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RICO Claims

By: Derek Hawkins//April 16, 2018//

RICO Claims

By: Derek Hawkins//April 16, 2018//

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7th Circuit Court of Appeals

Case Name: Heung K. Baek, et al. v. Patricia A. Clausen, et al.

Case No.: 16-3838

Officials: RIPPLE, SYKES, and HAMILTON, Circuit Judges.

Focus: RICO Claims

Clark & Leland Condominiums, LLC (“C & L”), and its shareholders, Heung Baek and Hyun Baek‐Lee (collectively “the Baeks”), brought this action against Northside Community Bank (“NCB”) and several of its employees, alleging violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1964(c). The predicate acts set forth in the complaint focus on the allegedly fraudulent and abusive acts committed by NCB in the course of a lending relationship with the plaintiffs.

This RICO action is the last in a series of legal actions between the parties: the first, a foreclosure action (“Foreclosure Action”), was brought by NCB in state court in 2010; the second, an action on the loan guaranty (“Guaranty Action”), followed in 2012; and, finally, a fraud and breach of contract action (“Parallel Action”), was brought by Mr. Baek and Ms. Baek‐Lee in 2014. The latter two actions were consolidated in the Circuit Court of Cook County. In response to the RICO complaint, NCB initially moved to dismiss, or in the alternative, to stay the proceeding under Colorado River Water Conservation District v. United States, 424 U.S. 800 (1976). After the state court struck or dismissed all of the plaintiffs’ claims and granted summary judgment to NCB on its claims, NCB amended its motion to assert an alternative ground for dismissal: res judicata. The district court granted NCB’s amended motion.

On reconsideration, the district court vacated its earlier dismissal because it is not clear under Illinois law whether an adjudication is final for purposes of res judicata if an appeal is pending. The district court therefore stayed the action pending the disposition of the plaintiffs’ appeal in state court. After the state appellate court affirmed the judgment in favor of NCB, the district court reinstated its dismissal with prejudice.

We now affirm. The district court correctly determined that res judicata precludes the plaintiffs’ present action. There has been a final judgment on the merits, the same parties are litigating here as in state court, and the claims arise from a single group of operative facts. Moreover, given the nature and extent of litigation that had taken place in the state court, we perceive no abuse of discretion in the district court’s decision to stay the RICO action under Colorado River.

Affirmed
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Attorney Derek A. Hawkins is the managing partner at Hawkins Law Offices LLC, where he heads up the firm’s startup law practice. He specializes in business formation, corporate governance, intellectual property protection, private equity and venture capital funding and mergers & acquisitions. Check out the website at www.hawkins-lawoffices.com or contact them at 262-737-8825.

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