Hartz v. FriedmanHartz v. Friedman
Robert F. Parker, Beckman, Kelly & Smith, Hammond, Ind., for Albert B. Friedman, and Albert Brooks Friedman, Ltd.
David C. Jensen, Eichhorn, Eichhorn & Link, Hammond, Ind., for Dawn E. Wellman, Max Cohen and Law Firm of Cohen and Thiros.
Before WOOD, Jr., and EASTERBROOK, Circuit Judges, and FAIRCHILD, Senior Circuit Judge.
FAIRCHILD, Senior Circuit Judge.
Plaintiffs Bettye Hartz аnd her husband, Carroll, employed defendant Friedman, an Illinois lawyer, to recover damages for injuries Bettye sustained in 1980 and for medical malpractice in diagnosis and treatment of an injury she suffered in 1976. In 1981 Friedman brought an action on those claims in an Indiana court. Friedman, however, had failed to present the malpractice complaint to a medical review panel аs required by Indiana law.
In 1985 the Hartzes, on Friedman‘s recommendation, additionally employed Indiana lawyers Wellman and Cohen, and the personal injury claims were then settled. By that time, Friedman had brought the malpractice complaint against Dr. Alexander Kott and two others before a medical review panel. On August 16, 1986, the panel issued its opinion, finding evidence of negligence as to Dr. Kott, but not the others. Plaintiff had ninety days within which to bring suit.
The Hartzes brought the present action against Friedman, Wellman, and Cohen and their law firms in 1988. They attempted to state a RICO claim as authorized by
On motion of defendants, the district court dismissed the RICO count with prejudice and the pendent claims withоut prejudice. The court found sanctions against plaintiffs’ counsel appropriate under Rule 11, and awarded $1,734 in favor of defendant Friedman and $8,075 in favor of defendants Wellman and Cohen and their firm. The Hartzes and their counsel appealed.
DISCUSSION
The district court might well have dismissed the plaintiffs’ complaint on the ground that it was an egregious violation of Rule 8(a) of the Federal Rules of Civil Procedure. Rule 8(a) requires that a complaint set forth “a short and plain statement of the claim.” The plaintiffs’ complaint is neither short nor plain. It contains 125 pages (323 paragraphs) including a mass of details which might be relevant and appropriate at trial, but which are clearly surplusage in stating a claim. The volume and form of the pleading make it difficult to sort out the nеcessary elements of a RICO claim. Nonetheless, we will treat the complaint on its merits because the district court chose to do so and because doing so will dispose of the RICO claim with finality. See Jennings v. Emry, 910 F.2d 1434, 1436 (7th Cir.1990).
The plaintiffs claim the defendants violated
The law firms with which the defendants were associated might well meet the requirements for being “enterprises,” but that is not the plaintiffs’ claim. The plaintiffs allege that Friedman, Cohen, and Wellman formed an association in fact that provided legal services (Complaint p 192A). The complaint does not allege that Friedman associated with Wellman and Cohen apart from the Hartzes’ case. The association did no more than continue the representation of the Hartzes, earlier begun by Friedman. Whether this ad hoc association for carrying on the Hartz litigation has the structure, рurpose, and continuity needed in order to qualify as an “enterprise” under RICO is open to question. We need not resolve it, however. As will be seen, we find no pattern of racketeering activity.
The next requirement of RICO is that the defendants engage in a pattern of racketeering activity. The pattern requirement is difficult to define and requires courts to use common sense. H.J., Inc. v. Northwestern Bell Telephone Co., 492 U.S. 229, 109 S.Ct. 2893, 2901, 106 L.Ed.2d 195 (1989); United States Textiles, Inc. v. Anheuser-Busch Companies, Inc., 911 F.2d 1261, 1269 (7th Cir.1990). In H.J., Inc., the Supreme Court said that the continuity plus relationship test first described in Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 n. 14, 105 S.Ct. 3275, 3285, n. 14, 87 L.Ed.2d 346 (1985), was still valid. H.J., Inc., 109 S.Ct. at 2900. Predicate acts are related if the acts ” ‘have the same or similar purposes, results, participants, victims, or methods of commission, or otherwise are interrelated by distinguishing characteristics and are not isolated events.’ ” H.J., Inc., 109 S.Ct. at 2901 (quoting
The Seventh Circuit has decided several cases since H.J., Inc. and has in each case concluded that the necessary continuity was absent. United States Textiles, 911 F.2d at 1269 (no pattеrn where criminal activity does not present a significant social threat); New Burnham Prairie Homes, Inc. v. Village of Burnham, 910 F.2d 1474, 1478-79 (7th Cir.1990) (no pattern where there is one injury to one person and no threat of future fraud); Olive Can Co. v. Martin, 906 F.2d 1147, 1151 (7th Cir.1990) (no pattern where defendants were involved in fraud to pay back a business loan and fraud was not the regular way of doing business); Management Computer Services, Inc. v. Hawkins, Ash, Baptie & Co., 883 F.2d 48, 51 (7th Cir.1989) (no pattern where all wrongdoing occurred at one time); Sutherland v. O‘Malley, 882 F.2d 1196, 1205 (7th Cir.1989) (no pattern where defendant is “an ‘isolated offender’ engaged in a ‘one-shot’ effort to infliсt a single injury“).
