G&G Closed-Circuit Events, LLC. v. Castillo et al
Filing
350
MEMORANDUM Opinion and Order signed by the Honorable Edmond E. Chang. For the reasons stated in the Opinion, Plaintiff G&G's summary judgment motion 304 is denied; Plaintiff/Counter-Defendant G&G's motion 293 to dismiss is granted; Thir d-Party Defendant Riley's motion 300 to dismiss is granted; and Defendants' summary judgment motion 295 is denied. The counterclaim (already on its third iteration) is dismissed with prejudice. Additionally, Defendants' motion [337 ] to take judicial notice, construed as a motion to file supplemental authority, is granted. Plaintiff's motion 341 347 to file check under seal is granted, but a public version redacting financial-account numbers and the amount must be file d by 06/28/2018. Defendants' motion 344 to file reply on the supplemental authority issue is denied as unnecessary. In order to give G&G and Defendants enough time to review this Opinion and re-evaluate their settlement positions, the status hearing of 06/21/2018 is reset to 07/09/2018 at 10:15 a.m. Mailed notice (mw, )
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
G&G CLOSED CIRCUIT EVENTS, LLC,
Plaintiff,
v.
JAIME CASTILLO, MARIA CASTILLO,
and EL BAJIO ENTERPRISES, INC.
Defendants.
____________________________________
JAIME CASTILLO, MARIA CASTILLO,
and EL BAJIO ENTERPRISES, INC.,
on behalf of themselves and others
similarly situated,
Counter-Plaintiffs
v.
LAW OFFICES OF THOMAS P. RILEY,
and
G&G CLOSED CIRCUIT EVENTS, LLC,
Counter-Defendants.
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No. 14 C 2073
Judge Edmond E. Chang
MEMORANDUM OPINION AND ORDER
This is the latest installment in a years-long saga of litigation between Jaime
and Maria Castillo, El Bajio Enterprises,1 G&G Closed Circuit Events (G&G for
short), and G&G’s attorney, the Law Offices of Thomas P. Riley (Riley for short).
The conflict began when G&G accused the Castillos of unlawfully broadcasting a
1For
the sake of simplicity, the Court will refer to Jaime Castillo, Maria Castillo, and
El Bajio Enterprises collectively as “the Castillos.”
boxing match at their restaurant in violation of G&G’s exclusive commercial
distribution rights.2 When G&G’s settlement demands proved futile, G&G initiated
this lawsuit. R. 1, Compl.3 The Castillos struck back with several counterclaims, the
current version looping in Riley as a defendant. R. 178, Third Am. Counterclaim. At
this point (after years of disputes over discovery and liability), G&G and the
Castillos have both moved for summary judgment on the issue of the Castillos’
liability for broadcasting the boxing match. R. 295, Castillo Mot. Summ. J.; R. 304,
G&G Mot. Summ. J. Meanwhile, G&G and Riley have each moved to dismiss the
Castillos’ entire Third Amended Counterclaim. R. 293, G&G Mot. Dismiss; R. 300,
Riley Mot. Dismiss. For the reasons stated below, the Castillos’ motion for summary
judgment is granted on G&G’s claim under 47 U.S.C. § 553, but otherwise denied.
G&G’s motion for summary judgment is also denied. Both motions to dismiss are
granted, and the Castillos’ Third Amended Counterclaim is dismissed with
prejudice.
I. Summary Judgment Motions
A. Background
In deciding a motion for summary judgment, the Court views the evidence in
the light most favorable to the non-moving party. Matsushita Elec. Indus. Co. v.
Zenith Radio Corp., 475 U.S. 574, 587 (1986). Because G&G and the Castillos have
both moved for summary judgment, the Court will consider the evidence in the light
most favorable to each party to see if the opposing party is entitled to summary
2This
Court has subject matter jurisdiction over the case under 28 U.S.C. § 1331.
to the record are noted as “R.” followed by the docket number and the
page or paragraph number.
3Citations
2
judgment.
G&G’s version of events is that G&G owns the commercial distribution rights
to a boxing match, Saul Alvarez v. Austin Trout Championship Fight Program,
which was telecast nationwide on April 20, 2013. R. 306, G&G SOF ¶ 7.4 The
Castillos obtained access to the fight through their residential DirecTV account, and
broadcast the fight at their restaurant, La Pena.5 Id. ¶¶ 8-11. Aaron Lockner, an
investigator working on behalf of G&G,6 observed the fight through the window of
La Pena, and went into the restaurant to investigate. R. 320, G&G Resp. Castillo
SOF ¶ 46. Lockner wrote an affidavit stating that he saw the fight being displayed
on three TVs in La Pena around 10:30 p.m. on April 20. G&G SOF Exh. 9, Lockner
Aff. The Castillos did not order the fight from G&G, and did not obtain a
commercial license to broadcast it. G&G SOF ¶ 12.
The Castillos admit that they showed the fight at their restaurant, and that
they never purchased a commercial license from G&G. R. 324, Castillo Resp. G&G
SOF ¶ 12; R. 297, Castillo SOF ¶ 42. But the Castillos maintain that they were
4Abbreviations
to the parties’ Local Rule 56.1 Statements are as follows: “Castillo
SOF” for the Castillos’ Statement of Facts [R. 297], “G&G SOF” for G&G’s Statement of
Facts in support of its own motion for summary judgement [R. 306]; “Castillo Resp. G&G
SOF” for the Castillos’ response to G&G’s Statement of Facts [R. 324]; and “G&G Resp.
Castillo SOF” for G&G’s response to the Castillos’ Statement of Facts [R. 320]; “G&G Add.
SOF” for G&G’s statement of additional facts in response to the Castillos’ motion for
summary judgment [R. 318]; and “Castillo Resp. G&G Add. SOF” for the Castillos’ response
to G&G’s additional statement of facts in response to the Castillos’ motion for summary
judgment [R. 329].
5La Pena is the business name of El Bajio Enterprises. G&G SOF ¶ 2.
6Lockner was apparently hired by another investigator named Larry Biela, who was
hired by G&G’s attorney Thomas Riley. Castillo SOF ¶ 34; Castillo SOF Exh. 4, Riley Dep.
67:5-13. (G&G objected to this factual statement, but on grounds of relevance rather than
factual accuracy. G&G Resp. Castillo SOF ¶ 34.)
3
entrapped into showing the fight by Aaron Lockner. See Castillo SOF ¶ 42.
According to the Castillos, on the night of the fight, an unknown customer—who the
Castillos now believe to be Lockner—asked Jaime Castillo to change the channel to
Showtime to put on the fight. Id. The Castillos were able to show the fight because
(they maintain), DirecTV had mistakenly installed residential programming at La
Pena. Id. ¶ 43. (The fight was broadcast to residential customers at no charge on
April 20, so the Castillos presumably were not prompted to pay for the
programming when they put on the fight at Lockner’s request. See Castillo SOF
¶¶ 44, 46.) The Castillos further assert that G&G encourages investigators like
Lockner to engage in dishonest behavior by paying them only if they provide signed
affidavits attesting to acts of piracy, by not double-checking the investigators’
assertions in their affidavits, and by failing to verify other evidence provided by the
investigators, such as photos and videos. Castillo SOF ¶¶ 30-33, 38.
