*1 to define Treasury) power retary of the must perspective EMERY, regulatory on behalf herself and that Verna groups, is, only was, one situated, similarly There respected. all others group. No the Sherwin-Williams “group”: Plaintiff-Appellant, no “new group” “old Sherwin-Williams group one group.” Just Sherwin-Williams assets assortments changing comprising FINANCE, AMERICAN GENERAL not com- group That has operations. INCORPORATED, Defendant- Fund. from the withdrawn pletely Appellee. only brief requires issue final One No. 95-1037. sought attor Sherwin-Williams
treatment. from the cross-appeal and filed neys’ fees Appeals, Court United States each side requiring court’s decision district Circuit. Seventh court, the both and fees costs its own bear 1451(e), Argued Sept. before § 29of U.S.C. province arbitrator, 14, 1995. Dec. Decided right question 1401(a)(2) applies. § Rehearing Suggestion for Rehearing and abused court the district appeal is whether Demco, Banc Denied Jan. 1996.* En Hooper v. discretion. its Cir.1994); v. Pullman (7th Nichol (7th Cir. Inc., Standard, F.2d Underwood, U.S. 1989). Pierce v. Cf. (1988), L.Ed.2d appellate review deferential holding that statute under another right standard provisions attorneys’ fees similar should court say that the Regulations ERISA. attorneys’ unless fees arbitral not shift in dilato engages “in faith bad acts loser dur improper harassing, conduct ry, 29 C.F.R. the arbitration”. course of ing the 2641.9(c). contain does not record This proceed As for the conduct. whiff pay must the loser court: ings in the district See basis. a substantial position lacked its if Lady Balti Fund v. Pension States Central Foods, Inc., more Cir.1992). have established Although we challenges an arbi one who presumption substantial loses lacked award and trator’s v. Chi Co. Can see Continental
justification, Fund, Pension cago Truck Drivers can be presumption court concluded The district overcome. of first been, is a ease because
it had each arguments on with decent impression sensible; strikes us That assessment side. discretion. abuse of an certainly it is not
Affirmed. [*] Hon. Walter J. Cummings did not participate vote for rehearing en banc. *2 1961(1)(B)), only one § by 18 prohibited complaint, mail judge dismissed The district U.S.C. 12(b)(6) on Fed.R.Civ.P. complaint under alleged do facts ground *3 violate section 14,1992, July alleged. On is what Here $1,983.81 from American Emery borrowed Finance, being secured the loan General including a property, personal miscellaneous The finance set. a television typewriter and annual rate percent on the 36 charge, based loan, was the charged for of interest years. for three $1,327.08, loan was and the later, General Finance American months Six letter, signed Emery. The to a letter wrote as follows: manager, reads by a branch Dear Verna: you. money for spending I have extra to tune-up? need a Want your car Does pay Or, just want you to trip? do take a you can lend your bills? We off some or want. you need money for whatever you To thank good customer. a You’re * business, aside $750.00 I’ve set your for your name. in my into coupon below bring the Just write qualify, we could you if and office Or, call ahead spot. your check the Edelman, M. Combs Cathleen A. Daniel you. waiting for I’ll have check Arend, Michelle A. Eric Vander (argued), J. Tara cash. L. extra Randolph Bragg, great with Weinberg, 0. this month Make IL, Combs, Chicago, money to loan. Goodwin, today have Edelman & me Call —I Plaintiff-Appellant. for * policies. credit Subject normal to our (ar- Varga Craig Ledsky, A. N. Jonathan coupon is a letter bottom At the IL, Ross, Chicago, & gued), Peterson out Coupon” made Cash captioned “$750.00 Defendant-Appellee. Her address. Emery at her M. to Verna by the words preceded are and address name POSNER, Judge, Chief Before at explains print Small cash for:”. “$750.00 Judges. COFFEY, Circuit BAUER and bottom, not a check.” “This POSNER, Judge. Chief loan, responded so a she wanted up she showed When the letter. damages RICO under a suit for This is office, gave her forms he manager’s seq. The branch §§ 1961 et statute. with existing loan of her refinancing for a charges the defen- Emery, plaintiff, Verna note new The