Court Opinion

ID: 768351
Source: CourtListenerOpinion
Date Created: 2012-04-18 09:02:53+00
Date Added: 2024-06-11T12:12:23.730725
License: Public Domain

209 F.3d 648 (7th Cir. 2000)
Oak Park Trust and Savings Bank, as Trustee  under Trust Agreement No. 6716,  and Radcliff Development Corporation,    Plaintiffs, Counterdefendants-Appellees,v.C.G. Therkildsen, Defendant, Counterplaintiff-Appellant.
Nos. 98-2841 & 99-2020
In the  United States Court of Appeals  For the Seventh Circuit
Argued February 9, 2000Decided March 30, 2000

Appeals from the United States District Court  for the Northern District of Illinois, Eastern Division.  No. 96 C 2896--Charles P. Kocoras, Judge.
Before Bauer, Easterbrook, and Ripple, Circuit Judges.
Easterbrook, Circuit Judge.

1
Illinois law provides  that a person named as a defendant in a lawsuit  sometimes may pursue a claim that otherwise would  be time-barred by asserting it as a counterclaim  against the original plaintiff. 735 ILCS 5/13-  207. When Radcliff Development Corporation*  sued the Village of Inverness and its Trustees  for failing to provide compensation for water and  sewer facilities that the Village required  Radcliff to furnish to neighbors of a residential  development, C.G. Therkildsen, one of the  Trustees, saw this as an opening. Therkildsen had  purchased a house in one of Radcliff's  subdivisions. According to Therkildsen, Radcliff  promised to maintain the subdivision as a gated  community, with round-the-clock security, but has  not kept this promise. By way of a counterclaim,  Therkildsen sought treble damages under state law  and the Racketeer Influenced and Corrupt  Organizations Act (RICO), 18 U.S.C. sec.sec. 1962,  1964.

2
District Judge Duff, to whom Radcliff's suit  was initially assigned, entered an order  forbidding any of the defendants to file an  answer to the complaint while the parties engaged  in settlement negotiations. The basis of this  order is not readily apparent, but it was not  appealable. Therkildsen filed his counterclaim  before Judge Duff prohibited answers. After Judge  Duff retired from active service, the case was  reassigned to Judge Kocoras, who added a  prohibition against "motions to dismiss and/or  for summary judgment". After Radcliff moved to  dismiss Therkildsen's counterclaim (violating  Judge Kocoras's order in the process) on the  ground that a counterclaim is supposed to  accompany the answer, see Fed. R. Civ. P. 12(b),  Therkildsen filed an answer--which Radcliff moved  to strike, asserting not only that filing an  answer violated Judge Duff's order but also that  an answer was unnecessary because the parties  were so close to settlement. Judge Kocoras  granted this motion and struck Therkildsen's  answer. 1997 U.S. Dist. Lexis 19516 (N.D. Ill.  Dec. 4, 1997). Observing that Therkildsen had not  answered the complaint, the judge then dismissed  the counterclaim. Until an answer has been filed,  the plaintiff has an unconditional right to  dismiss the suit. Fed. R. Civ. P. 41(a)(1). Once  the answer is on file, a judge may impose  conditions to protect the interests of other  parties. "If a counterclaim has been pleaded by  a defendant prior to the service upon the  defendant of the plaintiff's motion to dismiss,  the action shall not be dismissed against the  defendant's objection unless the counterclaim can  remain pending for independent adjudication by  the court." Fed. R. Civ. P. 41(a)(2). Having  struck the answer, the district court dismissed  the counterclaim without waiting for a motion  under Rule 41(a), and without inquiring under  Rule 41(a)(2) whether "the counterclaim can  remain pending for independent adjudication by  the court." Because timeliness of Therkildsen's  action likely depended on 735 ILCS 5/13-207,  which is not available if the claim must stand on  its own, dismissal of the counterclaim prevents  its refiling as an independent suit, whether or  not it could be supported by federal  jurisdiction.

