Corley v. Rosewood Care Center, Inc. of Peoria

In the

United States Court of Appeals

For the Seventh Circuit

____________

Nos. 01-3625 & 01-3642

ROBERT N. CORLEY, individually, and as executor

of the Estate of Vera M. Corley, Deceased,

Plaintiff-Appellant, Cross-Appellee,

and

RICHARD L. STEAGALL, JOHN P. NICOARA, THE LAW

FIRM OF NICOARA & STEAGALL, and SHERMAN COHN,

Cross-Appellees,

v.

ROSEWOOD CARE CENTER, INCORPORATED OF PEORIA,

an Illinois Corporation, DARRELL HOEFLING,

individually and as Trustee of the Darrell Hoefling

Revocable Trust, LARRY VANDER MATEN, individually

and as Trustee of the Larry Vander Maten Revocable

Trust and as General Partner of the Vander Maten

Family Limited Partnership, et al.,

Defendants-Appellees, Cross-Appellants.

____________

Appeals from the United States District Court

for the Central District of Illinois.

No. 95 C 3350—Jeanne E. Scott, Judge.

____________

ARGUED JANUARY 9, 2003—DECIDED OCTOBER 13, 2004

____________

2 Nos. 01-3625 & 01-3642

Before RIPPLE, ROVNER and EVANS, Circuit Judges.

ROVNER, Circuit Judge. Placing an elderly parent in a

nursing home is a trying experience under the best of cir-

cumstances. Running a nursing home can also be challeng-

ing; the industry is highly regulated and the customers are

often anxious and unhappy about the need for nursing

home services. Needless to say, when a customer believes

he has been defrauded and the proprietors of the establish-

ment have been accused not just of fraud but racketeering,

emotions can be expected to run high. One would hope their

respective attorneys would be able to defuse the situation

and litigate the case in a dispassionate manner. No such

luck here: the parties and their attorneys have chosen the

scorched earth model of litigation. This relatively simple

case has generated more than one thousand entries in the

district court docket. The record fills a back-breaking seven

bankers boxes stuffed to bursting, and the briefs on appeal

do little to untangle the mess the parties have made of the

case. This is the second time we have reviewed a district

court’s grant of summary judgment against the plaintiff in

this civil RICO action. We previously reversed and remanded

a grant of summary judgment because the district court

halted discovery before the plaintiff had a full opportunity to

prove his case. Now that the plaintiff has been given every

opportunity to make his case, we affirm the district court’s

grant of summary judgment because the plaintiff is still

unable to produce enough evidence to demonstrate a viable

RICO claim against the defendants here. The defendants

have cross-appealed, arguing that the district court abused its

discretion in declining to sanction the plaintiff for multiply-

ing the proceedings in an unreasonable and vexatious

manner. Finding no abuse of discretion, we affirm the district

court’s judgment in all respects.

Nos. 01-3625 & 01-3642 3

I.

We will assume familiarity with our first opinion in this

matter and repeat only what is necessary to the resolution

of this appeal. See Corley v. Rosewood Care Center, Inc. of

Peoria, 142 F.3d 1041 (7th Cir. 1998) (hereafter “Corley I”).

The cast of characters remains unchanged: Larry Vander

Maten and Darrell Hoefling own and operate corporations

and other entities that, in turn, own and operate a string of

nursing homes. There are fourteen homes in this chain of

ownership, each using the name “Rosewood Care Center.” A

holding company owns each nursing home’s individual

operating corporation. Each home uses the same manage-

ment company, and each home’s ownership and operation

are organized through the same system of leases, manage-

ment contracts and other agreements. Each home transfers

revenues to the same central bank account. All of the homes

use the same advertising brochure and all advertising is

purchased centrally by a single management company. The

nursing home at issue in this case is a Rosewood facility in

Peoria, Illinois and we will refer to that home and the other

defendants collectively as “Rosewood.” That describes the

universe of defendants in the case. The plaintiff is Robert

Corley, who placed his mother, Vera Corley, in Rosewood

and later came to regret his selection. Vera Corley’s health

precluded her from participating in decisions related to her

care. Rosewood thus dealt directly with Robert Corley in all

communications relevant to this lawsuit. Vera Corley was

initially a plaintiff in the case, but when she died in 1999,

the district court entered an order substituting Robert Corley

as Executor of his mother’s estate as a party plaintiff.

Henceforth, we will refer to Robert Corley as “Corley” and

to Vera Corley as “Vera” to avoid confusion.

Nearly all of the following facts are hotly contested by the

parties but on summary judgment, we view the facts in the

light most favorable to the party opposing summary

judgment, drawing all reasonable inferences in that party’s

4 Nos. 01-3625 & 01-3642

favor. Ziliak v. AstraZeneca LP, 324 F.3d 518, 520 (7th Cir.

2003). Hence our recitation of the facts is heavily slanted in

Corley’s favor. Corley placed his mother, Vera, in Rosewood

after visiting the home in October 1989. During his visit, he

met with Valerie Mushrush, a Rosewood employee who

showed him the facility and explained what Rosewood had

to offer. Mushrush told Corley he could choose a private suite,

a private room or a semi-private room for his mother. The

private suite was the largest room and cost $70 per day,

which was $12 more per day than the semi-private room.

Corley was led to believe that any increase in the cost of the

private suite would stay in line with price increases for the

other room types. Mushrush told Corley that Rosewood

allowed residents to bring their own furniture from home,

gave residents a choice of two entrees at every meal and

provided a high quality of care for residents. Mushrush had

been instructed to market private suites to potential

residents. She believed the prices for all of the rooms would

not increase for one year and communicated that belief to

some customers but did not recall telling Corley specifically.

Significantly, Corley does not present any evidence regard-

ing whether he was told prices would remain constant for

a year, but instead focuses on the representation that when

prices increased, they would increase proportionately for the

private suites, private rooms and semi-private rooms.

Rosewood’s advertising at that time also included a guaran-

tee of continuing care for residents whose assets were

depleted. Under this guarantee, if a resident’s money ran

out, Rosewood represented that the resident could continue

to live at the facility with the same level of care which

would then be paid for by Medicaid.

Some of these representations were irrelevant to Corley

and some were very important to his decision to place his

mother in Rosewood. For example, his mother had sufficient

assets to ensure that she would never need to use Medicaid

to pay for her nursing home expenses, and thus the guaran-

Nos. 01-3625 & 01-3642 5

tee of continuing care was irrelevant to Corley. On the other

hand, it was important to Corley that his mother be able to

stay in a private suite. He relied on Mushrush’s representa-

tions about the cost keeping pace with the other room

options when he decided to place his mother in a private

suite, carpet it at his mother’s expense, install a private

phone line and move in her furniture from home. In

reliance on this and other representations that we will

discuss shortly, Corley signed a contract for a private suite

at a base rate of $70 per day. The contract specified, “We do

not guarantee your accommodations will remain private

throughout your stay with us.”1 R. 3, Ex. 1. But Corley and

Mushrush struck out a line that read “For administrative

or other reasons, we may convert any private room to a

semi-private room upon ___ days prior written notice, with

an appropriate adjustment in your base rate.” R. 3, Ex. 1.

The contract permitted Rosewood to raise the base rate of

any room at any time on 30 days notice. R. 3, ¶ XI.H.

Contrary to the advertising regarding continuing care, the

contract provided that Rosewood was not qualified to accept

Medicaid patients and there was no guarantee that it would

be qualified in the future.

Vera moved into Rosewood on October 25, 1989. About

fifty days later, on December 14, 1989, Rosewood’s adminis-

trator wrote a letter to Corley, suggesting that he move his

mother to a regular private or semi-private room. According

to the letter, the base rate on private suites was scheduled

to increase from $70 per day to $84 per day in January

1990. This was a 20% increase. Corley objected to the

increase by a letter dated December 31, 1989. He com-

plained that he was the victim of a classic “bait and switch”

1

This statement appears in a “welcome letter" appended to the

contract. The parties have treated the welcome letter as part of

the contract and for the purposes of this appeal, we will do so as

well.

6 Nos. 01-3625 & 01-3642

scheme. As a result of his complaint, Rosewood deferred the

rate increase for Vera’s room until March 1, 1990. On

March 30, 1990, the base rate for all rooms rose an addi-

tional $4, increasing Vera’s rate to $88. On October 24, 1990,

the private suite base rate increased again to $122, a whop-

ping 74% increase in one year. During the same time per-

iod, the base rate for semi-private rooms increased 13.7%,

from $58 per day to $66 per day.

Corley complained to the Illinois Attorney General.

Rosewood’s attorney, Stephen Ukman, responded to the

complaint on behalf of Rosewood in a December 18, 1990

letter (the “Ukman Letter”) that was approved by Vander

Maten. R. 1036, Ex. 12. Ukman explained that private suites

were actually semi-private rooms equipped with only one bed.