advanced. funds Finance, additional maker of dant, General American amount financed for an signed she of which practice loans, in the engaging small (computed charge $2,399.83 finance plaintiff practice that flipping,” “loan rate) of percent interest same activity” within “racketeering claims ' years. over three $1,641.28, payable 1962(c). such, it To meaning RICO. un- $89.47 been which had monthly payment, crimes listed or one more must involve loan, jumped $108.20 (see original der the 1961(1), among in section (more payment) for the first for the new generally borrowers who do not understand loan. Had she not refinanced she computations necessary to determine have pay a month comparative had for another $89.47 cost” of a loan and second (for (with or refinancing refinancing months so advanced) took additional funds place approximately six existing months after the their practice loan. This is al- made), leged loan was while with to be a defraud,” the refi- or “scheme artifice to nancing pay she had to having one who $108.20 the next devised such a scheme months —and this to artifice receive uses mails purpose $200. The “for the executing increment cost such scheme came to attempts about artifice or $1,200, paid ing so to years, over do” three violates the mail this is for fraud statute. right get only now. $200 The cost to language of the mail-fraud *4 borrowing her of way rough- $200 was broad, very statute is and concern has re ly great three times as as it would have been peatedly expressed been that it given not be had she borrowed that amount for three vague too encompassing scope by judi a years separate in a loan at the annual inter- interpretation. cial E.g., United States v. percent. est of 36 By calculation, rate our Dial, 163, 170 (7th 757 Cir.1985); F.2d Unit implicit the interest paid rate that she for the McNeive, ed States v. 1245, 536 F.2d 1252 percent $200 loan exceeded per annum. (8th Cir.1976); United Margiotta, States v. This not was disclosed on the Truth in Lend- 108, (2d Cir.1982) 688 F.2d 139-40 (Winter, ing form Emery Act that received because J., concurring dissenting); cf. United the Act treats the transaction as a reborrow- Goodman, States 235, 984 F.2d 239 and n. ing of original the amount plus of the loan (8th Cir.1993). purely Since it is a criminal much $200. Lending So the Truth in Act statute, unlike statutes such as the Sherman protection as a for borrowers. Act that both authorize civil and criminal We have remedies interpreted said that and are was Emery’s liberally $200 bene- more loan, fit in cases only from the where figure may but the the sought, former are be larger. The United Co., difference States v. Gypsum between United States the amount 422, 436-43, by 438 U.S. 2864, financed the new loan 2873-76, the amount by (1978), 57 L.Ed.2d financed the old is if more than a interpreta narrow $400. only tion appropriate she $200, cash was a received check for meet the concern with vagueness rest breadth and being up difference by ap eaten would have to ply increased to the insurance and invocation of expenses. the statute in this Perhaps civil suit. expenses those inured to her bene- fit. If the. implicit so interest rate concern, Consistent with this recent less percent. than 110 These are not details cases, least, at make clear that all the statute that can be or have to be resolved at the punishes fraud, is deliberate United States v. complaint stage. Dunn, (7th 961 F.2d Cir.1992); The complaint alleges, a clearly little less Stewart, United States v. 872 F.2d than (10th could be clearly but enough, desired Cir.1989), where get money order to
that while the letter
sent to
and other
or something else of monetizable value from
customers American General
im-
you
Finance
someone
amake
statement
himto
plies that
the customer
being
you
a
false,
offered
know to be
or a
you
half truth that
separate loan, when the customer
up
shows
misleading,
know to be
expecting him to act
to take advantage of
company
the offer the
upon
your
it to
benefit and his detriment.
presents him
papers
refinancing
the Midwest
Banking
Commerce
Co. v. Elkhart
existing
customer’s
loan with
Centre,
City
(7th
additional funds
Cir.1993);
F.3d
being advanced
disclose,
and does not
Collins,
indeed
Rubinstein v.
