Antitrust Law Daily Wrap Up, RICO—E.D. Wis.: Minority bar owners serve up sufficient RICO claims against Racine, mayor, (Nov 4, 2014)

By Greg Hammond, J.D.

Four minority bar owners stated sufficient Racketeer Influenced and Corrupt Organizations Act (RICO) claims against the City of Racine and its mayor, for allegedly engaging in activities to eliminate minority-owned bars from downtown Racine, Wisconsin. In denying the municipality’s motion to dismiss the plaintiffs’ RICO claims, the federal district court in Milwaukee determined that the plaintiffs adequately alleged causation, predicate acts of bribery, and open-ended continuity (Holmes v. City of Racine, October 31, 2014, Stadtmueller, J.).

Background. In their amended complaint, minority bar owners in downtown Racine alleged RICO claims against: (1) municipal defendants, including the City of Racine, the mayor, and other politicians; (2) political staff defendants, including city workers and individuals involved in the mayor’s campaign; (3) the Racine City Tavern League, a non-profit that serves as a lobbying group for alcohol retailers in Racine; and (4) Devin Sutherland, the director of Downtown Racine Corporation—a non-profit engaged in enhancing downtown Racine’s image and functionality.

The bar owners alleged that Racine’s mayor accepted money from Tavern League members during his mayoral campaign and that he continues to receive such contributions. The donations were supposedly made to sway his agenda and to buy positions on the City’s municipal government. In addition, the bar owners claimed that the mayor conspired with Alderpersons, police department officials, the Downtown Racine Corporation, and others to prevent minority bar owners from obtaining and/or maintaining their liquor licenses and to ensure white Tavern League members kept their respective liquor licenses.

Municipal defendants. In support of their motion to dismiss the RICO claims, the municipal defendants argued that the plaintiffs’ amended complaint failed to adequately allege: (1) causation; (2) predicate acts; and (3) continuity. The court disagreed with all three arguments, first finding that the plaintiffs alleged injuries—including fines, side agreements, license revocations, and voluntary license revocations resulting from the burdensome fines and side agreements—are directly related to alleged RICO predicate acts, demonstrating sufficient causation. Second, the court found that the plaintiffs stated sufficient bribery allegations, constituting RICO predicate acts. Lastly, it was found that at the very least, the plaintiffs demonstrated open-ended continuity, as the mayor is still in office; other municipal actors remain involved in Racine politics; the scheme is allegedly continuing to produce fruit; the racketeering activity has allegedly occurred for over two mayoral terms; and the racketeering activity is allegedly continuing to this day. Consequently, the motion to dismiss the RICO claims against the municipal defendants was denied.

Political staff and Sutherland. The court also determined that there were sufficient RICO claims against one other defendant—Doug Nicholson, a member of the Racine City Tavern League and former campaign worker for the mayor. Specifically, it was found that the plaintiffs sufficiently alleged that Nicholson paid bribes to the mayor in exchange for favorable action, and the court could therefore infer that he agreed to participate in the RICO scheme. The motions to dismiss the RICO claims against the remaining political staff members and Sutherland were granted, however, as the claims were conclusory and devoid of any allegations that those defendants participated in any predicate acts.

The case number is 14-CV-208-JPS.

Attorneys: Brian H. Eldridge (Segal McCambridge Singer & Mahoney Ltd.) for Thomas J. Holmes. William T. Stuart (Meissner Tierney Fisher & Nichols SC) for City of Racine.

Cases: RICO WisconsinNews