B. Summary Judgment Standard
Summary judgment must be granted “if the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a
matter of law.” Fed. R. Civ. P. 56(a). A genuine issue of material fact exists if “the
evidence is such that a reasonable jury could return a verdict for the nonmoving
party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In evaluating
summary judgment motions, courts must view the facts and draw reasonable
inferences in the light most favorable to the non-moving party. Scott v. Harris, 550
U.S. 372, 378 (2007). The Court may not weigh conflicting evidence or make
4
credibility determinations, Omnicare, Inc. v. UnitedHealth Grp., Inc., 629 F.3d 697,
704 (7th Cir. 2011), and must consider only evidence that can “be presented in a
form that would be admissible in evidence.” Fed. R. Civ. P. 56(c)(2). The party
seeking summary judgment has the initial burden of showing that there is no
genuine dispute and that they are entitled to judgment as a matter of law.
Carmichael v. Village of Palatine, 605 F.3d 451, 460 (7th Cir. 2010); see also Celotex
Corp. v. Catrett, 477 U.S. 317, 323 (1986); Wheeler v. Lawson, 539 F.3d 629, 634 (7th
Cir. 2008). If this burden is met, the adverse party must then “set forth specific
facts showing that there is a genuine issue for trial.” Anderson, 477 U.S. at 256.
C. Analysis
1. G&G’s Commercial Distribution Rights
A threshold dispute is whether G&G actually owns the commercial
distribution rights to the Alvarez/Trout boxing match. G&G asserts that it
purchased the rights from Showtime, and backs up this assertion with testimony
from G&G’s president Nicholas Gagliardi. G&G SOF ¶ 7; G&G SOF Exh 4,
Gagliardi Dep. 21:5-23:1; R. 308, Gagliardi Aff. ¶ 3. The Castillos, on the other
hand, argue that G&G’s proof is insufficient to prove that G&G owns the
commercial rights to the fight. See Castillo SOF ¶¶ 12-20; R. 296, Castillo Summ. J.
Br. at 4. The Castillos do not provide any evidence to back up their suspicion that
G&G does not own the rights to the fight, choosing to point only to oddities and
inconsistencies in Gagliardi’s testimony. See id.7
7It
is passing strange that, for all the discovery skirmishes in this case, there is little
or no actual, well, discovery taken on the issue of G&G’s ownership of the commercial
5
Ordinarily, this kind of speculation about the truthfulness of the other side’s
testimony would not be enough to defeat a motion for summary judgment. See, e.g.,
Bell v. Duperrault, 367 F.3d 703, 707 (7th Cir. 2004) (“Inferences that are supported
by only speculation or conjecture will not defeat a summary judgment motion.”). In
this case, however, there is some reason to be skeptical about Gagliardi’s testimony.
Gagliardi states that he negotiated purchase of the rights via email with someone
named Jock McLean, who was then a vice president for sports and event
programming at Showtime Networks, Inc. Gagliardi Aff. ¶ 3. Gagliardi testifies that
it was the usual practice to not have a written contract. Castillo SOF Exh. 7,
Gagliardi Dep. 22:2-5.
But Gagliardi was also unable to produce the emails that supposedly
memorialized the agreement, or any other documentation to confirm that the sale
actually took place. See id. 23:18-24:3. Gagliardi did explain the missing emails by
testifying that his computer files got corrupted and the email was lost. Id. Gagliardi
also testified that he tried to reach out to McLean, his contact at Showtime, and got
no response. Id. 93:15-94:5. To be sure, none of this is a smoking gun. It could very
well be true that Gagliardi’s emails were indeed lost, and that McLean no longer
works at Showtime or just refused to respond (though a subpoena would have
required a response). Still, it is odd that G&G would have no documentation of its
supposed rights to the programming. It is also strange that Gagliardi’s emails were
apparently stored only as files on one computer and could not be obtained from the
broadcast rights. For example, the parties have presented no evidence that Showtime was
subpoenaed, by either side, for records or for a Rule 30(b)(6) deposition on the ownership
issue.
6
provider of the email service. But, on the other hand, the Castillos provided no
actual evidence to cast doubt on Gagliardi’s testimony, even though they could
presumably have backed up their theories by (as noted earlier) subpoenaing records
from Showtime, for example. Even an absence of Showtime records would have been
probative to rebut Gagliardi’s testimony.
At the end of the day, this is a close enough question to preclude summary
judgment right now. Taken in the light most favorable to the Castillos, a reasonable
jury could find, on these facts, that there is enough circumstantial evidence to
disbelieve Gagliardi’s testimony on ownership. This is an example of a case where
the gaps in a movant’s summary-judgment presentation cast enough doubt on an
asserted fact that the non-movant can reasonably point to the absence of evidence
as enough to raise a genuine issue. Having said that, a prompt motion from either
side might be granted for very limited and targeted discovery on Showtime, even at
this late date, to ascertain the truth of the ownership issue. And, in any event, at
the pretrial order stage, the parties should consider whether a special interrogatory
would be helpful on this issue (the Court has no firm thoughts on this as of yet).
Also, depending on how the evidence plays out at trial, the Court might consider a
motion for judgment as a matter of law on the issue. See Fed. R. Civ. P. 50(a). But,
at this point, G&G cannot prevail on its summary judgment motion because it has
not established that a reasonable factfinder must find that G&G owns the rights to
the Alvarez/Trout fight. Conversely, the Castillos also cannot prevail on this issue
7
right now, because a jury could reasonably believe Gagliardi’s testimony that he
purchased the rights.8
2. Liability under 47 U.S.C. § 605
Assuming that G&G owns the rights to the fight, it would still need to
establish El Bajio and the Castillos’ liability under 47 U.S.C. § 605. Section 605(a)
8After
the close of summary judgment briefing, the Castillos filed a “Motion to Take
Judicial Notice,” which was in fact a motion for the Court to consider supplemental
authority. See R. 337; R. 338. That motion drew the Court’s attention to an order in another
case, G&G Closed-Circuit Events, LLC v. Medel’s Icehouse, et al., Case No. 4:15-cv-01042
(S.D. Tex. June 7, 2016). The order granted summary judgment to the defendant on the
grounds that G&G had not established its rights to the broadcast. R. 337 Exh. 1 at 6.
Attached to the motion was an affidavit by Gagliardi attesting that G&G owned the rights
to the April 20 Trout/Alvarez fight. R. 337 Exh. 2. This affidavit was submitted during
summary judgment briefing in the Medel’s Icehouse case.
In response, G&G pointed out that the opinion that the Castillos submitted as
supplemental authority was subsequently vacated. R. 339 at 2-3. G&G also asked for leave
to file under seal a copy of a check made out to Showtime Networks, Inc., with the
memorandum “April 20, 2013.” R. 340; R. 341; R. 344. The motion to file a sealed version of
the check is granted, but a public version redacting financial-account numbers and the
amount of the check must be filed by June 28, 2018. But none of this makes a difference to
the outcomes on summary judgment (so the defense motion to file a reply, R. 344, is
denied). First, the (apparently vacated) order in Medel’s Icehouse is of very limited
persuasive value because it is not clear that the evidentiary record in that case is the same
as the record here. The Medel’s Icehouse order did not discuss any testimony by Gagliardi
that substantiated the claims in the affidavit, whereas Gagliardi’s testimony is part of the
record in this case.
