Pizzo, Josephine v. Bekin Van Lines Co

In the
United States Court of Appeals
For the Seventh Circuit

No. 00-2750

Josephine Pizzo,

Plaintiff-Appellant,

v.

Bekin Van Lines Company, et al.,

Defendants-Appellees.

Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 99 C 4595--Charles R. Norgle, Sr., Judge.

Argued April 3, 2001--Decided July 20, 2001

Before Posner, Kanne and Rovner, Circuit
Judges.

Posner, Circuit Judge. The plaintiff
sued the defendants under RICO, the
Carmack Amendment, and Illinois consumer
protection law and now appeals from the
dismissal of her suit for failure to
state a federal claim. As is customary,
having dismissed the federal claims
before trial the judge relinquished
jurisdiction over the state claims (which
we’ll call Pizzo’s "state-law fraud
claim"), leaving the plaintiff free to
refile them in state court.

The implausible allegations of the
complaint are the only facts we have to
go on, so we suppress our skepticism and
assume their truth. Josephine Pizzo, the
plaintiff, lives in southern Illinois.
From a retail furniture store in a
Chicago suburb owned by Mr. and Mrs.
Reznikoff, two of the defendants, Pizzo
bought a nine-piece bedroom set, to be
imported from Italy. The set was not on
display but Pizzo was shown color photos
of the pieces and told that the furniture
was made of solid walnut. The price was
$16,200, to be paid (and it was paid)
before delivery. The furniture arrived in
the store and from there was trucked to
Pizzo’s home by the moving-company
defendants. It arrived in damaged
condition. "The cartons containing the
furniture were ripped and torn"--we are
quoting from the complaint--and "several
pieces of the furniture were outside of
the cartons." What is more, "it was also
readily apparent to Ms. Pizzo that the
furniture was not, in fact, made of
wood"--of "solid walnut, or any other
natural wood. It appears to be made of
some sort of aerated foam product,
similar to (albeit heavier than)
styrofoam . . . . Foam furniture is
unsuitable for use in Ms. Pizzo’s home,
and is worth far less than genuine wood
furniture. In the absence of Ms.
Reznikoff’s misrepresentation that the
furniture was made of solid wood, Ms.
Pizzo would not have purchased it." But,
the complaint continues, since the
"furniture cost $16,200 and was a total
loss . . . , the minimum jurisdictional
amount of $10,000 for a Carmack Amendment
claim is satisfied."

Pizzo refused to accept delivery, and
the furniture was carried away,
apparently to a storage facility of one
of the moving-company defendants, where
it remains awaiting the outcome of this
suit. The furniture store mailed Pizzo a
copy of the bill of sale, which states
that no refunds or exchanges will be
made; this mailing is alleged as mail
fraud and related mailings or
telecommunications are alleged as mail
and wire fraud, the various frauds being
the "predicate acts"--the "racketeering"-
- required for liability under the RICO
statute. The Reznikoffs are alleged to
have conducted the "enterprise"
consisting of their furniture store by a
"pattern" of this "racketeering," the
pattern being demonstrated by a complaint
made by another customer of the store. He
claimed that he had bought from them a
sofa and chair, both with coil springs,
to be imported from Germany, and that the
sofa arrived damaged, with no coil
springs and with indications that it
hadn’t been made in Germany, and that
Mrs. Reznikoff used the mails (or wire
communications) to stop payment on the
check she gave him in response to his
demand that she refund his money. There
is no indication of how the complaint was
resolved.

If Pizzo has succeeded in stating a
claim under RICO there probably isn’t a
retail store in the United States that
can’t be sued successfully under RICO,
and thus branded as a "racketeer" and
exposed to liability for treble damages,
by a disgruntled customer. All the
customer has to do, if Pizzo’s RICO claim
can survive a Rule 12(b)(6) motion, is
allege a misrepresentation by a salesman
that induced him to buy a product that he
otherwise wouldn’t have bought, the use
of the mails or of wire communications in
connection with the sale or the ensuing
dispute, and that another customer was
similarly victimized.

