plaintiffs response to drc's motion to dismiss

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF WISCONSIN

THOMAS J. HOLMES, et al., Plaintiffs, v. Case No: 14-CV-208 JOHN DICKERT, et al., Defendants.

PLAINTIFFS’ BRIEF IN OPPOSITION TO DOWNTOWN RACINE CORPORATION’S MOTION TO DISMISS

Case 2:14-cv-00208-JPS Filed 06/27/14 of 15 Document 47

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UNITED STATES DISTRICT COURT EASTERN DISTRICT OF WISCONSIN

THOMAS J. HOLMES, et al., Plaintiffs, v. Case No: 14-CV-208 JOHN DICKERT, et al., Defendants.

PLAINTIFFS’ BRIEF IN OPPOSITION TO DOWNTOWN RACINE CORPORATION’S MOTION TO DISMISS

In opposition to Downtown Racine Corporation’s Rule 12(b)(6) motion (Doc. Nos. 28

and 29), Plaintiffs submit as follows:

I. Introduction The pleading motion brought by Downtown Racine Corporation (“DRC”) relies on an

unfair and anemic representation of the facts and a misunderstanding of the law. It argues, first,

that Plaintiffs have failed to plead a civil RICO claim because Plaintiffs have not alleged that

DRC had an interest in the conspiratorial enterprise at issue and because Plaintiffs have further

failed to allege predicate acts, a pattern of racketeering, or even an injury supportive of the RICO

claim. DRC then asserts that Plaintiffs’ civil rights claims fail as well because of a lack of

“personal involvement” in Plaintiffs’ constitutional deprivations and a general insufficiency

under Twombly/Iqbal. Not to be left out, DRC adopts the standing and statute of limitations

arguments of other Defendants’ briefs.

Accepting the facts in Plaintiff’s Compolaint as true, along with the reasonable inferences

therefrom, it is clear that Plaintiffs have alleged that DRC played a crucial role in the conspiracy


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to rid downtown Racine of minority-owned bars with minority patrons. DRC committed

multiple predicate acts of extortion as a part of a pattern of racketeering; namely, by

incentivizing “anonymous” callers to falsely report on minority-owned bars, selectively

providing reports to the Licensing Committee to be used against minority bars, and purchasing

surveillance cameras directed exclusively at those same bars. Plaintiffs’ injuries, including

suffering extortionate “side agreements”, increased police scrutiny, forced meetings and hearings

before the Licensing Committee, and ultimately the forfeiture or revocation of their liquor

licenses, could not have occurred without DRC’s discriminatory and multi-faceted actions. As a

result, DRC’s motion should be rejected in its entirety.

II. Legal Standard

Federal Rule of Civil Procedure 12(b)(6) evaluates the legal sufficiency of a plaintiff’s

complaint. Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990). Rule 8(a)(2)

requires only “a short and plain statement of the claim showing that the pleader is entitled to

relief,” in order to “give the defendant fair notice of what the…claim is and the grounds upon

which it rests.” Fed. R. Civ. P. 8(a)(2); Conley v. Gibson, 355 U.S. 41, 47 (1957). Detailed

factual allegations are not required under Rule 8(a)(2), but a complaint needs to contain more

than labels and conclusions, “and a formulaic recitation of the elements of a cause of action will

not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). The factual allegations must lift

a legal claim “above the speculative level.” Id.

In ruling on a motion to dismiss, a court must not only accept as true all well-pled facts

and allegations in the complaint, but must also draw all reasonable inferences in favor of the

plaintiff and construe all allegations of a complaint in the light most favorable to the plaintiff.

Bontkowski v. First Nat’l Bank of Cicero, 998 F.2d 459, 461 (7th Cir.1993); Perkins v.


