RICO: Corp. + Outside Counsel May = Enterprise; Emotional Distress ≠ Injury, But Time Value of Settlement Does — Jurisdiction: Merits of Complaint Must Be Sufficiently Substantial to Confer Fed. Jur. — Much Harsher Test Than 12(b)

Roppo v. Travelers Comm’l Ins. Co., 2017 U.S. App. LEXIS 16407 (7th Cir. Aug. 28, 2017):

This dispute arises out of representation provided by Travelers Commercial Insurance Co. ("Travelers") to one of its insureds, Jeffery Block, following a motor vehicle accident. During the course of that personal-injury suit, Travelers and the attorneys it retained for Block disclosed only the limits of Block's automobile liability policy; they did not disclose the existence of [*2]  his additional umbrella policy. Ms. Roppo, the plaintiff in the underlying personal injury action, eventually learned of the umbrella policy and then settled the case.

She brought this proposed class action in state court against Travelers. Basing the action on several state law claims, she challenged Travelers's alleged practice of not disclosing the existence of umbrella policies. Travelers removed the action to the district court. Ms. Roppo then filed a motion to remand, claiming that the district court lacked jurisdiction under the Class Action Fairness Act, 28 U.S.C. § 1332(d). The district court denied Ms. Roppo's motion to remand, but allowed her to file a second amended complaint, which added Block's defense attorney, Jason Hitchings, and his law firm, Maisel & Associates, as defendants. Ms. Roppo later filed a third amended complaint, adding an additional cause of action under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962(c). The defendants then filed a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6). The district court granted this motion and dismissed with prejudice the complaint's eleven counts.

Ms. Roppo now renews her argument that federal jurisdiction is lacking and therefore asks us to vacate the district [*3]  court's judgment. She also contends that, even if the district court had jurisdiction, we should reverse its judgment because the third amended complaint sufficiently states claims of fraudulent misrepresentation, negligent misrepresentation, and negligence under Illinois law, as well as violations of the Illinois Insurance Code and the Illinois Consumer Fraud and Deceptive Business Practices Act. We cannot agree with her submission and, for the reasons set forth in this opinion, we affirm the district court's dismissal of Ms. Roppo's third amended complaint.

I

BACKGROUND

A.

Ms. Roppo's complaint recites that, on July 11, 2011, she suffered serious personal injuries in a motor vehicle accident with Jeffrey Block, a Travelers's insured. At the time of the accident, Block carried two types of insurance with Travelers: an automobile liability policy with a policy limit of $500,000 and a general umbrella policy with a policy limit of $1,000,000. The general umbrella policy would be triggered if Block's primary automobile policy limits were exhausted.

On August 9, 2011, Ms. Roppo's attorney requested that a Travelers claims adjuster provide Block's policy limits. On August 30, 2011, Travelers [*4]  informed Ms. Roppo's attorney that, on the date of the accident, Block had a $500,000 combined single limit for property damage and bodily injury liability claims. Over a year later, in December 2012, Ms. Roppo underwent foot surgery to repair several bones that were broken in the accident. She then filed the underlying personal injury action against Block in state court. According to the complaint, between December 21, 2012, and January 22, 2013, Travelers again represented to Ms. Roppo's attorney that Block had only $500,000 of coverage available for the claim.

In early 2013, as part of discovery in the underlying personal injury suit, Ms. Roppo's attorney again requested information regarding Block's insurance policies. This request explicitly included information regarding Block's "umbrella or excess insurance coverage."1 Mr. Hitchings, representing Block in the personal injury suit,2 disclosed only Block's $500,000 automobile policy. According to the complaint, Ms. Roppo's attorney had been "lied to in another case" about Travelers's policy limits, and therefore continued to question whether Block also carried an umbrella policy.3 Finally, on June 13, 2013, Mr. Hitchings disclosed [*5]  the $1,000,000 umbrella policy. On May 9, 2014, Ms. Roppo settled her claim against Block for $750,000.

1   R.63, ¶ 47 (emphasis removed).

2   The complaint asserts that Roanne Maisel, doing business as Maisel & Associates, supervised Mr. Hitchings.

3   Id. ¶ 26.

B.

1.

One month after she learned of the existence of the umbrella policy, in July 2013, Ms. Roppo filed a putative class action in the Circuit Court of Cook County, Illinois, on behalf of "all Illinois persons who made a personal injury motor vehicle claim[] for accidents occurring after August 12, 1988 and had the Travelers Insurance Company4 ... misrepresent and conceal the actual policy limits of their insured's facing claims from a third-party."5 In Count I, Ms. Roppo alleged that Travelers had engaged in fraudulent concealment: through both Travelers's claim representative, Rachel Grace, and the attorney Travelers had retained on behalf of Block, Mr. Hitchings, Travelers had misrepresented and concealed the liability limits on Block's vehicle. In Count II, Ms. Roppo alleged an implied private right of action under 215 ILCS 5/143.24b, which requires that an insured "disclose the dollar amount of liability coverage under the insured's personal private passenger automobile liability insurance policy" when a specific request has been made.6

4   In its removal papers, Travelers explained that the named defendant in the new state court action does not exist: "The alleged tortfeasor's auto policy was issued by Travelers Commercial Insurance Company and the alleged tortfeasor's personal liability umbrella policy was issued by The Travelers Indemnity Company of America." R.1 at 1 n.1. The complaint later was amended to name the correct defendants. For ease of discussion, we refer to the defendants collectively as Travelers.