In all of its cases, the Seventh Circuit has evaluated the pattern requirement with reference to four factors: “(1) the number and variety of predicate acts and the length of time over which they were committed; (2) the number of victims; (3) the presence of separate schemes; and, (4) the occurrence of distinct injuries.” United States Textiles, 911 F.2d at 1266 (citing Morgan v. Bank of Waukegan, 804 F.2d 970, 975 (7th Cir.1986)).
The RICO statute defines “racketeering activity,” often referred to as predicate acts, as any one of several federal or state offenses, including wire and mail fraud.
The Seventh Circuit, however, does not look favorably on relying on many instances of mail and wire fraud to form a pattern. In Lipin Enterprises Inc. v. Lee, 803 F.2d 322 (7th Cir.1986), the court did not find a pattern although twelve predicate acts were alleged:
Mail fraud and wire fraud are perhaps unique among the various sorts of “racketeering activity” possible under RICO in that the existence of a multiplicity of predicate acts (here, the mailings) may be no indication of the requisite continuity of the underlying fraudulent activity.
Id. at 325 (Cudahy, J., concurring).
In their brief, the plaintiffs argue they could also prove a violation of the Hobbs Act,
The second factor requires a consideration of the number of victims. Clearly, the Hartzes were the only victims. The third factor asks whether there are separate schemes, although the definition of a scheme may be as difficult to explain as the definition of a pattern, H.J., Inc., 109 S.Ct. at 2901 n. 3. The plaintiffs alleged that the defendants devised two schemes to defraud. The complaint, in paragraphs 191A to 192, alleges that there was a scheme to conceal from plaintiffs a certain lawsuit against plaintiffs which arose out of defendant Friedman‘s failure to appear at a deposition he had noticed in preparation for the medical review panel. In this lawsuit the parties attending the depositiоn obtained an award of their expenses.
The complaint alleges that the injury resulting from this scheme is that the plaintiffs would have dismissed the defendants had they known of the matter. This seems no more than a claim that plaintiffs were deprived of the intangible right of honest services of their lawyers. Before enactment of
Paragraphs 273A, 274, 275, and 279 might be read, liberally construed, as pleading a scheme to defraud plaintiff of money by demanding an advance of $8,500 in order to hire certain assistance in the malpractice case which defendants really did not intend to employ. It would follow that mailings or interstate telephone calls in furtherance of this scheme would be predicate acts for the purpоse of RICO. Some such communications were alleged, at least in general terms.
We then assume, perhaps with excessively generous interpretation, that some small number of mailings and interstate telephone calls in furtherance of each scheme are sufficiently alleged as predicate acts.
The final factor is whether the plaintiffs experienced distinct injuriеs. The plaintiffs may have had a meritorious claim for medical malpractice. They have lost the opportunity to pursue it, allegedly through the failure of defendants to perform their professional duties. The complaint also suggests that defendants persuaded the plaintiffs to settle their personal injury claims for too low a figure. How these two injuries arose out of the schemes alleged, or the mailings and interstate telephone calls which may have furthered them, is hard to see. The Hartzes were also injured if the defendants used money belonging to the Hartzes to pay the judgment which arose out of Mr. Friedman‘s failure to appear at a deposition.
Taking together all the predicate acts alleged, and applying the four factors rеferred to, we conclude that there was neither the relationship nor continuity among the predicate acts necessary to form a RICO pattern. Except for the belated claim that some of the communications violated the Hobbs Act, all the predicate acts constituted mail or wire fraud. Those relating to each scheme occurred over a short рeriod of time, and the entire “enterprise” lasted a year and a half at most. The Hartzes were the only victims. The two schemes were unrelated, except that both were incidents of defendants’ representation of the Hartzes.
In an effort to improve their claim, the plaintiffs bring up facts that were not in the complaint but which they included in a proposed amended cоmplaint that they were not allowed to file. The plaintiffs claim they have discovered two additional instances of wrongdoing by Friedman. In the first instance, Friedman allegedly caused a female client to agree to a fee by using “undue influence, coercion, misrepresentation, and intimidation.” Friedman and members of his firm told the client that she would not be able to get a divorce аnd would be left to represent herself unless she agreed to excessive fees. When Friedman sent the client a billing statement, it included time during which Friedman was engaged in sexual relations with her. The second instance is that Friedman was incarcerated for contempt of court orders in the case of Friedman v. Friedman.
These allegations spell out no scheme to defraud, and no mailings nor interstatе wire communications, except for the reference to sending a bill to the client. Thus they do not allege any additional predicate acts. It seems apparent that they are unrelated to the conduct of the Friedman-Wellman-Cohen “enterprise.”
After the entry of judgment dismissing the complaint, the plaintiffs moved to alter and amend the judgment pursuant to
We affirm the judgment.
The plaintiffs’ counsel brought his own appeal from the award of Rule 11 sanctions against him. We find no abuse of discretion. As the district court noted, the plaintiffs’ complaint excessively details a serious dispute with the defendants which may form the basis for relief in state court, but which does not state a claim for whiсh relief can be granted under
We also grant the defendants’ motion for sanctions under
Thus, the appeal was frivolous. Sanctions are appropriate if “the appeal was prosecuted with no reasonable expectation of altering the district court‘s judgment and for purpоses of delay or harassment or sheer obstinacy.” Reid v. United States, 715 F.2d 1148, 1155 (7th Cir.1983). Although
Accordingly, we AFFIRM the judgment and order for sanctions and GRANT defendants’ motions for