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Silverstein, 939 F.2d 463, 466 (7th Cir. 1991). Dismissal under Rule 12(b)(6) should therefore

be granted only when the complaint does not contain sufficient facts that, accepted as true, “state

a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)

(quoting Twombly, 550 U.S. at 570). However, while “a claim may fail on the facts, [] assessing

factual support for a suit is not the office of Rule 12(b)(6).” Johnson v. Revenue Mgmt. Corp.,

169 F.3d 1057, 1059 (7th Cir. 1999); see Neitzke v. Williams, 490 U.S. 319, 327 (1989) (“Rule

12(b)(6) does not countenance…dismissals based on a judge’s disbelief of a complaint’s factual

allegations.”); Scheuer v. Rhodes, 416 U.S. 232, 236 (1974) (“whether a plaintiff will ultimately

prevail,” even if it appears on the face of the complaint “that a recovery is very remote and

unlikely,” is irrelevant to the determination of whether the complaint states a claim upon which

relief can be granted).

III. Argument

A. Plaintiffs Have Sufficiently Alleged Civil RICO Claims Against DRC Under §§ 1962 (c) and 1962 (d)

1. Plaintiffs’ § 1962(c) Claim is Sufficiently Pled

Plaintiffs have adequately alleged facts to support their extortion claims against DRC and

sufficiently detail DRC’s involvement in the conspiracy at issue. It can reasonably be inferred

from those facts that DRC stood to benefit financially and otherwise from its participation in the

conspiracy and that its actions were intended to result in the “cleaning up” and “revitalization” of

downtown Racine by causing Plaintiffs to voluntarily forfeit their liquor licenses or otherwise

have them revoked.

Plaintiffs address the sufficiency of its RICO claims in response to DRC’s particularized

arguments, below. However, Plaintiffs note at the outset that DRC tacks on a facial plausibility

argument at the end of its brief. DRC Mem. at 11-12. This perfunctory and vague argument


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faults Plaintiffs, falsely, for not identifying information regarding DRC’s involvement in the

conspiracy and the particular details of the conspiracy. DRC Mem. at 11-12. The DRC further

implies that that Plaintiffs’ state law extortion allegations are subject to Rule 9(b)’s heightened

pleading standard, but cites no case law in support. That is because there is no such case law.

Rather, consistent with Rule 8(a)(2), a complaint “attacked by a Rule 12(b)(6) motion to dismiss

does not need detailed factual allegations.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555

(2007). As discussed below, Plaintiffs have more than met the appropriate pleading standard.

a. Plaintiffs allege sufficient facts to support extortion as a predicate act

DRC’s recitation of the predicate act allegations against it is anemic and misleading.

DRC Mem. at 5. DRC’s characterization of its involvement as “working with” callers,

“selectively distributing” reports, and merely “purchasing” cameras is simply a watered down

misrepresentation of the factual record. DRC Mem. at 5. By referencing its actions in isolation

and, more importantly, by refusing to apply the facts to the law, DRC hopes to win dismissal.

But a review of Plaintiffs’ allegations shows that Plaintiffs have properly pled multiple acts of

extortion against DRC under Wisconsin law, which are predicate acts for civil RICO.

In particular, civil RICO plaintiffs are required to plead at least two “predicate acts,” or

any action which is indictable under specific federal statutes, as well as “any act or threat

involving murder, kidnaping, gambling, arson, robbery, bribery, extortion, dealing in obscene

matter, or dealing in a controlled substance or listed chemical (as defined in Section 102 of the

Controlled Substances Act), which is chargeable under State law and punishable by

imprisonment for more than one year.” 18 U.S.C. § 1961(1). Accordingly, the Wisconsin

criminal statute for extortion provides the basis for a predicate act:.

Whoever, either verbally or by any written or printed communication…threatens or commits any injury to the person, property, business, profession, calling or


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trade, or the profits and income of any business, profession, calling or trade of another…with intent to compel the person so threatened to do any act against the person’s will or omit to do any lawful act, is guilty of a Class H felony.

Wis. Stat. 943.30. Plaintiffs’ allegations against DRC detail chargeable behavior under the

Wisconsin statute.

In particular, Plaintiffs allege that DRC incentivized “anonymous” callers who, in turn,

falsely reported incidents at minority-owned bars to the Police Department. ¶ 59. Plaintiffs

further allege that DRC selectively provided security reports on minority-owned businesses to

the Licensing Committee. ¶ 60. Still further, Plaintiffs allege that DRC purchased surveillance

cameras that were directed at minority-owned bars exclusively and were linked directly to City

Hall for viewing by City officials, including members of the Licensing Committee. ¶ 61.