5   R.1-2, ¶ 2.

6   Id. ¶ 33 (internal quotation marks omitted).

Travelers then removed the action to federal court under [*6]  the Class Action Fairness Act ("CAFA"), 28 U.S.C. §§ 1332(d), 1453(b). In its moving papers, Travelers argued that all of the requirements for removal under CAFA had been met: (1) Ms. Roppo had alleged a class size of "approximately 500 persons," far exceeding CAFA's requirement of at least 100 persons;7 (2) there was the necessary diversity; and (3) based on the affidavit submitted by Gary G. Hafner, Travelers's Director of Underwriting, the amount in controversy ranged from the CAFA minimum of $5 million, see 28 U.S.C. § 1332(d)(2), to $500,000,000, the total amount of the insureds' coverage that, allegedly, had been concealed by Travelers.8 One week later, Travelers moved to dismiss Ms. Roppo's complaint in the district court for failure to state a claim for relief under Federal Rule of Civil Procedure 12(b)(6).

7   See R.1 at 3 (internal quotation marks omitted) (citing 28 U.S.C. § 1332(d)(5)).

8   See R.1-1 at 2-3.

In response, Ms. Roppo filed a motion for leave to file a first amended complaint and also moved to remand. The new five-count complaint alleged the following causes of action: (1) fraudulent concealment against both Travelers and its claims representative, Ms. Grace; (2) negligence against the insured, Block, for failing to answer accurately interrogatories related to the limits of his insurance policies; (3) negligence against Mr. Hitchings, for his part [*7]  in responding to the same interrogatories; (4) negligence against Maisel & Associates, Mr. Hitchings's law firm, for failing to train him; and (5) a violation of 215 ILCS 5/143.24b against both Travelers and Ms. Grace.9 In her motion to remand, Ms. Roppo asserted that the proposed new defendants all were citizens of Illinois "whose alleged conduct form[ed] a significant basis for the claims asserted."10 Therefore, the case fell within CAFA's "local controversy" exception, 28 U.S.C. § 1332(d)(4)(A).11 Travelers opposed both motions.

9   See R.15; R.15-1 at 19-30.

10   R.17 at 2 (quoting 28 U.S.C. § 1332(d)(4)(A)(i)(II)(bb)).

11   See id. at 1.

In her reply brief in support of her motion to remand, Ms. Roppo proposed a new basis for remanding the action: Travelers had failed to establish CAFA's required amount in controversy, $5,000,000, and the minimum number of class members, 100.12 She also urged that, even if the court had jurisdiction, it should exercise its discretion to remand under 28 U.S.C. § 1332(d)(3) because at least one-third of the proposed class members were Illinois citizens, "Illinois has a distinct nexus with the class members, the alleged harm and the defendants," and "the other requirements of ... § 1332(d)(3) [we]re easily met."13

12   See R.26 at 4-6.

13   Id. at 10. Among the other requirements of 28 U.S.C. § 1332(d)(3) is that "the primary defendants are citizens of the State in which the action was originally filed."

Before the court could rule on the pending motions, Ms. Roppo moved for leave to file a second amended complaint.14 Ms. Roppo's proposed [*8]  complaint consisted of eight counts: three counts of fraudulent concealment against Travelers, Maisel & Associates, and Mr. Hitchings (Counts I--III); negligence against Mr. Hitchings and Maisel & Associates (Counts IV--V); a violation of 215 ILCS 5/143.24b against Travelers (Count VI); and violations of the Illinois Consumer Fraud and Deceptive Business Practices Act ("ICFA") against Travelers and Maisel & Associations (Counts VII--VIII).

14   See R.31.

After more briefing, the district court ultimately granted Ms. Roppo's motion for leave to file her second amended complaint, but denied the motion to remand. The court noted that Ms. Roppo "herself [had] describe[d] the size of the class to be 'approximately 500 persons'"; because there was "no basis in the record that the Plaintiff's estimate was incorrect," Travelers could rely on that representation in establishing the class-number requirement.15 Regarding the amount in controversy, the district court found it compelling that "[e]ven if the alleged additional damages of each putative class member were as small as $10,000," as Travelers had estimated, "then the aggregate damages for the putative class would nevertheless exceed the requisite amount of $5 million (i.e., 500 x $10,000 [*9]  = $5 million)."16 Finally, the district court also concluded that the action did not fall within the local controversy exception because Mr. Hitchings and Maisel & Associates only defended Block in the suit against Ms. Roppo and were not "defendant[s] from whom significant relief [was] sought."17 For the same reasons, Mr. Hitchings and Maisel & Associates were not "primary" defendants with respect to the class as a whole:

   for the discretionary exception to apply at all, the "primary" defendants must be the Illinois defendants. But ... the record does not bear out that the local defendants--Hitchings and Maisel & Associates--are the "primary" defendants with regard to the class as a whole ... . ... Travelers is the primary defendant. Travelers, however is a citizen of Connecticut. ... The discretionary exception has not been triggered.18

15   R.49 at 8.

16   Id. at 10 (alteration in original) (internal quotation marks omitted) (quoting R.39 at 4).

17   Id. at 12 (internal quotation marks omitted).

18   Id. at 14 (internal citation omitted).

2.