Nor does the new evidence submitted by G&G in response to the Castillos’ motion
change the result. Even if the Court were to consider this late-filed evidence (which was
inexplicably not included in G&G’s summary judgment filings), there would still be a
genuine issue of material fact as to G&G’s ownership of the rights. It is true that the check
tends to support Gagliardi’s story that G&G purchased the rights to the Alvarez/Trout fight
from Showtime. But, contrary to G&G’s assertions, the check does not “alone refute any
argument” that there was no contract between G&G and Showtime for the fight. See R. 339
at 5. The check does contain the memorandum “April 20, 2013,” but it does not state
outright that the payment was for the fight at issue. See R. 340. Presumably Gagliardi or
another G&G representative would have to testify that the check was indeed payment for
the Alvarez/Trout fight rather than for some other event that took place on April 20. And,
as discussed already, Gagliardi’s story is odd enough that a jury could reasonably doubt his
credibility. So, even considering the check, there are enough unresolved questions about the
transaction between G&G and Showtime to prevent summary judgment on the issue of
G&G’s right to broadcast the fight.
8
prohibits different forms of satellite signal piracy. 47 U.S.C. § 605(a); see also J&J
Sports Prods., Inc. v. Mandell Family Ventures, LLC, 751 F.3d 346, 353 (5th Cir.
2014). Section 605(a) is densely worded and not divided into subparagraphs, so it is
helpful to break the statute down into sentences:
[Sentence 1] [N]o person receiving, assisting in receiving, transmitting, or
assisting in transmitting, any interstate or foreign communication by wire or
radio shall divulge or publish the existence, contents, substance, purport,
effect, or meaning thereof, except through authorized channels of
transmission or reception, (1) to any person other than the addressee, his
agent, or attorney, (2) to a person employed or authorized to forward such
communication to its destination, (3) to proper accounting or distributing
officers of the various communicating centers over which the communication
may be passed, (4) to the master of a ship under whom he is serving, (5) in
response to a subpoena issued by a court of competent jurisdiction, or (6) on
demand of other lawful authority.
[Sentence 2] No person not being authorized by the sender shall intercept
any radio communication and divulge or publish the existence, contents,
substance, purport, effect, or meaning of such intercepted communication to
any person.
[Sentence 3] No person not being entitled thereto shall receive or assist in
receiving any interstate or foreign communication by radio and use such
communication (or any information therein contained) for his own benefit or
for the benefit of another not entitled thereto.
[Sentence 4] No person having received any intercepted radio
communication or having become acquainted with the contents, substance,
purport, effect, or meaning of such communication (or any part thereof)
knowing that such communication was intercepted, shall divulge or publish
the existence, contents, substance, purport, effect, or meaning of such
communication (or any part thereof) or use such communication (or any
information therein contained) for his own benefit or for the benefit of
another not entitled thereto.
The first sentence of Section 605 is not applicable, because it regulates the
behavior of communications personnel. United States v. Norris, 88 F.3d 462, 465
(7th Cir. 1996). Sentences 2 and 4 also do not apply here, because they target people
9
who
have
“intercepted”
satellite
communications
themselves
or
received
“intercepted” communications from others. “Intercept” means to “tak[e] or seiz[e] by
the way or before arrival at the destined place.” Nat’l Satellite Sports, Inc. v.
Eliadis, Inc., 253 F.3d 900, 915 (6th Cir. 2001) (quoting Goldman v. United States,
316 U.S. 129, 134 (1942), overruled on other grounds, Katz v. United States, 389
U.S. 347 (1967)). In this case, there are no facts suggesting that the Castillos “took”
or “seized” programming on its way to its intended destination. All parties seem to
agree that La Pena was the intended endpoint of the DirecTV service at issue, and
G&G does not argue that improper use of residential programming in a commercial
establishment could be considered “interception.” Indeed, G&G relies on the Court’s
analysis in Joe Hand Promotions, Inc. v. Killeen, where the Court held that using
residential programming for a commercial establishment was not “interception.” Joe
Hand Promotions, Inc. v. Killeen, 14-cv-3996 (N.D. Ill. Dec. 22, 2015), ECF No. 80 at
9-10. Nor does G&G argue that anyone else “intercepted” the programming before
the Castillos exhibited it. Sentences 2 and 4 of Section 605 do not apply.
That leaves the third sentence: “No person not being entitled thereto shall
receive or assist in receiving any interstate or foreign communication by radio and
use such communication (or any information therein contained) for his own benefit
or for the benefit of another not entitled thereto.” 47 U.S.C. § 605(a) (emphasis
added). So, the question for summary judgment is whether a reasonable factfinder
could find the Castillos were “entitled” to receive the Alvarez/ Trout fight, or, if not,
10
whether the factfinder would have to find that the Castillos were not entitled to
receive the programming.
Courts have generally held that Section 605(a) imposes strict liability. See,
e.g., J&J Sports Productions, Inc. v. Jorkay, LLC, 2013 WL 2629461, at *2
(E.D.N.C. June 11, 2013) (collecting cases finding that 47 U.S.C. § 605 imposes
strict liability for violations). Because Section 605 imposes strict liability, courts
generally grant summary judgment to plaintiffs if there is undisputed evidence that
the defendant exhibited satellite programming without authorization, even when
the defendants argue that the violation was caused by mistaken installation of
residential programming at a commercial establishment. See, e.g., J&J Sports
Productions, Inc. v. Dabrowski, 2015 WL 9304347, at *3 (N.D. Ill. 2015); Joe Hand
Promotions, Inc. v. Zani, 2013 WL 5526524, at *2 (N.D. Ill. Oct. 7, 2013); Joe Hand
Promotions, Inc. v. Ol’ River Hideaway, LLC, 2016 WL 590251, at *3 (W.D. Tex.
Feb. 11, 2016); Eliadis, 253 F.3d at 916-17.
This case is different. The Castillos have offered evidence that their alleged
violation of the statute was actually caused by the purported rights-holder’s agent.
The Castillos testified that Jaime only turned on the fight because Aaron Lockner—
who at the time was investigating potential violations on G&G’s behalf—asked
them to turn it on. Castillo SOF ¶ 42. According to Jaime, Lockner even directed
Jaime to the channel where the fight could be found. Id. Assuming that this version
of events is true (which the Court must do in deciding G&G’s summary judgment
motion), and assuming that Lockner was acting within the scope of his agency,
11
there was no violation of Section 605. If the rights-holder (or the rights-holder’s
agent) asks someone else to turn on their proprietary programming, then the rights
holder is effectively giving permission for the program to be shown—which means
that the exhibitor would be, in the terminology of Sentence 3, “entitled” to show the
program. Cf. Eliadis, 253 F.3d at 917 (holding that a party who was contractually
authorized to receive and relay a communication was “entitled” to receive and use
the communication under Section 605). In this case, the Castillos maintain that
Lockner, G&G’s agent, asked Jaime Castillo to turn on the program, implicitly
granting him permission to do so. This permission means that the Castillos became
“entitled” to receive and show the boxing match when Lockner asked them to turn it
on. See 47 U.S.C. § 605(a), Sentence 3. This result makes sense: it would be bizarre
if G&G’s agents could effectively cause violations of Section 605 and then collect
from their unwitting victims. A reasonable factfinder could decide that this is
exactly what happened to the Castillos, so G&G’s motion for summary judgment is
denied.