The RICO claim fails, although the
"enterprise" allegations are sufficient,
Cedric Kushner Promotions, Ltd. v. King,
121 S.Ct. 2087 (U.S. 2001); McCullough v.
Suter, 757 F.2d 142, 144 (7th Cir. 1985),
and we’ll assume that the "racketeering"
allegations are as well. Mail and wire
fraud, 18 U.S.C. sec.sec. 1341, 1343, are
predicate acts specified by RICO, 18
U.S.C. sec. 1961(1); Stachon v. United
Consumers Club, Inc., 229 F.3d 673, 675
n. 1 (7th Cir. 2000), and we’ll not
quibble over whether they’ve been alleged
with the particularity required of fraud
allegations, Fed. R. Civ. P. 9(b); Emery
v. American General Finance, Inc., 71
F.3d 1343, 1348 (7th Cir. 1995), though
as a matter of fact, while the place and
content of the misrepresentations are
specified, the time is not, as the cases
also require. Slaney v. International
Amateur Athletic Federation, 244 F.3d
580, 599 (7th Cir. 2001); Vicom, Inc. v.
Harbridge Merchant Services, Inc., 20
F.3d 771, 777 (7th Cir. 1994). What dooms
the RICO claim in any event is that two
complaints by dissatisfied customers do
not add up to a pattern.

The fact that Pizzo alleges several
violations of the mail and wire fraud
statutes growing out of her single tiff
with the furniture store (ordering the
furniture, arranging to deliver it, and
mailing the contract--a fourth
allegedviolation, that "the mails . . .
and wires were used . . . [in that] the
furniture was delivered via interstate
carrier," makes no sense, since the
furniture was not mailed, nor, of course,
wired) does not help her to make out the
requisite pattern. The Reznikoffs had
only a single dispute with her and
likewise a single dispute with the other
dissatisfied customer, making a total of
only two "acts" relevant to whether the
defendants’ behavior can be characterized
as patterned. As explained in Ashland
Oil, Inc. v. Arnett, 875 F.2d 1271, 1278
(7th Cir. 1989), "[RICO] plaintiffs are
mistaken to emphasize the raw number of
mail and wire fraud violations. Some of
the present uncertainty over the pattern
element stems from such arguments which
depend upon the unusual nature of these
two most commonly alleged RICO predicate
acts . . . . In mail and wire fraud, each
mailing or interstate communication is a
separate indictable offense, even if each
relates to the same scheme to defraud,
and even if the defendant did not control
the number of mailings or communications.
United States v. Aldridge, 484 F.2d 655,
660 (7th Cir. 1973). See Badders v.
United States, 240 U.S. 391, 393 (1916).
Thus, the number of offenses is only
tangentially related to the underlying
fraud, and can be a matter of
happenstance." See also Vicom, Inc. v.
Harbridge Merchant Services, Inc., supra,
20 F.3d at 781.

And so it is here. There were only two
disputes that have given rise to the
charge of a pattern of racketeering. And
from two disputes five months apart (cf.
id. at 780-81, and cases cited there;
Pik-Coal Co. v. Big Rivers Electric
Corp., 200 F.3d 884, 890 n. 10 (6th Cir.
2000); Hughes v. Consol-Pennsylvania Coal
Co., 945 F.2d 594, 611 (3d Cir. 1991)),
and no evidence that would enable a trier
of fact to extrapolate from them a danger
of recurrence, no inference can be drawn
that the Reznikoffs are engaged in a
pattern of fraudulent activity. We are
sure that not all retail stores in the
United States are violating RICO; yet we
imagine that almost every retail store in
the United States has had at least two
customers mad enough at it to cry fraud.

The requirement of proving "pattern" is
central to the statute. As the Supreme
Court explained in H.J. Inc. v.
Northwestern Bell Telephone Co., 492 U.S.
229, 242 (1989), "Congress was concerned
in RICO with long-term criminal conduct."
Unless the requirement of proving a
pattern of criminal activity is taken
seriously, isolated wrongdoing by
employees of a firm would expose it, and
perhaps its owners and executives as
well, to the heavy sanctions that the
statute imposes on violators. A criminal
enterprise, as distinct from a normal
enterprise that gets into trouble with
the law from time to time, is an
enterprise that habitually resorts to
illegal methods of doing business. It is
an enterprise whose disposition, whose
bent, is criminal--as shown by its
illegal acts composing a pattern from
which such a disposition can be inferred,
in much the same way that an individual’s
generous disposition is inferred from a
pattern of generous acts, acts frequent
enough and similar enough to enable such
an inference. The customer complaints
against the Reznikoffs are similar
("related," in the language of the
cases), but lack the frequency
("continuity," in the lingo of the RICO
cases) necessary to ground an inference
that the Reznikoffs habitually use their
furniture store as an engine of fraud.
See, e.g., id. at 237; Vicom, Inc.
v.Harbridge Merchant Services, Inc.,
supra, 20 F.3d at 779-84; GE Investment
Private Placement Partners II v. Parker,
247 F.3d 543, 549 (4th Cir. 2001). So
clear is this from the complaint itself
that the RICO claim was properly
dismissed on the pleadings, as in Vicom
and Pik-Coal.

