DT Boring, Inc. v. Chicago Public Building Commission, The et al

Filing 64

Memorandum opinion and order signed by the Honorable Robert W. Gettlemanon 6/28/2016: Plaintiff's motion 10 to disqualify Duane Morris is denied without prejudice. PBC's motion 35 to dismiss is denied. EDI's 37 and Harbour� 39;s 30 motions to dismiss are granted with respect to counts I and II and denied with respect to count III. An amended complaint is due by 7/25/2016. A joint status report is due by 8/8/2016. Status hearing is set for 8/18/2016 at 9:00 a.m. Signed by the Honorable Robert W. Gettleman on 6/28/2016:Mailed notice(gds, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
DT BORING, INC.,

)
)
Plaintiff,
)
v.
)
)
THE CHICAGO PUBLIC BUILDING
)
COMMISSION, HARBOUR CONTRACTORS, )
INC., an Illinois corporation,
)
ENVIRONMENTAL DESIGN
)
INTERNATIONAL, INC., an Illinois corporation, )
and JOHN DIMOS, an individual,1
)
)
Defendants.
)

Case No. 15 C 11222
Judge Robert W. Gettleman

MEMORANDUM OPINION AND ORDER
Plaintiff DT Boring, Inc. (“DT Boring”) filed a ten-count complaint against defendants
The Chicago Public Building Commission (“PBC”), Harbour Contractors, Inc. (“Harbour”),
Environmental DesigInternational, Inc. (“EDI”), and John Dimos, alleging that Harbour, EDI,
and Dimos violated the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962
(“RICO”), (Counts I, II, and III), PBC and Harbour engaged in common law fraud (Counts IV
and V), and PBC and Harbour tortiously interfered with contractual relations (Counts VI, VII,
and VIII). Plaintiff also asserts claims for unjust enrichment (Count IX) and promissory
estoppel (Count X) against PBC and Harbour. All defendants have filed separate motions to
dismiss plaintiff’s complaint.2 Plaintiff has also filed a motion to disqualify Duane Morris, LLP

1

A summon was issued to defendant Dimos on February 4, 2016. Service, however, was
never returned executed and Dimos has not filed an appearance in this matter.
2

In addition to asserting independent grounds upon which plaintiff’s complaint should be
dismissed, defendant EDI also adopts Harbour and PBC’s arguments for dismissal.
The court notes that Harbour’s brief in support of its motion to dismiss (doc. 31) violates
(continued...)

(“Duane Morris”), Charles Lewis, Adam Gill, and Ben Johnston as counsel for Harbour. For the
reasons discussed below, the court denies plaintiff’s motion to disqualify, denies PBC’s motion
to dismiss, and grants in part and denies in part EDI’s and Harbour’s motions to dismiss.
BACKGROUND3
Plaintiff is an Illinois corporation that consults on geothermal energy, as well as designs,
drills, and installs geothermal well fields and geothermal heating and ventilation systems for
governmental, commercial, and residential structures. Tom Shelton and his wife own plaintiff in
joint tenancy. In October 2010, Shelton received from Optimal Energy, LLC (“Optimal”) an
abbreviated version of bid documents produced by defendant PBC, a municipal corporation that
controls and oversees the construction and renovation of public buildings in Chicago, for
construction of the 12th District Police Station in Chicago, Illinois (the “12th District Project”).
Optimal subsequently sent Shelton a draft subcontractor’s agreement, under which plaintiff
would act as a subcontractor for Optimal on the 12th District Project, performing the drilling of
88 geothermal boreholes and other related work.
Included with the draft subcontractor agreement were revised plans for the geothermal
portion of the 12th District Project taken from PBC’s bid documents. The revised bid documents
stated that the property on which the police station was to be built had previously contained

2

(...continued)
Local Rule 7.1, as it exceeds the page limit without prior approval of the court and includes
neither a table of contents nor a table of cases. Harbour is admonished that the rules of this court
apply to it as they do to any litigant.
3

The following facts are taken from plaintiff’s complaint and are assumed to be true for
purposes of defendants’ motions to dismiss. See Murphy v. Walker, 51 F.3d 714, 717 (7th Cir.
1995).
2

Chicago Housing Authority (“CHA”) residential buildings that had been removed from the site
in 2009. In addition, the bid documents stated that “[r]emaining subsurface structures were
removed in April 2010 [from the property] as a part of the site preparation for the construction of
the 12th District Police Station.” Plaintiff alleges that it relied on these statements when
preparing and submitting its revised bid to Optimal. Plaintiff subsequently entered into a
contract with Optimal to perform the above referenced work for the 12th District Project.
Optimal in turn entered into a subcontract with defendant Harbour, which served as the general
contractor for the 12th District Project.
Plaintiff alleges that the revised bid documents fraudulently asserted that the “remaining
subsurface structures” from the residential housing on the project site had been removed.
According to the complaint, “numerous, steel rebar-reinforced, concrete foundations from those
[residential] buildings remained buried on the site several feet below grade.” The complaint
further alleges that “buried several feet below ground . . . were numerous asbestos-wrapped
steam pipes.”
Plaintiff alleges that PBC, Harbour, and EDI, which was hired to complete preconstruction environmental testing on the project site, knew about both the underground concrete
obstructions and asbestos prior to PBC preparing the project’s bid documents. Months before
the residential housing buildings were demolished, PBC and EDI allegedly received site plans
from the CHA identifying the asbestos-wrapped steam lines. The complaint alleges that in April
2009, PBC and EDI “agreed that EDI would do environmental test borings around the Project
site looking for contaminated soil, but that the test borings would deliberately avoid coming near
the underground, asbestos-wrapped steam lines.” Plaintiff further alleges that EDI hired a

3

subcontractor during its environmental testing that identified 36 underground anomalies during
testing on the project site, and therefore recommended further testing on each anomaly. EDI and
PBC, however, “agreed that EDI would do test borings near only 17 of the 36 ‘anomalies’ . . . to
avoid ‘discovering’ the underground, asbestos-wrapped steam lines.” According to the
complaint, EDI, “in order to satisfy PBC, a major customer, . . . states whatever is necessary to
protect PBC’s position” with respect to the environmental conditions of PBC’s projects.
1.