Following the district court's denial of her motion to remand, Ms. Roppo sought permission from this court, pursuant to 28 U.S.C. § 1453(c)(1), to file an interlocutory appeal challenging the district court's denial of her motion. She claimed that the appeal, which focused on whether Travelers had established the requisite amount in controversy, was a matter of first impression and would help [*10]  us develop a body of law interpreting CAFA. We denied the motion.

3.

After the denial of leave to appeal, Ms. Roppo sought permission from the district court to file a third amended complaint. The district court granted the motion. The third amended complaint included all eight counts set forth in the second amended complaint as well as a claim of "Bad Faith Insurance Practices" against Travelers (Count IX), a claim of negligent misrepresentation of the policy limits against Travelers (Count X), and a civil action under the Racketeer Influence and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962(c), against Travelers (Count XI).19

19   In the third amended complaint filed with the court, Ms. Roppo does not address any claims against "Maisel & Associates," as she had in her motion for leave; instead, pursuant to the district court's order, the relevant counts were brought against Roanne Maisel doing business as Maisel & Associates. See R.62.

The defendants again moved to dismiss the complaint under Rule 12(b)(6); the district court granted the motion. In explaining its decision, the court noted several deficiencies in Ms. Roppo's allegations. It noted, first of all, that the complaint lacked the necessary allegations of reliance for her fraud and negligent misrepresentation claims (Counts I--III, X). The complaint also failed to allege that Mr. Hitchings or any member of his firm owed Ms. Roppo a duty of care (Counts IV--V). The court could discern no violation of 215 ILCS 5/143.24b because Travelers had made the only disclosure required by [*11]  the statute--the "amount of liability cover-age under the insured's personal private passenger automobile liability insurance policy" (Count VI).20 The court further determined that the claims under ICFA (Counts VII--VIII) failed in the absence of any allegation of "consumer nexus."21 The claim under the Illinois Insurance Code, 215 ILCS 5/155 (Count IX), also failed because the statute did not provide penalties to third parties. Finally, turning to the RICO allegation, the court determined that Ms. Roppo had not only failed to plead adequately a RICO enterprise--a failing she conceded--but also had failed to plead with particularity the underlying predicate acts of fraud (Count XI).

20   R.78 at 18.

21   Id. at 21.

Ms. Roppo moved for reconsideration. The motion was denied, and Ms. Roppo timely appealed.

II

DISCUSSION

***

C.

Travelers submits that, even if the district court did not have jurisdiction under CAFA, Ms. Roppo's RICO count provided an alternative basis for federal jurisdiction.53 Ms. Roppo maintains, however, that Travelers cannot now assert that her RICO claim provides a basis for jurisdiction because it previously took the position that it was "so insubstantial, implausible, foreclosed by prior decisions of this Court, or otherwise completely devoid of merit as not to involve a federal controversy."54 Having prevailed on that argument below, she continues, Travelers now cannot reverse course.

53   Following the district court's denial of her motion to remand, Ms. Roppo sought review pursuant to 28 U.S.C. § 1453(c)(1), which we denied. See supra at 9. She maintains that she interpreted our denial of leave to appeal as "strongly suggesting" that the district court "got it right" in determining that it had jurisdiction under CAFA. Appellant's Br. 11 (internal quotation marks omitted) (quoting Dart Cherokee Basin Operating Co., 135 S. Ct. at 556). "In practical effect," she continues, our "denial of review established the law not simply for this case but for future CAFA removals sought by defendants." Id. (internal quotation marks omitted) (quoting Dart Cherokee Basin Operating Co., 135 S. Ct. at 556). She further notes that, in Dart Cherokee, the Supreme Court determined that the Tenth Circuit had abused its discretion in denying the petition for review. Although she does not state so explicitly, Ms. Roppo apparently believes that our denial of review, like that of the Tenth Circuit in Dart Cherokee, was an abuse of discretion. She continues that, had we not lulled her into believing that jurisdiction was secure under CAFA, she never would have included a RICO claim and thus there would be no alternative basis for federal subject matter jurisdiction.

Ms. Roppo's premise is faulty: her situation and the facts of Dart Cherokee are readily distinguishable. In Dart Cherokee, the district court denied removal on the basis that the defendant had failed to proffer evidence of the amount in controversy with the notice of removal. The district court had read Tenth Circuit precedent as holding "that reference to factual allegations or evidence outside of the petition and notice of removal is not permitted to determine the amount in controversy." Dart Cherokee Basin Operating Co., 135 S. Ct. at 552 (internal quotation marks omitted). Consequently, when the defendant submitted detailed calculations as to the amount in controversy after the notice of removal, the district court refused to consider them and ordered a remand. The Tenth Circuit then denied review of the remand order. The Supreme Court observed that "[i]n practical effect, the Court of Appeals' denial of review established the law not simply for this case, but for future CAFA removals sought by defendants in the Tenth Circuit" because "any diligent attorney ... would submit to the evidentiary burden rather than take a chance on remand to state court." Id. at 556 (internal quotation marks omitted). Ms. Roppo's petition for leave to appeal the district court's denial of her motion to remand, however, did not raise the question of a pleading standard that, in the absence of immediate review, may not make its way back to the appellate court.