20 172 n. 53
fact,
(5th
conceals the
that this
Cir.1994).
method of obtain-
emphasize
We
the “half
ing additional funds is much
costly
more
than
truth” half of this definition. United States
taking out a new loan. The
do
customers
v. Keplinger,
(7th
Cir.
this,
understand
1985),
because American General
holds “that omissions or concealment
Finance “markets its loans to working-class
of material information can constitute fraud
$200,
plus
separate
loan
a
loan for
which we
mail
cognizable
under
duty
you), you
infor
can
to disclose the
could have made
have mea-
proof
without
regu
specific statute or
pursuant
ger
to a
now. We were not reassured when
$200
mation
laboratory
omit
that ease a
had
argument
lation.” In
oral
American
Fi-
General
drug
report
toxicity of a
an
on the
lawyer
ted from a
unable to tell us what it
nance’s
drug
had
by a
opinion
consultant
through
cost
to obtain
Verna
$200
effects,
jury
we
held that
some toxic
refinancing compared
to what it would have
to find that this omission was
was entitled
company simply
cost
had the
made her a
conveyed
fraudulent, given
impression,
separate loan for that amount.
harmlessness
by
report,
of the utter
say
“merely
thought
drug. Plenty of cases
The district court
not,
more,
plaintiff’s
disclose” is
without
illegality
failure to
scheme saved from
Develop
Reynolds
Dyer
e.g.,
v. East
allege
failure to
either a violation
Co.,
ment
fiduciary
Lending
Truth in
Act or a
relation
certainly
quarrel with this
we
have no
ship
company
between the finance
and her.
proposition. Whether
failure
disclose
turn
A
points
out
be related.
careful
context,
depends on
United States
fraudulent
reader, comparing
Lending
the Truth in
Act
Biesiadecki,
542-43
to Em
disclosure forms for the
loan
*5
Cir.1991), to
we now turn.
which
ery
refinaneing-plus-additional-ad-
and the
loan,
monthly
notice that
vance
would
know the state of
do not of course
We
payment
higher
was almost
a month
$20
employees of American General
mind of the
by comparing
under the second loan and
to
Finance who drafted
letter
dates of the two forms would also realize that
customers;
plaintiff
nor can the
other
its
require
six more
second loan would
until
has an
inkling
than an
she
have more
payments.
persons
months of
But not all
are
discovery.
opportunity
pretrial
to conduct
capable
being
Suppose
of
careful readers.
assume,
complaint adequately in
But
as the
Emery were blind. Or retarded. Would
do,
desiring
employees,
us
these
vites
to
that
anyone argue
shoving a
in
that
Truth
Lend
working-
naiveté of
exploit
to
the financial
in
her
ing Act disclosure form front of
face
borrowers, realizing that these borrow
class
allegation
to
would be a defense
fraud? The
Lending
in
Act disclo
read Truth
ers do not
belongs to
is
she
a class of borrowers
to trick
intelligently,
hoping
sure forms
competent interpreters of
who are not
credit,
disastrously
overpaying
for
them into
this and
forms and that the
knows
they believed would be
drafted a letter that
defendant
Taking
advantage
it.
ad
sought to
concealing
of refinanc
take
in
the costs
effective
of
of
vantage of
vulnerable is a leitmotif
against
background of nefari
ing.
this
Read
Newman,
replete
v.
965 F.2d
is
to be
fraud. United States
purpose,
letter
seen
ous
(7th Cir.1992).
206,
Competent people
half
Ver
truths.
“Dear
with falsehoods
against
good
enough
To thank
well
protect
na
You’re a
customer.
can
themselves
business,
you
your
incompetent
for
I’ve set aside
of fraud. The
are
$750.00* most forms
your
frequent target
is
“Dear
name.”
no
Verna” to
of con men
She
for that reason
them;
is,
defrauders,
targeting
has not been selected to receive
she
and such
and other
customer,
good
unlawful,
course,
because she is a
the letter
and indeed earns the
of
proba
211;
belongs
she
to a class of
but because
Id.
Unit
longer
criminal a
sentence.
at
credit;
purpose
(7th
bly gullible
Sutherland,
for
customers
955 F.2d
ed States v.
money
offering
Leonard,
her more
is not to thank Cir.1992);
61 F.3d
States v.
United
off;
rip
(5th Cir.1995).
for
but
her
noth
her business
ing
for
“[W]e
has been “set aside”
her.
acknowledged
district court
Or,
your
spot.
write
check on the
call
company
had
fidu
that if the finance
had
waiting
I’ll have the check
ahead and
Emery,
it
ciary relationship with Verna
sign
you.” Yes—along
few forms to
with a
guilty of fraud had
failed
$1,200
would have been
payable
whereby
only
over three
fact as
refinanc
monthly
so material a
higher
disclose
years
an even
rate than
(and
costly
ing
be
more
method
present
your present
would
a much
your
loan
than
borrowing
9(b);
borrowing
than
it in
Development
$200
another
R.Civ.P.