Drill Rig Relocation
The complaint alleges that “within days” of beginning work on the 12th District Project

site in May 2011, plaintiff “encountered the first of the underground steel rebar-reinforced
underground obstructions.” After finding the obstruction, plaintiff alleges that Shelton
immediately notified Harbour’s project manager, “explaining that the obstruction had not been
disclosed on any of the bid documents given to Shelton.” Plaintiff alleges that an “on-site
meeting” between Harbour, PBC, and plaintiff then occurred, during which Harbour and PBC
agreed to have plaintiff “relocate its drilling rigs anywhere within a 2-foot radius of the original,
specified location for the borehole.”
According to the complaint, a day after the on-site meeting, Shelton spoke with PBC’s
assistant project manager Andy Horn, who inquired about how much it would cost PBC for
plaintiff to relocate its drilling rigs when it encountered the previously undisclosed underground
obstructions. Shelton told Horn that plaintiff would charge a flat three hours of time at a cost of
$1,650 for each drill rig plaintiff had to relocate, plus the additional cost of removing excess soil.
Horn allegedly agreed to pay plaintiff at this rate. The complaint alleges that on May 26, 2011,
“Shelton received an email over the interstate wires that contained another email, also sent over

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the interstate wires, dated May 17th, 2011, and sent from Horn to [James] Harrell [PBC’s project
manager], and other PBC staff members expressly authorizing [plaintiff] to relocate its drilling
rigs a maximum of 2 feet in any direction in order to avoid undisclosed, underground
obstructions.”
Plaintiff alleges that in early June 2011 Shelton inquired with Harbour’s project manager,
Sam Rae, as to why plaintiff had not received written field orders from Harbour for the drill rig
relocations. Rae allegedly informed Shelton that “Harbour had not issued any Field Orders
because Harbour had to ‘package’ [plaintiff’s] drill rig relocation costs as change orders with
other subcontractors’ change orders, before submitting them all to the PBC for payment.”
According to the complaint, “Rae told Shelton again that [plaintiff] would be paid for its drill rig
relocation costs, and he also told Shelton to have [plaintiff] continue with its work including
relocating the drill rigs when necessary.” As a result, plaintiff alleges that it continued drilling
the remaining 88 boreholes for the 12th District Project.
The complaint alleges that PBC’s and Harbour’s statements to plaintiff orally authorizing
the drill relocation and agreeing to pay plaintiff for the extra work “were all intentionally false
and fraudulent when made.” Plaintiff alleges that the statements were intended to induce it to
continue drilling the boreholes, but that PBC and Harbour had no intention of paying for the
work. According to the complaint, “Rae, on behalf of Harbour, and Harrell, on behalf of the
PBC, had already made a secret agreement [that] when [plaintiff] encountered the first of the
undisclosed, underground obstructions that the PBC and Harbour would deliberately withhold all
payments for [plaintiff’s] drill rig relocations until [plaintiff] had completed all of its work on the
geothermal portion of the Project . . . in the hope that no payment would be necessary because of

5

a credit owed to PBC by Optimal.” Plaintiff alleges that “Harbour and the PBC hoped that
Optimal’s credit owed to the PBC would fully offset the amount owed to [plaintiff] for the drill
rig relocations so that the PBC would not have to pay [plaintiff] anything” for the extra work.
Unaware of this agreement, plaintiff alleges that it continued to submit timely invoices
for the extra work to Optimal as directed by Rae. “In reality, Rae and Harbour directed
[plaintiff] to submit its invoices to Optimal for transmission to Harbour simply to ensure that
payments for [plaintiff’s] drill rig relocation costs had to pass through Optimal so that those
payments could be offset by Optimal’s credit owed to the PBC.” The complaint alleges that into
September 2011 Harbour continued to assure plaintiff that it would be paid for the extra work,
but that it was still “packaging” plaintiff’s change orders. Specifically, plaintiff alleges that Rae
sent Shelton an email on September 14, 2011, stating that “Harbour was waiting for the
necessary backup and documentation for each change order,” and that it was “Harbour’s opinion
that the additional work was performed, and that the PBC was aware that the work was taking
place.” These statements, plaintiff alleges, were made “to fraudulently induce [it] to continue
working on the Project.”
According to the complaint, plaintiff’s additional costs associated with the undisclosed
obstructions “quickly exceeded the amount of any credit that Optimal owed to the PBC.” As a
result, plaintiff alleges that Harbour began submitting the change orders to PBC, that were then
rejected “with a ‘wink and a nod’ as ‘insufficient.’” The complaint alleges, however, that on
September 21, 2011, during a meeting at Harbour’s headquarters with Harbour project executive
Mark Karaskiewicz, Rae, and two principals from Optimal, Rae “expressly stated that the change

6

orders had been ‘approved’ by Harrell and were being sent downtown to the PBC for ‘final
approval’ and payment.”
2.

Asbestos-Related Downtime
The complaint alleges that in August 2011, while working on the trenches, Shelton

discovered a large pipe encased in wrapping that was later determined may be asbestos. EDI
was subsequently called to the site to examine the piping insulation, concluding before samples
were sent to the lab that the asbestos was non-friable, meaning that it could not move through the
air, and therefore was not dangerous. The area where the pipe was located was cordoned off and
plaintiff was ordered to resume work in a different area of the project. Because only limited
work could be completed in that area, plaintiff alleges that with the exception of Shelton, all of
its crew “had to stand idle.”
The next day, on September 1, 2011, Optimal personnel examined the trenches in which
plaintiff’s employees had been working for several weeks, and concluded that they too may
contain asbestos. Plaintiff alleges that Optimal issued a formal Notice of Delay, halting
plaintiff’s work on the project. EDI, however, once again declared that the asbestos was nonfriable, informing Harbour, Optimal, and plaintiff that work on the trenches could continue if
plaintiff’s employees worked downwind. Harbour issued a formal back to work order on
September 2, 2011.
Plaintiff alleges that on September 9, 2011, the Occupational Safety and Health
Administration (“OSHA”) conducted a site visit and concluded that friable asbestos was present
in significant quantities on the project site. That same day, Optimal received test results from
samples it had taken, which also showed the presence of friable asbestos. The complaint alleges

7

that Optimal issued a stop work order that day. Harbour subsequently “agreed that the stop work
order could remain in effect until [ ] abatement measures had been taken to remove the asbestoscontaminated soil.” Following the stop work order, plaintiff alleges that “Shelton repeatedly told
Harbour – and specifically Karaskiewicz – that, because [plaintiff] had not been released from
the Project, [it] had to continue paying its employees even while they were unable to work.”
According to the complaint, during a September 21, 2011, meeting at Harbour’s
headquarters, Karaskiewicz inquired about plaintiff’s per diem costs resulting from Harbour’s
decision not to release it from the project. Shelton allegedly reported that it cost plaintiff
approximately $4,200 per day to have its employees and equipment sit idle, which plaintiff
alleges Harbour subsequently agreed to pay. The complaint alleges that plaintiff’s employees
and equipment sat idle from September through November 18, 2011, at which time plaintiff was
terminated from the project. Plaintiff, however, alleges that defendants continued to fraudulently
represent, as late as January 26, 2012, that it would be paid for its extra work and down-time
related to the undisclosed obstructions.
3.

