Jan Domanus, et al v. Locke Lord LLP, et al
Filing
Filed opinion of the court by Judge Wood. AFFIRMED. Diane P. Wood, Chief Judge; Michael S. Kanne, Circuit Judge and David F. Hamilton, Circuit Judge. [6815473-1] [6815473] [15-3647]
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In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 15‐3647
JAN DOMANUS, et al.,
Plaintiffs‐Appellants,
v.
LOCKE LORD LLP, et al.,
Defendants‐Appellees.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 08 C 4922 — Manish S. Shah, Judge.
____________________
ARGUED SEPTEMBER 8, 2016 — DECIDED JANUARY 31, 2017
____________________
Before WOOD, Chief Judge, and KANNE and HAMILTON, Cir‐
cuit Judges.
WOOD, Chief Judge. If the allegations in the supplemental
complaints filed in this case are to be believed, the defendant
law firms and lawyers were involved in a hornet’s nest of eth‐
ical violations. The more difficult question, however, is
whether the complaints state claims under the Racketeer In‐
fluenced and Corrupt Organizations Act, 18 U.S.C. § 1962(d),
commonly known as RICO. Complicating matters is the fact
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that the alleged RICO violations all relate to a Polish company,
Krakow Business Park Sp. z o.o. (Spółka z ograniczoną od‐
powiedzialnością, which roughly means private limited com‐
pany), and its affiliates and owners. See RJR Nabisco, Inc. v.
European Community, 136 S. Ct. 2090 (2016). The district court
concluded, in an exhaustive opinion, that plaintiffs were es‐
topped from asserting certain aspects of their claim and that
nothing in the complaint plausibly asserted that the lawyer‐
defendants (which we will call them unless greater precision
is needed) stepped over the line between representation of
their clients and participation in a RICO conspiracy. We agree
that the complaints do not state any federal claim, and so we
affirm the district court’s judgment.
I
This is not the first time this court has encountered the
problems of the Krakow Business Park. In Domanus v. Lewicki,
742 F.3d 290 (7th Cir. 2014) (Domanus I), we addressed a dif‐
ferent slice of this litigation: a case brought (as this one is) by
Jan Domanus and Andrew Kozlowski, two shareholders in
the Business Park, against Adam Swiech, Richard Swiech, and
Derek Lewicki, the other major shareholders. Domanus I
reached us after a certification under Federal Rule of Civil
Procedure 54(b) to the effect that the judgment was final, sep‐
arable from the remainder of the case, and there was no just
reason for delaying the appeal. At that time, the Swiechs and
Lewicki challenged a default judgment of $413,000,000 that
had been entered against them. The default was imposed as a
sanction for discovery abuse. The plaintiffs offered evidence
showing that they had suffered damages in the amount of
$137,800,000. That number was then trebled to $413,000,000
pursuant to 18 U.S.C. § 1964(c).
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Critically for the present appeal, the Swiechs and Lewicki
argued in Domanus I that the district court should have stayed
its determination of damages until the plaintiffs’ claims
against nondefaulting defendants that were not involved in
the appeal had been resolved—essentially, that there should
have been no Rule 54(b) certification because the judgment
was not sufficiently final. We responded as follows:
Though we have in the past prohibited district
courts from holding a damages hearing against a de‐
faulting defendant when the same claim remains
pending against non‐defaulting defendants, this rule
comes from concerns of judicial economy and incon‐
sistent damages awards. In re Uranium Antitrust Litig.,
617 F.2d 1248, 1262 (7th Cir. 1980). There is no concern
for inconsistent awards here. The plaintiffs have com‐
mitted—both in open court and in their briefs—to dis‐
miss all claims against the nondefaulting defendants if
the judgment against the Swiechs and Lewicki is af‐
firmed. Accordingly, they will be judicially estopped
from abandoning their firm commitment once we do
so. See, e.g., Grochocinski v. Mayer Brown Rowe & Maw
LLP, 719 F.3d 785, 795 (7th Cir. 2013).
The scope of the judicial estoppel on which we relied is one of
the issues in the present appeal.
Before delving much further into the case now before us,
it may help to set out the cast of characters, along with the
shorthand designations we use in this opinion. The briefs pre‐
sent a bewildering alphabet soup of abbreviations, which we
prefer to avoid.