He claimed that at the time Vera Corley moved into

Rosewood, management of the facility had advised Corley

that “the availability and price of private suites was unique to

the period when the facility was filling up, and were subject

to change.” Id. at 5. In other words, Rosewood admitted,

consistent with the contract’s warning that residents were

not guaranteed a private room and consistent with the

provision for price increases, that the price of private suites

was anticipated to rise. Rosewood’s statement that the base

price in the contract was “unique” to the time period when

the facility was filling up is a concession that the facility

expected prices to rise with increased demand. This admis-

sion was also consistent with the contract, which provided

for rate increases for any room at any time on thirty days’

notice. The parties vehemently dispute whether Corley was

told the base price was unique to the time period when the

facility was first opening for business. Rosewood claims that

it was completely forthcoming in its plans for the suites, and

Corley contends he was misled. There is evidence in the

record supporting both versions of this story. We accept

Corley’s version for the purposes of this appeal. Because it

is a RICO case, though, much more than a single fraud (if

Nos. 01-3625 & 01-3642 7

this is, in fact, a fraud) is needed to sustain the action. We

therefore continue with Corley’s story.

In addition to the pricing bait and switch, Corley com-

plains that Rosewood failed to provide the high quality care

he was promised and ended the two-entree program nine

months after his mother moved in. Corley believed he was

not the only person who fell for Rosewood’s bait and switch

scheme. When he filed his complaint, he alleged that others

also were influenced to sign contracts with Rosewood

because of these and other fraudulent representations by

the defendants. In particular, he cited representations in

Rosewood’s sales brochure, which specified that (1) a nurse,

not unlike a maitre d’, would be available in the dining

room to look after the quality of the food and service and

the well-being of the residents during each meal; (2)

Rosewood had a unique system of nursing shifts, with

overlapping shifts in the morning so that residents could be

greeted, changes in condition could be reported and morn-

ing routines could be completed; (3) Rosewood had regis-

tered nurses and licensed practical nurses on duty day and

night, seven days a week; and (4) a physician would be

given regular reports on the medical condition of the

patients. He also cited to a state court lawsuit brought

against Rosewood’s East Peoria facility for violations of the

Illinois Consumer Fraud Act based on the guarantee of con-

tinuing care. Eventually, four plaintiffs prevailed in that

suit against Rosewood East Peoria. See Hopp v. Rosewood

Care Center, Inc. of East Peoria, Case No. 92 L 74, Decision

and Order of December 5, 1997.

Corley has sued Rosewood for violations of the Racketeer

Influenced and Corrupt Organizations Act (“RICO”), 18

U.S.C. §§ 1961-1968. According to Corley, the defendants

systematically defrauded the residents of the Peoria and

East Peoria homes with a classic bait and switch scheme.

He alleged that the defendants used the mails in support of

this scheme by mailing contracts and bills to residents,

8 Nos. 01-3625 & 01-3642

actions which amounted to mail fraud by his estimation.

When the defendants moved for summary judgment the

first time, Corley’s evidence in support of his allegations

was thin and the district court granted judgment in favor of

the defendants. On appeal, we reversed and remanded.

Corley I, 142 F.3d at 1059. The appeal focused on whether

Corley could establish a pattern of racketeering activity.

One of the elements of a pattern, as we will discuss below,

is continuity. That is, a plaintiff must demonstrate that the

predicate acts making up the RICO claim amount to or

otherwise constitute a threat of continuing racketeering

activity. 142 F.3d at 1048. At the time the defendants first

moved for summary judgment, the district court determined

that Corley had evidence of five predicate acts of mail fraud

occurring over a fourteen-month period against a single

victim (himself). The district court noted that, although

Corley alleged others had been damaged by the bait and

switch scheme, he had no evidence in support of these

allegations. We agreed with the district court that this

evidence was too thin to satisfy the continuity requirement.

However, because discovery had been prematurely halted,

we remanded so that Corley would have a complete oppor-

tunity to develop evidence that other residents had fallen

victim to Rosewood’s misrepresentations, and that the mails

had been used to support the scheme against these other

victims. We suggested that Corley’s allegations about

similar misrepresentations made to other residents, if true,

were sufficient to establish a pattern of racketeering

activity under the RICO statute. 142 F.3d at 1050. In

particular, we found compelling Corley’s allegations of

similar misrepresentations made to other residents and

their families regarding the pricing of private suites, the

two-entree program, and the guarantee of continuing care,

combined with innumerable predicate acts of mail fraud

occurring over a significant period of time directed against

a substantial number of victims, all of whom experienced

distinct injuries. 142 F.3d at 1050. We thus provided a

Nos. 01-3625 & 01-3642 9

roadmap for Corley on remand, to seek discovery uncover-

ing other victims of the bait and switch scheme and other

instances of mail fraud on a scale that would suggest a

threat of continuing racketeering activity. We were aware

at the time that an Illinois court had found in favor of the

Hopp plaintiffs on their Illinois Consumer Fraud case, and

this too provided seemingly fertile ground for Corley to

mine in support of his case.

On remand, the parties completed discovery and the

defendants once again moved for summary judgment. The

district court, mindful of where we left off, focused on the

additional evidence Corley brought to light to supplement

the five predicate acts we found too thin to support a RICO

claim. Corley v. Rosewood Care Center, Inc. of Peoria, 152 F.

Supp. 2d 1099, 1104 (N.D. Ill. 2001) (hereafter “Corley II”).

First, Corley had submitted a few old price lists for other

Rosewood homes. One of the lists was for the Swansea,

Illinois home and was dated February 17, 1989 with an

effective date of April 1, 1989. Another Swansea price list

with an effective date of August 20, 1990 showed increased

room rates similar to the charges Corley experienced in the

Peoria home. Two other lists did not identify the homes to

which they applied but showed room rates as of November

1, 1988 and January 1, 1990. The remaining price lists

Corley submitted related to the Peoria Rosewood home

where his mother lived, and reflected the price increases

that Corley had already described.

On the two-entree issue, the court considered Corley’s

evidence that the Peoria home was the only Rosewood facility

offering this perk and that the program ended thirteen

months after it began. Corley also presented evidence to the

district court that five residents had experienced inadequate

care in contravention of Rosewood’s promise to be a “high

quality” facility. The court commented that the “evidence

indicates that the homes were understaffed and budgets for

food were inadequate.” Corley II, 152 F. Supp. 2d at 1105-

10 Nos. 01-3625 & 01-3642

06. The court did not cite the record in drawing this conclu-

sion, which becomes problematic on appeal, as we will see

below, when Corley invites us to rely on the district court’s

“finding” in this regard. Corley produced evidence on the

brochure promises as well. He presented testimony that

there was never a “nurse maitre d’ ” in the dining room at

mealtime, that the “unique” system of staff overlapping at

shift change was actually standard practice in the industry,

that Rosewood followed Medicare regulations on nurse

staffing and did not have both RNs and LPNs on duty all day

everyday as represented in the brochure, and that oral but

not written reports about residents were given to doctors

serving the home.

Corley presented the strongest evidence of fraud on the

guarantee of continuing care. Contrary to Rosewood’s ad-

vertising, the Peoria home was never qualified to accept

Medicaid patients. Rosewood’s Peoria facility administrators

told residents they would have to move to the East Peoria

home if they wished to take advantage of the guarantee.

Several did, and the East Peoria home later stopped par-

ticipating in the Medicaid program and stopped providing

care to existing Medicaid residents. As previously noted,

several residents of the Peoria and East Peoria Rosewood

homes brought state law fraud claims against Rosewood

and won. See Hopp v. Rosewood Care Center, Inc. of East

Peoria, Case No. 92 L 74, Decision and Order of December

5, 1997. The Hopp court noted that the defendants in that

case were still advertising a guarantee of continuing care as

late as 1995 in the Peoria area.

Finally, Corley claimed the defendants were engaged in

what he characterized as a fraudulent attempt to cover up

the racketeering at Rosewood. He cited the Ukman Letter

and a number of pleadings and statements before the dis-

trict court as evidence of the coverup.

The district court considered the evidence piecemeal at

first and then analyzed it in terms of an overall scheme. For

Nos. 01-3625 & 01-3642 11

the bait and switch pricing scheme, the court found that

Corley had adequate evidence that, if credited, would show

he had been the victim of a fraudulent scheme to induce

him to contract with Rosewood for his mother’s care.