Graue Mill
A fiduciary
Co.,
separate
loan.
must
&
Corp. Colonial Bank Trust
927 F.2d
(7th
persons
to whom he stands
Cir.1991);
honest with the
Lancaster Commu-
relationship
fiduciary
in a
as he would want
nity Hospital
Antelope Valley Hospital
with
people
District,
(9th
to be
him. Charter Oak
Cir.1991);
Converting Industries
Fire Ins. Co. v. Color
Services,
Becher,
England
New
Data
Inc. v.
Co.,
Cir.1995);
1175-76
45 F.3d
(1st Cir.1987).
plain-
Miller,
Burdett v.
pleaded
adequate particularity
tiff
Cir.1992).
you
is not true
if
But it
are
her,
against
regard
fraud directed
but with
anything goes,
fiduciary
not a
short
false
Fi-
to other customers of American General
truth,
usually
A half
or what is
statements.
alleged merely
company
nance
that the
did
omission,
thing misleading
is
the same
thing
the same
to them. There are no names
fraud, including
fraud if
actionable as
or
in-
dates
other details
transactions
it,
if it
the mails are used
further
volving any
Emery.
other customer besides
resulting
a false
intended to induce
belief and
details
necessary
These
would not be
to iden-
advantage of
action to
misleader
tify
plaintiff’s
additional
of the
members
disadvantage
misled. This
ade-
class, but
necessary
identify
are
a violation
quately alleged
complaint.
in the
(in
RICO,
case)
requires
more
only
than one fraud
one is
flipping”
hold that
We do not
“loan
against
perpetrated
have been
her-
fraud,
the term
because
boundaries of
self.
are
do not
obscure. We
hold that American
engaged
General
even in
Finance
judge
The district
was therefore
do
flipping.”
“loan
not hold that the mail
We
right to
complaint.
dismiss the
But
he
had
tactics,
sleazy
fraud statute criminalizes
sales
9(b),
on the
done so
basis of Rule
he
*6
society.
a
which abound in
free commercial
given Emery
course have
a chance to amend
in a
State of mind is crucial
case of criminal
complaint
appears
to
a
cure what
to be
fraud,
emphasized,
as we
there is
have
and
merely
pleading deficiency.
technical
Deva
yet concerning
no
state of
evidence as
Chester,
(2d
ney v.
569
Cir.
employees.
mind of the defendant’s relevant
1987);
Distributing
Schreiber
Co. v. Serv-
composed
We have no idea who
the letter to
Co.,
Well Furniture
1401-02
Verna
or what
had in
author
(9th Cir.1986).
suit,
The dismissal of
as
composed
mind
it.
when he
All
know
we
distinct from
complaint,
was therefore
allegations
that the
of fraud are sufficient to
premature, unless the defendant’s other
complaint
withstand a motion to dismiss the
grounds for affirming
judgment
have
for
a
failure to state
claim. There is a state
But
they
complicated,
merit.
are
and the
of
complaint
facts
with the
that if
consistent
judge
them,
district
has not considered
we
proved would
a
the mail
establish violation of
them for
leave
his
on
consideration
remand.
required
fraud
no
and more is
at this
REVERSED AND REMANDED.
stage
E.g.,
for the
continue.
suit to
H.J. Inc.
Co.,
v. Northwestern Bell Tel.
U.S.
COFFEY,
Judge,
Circuit
dissenting.
249-50, 109
2893, 2905-06, 106
S.Ct.
