, e.g., Hecht v.
Commerce Clearing House, Inc., 897 F.2d 21, 24 (2d. Cir. 1990) (“loss of employment
... for reporting or refusing to participate in an enterprise engaging a pattern of
racketeering activity is not injury sufficient for standing”); Nordine v. Textron, Inc., 819
F.2d 347, 349 (1st Cir. 1987) (noting that plaintiff’s injury resulted only from
defendant’s decision to terminate him for reporting alleged RICO violations, and
although “firing [the plaintiff] under these circumstances was wrong, ... it did not
violate the RICO Act”); 18 U.S.C. § 1962 (a)-(c) (listing unlawful practices under RICO,
none of which are employment termination or retaliation). See also Anza v. Ideal Steel
Supply Corp., 126 S. Ct. 1991, 1994 (2006) (holding that a plaintiff may sue under 18
U.S.C. § 1962(c), a different provision of RICO, “only if the alleged RICO violation was
the proximate cause of the plaintiff’s injury”).

       On appeal, McFarland also argues that the district court failed to consider his
No. 04-3719                                                                     Page 4

claim against the Defendants for violation of the Hobbs Act. His second amended
complaint, however, alleges no set of facts that constitute extortion under the Hobbs
Act. See Scheidler v. Nat’l Org. of Women, 537 U.S. 393, 404 (2003) (The “extortion
provision of the Hobbs Act ... require[s] not only the deprivation, but also the
acquisition of property.”). The only property at issue in this case is the valuation
report. McFarland’s complaint concedes that this report was not his own property, but
instead was something that he created as an employee of M&S under the direction of
Bryan Cave and for use by the Hogans. He has no right to pursue a claim that the
defendants wrongfully acquired their own appraisal reports.

       Although McFarland is unable to take advantage of the treble damages
provisions for federal claims brought under RICO, we note in closing that his state law
claims for tortious interference of contract and slander were dismissed without
prejudice. He is of course at liberty to refile these claims in state court and see how
they fare in that tribunal. We express no opinion on the latter point.

      The judgment of the district court is AFFIRMED.