RICO Scheme
The complaint alleges that neither Harbour nor PBC has ever paid plaintiff for the money

owed to it for the extra work associated with the undisclosed underground obstructions or
asbestos-related downtime. As a result of the non-payment, plaintiff alleges that its working
capital was exhausted and it was forced out of business. Plaintiff alleges that defendants’ actions
on the 12th District Project were consistent with a greater fraudulent scheme perpetrated by
defendants. Specifically, the complaint alleges that PBC heads and controls a RICO enterprise
made up of a group of “second-tier” pre-approved general contractors such as Harbour and

8

“third-tier” minority/women owned subcontractors such as Optimal, as well as consultants like
EDI. According to the complaint, “the goal of the enterprise, through fraud and extortion, is to
benefit the PBC by constructing and/or renovating public buildings . . . at or below their actual
construction cost while enriching both the second tier general contractors, and the third tier
minority/women owned subcontractors at the expense of the bottommost project subcontractors.”
The process by which the enterprise allegedly accomplishes this goal begins with PBC
requesting project bids from a group of general contractors, including those that are a part of the
RICO enterprise. The general contractors subsequently request preliminary bids from the thirdtier minority/women owned subcontractors, also a part of the enterprise, who in turn request bids
from the lower-tier subcontractors, such as plaintiff. The lower-tier subcontractors then submit
their bids, with a reasonable profit margin, to the third-tier subcontractors. The second-tier
general contractor, however, demands that the lower-tier subcontractors reduce their bids in
order to be included in the general contractor’s overall bid to PBC. The lower-tier
subcontractors do so by eliminating their own profit margins. The general contractor
subsequently submits its overall proposed bid to PBC, fraudulently leaving out its own profit
margin to ensure that it is the lowest bidder.
Plaintiff alleges that once PBC awards the project to the RICO enterprise general
contractor, the general contractor is tasked with both ensuring that the project is completed at or
below the actual construction cost so as to benefit PBC and regaining its own profit margins that
were intentionally omitted from its bid. To accomplish this, plaintiff alleges that the general
contractor extorts funds and performance from the lower-tier subcontractors by: (a) “refusing to
process change orders approving work performed outside the scope of the original contracts and

9

subcontracts so that PBC gets the benefit of additional work and materials for free”;
(b) “trumping up phony ‘back charges’ for the subcontractor’s purportedly defective work so the
general contractor can withhold the amount of those fraudulent back charges”; (c) “refusing to
pay the subcontractor at all”; and/or (d) “agreeing to pay the retainage, change orders and/or
amounts due, but only if the subcontractor agrees to a ‘buyout’ which is a reduction in the
amount owed to the subcontractor.”
In November 2012, plaintiff filed a lawsuit against Travelers Casualty and Surety Co. of
America (“Travelers”) in the Circuit Court of Cook County seeking to recover under the
performance and payment bond that Travelers issued for PBC’s benefit on the 12th District
Project and on which Harbour was the principal. DT Boring, Inc. v. Travelers Casualty and
Surety Co. of America, No. 12 L 12781. Plaintiff thereafter, in January 2013, filed an action in
this court against Optimal, PBC, Harbour, and EDI, alleging most of the same causes of action
presently before the court. DT Boring, Inc. v. Chicago Public Building Commission, No. 13-C450 (“DT Boring I”). On October 28, 2013, this court dismissed DT Boring I pursuant to Rule
12(b)(1) for lack of RICO standing because plaintiff was pursuing collateral sources of recovery.
DT Boring, Inc. v. Chicago Public Building Commission, No. 13-C-450, 2013 WL 5835703
(N.D. Ill. Oct. 28, 2013).
DISCUSSION
1.

Motion to Disqualify
Plaintiff argues that Duane Morris, and the attorneys from Duane Morris, which the court

will refer to collectively as “Duane Morris,” should be disqualified from representing Harbour
because counsel will be called to testify as necessary witnesses at trial. Plaintiff also argues that

10

disqualification is necessary because Duane Morris has a conflict of interest with both Harbour
and its former client, Travelers.
Although plaintiff’s complaint does not name Duane Morris, or any of its attorneys, as
defendants, it contains factual allegations concerning actions Duane Morris allegedly took in
connection with its representation of Harbour and Travelers in plaintiff’s state court action and
previously dismissed federal action. Summarily, the complaint alleges that Duane Morris
delayed asserting defenses Travelers had in plaintiff’s state court case in order to defeat
plaintiff’s first federal action. The complaint further alleges that Duane Morris, as counsel for
Travelers, improperly asserted a lack of knowledge in its answer to plaintiff’s state court
complaint and improperly responded to discovery requests. Plaintiff’s complaint alleges that
these “deceptive actions” were “committed on behalf of Harbour as a continuation . . . of
Harbour’s RICO and other tortious activities.” According to the complaint, Duane Morris’s
actions “were intended at least to delay, if not prevent altogether DT from collecting all of its
damages.”
Harbour first argues that plaintiff’s motion should be denied because plaintiff’s
complaint “contains no allegations that Duane Morris aided Harbour in committing predicate
acts or failed to stop a predicate act.” While it is unclear to the court how Duane Morris’s
actions while defending Travelers and Harbour in litigation related to the present case can form
the basis of plaintiff’s RICO claims against Harbour, the court need not reach this issue. As
Harbour contends, it is premature at this stage of the litigation to disqualify Duane Morris based
on the possibility that its attorneys may testify at trial in the future. Model Rule of Professional
Conduct 3.7(a) provides that “A lawyer shall not act as advocate at a trial in which the lawyer is

11

likely to be a necessary witness.”4 Because the instant action is merely in the pleading stage, and
Rule 3.7 speaks of disqualification only at trial, plaintiff’s motion is premature. ABA Model
Rule 3.7; see also Mercury Vapor Processing Tech., Inc. v. Village of Riverdale, 545 F. Supp. 2d
783, 788-89 (N.D. Ill. 2008) (holding that the local rule prohibiting a lawyer-witness from acting
as an advocate in a trial or evidentiary hearing does not prohibit the attorney from handling other
phases of the litigation).
Plaintiff next argues that Duane Morris should be disqualified from representing Harbour
because it has a conflict of interest with both Harbour and its former client Travelers. According
to plaintiff, “Duane Morris and its attorneys have an interest in concealing their misconduct,
possibly by pointing the finger at either or both Harbour and Travelers as directing, or ratifying
their conduct.” Plaintiff argues that “[w]hether by protecting themselves, and/or by endeavoring
to shift blame to their present or former clients, Duane Morris and its attorneys clearly have a
concurrent conflict.”
Generally, only a current or former client has standing to seek disqualification of an
attorney based on a conflict of interest. See Tizes v. Curico, No. 94-C-7657, 1997 WL 116797,
at *2 (N.D. Ill. Mar. 12, 1997); see also Mills v. Hausmann-McNally, S.C., 992 F. Supp. 2d 885,
891 (S.D. Ind. 2014). “The majority position draws its strength from the logic of the Rule itself,
which is designed to protect the interests of those harmed by conflicting representations rather
than serve as a weapon in the arsenal of a party opponent.” Mills, 992 F. Supp. 2d at 891.
Nonetheless, courts in this district have concluded that “[w]here the conflict is such as to clearly