That said, the Castillos are not entitled to summary judgment either. The
crucial fact dispute about whether or not Lockner asked Jaime to turn on the
program could go either way: a reasonable jury could find that Lockner is credible,
and that the boxing match was already playing when he arrived.9 If the match was
9Both
G&G and the Castillos ask the Court to believe their version of events and
disbelieve the other side’s, but that kind of factual finding is prohibited at the summary
judgment stage. It does not matter at this stage that Lockner has been charged with a
felony or that he is not a licensed investigator, see Castillo SOF ¶¶ 23-24; these facts go
only to Lockner’s credibility. See Omnicare, 629 F.3d at 704 (noting that credibility
determinations are the province of the jury). Similarly, the Court cannot decide that Jaime
12
already playing when Lockner walked in, then the Castillos are liable under Section
605 (so long as G&G owned the commercial distribution rights). In addition to this
factual dispute, there are also some fact questions about Lockner’s relationship with
G&G, and whether he was acting within the scope of his agency when he (allegedly)
asked the Castillos to turn on the Alvarez/Trout fight. All of these disputed fact
issues prevent the Court from granting summary judgment to the Castillos on the
Section 605 claim.
3. Individual Liability
If there is liability under Section 605, the Castillos will be individually liable
for the violation. Courts generally hold that an individual is liable under Section
605 if she had a right and ability to supervise the violation and had a financial
interest in it. J&J Sports Productions, Inc., 2015 WL 9304347, at *4. The Castillos
admit that they are co-owners of El Bajio Enterprises, which does business as La
Pena, that they were both at the restaurant on the night the fight was shown, and
that they both had the right and ability to supervise the goings-on at the
restaurant. Castillo Resp. G&G SOF ¶¶ 3, 19. The Castillos had an obvious
financial interest in showing the fight, even if they only put it on at Lockner’s
request: they wanted to make Lockner, a presumed customer, happy. That is
enough for individual liability.
Castillo’s testimony that Lockner asked him to put on the fight is “simply not true,” see R.
305, G&G Summ. J. Br. at 7. It is for the jury to decide which testimony is credible and
which testimony is not, and until that happens, neither side is entitled to judgment.
13
4. Willfulness
Disputed factual issues also prevent summary judgment on the issue of the
Castillos’ willfulness. Section 605 provides for enhanced damages up to $100,000 if
the violation was “committed willfully and for purposes of direct or indirect
commercial advantage or private financial gain.” 47 U.S.C. § 605(e)(3)(C)(ii). The
Castillos moved for summary judgment on this issue, arguing that there are no
facts on the record to support a willfulness finding. Castillo Summ. J. Br. at 9. That
is incorrect. There are a number of disputed fact issues that go to willfulness. To
give a few examples, the parties dispute whether the Castillos turned on the fight
on their own initiative, whether the Castillos deliberately obtained residential
DirecTV service for their commercial establishment, and whether the Castillos have
shown other boxing matches at La Pena. See R. 318, G&G Add. SOF ¶¶ 3-4, 7-12; R.
329, Castillo Resp. G&G Add. SOF ¶¶ 2-4, 11; R. 319, G&G Resp. Castillo Mot.
Summ J. at 14. With these facts in dispute, the Castillos are not entitled to
summary judgment, so the willfulness issue also must go to a jury.
5. Liability under 47 U.S.C. § 553
The Castillos’ motion for summary judgment is granted on G&G’s claim
under 47 U.S.C. § 553. Section 553 applies to unauthorized use of cable, whereas
Section 605 deals with satellite television. Even though a plaintiff cannot collect
under both Section 605 and Section 553, it is common to plead violations of both
statutes when the plaintiff does not know exactly how the alleged piracy occurred
(that is, when the plaintiff does not know whether the violation occurred via
14
satellite or via cable). J&J Sports Productions, Inc. v. B O B Lounge, LLC, 2018 WL
300363, at * 4 (E.D. Mich. Jan. 5, 2018). That is exactly what G&G did in this case.
See R. 1, Compl. Now that it is clear that the alleged violation involved the
Castillos’ satellite TV service, G&G concedes that summary judgment is appropriate
on the Section 553 claim. G&G Resp. to Castillo Mot. Summ. J. at 15. So summary
judgment is granted against that claim.
II. Motions to Dismiss
A. Background
For the purposes of deciding the motions to dismiss, the Court takes as true
all the factual allegations in the Castillos’ Third Amended Counterclaim. See
Erickson v. Pardus, 551 U.S. 89, 94 (2007). The Castillos allege that G&G and the
Law Offices of Thomas Riley “have been engaged in a nationwide scheme …
whereby they use questionable means to entrap unsuspecting business and
individual consumers who have allegedly violated their licensing rights, and then
extort money … using threatening and misleading settlement and litigation tactics.”
R. 178, Third Am. Counterclaim ¶ 2. According to the Castillos, the scheme works
as follows: Riley enlists hundreds of investigators (called “auditors”) to search for
violations of G&G’s television licensing rights. Id. ¶ 6. Riley does not interview
these investigators or verify their credentials. Id. ¶ 7. Riley encourages the
investigators to hire their own subcontractors; Riley does not have a direct
contractual relationship with these individuals. Id. ¶¶ 9-10. The investigators are
provided with form affidavits to complete, and encouraged to provide photos and
15
videos of violations. Id. ¶ 13. The investigators use “questionable” tactics to find
violations, including asking that a fight be turned on in order to entrap the owners
into showing unlicensed programming. Id. ¶ 15. According to the Castillos, the
investigators frequently lie or exaggerate in their affidavits. Id. ¶ 16. Riley does not
supervise the investigators, and does not review the affidavits, photos, and videos to
make sure they are accurate. Id. ¶¶ 11, 17. Investigators are paid only if they find a
violation, which gives the investigators an incentive to lie. Id. ¶ 69.
G&G and Riley then send “hundreds, if not thousands” of “misleading and
threatening form letters” to consumers and businesses, seeking to enter settlements
with alleged violators. See id. ¶¶ 61-62. G&G and Riley also allegedly make threats
and misleading statements over the telephone. Id. ¶ 62. The Castillos accuse G&G
and Riley of engaging in a number of “unfair” practices in seeking settlements,
including implying “guilt” in a civil context, refusing to provide copies of evidence10
to alleged violators, and refusing to provide the alleged violators with specific
statutory references or legal authority for their alleged claims. Id. ¶¶ 75-77. G&G
and Riley also act unfairly by neglecting to investigate their entitlement to
enhanced damages, failing to advise alleged violators to engage attorneys, and
failing to advise the alleged violators of statutory provisions that might limit
damages. Id. ¶¶ 78-80. Riley and G&G demand large sums as settlement “with no
statutory basis.” Id. ¶ 82.