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Plaintiffs (collectively Domanus, unless context requires
otherwise):
Jan Domanus, shareholder in Krakow Business
Park
Andrew Kozlowski, shareholder in Krakow Busi‐
ness Park
Krakow Business Park SP. z o.o. (now in bank‐
ruptcy in Poland) and its subsidiaries (i.e., KBP‐2
SP. z o.o., etc.), referred to collectively as the Busi‐
ness Park
Original Defendants (collectively the Swiech Group unless
context requires otherwise):
Adam Swiech, shareholder in the Business Park
Richard Swiech, shareholder in the Business Park
Derek Lewicki, shareholder in the Business Park
Supplemental Defendants (also referred to as the lawyer‐
defendants):
Kubasiak, Fylstra, Thorpe & Rotunno P.C. (“the Ku‐
basiak Firm”)
John Dienner III, a lawyer at the Kubasiak Firm
Locke Lord, LLP
Jay Safer, a lawyer with Locke Lord
Daniel Schlessinger, a lawyer with Locke Lord
Martin Jaszczuk, a lawyer with Locke Lord
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Other Actors:
Gordon & Karr, LLP, law firm initially representing
the Swiech Group, called the Gordon firm
Richard Karr, lawyer at the Gordon firm
Janusz Dlugopolski, Polish lawyer for the Business
Park, and also for Adam Swiech
At bottom, this litigation involves allegations that begin‐
ning in 1997 the Swiech Group undertook an extensive series
of actions to loot the Business Park’s assets and thus to dilute
the value of the firm and, by extension, the shares held by Do‐
manus and Kozlowski. Notably, all of the actions we are about
to describe took place near Krakow, Poland. Several large of‐
fice buildings make up the Business Park, which constructed
and managed them. Among other things, the scheme in‐
volved tricking the Business Park to enter into sham contracts
with members of the Swiech Group or companies they con‐
trolled, pursuant to which the Business Park paid for services
that were never performed or paid inflated prices for land;
causing the Business Park’s subsidiaries to lease office‐build‐
ing space at below‐market rates to companies the Swiech
Group controlled; misappropriating from the Business Park’s
subsidiaries land worth about $28 million; and demanding
and receiving kickbacks from building contractors the Busi‐
ness Park’s subsidiaries were using.
Some of the ill‐gotten monies the Swiech Group received
were then, Domanus asserted, funneled to Chicago‐area busi‐
nesses and properties that the Swiech Group managed. Adam
Swiech also reinvested some of the stolen assets into the Busi‐
ness Park, thereby diluting Domanus’s and Kozlowski’s
shares. The Swiech Group also killed a deal with an outside
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Luxembourgeois firm, Orco, which had agreed to buy all of
the Business Park’s outstanding shares.
In 2008 Adam Swiech was arrested by the Polish authori‐
ties and charged with money laundering, forgery, tax evasion,
and leading an organized crime ring, in connection with his
conduct at the Business Park. Although he had to resign from
his positions as president and sole management‐board mem‐
ber of the Business Park, he allegedly maintained control by
appointing family members and friends to key positions in his
stead. He was convicted in 2014 on some charges, and appar‐
ently others were being prosecuted around the time this case
was filed in the district court. Richard Swiech and Lewicki
were also criminally charged in Poland for crimes related to
the Business Park, but the record does not reflect if or how
those charges have been resolved.
All of this led to the lawsuit that came before us in Do‐
manus I, and that we are now revisiting. As we noted earlier,
in this action Domanus and Kozlowski assert claims under
RICO and state law. Their action against the original defend‐
ants (the Swiech Group) was resolved by a default judgment,
which had been entered as a discovery sanction. We accepted
that appeal on the representation that Domanus and Ko‐
zlowski would dismiss all claims against the non‐defaulting
defendants—a group that included Katarzyna Szubert‐
Lewicki (Lewicki’s wife), Bozena Sanecka‐Swiech (Richard’s
wife), and several companies. See Domanus I, 742 F.3d at 294
n.2. At that time, neither of the Supplemental Complaints had
been filed, and so the Supplemental Defendants had not yet
been added to the case.
Domanus I did not, however, spell the end to Domanus’s
efforts to recover for the alleged RICO conspiracy. In August
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2014, plaintiffs filed a Supplemental Complaint against Locke
Lord and its attorneys, and in November 2014, they added a
Second Supplemental Complaint against the Kubasiak firm
and Dienner. Both supplemental complaints, it is worth not‐
ing, appeared well after February 4, 2014, when this court de‐
cided Domanus I. In them, plaintiffs accused the lawyers and
law firms of facilitating the alleged RICO conspiracy and vio‐
lating state law by means of ethical violations—principally by
simultaneously representing both the Business Park (the ac‐
tual client) and, surreptitiously, the Swiech Group (the alleg‐
edly disloyal insiders).