Specifically, Corley had evidence that he had been told the

price differentials would remain relatively constant and

that he was later pressured to move his mother to a semi-

private room or pay exorbitant fees that were out of line

with the costs of other types of rooms. The court considered

the Ukman Letter to be evidence that Rosewood intended to

raise the prices on private suites as soon as the home filled

up and intended to turn the private suites into semi-private

rooms in contravention of promises made to Corley at the

time he signed the contract. The court found this evidence

would be adequate to overcome summary judgment had

Corley brought a simple fraud claim, but that more was

required to support a RICO claim. Turning to Corley’s other

bait and switch evidence, the court declined to consider the

submitted price lists in support of Corley’s RICO claim

because he was unable to show that these lists were ever

actually used. Corley did not identify whether the lists were

final or were simply drafts. Moreover, the court noted that

sky-rocketing prices are not indicative of fraud in and of

themselves; Corley failed to demonstrate that other resi-

dents were told, as he claims to have been told, that when

rates increased, they would increase proportionately.

Mushrush testified that she believes she told some prospec-

tive customers in 1989 that prices would stay fixed the first

year of residency, but Corley has brought forth not one

resident who claims to have been fraudulently induced to

sign the contract on the basis of this representation, which

conflicted with the plain language of the contract. In any

case, the district court found that Corley had uncovered no

additional evidence of bait and switch on the price of the

private suite. Corley II, 152 F. Supp. 2d at 1108-10.

The court turned to Corley’s claim that Rosewood frau-

dulently represented that it provided high quality care for

12 Nos. 01-3625 & 01-3642

its residents. Corley presented testimony from six former

residents of Rosewood facilities, five from the Peoria facility

and one from Edwardsville, that they were provided

inadequate care. He also proffered statements from four

former employees of Rosewood, three from the Peoria facility

and one from Alton, that the homes in which they worked

provided inadequate care. He produced documentary evidence

that Rosewood had a policy to meet only minimum licensing

requirements with its level of care. The district court found

that this was “minimal evidence . . . too sporadic and

anecdotal to establish that an issue of fact exists regarding

whether Defendants’ representations of quality care were

either false or part of a scheme to defraud.” Corley II, 152

F. Supp. 2d at 1110. The court also rejected Corley’s claims

about the two-entree program because the representation

was made only to residents of the Peoria facility and only

for thirteen months. Because the scheme was limited in

time and duration, and because Rosewood delivered on the

promise for those thirteen months, the court found that

Corley failed to show that Rosewood’s two-entree promises

were part of a RICO pattern of mail fraud.

The court turned to the brochure representations re-

garding (1) the nurse maitre d’; (2) the unique system of

double shifting the nursing staff at morning turnover; (3)

the presence of RNs and LPNs twenty-four hours a day,

seven days a week; and (4) the provision of regular reports

to physicians. The evidence, according to the district court,

demonstrated that most of these promises were kept and

that the discrepancies, if any, were not material enough to

constitute fraud. Although the parties agreed that no nurse

ever acted as a maitre d’ in the dining hall, the court found

that Corley failed to show this was a material consideration

for anyone deciding whether to enter a Rosewood facility.

The court found that uncontroverted evidence demonstrated

that Rosewood does employ double shifts at the morning

shift turnover, and the only false part of the statement was

Nos. 01-3625 & 01-3642 13

that this system was “unique.” The court found that

Rosewood does have either RNs or LPNs on staff twenty-

four hours a day, seven days a week, just not both at the

same time, necessarily, and thus substantially complied with

the promise to have RNs and LPNs on duty day and night,

seven days a week. Finally, the evidence demonstrated that

the nurses in fact gave oral reports on the condition of the

residents to physicians visiting the home and called a doc-

tor when a particular need arose. The court found that,

although these oral reports might not meet Corley’s standard

of “regular” reports, they largely met the language of the

promise and thus there was no material misrepresentation.

Corley II, 152 F. Supp. 2d at 1111.

The court found that Rosewood’s failure to honor the

guarantee of continuing care may constitute a pattern of

racketeering activity. Construing the evidence favorably to

Corley, the court found that Rosewood began making that

misrepresentation in 1989 and continued through 1995, and

that large numbers of people were harmed by that false-

hood. Nonetheless, the court said, the Corleys were not

injured by this misrepresentation because they did not rely

on it in placing Vera Corley in Rosewood and because she

never needed the assistance of Medicaid during her stay.

Corley II, 152 F. Supp. 2d at 1112.

Considering all of the schemes as a whole, the court found

Corley’s evidence was inadequate to demonstrate a pattern

of racketeering. The court found that the evidence, if

believed, would show “a small number and variety of

separate schemes.” Corley II, 152 F. Supp. 2d at 1112. The

evidence showed only one repeated scheme of mail fraud,

related to the guarantee of continuing care. Corley suffered

no injury from that scheme and the remaining evidence

showed only isolated instances of possible fraud against

Corley, relating to the pricing of private suites, the promise

of high quality care and the two-entree program. The court

noted that Corley provided almost no evidence of injury to

14 Nos. 01-3625 & 01-3642

other victims (except for himself and the four Hopp plain-

tiffs), claiming that he was not required to do so because

injury is not an element of mail fraud. The court explained

that although injury is not an element of mail fraud, the

number of victims and the existence of distinct injuries are

factors in determining whether a pattern of racketeering

exists. The court ultimately found that a common sense

reading of the RICO statute would not allow Corley to

bootstrap his isolated instances of fraud onto a separate

scheme (the guarantee of continuing care scheme) that did

not affect him or his mother in order to make out a RICO

claim. Because Corley’s evidence was insufficient to demon-

strate a pattern of racketeering, the court entered judgment

in favor of the Rosewood defendants.2 Corley appeals.

II.

On appeal, Corley complains that the district court erred

in holding that he must show injury from all wrongful acts

if they are to be considered predicate acts that establish a

RICO pattern. Corley boldly asserts that once this issue is

cleared up, he is in fact entitled to partial summary judg-

ment on the issue of pattern, apparently believing he has

proved pattern as a matter of law. He maintains that the

court erred in a number of threshold rulings that go to the

issue of pattern: first, he argues that the court should have

considered evidence from Rosewood’s marketing coordinator

and a letter written by corporate counsel as creating an

inference that “bait and switch” on the private suites was

“company policy” and that the centralized marketing system

for the home created an inference that the policy was

carried out at least with other private suite residents if not

pervasively; second, he maintains the court erred in failing

2

We will consider the facts related to the cross-appeal on

sanctions separately.

Nos. 01-3625 & 01-3642 15

to recognize that there was one overall scheme of bait and

switch, albeit with different falsehoods inducing different

people to sign a Rosewood contract; third, he faults the court

for removing from a jury the question of whether the

promises made in the marketing brochure were material;

and fourth, he contends that the court erroneously failed to

consider certain admissions by the defendants under Rules

36(a) and 37(a)(2). The defendants have cross-appealed the

district court’s refusal to grant sanctions against Corley and

we will consider that issue separately once we have resolved

the main appeal.

We review de novo the district court’s order granting sum-

mary judgment, viewing the facts and making all reasonable

inferences that flow from them in the light most favorable

to the non-moving party. Ziliak, 324 F.3d at 520; Nelson v.

Sandoz Pharmaceuticals Corp., 288 F.3d 954, 962 (7th Cir.

2002). Summary judgment is appropriate where the plead-

ings, depositions, answers to interrogatories, and admissions

on file, together with any affidavits, show that there is no

genuine issue of material fact for trial and that the moving

party is entitled to judgment as a matter of law. Fed. R. Civ. P.

56(c). Neither party has made it easy for this court to de-

termine whether there are genuine issues of material fact.

Corley inexplicably spends most of his “Statement of Facts”

reciting the allegations of his Sixth Amended Complaint,

with only a handful of citations to the factual record. In the

remainder of his brief, he cites liberally to the district

court’s opinion for the facts, a substantial problem for this

court because the district court did not cite the record. We

hasten to add the district court is not required to cite to the

record. The appellants, however, are obliged to do so. Fed.

R. App. P. 28(a)(7) (“appellants brief must contain . . . a

statement of facts relevant to the issues submitted for

review with appropriate references to the record.”); Circuit

Rule 28(c) (“Statement of the Facts. The statement of the

facts required by Fed. R. App. P. 28(a)(7) shall be a fair

16 Nos. 01-3625 & 01-3642

summary without argument or comment. No fact shall be

stated in this part of the brief unless it is supported by a

reference to the page or pages of the record or the appendix

where that fact appears.”). Corley has failed miserably and

we will not root through the hundreds of documents and

thousands of pages that make up the record here to make

his case for him. “Judges are not like pigs, hunting for

truffles buried in’ the record.” Albrechtsen v. Board of Regents

of University of Wisconsin System, 309 F.3d 433, 436 (7th

Cir. 2002), cert. denied, 539 U.S. 941 (2003) (quoting United

States v. Dunkel, 927 F.2d 955, 956 (7th Cir. 1991)). The

defendants have done only a little better. Clearly convinced

that the main issue in the case is the district court’s refusal

to sanction the plaintiff, the defendants tell us over and

over about the filings of various pleadings and devote

perhaps a page or two to responding to Corley’s version of

the events making up the RICO claim. If the appellees are

dissatisfied with the appellant’s statement of facts, as is

surely the case here, they are obliged to make their own

properly supported statement of facts. Fed. R. App. P.