10Presumably
the affidavits, photos, and videos, though the counterclaim does not
make this clear. See Third Am. Counterclaim ¶ 76.
16
That is the general shape of the scheme; the details emerge in the Castillos’
narrative of their own experiences with G&G and Riley. The Castillos allege that
Riley contracted with Larry Biela and Associates, a private detective agency in
Chicago. Id. ¶ 18. Biela subcontracted investigation work to Aaron Lockner. Id.
¶ 19. On the night of April 20, 2013, Lockner entered La Pena restaurant and asked
Jaime Castillo if he could put “the fight” on. Id. ¶¶ 20-23. Jaime did not know what
Lockner was talking about, and asked Lockner what channel he wanted. Id. ¶ 24.
Lockner gave Jaime a channel number, and the fight appeared on the screen
without any kind of pay screen or special notice. Id. ¶ 25. Jaime was only able to
show the fight because DirecTV had set up an improper residential account in La
Pena, a commercial establishment. Id. ¶ 28.11
According to the Castillos, Lockner submitted an affidavit to Riley that
contained critical omissions and outright falsehoods.12 Specifically, Lockner did not
disclose in his affidavit that he asked for the fight to be turned on. Id. ¶ 29. He also
lied about the number of televisions showing the fight, and exaggerated both the
11The
Third Amended Counterclaim alleges that DirecTV intentionally installs
improper residential satellite TV service in small minority-owned businesses (why DirecTV
does this is not explained). See Third Am. Counterclaim ¶ 3 & n. 2, ¶ 28. DirecTV was
dismissed as a defendant by stipulation in December 2017, and is not a party to the current
litigation. See R. 292 (12/13/17 Minute Entry).
12The Third Amended Counterclaim is unclear about how Lockner prepared the
affidavit or how it was used. In fact, it does not even explicitly say that Lockner wrote the
affidavit or that he submitted it to Riley. But the Court infers that this happened based on
Paragraphs 30 and 31, which state that Biela did not review Lockner’s affidavit “prior to
submission to Riley,” that Riley paid Biela for Lockner’s affidavit, and that Biela then paid
Lockner.
17
occupancy of the establishment13 and the number of patrons in the establishment at
the time of his visit. Id.
About a month after showing the fight, Jaime received two letters from the
Riley law office. The Third Amended Counterclaim characterizes these letters as
“threatening and misleading.” See Third Am. Counterclaim at ¶¶ 32-33. The letters
are attached to the counterclaim as exhibits. The first, dated May 29, 2013, stated
that Riley was “informed and believe[d]” that the Alvarez/Trout fight was exhibited
at Jaime Castillo’s commercial establishment without permission, and that any
unauthorized broadcast was “in direct violation of the law, including but not limited
to Title 47 U.S.C. Section 605, and or Title 47 U.S.C. Section 553.” Third Am.
Counterclaim Exh. 1. The letter encouraged Jaime to contact Riley in order to reach
a settlement to avoid potential liability. Id. The second letter, dated July 2, 2013,
referenced the first letter and threatened to sue and seek “enhanced statutory
damages, compensatory damages, [and] attorneys’ fees and costs” unless Jaime
“resolve[d] this matter without further delay.” Id. The letter stated that any
opportunity to settle on favorable terms would be withdrawn once litigation
commenced. Id.
After receiving the second letter, Jaime phoned Riley’s office several times.
Third Am. Counterclaim ¶¶ 34-35. Eventually, he was given an appointment with
an attorney named Julie Dadayan, who worked as an independent contractor for
Riley. Id. ¶¶ 35 & n.7, 37. At the meeting, Dadayan was “pushy and short.” Id. ¶ 36.
13Presumably
meaning the restaurant’s capacity, as opposed to the number of people
actually inside the restaurant at the time of the boxing match.
18
She told Jaime that she “knew he was guilty,” and pushed him to settle. Id.
Dadayan did not describe any specific legal authority for G&G’s claims. Id. Dadayan
never suggested that Jaime (who had a strong accent) should contact an interpreter,
and never suggested that he should consult an attorney. Id. ¶¶ 38-39. She did not
inquire about whether Jaime had cable or satellite or attempt to elicit facts from
Jaime that would have supported (or undermined) a claim of enhanced damages. Id.
¶¶ 40-41. Dadayan also did not advise Jaime that his liability might be limited if
the violation was unknowing. Id. ¶ 44. Dadayan tried to convince Jaime that his
only option was to settle, and demanded $20,000. Id. ¶ 45. Jaime explained that he
did not have that kind of money, and told Dadayan that G&G would have to take
him to court. Id. ¶ 46.
After the meeting, Jaime received another two letters from Riley, which the
Castillos also characterize as “threatening and misleading.” Id. ¶ 52. The first letter
stated that attempts to settle had been unsuccessful, informed Jaime that G&G was
preparing to file a complaint against him, and asked Jaime to complete a
questionnaire to facilitate service of process. Third Am. Counterclaim Exh. 2. The
second letter stated that it was G&G’s “final overture towards reaching any pre-suit
resolution of this matter,” and told Jaime that he had until the end of the week to
avoid the impending federal lawsuit. Id. (emphasis in original). Finally, in March
2014, G&G’s Illinois counsel filed a lawsuit against the Castillos. R. 1, Compl. The
complaint claimed that the Castillos had violated 47 U.S.C. § 605 or 47 U.S.C. § 553
by exhibiting the Alvarez/Trout fight at La Pena. Id.
19
B. Motion to Dismiss Standard
“A motion under Rule 12(b)(6) challenges the sufficiency of the complaint to
state a claim upon which relief may be granted.” Hallinan v. Fraternal Order of
Police Chicago Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009). “[W]hen ruling on a
defendant’s motion to dismiss, a judge must accept as true all of the factual
allegations contained in the complaint.” Erickson v. Pardus, 551 U.S. 89, 94 (2007).
A “complaint must contain sufficient factual matter, accepted as true, to ‘state a
claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009) (quoting Bell Atl. v. Twombly, 550 U.S. 544, 570 (2007)). These allegations
“must be enough to raise a right to relief above the speculative level.” Twombly, 550
U.S. at 555. And the allegations that are entitled to the assumption of truth are
those that are factual, rather than mere legal conclusions. Iqbal, 556 U.S. at 679.
Ordinarily, under Federal Rule of Civil Procedure 8(a)(2), a complaint need
only include “a short and plain statement of the claim showing that the pleader is
entitled to relief.” Fed. R. Civ. P. 8(a)(2). This short and plain statement must “give
the defendant fair notice of what the … claim is and the grounds upon which it
rests.” Twombly, 550 U.S. at 555 (alteration in original) (cleaned up).14 The Seventh
Circuit has explained that this rule “reflects a liberal notice pleading regime, which
is intended to ‘focus litigation on the merits of a claim’ rather than on technicalities
that might keep plaintiffs out of court.” Brooks v. Ross, 578 F.3d 574, 580 (7th Cir.