L.Ed.2d
(1989).
a
It is
truth at least as old as the Bible
that “the borrower is
to
servant
the lender.”
defendant, however,
The
ad
recognized
Proverbs 22:7. Polonius
this
vanced,
plaintiff
reply
and the
in her
brief
he
when
advised Laertes:
contested,
grounds
up
several alternative
for
a
be;
Neither
borrower nor a lender
For
holding the
of the
dismissal
suit. One of
oft
friend,
loan
loses both itself and
And
them is plainly
prevail in
meritorious. To
a
borrowing
edge
husbandry.
dulleth th’
of
case,
RICO
plaintiff
prove
“pat
must
a
racketeering”
Hamlet,
iii,
(Riverside
tern of
consisting
I,
at least
of
Act
scene
line 75
separate
two
Shakespeare).
criminal acts. Where the acts
reason,
For whatever
Verna
are acts of
of
and,
circumstances
each
did not
wisdom
heed this
in the
act
pleaded
particularity.
must be
with
Fed.
of
majority,
up
words
she ended
“over-
consists of
racketeering activity
of
pattern
Emery then
disastrously for credit.”
paying
racketeering
acts
predicate
RICO, claiming
least two
civil
under
brought a suit
Pred-
(“AGF”)
ten-year period.
Finance,
within
Inc.
committed
General
American
speci-
activity,
under
racketeering
indictable
are acts
acts
pattern
icate
in a
engaged
laws, including
con-
mail
allegedly
“loan-flipping” that
of criminal
i.e.,
list
acts
fied
18 U.S.C.
to
and wire
§
pursuant
18 U.S.C.
fraud
under
fraud
stitute
was
it
majority
§
concludes
The
§ 1341.
under
to dismiss
court
district
for the
improper
Spitz,
Grinding Co. v.
Midwest
12(b)(6)
I am
motion.
Emery’s
suit
Cir.1992) (internal
citations
there-
conclusion
join in
to
unable
omitted).
dissent.
respectfully
fore
under
mail fraud
elements
The
ANALYSIS
“(1)
par
defendant’s
are:
U.S.C.
claim, it is
any civil RICO
addressing
In
(2)
defraud;
defen
in a scheme
ticipation
pur-
both
to consider
worthwhile
intent
the act with
commission
dant’s
way in
statute1
RICO
of the
poses
(3)
further
mails
defraud;
of the
use
with
in tandem
operates
RICO
United
scheme.”
fraudulent
ance
statutes:
Walker,
States
attempt to
in an
RICO
Congress enacted
—
-,
denied,
U.S.
cert.
ac-
criminal
long-term
organized,
eradicate
(1994). The
128 L.Ed.2d
S.Ct.
end,
chose
Congress
tivity. To that
12(b)(6), dis
court,
Rule
pursuant to
district
of its
enforcement
criminal
supplement
claim because
Emery’s civil RICO
missed
of action
cause
civil
awith
provisions
mail fraud.2
.
a claim
to state
failed
property has
business
whose
persons
plaintiffs
by the
troubled
court
district
activity. To
by
criminal
injured
been
false
any specific
state
“identify
failure
enforcement, Congress
private
encourage
by the
allegedly made
fact
of material
ment
op-
plaintiffs
civil RICO
provided
concluded,
light of AGF’s
defendant”
costs,
damages,
treble
recover
portunity
consumer
and federal
with state
compliance
successfully
they can
attorney’s fees if
establish
laws,
Emery could not
lending
violation
aof RICO
the elements
establish
meaning of
within
to defraud”
a “scheme
the evidence.
preponderance
Gen
Emery v. American
§ 1341.
‘(1) 18 U.S.C.
*7
of
consist
RICO violation
of a
elements
Finance,
F.Supp.
873
(3)
eral
through a.
(2)
enterprise
anof
conduct
(N.D.Ill.1994).
activity.’ A
(4)
racketeering
of
pattern
level,
addi
offered
AGF
court
the district
good
strayed
At
a
we have
that
aware
am well
1. X
These
of dismissal.
arguments
favor
tional
the
behind
intent
from
distance
Emery’s
failure
on
arguments centered
organized
statute,
to combat
which
RICO
crime,
elements,
but
of mail
not
establish
has to some
Supreme Court
that
(1) Emery
failed
argued that
AGF
itself.
RICO
Sedima,
See, e.g.
trend.
this
validated
extent
AGF,
“person,”
sufficiently
as RICO
allege
that
479,
Co.,
S.Ct.
105
U.S.
473
v. Imrex
S.P.R.L.