28(b)(4). In the end, as we shall see below, both sides have

missed the main flaws in Corley’s case, flaws alluded to by

the district court, which granted judgment on another

ground. The parties ultimately seem to concede (albeit with

a few objections that we address herein) that the district

court’s version of events accurately represents the record as

it may be construed in the best light for Corley, the non-

moving party. With few modifications, we too rely on that

version of events. The question then becomes whether these

facts are legally sufficient to make out a RICO claim

against Rosewood.

We begin with the basics of RICO for it is on the basics

that Corley’s claim rises or falls. Under the civil remedies

portion of the RICO statute, “[a]ny person injured in his

business or property by reason of a violation of section 1962

of this chapter may sue therefor in any appropriate United

Nos. 01-3625 & 01-3642 17

States district court and shall recover threefold the dam-

ages he sustains and the cost of the suit, including a

reasonable attorney’s fee[.]” 18 U.S.C. § 1964(c). Section

1962 in turn provides, among other things, that 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 collec-

tion of unlawful debt.” 18 U.S.C. § 1962(c). There are, of

course, other paths to RICO liability but Corley’s theory of

the case centers on section 1962(c) and that is therefore our

focus. See also H.J., Inc. v. Northwestern Bell Telephone Co.,

492 U.S. 229, 232-33 (1989) (RICO renders civilly liable any

person who, while employed by or associated with an

enterprise that is engaged in interstate commerce, conducts

or participates in the conduct of its affairs through a

pattern of racketeering activity); Midwest Grinding Co., Inc.

v. Spitz, 976 F.2d 1016, 1019 (7th Cir. 1992) (the elements

of a RICO violation consist of (1) conduct (2) of an enterprise

(3) through a pattern (4) of racketeering activity). We look to

section 1961 to determine what is meant by “racketeering

activity” and find that it includes mail fraud (among other

things). 18 U.S.C. § 1961(1)(B). It is on mail fraud that

Corley rests his case and so we will shortly consider the

requirements of making out a mail fraud claim. So far,

then, we know that Corley must show he (1) was injured (2)

by reason of (3) a violation of section 1962. To demonstrate

a violation of section 1962, he must show the defendants

conducted the affairs of the enterprise through a pattern of

racketeering activity, in this case, mail fraud.

A.

The district court (and the parties, for that matter)

focused on the pattern requirement and we therefore turn

18 Nos. 01-3625 & 01-3642

to that part of the analysis first. In Corley I, we noted that

the viability of Corley’s claim turns on whether he can

establish that the defendants conducted the business of the

Rosewood nursing homes through a pattern of racketeering

activity. Corley I, 142 F.3d at 1048. To show a pattern of

racketeering activity, Corley must demonstrate at least two

acts of racketeering activity (called predicates); although two

predicates are necessary, they may not be sufficient to

establish a pattern. H.J., Inc., 492 U.S. at 237. In H.J., Inc.,

the Supreme Court looked to the common understanding of

the word “pattern” as an “arrangement or order of things or

activities,” reasoning that a pattern is not formed by

sporadic activity and that RICO liability will not attach

simply because a person has committed two widely sepa-

rated and isolated criminal offenses. H.J., Inc., 492 U.S. at

239. Instead, the Court held, the term “pattern” itself

requires a showing of (1) a relationship between the

predicates, and (2) the threat of continuing criminal activity.

H.J., Inc., 492 U.S. at 239 (citing to the Congressional

Record). In short, the Court said, “RICO’s legislative history

reveals Congress’ intent that to prove a pattern of racke-

teering activity a plaintiff or prosecutor must show that the

racketeering predicates are related and that they amount

to or pose a threat of continued criminal activity.” H.J., Inc.,

492 U.S. at 239 (emphasis in original). In H.J., Inc., the

Supreme Court “attempted to give definition to the pattern

requirement to forestall RICO’s use against isolated or

sporadic criminal activity, and to prevent RICO from

becoming a surrogate for garden variety fraud actions

properly brought under state law.” Midwest Grinding, 976

F.2d at 1022.

Although relationship and continuity appear to be

analytically separate requirements, “in practice their proof

will often overlap.” H.J., Inc., 492 U.S. at 239. Taking guid-

ance from a similar “relationship” requirement in the

Organized Crime Control Act of 1970, the Court defined the

term thusly:

Nos. 01-3625 & 01-3642 19

Criminal conduct forms a pattern if it embraces crim-

inal acts that have the same or similar purposes, re-

sults, participants, victims, or methods of commission,

or otherwise are interrelated by distinguishing charac-

teristics and are not isolated events.

H.J., Inc., 492 U.S. at 240 (quoting 18 U.S.C. § 3575(e)). As

for continuity, the Court noted that it is “both a closed- and

open-ended concept, referring either to a closed period of

repeated conduct, or to past conduct that by its nature

projects into the future with a threat of repetition. H.J.,

Inc., 492 U.S. at 241-42. Because we do not ultimately rest

our conclusion on continuity, we will set that factor aside

for the time being.

In Corley I, we commented that the “ ‘relationship’ prong

is relatively uncontroversial here. . . . Neither the defendants

nor the district court have suggested that the core predicate

acts comprising the alleged ‘bait and switch’ scheme are

insufficiently related to satisfy the relationship prong.”

Corley I, 142 F.3d at 1048. We therefore accepted that the

predicate acts were related and proceeded to consider con-

tinuity. Because Corley did not have an adequate opportu-

nity to complete discovery, we remanded so that he could

continue his attempt to demonstrate continuity. On remand,

after full discovery, the relationship prong turned out to be

more controversial than we anticipated.

The district court ultimately rested its judgment in favor

of the defendants on Corley’s failure to meet the relation-

ship prong of the pattern requirement, although the court

was somewhat circumspect in labeling the problem as such:

[T]he court must conclude that the Defendants are

entitled to summary judgment. Corley has presented

evidence which, if believed, shows that Corley and his

mother were injured by a bait and switch scheme and

inadequate care; she also stopped receiving a choice of

two-entrees after eight months in the Peoria home. He

20 Nos. 01-3625 & 01-3642

has failed to show that these acts constitute a RICO

pattern. The Defendants may have been engaged in a

pattern of racketeering activity in marketing a guaran-

tee of continuing care in Peoria and East Peoria over a

six-year period, but Corley suffered no injury from this

scheme. A ‘common sense’ result does not allow Corley

to bootstrap his isolated incidents onto a separate scheme

that did not affect him or his mother to assert a RICO

violation.

Corley I, 142 F.3d 1112-13. By characterizing the purported

fraud against Corley as “isolated,” labeling the guarantee of

continuing care scheme as “separate,” and finding that

Corley may not “bootstrap” his claim onto the conduct that

formed the basis of the Hopp case, the district court was

essentially holding that the predicate acts were not suffi-

ciently related.

Neither party picked up on this as being the controlling

ground for the district court’s decision and both sides gave

it scant attention in their briefs. That does not relieve us of

our duty to consider whether Corley has sufficient evidence

to overcome summary judgment on this point. Corley’s theory

of the case is that the defendants engaged in an overarching

scheme to fill their nursing homes by fraudulently inducing

customers to sign contracts for nursing home services. Corley

seems to hang his hat on our statement in Corley I that the

relationship prong is relatively uncontroversial. He con-

tends that our statement was still justified following full

discovery. In Corley’s view, although the particular fraudu-

lent promise may have changed for each victim, (1) the

purpose of the fraud was the same in each case, to induce a

prospective customer to move into a Rosewood home; (2) the

results were the same because contracts were in fact signed

and residents moved in; (3) the victims were similar as they

were all elderly persons needing nursing care or family

members charged with the responsibility of finding nursing

care for a loved one; and (4) the methods were similar

Nos. 01-3625 & 01-3642 21

because the fraudulent statements were delivered in

advertising, sales brochures and in oral statements during

tours of the homes. We tend to agree that, if (and this turns

out to be a big “if”) Corley has enough evidence to demon-

strate acts of fraud against himself and others as described

above, then he has sufficiently demonstrated a triable issue

on relationship. Summary judgment should not have been

granted on that ground and to the extent the district court

relied on the relationship prong of pattern to grant judg-

ment against Corley, we disagree with that rationale.

B.

