## Facts

- Verna Emery borrowed $1,983.81 from American General Finance, Inc., secured by personal property, with a 36% annual interest rate, a $1,327.08 finance charge, and a three-year term.
- About six months later, the lender mailed Emery a solicitation stating it had “extra spending money for you” and had “set aside $750.00” in her name, with a “$750.00 Cash Coupon” identifying her; the coupon stated in small print, “This is not a check.”
- Emery went to the branch and was presented with documents to refinance her existing loan with additional funds advanced.
- She signed a new note reflecting an amount financed of $2,399.83 and a $1,641.28 finance charge at the same 36% rate, payable over three years.
- Emery alleged the mailing was part of “loan flipping,” meaning a refinancing pitched as advantageous while concealing that it was economically disadvantageous because it replaced the existing loan with a new obligation and additional finance charges.
- Emery brought a civil RICO class action alleging the mailed solicitation constituted mail fraud as the predicate racketeering act; the district court dismissed under Rule 12(b)(6) for failure to state mail fraud.

## Issues

1. Whether the complaint plausibly alleged a “scheme to defraud” by mail, sufficient to state a predicate act of mail fraud under 18 U.S.C. § 1341.
2. Whether the complaint adequately pleaded a RICO claim under 18 U.S.C. § 1962(c), including a “pattern of racketeering activity” and fraud allegations with the particularity required by Federal Rule of Civil Procedure 9(b).

## Decision

- The Seventh Circuit reversed the dismissal insofar as it rested on the conclusion that the alleged facts could not constitute mail fraud.
- The court held the solicitation letter, as alleged and read in context, could be sufficiently misleading to plead mail fraud as to Emery.
- The court noted the complaint inadequately pleaded a RICO pattern because it offered no specific facts about additional predicate acts beyond Emery’s mailing.
- The court remanded to allow Emery an opportunity to replead the RICO “pattern” and related fraud allegations with Rule 9(b) specificity.

## Legal Principles

- On a Rule 12(b)(6) motion, the court must accept well-pleaded factual allegations as true and determine whether they plausibly state a claim.
- Mail fraud under 18 U.S.C. § 1341 may be pleaded where a mailing is used as part of a scheme to obtain money through materially misleading representations or omissions.
- Civil RICO under 18 U.S.C. § 1962(c) requires a “pattern of racketeering activity,” generally requiring at least two predicate acts.
- When the alleged predicate acts sound in fraud, Federal Rule of Civil Procedure 9(b) requires pleading the circumstances of fraud with particularity; generalized allegations that similar fraud was committed against others are insufficient without specifics.

## Conclusion

The Seventh Circuit held Emery’s allegations about the lender’s refinancing solicitation could support a mail-fraud predicate, making dismissal for lack of mail fraud improper, but remanded because the complaint failed to plead a RICO pattern and related fraud details with the particularity required by Rule 9(b).


Emery v. Am. Gen. Fin., Inc., 71 F.3d 1343 (7th Cir. 1995)