We are not impressed by Pizzo’s argument
that with pretrial discovery she might
discover additional frauds. If the
defendants were busy defrauding their
customers, Pizzo could have obtained
evidence of that without discovery by
consulting the Better Business Bureau and
the FTC, or by advertising for persons
complaining of being defrauded by the
defendants. The defendants should not be
put to the burden of litigating a RICO
suit beyond the pleadings by allegations
as thin as in this case.

So much for the RICO claim. The Carmack
Amendment to the Interstate Commerce Act,
a codification of the common law
liability of carriers for damage to
shippers’ goods, provides a remedy
against truckers responsible for damage
to a plaintiff’s goods unless the trucker
can prove that he was free from fault. 49
U.S.C. sec. 14706; Missouri Pacific R.R.
v. Elmore & Stahl, 377 U.S. 134, 137-38,
(1964); Allied Tube & Conduit Corp. v.
Southern Pacific Transportation Co., 211
F.3d 367, 369 (7th Cir. 2000);
Hollingsworth & Vose Co. v. A-P-A
Transportation Corp., 158 F.3d 617, 618
(1st Cir. 1998). The defendants argue
that the Carmack count in Pizzo’s
complaint is defective for failing to
allege that the furniture was in good
condition when they picked it up at the
Reznikoffs’ store to carry it to her
house. They are confused in thus arguing
that the elements of a Carmack claim must
bepleaded. There are no special pleading
rules for such claims. The Federal Rules
of Civil Procedure require a plaintiff to
plead no more than is necessary to place
the defendants on notice of his claim.
E.g., Weiss v. Cooley, 230 F.3d 1027,
1033 (7th Cir. 2000); Bartholet v.
Reishauer A.G. (Zurich), 953 F.2d 1073,
1077-78 (7th Cir. 1992). The rules
contain no special pleading requirements
for Carmack claims; judicial engrafting
of such requirements is disfavored,
Leatherman v. Tarrant County Narcotics
Intelligence & Coordination Unit, 507
U.S. 163, 168 (1993); Hammes v. AAMCO
Transmissions, Inc., 33 F.3d 774, 778
(7th Cir. 1994); In re NationsMart Corp.
Securities Litigation, 130 F.3d 309, 315
(8th Cir. 1997); and no reason is given
or occurs to us why such requirements
would be appropriate for such claims.

The complaint alleges that the defendant
moving companies are carriers within the
meaning of the Carmack Amendment, that
they transported the furniture that was
delivered in damaged condition to the
plaintiff, and that the damage exceeded
the statutory minimum of $10,000. (This
exception to the abolition of minimum
amounts in controversy in federal-
question cases was, as explained in Ford
Motor Co. v. Transport Indemnity Co., 795
F.2d 538, 544 (6th Cir. 1986), a
"response to a flood of suits in the
United States District Court for the
District of Massachusetts brought under
the Carmack Amendment . . . which often
involved ’minuscule amounts’ and forced
the district court to function ’as a
clearinghouse for the negotiation
andsettlement of private debt.’") So far
as the defendants’ responsibility for the
damage is concerned, however, all the
complaint alleges is that "one or more .
. . or all of them [the carrier
defendants]" caused the damage, and those
who did not cause it would not be liable
for it. But there is cause and there is
cause, and in the Carmack Amendment
"cause" means "responsible for," and the
amendment casts the net of responsibility
wide. Pizzo was free to sue the carrier
that issued the bill of lading as well as
the carrier that delivered the goods, 49
U.S.C. sec. 14706(a)(1), and these
carriers would be jointly as well as
severally liable to her unless they could
show that they were not to blame. Tempel
Steel Corp. v. Landstar Inway, Inc., 211
F.3d 1029, 1029-30 (7th Cir. 2000);
Project Hope v. M/V IBN SINA, 250 F.3d
67, 75-76 (2d Cir. 2001). The Carmack
Amendment is intended to "relieve
shippers of the burden of searching out a
particular negligent carrier from among
the often numerous carriers handling an
interstate shipment of goods." Reider v.
Thompson, 339 U.S. 113, 119 (1950); PNH
Corp. v. Hullquist Corp., 843 F.2d 586,
588-89 (1st Cir. 1988). The issuer of the
bill of lading and the delivering carrier
are prima facie liable even though the
goods may have been damaged by
intermediate carriers; it’s up to the
defendants to put the finger on the
guilty carrier. Id. at 588.