4

Local Rule 83.50 provides that the “applicable disciplinary rules are the model rules
adopted by the American Bar Association.”
12

call in question the fair or efficient administration of justice, opposing counsel may properly
raise the question.” Blanchard v. EdgeMark Fin. Corp., 175 F.R.D. 293, 306 (N.D. Ill. 1997).
Plaintiff, however, has not identified a conflict that clearly calls into question the fair or
efficient administration of justice, and therefore lacks standing to seek disqualification of Duane
Morris as Harbour’s counsel. As noted above, while plaintiff’s complaint includes factual
allegations concerning Duane Morris’s actions in earlier litigation, it does not assert a cause of
action against Duane Morris. Instead, plaintiff’s complaint alleges only that Duane Morris’s
actions were “committed on behalf of Harbour as a continuation . . . of Harbour’s RICO . . .
activities.” Liability under plaintiff’s RICO allegations, therefore, arises not from Duane
Morris’s actions, but from Harbour’s alleged actions in supposedly orchestrating its defense to
plaintiff’s lawsuits to further delay plaintiff’s recovery under the contract. As a non-party to this
lawsuit, it is unclear to the court, and not articulated by plaintiff, why Duane Morris would be
inclined to protect itself from anything.
Moreover, as discussed above, the court is not convinced at this early stage of the case
how Duane Morris’s failure to raise a defense within the time period preferred by plaintiff or
properly respond to discovery or answer a complaint can form the basis of a RICO claim. It
seems obvious to the court that had plaintiff taken issue with Duane Morris’s litigation tactics
during the earlier two lawsuits, it could have sought a remedy in those venues, such as through a
motion to strike or compel. As such, the court is not persuaded at this time that such a “drastic
measure” as disqualification is “absolutely necessary.” Owen v. Wangerin, 985 F.2d 312, 317
(7th Cir. 1993) (internal quotations omitted). Consequently, plaintiff’s motion to disqualify
Duane Morris and its attorneys as counsel for Harbour is denied without prejudice.

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2.

Motions to Dismiss
A.

Collateral Sources of Recovery

Defendants5 each argue, in some fashion, that plaintiff’s three RICO claims should be
dismissed because plaintiff has failed to exhaust other sources of recovery. The civil RICO
statute provides that “[a]ny person injured in his business or property by reason of a violation of
section 1962 of this chapter may sue . . . in any appropriate United States district court and shall
recover threefold the damages he sustains and the cost of the suit, including a reasonable
attorney's fee.” 18 U.S.C. § 1964(c). In evaluating RICO causation – whether an alleged RICO
injury was caused “by reason of” a violation of the statute – the Supreme Court has held that a
defendant’s RICO violation, must not only be the “but for” cause of the plaintiff’s injuries, but
also the “proximate cause.” Holmes v. Sec. Investor Prot. Corp., 503 U.S. 258, 268, 276 (1992)
(holding that because the alleged conspiracy did not proximately cause the injury claimed,
plaintiff “failed[ed] to make out a right to sue [the defendant] under § 1964(c)”).
The Seventh Circuit has held that to satisfy the proximate cause component, a plaintiff’s
RICO injury requires proof of “a concrete financial loss.” Evans, 434 F.3d 916, 932 (7th Cir.
2013) overruled on other grounds by Hill v. Tangherlini, 724 F.3d 965 (7th Cir. 2013) (internal
quotations omitted). As a part of this discussion, the Evans court cited the Second Circuit’s

5

PBC, although not named as a RICO defendant, has moved to dismiss plaintiff’s RICO
claims pursuant to Rule 41(b) for failure to comply with the court’s order in DT Boring I.
Specifically, PBC’s motion first argues that this court’s earlier dismissal in DT Boring I was
with prejudice, and alternatively that plaintiff failed to comply with the court’s order in DT
Boring I to exhaust collateral sources of recovery. PBC appears to have withdrawn its first
argument in its reply brief. Because PBC’s alternative argument is related to EDI’s and
Harbour’s arguments addressed in this section, the court does not address PBC’s Rule 41(b)
motion separately.
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standard requiring the amount of RICO damages to be “clear and definite” as articulated in
Motorola Credit Corp. v. Uzan, 322 F.3d 130, 135 (2d Cir. 2003).
Relying on the Motorola case, defendants argue, as they did when moving to dismiss
plaintiff’s first federal action, that “[a] RICO plaintiff has no standing to bring its claims, until it
exhausts all other means of recovery for its alleged injuries.” According to defendants, without
exhausting all other sources of recovery, a plaintiff’s damages cannot be “clear and definite.”
Defendants contend that because plaintiff failed to pursue its Mechanic’s Lien claim or file
breach of contract claims against Optimal or Harbour, it has not exhausted its collateral sources
of recovery, and therefore does not have damages concrete enough for RICO standing.
The court, however, already rejected this argument in its October 28, 2013, memorandum
opinion and order in DT Boring I. Specifically, this court held that Motorola was not as broad as
requiring a plaintiff to exhaust every collateral source of recovery before pursuing RICO claims.
DT Boring, 2013 WL 5835703 at *4. Instead, the court held that “the rule in Motorola applies
and the plaintiff lacks RICO standing,” only where “a plaintiff seeks repayment on the same debt
through two different sources.” Id. (emphasis added). Contrary to PBC’s position, nothing in
the court’s 2013 memorandum opinion and order requires or states that plaintiff must exhaust all
possible collateral sources of payment prior to seeking relief pursuant to RICO.
Having abandoned its Mechanic’s Lien claim and settled its bond case in state court,
plaintiff is currently seeking a single source of recovery. Unlike the plaintiff in Motorola, the
plaintiff here is not a secured creditor, and therefore its RICO damages are not “netted against
recovery obtained from collateral.” Motorola, 332 F.3d at 135. Similarly, and unlike in
Motorola, there are no longer parallel legal proceedings that make the damages plaintiff seeks

15

indefinite. See id. at 136 (noting that the RICO damages the plaintiff sought are not definite
because they may be abated by foreclosing on the secured collateral or by ongoing parallel
arbitration). Consequently, the court denies defendants’ motions with respect to this issue.
B.

Statute of Limitations

In direct contradiction to its argument that plaintiff’s RICO claims are premature for
failure to exhaust other sources of recovery, defendant Harbour also argues that the claims are
barred by the statute of limitations. “Although the statute of limitations is an affirmative defense
to liability and so ordinarily must be pleaded and proved by the defendant, if it is plain from the
complaint that the defense is indeed a bar to the suit dismissal is proper without further
pleading.” Jay E. Hayden Foundation v. First Neighbor Bank, N.A., 610 F.3d 382, 383 (7th Cir.
2010). Because it is not evident from the complaint that plaintiff’s RICO claims are untimely,
the court denies Harbour’s motion with respect to this argument.
RICO actions are governed by a four year statute of limitations. Jay E. Hayden, 610 F.3d
at 383; Rotella v. Wood, 528 U.S. 549, 552–53 (2000). The limitations period begins to run
when the plaintiff discovers (or should if diligent have discovered) both the injury that gives rise
to its claim and the injurer. Jay E. Hayden, 610 F.3d at 386. “The focus is on the discovery of
the harm itself, not the discovery of the elements that make up a claim.” Cancer Foundation, Inc.
v. Cerberus Capital Mgmt., LP, 559 F.3d 671, 674 (7th Cir. 2009). Thus, the plaintiff need not
know that the injury is actionable to trigger the statute of limitations. Id.
Additionally, it is “the injury arising from the first predicate act to injure the plaintiff
(predicate acts are the illegal acts committed by the racketeering enterprise) [that] starts the
limitations period running, rather than the injury from the last predicate act, which might occur