Although they were recruited by Richard Karr, an attor‐
ney at the Gordon firm who was representing the Swiech
Group, Dienner and his firm were engaged to represent the
Business Park. Domanus accused Dienner (and derivatively
the Kubasiak firm) of fraudulent billing practices, through
which the Business Park was tricked into paying for the
Swiech Group’s legal services at a time when it was adverse
to their client, the firm. Dienner was also accused of collabo‐
rating with the Swiech Group’s attorneys on a joint defense,
in violation of the “neutrality rule” under which, plaintiffs as‐
sert, corporate insiders accused of disloyalty are forbidden
from defending themselves at the company’s expense.1 For ex‐
ample, he consulted with Karr as he prepared a motion to
1 For the sake of argument, we will assume in this appeal that a cor‐
porate neutrality rule along the lines described by plaintiffs applied to the
defendants. We must note, however, that the scope of such a duty is not
defined sharply or universally in American corporate law. For American
corporations, such duties are ordinarily a matter for the law of the state of
incorporation under the internal affairs doctrine. See generally CTS Corp.
v. Dynamics Corp. of America, 481 U.S. 69, 89 (1987) (“No principle of cor‐
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quash service on the Business Park, as he worked on re‐
sponses to discovery motions, and as he prepared a reply
brief. Dienner also allegedly participated in a fraudulent bill‐
ing scheme, pursuant to which he managed to make the Busi‐
ness Park pay the attorneys’ fees for the Swiech Group, who
were by then adverse to the company. He did so by concealing
the letterhead of the Gordon firm on its bills, by serving as an
intermediary between the Business Park and the Gordon firm,
and by vaguely referring to work that was actually performed
by Karr for the Swiech Group as “additional legal services.”
Dienner was involved with the case for 14 months—from July
2010 until October 2011, when he and his firm were replaced
by Locke Lord.
The latter firm’s representation lasted about a year, from
May 2011 until May 2012. (There seems to have been some
overlap with Dienner at first; we describe the maximum pos‐
sible time.) Locke Lord initially was asked to represent both
the Business Park and the Swiech Group, but it concluded that
doing so would raise questions in the Polish prosecutor’s
mind about Locke Lord’s independence. Domanus accuses
Locke Lord of accomplishing this joint representation by sub‐
terfuge, including by billing for services rendered to benefit
the Swiech Group. He also asserts that Locke Lord helped the
poration law and practice is more firmly established than a State’s author‐
ity to regulate domestic corporations … .”); Restatement (Second) of Con‐
flict of Laws § 309. In this case Polish law would seem to govern such du‐
ties for those involved in the Business Park, yet plaintiffs have made no
effort to inform us about applicable Polish law. See FED. R. CIV. P. 44.1
(party who intends to raise issue about a foreign country’s law must give
written notice).
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Swiech Group by attempting to intimidate Kozlowski, by con‐
cealing evidence of looting, by concealing evidence of the
RICO conspiracy, by providing a defense on the merits
through a cross‐claim it filed, and by facilitating a fraudulent
dilution of the Business Park’s shares.
All of the lawyer‐defendants moved for dismissal of the
claims against them under Federal Rule of Civil Procedure
12(b)(6). The district court granted the motions. It concluded
first that the plaintiffs’ agreement to drop all claims against
the non‐defaulting defendants in Domanus I necessarily in‐
cluded an undertaking not to seek the same damages against
the supplemental parties, and so they were judicially es‐
topped to the extent that they were still pursuing damages
that overlapped with those at issue against the original de‐
fendants. Nothing in the commitment they made to this court
supported a limitation to parties that were already involved
in the lawsuit, as far as the district court could tell. Such an
approach would, the court thought, be inconsistent with In re
Uranium insofar as it would raise the problem of potentially
inconsistent damage awards. It recognized, however, that
“there may be new ‘direct’ claims for which damages have not
yet been determined,” and there are also the derivative
claims. It held that neither of those types of claims fell within
the judicial estoppel bar.
Nevertheless, the court concluded that the remainder of
Domanus’s case failed for other reasons. Reviewing both the
complaint and the full texts of certain documents central to its
allegations, it found nothing indicating that the lawyer‐de‐
fendants agreed to join the alleged RICO conspiracy. Do‐
manus’s only theory under RICO rested on 18 U.S.C.
