Commercial Litigation and Arbitration

No RICO Standing If Alleged Damages Are Speculative — Noerr-Pennington Applies to RICO Claims

Rubloff Dev. Grp., Inc. v. SuperValu, Inc., 2012 U.S. Dist. LEXIS 41304 (N.D. Ill. Mar. 27, 2012):

At the heart of this case is the battle for grocery shoppers' dollars in suburban Chicago. Plaintiffs develop shopping centers and say Defendants used sneaky and underhanded tactics to try to kill or delay their developments, which would have included grocery stores that compete with Defendant SuperValu, Inc. ("SuperValu"). *** Defendants do not really deny they were sneaky, but claim being sneaky is legal under the Constitution. ***

Rubloff acquired a purchase option on a parcel near Mundelein, Illinois (the "Mundelein Development") that was annexed to the village in 2005. Rubloff planned to develop a shopping center, and signed an agreement with Menards to buy part of the parcel. It also reached an agreement "in principle" with Walmart for another portion of the parcel and signed lease agreements with several other big-name stores. Rubloff expected construction to start in 2007 and finish in 2008.***

Several landowners retained the unfortunately named attorney William Graft ("Graft"), who began pressing certain objections to the development, both in hearings with the village and in court. *** Two groups of landowners (the "Acker" plaintiffs and the Ivanhoe Country Club "Ivanhoe") sued the Mundelein in the fall of 2007 in Lake County Circuit Court, alleging violations of due process rights in zoning approvals Mundelein had granted. These cases were consolidated. Ivanhoe also filed suit directly against Rubloff in January 2009, alleging nuisance and trespass against the not-yet-developed shopping center. The legal fight continued until January 2011, when Mundelein and Rubloff settled all three lawsuits, with Rubloff agreeing to certain redesigns and paying out a total of $200,000 to various plaintiffs. ***

Meanwhile, in New Lenox, Illinois, McVickers was also planning a shopping center (the "New Lenox Development"). It acquired 73 acres in 2005, and signed land sale contracts with Walmart and Menards. It also had lease or purchase agreements with Aldi Foods and many other big-name stores. *** It, too, ran into problems getting permits from New Lenox and the Illinois Department of Transportation ("IDOT"). ***

All of this bad fortune would likely have been attributed simply to the whim of NIMBY ("Not In My Backyard") residents had it not been for a man named Greg Olson ("Olson"). Or, more accurately, a man named Leigh Mayo ("Mayo"), which was Greg Olson's real name. Mayo contacted Rubloff co-founder Robert Brownson ("Brownson") in August 2009 and dropped a bombshell.

Mayo was an agent provocateur for Saint and used the pseudonym of Olson to organize local opposition to the Mundelein development. SuperValu had retained Saint in 2007 and Mayo, in turn, had engaged Graft to represent community landowners before the Mundelein Village board and in the state court proceedings. Plaintiffs allege community members were never told that Graft was actually being paid by SuperValu. Saint's practice was to have "project managers" like Mayo use pseudonyms, even employing e-mail accounts utilizing the pseudonyms.***

The documents revealed that Saint's avowed purpose was to delay or kill the development, and delays won at village hearings and in court were celebrated with glee. ***

In one report to SuperValu, Saint boasted "the hearings under administrative review could take an enormous amount of time as court dockets are clogged and a Judge will allow us to present testimony for as long as we desire." Pl.'s Compl. 8. Attorney Graft celebrated delays as well, updating Saint on litigation progress and also reveling in delays. "Happy 1 year Anniversary, by the way. We cost these guys [Rubloff] a ton of money," he wrote to Saint. Id. at 14.

Other questionable tactics included the rewriting of expert reports for use in litigation, "backchannel" communications with a Lake County judge to try to get a read on how that litigation would turn out, and attorney Graft's failure to promptly forward settlement offers to his landowner clients, presumably as another delay tactic.***

1. Noerr-Pennington Doctrine

"Although the Noerr-Pennington doctrine originated in antitrust law, its rationale is equally applicable to RICO suits." Int'l Bhd. Of Teamsters, Local 734 Health & Welfare Trust Fund et al. v. Philip Morris, 196 F.3d 818, 826 (7th Cir. 1999). Therefore, it provides the same protection with regards to the RICO charges [as to the antitrust claims], eliminating the petitioning of the municipalities, IDOT and the courts (as well as the attendant public relations campaign) from liability. ***

2. RICO Standing

Neither Defendant brings up RICO standing, and admittedly, it is an easier standard to meet than antitrust standing. For instance, injury that is not necessarily anticompetitive injury is sufficient under RICO. Schact v. Brown, 711 F.2d 1343 (7th Cir. 1983). But RICO standing is still a hurdle greater than mere Article III standing, and requires a proximate cause analysis because the language of Section 1964(c) provides treble damages. Anza v. Ideal Steel Supply Corp., 547 U.S. 451 (2006) ("Proximate cause is . . . required."). "[E]very court that has addressed this issue has held that injuries proffered by plaintiffs in order to confer RICO standing must be 'concrete and actual,' as opposed to speculative and amorphous." Evans v. City of Chicago, 434 F.3d 916, 932 (7th Cir. 2006). "[A] cause of action does not accrue under RICO until the amount of damages becomes clear and definite." Id. One of the factors weighing against standing is difficulty in ascertaining the amount of the Plaintiffs' damages that are attributable to Defendants' wrongful conduct. Gregory P. Joseph, CIVIL RICO: A DEFINITIVE GUIDE 53 (3d ed. 2010) (referencing Hemi Group LLC v. City of N.Y., 130 S.Ct. 983 (2010) and other collected cases).

Here, Plaintiffs have alleged mail and wire fraud as the predicate acts, and the injury of lost value of their development and millions of dollars of expenses caused by Defendants' delay of the projects. Plaintiffs have made vague references to damages amounts, but essentially they remain speculative, to the extent that Defendants alone caused them. To be sure, they were instrumental, but Plaintiffs' allegation that negotiations would have gone flawlessly with nearby landowners had Defendants not stepped in is nothing more than supposition and conclusion.

Plaintiffs contend that, had they known the real scope of the battle (i.e., that Defendants were stirring up landowners rather than the opposition being a true grass-roots uprising), they could have defeated the opposition much more quickly and effectively. This, too, is supposition and conclusion, and even if true, gives no measure of how much of Plaintiffs' damages were attributable to Defendants' predicate acts, and how much is the normal expenditure by suburban shopping mall developers in the age of NIMBY.

Because the damages alleged in this Complaint are speculative and amorphous, and therefore causation of them cannot be shown, there is no RICO standing.

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