2009) (quoting Swierkiewicz v. Sorema N.A., 534 U.S. 506, 514 (2002)). But claims
14This
opinion uses (cleaned up) to indicate that internal quotation marks,
alterations, and citations have been omitted from quotations.
20
alleging fraud must satisfy the heightened pleading requirement of Federal Rule of
Civil Procedure Rule 9(b), which requires that “[i]n alleging fraud or mistake, a
party must state with particularity the circumstances constituting fraud or
mistake.” Fed. R. Civ. P. 9(b) (emphasis added). Put differently, the complaint
“must describe the who, what, when, where, and how of the fraud.” Pirelli
Armstrong Tire Corp. Retiree Med. Benefits Trust v. Walgreen Co., 631 F.3d 436,
441-42 (7th Cir. 2011) (cleaned up).
C. Analysis
1. ICFA
The Illinois Consumer Fraud and Deceptive Business Practices Act (ICFA),
815 ILCS 505/1 et seq., “is a regulatory and remedial statute intended to protect
consumers, borrowers, and business persons against fraud, unfair methods of
competition, and other unfair and deceptive business practices.” Robinson v. Toyota
Motor Credit Corp., 775 N.E.2d 951, 960 (Ill. 2002). ICFA prohibits “[u]nfair
methods of competition and unfair or deceptive acts or practices … in the conduct of
any trade or commerce.” 815 ILCS 505/2. ICFA defines “trade” and “commerce” as
“the advertising, offering for sale, sale, or distribution of any services and any
property, tangible or intangible, real, personal or mixed, and any other article,
commodity, or thing of value wherever situated.” 815 ILCS 505/1(f).
This definition heads off any ICFA claim based on the events described in the
Third Amended Counterclaim. For G&G and Riley’s actions to fall within the
purview of ICFA, G&G and Riley would have had to engage in deceptive acts or
21
unfair practices “in the conduct of” the “advertising, offering for sale, sale, or
distribution” of G&G’s property, 815 ILCS 505/1(f). The Castillos allege that G&G,
Riley, and their agents engaged in all manner of shady practices in their attempts
to extract settlements from unlicensed exhibitors of G&G properties. But G&G’s
efforts to enforce its rights through litigation and threats of litigation is not “the
advertising, offering for sale, sale or distribution” of any property or service, which
is what ICFA regulates.
The Castillos argue that the “raison d’etre for this litigation” is G&G’s
distribution of television programming. That is certainly true in a roundabout way,
but that kind of attenuated connection is not enough. ICFA does not prohibit any
deceptive acts or unfair practices that are in some nebulous way connected to trade
or commerce. If it did, ICFA’s reach would be nearly endless, given the breadth of
trade or commerce. What ICFA actually prohibits are unfair acts and deceptive
practices “in the conduct of any trade or commerce.” 805 ILCS 505/2 (emphasis
added). Litigation conduct is not on the list of actions that constitute “trade or
commerce” under ICFA, and the Castillos have not convincingly argued that any of
the actions described in the counterclaim occurred “in the conduct” of any of the
activities on the list. See Roppo v. Travelers Commercial Ins. Co., 869 F.3d 568, 59596 (7th Cir. 2017) (declining to hold that discovery of insurance policy limitations in
civil litigation was “trade or commerce”); Falk v. Perez, 973 F.Supp.2d 850, 868
(N.D. Ill. 2013) (evicting a tenant is not “trade or commerce”); cf. Cripe v. Leiter, 703
N.E.2d 100, 197 (Ill. 1998) (holding that claims arising out of the attorney-client
22
relationship are not within the purview of ICFA because “the attorney-client
relationship in this state … is already subject to extensive regulation”) (Ill. 1998).
The Castillos’ claims are not within the reach of ICFA, so their ICFA claim must be
dismissed.15
G&G and Riley raise a number of other arguments for dismissing the ICFA
claim, including the Illinois litigation privilege, failure to adequately allege
standing under ICFA, the Noerr-Pennington doctrine, and failure to allege unfair
conduct. See generally R. 294, G&G Mot. Dismiss Br.; R. 301, Riley Mot. Dismiss Br.
Most or all of these arguments would require the Court to tread into unsettled areas
of Illinois law. It is generally not the role of federal courts to break new ground in
state law, Roppo, 869 F.3d at 596, and the Court will avoid doing so here. It is
enough to say that the Third Amended Counterclaim has not alleged any unfair or
deceptive practices in the conduct of trade or commerce; the other arguments are
left for Illinois courts to explore in other cases.
15The
Castillos note that the Court has “twice found that the ICFA claim is
sufficiently pled.” See R. 322, Castillo Resp. to G&G Mot. Dismiss at 7. It is true that the
previously assigned judge denied G&G’s motions to dismiss two previous versions of the
ICFA claim. See R. 28, Opinion on Motion to Dismiss Counterclaim at 5-7; R. 73, Opinion on
Motion to Dismiss First Amended Counterclaim at 3-5. But the Court’s prior decisions are
not binding here because there is a new operative complaint. See Massey v. Helman¸ 196
F.3d 727, 735 (7th Cir. 1999). And, in any event, there is a sensible explanation for the
difference in outcome between this motion and G&G’s prior motions: G&G did not argue in
its prior motions to dismiss that the allegations did not describe unfair practices in the
conduct of “trade or commerce.” See generally R. 17, G&G Br. on Mot. Dismiss
Counterclaim; R. 51, G&G Br. on Mot. Dismiss First Am. Counterclaim. When a plaintiff
decides to amend a complaint, she takes her chances that the opposing party will come up
with new and better arguments in favor of dismissal. See Massey, 196 F.3d at 735. In this
case, G&G did come up with some better arguments, so the result is different this time
around.
23
2. RICO
The Castillos also assert that they have a claim under the federal Racketeer
Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1961 et seq. RICO
forbids “any person employed by or associated with any enterprise engaged in, or
the activities 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.” 18 U.S.C. § 1962(c).16 A “pattern of racketeering
activity” requires at least two acts of racketeering activity, defined as any one of the
long list of offenses in 18 U.S.C. § 1961(1). 18 U.S.C. § 1961(5).
The Castillos argue that Riley and G&G, along with their agents, make up an
association-in-fact enterprise, which they name “the Extortion Enterprise.” Third
Am. Counterclaim ¶ 97. The “Extortion Enterprise” was created for the purpose of
extorting settlements and obtaining unfair default judgments, as described in the
Third Amended Counterclaim. See id. ¶¶ 105-108. The predicate racketeering
activities, according to the Castillos, are multiple acts of mail and wire fraud under
18 U.S.C. §§ 1341 and 1343. The mail fraud statute criminalizes use of the mails in
connection with “any scheme or artifice to defraud, or for obtaining money or
property by means of false or fraudulent pretenses.” 18 U.S.C. § 1341. The wire
fraud statute criminalizes use of the wires in support of the same activities.