We turn next to Corley’s complaint that the district

court’s decision rested on a legal error related to the injury

requirement. Corley contends that the court required him

to prove that he was injured by each and every predicate

act, contrary to our decision in Marshall & Ilsley Trust Co.

v. Pate, 819 F.2d 806 (7th Cir. 1987). He maintains that he

need only demonstrate injury to himself from one predicate

act that is related to enough other predicate acts to con-

stitute continuity. He adds that the other predicate acts

making up the pattern need not have injured anyone so

long as they satisfy the definition of mail fraud. Because a

person may be found guilty of mail fraud without any

showing that anyone relied on the fraud or was injured by

it, he claims, he need not show injury from any predicate

act directed towards other persons. We do not read the dis-

trict court’s opinion as requiring Corley to demonstrate

injury from all of the predicate acts, although the court may

have relied in part on such a rationale. As we discussed

above, the district court’s decision seemed to rest on a

finding that the acts that injured Corley were isolated acts

that were insufficiently related to the guarantee of continu-

ing care scheme that injured others. In any case, Corley is

correct (and the defendants seem to agree) that a plaintiff

22 Nos. 01-3625 & 01-3642

need not demonstrate injury to himself from each and every

predicate act making up the RICO claim. Pate, 819 F.2d at

810. In Pate, the question presented was whether a plain-

tiff, after proving predicate acts sufficient to constitute a

pattern must prove that every act involved in the pattern

also caused a direct injury to the plaintiff. 819 F.2d at 809.

We noted that one of the factors tending to show the

existence of a pattern of racketeering activity is the pres-

ence of multiple victims. Id. Moreover, requiring the

plaintiff to prove injury from all of the predicate acts “would

conflate what must be two separate inquiries: first, was

there a pattern of racketeering activity violating RICO, and

second, was the plaintiff injured by the RICO violation?”

819 F.2d at 809. Requiring a plaintiff to show injury from

all of the acts adding up to a pattern would thus be illogical,

especially because the acts might be somewhat distinct and

separate in time. Pate, 819 F.2d at 810. We therefore held

that a “plaintiff need not prove that it suffered injury from

each (or more than one) predicate act constituting the

pattern.” Pate, 819 F.2d at 810. To the extent the district

court required Corley to show injury from all of the predi-

cate acts (and again, we do not necessarily read the district

court’s opinion to so hold), summary judgment should not

have been entered on that basis.

C.

Corley does need to demonstrate a triable issue of fact on

injury to himself from at least one predicate act, though,

and we turn finally to what Corley’s evidence shows, con-

struing it in a light most favorable to him. As we noted

above, Corley must show that he was injured “by reason

of” a violation of section 1962(c). See 18 U.S.C. § 1964(c)

(“Any person injured . . . by reason of a violation of section

1962 of this chapter may sue therefor. . .”). This “by reason

of” language requires a showing of both “but for” causation

Nos. 01-3625 & 01-3642 23

and proximate cause. Holmes v. Securities Investor Protection

Corp., 503 U.S. 258, 268 (1992). That is, Corley must show

that but for the defendants’ conduct he would not have been

injured. He must also show “some direct relation between

the injury asserted and the injurious conduct alleged.”

Holmes, 503 U.S. at 269.

In addition to injury and causation, because Corley relies

on the mail fraud statute as the source of the predicate acts

making up his RICO claim, he must show a triable issue of

fact on the elements of mail fraud: (1) the defendants’ partici-

pation in a scheme to defraud; (2) the defendants’ intent to

defraud; and (3) the defendants’ use of the mail in further-

ance of the scheme to defraud. United States v. Britton, 289

F.3d 976, 981 (7th Cir. 2002); United States v. Davuluri,

239 F.3d 902, 906 (7th Cir. 2001); United States v. Hickok,

77 F.3d 992, 1002-03 (7th Cir.), cert. denied, 517 U.S. 1200

(1996). The words “to defraud” in the mail fraud context

mean “wronging one in his property rights by dishonest

methods or schemes” and “usually signify the deprivation of

something of value by trick, deceit, chicane or overreaching.”

Hickok, 77 F.3d at 1003 (quoting McNally v. United States,

483 U.S. 350, 359, 107 S. Ct. 2875, 2881 (1987)). “Intent to

defraud requires a wilful act by the defendant with the

specific intent to deceive or cheat, usually for the purpose

of getting financial gain for one’s self or causing financial

loss to another.” Britton, 289 F.3d at 981. See also Perlman

v. Zell, 185 F.3d 850, 854 (7th Cir. 1999) (“The word ‘fraud’

in the mail fraud statute means deliberate, material

misrepresentation. . . . No fraud, no mail fraud.”). Addition-

ally, materiality of the falsehood is an element of the mail

fraud statute, and so Corley must demonstrate a triable

issue of fact on the materiality of the falsehoods he relied

upon when he signed a contract and moved his mother into

Rosewood. Neder v. United States, 527 U.S. 1, 25 (1999).

Corley argues that the scheme to defraud involved

Rosewood making promises it had no intention of keeping

24 Nos. 01-3625 & 01-3642

in the hopes of inducing people to move into Rosewood facil-

ities. We will again recount the false promises Corley

claims injured himself or his mother when he relied upon

them to place his mother at Rosewood and to furnish her

room with carpeting, a private phone line and his mother’s

personal furniture from home: (1) Corley contends that

Mushrush told him that the price differential between pri-

vate suites and other types of rooms would remain rela-

tively constant; (2) he contends he was promised that his

mother would be offered a choice of two entrees at each

meal; (3) he claims he was told that Rosewood provided a

high quality of care for its residents; (4) Rosewood’s sales

brochure represented that a nurse maitre d’ would be present

in the dining hall; (5) that same brochure claimed that

Rosewood had a unique system of nursing shift overlaps; (6)

the brochure promised LPNs and RNs would be on-site

twenty-four hours a day, seven days a week; and (7) the

brochure stated that regular reports would be provided to

physicians regarding the residents’ condition. For the pur-

poses of this discussion, we will ignore the guarantee of con-

tinuing care because Corley was not injured by that promise

and must therefore show injury from one of the other

purported predicate acts in order to recover under RICO.

We will analyze each of the seven promises to determine if

they qualify as predicate acts on which to rest RICO

liability.

1.

The centerpiece of Corley’s case is Mushrush’s alleged

representation that when the prices of the private suites

rose, the price differential between private suites and other

types of rooms would remain relatively constant. Corley

does not complain that the price of the private suite rose

but only that when it did so, the increase was disproportion-

Nos. 01-3625 & 01-3642 25

ate to price increases in other room types. Corley could not

complain of fraud in the increase itself because the contract

specified:

The facility may increase its base rate at any time upon

30 days’ prior written notice to the resident and res-

ident’s representative. Such change shall be effective on

the 31st day following delivery or mailing of written

notice as herein provided.

R. 3, at ¶ XI.H. The contract also provided that “[t]his

Contract constitutes the entire agreement between the

parties with respect to the subject matter hereof and may

not be amended except by a writing signed by each of the

parties.” R. 3, at ¶ XI.B. Corley could hardly claim he was

deceived or injured by a price increase in and of itself when

that risk was explicitly disclosed in the contract. See

Reynolds v. East Dyer Development Co., 882 F.2d 1249, 1253

(7th Cir. 1989) (a person who discovers the truth may not

claim that a defendant’s misrepresentation harmed him);

Perlman, 185 F.3d at 855 (no fraud is involved when the

defendants tell the plaintiff exactly what they were doing).

A claim for injury based purely on price increase would also

fall short because the contract allows a resident to termi-

nate the contract at any time on 30 days’ notice, and thus

the resident has the unencumbered ability to avoid any

price increase by terminating the contract and leaving the

facility before the increase becomes effective. See R. 3, ¶

V.B. (“The resident may terminate this Contract at any time

and all obligations under it by giving the facility at least 30

days’ prior written notice of termination.”).

So instead Corley complains about the disproportionate

increase in the cost of private suites, a subject not covered

by the contract but by an alleged oral representation from

Mushrush, one of Rosewood’s representatives. There are at

least three significant problems with a fraud claim based on

disproportionality. First, Corley does not explain how he

26 Nos. 01-3625 & 01-3642

was injured by a disproportional rate hike when he signed

a contract that contained no cap on prices at all. Put

another way, he does not explain how he was injured when

Rosewood failed similarly to raise the rates on other

residents living in other types of rooms. We can guess what

his theory is. Presumably, he believed that if rate increases

were tied together for all room types, external market pres-

sures on the home would keep the prices down generally. In

other words, Rosewood would be constrained in raising the

prices on private suites by the market pressures on semi-

private rooms, for example. The problem with this argu-

ment is that Corley does not make it anywhere in his briefs

or in the court below. Consequently, he has presented no

evidence of whether this market pressure theory would

have been borne out in practice and we thus have no way of

knowing if he was injured by the failure to tie room rate

increases together. We do not know anything about the

market for any types of nursing home rooms during the

relevant time period. We will not make Corley’s market

pressure argument for him. “This court is not obliged to

comb the record without guidance looking for facts that

might call the district court’s holding into question, or to con-

duct the legal research necessary to construct an argument

from those facts.” Reynolds, 882 F.2d at 1254. Second, a

market pressure theory would suffer the same infirmity that

a claim for fraud based on pure price increase suffers—

because Corley had the ability to terminate the contract

before any price increase took place, he could not claim to

have been injured by the increase. If fraud was Rosewood’s

aim, it went about the process in a very unlikely manner by

giving residents an absolute out that would protect them

from injury.