3275,
aof
affairs
participated in the
conducted
(1985) (RICO applies to
346
L.Ed.2d
87
(2)
to al
Emery failed
"enterprise,” and
RICO
lege
businesses);
Organization
National
legitimate
violation was
sufficiently
a RICO
that
798,
U.S. -,
—
Scheidler,
114 S.Ct.
v.
Women
Admittedly, these
any injury.
cause of
proximate
require
(RICO
(1994)
not
does
Nevertheless,
99
127 L.Ed.2d
the district
complicated, and
arguments are
motive).
Nevertheless,
proof of an economic
this
them.
judge did not address
it clear
made
has also
Supreme
ground
Court
any
a dismissal
may affirm
court
supported
(see note
clause
Vicom,
construction”
"liberal
Har
RICO’s
Inc. v.
by
record.
771,
1961)
Inc.,
check
Servs.,
a blank
is not
778
following 18 U.S.C.
20 F.3d
bridge Merchant
interpreta
novel
Cir.1994).
advance
it
unfortunate
(7th
who wish
I
for those
think
Young,
argu
507
these
&
v. Ernst
to consider
Reves
not
majority
statute.
chooses
tions of
Cudahy
1172,
Judge
1163,
ments,
525
As
170,
may
122 L.Ed.2d
have merit.
113 S.Ct.
U.S.
nightmare and
observed,
judge’s
further
is a
important to resist
"RICO
(1993).
isit
once
doggedly persistent
I believe
into a
it
interpre
to hammer
efforts
through
liberal
RICO
expansion of civil
respect even
utmost
shape
deserve
various
rational
RICO itself
of either
tation
impossi
accomplish the
rarely
they can
statutes,
though
fraud
the mail
such as
"predicate act”
J., concurring).
(Cudahy,
at 785
Id.
ble.”
statute.
gist
Emery’s complaint
not
dealings,
business
but
targets
rather
only
her;
outright
AGF
lied to
she cannot make
conduct that widely
recognized as fraudu
such a claim because the flier distributed to
Holzer,
lent. See
309;
816 F.2d at
United
(quoted
her
length
in majority
opinion)
Cir.1985),
Dial,
(7th
163,
States
757 F.2d
contained no false statements or affirmative
denied,
rt.
838,
474 U.S.
ce
116,
misrepresentations. Rather, Emery argues
(1985).
the mail fraud statute. 816 F.2d at approach guarantees
309. This conservative judges
that “federal not in [will be] the busi-
ness of creating what in effect would be crimes, i.e.,
common law crimes not defined
by statute.” Id. America, UNITED STATES of
CONCLUSION Plaintiff-Appellee, I am somewhat heartened the limited majority’s nature of holding. Wisely, my colleagues “loan-flipping” to hold that refuse King, Nathaniel BROWN and Willie engaged or that AGF in in Defendants-Appellants. majority ease. The also any in- denies 94-3504, sleazy tactics,
tention to Nos. ] 94-3556. sales “eriminalizef which in abound a free society.” commercial United States Court Appeals, Maj.Op. Nevertheless, at 1348. majority Seventh Circuit. does hold premature it was for the district court to disagree. dismiss the suit. I Argued Sept. 1995. light In compliance with AGF’s TILA and Illinois lending consumer I do Decided Dec. believe that will ever be able to defraud,” establish a “scheme or artifice to
much less “an attempt elaborate at conceal-
ment.” compliance AGF’s appli- full with the requirements,
cable disclosure the ab- any special
sence of circumstance that would fraudulent,
render AGF’s non-disclosure bar
any possible claim under the mail fraud stat-
ute, thus, under RICO. The district
court’s of Emery’s dismissal lawsuit under 12(b)(6) was proper appeared because it “prove no set of facts support in
of [her] claim entitle [her] to Gibson, Conley
relief.”
41, 45-46,
355 U.S.
99, 102,
(1957) (inter-
preting Rule Remanding the case proceedings further juncture is, at this
my opinion, unnecessary both and a waste of
judicial majority’s holding resources. wrong
sends message judges, district trying desperately
who are to manage their
dockets of mounting face litiga- civil
tion, and will only encourage further lawsuits
based on expansive novel and readings of the
5. Similarly, the urged by television, definition of fraud late-night Em- which tout the benefits of ery extend, under the wire telephone psychics, vitamins, miracle and the many advertisements on like.