§ 1962(d), which requires that the defendant agree to some
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type of participation in the affairs of a RICO “enterprise”
through a pattern of racketeering activity, and that the de‐
fendant agree that someone commit at least two predicate acts
in furtherance of the conspiracy. (Domanus does not argue
that the complaint supports any different RICO claim, and so
we do not need to concern ourselves with the fact that plain‐
tiffs are not obliged to plead legal theories.) The requisite
knowledge, it concluded, could not come solely from a read‐
ing of the various complaints filed in the case, or from the ac‐
cusations of the Polish prosecutor, because knowledge of ac‐
cusations is not the same as knowledge that the underlying
allegations are true. Neither could Domanus rely on
knowledge gained from a huge document‐drop of some 60
gigabytes of electronically stored information that the lawyers
received, since Domanus acknowledged that the lawyers
never meaningfully reviewed those materials. Willful blind‐
ness was also out as a theory, the district court thought, be‐
cause the complaint showed that the lawyers had a sound and
straightforward reason for skipping a painstaking review of
the documents—cost, plus the idea that a better strategy
would be to focus on what the plaintiffs did and what they
knew. Overall, the court thought that the lawyer‐defendants
had done no more than to provide legal services. If they vio‐
lated the rules of legal ethics in doing so by serving adverse
parties (a point the court did not decide), they were subject to
discipline, but the court thought that more needed to be
shown for a RICO conspiracy.
The court had little to say about several additional de‐
fenses raised by the lawyers, including the assertion that
RICO does not reach this arrangement, which unfolded in Po‐
land except for the disposition of some of the ill‐gotten gains;
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that the lawyers’ actions were immune from civil liability un‐
der the Noerr‐Pennington doctrine, see Eastern R.R. Presidents
Conf. v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961), United
Mine Workers v. Pennington, 381 U.S. 657 (1965); and that the
supplemental complaints failed adequately to allege causa‐
tion. It relinquished jurisdiction over the supplemental state‐
law claims, see 28 U.S.C. § 1367(c)(3), and otherwise dis‐
missed the case.
II
Before turning to the merits of the appeal, we offer a word
about our appellate jurisdiction, which, as in Domanus I, de‐
pends on a certification under Rule 54(b) and 28 U.S.C. § 1291.
In the present case, the district court resolved the claims of all
plaintiffs (Domanus, Kozlowski, and the Business Park, rea‐
ligned as a plaintiff in the bankruptcy proceeding) against the
lawyer‐defendants. Remaining in the district court is the ad‐
judication of the damages claims the Business Park (with its
subsidiaries) has against the Swiech Group (the original de‐
fendants). The district court concluded that the latter claims
are separate from anything pertaining to the lawyers and that
there is no just reason for delay for the present appeal.
Under Rule 54(b), when (as here) multiple parties or
claims are involved, “the court may direct entry of a final
judgment as to one or more, but fewer than all, claims or par‐
ties only if the court expressly determines that there is no just
reason for delay.” Otherwise, the partial resolution of the case
must await a true final judgment—one that resolves all claims
of all parties. See generally Mohawk Indus., Inc. v. Carpenter,
558 U.S. 100 (2009); General Ins. Co. of Am. v. Clark Mall Corp.,
644 F.3d 375, 379 (7th Cir. 2011). It is not enough to resolve
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something that is designated as a separate claim, if other as‐
pects of the case involve the same underlying subject matter.
The claim resolved must dispose of a distinct issue; only then
will there be “no just reason for delay” in the appellate pro‐
cess. In hindsight, we wonder whether Rule 54(b) was
properly used in Domanus I. It is too late now, however, to do
anything about that. We are limited to evaluating the propri‐
ety of appellate jurisdiction in the case now before us.
We can immediately set aside two problems that occasion‐
ally arise: timeliness and parties. Domanus filed this appeal
within 30 days of the district court’s Rule 54(b) certification,
and there are no claims of any kind left in the district court
against the lawyer‐defendants. The difficult issue concerns
the relation between these claims and those that the Business
Park is attempting to resolve against the original defendants.
If the original alleged conspiracy to loot the Business Park is
distinct from the allegedly disloyal actions undertaken by the
lawyers, then the appeal can go forward. If instead we are
looking at one amorphous conspiracy to siphon money from
the Business Park whenever, however, and by whomever,
then we have a serious finality problem.
The district court understood the supplemental com‐
plaints to allege a series of actions undertaken in connection
with the legal representation of the Business Park in connec‐
tion with Domanus and Kozlowski’s 2008 RICO lawsuit.