Indeed, the issues presented by Ms. Roppo's petition for leave to appeal were unique to her and could have been raised and reviewed in due course. In her petition, Ms. Roppo claimed that the district court had erred in concluding (1) that Travelers had met its burden of establishing the amount in controversy and (2) that she was not entitled to limited discovery on the issue of the involvement of Maisel & Associates. See Roppo v. The Travelers Cos., No. 14-8018, App. R.1-1. When we previously have granted leave to appeal under 28 U.S.C. § 1453(c)(1), we have done so in cases involving novel or unsettled questions of law. See, e.g, Bullard v. Burlington N. Santa Fe Ry. Co., 535 F.3d 759, 761 (7th Cir. 2008) ("We grant this petition, because the legal issue is novel. It has not been addressed in this or any other circuit."). Ms. Roppo's appeal did not involve such a question.

In sum, neither Dart Cherokee nor our own case law required us to review immediately the district court's denial of Ms. Roppo's motion to remand. Additionally, our denial of review did not lull Ms. Roppo into any false belief concerning the merits of Travelers's CAFA allegations.

54   Appellant's Br. 28 (internal quotation marks omitted) (quoting Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 89 (1998)).

We have reviewed Travelers's submissions to the district court. Although it vigorously argued that Ms. Roppo had not pleaded a proper RICO claim, it never made the argument that [*28]  the flimsiness of Ms. Roppo's allegations deprived the court of jurisdiction.55 Indeed, it would have been an odd argument for Travelers to make given that the district court already had determined that it had subject matter jurisdiction under CAFA.

55   In its Reply in Support of Defendants' Motion to Dismiss, Travelers did argue that the district court should not grant Ms. Roppo an opportunity "to file a Fourth Amended Complaint on grounds of undue delay and futility." R.76 at 11. It submitted that Ms. Roppo had not shown the court how she could cure the deficiencies in her complaint by way of amendment. The fact that it believed that Ms. Roppo could not state a viable claim for relief under RICO, however, is not a concession that her claim falls into that category of "extraordinary" cases where the federal claim is so "obviously[] or plainly insubstantial or frivolous" as to deprive the federal court of jurisdiction. See Ricketts v. Midwest Nat'l Bank, 874 F.2d 1177, 1182 (7th Cir. 1989) (internal quotation marks omitted).

At oral argument, however, we articulated the concern that, in the absence of CAFA jurisdiction, Ms. Roppo's RICO allegations were so lacking in substance as to deprive the district court of subject matter jurisdiction. We therefore requested that the parties address through supplemental briefing the issue whether Ms. Roppo's RICO claim met the requirement of substantiality. See Bell v. Hood, 327 U.S. 678, 681-82 (1946). Having considered their arguments, we now conclude that, although the district court correctly dismissed Ms. Roppo's RICO claim, her allegations nevertheless are sufficient to support, and supply an independent basis for, federal jurisdiction.

1.

"The Supreme Court has repeatedly held that 'federal courts are without power to entertain claims otherwise within their jurisdiction if they are so attenuated and unsubstantial as to be absolutely devoid of merit.'" Gammon v. GC Servs. Ltd. P'ship, 27 F.3d 1254, 1256 (7th Cir. 1994) (quoting Hagans v. Lavine, 415 U.S. 528, 536 (1974)). This "substantiality doctrine" requires that a district court "conduct an initial review of [*29]  the face of the complaint to determine whether the merits are sufficiently substantial to engage the subject matter jurisdiction of the court." Id. (citing Ricketts v. Midwest Nat'l Bank, 874 F.2d 1177, 1180-82 (7th Cir. 1989)).

"Through its choice of language, ... the Court has ... made clear that only the most extreme cases will fail the jurisdictional test of substantiality." LaSalle Nat'l Trust, N.A. v. ECM Motor Co., 76 F.3d 140, 143 (7th Cir. 1996). "A claim must be 'wholly insubstantial,' or 'obviously frivolous,' 'plainly unsubstantial,' or 'no longer open to discussion,' to merit dismissal under the substantiality doctrine." Gammon, 27 F.3d at 1256 (citing Hagans, 415 U.S. at 537). "Although similar to the standard for dismissal for failure to state a claim upon which relief can be granted under [Federal Rule of Civil Procedure] 12(b)(6), the standard for dismissal for want of subject matter jurisdiction is considerably more rigorous." Id. "A claim is insubstantial only if 'its unsoundness so clearly results from the previous decisions of this court as to foreclose the subject and leave no room for the inference that the questions sought to be raised can be the subject of controversy.'" Hagans, 415 U.S. at 538 (quoting Ex parte Poresky, 290 U.S. 30, 32 (1933)). If the district court concludes that the claim, in fact, is "wholly insubstantial and frivolous," it must dismiss the complaint for lack of subject matter jurisdiction. Bell, 327 U.S. at 682-83. "Absent such frivolity, 'the failure [*30]  to state a proper cause of action calls for a judgment on the merits and not for a dismissal for want of jurisdiction.'" Shapiro v. McManus, 136 S. Ct. 450, 456 (2015) (quoting Bell, 327 U.S. at 682)).

2.

We do not believe that Ms. Roppo's RICO claim falls within this narrow category of "most extreme cases." LaSalle Nat'l Trust, 76 F.3d at 143. Although pleaded deficiently, especially when evaluated against the heightened pleading requirements of Federal Rule of Civil Procedure 9(b),56 Ms. Roppo's RICO allegations are not so wholly without legal foundation as to fail the test for substantiality.

