Michael Deguelle v. Kristen Camilli
664 F.3d 192
7th Cir.2011Background
- DeGuelle, a tax employee at SCJ, was terminated after reporting alleged tax fraud to SCJ and federal authorities.
- He sued SCJ and related individuals in district court, asserting §1962(c) and §1962(d) RICO claims.
- District court dismissed the RICO claims with prejudice, finding predicate acts unrelaed or nonproximate to injuries.
- The court held retaliatory acts were unrelated to the alleged tax fraud scheme, and thus not a pattern under §1962(c).
- The Seventh Circuit reversed, concluding the predicate acts are related under the continuity plus relationship test and that §1513(e) acts can form a RICO pattern.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §1962(c) pattern requires relation between acts | DeGuelle argues retaliation is related to tax fraud as part of a single pattern. | Appellees contend retaliation and tax fraud are separate schemes with different victims. | Related under continuity plus relationship; pattern established. |
| Whether §1513(e) acts can be RICO predicates and relate to underlying fraud | §1513(e) retaliation acts can be tied to the underlying fraud as part of a single scheme. | Retaliation acts are not automatically related to underlying fraud for RICO purposes. | §1513(e) predicates can relate to underlying wrongdoing; not per se isolated. |
| Whether there is continuity to satisfy pattern under §1962(c) | Tax fraud acts over several years show closed-ended continuity; more acts reinforce pattern. | The scheme lacks ongoing threat beyond foreign tax credit issues. | Continuity satisfied when grouping with retaliation acts; five-month period shows ongoing threat. |
| Whether the injuries were proximately caused by the RICO predicate acts | Injury suffered (termination, suit, defamation) was caused by retaliatory acts. | Injury must be by reason of violation; retaliation alone may be insufficient. | Retaliation proximate cause established when tied to RICO predicate acts in pattern. |
| Whether §1962(d) conspiracy claim survives | There was an agreement among tax conspirators and others to commit and conceal fraud. | Need explicit agreement to two predicates; some actors’ involvement is sparse. | Complaint plausibly alleges an agreement among core conspirators and others; §1962(d) survives. |
Key Cases Cited
- H.J. Inc. v. Northwestern Bell Telephone Co., 492 U.S. 229 (1989) (establishes 'continuity plus relationship' pattern test)
- Evans v. City of Chicago, 434 F.3d 916 (7th Cir. 2006) (proximate cause and injury-by-reason standards)
- Morgan v. Bank of Waukegan, 804 F.2d 970 (7th Cir. 1986) (factors for continuity in RICO analysis)
- United States v. Maloney, 71 F.3d 645 (7th Cir. 1995) (relatively broad relationship standard for pattern)
- Roger Whitmore’s Auto. Servs., Inc. v. Lake Cnty., Ill., 424 F.3d 659 (7th Cir. 2005) (conspiracy requires two or more predicate acts in furtherance of enterprise)