3
Therkildsen asks us to hold that the district  judge should not have struck his answer, and  there is much to be said for his position. How  can a district judge strike an answer that meets  none of the conditions that Fed. R. Civ. P. 12(f)  specifies for that action? A desire to avoid the  application of Rule 41(a)(2) is not a good reason  to strike an otherwise proper answer. Moreover,  the foundation of dismissal--a motion under Rule  41(a)(1)--was missing. The district judge  dismissed the action in anticipation of  settlement. The order of December 1997 said that  because agreement was imminent, an answer was  unnecessary; because the answer had just been  vaporized, the counterclaim could be dismissed  without regard to Rule 41(a)(2). Yet the  plaintiff did not move for dismissal under Rule  41(a)(1). Instead the judge dismissed the suit on  his own some months later, "with leave to  reinstate" if a settlement were not reached by a  date certain. That date was repeatedly extended,  and the action did not come to an end (by the  expiration of time to reinstate) until March  1999. As in Otis v. Chicago, 29 F.3d 1159 (7th  Cir. 1994) (en banc), the court never did enter  a proper judgment. Extended delay embarrasses the  judge's assertion of December 1997 that  settlement was only a few trivial details from  completion, so that the court could act as if  settlement had been consummated, as if an answer  were pointless and had not been filed, as if  there were no suit to which a counterclaim could  pend, and as if a Rule 41(a)(1) motion had been  filed. None of these "as ifs" was true.

4
We need not nail down the consequences of these  events, however, because there is a compelling  reason why Therkildsen's counterclaim was not  properly before the court: lack of subject-matter  jurisdiction. The district court hinted at this  possibility when denying Therkildsen's motion for  reconsideration. 1998 U.S. Dist. Lexis 9274 (N.D.  Ill. June 19, 1998). Therkildsen's claim against  Radcliff arises from events other than those that  led to Radcliff's claim against the Village. It  is therefore a permissive rather than a  compulsory counterclaim. Fed. R. Civ. P. 13(b).  As a permissive counterclaim, it is outside the  supplemental jurisdiction (28 U.S.C. sec.1367(a)  covers only "claims that are so related to claims  in the action within such original jurisdiction  that they form part of the same case or  controversy under Article III of the United  States Constitution") and requires an independent  basis of federal jurisdiction. By-Prod Corp. v.  Armen-Berry Co., 668 F.2d 956, 961 (7th Cir.  1982); Clark v. Universal Builders, Inc., 501 F.2d 324, 341 (7th Cir. 1974); Charles Alan  Wright, Arthur R. Miller & Mary Kay Kane, 6  Federal Practice and Procedure sec.1422 (2d ed.  1990). Because the parties are not of diverse  citizenship, jurisdiction depends on a claim  arising under federal law. All but one of  Therkildsen's theories rests on Illinois law,  however, and the exception is insubstantial.

5
The nub of Therkildsen's grievance is, to quote  his brief: "Despite numerous written  representations by Radcliff that the Development  was a private gated community, some time after  the house was built and Therkildsen moved in,  Therkildsen came to realize that the Development  would be neither private nor gated." If these  "written representations" were sufficiently  definite, then they formed part of the parties'  contract, and Therkildsen has a simple contract  claim. If they were not definite, then  Therkildsen has no claim at all, whether  denominated contract or fraud. Eisenberg v.  Goldstein, 29 Ill. 2d 617, 195 N.E.2d 184 (1963);  Barille v. Sears, Roebuck & Co., 289 Ill. App. 3d 171, 682 N.E.2d 118 (1st Dist. 1997); see also  Vaughn v. General Foods Corp., 797 F.2d 1403 (7th  Cir. 1986) (Indiana law). RICO does not provide a  federal treble-damages action for breach of  contract. See Perlman v. Zell, 185 F.3d 850, 853  (7th Cir. 1999). Even if Radcliff's  representations deserve the label "fraud," RICO  still does not come into play unless the  defendant conducted a pattern of racketeering.   H.J. Inc. v. Northwestern Bell Telephone Co., 492 U.S. 229 (1989); see also Sedima, S.P.R.L. v.  Imrex Co., 473 U.S. 479 (1985). Therkildsen does  not contend that Radcliff defrauded anyone other  than purchasers at a single real estate  development--one scheme at most, and well short  of the required pattern. A plaintiff's failure to  prove his contentions does not deprive a court of  jurisdiction, Steel Co. v. Citizens for a Better  Environment, 523 U.S. 83, 89-90 (1998); Bell v.  Hood, 327 U.S. 678, 682 (1946), but Therkildsen's  RICO theory is so feeble, so transparent an  attempt to move a state-law dispute to federal  court and avoid the state statute of limitations,  that it does not arise under federal law at all.  See Goosby v. Osser, 409 U.S. 512, 518 (1973);  Crowley Cutlery Co. v. United States, 849 F.2d 273 (7th Cir. 1988). Thus the district judge  rightly dismissed Therkildsen's counterclaim,  though not for the reasons the judge gave.

Affirmed

Notes:

*
 The complaint used "Radcliffe Development  Corporation," but the firm's brief in this court  drops the "e"--though its certificate of interest  labels the party "Radcliffe Corporation." We use  "Radcliff" because that spelling predominates in  the most recent papers.