Consequently, DRC provided the Licensing Committee the means to build a case against

minority-owned bars and, in turn, scrutinize minority bar activity, extort side agreements, and

revoke liquor licenses. In summary, both the reports and surveillance provided by DRC to the

Licensing Committee were “written communications” that “injured” Plaintiff’s “property,” i.e.

the imposition of side agreements, with the intent to compel Plaintiffs to forfeit their liquor

licenses. Accordingly, Plaintiffs have properly pled predicate acts and DRC’s motion must be

denied.

b. Plaintiffs adequately allege a “pattern of racketeering activity”

DRC argues that Plaintiffs have failed to allege any facts demonstrating a pattern of

racketeering activity as is required to state a RICO claim. Reference to the statute and Plaintiffs’

Complaint quickly disposes of DRC’s conclusory assertion.

In particular, a RICO claim under 18 U.S.C. § 1962(c) requires that a plaintiff plead a

“pattern of racketeering activity.” 18 U.S.C. § 1962(c). A “pattern of racketeering activity”


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requires at least two acts of racketeering activity occurring within 10 years of each other. 18

U.S.C. § 1961(5). In addition to alleging at least two predicate acts, a civil RICO plaintiff must

show that the predicate acts amount to a pattern of racketeering activity. Under the “continuity-

plus-relationship” test for a pattern of racketeering activity, the predicate acts must be related to

one another and pose a threat of continued criminal activity.

i. There is a sufficient relationship between the predicate acts

The relationship prong of the “continuity-plus-relationship” test requires that the

predicate acts be “committed somewhat closely in time to one another, involve the same victim,

or involve the same type of misconduct.” Morgan v. Bank of Waukegan, 804 F.2d 970, 975 (7th

Cir. 1986). This is a relatively broad standard. United States v. Maloney, 71 F.3d 645, 661 (7th

Cir. 1995). Predicate acts are related if they “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.” H.J. Inc. v. Nw. Bell Tel. Co., 492 U.S. 229, 240,

(1989).

DRC’s predicate acts are sufficiently related to those of Municipal Defendants; indeed,

DRC’s and the Municipal Defendants’ acts built upon one another to effect a continuing

conspiracy. Acts of extortion under state law were committed by both, causing, under fear of

economic loss, the imposition of costly side agreements, and ultimately the actual forfeiture or

revocation of Plaintiffs’ liquor licenses. ¶¶ 59-62, 91-130. The predicate acts shared the

common goal of ridding minority-owned bars from downtown Racine. ¶ 44. The results of

DRC’s and Municipal Defendants’ predicate acts – either the voluntary forfeiture or revocation

of liquor licenses from minority-owned bars – were substantially similar. The victims – minority

bar owners – were the same. Accordingly, the actions of DRC are sufficiently similar to those of


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the Municipal Defendants to satisfy the relationship prong of the “continuity-plus-relationship”

test.

ii. There is close-ended continuity among the predicate acts

The continuity prong can be satisfied by demonstrating the existence of either closed-

ended or open-ended continuity. A “closed-ended” period of racketeering is a course of criminal

activity that has come to a close. Midwest Grinding Co., Inc. v. Spitz, 976 F.2d 1016, 1022 (7th

Cir. 1992). In order to demonstrate closed-ended continuity, a plaintiff must allege “a series of

related predicates extending over a substantial period of time.” H.J., Inc., 492 U.S. at 241. “The

underlying rationale is that the duration and repetition of the criminal activity carries with it an

implicit threat of continued criminal activity in the future.” Midwest Grinding Co., Inc., 976

F.2d at 1022-23. Thus, predicate acts that extend for only a few weeks or months are not

sufficient to establish closed-ended continuity. H.J., Inc., 492 U.S. at 241.1

Here, Plaintiffs have alleged sufficient facts to establish closed-ended continuity.