These actions, it thought, were qualitatively different from the
various ways in which Adam Swiech, Richard Swiech, and
Derek Lewicki were allegedly looting the firm and its subsid‐
iaries—the actions at issue under the original complaints, as
amended, and the actions that have given rise to criminal pro‐
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ceedings in Poland. The question of the scope of the com‐
plaint, it turns out, also has some bearing on our resolution of
the merits of the appeal, but there is no avoiding this overlap
when we are construing a Rule 54(b) certification.
Although the question is a close one, we conclude that the
line drawn by the district court between the conduct at issue
in the underlying legal proceedings (the original looting) and
the conduct of the Business Park’s lawyers offers the best way
to understand this case. It is in no one’s interest to define the
alleged conspiracy so capaciously that it sweeps in conduct
unlimited by time, purpose, and actors. We therefore con‐
clude that we do have jurisdiction pursuant to Rule 54(b) and
28 U.S.C. § 1291, and we proceed to the merits.
III
Because the district court dismissed this case for failure to
state a claim, we consider the issues de novo, accepting as true
the factual allegations of the two supplemental complaints,
drawing inferences in the plaintiffs’ favor, and asking
whether they state a plausible claim. Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S.
544, 570 (2007)). We will focus on Domanus’s RICO theory, be‐
cause if it survives, the supplemental claims will come back
into the case, but if it was properly dismissed, then the district
court had discretion under the supplemental jurisdiction stat‐
ute, 28 U.S.C. § 1367(c)(3), to relinquish them. (It appears that
there may be citizens of Illinois on both sides of the case,
which would explain why there is no allegation of independ‐
ent jurisdiction over the supplemental claims under the diver‐
sity statute, 28 U.S.C. § 1332.)
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Domanus sued the lawyer‐defendants under RICO’s con‐
spiracy subsection, which provides in relevant part that:
(c) It shall be unlawful for any person employed by
or associated with any enterprise engaged in, or the ac‐
tivities of which affect, interstate or foreign commerce,
to conduct or participate, directly or indirectly, in the
conduct of such enterprise’s affairs through a pattern
of racketeering activity or collection of unlawful debt.
(d) It shall be unlawful for any person to conspire
to violate any of the provisions of subsection (a), (b), or
(c) of this section.
18 U.S.C. § 1962. Briefly put, a plaintiff proceeding under sub‐
section (d) must allege that the defendant (1) agreed to main‐
tain an interest in or control of an enterprise, or to participate
in an enterprise’s affairs, (2) through a pattern of racketeering
activity, and (3) that the defendant agreed that some member
of the conspiracy (not necessarily the defendant herself)
would commit at least two predicate acts in furtherance of
those goals. DeGuelle v. Camilli, 664 F.3d 192, 204 (7th Cir.
2011). The conspiracy provision is concerned with the agree‐
ment to participate in an endeavor, which if completed would
violate a substantive provision of the Act. Goren v. New Vision
Int’l, Inc., 156 F.3d 721, 731–32 (7th Cir. 1998). Subsection (c) is
the relevant substantive provision here; it requires conduct of
an enterprise through a pattern of racketeering activity. Gam‐
boa v. Velez, 457 F.3d 703, 705 (7th Cir. 2006).
Everything hinges on whether, reading the supplemental
complaints as favorably to the plaintiffs as we can, they allege
that the lawyer‐defendants agreed to join the longstanding al‐
leged conspiracy among the Swiech Group to loot the assets
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of the Business Park and cover up their actions. The first step
is to allege that each defendant—that is, the individual law‐
yers and the two firms—knew about this conspiracy. United
States v. Muskovsky, 863 F.2d 1319, 1324 (7th Cir. 1988) (plain‐
tiff must show that a defendant in a RICO conspiracy action
“was aware of the essential nature and scope of the enterprise
and intended to participate in it.”) (internal citation omitted).
The district court concluded that the complaints fell short in
this respect, even under the generous standard required by
Rule 12(b)(6).
There are two ways in which the plaintiffs might have
pleaded knowledge: actual knowledge or willful blindness.
We consider these in turn.
Actual knowledge may be proven either by direct or cir‐
cumstantial evidence; as we held in Ortiz v. Werner Enters.,
Inc., 834 F.3d 760, 765 (7th Cir. 2016), there is no reason to priv‐
ilege one type of evidence over another. Circumstantial evi‐
dence involves drawing an inference from the circumstances,
see Washington v. LaPorte Cnty. Sheriff’s Dept., 306 F.3d 515, 519
(7th Cir. 2002). Here, Domanus alleges that Locke Lord was
aware of the conspiracy “because Defendants expressly asked
them to engage in its core activity: taking money from [the
Business Park] on false pretenses and using it to benefit [the
Swiech Group], including by perpetuating their control of
[the Business Park].” He supports this allegation by reference
to the supposedly unsavory billing practices that were used,
under which first Dienner, and later the Locke Lord attorneys,
tucked services for the Swiechs and Lewicki inside their bills
to the Business Park and thereby extracted money from the
Business Park for the benefit of the allegedly disloyal individ‐
uals.