56   Allegations of fraud in a RICO complaint are subject to the heightened pleading requirements of Federal Rule of Civil Procedure 9(b). Goren v. New Vision Int'l, Inc., 156 F.3d 721, 726 (7th Cir. 1988). "[A] RICO plaintiff 'must, at a minimum, describe the predicate acts [of fraud] with some specificity and state the time, place, and content of the alleged communications perpetrating the fraud.'" Id. (alteration in original).

Ms. Roppo alleges a civil violation of 18 U.S.C. § 1962(c), which states: "(c) It shall be 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." Section 1964 of Title 18 further limits the population of civil RICO plaintiffs to persons who have been "injured in [their] business or property by reason of a violation of section 1962." 18 U.S.C. § 1964(c). Thus, to allege a violation of § 1962(c), Ms. Roppo must show "(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity." Vicom, Inc. v. Harbridge Merch. Servs., Inc., 20 F.3d 771, 778 (7th Cir. 1994) (internal quotation marks omitted) (quoting [*31]  Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 496 (1985)). Additionally, to have standing, Ms. Roppo must allege that she "has been injured in h[er] business or property by the conduct constituting the violation." Sedima, S.P.R.L., 473 U.S. at 496.

a.

Initially, therefore, Ms. Roppo must "identify a 'person'--i.e., the defendant--that is distinct from the RICO enterprise." United Food & Commercial Workers Unions & Employers Midwest Health Benefits Fund v. Walgreen Co., 719 F.3d 849, 853 (7th Cir. 2013) (citing Cedric Kushner Promotions, Ltd. v. King, 533 U.S. 158, 161 (2001)). Before the district court, Travelers argued that Ms. Roppo had not alleged an enterprise separate from Travelers itself.57 Ms. Roppo maintained that Travelers and Maisel & Associates together constituted the "enterprise."58 She admitted, however, that she had not set forth this relationship sufficiently and sought permission to file a fourth amended complaint to add those allegations.59

57   See R.69 at 23-24.

58   See R.74 at 33 (internal quotation marks omitted).

59   See id. On appeal, Ms. Roppo does not contend that the district court abused its discretion in denying her the opportunity to file a fourth amended complaint, see, e.g., Mulvania v. Sheriff of Rock Island Cty., 850 F.3d 849, 854 (7th Cir. 2017) ("We review for abuse of discretion the district court's denial of Mulvania's motion to amend her complaint."), petition for cert. filed,     U.S.L.W.     (U.S. Aug. 16, 2017) (No. 17-245), nor would such an argument be persuasive.

Although Ms. Roppo fails to connect the legal dots between Travelers and its outside counsel, the possibility that those players, together, could form a RICO enterprise is not without support in case law. One of our sister circuits has recognized that a corporation and its outside counsel can constitute an enterprise under RICO. See Living Designs, Inc. v. E.I. Dupont de Nemours & Co., 431 F.3d 353, 362 (9th Cir. 2005) (observing that "[j]ust as a corporate officer can be a person distinct from the corporate enterprise, DuPont is separate from its legal defense team" [*32]  and holding, therefore, that "the district court erred in concluding that Plaintiffs failed to allege a distinct RICO enterprise"). Moreover, the Supreme Court recently clarified what is required to show an "association-in-fact" enterprise: "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 (2012). Nothing in these requirements forecloses a RICO enterprise comprised of a corporation and its outside counsel.60 We cannot conclude, therefore, that Ms. Roppo's allegations of a RICO enterprise, although lacking in detail, are wholly insubstantial or frivolous.

60   Fitzgerald v. Chrysler Corp., 116 F.3d 225 (7th Cir. 1997), also does not foreclose this possibility. In Fitzgerald, we held that the "'Chrysler family' consisting of subsidiaries of the Chrysler Corporation engaged in various facets of production, financing, and marketing of Chrysler automobiles, plus Chrysler's dealers, plus trusts controlled by Chrysler" was not sufficiently distinct from the Chrysler Corporation, the named defendant, to be recognized as a RICO enterprise. Id. at 226. Here, however, there is no apparent corporate relationship between Travelers and Maisel & Associates; rather they are distinct legal entities. See George v. Urban Settlement Servs., 833 F.3d 1242, 1249-50 (10th Cir. 2016) (distinguishing Fitzgerald on the ground that it involved related corporate entities, but the plaintiffs' proposed RICO enterprise involved "two separate legal entities").

b.

Turning to the remaining RICO elements, "to satisfy the 'conduct' element, ... a plaintiff must allege that the defendant 'participated in the operation or management of the enterprise itself,' and that the defendant played 'some part in directing the enterprise's affairs.'" Goren v. New Vision Int'l, Inc., 156 F.3d 721, 727 (7th Cir. 1998) (quoting Reves v. Ernst & Young, 507 U.S. 170, 179 (1993)). Additionally, the conduct cannot be an isolated incident. A pattern of racketeering activity consists of at least two violations of a specified list of criminal laws. See Goren, 156 F.3d at 728. Ms. Roppo alleges wire and mail fraud, which require [*33]  (1) "the defendant's participation in a scheme to defraud"; (2) "defendant's commission of the act with intent to defraud"; and (3) the use of wires--or mail--"in furtherance of the fraudulent scheme." Bible v. United Student Aid Funds, Inc., 799 F.3d 633, 657 (7th Cir. 2015) (internal quotation marks omitted). These violations must "exhibit 'continuity plus relationship.' ... Related predicate acts have 'the same or similar purposes, results, participants, victims, or methods of commission, or otherwise are interrelated by distinguishing characteristics and are not isolated events.'" Empress Casino Joliet Corp. v. Balmoral Racing Club, Inc., 831 F.3d 815, 828 (7th Cir. 2016) (quoting H.J. Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 239, 240 (1989)).