18 U.S.C. § 1343. Because the alleged RICO predicate acts are mail and wire fraud,
1618
U.S.C. § 1962(c) is a criminal prohibition, but 18 U.S.C. § 1964(c) allows “[a]ny
person injured in his business or property by reason of a violation of section 1962” to sue in
federal court.
24
the heightened pleading requirements of Rule 9(b) apply. Jepson, Inc. v. Makita
Corp., 34 F.3d 1321, 1327 (7th Cir. 1994).
a. Predicate Acts
Unfortunately for the Castillos, the RICO claim falls apart on the predicate
acts. A scheme to defraud requires a material false statement, misrepresentation or
promise, or concealment of a material fact. United States v. Weimert, 819 F.3d 351,
355 (7th Cir. 2016); United States v. Sloan, 492 F.3d 884, 890 (7th Cir. 2007). But
the
complaint
does
not
identify
any
materially
false
statements,
misrepresentations, or concealments made in furtherance of the alleged fraudulent
scheme. Although the Castillos characterize the four letters sent by Riley as
“misleading,” that characterization is simply incorrect. The letters are actually very
straightforward and do not contain any false or even misleading statements. See
Third Am. Counterclaim Exhs. 1-2. The first letter identifies the boxing match at
issue and states that Riley and G&G “are informed and believe” that the program
was exhibited at Jaime Castillo’s establishment. Third Am. Counterclaim Exh. 1.
This is true, as even the Castillos admit. See Third Am. Counterclaim. ¶ 25. The
rest of the letter merely states that unauthorized broadcast of the fight would be
unlawful (also true), and encourages Jaime to settle. Third Am. Counterclaim Exh.
1. The second letter has even less in the way of factual assertions, and again urges
Jaime to settle. Id. Similarly, the last two letters state that G&G and Riley intend
25
to file a lawsuit unless Jaime agrees to settle. Third Am. Counterclaim Exh. 2. None
of this is false or even misleading.17
The Castillos also allege that one of Riley’s contractors, Julie Dadayan, made
various statements and omissions that were unfair or misleading. See Third Am.
Counterclaim ¶¶ 36-45. But, as with the letters, none of Dadayan’s words or actions
rise to the level of materially false or misleading statements or omissions. Indeed,
many of the Castillos’ allegations boil down to complaints that Dadayan did not
guard their interests carefully enough—something that she had no obligation to do.
The Castillos allege, for example, that Dadayan did not ask Jaime whether he
understood English or whether he would like an interpreter; that she did not advise
the Castillos to seek counsel; that she did not perform factual investigation that
might have partially exculpated the Castillos; and that she did not advise them of
statutory provisions that might have been favorable to them. Id. ¶¶ 38-44. None of
this is actionable. Dadayan had no obligation whatsoever to give the Castillos legal
advice or investigate their potential defenses, and her failure to help them is
nowhere close to being a false statement or misleading omission that would support
a claim of fraud. Similarly, she had no obligation to investigate Jaime’s level of
English ability or to advise him that he should contact an interpreter. The Castillos
17It
would be another thing if G&G did not have the commercial distribution rights
to the boxing program, but the Castillos do not allege that this is the case. The counterclaim
dances around the issue of the rights—complaining that “G&G offers no evidence of these
alleged ‘exclusive nationwide television distribution rights’ in its complaint,” Third Am.
Compl. ¶ 54; noting that “G&G alleges no facts linking its alleged television distribution
rights to any oral or written contract with any entity,” id. ¶ 55; and referring to G&G’s
rights to boxing matches as “purported contractual rights,” id. ¶ 2—but it stops short of
actually alleging that G&G lied about having the rights to the Alvarez/Trout fight (or any
other fights, for that matter).
26
do not allege that Dadayan took advantage of Jaime’s limited English abilities in
order to deceive him, so Dadayan’s supposed shortcomings in providing language
assistance are not fraudulent.
As for the statements that Dadayan allegedly made to the Castillos—that she
“knew [Jaime] was guilty” and that he should settle for $20,000, see id. ¶¶ 36, 45—
these are just legal opinions or negotiation positions, not the kind of false
representations that an opposing party would take as fact and rely on to her
detriment. See, e.g., Weimert, 819 F.3d at 357 (holding that deception about a
party’s negotiating positions cannot give rise to a wire fraud conviction); Sosa v.
DIRECTV, Inc., 437 F.3d 923, 940 (9th Cir. 2006) (“It is well established … that
misrepresentations of the law are not actionable as fraud, including under the mail
and wire fraud statutes, because statements of the law are considered merely
opinions and may not be relied upon absent special circumstances.”).
Nor were any of the statements in G&G’s complaint false or misleading
representations (even assuming that such statements could be the basis of a RICO
claim). The complaint filed by G&G is short on factual detail, and contains only
conclusory allegations that the Castillos were supervisors and owners of La Pena
(which is true), that G&G owns the rights to the Alvarez/Trout match (which the
Castillos do not allege is false), and that the Castillos or their agents unlawfully
published, divulged, or exhibited the program (which is a reasonable legal position
even on the Castillos’ version of the facts). Compl. ¶¶ 9-12, 18, 21. G&G’s complaint
does not even state how the program came to be shown, so there are no misleading
27
statements about the the Castillos’ alleged entrapment. See id. ¶ 21. The Castillos
point out that the civil cover sheet for the complaint demands $300,000.00. See R. 2.
But, like Dadayan’s settlement demand, this is a litigation position, not the kind of
false assertion that could support a claim of fraud.
The Castillos do allege that G&G, Riley, and their associates sent
“misleading and threatening” form letters to hundreds of other consumers and
businesses each year. Third Am. Counterclaim ¶ 61. They also allege that G&G and
Riley use unfair tactics to pressure these alleged violators to settle. Id. ¶¶ 75-82.
But these are very general allegations, and mail and wire fraud must be pled with
specificity under Rule 9(b). The Castillos have not alleged “the who, what, when,
where, and how of the fraud” for any of those hundreds of supposed victims, so they
have not stated fraud claim based on any of these events. Pirelli, 631 F.3d at 441-42
(cleaned up); see also Jepson, 34 F.3d at 1328 (“Loose references to mailings and
telephone calls in furtherance of a purported scheme to defraud will not do.”)
(cleaned up); Goren v. New Vision Intern., Inc., 156 F.3d 721, 729 (7th Cir. 1998)
(“[W]e have repeatedly held that a plaintiff's conclusory allegations that
‘defendants’ also defrauded unidentified ‘others’ are not enough to plead the
requisite pattern of fraud.”).
The only materially false or misleading statements described with specificity
in the Counterclaim are the lies and omissions in Lockner’s affidavit. But the
Counterclaim does not describe how these false statements are connected to the
alleged scheme to defraud. The Counterclaim only implies that Lockner prepared an
28
affidavit, which was submitted to Riley. But the letters sent by Riley to Jaime
Castillo do not refer to the allegedly false statements in the affidavit. Nor does the
complaint eventually filed by G&G repeat any of the false claims made by Lockner.