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Although a conspirator does not need to know the intrica‐
cies and full dimensions of the scheme in order to be liable (or
convicted in a criminal case), he must be aware of its essential
scope and nature. See United States v. Volpendesto, 746 F.3d 273,
285 (7th Cir. 2014). Inappropriate though the billing practices
may have been (and, like the district court, we do not need to
reach this question), they do not get the plaintiffs where they
need to go. Let’s assume that the lawyer‐defendants should
have smelled a rat from Lewicki’s comments and the elaborate
efforts to conceal the individual bills in their invoices. What
kind of rat was it? More concretely, does their participation or
acquiescence in this allegedly shady effort shed any light on
whether they personally knew about the sham contracts, the
leasing arrangements, and the other fraudulent activity that
had occurred years before they were engaged—that is, about
the RICO conspiracy that Domanus and Kozlowski, and later
the company, originally attacked? Nothing in the complaints
supports a conclusion that they had such knowledge. As to
the lawyer‐defendants, the complaints support only an infer‐
ence that they misrepresented their failure to observe the al‐
leged ethical restrictions on representing both a victim‐corpo‐
ration and its disloyal insiders under the version of the neu‐
trality rule Domanus asserts is applicable. This is hardly ad‐
mirable, but it is a far cry from participating in a RICO con‐
spiracy based in Poland.
Domanus also pointed to the allegations in the Third
Amended Complaint and certain statements from the Polish
prosecutor as sources of the lawyer‐defendants’ actual
knowledge. But, as the district court pointed out, lawyers look
at allegations every time they are engaged to respond to a
lawsuit. They are not obliged to treat those allegations as true;
to the contrary, they recognize that a plaintiff is asserting only
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that it proposes to prove them, and they evaluate the com‐
plaint to see what kind of a defense can be raised. Faced with
a similar situation, the D.C. Circuit reached this common‐
sense conclusion in a case in which the plaintiff alleged that a
defendant law firm knew about its client’s wrongdoing. RSM
Prod. Corp. v. Freshfields Bruckhaus Deringer U.S. LLP, 682 F.3d
1043 (D.C. Cir. 2012). There the plaintiff had alleged that the
law firm knew about its client’s bribery conspiracy from news
reports about the bribery and embezzlement scheme, the cli‐
ent’s reputation for wrongdoing, and a prior criminal convic‐
tion. Id. at 1048–50. The court concluded that “[t]hese allega‐
tions are insufficient to establish a plausible inference that
[the defendant law firm] was aware of anything corrupt rele‐
vant to its provision of legal services other than accusations
made by and on behalf of Global Petroleum’s litigation adver‐
sary and general reports of public corruption in Grenada.” Id.
at 1050. The same idea applies here.
Domanus also argues that everything the lawyer‐defend‐
ants saw, combined with the allegations in the Third
Amended Complaint and the prosecutor’s statements, made
it at least plausible that they actually knew about the conspir‐
acy. We do not doubt that these materials raised a red flag, but
that takes us from the realm of actual knowledge to that of
willful blindness. The billing scheme and the efforts of the
Swiech Group to get their litigation costs paid by the Business
Park are troublesome. Nonetheless, the fact that someone
should have known about a scheme or fraudulent activity is
not enough to show that the person actually knew. See Frost
Nat’l Bank v. Midwest Autohaus, Inc., 241 F.3d 862, 870–71 (7th
Cir. 2001) (but noting that once the party became suspicious,
it took steps to deal with the situation). Here, there are no al‐
legations suggesting that the lawyers knew about the Swiech
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Group’s efforts to loot the business before the time of their en‐
gagement, and thus nothing plausibly suggesting that the
lawyers joined any conspiracy related to those efforts.
Willful blindness might be a better theory for the plaintiffs,
but it too falls short. An inference of knowledge through will‐
ful blindness requires that the defendant “believe that there is
a high probability that a fact exists” and “take deliberate ac‐
tions to avoid learning of that fact.” Global‐Tech Appliances, Inc.
v. SEB S.A., 563 U.S. 754, 769 (2011). Only a subjective belief
that there is a high probability that the fact is true, coupled
with deliberate steps to avoid learning the fact, is equivalent
to knowledge. See Chaney v. Dreyfus Serv. Corp., 595 F.3d 219,
240 (5th Cir. 2010) (“Neither awareness of some probability of
illegal conduct nor a showing that the defendant should have
known is enough” to constitute the legal equivalent of
knowledge.).