In her amended complaint, Ms. Roppo alleges that "there is a widespread practice within the Travelers Companies ... of not disclosing excess and umbrella policies,"61 that Travelers is incentivized not to disclose policy limits, and that it may have instructed its outside counsel to misrepresent, or not disclose, the existence of excess or umbrella policies.62 Additionally, she avers that Travelers intentionally misrepresented, or failed to reveal when under a legal obligation to do so, relevant policy limits of its insureds. It did so through written communications sent by its attorneys to counsel for injured parties and through oral communication over the telephone.63 [*34]  And it did so with the intent of inducing injured parties to rely on these statements and settle their claims for less than they would if the actual coverage limits were revealed.64

61   R.63 ¶ 32 (emphasis in original).

62   Id. at 25 (¶¶ 64-65).

63   See id. at 23-26 (¶¶ 54-71), 63 (¶ 58).

64   Id. at 24 (¶ 62).

In general terms, Ms. Roppo's complaint speaks to the elements of a RICO cause of action by alleging that Travelers was a key player in a fraudulent scheme to communicate false policy limits to injured parties, through both interstate wires and the mail, in order to reduce its payouts under its policies. Her complaint may not be sufficiently specific to meet the heightened pleading requirements of Rule 9(b), see Goren, 156 F.3d at 729 (setting forth the detailed pleading requirements for a RICO claim based on predicate acts of wire fraud), as Ms. Roppo readily acknowledges.65 Nevertheless, her allegations of conduct and racketeering activity are neither wholly insubstantial nor legally unsound.

65   See R.74 at 33 ("Travelers' other challenges to Count XI are acknowledged ... .").

c.

Finally, to obtain relief under RICO, indeed to have standing to pursue a RICO cause of action, a plaintiff must allege that she has been injured in her "business or property by reason of" the RICO violation. 18 U.S.C. § 1964(c). We have explained that "[t]he terms 'business or property' are ... words of limitation which preclude recovery for personal injuries and [*35]  the pecuniary losses incurred therefrom." Doe v. Roe, 958 F.2d 763, 767 (7th Cir. 1992). Thus, "a civil RICO action cannot be premised solely upon personal or emotional injuries." Id.

In her RICO count, Ms. Roppo requests damages for "[e]motional distress" as well as "[a]ggravation and inconvenience."66 These clearly are not available under § 1964(c) and will not support standing to pursue a RICO claim. Nevertheless, Ms. Roppo also alleges that, because of Travelers's misrepresentations, there was a delay in settling her claim.67 Consequently, she lost the time value of her settlement over the months that Travelers (allegedly) was perpetrating the fraud. See Habitat Educ. Ctr. v. U.S. Forest Serv., 607 F.3d 453, 457 (7th Cir. 2010) (recognizing that a party had "incurred a loss" of the time value of $10,000).68 Thus, she has alleged an injury to property resulting from the alleged RICO violation.

66   R.63 at 63-64 (¶ 60) (internal quotation marks omitted).

67   See id. at 64 (¶ 60).

68   See also Medcom Holding Co. v. Baxter Travenol Labs., Inc., 200 F.3d 518, 519-20 (7th Cir. 1999) ("'Compensation deferred is compensation reduced by the time value of money.'" (quoting In re Milwaukee Cheese Wis., Inc., 112 F.3d 845, 849 (7th Cir. 1997)); Soo Line R.R. Co. v. Escanaba & Lake Superior R.R. Co., 840 F.2d 546, 552-53 (7th Cir. 1988) (explaining that the time value of money requires compensation because, during the delay in compensation, one party "has the benefit of the other's purse"). This loss may have been taken into account in Ms. Roppo's settlement of her personal injury claim. However, the settlement agreement is not part of the record.

In sum, although, in some respects, Ms. Roppo's RICO allegations do not satisfy the heightened pleading requirement of Rule 9(b), hers is not among "the extreme cases" in which the federal claim is so "obviously frivolous" that it cannot support our exercise of jurisdiction. Ms. Roppo's RICO claim, therefore, provides an alternative basis for our exercise of jurisdiction over her complaint.

D.

Having determined that the district court had jurisdiction, [*36]  we now turn to whether the district court erred in dismissing Ms. Roppo's third amended complaint. We review de novo a district court's decision to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). Abcarian v. McDonald, 617 F.3d 931, 933 (7th Cir. 2010). We "accept as true all factual allegations in the amended complaint and draw all permissible inferences in [the plaintiff]'s favor." Bible, 799 F.3d at 639. A complaint will survive a motion to dismiss for failure to state a claim if it "contain[s] 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. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). However, "[a] plaintiff can plead herself out of court by alleging facts that show she has no legal claim." Shott v. Katz, 829 F.3d 494, 497 (7th Cir. 2016).