Even if we consider as injury the cost of installing car-

peting and a private phone line, Corley must demonstrate

fraudulent intent and he has failed to do so in this instance.

This is the third flaw in Corley’s theory. As we discussed

Nos. 01-3625 & 01-3642 27

above, mail fraud requires a showing of specific intent to

defraud. This in turn requires a wilful act by the defendant

with the specific intent to deceive or cheat, usually for the

purpose of getting financial gain for one’s self or causing

financial loss to another. Britton, 289 F.3d at 981. Corley

must provide some evidence that, if believed by the jury,

would tend to show that at the time Mushrush made this

representation, Rosewood had no intention of honoring it.

Corley points to two pieces of evidence in support of frau-

dulent intent. First, Rosewood in fact increased prices in a

disproportionate manner after promising not to do so. This is

a recurring theme in Corley’s arguments and we will

address it here briefly. The fact that Rosewood subsequently

broke a promise is not evidence that it never intended to

keep the promise when made. At most this is evidence of

breach of contract, not fraud. Fraud requires much more

than simply not following through on contractual or other

promises. It requires a showing of deception at the time the

promise is made. A subsequent breach, although consistent

with deceptive intent is not in and of itself evidence of such

an intent.

Second, Corley relies on the Ukman Letter as evidence

that Rosewood never intended to keep its promise to raise

room rates proportionally. Recall that the Ukman Letter

was drafted by Rosewood’s attorney in response to an in-

quiry from the Illinois Attorney General after Corley lodged a

complaint with that office. We have reviewed the Ukman

Letter and find nothing in it that indicates that Rosewood

intended to deceive Corley at the time Mushrush told him

the price differentials would remain relatively constant. We

will recount here the passages of the Ukman Letter that

address Corley’s pricing complaints. In defending Rosewood

against Corley’s charges of extortion and fraud, Ukman

conceded that the cost of a private suite had “increased

substantially since Mrs. Corley was admitted to the facility”

but that other, less expensive private rooms were still

28 Nos. 01-3625 & 01-3642

available, as were private suites at other comparable homes

where there was less demand for the suites and therefore

lower costs. R. 1036, Ex. 12, at 3. Ukman noted that when

Vera Corley was first admitted to Rosewood, she was given a

discount of $14 per day off the usual price of a private suite

(a fact that Corley states he was never told). According to

Ukman, the first increase in price, detailed in a December

14, 1989 letter to Corley, “was brought on by the mush-

rooming occupancy of the facility and demand for beds.” R.

1036, Ex. 12, at 4. The next increase was a $4 per day across

the board increase in all room rates “necessitated by addi-

tional costs of running the facility[.]” The next increase,

from $88 to $122 per day was “brought about by the

continuing growth of the facility.” According to Ukman, the

facility was so full it was turning away individuals in need

of care. Id. In response to the charge that Corley had been

the victim of a bait and switch scheme, Ukman pointed out

that the contract itself provided for rate increases at any

time on 30 days’ notice. Further, at “the time Mrs. Corley

was admitted, management of the facility advised Mr.

Corley that the availability and price of private suites was

unique to the period when the facility was filling up and were

subject to change.” Id. at 5. Ukman told the Attorney

General that private suites were more expensive because

the residents were paying for the privilege of occupying a

room licensed by the State for two people, and that the

premium increased as occupancy rose. Simply put, “[r]ate

increases were the result of increasing occupancy and costs

of doing business.” Id. at 6. In response to a claim by Corley

that Rosewood planned the rate increases and that their

intent was “misstated and fraudulent,” Ukman responded

thusly:

Though rate increases for private suites were certainly

anticipated (and provided for in paragraph XI H. of the

contract), the amount and timing of them could not pos-

sibly have been planned. These increases depended al-

Nos. 01-3625 & 01-3642 29

most entirely on the growth in occupancy, which was

totally unpredictable.

Id. at 7. From this, Corley would have us assume that the

Rosewood defendants knew ahead of time that the demand

for private suites would far outpace the demand for more

modestly priced private rooms and semi-private suites.

Nothing in the Letter indicates such knowledge and fore-

thought on Rosewood’s part. Both Corley and the district

court read too much into the Ukman Letter and Corley lacks

any proof of fraudulent intent on the price differential claim.

“Not all conduct that strikes a court as sharp dealing or

unethical conduct is a ‘scheme to defraud.’ . . . Given the

pervasive use of the mails along with the ease of satisfying

the mailing requirement, such a broad meaning of fraud for

the mail fraud statutes would put federal judges in the

business of creating common law crimes.” Reynolds, 882

F.2d at 1252. Because Corley cannot show he was injured

by the promise of proportional pricing and cannot show that

the defendants intended to deceive him when Mushrush

made that promise, it cannot form the basis of a RICO

claim.

2.

We turn to the promise of a choice of two entrees at every

meal. This program was unique to Rosewood’s Peoria

facility and was in effect from June 1989 through July 1990,

for approximately thirteen months. Corley has literally no

evidence of fraudulent intent in the making of this promise

and simply relies on the fact that the program ended nine

months after his mother entered the facility as evidence that

the defendants did not intend to carry through on this

promise when they made it. This is the flimsiest of Corley’s

claims because the home did in fact operate the two-entree

program for a substantial period of time before terminating

30 Nos. 01-3625 & 01-3642

it. Corley does not claim he was ever told, for example, that

the program would be offered in perpetuity like the guaran-

tee of continuing care. Without any evidence of fraudulent

intent, the cancellation of the two-entree program cannot

qualify as a predicate act for the purposes of RICO.

3.

Next is Corley’s claim that he was told that Rosewood

provided a “high quality” of care for its residents. According

to Corley, the home had a policy of meeting minimum State

nursing requirements and thus never intended to provide

“high quality” care to its residents. The phrase “high quality”

is highly subjective. See Jepson, Inc. v. Makita Corp., 34

F.3d 1321, 1330 (7th Cir. 1994) (labels like “poor quality”

are inherently subjective expressions that are ill-suited as

the basis for mail and wire fraud claims). Without elabora-

tion, it comes under the category of sales puffery upon

which no reasonable person could rely in making a decision

and therefore it does not qualify as material. Williams v.

Aztar Indiana Gaming Corp., 351 F.3d 294, 299 (7th Cir.

2003) (promotional mailings from casino representing that

“Players win!” and “the winning is big,” among other things,

are nothing more than sales puffery on which no person of

ordinary prudence and comprehension would rely); Associates

In Adolescent Psychiatry, S.C. v. Home Life Ins. Co., 941

F.2d 561, 570 (7th Cir. 1991), cert. denied, 502 U.S. 1099

(1992) (fraud occurs only when a person of ordinary pru-

dence and comprehension would rely on misrepresentations;

no reasonable person would rely on puffery that an invest-

ment will earn the “highest” rate of return). A generic promise

to provide “high quality” services cannot therefore be the

basis of a mail fraud claim. In any event, this alleged mis-

representation suffers the same flaw as the others because

Corley has no evidence that Rosewood intended to provide

anything other than high quality services when it made this

statement in its advertising materials.

Nos. 01-3625 & 01-3642 31

4.

Rosewood’s sales brochure also represented that a nurse

maitre d’ would be present during meals. Specifically, the

brochure stated, “A nurse, not unlike a maitre de [sic], looks

after the quality of food, service and well-being of the guests

during each meal.” R. 1035, Ex. 1, at 8. Corley presented

evidence that no nurse acted like a maitre d’ during meal

times. The district court found that statement regarding the

presence of a nurse maitre d’ was not material. The court

noted that Corley presented no evidence that the presence

or absence of a nurse maitre d’ had a tendency to affect

anyone’s decision to stay at a Rosewood facility. Corley

argues that materiality is an issue for the jury, not the

judge. He suggests that the mere fact that Rosewood in-

cluded this statement in the brochure indicates that

Rosewood thought it was material to prospective residents.

This argument is a non-starter. Sales brochures contain all

sorts of puffery. To turn every statement in a sales brochure

into a material representation that could form the basis of

a RICO claim would lead to absurd results. The same

section of the brochure states, “Mealtimes are social

gathering times for residents who often get together early

to talk.” Corley’s argument would lead to the ridiculous

result that Rosewood could be sued for fraud if his mother

found herself without a social companion with whom to

converse before the meal hour. Materiality will in many

circumstances be an issue of fact for a jury, but not here.