The key to this argument lies in an email that Jaszczuk
(one of the Locke Lord attorneys) sent to his colleagues in the
firm, proposing a strategy for the litigation. The email is cen‐
tral to the plaintiffs’ claims and was referred to in the supple‐
mental complaints. The district court was therefore entitled to
consider it in resolving the motion to dismiss. See 188 LLC v.
Trinity Indus., Inc., 300 F.3d 730, 735 (7th Cir. 2002). In the
email, Jaszczuk acknowledged that sifting through the volu‐
minous discovery materials that the firm had received would
be time‐consuming and extremely expensive. He predicted
that the Business Park “simply wouldn’t be able to (or
wouldn’t want to) pay for this type of undertaking.” He ac‐
cepted that if they did undertake such a review, “we might
very well learn that certain of the allegations are technically
true—i.e. that the transactions did occur and that they weren’t
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entirely above board. But, I also get the feeling that we might
find that [plaintiffs] were well aware of what was going on.”
He suggested that the firm focus on “what the Plaintiffs did
and what they knew” when examining the discovery, and
leave the rest to the prosecutor.
Taking this favorably to the plaintiffs, this does indicate
that Jaszczuk at least suspected that the Swiech Group de‐
fendants were up to something shady. What it does not indi‐
cate, however, is that he was avoiding the truth because he
did not want to learn the answer. His decision, apparently
adopted by Locke Lord, was to skip an exhaustive review of
the 60 gigabytes of electronically stored information for the
time being in order to save the client money; instead, he pro‐
posed what he painted as a more efficient strategy. This is not
enough to show willful blindness. Indeed, the email as a
whole, which is quoted in the district court’s opinion, does not
imply that the documents, if read, would reveal evidence of a
conspiracy; at most it says that Jaszczuk thought that some
transactions “weren’t entirely above board.” He apparently
thought that the plaintiffs might have been part of those deals,
which would have put a very different spin on things.
Apart from the supplemental complaints’ shortcomings
on the subject of knowledge, they are also deficient on the
question of agreement—a critical element of a RICO conspir‐
acy case. See Brouwer v. Raffensperger, Hughes & Co., 199 F.3d
961, 967 (7th Cir. 2000). We accept that Domanus presented
allegations showing that the Swiech Group, with the assis‐
tance of its attorney, successfully persuaded first Dienner and
then the Locke Lord attorneys to restructure their bills and to
coordinate their litigation activities. But the allegations do not
tie the story together to show how the lawyer‐defendants
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would have understood these actions (dubious as they may
have been, ethically) as an extension or part of the conspiracy
to loot the Business Park.
In order to raise an allegation of a conspiracy prohibited
by section 1962(d), the plaintiff must allege (1) that the de‐
fendant agreed to conduct or participate in the affairs of an
“enterprise,” and (2) that he agreed to the commission of two
predicate acts. Frost, 241 F.3d at 869; Goren, 156 F.3d at 732. The
absence of either of these is fatal to the claim. Formal agree‐
ment is not necessary; when the acts performed by the alleged
members of the conspiracy are unlikely to have been done
alone, the court may infer agreement. Kunik v. Racine Cnty.,
946 F.2d 1574, 1580 (7th Cir. 1991); see Monsanto Co. v. Spray‐
Rite Serv. Corp., 465 U.S. 752, 764 (1984) (circumstantial evi‐
dence of anticompetitive agreement must tend to exclude the
possibility that the alleged conspirators acted independently).
In addition, we bear in mind that mere association with con‐
spirators is not enough to establish an agreement. Goren, 156
F.3d at 732. Claims that lawyers have conspired with their cli‐
ents are insufficient in the absence of allegations that the ar‐
rangement involves more than standard legal representation.
See RSM, 682 F.3d at 1051–52.
The allegations against the lawyer‐defendants are easily
explained by their own self‐interest: making money and keep‐
ing a client happy by avoiding excessive discovery costs.
There is no indication that the lawyer‐defendants earned any
extra money for facilitating the Swiech Group’s efforts to have
their bills paid by the Business Park, nor that they hatched the
plan. But, Domanus insists, the lawyer‐defendants were do‐
ing more than providing legal representation for their client,
because they were simultaneously doing the bidding of their
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client’s adversary. Why would they have done this, without
some agreement in place? The short answer is that there may
have been some agreement, but it is not one that was ever tied
to the RICO conspiracy alleged in the underlying lawsuit.