Plaintiffs allege that the conspiracy spanned from 2006 to 2012, and likely continues today. ¶

38, 130, 137. The conspiracy began in 2006 during the mayoral term of Defendant Gary Becker,

at which time Defendants commenced the conspiracy to disparately treat, restrict and/or

eradicate minority-owned bars from downtown Racine. ¶ 38. “Defendants used the municipal

and state liquor licensing ordinances, regulations, and statutes to deny issuance of licenses, deny

renewal of licenses, [and] suspend and/or revoke licenses associated with minority-owned bars

located in areas where the City planned development” and certain other areas. ¶ 38. The

1 Conversely, open-ended period of racketeering activity is a course of criminal activity that lacks the duration and repetition to establish continuity. Midwest Grinding Co., Inc., 976 F.2d at 1023. A plaintiff can establish open-ended continuity by showing past conduct which “by its nature projects into the future with a threat of repetition.” Id. (citing H.J., Inc., 492 U.S. at 241).


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conspiracy continued through 2009 when Defendant John Dickert, who ran on a platform to

“revitalize” and “clean up” downtown Racine, was elected as Mayor of Racine. ¶ 40. During

Defendant Dickert’s campaign and throughout his two mayoral terms, he and Alderpersons,

members of the Licensing Committee, members of the Common Council, Police Department

officials, the Downtown Racine Corporation, and BID #1 Board members received bribe money

and other benefits in exchange for official acts, conspired to perpetuate the scheme, and engaged

in additional predicate acts resulting in the extortion of Plaintiffs property. ¶¶ 41-44.

Accordingly, it is clear the predicate acts endured for a substantial period of time and, as least as

to Plaintiffs who have had their licenses revoked, constitutes a period of racketeering that has

come to a close. Accordingly, Plaintiffs have sufficiently alleged closed-ended continuity.2

2. Plaintiffs allege that DRC’s actions caused them harm.

There is no requirement that a plaintiff in a civil RICO case prove a “‘racketeering

injury’ separate from the harm from the predicate acts.” Sedima, S.P.R.L. v. Imrex Co., Inc., 473

U.S. 479, 495 (1985). DRC’s argument that Plaintiffs have failed to allege that they were injured

in their business or property by reason of the DRC’s RICO violation ignores the numerous well-

pled facts and reasonable inferences that can be drawn therefrom. DRC. Mem. at 8.

Specifically, Plaintiffs allege that, as a result of the DRC’s actions, they were forced to spend

significant amounts of money to comply with side agreements, lost the goodwill and patronage

of their customers, lost the right to conduct a lawful business, including the right to solicit

business, and had their liquor licenses extorted. ¶¶ 44, 59-62, 91-130. Because Plaintiffs have

2 Plaintiffs’ pleading also satisfies the open-continuity standard as there is a threat of continuing harm. For this argument, Plaintiffs incorporate by reference its same argument in opposition to the Municipal Defendants’ motion to dismiss as if fully set forth herein. See Sect. IV(B)(2).


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alleged sufficient facts to demonstrate a direct relationship between DRC’s extortionate acts and

their injuries, the DRC’s argument fails as a matter of law.

B. Plaintiffs dismiss their claim against DRC under 18 U.S.C. § 1962(b).

Plaintiffs agree to voluntarily dismiss their claim against the DRC under 18 U.S.C. §

1962(b) without prejudice.

C. Plaintiffs allege sufficient facts to state a claim against DRC under 18 U.S.C. § 1962(d) in the Alternative

DRC adopts the argument of Municipal Defendants. Plaintiffs, therefore, likewise adopt

and incorporate by reference their arguments concerning this issue as set forth in Plaintiffs’ Brief

in Opposition to Municipal Defendants’ Motion to Dismiss as if fully set forth herein. See Sect.

IV(C)(3).

D. Plaintiffs adequately state claims under 42 U.S.C. §§ 1983 and 1985(3) against DRC

1. Plaintiffs have “standing”

Plaintiffs adopt and incorporate by reference their argument on this issue as set forth in

Plaintiffs’ Brief in Opposition to Municipal Defendants’ Motion to Dismiss as if fully set forth

herein. See Sect. V(A).

2. The Maldonados’ claims are not barred by the statute of limitations.



herein. See Sect. V(C).


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3. Plaintiffs alleged the “personal involvement” of Downtown Racine Corporation in their constitutional deprivations.



herein. See Sect. V(D).