16

decades after the first.” Jay E. Hayden, 610 F.3d at 386–87. Thus, a plaintiff need not know that
he has been injured by a RICO violation (a pattern of racketeering activity), because the scope
and nature of his legal claims are what it has four years to discover. Id. at 387.
Harbour argues that the limitations period commenced on numerous dates, the earliest of
which was April 6, 2011, when plaintiff received the final project site plans for the 12th District
Project from Optimal, and the last of which was when Harbour was removed from the job site on
November 18, 2011. Harbour, however, does not explain, and the court cannot discern, how
plaintiff knew it was injured on April 6, 2011, when it received the final project plans. Nor is it
plain from the complaint that plaintiff knew of its injury upon discovery of the underground
concrete obstructions or asbestos.
Construing all reasonable inferences in plaintiff’s favor, the complaint alleges that
defendants’ RICO scheme consisted not only of concealing the condition of the project site so as
to cause subcontractors to low-bid the cost of completing the work, but also defendants’
continued false representations that they would pay for the extra work and down-time associated
with the obstructions. Given defendants’ alleged promises to pay, discovery of the obstructions
alone would have been insufficient to put plaintiff on notice that it had been injured by Harbour.
Similarly, because Harbour and the other defendants allegedly continued to reassure plaintiff that
it would be paid for the work associated with the obstructions up until and after the time it was
terminated from the project, the court cannot conclude that plaintiff knew of its injury on
November 18, 2011, when it was terminated from the project.6

6

In apparent recognition of the fact that the allegations of the complaint alone do not
establish a statute of limitations defense, Harbour asks the court in its reply brief to consider a
(continued...)
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C.

Rule 9(b)

Harbour also argues that plaintiff’s RICO claims should be dismissed for failure to plead
fraud with particularity as required by Rule 9(b). Rule 9(b) requires a plaintiff alleging fraud to
plead the “who, what, when, where, and how of the fraud.” Camasta v. Jos. A. Bank Clothiers,
Inc., 761 F.3d 732, 737 (7th Cir. 2014). Plaintiff has pled that defendants engaged in a pattern of
racketeering through the predicate actions of wire and mail fraud. Accordingly, plaintiff’s
allegations of mail and wire fraud are subject to the heightened pleading standard set forth in
Rule 9(b), which requires particularity. See Kaye v. D’Amato, 357 Fed.Appx. 706, 710 (7th Cir.
2009)
Relying predominantly on this court’s opinion in Freedom Mortgage Corp. v. Burnham
Mortgage, Inc., 720 F. Supp. 2d 978 (N.D. Ill. 2010), Harbour argues that plaintiff “does not
allege any specific instances of fraud committed by Harbour,” “explain[] how a single statement
or communication made by Harbour, any person, or any other party was fraudulent,” or how it
relied on any misrepresentation to its detriment. Harbour’s contentions, however, are both
factually and legally incorrect.
As an initial matter, Freedom Mortgage is easily distinguishable from the instant case.
The plaintiff’s complaint in Freedom Mortgage, as this court explained in its opinion, made
collective allegations against “the RICO Defendants,” failed to specify the defendants’
participation in the mail and wire fraud, and did not identify the specific mail or wire

6

(...continued)
number of emails in support of its timeliness argument. These materials, however, are outside
the pleadings, and therefore not properly considered as a part of defendant’s Rule 12(b)(6)
motion. Of course, defendants may revisit the issue in a motion for summary judgment pursuant
to Fed. R. Civ. P. 56 after discovery.
18

communications that allegedly were the predicate acts. 720 F. Supp. 2d at 995. Conversely,
here plaintiff has made specific allegations with respect to each defendants’ conduct and roll in
the alleged scheme to defraud, identified each defendants’ false statements and/or
misrepresentations, and has specified the form, date, sender, and recipient of each of the
offending mail and wire communications that make up the predicate acts.
Far from failing to identify “any specific instances of fraud committed by Harbour,”
plaintiff’s entire RICO theory, as alleged in the complaint, is based on Harbour’s participation in
a scheme to defraud it and other lower-tier subcontractors. Specifically, the complaint alleges
that Harbour, along with the other defendants, knew about the underground concrete obstructions
and asbestos on the 12th District Project site prior to plaintiff beginning its work. Defendants,
including Harbour, allegedly knew these obstructions would require additional work from
plaintiff. Plaintiff further alleges that Harbour induced this extra work from plaintiff through
false representations that it and/or PBC would pay for the work.
As a part of this scheme, the complaint alleges that Harbour made numerous false
statements to plaintiff, including in early June 2011 when Rae stated to Shelton that “Harbour
had not issued any Field Orders [for plaintiff’s drill rig relocations] because Harbour had to
‘package’ DT’s drill rig relocation costs as change orders with other subcontractors’ change
orders, before submitting them all to the PBC for payment.” Plaintiff’s complaint also alleges
that Rae sent Shelton an email on September 14, 2011, stating that “Harbour was waiting for the
necessary backup and documentation for each change order,” and that it was “Harbour’s opinion
that the additional work was performed, and that the PBC was aware that the work was taking
place.” The complaint further alleges that on September 21, 2011, Rea “expressly stated [to

19

Shelton] that the change orders had been ‘approved’ by Harrell and were being sent downtown
to the PBC for ‘final approval’ and payment,” despite the fact that Harbour knew PBC would not
approve the change orders. These allegations are sufficient to satisfy Rule 9(b)’s particularity
requirements.
Contrary to Harbour’s understanding of the law, plaintiff need not allege that the Harbour
made false representations in a wire or mail communication. Instead, as explained by the
Supreme Court, “[t]he gravamen of the [mail/wire fraud] offense is the scheme to defraud, and
any mailing that is incident to an essential part of the scheme satisfies the mailing element, even
if the mailing itself contains no false information.” Bridge v. Phoenix Bond & Indem. Co., 553
U.S. 639, 647 (2008) (internal quotations and citations omitted). Likewise, a plaintiff asserting a
RICO claim predicated on mail fraud need not plead or prove that it relied on the defendant’s
alleged misrepresentations. Id. at 641-42. Consequently, the court denies Harbour’s motion to
dismiss for failure to comply with Rule 9(b).7
D.

RICO Elements

As discussed above, plaintiff’s complaint asserts three RICO claims. The claims allege
that defendants, by engaging in a scheme to defraud plaintiff and other lower-tier subcontractors,
committed various acts of mail and wire fraud. See 18 U.S.C. §§ 1341, 1343. Mail and wire
fraud are forms of “racketeering activity” for purposes of RICO. 18 U.S.C. § 1961(1)(B).

