Uniroyal Goodrich Tire Co. v. Mutual Trading Corp.

749 F. Supp. 869, 1990 U.S. Dist. LEXIS 17759, 1990 WL 162029
CourtDistrict Court, N.D. Illinois
DecidedSeptember 27, 1990
Docket90 C 02370
StatusPublished
Cited by21 cases

This text of 749 F. Supp. 869 (Uniroyal Goodrich Tire Co. v. Mutual Trading Corp.) is published on Counsel Stack Legal Research, covering District Court, N.D. Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Uniroyal Goodrich Tire Co. v. Mutual Trading Corp., 749 F. Supp. 869, 1990 U.S. Dist. LEXIS 17759, 1990 WL 162029 (N.D. Ill. 1990).

Opinion

MEMORANDUM OPINION AND ORDER

ASPEN, District Judge:

Uniroyal Goodrich Tire Co. (“Uniroyal Goodrich”) has sued Mutual Trading Corp. (“Mutual Trading”), Mohammad Shafiq (“Shafiq”), John P. Hauper (“Hauper”), and Richard K. Germano (“Germano”) under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961-1968 (1988) (“RICO”), and various pendent state claims. Mutual Trading, Shafiq, and Hau-per now move to dismiss. For the reasons set forth below, we grant that motion only with respect to one aspect of the RICO allegations, and to the count seeking recovery on an “account stated” theory. We otherwise deny the motion to dismiss.

I. Allegations

Uniroyal Goodrich, a tire manufacturer and retailer, seeks damages for losses sustained as a result of the defendants’ alleged fraudulent activity. Mutual Trading is an Illinois corporation that did business with Uniroyal Goodrich between 1982 and 1990. Shafiq is Mutual Trading’s president and sole shareholder; Hauper is Mutual Trading’s vice-president and director of finance. Germano worked for Uniroyal Goodrich in its international sales division from 1970 until 1990; he has not yet appeared in this matter.

Specifically, Uniroyal Goodrich lists seven “unlawful schemes” allegedly perpetrated by defendants. They maintain defendants: 1) submitted credit invoices for nonexistent billboard advertising in West Africa; 2) claimed a “volume discount” for which they did not qualify; 3) purchased tires from Uniroyal Goodrich at unauthorized prices; 4) took advantage of wrongfully waived interest charges; 5) made false claims of tire defects and received warranty credits for unblemished tires; 6) engaged in “short shipping” tactics; and 7) *872 wrongfully requested “downgrade credits” for certain tire shipments.

II. Rule 9(b) Particularity

Defendants argue that Uniroyal Goodrich’s RICO allegations must be dismissed for failure to plead with the particularity required by the Federal Rules of Civil Procedure. Fed.R.Civ.P. 9(b) (“[i]n all aver-ments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity”).

Rule 9(b)’s requirements are certainly applicable to fraud claims in civil RICO complaints. See Haroco, Inc. v. American Nat’l Bank & Trust Co., 747 F.2d 384, 405 (7th Cir.1984), aff'd, 473 U.S. 606, 105 S.Ct. 3291, 87 L.Ed.2d 437 (1985). These requirements, however, are not absolute or unbounded; defendants need not be given a “pretrial memorandum containing all the evidentiary support for plaintiffs’ case.” Pellman v. Cinerama, Inc., 503 F.Supp. 107, 111 (S.D.N.Y.1980); accord Bruss Co. v. Allnet Communication Servs., Inc., 606 F.Supp. 401, 405 (N.D.Ill.1985) (“plaintiff ... need not plead detailed evidentiary matters”).

Uniroyal Goodrich’s complaint need only set forth “a brief sketch of how the fraudulent scheme operated, when and where it occurred, and the participants.” Tomera v. Galt, 511 F.2d 504, 509 (7th Cir.1975). This the plaintiff’s complaint has done; it “adequately details, in broad strokes, the nature and essential factual elements of the alleged fraud.... [T]he defendants are not left guessing as to the outlines of the fraud, its purposes, or the critical facts_” Adair v. Hunt Int’l Resources Corp., 526 F.Supp. 736, 744 (N.D.Ill.1981).

Defendants correctly point out that, generally speaking, a complaint naming multiple defendants must provide adequate notice of the role each individual defendant allegedly played in the scheme. Lincoln Nat’l Bank v. Lampe, 414 F.Supp. 1270, 1278 (N.D.Ill.1976); see also Adair, 526 F.Supp. at 744-45. Where the defendants are all “corporate insiders,” however, the general rule does not apply. Banowitz v. State Exchange Bank, 600 F.Supp. 1466, 1469 (N.D.Ill.1985). The attribution of specific fraudulent acts to specific defendants is unnecessary where the individual defendants are insiders if, as here, “the complaint sufficiently describes the fraudulent acts and provides the individuals with sufficient information to answer the allegations.” Id. (citing Pellman, 503 F.Supp. at 111); accord Swanson v. Wabash, Inc., 577 F.Supp. 1308, 1321 (N.D.Ill.1983); Helfant v. Louisiana & S. Life Ins. Co., 82 F.R.D. 53, 57 (E.D.N.Y.1979); Barotz v. Monarch General, Inc., [1974-1975 Transfer Binder] Fed.Sec.L.Rep. (CCH) ¶ 94,933 (S.D.N.Y.1975). Because Shafiq and Hauper are clearly insiders in Mutual Trading, Uniroyal Goodrich need not specifically attribute fraudulent acts to them beyond the attributions already contained in its complaint.

Related to defendants’ particularity argument is the contention that allegations in the complaint “made solely on ‘information and belief’ ” must be disregarded. Defendants’ Memorandum of Law at 3 (emphasis added) (citing, inter alia, Duane v. Altenburg, 297 F.2d 515, 518 (7th Cir.1962)); Reply Memorandum at 4 (same). In Altenburg, the court dismissed plaintiff’s complaint because it alleged fraud “on information and belief only and without any statement of or reference to any facts upon which such beliefs supposedly rest.” Altenburg, 297 F.2d at 519. Here, Uniroyal Goodrich does adequately refer to the facts upon which its fraud allegations rest; to dismiss the “information and belief” allegations simply because its counsel included that phrase in particular paragraphs of the complaint is entirely inappropriate.

Similarly, defendants fail to show precisely why Uniroyal Goodrich has not alleged sufficient acts of mail and wire fraud in support of its RICO counts. The complaint itself alleges fraudulent activity by Mutual Trading and its top officers, Shafiq and Hauper. The alleged success of that activity depended, according to Uniroyal Goodrich, on a confederation between the defendants and Germano, a key Uniroyal Goodrich employee. The two companies *873 had a business relationship stretching over several years.

As such, the mailings alleged could easily have been “part of the execution of the fraud_” Schmuck v. United States, 489 U.S. 705, -, 109 S.Ct. 1443, 1447, 103 L.Ed.2d 734, reh’g denied, — U.S. -, 109 S.Ct. 2091, 104 L.Ed.2d 654 (1989).

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Bluebook (online)
749 F. Supp. 869, 1990 U.S. Dist. LEXIS 17759, 1990 WL 162029, Counsel Stack Legal Research, https://law.counselstack.com/opinion/uniroyal-goodrich-tire-co-v-mutual-trading-corp-ilnd-1990.