Antitrust Law Daily Wrap Up, RICO—N.D. Ill.: Developer fails to state RICO claims based on alleged scheme to cut him out of project following refusal to pay bribe, (Aug 13, 2013)

By Tobias J. Gillett, J.D., LL.M.

A prospective real estate developer failed to state RICO claims against the City of Chicago, a Chicago alderman, and the president of a grocery store chain over an alleged scheme to shut the developer out of a project to build a grocery store in the alderman’s ward, following the developer’s refusal to pay a bribe to the alderman, the federal district court in Chicago has ruled (Haynes v. City of Chicago, August 12, 2013, Durkin, T.).

In February 2007, Jeffrey Haynes approached then-28th Ward Alderman Ed Smith with a proposal to develop a shopping center in his ward. Smith was initially supportive of Haynes’ proposal and contacted the City’s Planning Department to commence the eminent domain process. The plan later evolved to include a grocery store as an anchor tenant, and Haynes reached out to the president of one grocery chain, Moo & Oink, about the possibility of serving as that tenant.

However, negotiations between Haynes and Moo & Oink soon broke down, and Haynes began reaching out to several other chains. Moo & Oink and Haynes both demanded ownership of the land where the grocery store would be built. According to Haynes, from June through August 2009, Smith requested a $5,000 “contribution” from Haynes, and eventually set an August 17, 2009 deadline for payment of the contribution. Shortly after the deadline expired, Smith announced at a meeting with the Planning Department and Moo & Oink that Moo & Oink could proceed with a grocery store with or without Haynes, even though Haynes had told Smith that he had two other chains interested in the project. The president sent Haynes an email notifying him that Moo & Oink would purchase the land from the City and develop it without Haynes, and that Smith would support Moo & Oink in this effort. Moo & Oink then proceeded to follow through with this plan.

Haynes filed suit against Smith, the City of Chicago, and the president of Moo & Oink, asserting claims for violation of Sections 1962(a) and 1962(d) of the RICO Act, among other claims. The defendants filed a motion to dismiss.

Haynes failed to state a claim for violation of Section 1962(a), the court concluded. The court explained that a plaintiff asserting a claim under Section 1962(a) must allege that the defendant “(1) received income from a pattern of racketeering activity; (2) used or invested that income in the operation of an enterprise; and (3) caused the injury complained of by the use or investment of racketeering income in an enterprise.” Here, Haynes did not allege that Smith “received income, used or invested the income in the operation of a RICO enterprise, or caused Haynes’ alleged injuries by the use or investment of the income in a RICO enterprise.”

Moreover, a “pattern of racketeering activity” required “at least two acts of racketeering activity within a 10-year-period,” and that those acts that must relate to one another and pose a threat of continued criminal activity. Haynes alleged only one act of bribery, according to the court. Even if multiple requests for the same bribe were considered to be separate acts, to constitute a pattern “predicate acts must extend over a substantial period of time; a few weeks or months is considered insubstantial.”

The court also found that Haynes’ Section 1962(d) RICO conspiracy claim failed. To assert a claim under Section 1962(d), Haynes would have to “allege (1) that each defendant agreed to maintain an interest in or control of an enterprise or to participate in the affairs of an enterprise through a pattern of racketeering activity and (2) that each defendant further agreed that someone would commit at least two predicate acts to accomplish those goals.”

As previously discussed, Haynes did not adequately allege an agreement involving a pattern of racketeering activity. Moreover, he failed to allege that Smith or Levy agreed that someone would commit at least two predicate acts, since he alleged only that Smith committed a predicate act in the course of a single scheme to cut Haynes out of the project.

The case is No. 12 C 2980.

Attorneys: Michael J. Dolesh for the City of Chicago.

Cases: RICO IllinoisNews