7

The court likewise denies Harbour’s motion to dismiss for failure to comply with
Rule 8(a). Rule 8(a) requires only that a complaint contain, “a short and plain statement of the
claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). For the reasons
discussed both in this section and below, plaintiff’s complaint satisfies Rule 8.
20

Plaintiff alleges that defendants’ conduct constituted a pattern of racketeering activity because
the scheme was ongoing for years, involving multiple PBC projects.
Plaintiff asserts in its first cause of action that Harbour, EDI, and Dimos violated
§ 1962(b), which makes it unlawful for “any person through a pattern of racketeering activity . . .
to acquire or maintain, directly or indirectly, any interest in or control of any enterprise which is
engaged in, or the activities of which affect, interstate or foreign commerce.” Plaintiff’s second
cause of action is asserted against only Harbour, and alleges a violation of § 1962(c), which
makes it unlawful “for 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
or collection of unlawful debt.” Finally, defendant’s third RICO cause of action asserts that
Harbour, EDI, and Dimos violated § 1962(d) which makes it unlawful for “any person to
conspire to violate any of the provisions of subsection (a), (b), or (c).”
Despite the significant substantive differences among the numerous RICO provisions
encompassed in § 1962, any successful RICO claim requires a plaintiff to prove four elements:
(1) conduct; (2) of an enterprise; (3) through a pattern; (4) of racketeering activity. Kaye, 357
Fed.Appx. at 710. Harbour and EDI argue that plaintiff has failed to sufficiently allege the
existence of a RICO enterprise or that defendants engaged in a pattern of racketeering activity.
The court begins by addressing whether plaintiff’s complaint sufficiently alleges the existence of
a RICO enterprise.

21

RICO Enterprise
Section 1961(4) defines the term “enterprise” to include “any individual, partnership,
corporation, association, or other legal entity, and any union or group of individuals associated in
fact although not a legal entity.” Accordingly, the statute “allows for causes of action against
both formal legal entities and informal associations-in-fact.” Guaranteed Rate, Inc. v. Barr, 912
F. Supp. 2d 671, 686 (N.D. Ill. 2012). “The Supreme Court had held on multiple occasions that
this definition is to be interpreted broadly.” United Food and Commercial Workers Unions and
Employers Midwest Health Benefits Fund v. Walgreen Co., 719 F.3d 849, 853 (7th Cir. 2013).
As held by the Supreme Court, “an ‘association-in-fact” enterprise need not have any structural
features beyond ‘a purpose, relationships among those associated with the enterprise, and
longevity sufficient to permit these associates to pursue the enterprise’s purpose.’” United Food,
719 F.3d at 853 (quoting Boyle v. United States, 556 U.S. 938, 946 (2009)).
Contrary to defendants’ arguments, plaintiff’s complaint sufficiently alleges an
association-in-fact enterprise. As discussed above, plaintiff’s complaint alleges that PBC heads
and controls a RICO enterprise consisting of a group of “second-tier” pre-approved general
contractors such as Harbour and “third-tier” minority/women owned subcontractors such as
Optimal, as well as consultants like EDI. Accordingly, plaintiff’s complaint identifies a RICO
enterprise that is distinct from the defendants themselves. Cedric Kushner Promotions, Ltd. v.
King, 533 U.S. 158, 161 (2001) (“[O]ne must allege and prove the existence of two distinct
entities: (1) a ‘person’; and (2) an ‘enterprise’ that is not simply the same ‘person’ referred to by
a different name.”).

22

While Harbour concedes that plaintiff’s complaint alleges that the enterprise has a
common purpose, it attempts to re-characterize the alleged purpose as merely constructing
buildings for the least amount to allow the contractors to realize a profit. Harbour argues that
this re-casted goal cannot serve to establish a RICO enterprise because it is “the purpose of every
building owner and every general contractor for every construction project.” Harbour’s
argument, however, fails to acknowledge that plaintiff has alleged that the enterprise’s goal is
accomplished through fraud and extortion. Specifically, the complaint alleges that “the goal of
the enterprise,” is realized “through fraud and extortion . . . [to] benefit the PBC by constructing
and/or renovating public buildings . . . at or below their actual construction cost while enriching
both the second tier general contractors, and the third tier minority/women owned subcontractors
at the expense of the bottommost project subcontractors.”
The complaint also plausibly alleges relationships between the various RICO actors.
Specifically, plaintiff’s complaint alleges that PBC “consistently, if not exclusively, uses” EDI
as a consultant when a project site presents environmental issues. The complaint further alleges
that PBC and EDI agreed that EDI’s environmental testing at the 12th District Project would
deliberately avoid discovering the asbestos-wrapped steam lines that both parties knew were
present on the property. Similarly, the complaint alleges that Harbour and PBC made a “secret
agreement” to withhold payment from plaintiff for the extra costs of relocating its drill rigs, but
to simultaneously represent to plaintiff that it would be paid for the work. Finally, the complaint
contains factual allegations suggesting that defendants and the other RICO associates pursued
the enterprise’s goal from 2008 to at least 2012, and therefore sufficiently alleges longevity.
These allegations plausibly allege the existence of a RICO enterprise.

23

Relying on Guaranteed Rate, defendants argue that in addition to alleging facts sufficient
to establish the three structural features discussed in Boyle, plaintiff must also allege that each
defendant had an interest in the scheme beyond their own individual interests. According to
defendants, plaintiff’s complaint lacks these allegations, and therefore must be dismissed. The
court, however, finds no such requirement for adequately pleading the existence of a RICO
enterprise.
The district court in Guaranteed Rate held that the plaintiff’s complaint failed to state a
claim pursuant to 1962(c) because it did not contain any factual allegations “asserting the RICO
Defendants had any interest in the outcome of the alleged scheme beyond their own individual
interests.” Guaranteed Rate, 912 F. Supp. 2d at 687. In coming to this conclusion the district
court relied on Reves v. Ernst & Young, 507 U.S. 170, 185 (1993). Id. at 687. Reves, however,
does not address what allegations are necessary to allege a RICO enterprise. Instead, the Reves
decision interpreted § 1962(c)’s statutory language requiring that the defendant “conduct or
participate . . . in the conduct” of the enterprise’s affairs. Reves, 507 U.S. at 185. Accordingly,
Reves’ holding that § 1962(c) “liability depends on showing that the defendants conducted or
participated in the conduct of the enterprise’s affairs, not just their own affairs,” is inapposite to
whether a RICO enterprise has been sufficiently pled. See id.; see also Boyle, 556 U.S. at 945
n.3 (Reves “is inapposite because that case turned on our interpretation of the participation
requirement of § 1962, not the definition of ‘enterprise.’”). Consequently, the court finds that
plaintiff has sufficiently alleged a RICO enterprise.

24

Pattern of Racketeering Activity
Harbour and EDI next argue that plaintiff’s complaint fails to allege that defendants
engaged in a pattern of racketeering activity. A “pattern of racketeering activity” is at least two
acts of racketeering activity occurring within ten years of each other. 18 U.S.C. § 1961(5). In
addition to the existence of at least two predicate acts, a plaintiff “must show that the
racketeering predicate [acts] are related, and that they amount to or pose a threat of continued
criminal activity.” H.J. Inc. v. Northwestern Bell Telephone Co., 492 U.S. 229, 239 (1989); see
also Haynes v. City of Chicago, No. 12-C-2980, 2014 WL 5423269, at *3 (N.D. Ill. Oct. 22,
2014). This is known as the “continuity plus relationship” test. Haynes, 2014 WL 5423269 at
*3. The Supreme Court has identified the existence of two types of continuity – a closed
continuity, meaning a “closed period of repeated conduct” and an open-ended continuity,
meaning “past conduct that by its nature projects into the future with a threat of repetition.” H.J.,
492 U.S. at 241.
Plaintiff has failed to identify two instances of mail or wire fraud committed by either
Harbour or EDI, and therefore cannot maintain individual claims against Harbour and EDI
pursuant to §§ 1962(b) and (c). Guaranteed Rate, 912 F. Supp. 2d at 684 (“In alleging a RICO
pattern, liability is limited to persons who have ‘personally committed’ at least two predicate
acts of racketeering.”). Plaintiff’s complaint does not identify a single mailing or wire
communication sent by EDI, and therefore has not alleged that EDI engaged in a pattern of
racketeering activity for purposes of individual liability under § 1962(b). Nor does plaintiff’s
complaint plausibly allege that EDI caused the mails to be used. United States v. Alexander, 135
F.3d 470, 474-75 (7th Cir. 1998). Moreover, because plaintiff has not alleged that EDI