Beyond adopting the Municipal Defendants’ position, DRC also baldly argues that “[t]he

allegations that particularly reference the DRC fail to meet” the requirement of “personal

involvement” under § 1983. See Def. Mem. at 11. Unfortunately for DRC, saying it doesn’t

make it so. Plaintiffs have set forth far more than is required on the pleadings to allege that, at

the very least, DRC “set in motion a series of events that [it] knew or should reasonably have

known would cause others to deprive [Plaintiffs] of [their] constitutional rights.” Hoffman v.

Kelz, 443 F. Supp. 2d 1007, 1012–13 (W.D. Wis. 2006).

In Hoffman, a village police chief whose contract had not been renewed by the village

board sued a village prosecutor, claiming that the prosecutor’s negative (and false) public

comments regarding the chief caused the village board not to renew his contract. The defendant-

prosecutor argued that the chief’s complaint should be dismissed for failure to allege personal

involvement; namely, “because he was not plaintiff’s employer and did not participate in the

decision not to renew plaintiff’s contract.” Hoffman, 443 F. Supp. 2d at 1012. The court

rejected the argument, holding that [a] jury could reasonably infer from [the prosecutor]’s public

statements . . . that [he] “‘set in motion a series of events that the defendant knew or should

reasonably have known would cause the board to deprive the [police chief] of his constitutional

rights.’” Id. at 1013 (quoting Connor v. Reinhard, 847 F.2d 384, 396–97 (7th Cir. 1988)). See

also Soderbeck v. Burnett County, Wis., 752 F.2d 285, 292–94 (7th Cir. 1985) (finding that

although county law enforcement committee was not empowered to fire employees of sheriff’s


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department, they could be held liable if they participated in decision to terminate plaintiff-

employee; and fact that committee had hired plaintiff, had been involved in other disciplinary

matters in the sheriff’s department, met regularly with the sheriff and “may actually have

approved rather than merely have refused to annul the [termination]” was sufficient for jury to

find personal involvement of committee in termination).

Here, as DRC acknowledges at pages 3–4 of its motion, Plaintiffs have alleged numerous

actions by DRC leading to Plaintiffs’ deprivations, including that:

DRC encouraged anonymous callers to flood the police department with calls regarding minority-owned bars, see ¶¶ 59, 148(d);

those “often ‘bogus’ calls provided a convenient excuse for the Police Department to respond to the minority-owned bars and to provide a paper trail for subsequent referrals, complaints, and proceeding before the Licensing Committee[,]” see ¶ 59;

DRC purchased security cameras to be aimed exclusively at minority-owned

businesses on 6th Street – “cameras that were linked directly to City Hall for . . . viewing by City officials and the Licensing Committee[,]” see ¶ 61; and

DRC selectively sent reports on minority-owned bars – received from a security

contractor it hired – to the Licensing Committee for use against the minority-owned bars, see ¶ 60.

In short, Plaintiffs have alleged that DRC orchestrated much of the trumped-up evidence

used to deprive Plaintiffs of their constitutional rights. Like the defendants in Kelz and

Soderbeck, a jury could find that DRC’s actions led to the revocation of Plaintiffs’ licenses, for

example, even if DRC did not revoke the licenses itself. DRC’s hollow, perfunctory argument

should therefore be rejected.

4. Plaintiffs have sufficiently alleged § 1983 and § 1985(3) claims against DRC under Twombly/Iqbal.

DRC tacks on a request for complete dismissal at the end of their brief without any legal

support beyond a nod to Twombly/Iqbal. In doing so, DRC sidesteps any discussion of the


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elements of Plaintiffs’ claims. Indeed, with its slipshod assertions of the insufficiency of

allegations generally, it is difficult to discern the claim or claims being attacked by each such

assertion.

DRC appears to argue (1) that the allegations regarding DRC’s actions are lacking

because “[t]here are no specifics as to what calls were made, what discussions were had, when

these alleged events occurred, or if and how they relate to each specific Plaintiff[,]” see Def.