But hasn’t Pizzo pleaded herself out of
court by seeking not the furniture, but
her purchase price back? Neither the
district court’s dismissal of the RICO
claim, nor our affirmance of that
dismissal, has compelled Pizzo to take
the furniture in its damaged condition.
She can renew in state court her claim
that she was entitled to refuse delivery
of the furniture and get her money back.
If she prevails and does get her money
back, the fact that the furniture is in
damaged condition will be no skin off her
back; any claim arising from the damage
will belong to the Reznikoffs’ store,
which will be revested with the ownership
of the furniture.

Although not so pleaded, Pizzo’s Carmack
Amendment claim is best understood as an
alternative to her RICO and state law
claims. If she succeeds in rescinding the
purchase of the furniture on grounds of
fraud, she will receive her purchase
price back and the damage to the
furniture will be, as we have said, no
damage to her. But if she fails to
rescind the purchase (she has already
failed, we have held, to do so on the
basis of RICO), and cannot get her money
back, then she is entitled to the
furniture back, and as the owner of the
furniture she will bear the loss caused
by the damage in transit unless she can
obtain damages under the Carmack
Amendment from the movers.
 There is nothing wrong with alternative
pleading, of course, Fed. R. Civ. P.
8(e)(2); Taylor v. Pathmark Stores, Inc.,
177 F.3d 180, 189 (3d Cir. 1999), or with
filing a contingent claim to avoid the
running of the statute of limitations.
Swartz v. Meyers, 204 F.3d 417, 420 (3d
Cir. 2000); Taylor v. Lee, 186 F.3d 557,
561 (4th Cir. 1999); Nino v. Galaza, 183
F.3d 1003, 1005 (9th Cir. 1999). There
was no basis, therefore, for the
dismissal of the Carmack Amendment claim-
- unless it is plain that the damage to
the furniture inflicted by the moving
companies cannot exceed $10,000, the
minimum required for jurisdiction under
the amendment. If the furniture was worth
$16,200 on the assumption that it was
walnut, it is likely to be worth no more
than half of that if it is really a kind
of styrofoam; moreover it was not
completely destroyed, so that Pizzo
contradicts herself in alleging that it
was "a total loss." But these things turn
out not to be critical, even though the
Carmack Amendment does not insure people
against the consequences of being
defrauded, so that if the furniture was
completely worthless even its total
destruction by the carrier defendants
would not have inflicted damages for
which Pizzo could recover under the
amendment. See Olsen v. Railway Express
Agency, Inc., 295 F.2d 358, 359-60 (10th
Cir. 1961); cf. Project Hope v. M/V IBN
SINA, supra, 250 F.3d at 77; Camar Corp.
v. Preston Trucking Co., 221 F.3d 271,
276-78 (1st Cir. 2000). The fact that the
claim is contingent bites here, however.
For, should Pizzo’s state-law fraud claim
fail on the ground that the furniture, in
its undamaged state, really was what the
Reznikoffs had represented it to be and
really was worth the $16,200 that Pizzo
paid for it, then it is possible that the
damage in transit caused her to lose
$10,000 of value.

So the Carmack Amendment claim should
not have been dismissed for failure to
satisfy the minimum required amount in
controversy. Since, however, it is merely
a contingent claim, it does not provide a
secure basis for retaining under the
supplemental jurisdiction of the district
court the plaintiff’s state-law claim for
fraud. The tail would be wagging the dog
if the district court ruled on the
contingent federal claim before the
plaintiff obtained a ruling on whether
she can rescind the sale or used the con
tingent claim to lever her state-law
fraud claim back into federal court. Yet
to affirm the district court’s
relinquishment of jurisdiction over that
claim while reversing the dismissal of
the Carmack Amendment claim would condemn
the plaintiff to split her case against
the Reznikoffs between two courts. The
district court either should retain
jurisdiction over the state-law fraud
claim or, if it relinquishes it, should
stay further proceedings on the Carmack
Amendment until the state-law claim is
resolved in the state court. We leave the
choice to the district court to make on
remand, and affirm its dismissal of the
RICO claim.

Affirmed in Part, Reversed in Part,
and Remanded with Instructions.