Nurses were available at all times; the fact that none were

present in the dining room to act as a maitre d’ would not

be material to any reasonable person. If Corley wanted to

get the issue before a jury, he should have produced evidence

that this statement influenced at least some of the prospec-

tive residents in making their decision to move into Rose-

wood. See Neder, 527 U.S. at 16 (a false statement is

material if it has a natural tendency to influence or is

capable of influencing the decision of the decision making

32 Nos. 01-3625 & 01-3642

body to which it was addressed). This claim fails for lack of

any evidence on materiality.

5.

The brochure also claimed that Rosewood had a unique

system of nursing shift overlaps. As the district court

pointed out, the only part of this statement that proved to

be false was that the system may not have been “unique” but

may have been a common practice at health care facilities.

Corley’s argument on this point suffers a number of flaws.

First, he again lacks any evidence that the defendants had

a fraudulent intent when making this statement. Second,

he fails to show that Rosewood’s actual performance of this

promise differed in any material way from what was rep-

resented in the brochure. Third, he again fails to present

any evidence that this statement was material to anyone

deciding whether to enter Rosewood. All of these deficiencies

mean that this alleged misrepresentation may not serve as

the basis for a mail fraud claim.

6.

Nor is there any merit to Corley’s claim that Rosewood

acted with fraud when the brochure promised LPNs and

RNs would be on-site twenty-four hours a day, seven days

a week. As the district court noted, either LPNs or RNs and

sometimes both were in fact on duty twenty-four hours a

day, seven days a week. Rosewood followed Medicare reg-

ulations which required that one RN be on the Medicare

hallway at least one shift during the twenty-four hour day,

and either LPNs or RNs were to be on duty on every shift.

Under the district court’s reading, this staffing was sufficient

to meet the statement in the brochure. Corley takes issue

with the district court’s interpretation of the brochure and

offers his own reading. In his view, the brochure repre-

Nos. 01-3625 & 01-3642 33

sented that more than one RN would be present and that

both RNs and LPNs would be present day and night. The

actual statement in the brochure reads, “Registered nurses

and licensed practical nurses are on duty day and night

seven days a week.” R. 1035, Ex. 1, at 15. As we read the

statement, it is open to interpretation regarding how many

nurses will be present and what their level of training will

be. What is clear is that nurses will be present at all times

and nurses were in fact present at all times. An indefinite

statement like this is not the stuff of which fraud claims are

made. Corley has presented no evidence that the Rosewood

defendants intended to deceive anyone when they placed

this statement in their brochure, or that they intended not

to have adequate staffing. Corley points to a handful of

situations where the care provided to some residents was

inadequate, but a breach of the standard of care is not

evidence that Rosewood intended from the start to mislead

prospective customers about the number of nurses present

for each shift. This claim too fails for lack of evidence.

7.

Finally, Corley complains that the brochure stated that

regular reports would be provided to physicians regarding

the residents’ condition when in fact nurses provided oral

reports to doctors only when those doctors visited the home,

and also called doctors when there was a specific need.

Corley contends these are not “regular” reports and that

only a jury can decide what a reasonable person would un-

derstand by “regular” in the context of the entire brochure.

Again, “regular” is a subjective word in this context, and the

district court was quite correct to find that Corley could not

base a fraud claim on this statement. And, for the final

time, we must point out that Corley has presented literally

no evidence that the defendants intended to deceive anyone

34 Nos. 01-3625 & 01-3642

when they made this statement. The final nail in the RICO

coffin for this claim is a lack of any proof that this promise

would be material to a reasonable person placing a loved

one in a nursing home. A reasonable person would certainly

expect a physician to be notified when there is a need but

Corley’s vision of “regular” reports being provided even

when there was no particular need is too idiosyncratic to be

considered material in the absence of any evidence that

anyone else found this promise to be determinative.

All of this boils down to one conclusion. Corley has failed

to produce evidence of any predicate act that injured him-

self or his mother. Although Rosewood may have breached

some of the promises it made to Corley and other residents,

none of these breaches rose to the level required to prove

fraud. As we discussed above, for each allegedly breached

promise, Corley failed to produce evidence on a key element

of the fraud claim. Sometimes the evidentiary deficit related

to injury, sometimes to intent, sometimes to materiality and

sometimes to all three of those necessary elements. Even if

we assume that Corley has adequately demonstrated a

pattern of racketeering activity related to the guarantee of

continuing care, he must also show a related predicate act

injuring himself or his mother. This he has failed to do. The

district court was therefore correct to enter summary

judgment in favor of the defendants.

D.

We take this opportunity to tie up a few loose ends from

Corley’s appeal. Needless to say, in light of our analysis,

Corley is not entitled to partial summary judgment on the

issue of pattern. We do not need to decide whether the

district court erred in its treatment of certain inspection

records of the Illinois Department of Public Health. Corley

offered these reports to demonstrate the poor quality of care

provided to Rosewood residents. The records are irrelevant

Nos. 01-3625 & 01-3642 35

in light of our conclusion that Corley lacked evidence that

Rosewood intended to provide poor care at the time it

promised high quality care. Nor do we need to consider

Corley’s collateral estoppel argument relating to the effect

of the Hopp judgment on this case. Because Corley has

failed to produce evidence of acts of mail fraud injuring

himself or his mother, the defendants’ treatment of the

Hopp plaintiffs is irrelevant here. We have reviewed the

remainder of Corley’s arguments and find them similarly

without merit.

III.

We turn now to the defendants’ cross-appeal on sanctions.

Rosewood sought sanctions against Corley under 28 U.S.C.

§ 1927 and under Rule 11. Section 1927 provides in relevant

part:

Any attorney . . . who so multiplies the proceedings in

any case unreasonably and vexatiously may be required

by the court to satisfy personally the excess costs, ex-

penses, and attorneys’ fees reasonably incurred because of

such conduct.

28 U.S.C. § 1927. Rule 11 provides, among other things,

that when an attorney presents a pleading or written

motion to the court, that attorney:

is certifying that, to the best of that person’s knowledge,

information and belief, formed after an inquiry reason-

able under the circumstances,—

(1) it is not presented for any improper purpose, such

as to harass or to cause unnecessary delay or

needless increase in the cost of litigation;

(2) the claims, defenses, and other legal contentions

therein are warranted by existing law or by a

nonfrivolous argument for the extension, modifi-

36 Nos. 01-3625 & 01-3642

cation, or reversal of existing law or the establish-

ment of new law;

(3) the allegations and other factual contentions have

evidentiary support or, if specifically so identified,

are likely to have evidentiary support after a rea-

sonable opportunity for further investigation or

discovery[.]

Rule 11(b). Rule 11(c) provides that, if, after notice and a

reasonable opportunity to respond, a court determines that

Rule 11(b) has been violated, the court may, subject to cer-

tain conditions, impose an appropriate sanction upon the

attorneys who violated Rule 11(b). As a condition for im-

posing sanctions by motion of another party, that party must

serve the motion for sanctions on the offending attorney

twenty-one days before filing it with the court. The motion

for sanctions must describe the specific conduct that is al-

leged to violate Rule 11(b), and may be filed with the court

only if the offending attorney fails to withdraw or correct

the improper pleading or motion within those twenty-one

days. Rule 11(c)(1)(A).

A.

The defendants sought Section 1927 sanctions based on

a number of motions that they maintain were filed to

harass Rosewood, cause unnecessary delay in the proceed-

ings and needlessly increase the cost of the litigation.

Among these motions were (1) six pleadings accusing

Rosewood and its lawyers of furthering the RICO conspiracy

by seeking to evade service of process; (2) four motions

seeking to disqualify defense counsel; (3) an unstated num-

ber of motions seeking advisory opinions; and (4) eighteen

motions challenging the district court’s rulings. The defen-

dants also complain that Corley and his attorneys have

engaged in “extremely negligent, reckless and indifferent

conduct in the pursuit of the RICO claim.” Defendants’

Nos. 01-3625 & 01-3642 37

Brief at 48. This reckless conduct includes pursuing a RICO

claim that was unsupported by the facts when it was first

filed, and then failing to follow the guidelines set forth by

this court on remand after Corley I by failing to seek

discovery regarding the purported victims of Rosewood’s

alleged fraud.

Rosewood sought Rule 11 sanctions for similar reasons.

Specifically, Rosewood argued to the district court that

Corley’s RICO claims were filed and pursued without

foundation in law or fact. Rosewood also moved for Rule 11

sanctions on the ground that Corley had brought the RICO

claim and accompanying motions for an improper purpose,

namely, to force settlement of a spurious claim, to harass

the defendants, cause unnecessary delay and needlessly in-

crease the cost of litigation. Moreover, Rosewood sought

Rule 11 sanctions for disparaging and abusive comments

made by Corley and his lawyers in pleadings and in oral

argument before the district court.