1.

Ms. Roppo first asserts that the district court erred in dismissing her fraud and negligent misrepresentation claims. Counts I, II, and III of Ms. Roppo's third amended complaint allege that Travelers and its attorneys fraudulently misrepresented Block's policy limits. In the alternative, Count X asserts that Travelers negligently misrepresented the policy limits. Both parties agree that, under Illinois law, reliance is an element of both fraudulent and negligent misrepresentation. See Extra Equipamentos E Exportacao Ltda. v. Case Corp., 541 F.3d 719, 722-23 (7th Cir. 2008) ("A claim of fraud requires proof that the victim of the fraud relied [*37]  on the representations that he contends are fraudulent." (citing HPI Health Care Servs., Inc. v. Mt. Vernon Hosp., Inc., 545 N.E.2d 672, 681 (Ill. 1989)); Tricontinental Indus., Ltd. v. PricewaterhouseCoopers, LLP, 475 F.3d 824, 833-34 (7th Cir. 2007) ("[T]o state a claim for negligent misrepresentation under Illinois law, a party must allege ... 'reliance on the truth of the [false] statement'" (quoting First Midwest Bank, N.A. v. Stewart Title Guar. Co., 843 N.E.2d 327, 334-35 (Ill. 2006))). Without reliance, a plaintiff "cannot have been hurt by the fraud." Extra Equipamentos, 541 F.3d at 723.

As a result, Ms. Roppo's complaint must allege facts which suggest that she plausibly relied on defendants' alleged misrepresentation. See Iqbal, 556 U.S. at 678. The defendants maintain that Ms. Roppo has pleaded herself out of court because the complaint states that Ms. Roppo's attorney "repeatedly expressed uncertainty" about the lack of an umbrella policy.69 According to Travelers, this statement suggests that Ms. Roppo did not rely on the misrepresentations regarding the policy limits because her attorney did not believe them.

69   R.63, ¶ 49.

We agree. A plaintiff must believe the alleged misrepresentation to be true in order to state reliance. See Smith v. Duffey, 576 F.3d 336, 339 (7th Cir. 2009).70 Even under Rule 8's more relaxed pleading standard (which only applies to Ms. Roppo's negligent misrepresentation claim),71 the allegations in the third amended complaint do not pass muster. Indeed, the third amended complaint makes clear that neither Ms. Roppo nor her attorney believed Travelers's [*38]  and Mr. Hitchings's representations regarding Block's policy limits: the complaint alleges that Ms. Roppo's attorney was so "uncertain[]" about the represented policy limits that he continued to push Travelers and its employees to disclose the possibility of an umbrella policy.72 Accordingly, we conclude that Ms. Roppo has pleaded herself out of court with respect to her fraudulent and negligent misrepresentation claims.

70   See also Schmidt v. Landfield, 169 N.E.2d 229, 231-32 (Ill. 1960) ("In all cases where it is sought to hold one liable for false representations, the question necessarily arises whether ... the plaintiff had a right to rely upon them. In determining this question, the representations must be viewed in the light of all the facts of which the plaintiff had actual notice, and also of such as he might have availed himself by the exercise of ordinary prudence." (internal quotation marks omitted)).

71   See Tricontinental Indus., Ltd. v. PricewaterhouseCoopers, LLP, 475 F.3d 824, 833 (7th Cir. 2007) (applying Illinois law and holding that a claim for negligent misrepresentation "is not governed by the heightened pleading standard of Rule 9(b)" (emphasis in original)). Federal Rule of Civil Procedure 9(b) requires that claims of fraudulent misrepresentation be pleaded with particularity. See Extra Equipamentos E Exportacao Ltda. v. Case Corp., 541 F.3d 719, 723-24 (7th Cir. 2008).

72   R.63, ¶ 49.

2.

Regarding her negligence claims against Mr. Hitchings (Count IV) and his employer, Ms. Maisel, doing business as Maisel & Associates (Count V), Ms. Roppo contends that the district court erred in determining that they did not owe Ms. Roppo a duty of care. According to Ms. Roppo, both Mr. Hitchings and his employer owed her a duty of care because she was entitled to the protections of Block's automobile liability policy and therefore was a beneficiary of a cognizable relationship under Illinois law between a plaintiff and a defendant's attorney. In short, she believes that a defense attorney's duty as an officer of the court translates into a duty to Ms. Roppo to use reasonable care in answering her discovery inquiries.

In Illinois, an attorney generally [*39]  owes a duty of care only to his client and not to third parties. Kopka v. Kamensky & Rubenstein, 821 N.E.2d 719, 723 (Ill. App. Ct. 2004). This general rule is meant to protect the attorney-client relationship: "Since an attorney 'must represent his client with zeal and undivided loyalty in adversarial matters,' he cannot have fiduciary responsibilities to third parties which may interfere with this duty to his client and leave him vulnerable to liability." Schechter v. Blank, 627 N.E.2d 106, 109 (Ill. App. Ct. 1993) (quoting Gold v. Vasileff, 513 N.E.2d 446, 448 (Ill. App. Ct. 1987)). A "narrow exception," however, extends an attorney's duty of care to third parties when the attorney was "hired by the client specifically for the purpose of benefitting that third party." Kopka, 821 N.E.2d at 723. For this exception to apply in adversarial proceedings, "there must be a clear indication that the representation by the attorney is intended to directly confer a benefit upon the third party." Pelham v. Griesheimer, 440 N.E.2d 96, 100 (Ill. 1982).