25

committed any predicate act, plaintiff has also failed to sufficiently allege that its damages with
respect to Count I were proximately caused by EDI. See, e.g., RWB Services, LLC v. Hartford
Computer Group, Inc., 539 F.3d 681, 687 (7th Cir. 2008) (“[P]laintiff still must allege an injury
resulting from one of the predicate acts.”).
Plaintiff, by insufficiently alleging that Harbour committed two predicate acts, has
similarly failed to establish a pattern of racketeering activity for purposes of its §§ 1962(b) and
(c) claims against Harbour. Although plaintiff’s complaint identifies a September 14, 2011,
email sent by Harbour in furtherance of the scheme to defraud, the complaint lacks allegations of
a second predicate act. Plaintiff argues in its response brief to Harbour’s motion to dismiss that
three other emails from Harbour constitute predicate acts.8 However, plaintiff has not plausibly
alleged how these email communications were incident to an essential part of the scheme, as
opposed to normal business communications about the project. As such, Counts I and II of
plaintiff’s complaint do not state a claim upon which relief can be granted.
Conspiracy - § 1962(d)
Unlike with the individual counts discussed above, in alleging that Harbour, EDI, and
Dimos conspired to violate §§ 1962(b) and (c), plaintiff need not allege that each defendant
actually committed two predicate acts. Id. Rather, the “touchstone of liability under § 1962(d)
is an agreement to participate in an endeavor which, if completed, would constitute a violation of
the substantive statute.” Goren v. New Vision Int'l, Inc., 156 F.3d 721, 732 (7th Cir. 1998).

8

Specifically, plaintiff argues that an: (1) April 2011 email from Harbour notifying
subcontractors about a mandatory meeting concerning the 12th District Project; (2) September
2011 email from Harbour ordering plaintiff back to work following the discovery of asbestos;
and (3) October 2011 email from Harbour with an Asbestos Hazard Control Plan, qualify as wire
communications incident to an essential part of the scheme to defraud.
26

Because a predicate act need not actually be committed, a plaintiff asserting a § 1962(d) claim
does not need to “identify with particularity the two predicate acts, but only needs to allege an
agreement that two predicate acts would occur.” Nesbitt v. Regas, No. 13-C-8245, 2015 WL
1331291, at *17 (N.D.Ill. Mar. 20, 2015). Accordingly, to state a claim pursuant to § 1962(d) a
plaintiff must allege that, “(1) the defendant agreed to maintain an interest in or control of an
enterprise or to participate in the affairs of an enterprise through a pattern of racketeering
activity, and (2) the defendant further agreed that someone would commit at least two predicate
acts to accomplish those goals.” Slaney v. The Int'l Amateur Athletic Fed'n, 244 F.3d 580, 600
(7th Cir. 2001). EDI argues that plaintiff’s complaint fails to allege that it made either
agreement.9 The court disagrees.
The complaint alleges that EDI, which was hired to complete pre-construction testing of
the project site, knew about the underground obstructions – both the concrete and asbestos –
prior to PBC preparing and circulating the bid and project plan documents to contractors.
Specifically, plaintiff alleges that months before the CHA residential buildings were even
vacated, EDI and PBC “received a site plan from the CHA showing the asbestos-wrapped steam
lines.” Equipped with this information, plaintiff alleges that in April 2009 PBC and EDI “agreed
that EDI would do environmental test borings around the Project site looking for contaminated
soil, but that the test borings would deliberately avoid coming near the underground, asbestoswrapped steam lines.” The complaint further alleges that EDI “hired a subcontractor to do an
electromagnetic (‘EM’) analysis of the Project site.” According to the complaint, although the
“EM analysis recorded 36 underground ‘anomalies,’” EDI and PBC “agreed that EDI would do

9

Harbour’s motion to dismiss does not raise this argument.
27

test borings near only 17 of the ‘anomalies’” to further conceal the existence of the asbestoswrapped steam lines. The complaint alleges that the EM diagram generated from these tests,
which was included in the project plans and bid documents PBC sent to prospective contractors,
did not include any information about the asbestos-wrapped steam lines.
These allegations, combined with plaintiff’s allegations that EDI: (1) was actively
involved in the preparation of the project site prior to the bid documents being prepared and
circulated; (2) knew about the underground obstructions prior to plaintiff receiving the bid
documents indicating that there were no such obstructions; and (3) “states whatever is necessary
to protect PBC’s position,” allow the court to reasonably infer that EDI agreed to participate in
the affairs of an enterprise through a pattern of racketeering activity. Contrary to EDI’s
arguments that it was an outsider without any involvement in the alleged scheme, the complaint
alleges that EDI was a key participant in the RICO enterprise. Had EDI not allegedly schemed
with PBC to conceal the underground obstructions, plaintiff would have accounted for them
when bidding on the project, or potentially would have decided not to bid on the project at all,
and thus not have incurred the additional expenses from the undisclosed work that Harbour and
PBC subsequently refused to pay. EDI’s agreement with PBC to perform fraudulent work,
therefore, is what facilitated the entire RICO scheme. In addition, Harbour’s refusal to release
plaintiff from the project site during the asbestos related downtime, causing plaintiff additional
damages, was, according to plaintiff’s allegations, facilitated by EDI’s fraudulent reports of nonfriable asbestos.
The court can also reasonably infer from the complaint’s allegations that EDI agreed that
one of the other RICO coconspirators would commit at least two predicate acts to accomplish the

28

enterprise’s goal. As plaintiff argues, EDI was hired by PBC to complete environmental testing
on the project site prior to PBC’s preparation of the project plans and bid documents. The court
can reasonably infer that EDI knew or at least that it was reasonably foreseeable that its
allegedly fraudulent work would be included in the plans and bid documents PBC would later
use to generate bids from contractors and subcontractors. Use of the mails or interstate wires in
the distribution of these documents is, of course, normal business practice. Consequently, the
court finds that plaintiff has sufficiently alleged a RICO conspiracy claim against EDI.
Proximate Cause
Both Harbour and EDI argue that plaintiff’s RICO claims should be dismissed because
the complaint fails to adequately allege that they proximately caused plaintiff’s damages.
“Section 1964(c) states that a cause of action is available to anyone ‘injured . . . by reason of a
violation of section 1962.” Beck v. Prupis, 529 U.S. 494, 500 (2000). Consequently, to state a
claim against Harbour and EDI under § 1962(d), plaintiff’s complaint must sufficiently allege
that it was injured by reason of a conspiracy. Id.; see also DeGuelle v. Camilli, 664 F.3d 192,
205 (7th Cir. 2011) (“In order to state a claim for relief” pursuant to § 1962(d), the plaintiff
“must allege that this conspiracy proximately caused his injuries.”). However, as held by the
Supreme Court in Beck, an injury caused by an overt act in furtherance of the conspiracy “that is
not an act of racketeering or otherwise wrongful under RICO, is not sufficient to give rise to a
cause of action under § 1964(c) for a violation of § 1962(d).” Beck, 529 U.S. at 505. As such, a
“plaintiff cannot bring suit under RICO based on injury caused by any act in furtherance of a
conspiracy that might have caused the plaintiff injury” but must “allege injury from an act that is

