Menzies v. Seyfarth Shaw LLP

Federal 7th Circuit Court
Civil Court
Case Number: 
No. 18-3232
Decision Date: 
November 12, 2019
Federal District: 
N.D. Ill., E. Div.
Affirmed and reversed in part and remanded

Dist. Ct. did not err in granting defendants-lawyer, law firm and two financial services firms' motion to dismiss plaintiff’s RICO action alleging that defendants improperly pitched fraudulent tax shelter to plaintiff, that resulted in plaintiff selling over $64 million in stock but failing to report such sales in his tax return that resulted in finding that plaintiff had underreported capital gains taxes and IRS imposing penalties and interest. Section 1964(c) of RICO statute that precludes RICO claims alleging fraudulent sales of securities did not preclude plaintiff from pursuing instant RICO claim, since plaintiff’s claim alleged tax shelter fraud as opposed to securities fraud. However, Dist. Ct. properly dismissed plaintiff’s RICO claim alleging pattern of racketeering based on mail and wire fraud, where, although plaintiff provided sufficient details about defendant’s interactions with plaintiff, plaintiff failed to allege such details regarding defendants' alleged interactions with other individuals, that included allegations of mail and wire fraud based only on “information and belief.” As such, failure to provide such details precluded plaintiff from pleading requisite pattern of racketeering activity to satisfy RICO’s pattern requirement. Ct. further noted that plaintiff alleged only conclusory assertions that tax shelter posed threat of continued fraud to others in future. (Dissent filed.)