In fact, there are no allegations that Lockner’s false statements were used in any
way to pressure the Castillos to settle. The counterclaim does not give any
explanation of how Lockner’s affidavit was used by G&G and Riley (if it was used at
all). So, although Lockner allegedly made false statements to Riley, there are no
allegations that anyone used Lockner’s affidavit to make any false statements or
representations in an attempt to defraud the Castillos.
Because
the
Castillos
have
not
alleged
any
false
or
misleading
representations or omissions made in connection with the alleged scheme to
defraud, they have not alleged any RICO predicate acts of mail or wire fraud.18 The
RICO claim must be dismissed.
b. RICO Enterprise
Although it is unnecessary to addressG&G and Riley’s other arguments in
light of the fact that the Castillos have failed to allege predicate acts of racketeering
18Although
the Castillos label the alleged RICO enterprise the “extortion enterprise,”
and frequently accuse G&G and Riley of engaging in extortion, they do not even attempt to
explain how the events in the complaint constitute Hobbs Act or state law extortion. The
closest they come is a heading in their response brief that states that “Fraud and Extortion
are Sufficiently Pled.” Id. at 14; Castillo Resp. to Riley Mot. Dismiss at 14. They offer no
relevant argument or authority in support of that proposition. It is also worth noting that
the counterclaim itself identifies only mail and wire fraud as predicate acts and does not
characterize extortion as a predicate act. See Third Am. Counterclaim ¶¶ 101, 116. If
Castillos intended to argue that G&G and Riley engaged in predicate acts of extortion, they
needed to develop that argument in their briefs. The Court will not construct the argument
for them. See United States v. Berkowitz, 927 F.2d 1376, 1384 (“[P]erfunctory and
undeveloped arguments, and arguments that are unsupported by pertinent authority, are
waived.”). Nor do the Castillos argue that any of the actions described in their counterclaim
constitute bribery.
29
activity, one argument made by G&G and Riley merits a quick discussion. G&G and
Riley assert that the Castillos failed to allege a RICO enterprise because the
enterprise they describe has no purpose other than committing RICO predicate acts.
G&G and Riley suggest that the Court should ignore all allegations of predicate acts
when determining whether a RICO enterprise exists, and look only at what
allegations remain when the predicate acts are taken out. G&G Mot. Dismiss Br. at
18; Riley Mot. Diss. Br. at 11-12. That is not the correct test. A RICO enterprise
needs only three features: “a purpose, relationships among those associated with
the enterprise, and longevity sufficient to permit these associates to pursue the
enterprise’s purpose.” Boyle v. United States, 556 U.S. 938, 946 (2009). There is no
requirement that the Court “zero out” the alleged RICO predicate acts when
deciding whether these three structural features have been alleged. In other words,
Boyle does not hold that an enterprise must have a lawful purpose separate from
the purpose of committing crimes. To the extent that some case law appears to hold
otherwise, that law is not consistent with Boyle.
In this case, the Castillos have done enough to allege a RICO association-infact enterprise. The association made up of G&G, Riley, and their agents has a
purpose (extorting settlements), relationships among the associates (agency and
independent contractor relationships), and longevity (the association lasted at least
long enough to attempt to run the scheme on the Castillos). That is all that is
required.
30
c. RICO Conspiracy
18 U.S.C. § 1962(d) prohibits conspiracy to violate Section 1962(c). Because
the Castillos have not stated a valid claim of violation of Section 1962(c), their
Section 1962(d) conspiracy claim fails as well. See, e.g., United Food and
Commercial Workers Unions and Employers Midwest Health Benefits Fund v.
Walgreen Co., 719 F.3d 849, 856-57 (7th Cir. 2013) (“Having failed to plead facts
that would establish a violation of Section 1962(c), the [plaintiff] cannot state a
claim for conspiracy under Section 1962(d) based on those same facts.”). The RICO
conspiracy claim is dismissed.
3. Riley’s Arguments
The Castillos’ counterclaims against Riley are dismissed for the reasons
stated above. For the sake of completeness, however, it is worth discussing a couple
of Riley’s arguments. First, Riley argues that it was not timely named as a counterdefendant. Riley points out that back in December 2015, the magistrate judge
assigned to the case set March 1, 2016 as the deadline to name additional parties.19
R. 75 (12/02/15 Minute Entry). Riley was not added as a party until after this
deadline. Riley’s argument (as best as the Court can make out) seems to be that the
only proper way to amend the complaint to add Riley as a counter-defendant would
have been to appeal from the magistrate judge’s December 2015 order setting the
deadline to add defendants. See Riley Br. at 3-5. But this argument does not work.
Riley’s argument implies that the only way to change a magistrate judge’s
19The
Minute Entry actually says “3/1/15,” but this must have been a typo, because
the order was issued in December 2015.
31
scheduling order is to appeal the order under Federal Rule of Civil Procedure 72,
which requires a party to object to a magistrate judge’s nondispositive orders within
14 days. Fed. R. Civ. P. 72(a). Under Riley’s rule, any party who sought to change a
deadline for good cause more than two weeks after the entry of a magistrate judge’s
order would be forever out of luck—a plainly absurd result. What’s more, Rule 16
explicitly allows courts to amend their own scheduling orders for good cause. See
Fed. R. Civ. P. 16(b)(4); Alioto v. Town of Lisbon, 651 F.3d 715, 719 (7th Cir. 2011).
That is what happened in this case. In April 2016 (after the magistrate judge’s
deadline to add additional defendants), the Castillos asked to amend their Second
Amended Counterclaim in order to add additional defendants based on information
learned in recent depositions. R. 165, Motion to Amend/Correct Briefing Schedule ¶
6; R. 169 (4/27/16 Minute Entry). After an oral hearing, the previously assigned
District Judge granted leave to amend to add Riley as a counter-defendant. R. 169
(4/27/16 Minute Entry). The addition of Riley as a counter-defendant was proper;
the Castillos did all they were required to do.
Riley’s second argument is that naming the Law Offices of Thomas P. Riley
as a counter-defendant deprives G&G of its counsel of choice. Riley Br. at 7-8. This
argument is even more puzzling than Riley’s Rule 72 argument. Riley never
represented G&G in this case, and Riley does not explain how its status as G&G’s
co-defendant in this case would prevent it from representing G&G in any other case.
Nor has Riley cited any authority to explain why such a conflict (if any existed)
32
would be grounds for dismissing potentially meritorious claims against Riley. In
short, neither of Riley’s additional arguments holds water.
III. Conclusion
For the reasons stated above, summary judgment is granted to the Castillos
on the Section 553 claim, but the summary judgment motions are otherwise denied.
The motions to dismiss are granted in full. The dismissal is with prejudice. The
Castillos have already had three opportunities to amend their counterclaim, and
more chances will not be given in light of those three chances and the fact that this
case is over four years old. The Law Offices of Thomas P. Riley is thus out of the
case now (at least as a party; it is possible that Thomas Riley and his associates
could be called as witnesses at trial). In order to give G&G and the Castillos enough
time to review this Opinion and reconsider settlement positions, the status hearing
of June 21, 2018 is reset to July 9, 2018 at 10:15 a.m.
ENTERED:
s/Edmond E. Chang
Honorable Edmond E. Chang
United States District Judge
DATE: June 20, 2018
33
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