29

analogous to an ‘act of a tortious character’ . . . , meaning an act that is independently wrongful
under RICO.” Id. (internal citations omitted).
Although, as discussed above, plaintiff has alleged only one predicate act committed by
Harbour and none committed by EDI, the complaint alleges numerous instances of mail and wire
fraud committed by PBC, a co-conspirator in the RICO enterprise. As with all conspiracy
claims, the predicate acts allegedly committed by PBC may serve as the proximate cause of
plaintiff’s injuries for purposes of plaintiff’s § 1962(d) conspiracy claim. See Beck, 529 U.S. at
503 (explaining that “a conspiracy claim” is “the mechanism for subjecting co-conspirators to
liability when one of their member[s] committed a tortious act.”). As such, the court denies
Harbour’s and EDI’s motions to dismiss with respect to Count III.
Plaintiff’s complaint alleges that PBC was responsible for various mail and wire
communications that were essential to the enterprise’s fraudulent scheme. For example, the
complaint alleges that PBC’s bid documents, that did not disclose the underground obstructions
allegedly known to PBC at the time the documents were drafted, were emailed to plaintiff on
October 12, 2010. See Alexander, 135 F.3d at 474-75 (holding that defendant can be liable for
mail fraud where he caused the mails to be used by “acting with the knowledge that the use of
the mails will follow in the ordinary course of business, or where such use can reasonably be
foreseen” (internal quotations omitted)). Plaintiff alleges that this communication was sent as a
part of the RICO enterprise’s scheme to fraudulently induce it to bid on the project at a price that
did not take into account the undisclosed obstructions.
Similarly, plaintiff’s complaint alleges that PBC’s assistant project manager and project
manager communicated via email on May 17, 2011 (an email that was subsequently forwarded

30

to plaintiff), “expressly authorizing [plaintiff] to relocate its drilling rigs a maximum of 2 feet in
any direction in order to avoid undisclosed, underground obstructions.” According to plaintiff’s
complaint, this communication and others were sent to induce plaintiff to perform the extra work
made necessary by the undisclosed obstructions, despite Harbour’s knowledge that plaintiff
would never be paid for the work. These allegations are sufficient to plausibly suggest that the
conspiracy led to plaintiff’s injuries. See, e.g., Anza v. Ideal Steel Supply Corp., 547 U.S. 451,
461 (2006) (“When a court evaluates a RICO claim for proximate causation, the central question
it must ask is whether the alleged violation led directly to the plaintiff’s injuries.”).
E.

State Law Claims

Having adequately pled a federal cause of action against Harbour, the court rejects
Harbour’s position that the court dismiss plaintiff’s state law claims for lack of jurisdiction.
28 U.S.C. § 1367(a) (“[I]n any civil action of which the district courts have original jurisdiction,
the district courts shall have supplemental jurisdiction over all other claims . . .”). Harbour,
however, further argues that plaintiff’s unjust enrichment (Count IX) and promissory estoppel
(Count X) claims should be dismissed because such relief is available only where there is no
contract. According to Harbour, plaintiff alleged during the state court bond proceedings that it
had an oral contract with Harbour and successfully convinced the state court of such on summary
judgment. In addition, Harbour points to plaintiff’s present allegations of having entered into a
contract with Optimal as also barring its claims for equitable relief. Consequently, Harbour
argues that “the causes of action sounding in Unjust Enrichment and [Promissory] Estoppel
cannot stand.” The court disagrees.

31

As an initial matter, the court will not consider the state court bond proceedings because
they are outside the pleadings. Although a district court may take judicial notice of matters of
public record, the court cannot accept Harbour’s assertions regarding the state court finding as
true. Harbour has not provided the court with a state court decision, or even a citation to any
such decision, holding that plaintiff had an oral contract with Harbour. In addition, Harbour has
not replied to plaintiff’s assertion in its response brief that the state court’s favorable summary
judgment ruling was vacated on reconsideration. Consequently, this “adjudicated fact” is subject
to reasonable dispute, and not appropriate for judicial notice. See General Elec. Capital Corp. v.
Lease Resolution Corp., 128 F.3d 1074, 1081 (7th Cir. 1997) (“A court may take judicial notice
of an adjudicative fact that is both not subject to reasonable dispute and either 1) generally
known within the territorial jurisdiction of the trial court or 2) capable of accurate and ready
determination by resort to sources whose accuracy cannot reasonably be questioned.” (Internal
quotations omitted)).
Nor is the court persuaded that plaintiff’s contract with Optimal bars plaintiff from
seeking equitable relief against Harbour. “Promissory estoppel is a theory of recovery that
provides a remedy ‘for those who rely to their detriment, under certain circumstances, on
promises, despite the absence of any mutual agreement by the parties on all the essential terms of
a contract.’” Song v. PIL, LLC, 640 F.Supp.2d 1011, 1016 (N.D. Ill. 2009) (quoting Newton
Tractor Sales, Inc. v. Kubota Tractor Corp., 233 Ill.2d 46 (2009)). Similarly, unjust enrichment
is a quasi-contract claim that allows a court to imply a contract in order to prevent injustice. Id.
at 1015. “Where a valid contract exists, a plaintiff cannot use theories like unjust enrichment
and promissory estoppel . . . .” Id. at 1017. Plaintiff, however, has not alleged that it had a

32

contract with Harbour, from who it seeks equitable relief. Even assuming that plaintiff’s
contract with Optimal somehow controlled the equitable relief it can seek from Harbour,
plaintiff’s complaint alleges that the wrongful conduct falls outside of its contract with Optimal.
Id. at 1016. Consequently, the court denies Harbour’s motion to dismiss with respect to
plaintiff’s state law claims.
CONCLUSION
For the foregoing reasons, plaintiff’s motion (doc. 10) to disqualify Duane Morris is
denied without prejudice. PBC’s motion (doc. 35) to dismiss is denied. EDI’s (doc. 37) and
Harbour’s (doc. 30) motions to dismiss are granted with respect to Counts I and II and denied
with respect to Count III. Plaintiff is directed to file an amended complaint conforming to this
opinion on or before July 25, 2016. The court encourages plaintiff to streamline its allegations
so as to avoid some of the extraneous and unnecessary allegations that cause the current
complaint to exceed 70 pages. The parties are directed to file a Joint Status Report using this
court’s form on or before August 8, 2016, and appear at a status hearing August 18, 2016, at 9:00
a.m.

ENTER:

June 28, 2016

__________________________________________
Robert W. Gettleman
United States District Judge

33