Pelham is a good illustration of just how narrow this exception is. In Pelham, the defendant had been retained to represent Loretta Ray in a divorce action against her husband, George. The plaintiffs in the action were the Rays' children, all of whom were minors at the time of the divorce. The negotiated divorce decree required George to maintain all four of his children as the primary beneficiaries of a $10,000 [*40]  life insurance policy. Later, however, George remarried and named his second wife as the beneficiary, and she received the proceeds after his death. The children then sued Loretta's lawyer claiming that, given this provision, they were intended to benefit directly from his services. The court disagreed:

   Applying the "intent to directly benefit" test to the facts alleged in the complaint, it is clear that the plaintiffs herein are not in the nature of direct third-party beneficiaries. The attorney was hired primarily for the purpose of obtaining a divorce, property settlement, and custody of the minor children for Loretta Ray, not to represent her children's interest. The plaintiffs herein are, at best, only incidental beneficiaries in this situation. That George Ray name the children as beneficiaries of the policy cannot be described as the primary reason that Loretta Ray retained the defendant to be her attorney.

Id. at 100-01.

Applying the "intent to directly benefit" test to the facts alleged in the third amended complaint, it is clear that Ms. Roppo is not a direct third-party beneficiary. Ms. Roppo asserts that she was injured by Mr. Hitchings's negligence during his representation of Block in [*41]  the underlying personal injury action. In that context, Mr. Hitchings's primary duty was to protect the interests of his client, Block, against the claims asserted by Ms. Roppo. Although Ms. Roppo certainly may have benefitted from part of Mr. Hitchings's representation of Block, in the same way that the Ray children may have benefitted from the divorce lawyer's representation of their mother, Ms. Roppo was not a direct third-party beneficiary of Mr. Hitchings's relationship with Block. Mr. Hitchings's services were not secured for her benefit. Moreover, we agree with the district court's concern that "[e]xpanding an attorney's duty of care to adversaries on the basis of discovery violations would swallow the 'narrow' intent-to-directly-benefit exception."73 Also, as the district court noted, such an expansion could undermine the attorney-client relationship. See id. at 101 ("We refuse to create such a wide range of potential conflicts by imposing such duties upon an attorney in favor of a nonclient, unless the intent to benefit the third party is clearly evident."); Schechter, 627 N.E.2d at 109 ("Public policy requires that an attorney, when acting in his professional capacity, be free to advise his client without fear of personal [*42]  liability to third persons ... ." (emphasis removed) (internal quotation marks omitted)).

73   R.78 at 13 (quoting Kopka v. Kamensky & Rubenstein, 821 N.E.2d 719, 723 (Ill. App. Ct. 2004)).

In Ms. Roppo's negligence claim against Ms. Maisel, individually, and against Maisel & Associates, Ms. Roppo asserts that Ms. Maisel, and by extension her law firm, failed to train or supervise Mr. Hitchings. Under Illinois law, Ms. Roppo "must prove that the employer's breach--not simply the employee's malfeasance--was a proximate cause of the plaintiff's injury." Vancura v. Katris, 939 N.E.2d 328, 343 (Ill. 2010). But Ms. Roppo also must demonstrate that Mr. Hitchings's employer owed her a duty of care. Id. at 347 (holding that an employer's duty to train or supervise "is best analyzed under principles generally applicable to negligence cases"). Under Illinois law, "'[t]he touchstone of the duty analysis is to ask whether the plaintiff and defendant stood in such a relationship to one another that the law imposes on the defendant an obligation of reasonable conduct for the benefit of the plaintiff.'" Id. (quoting Krywin v. Chicago Transit Auth., 938 N.E.2d 440, 447 (Ill. 2010)).

The allegations of the complaint, taken as true, simply do not establish that the firm owed a duty of care to Ms. Roppo. As Mr. Hitchings's employer, Maisel & Associates was retained to represent Block, not Ms. Roppo, in the underlying personal injury [*43]  action. Nothing in the complaint suggests that Ms. Roppo's relationship with the firm was any different than her relationship with Mr. Hitchings. Because both the Maisel-Block and Hitchings-Block relationships were meant to defend Block in an adversarial proceeding against Ms. Roppo, and because Ms. Roppo has not established that she was an intended direct beneficiary of that relationship, we conclude that neither party owed her a duty of care.

***

Conclusion

For the reasons set forth in this opinion, the district court's judgment is affirmed. The allegations in the complaint operative at the time of removal, along with Travelers's disclosure of the relevant umbrella policy limits, were sufficient for the district court to conclude that it had subject matter jurisdiction under CAFA. The "local controversy" exception also does not require remand: Travelers is the "primary" defendant in this action. Moreover, Ms. Roppo's RICO allegations provide an independent basis for federal jurisdiction. Finally, the court did not err in dismissing the third amended complaint because it insufficiently pleads claims of fraudulent misrepresentation, negligent misrepresentation, and negligence, as well as violations of the Illinois Insurance Code, the Illinois Consumer Fraud and Deceptive Business Practices Act, and RICO.

AFFIRMED

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