The district court entered two orders relating to Rosewood’s

requests for sanctions. In the first, the district court de-

clined Rosewood’s request for Rule 11 sanctions sought

because Corley included paragraphs in his Sixth Amended

Complaint that had been dismissed by the court, and in-

cluded a defendant that had been previously dismissed from

the case. The district court refused to sanction Corley for

these infractions because Rosewood failed to comply with

Rule 11(c). Rule 11(c) requires a party seeking Rule 11

sanctions to give the other party notice and twenty-one days

to correct the problem. Because Rosewood’s notice to Corley

simply requested that he withdraw the Sixth Amended

Complaint and did not specifically mention the six offending

paragraphs (out of more than two hundred paragraphs) or

the dismissed defendant, the court found the notice was

inadequate under Rule 11(c). The court also declined to

award sanctions under either its inherent power or under

Section 1927 because the court found no evidence of bad

faith in Corley’s filing of the Sixth Amended Complaint. The

38 Nos. 01-3625 & 01-3642

court specifically found that Corley did not act unreason-

ably or vexatiously in filing the Sixth Amended Complaint,

and thus declined to award Section 1927 sanctions. See

Order, July 27, 2001.

In its second Order, the court again declined to sanction

Corley under Rule 11, finding that Corley had a good faith

basis to proceed to summary judgment on his RICO claims

because of the evidence of rapid price increases at other

Rosewood homes shortly after opening. As for Section 1927

sanctions, the court found this was a closer call:

The more difficult question is whether Corley and his

attorneys engaged in vexatious litigation tactics that

unreasonably drove up the cost of this case. The Court

believes that Corley and his attorneys acted unreason-

ably and increased costs by filing innumerable motions

to rehash virtually every ruling that was unfavorable to

them. At least some of this incessant, repetitious papering

of the Court and opposing counsel was unreasonable, if

not vexatious.

The problem is that the Defendants also seem to the

Court to be guilty of unreasonable litigation tactics. For

example, the Defendants started this case by spending

over a year litigating service of process. Both parties

seem to have decided from the outset to fight tooth and

nail. The Court will not put the blame for the outrageous

delays and expenses in this case solely at the feet of

Corley and his attorneys. The Court, therefore, will not

sanction Corley or his attorneys in this case for their

unreasonable litigation tactics.

See Order, September 6, 2001, at 5-6.

Rosewood appeals the district court’s refusal to sanction

Corley and his attorneys on several grounds: (1) having

found that Corley acted “unreasonably, if not vexatiously”

the court erred in refusing to grant sanctions under Section

1927; (2) the court erred in basing the Section 1927 decision

in part on a finding that the defendants spent a year

Nos. 01-3625 & 01-3642 39

litigating service of process; (3) the court erred in finding

that evidence of rapid price increases in other Rosewood

homes gave Corley a good faith basis to proceed to summary

judgment on his RICO claim; (4) the court erred in refusing

to grant Rule 11 sanctions because Corley filed to conduct

a reasonable inquiry into the facts before asserting there

were 50,000 victims of Rosewood’s business practices; (5) the

court erred in refusing to grant Rule 11 sanctions because

Corley failed to conduct a reasonable inquiry into the law;

and (6) the court erred in refusing to sanction Corley under

Rule 11 because Corley brought the RICO claim and

ancillary motions for an improper purpose.

B.

We review a court’s Rule 11 determination for abuse of

discretion. Cooter & Gell v. Hartmarx Corp., 496 U.S. 384,

405 (1990); Independent Lift Truck Builders Union v. NACCO

Materials Handling Group, Inc., 202 F.3d 965, 968 (7th Cir.

2000); Lorentzen v. Anderson Pest Control, 64 F.3d 327, 330

(7th Cir. 1995). We will find abuse of discretion only where

“no reasonable person could take the view adopted by the

trial court. If reasonable persons could differ, no abuse of

discretion can be found.” Lorentzen, 64 F.3d at 330. The

central goal of Rule 11 is to deter abusive litigation practices.

Cooter & Gell, 496 U.S. at 393. Because the district courts

have the best information about the patterns of their cases,

they are in the best position to determine whether a legal

position is far enough off the mark to be frivolous or whether

an attorney conducted an adequate inquiry under the par-

ticular circumstances of a case. Mars Steel Corp. v. Continental

Bank N.A., 880 F.2d 928, 933 (7th Cir. 1989) (en banc). See

also Brandt v. Schal Assoc., Inc., 960 F.2d 640, 645 (7th Cir.

1992) (decisions concerning Rule 11 sanctions are best left to

the discretion of the district court which has a bird’s eye view

of the actual positions taken by the litigants). With that

40 Nos. 01-3625 & 01-3642

deference in mind, we see no reason to overturn the district

court’s decision not to impose sanctions under Rule 11. The

main thrust of Rosewood’s argument is that the district

court erred in assessing the evidence when it found that

evidence of rapid price increase in private suites provided

a good faith basis to go forward with the case. According to

Rosewood, this error led to the district court’s erroneous

denial of Rule 11 sanctions. Although the court may have been

mistaken about the relevance of the rapid price increase

evidence, it is unlikely that that error would change the result

of the sanctions decision. After all, if the district court itself

believed this evidence to be relevant, it was unlikely to fault

Corley for suffering the same misapprehension. Under the

circumstances, we see no reason to remand to the district

court to determine whether this new view of the evidence

would change the sanctions decision. We hasten to add that

the converse would not necessarily be true. That is, if the dis-

trict court had granted sanctions based on an erroneous

view of the relevance of the evidence, a reversal of sanctions

would be necessary as an abuse of discretion. Nor do we see

any reason to reweigh the district court’s decision not to

award Rule 11 sanctions on any of the other bases cited by

Rosewood. The focus in Rule 11 sanctions is on what coun-

sel knew at the time the complaint was filed, not what

subsequently was revealed in discovery. Beverly Gravel, Inc.

v. DiDomenico, 908 F.2d 223, 226 (7th Cir. 1990). We follow

the district court’s lead in declining to judge Corley’s actions

in filing the lawsuit with the 20/20 vision of hindsight. The

fact that the underlying claim turned out to be groundless

does not necessarily mean that Rule 11 sanctions are

appropriate (much less required). Beverly Gravel, 908 F.2d

at 227. The district court, viewing the case as a whole,

simply did not believe that Corley’s claims were filed in bad

faith or for an improper purpose or without adequate

investigation. We therefore affirm the district court’s denial

of Rule 11 sanctions.

Nos. 01-3625 & 01-3642 41

C.

A district court’s decision regarding Section 1927 is also

reviewed for abuse of discretion. Kotsilieris v. Chalmers,

966 F.2d 1181, 1183 (7th Cir. 1992); Walter v. Fiorenzo, 840

F.2d 427, 433 (7th Cir. 1988). Rosewood has two main

objections to the district court’s ruling on Section 1927.

First, having found that Corley acted unreasonably, if not

vexatiously, Rosewood contends it was error not to sanction

him. We can dispatch this argument quickly. Section 1927

is permissive, not mandatory. The court is not obliged to

grant sanctions once it has found unreasonable and vex-

atious conduct. It may do so in its discretion. That leads to

Rosewood’s second objection, namely that the court erred in

finding that Rosewood itself contributed to the outrageous

delays and expenses with its own unreasonable litigation

tactics. Rosewood’s argument on Section 1927 is a good

example of what frustrated the patient district court judge.

Rosewood curiously spends many pages of its brief attempting

to convince this court that Corley and his attorneys behaved

unreasonably and vexatiously. But the district court found

in Rosewood’s favor on this point and this lengthy recitation

of Corley’s conduct was thus unnecessary. Rosewood does

briefly address the basis for the district court’s ruling,

namely, its belief that Rosewood contributed to the delay

and expense. But this argument too falls short as it asks us

to simply reweigh the district court’s decision. In no uncer-

tain terms, the district court who presided over the

thousand-plus filings in this case found that Rosewood

should bear at least part of the responsibility for the accompa-

nying delay and cost. Under the deferential standard of

review for Section 1927 sanctions, we affirm the district

court’s sound decision.

IV.

For all of the reasons stated above, we affirm the district

court’s grant of summary judgment in favor of the defendants

42 Nos. 01-3625 & 01-3642

and also affirm the district court’s denial of sanctions

against the plaintiff and his attorneys.

AFFIRMED.

A true Copy:

Teste:

________________________________

Clerk of the United States Court of

Appeals for the Seventh Circuit

USCA-02-C-0072—10-13-04