Mem. at 11; (2) that the allegations regarding DRC’s part in the conspiracy are lacking because

“there is no allegation as to how DRC was involved in the conspiracy, what agreement was

made, why it was made, or how it would benefit the DRC[,]” id. at 12; and (3) that the

allegations regarding harm to Plaintiffs are lacking because “there is no allegation of how DRC

harmed each Plaintiff[,]” id. at 12. Again, unfortunately for DRC, saying it doesn’t make it so.

Plaintiffs have specifically alleged that DRC engaged in a number of activities in

conjunction with the City, its Police Department, and other City officials, including those on the

Licensing Committee, to “trump up” evidence against minority-owned businesses. See ¶¶ 59–

61, 148(d) (enumerated in the argument section above). Those allegations specify the nature of

the calls – complaints regarding minority-owned bars – and their timeframe – beginning in 2006,

e.g., ¶¶ 58, 140. Furthermore, throughout the Complaint, Plaintiffs have alleged that they were

subjected to “side agreements” and “due process” hearings as a result of anonymous phone calls,

increased police surveillance, and selective security reports – all of which it can be inferred

occurred as a result of DRC, see, e.g., ¶¶ 98, 104, 113. Moreover, DRC’s refusal to

acknowledge the 130-plus paragraphs of factual allegations incorporated into Plaintiffs’ claims

by asserting that Plaintiffs merely allege that they were injured by “all defendants” is


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disingenuous. Accordingly, DRC’s argument regarding the insufficiency of allegations

regarding its actions and the harm it caused to Plaintiffs should be rejected under Twombly/Iqbal.

As for DRC’s role in the conspiracy, not only do Plaintiffs’ allegations permit the

reasonable inference that DRC conspired with the City, its Police Department, and other City

officials to rid Racine of minority-owned businesses, see ¶ 59–61, but Plaintiffs have also

alleged as much against DRC directly: “Beginning as early as 2006, the Defendants and their co-

conspirators entered into a continuing agreement and conspiracy to eradicate minority owned

bars . . . .” See ¶ 140. The law of pleading a conspiracy recognizes that because of its secretive

nature, allegations regarding the specifics of the agreement between co-conspirators are not

required. See United States v. Scarbrough, 990 F.2d 296, 299 (7th Cir. 1993) (noting that

conspiracies are “secret by their very nature.”); see also In re Graphics Processing Units

Antitrust Litigation, 540 F.Supp.2d 1085, 1096 (N.D. Cal. 2007) (stating that “direct allegations

of conspiracy are not always possible . . . [n]or are [they] necessary.”).

In any event, given the specificity of the allegations regarding DRC trumping up

evidence against Plaintiffs and other minority-owned bars, DRC’s alleged inability to ascertain

from the Complaint the nature of the conspiracy or its role in it is disingenuous. See Bissessur v.

Indiana University Bd. of Trustees, 581 F.3d 599, 603 (7th Cir. 2009) (“[The federal] system

operates on a notice pleading standard; Twombly and its progeny do not change this fact.”).

DRC’s argument should be denied accordingly.

In short, DRC’s attempt to gain dismissal with a nod to Twombly/Iqbal and without any

analysis of the elements of Plaintiffs’ claims should be rejected. Plaintiffs have properly alleged

claims under 42 U.S.C. §§ 1983 and 1985(3).


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IV. Conclusion For the foregoing reasons, Plaintiffs respectfully request this Court deny Downtown

Racine Corporation’s Rule 12(b)(6) motion and grant it such other futher relief as this Court

deems just and proper.

Dated: June 27, 2014 Respectfully submitted,

KOHLER & HART, S.C.

By: /s/ Martin E. Kohler Martin E. Kohler, Esq. State Bar No. 1016725 735 N. Water Street, Suite 1212 Milwaukee, Wisconsin 53202 (414) 271-9595 Attorney for the Plaintiffs

SEGAL MCCAMBRIDGE SINGER & MAHONEY, LTD.

By: /s/ Brian H. Eldridge Steven A Hart, Esq. (ARDC No. 6211008) [email protected] Brian H. Eldridge, Esq. (ARDC No. 6281336) [email protected] 233 S. Wacker Drive, Ste. 5500 Chicago, IL 60606 (312) 645-7800 (312) 645-7711 Attorney for the Plaintiffs


plaintiffs response to drc's motion to dismiss

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