In the end, as we said in considering our appellate juris‐
diction, whatever wrongdoings (if any) that occurred in the
course of any of the representation furnished by any of the
lawyer‐defendants were outside the scope of the RICO con‐
spiracy asserted in this case. Although the supplemental com‐
plaints paint a dismal picture of these attorneys’ behavior, as‐
suming the truth of the allegations of disregard for the alleged
neutrality principle, misleading billing statements, and the
like, these problems must be addressed in a different forum.
The lawyer‐defendants also have presented a number of
alternative arguments in support of the district court’s deci‐
sion. We see no reason to reach them, but we acknowledge
them here to confirm that they were properly preserved. First,
the lawyer‐defendants argue that it is now clear that the con‐
spiracy alleged throughout these proceedings falls outside the
territorial scope of RICO, in the wake of RJR Nabisco, supra.
Questions pertaining to the extraterritorial coverage of stat‐
utes normally go to the reach of the statute, not the court’s ju‐
risdiction. See Morrison v. Nat’l Australia Bank Ltd., 561 U.S.
247 (2010) (securities laws); Minn‐Chem, Inc. v. Agrium, Inc.,
683 F.3d 845 (7th Cir. 2012) (en banc) (antitrust). In RJR
Nabisco, the Court held that RICO’s substantive prohibitions
can apply extraterritorially, but just insofar as the predicate
violations themselves have rebutted the presumption against
extraterritoriality. The case before the Court involved
18 U.S.C. § 1962(c); with respect to that subsection, the Court
held that there is no private right of action for injuries suffered
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outside the United States. Importantly for us, the Court ex‐
pressly declined to reach the question whether the same rule
should apply to RICO’s conspiracy subsection, § 1962(d),
which is the one involved in our case. Because we have re‐
solved the matter before us on other grounds, we are content
to leave this for another day, although we suspect that a per‐
son asserting a private right under subsection (d) to recover
for foreign injuries may have an uphill battle after RJR
Nabisco.
We are also disinclined to rest our decision on judicial es‐
toppel, even though we agree with the district court that there
is at best a troubling inconsistency between plaintiffs’ com‐
mitments to this court at the time of Domanus I and their pre‐
sent position. Some aspects of the new claim may indeed be
estopped, but to the extent that plaintiffs are now complain‐
ing about a different alleged conspiracy, the requirements for
judicial estoppel might not be met. Rather than untangling all
the threads, we elect not to rest on this point. Even under the
district court’s view, not everything was barred by judicial es‐
toppel, and so it is easier to set this aside.
We express no opinion on the applicability of the Noerr‐
Pennington doctrine to the lawyer‐defendants’ actions. That
doctrine—which initially appeared in the field of antitrust—
recognizes that statutes should not be construed to cover the
activity of petitioning government, if at all possible. Whether
the branch of government is the legislature, the executive, or
the courts, the right to present one’s viewpoint is protected by
the First Amendment. There is a “sham” exception to Noerr‐
Pennington, see Prof. Real Estate Investors, Inc. v. Columbia Pic‐
tures Indus., Inc., 508 U.S. 49 (1993), but it is difficult to show
that litigation is so objectively baseless, or so clearly based on
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knowing and material falsehoods, that the exception applies.
We note only that there are many tools available to discipline
lawyers who foment frivolous litigation, and so our decision
not to reach this point is of little consequence.
Finally, as we indicated at the outset, the district court has
broad discretion over claims brought under its supplemental
jurisdiction, 28 U.S.C. § 1367. Typically, when a case is dis‐
missed under Rule 12(b)(6), the district court will relinquish
jurisdiction over these claims and allow the state courts (or
possibly in this case, the foreign court) to take over if that is
proper under their rules. That is the choice the district court
made here, and it is one that was comfortably within its dis‐
cretion.
IV
No one, least of all the law firms and lawyers involved in
these matters, covered himself with glory, accepting for pre‐
sent purposes the allegations in the two supplemental com‐
plaints. Nevertheless, we agree with the district court’s con‐
cluding comment: “Plaintiffs certainly provide a detailed
claim of wrongdoing by the attorney defendants, and plain‐
tiffs may not be without recourse. But their path to relief
based on these allegations is not through RICO, and thus not
in federal court.” We AFFIRM the judgment of the district
court.
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