In the

United States Court of Appeals
              For the Seventh Circuit

No. 07-3333

JOHN H. C RICHTON, JR.,
on behalf of himself and all
others similarly situated,
                                              Plaintiff-Appellant,
                               v.

G OLDEN R ULE INSURANCE C OMPANY,
                                             Defendant-Appellee.


           Appeal from the United States District Court
              for the Southern District of Illinois.
            No. 06 C 264—G. Patrick Murphy, Judge.



     A RGUED M ARCH 31, 2008—D ECIDED A UGUST 5, 2009




 Before K ANNE, E VANS, and SYKES, Circuit Judges.
  S YKES, Circuit Judge. John Crichton, Jr., sued Golden
Rule Insurance Company asserting three fraud-based
claims. The district court dismissed one claim with preju-
dice and gave Crichton an opportunity to replead the
other two. That effort was unsuccessful; the district
court held that the allegations in the remaining two
claims failed to state a claim for relief and dismissed the
2                                              No. 07-3333

case in its entirety. Crichton’s appeal requires us to con-
sider three questions: (1) whether Crichton had standing
to bring a claim under the Illinois Consumer Fraud and
Deceptive Business Practices Act (“ICFA”), 815 ILL. C OMP.
S TAT. 505/2 (2006), and somewhat relatedly, whether he
may maintain a claim under Florida’s analog to that act,
see F LA. S TAT. A NN. § 501.201 (West 2006); (2) whether
Crichton adequately pleaded a claim for common-law
fraud; and (3) whether Crichton adequately pleaded a
RICO (Racketeer Influenced and Corrupt Organizations
Act) claim. We answer each question “no” and affirm
the judgment of the district court.


                     I. Background
  Florida resident John Crichton began purchasing group
health insurance from Golden Rule in 1995 under a master
policy offered only to members of the Federation of
American Consumers and Travelers (“the Federation”), a
nonprofit organization that provided its members with
(among other services) discounts on insurance through
group-buying power. Crichton renewed his insurance
every year through 2004. In 2002 he filed a complaint
against Golden Rule in the Circuit Court of Madison
County, Illinois, seeking to represent a nationwide class
of Federation members who bought insurance from
Golden Rule. His lawsuit alleged violations of the ICFA
and, if his proposed class was certified, a host of other
state consumer-fraud statutes. Crichton later amended
his suit to add the Federation as a defendant. The Fed-
eration sought and received summary judgment in its
No. 07-3333                                                3

favor and successfully defended that judgment on
appeal. See Crichton v. Golden Rule Ins. Co., 

,
851-54 (Ill. App. Ct. 2005). Crichton’s claims against
Golden Rule were dismissed without prejudice based on
forum non conveniens. (Golden Rule is an Illinois corpora-
tion with its principal place of business in Indiana.)
  Crichton next proceeded to the District Court for the
Southern District of Illinois where he filed a complaint
against Golden Rule under the diversity jurisdiction of
28 U.S.C. § 1332(d). He reasserted his claim for an alleged
violation of the ICFA (and his class claim under the
consumer-fraud statutes of other states) and also alleged
a claim of common-law fraud. He later amended his
complaint to include a third count, a RICO claim. The
gist of all three claims was that Golden Rule had induced
him to purchase insurance by an artificially low introduc-
tory premium and that Golden Rule failed to inform
him that the cost of his renewal premiums would escalate
dramatically because of Golden Rule’s practice of closing
blocks of insurance to new enrollees.
   Golden Rule moved to dismiss Crichton’s amended
complaint under Rule 12(b)(6) of the Federal Rules of Civil
Procedure. The district court granted the motion with
prejudice on the ICFA count but without prejudice on
the common-law fraud and RICO counts. Crichton then
filed his second amended complaint, repleading his
common-law fraud and RICO allegations (this time with
greater specificity in an effort to meet the requirements
of Federal Rule of Civil Procedure 9(b)); he also
repleaded, “for the record,” the ICFA claim. Golden Rule
4                                                   No. 07-3333

once again moved to dismiss. The district court dismissed
Crichton’s common-law fraud and RICO claims with
prejudice for failure to state a claim, ignored the already
dismissed-with-prejudice ICFA claim, and entered final
judgment in favor of Golden Rule.


                        II. Discussion
   We review the district court’s order dismissing
Crichton’s claims de novo. St. John’s United Church of Christ
v. City of Chicago, 

, 625 (7th Cir. 2007), and will
affirm the dismissal if he did not plead “sufficient factual
matter, accepted as true, to ‘state a claim to relief that is
plausible on its face,’” Ashcroft v. Iqbal, 

, 1949
(2009) (quoting Bell Atl. Corp. v. Twombly, 

, 570
(2007)). In addition, Crichton’s fraud-based claims are
subject to Rule 9(b)’s heightened pleading requirements,
which means that the circumstances constituting the
fraud must be pleaded “with particularity.” FED. R. C IV.
P. 9(b).
  As an initial matter, the parties debate whether the
amended or second amended complaint is the operative
complaint for review. As we have noted, after the
district court dismissed the ICFA count in the amended
complaint with prejudice, Crichton repleaded it in his
second amended complaint “for the record,” adding
certain facts and rearranging the nature of his individual
and class claims under the Florida statutory analog. On
appeal Golden Rule argues that the facts Crichton added
in the second amended complaint are out of bounds on
our review of the earlier dismissed-with-prejudice
No. 07-3333                                               5

ICFA claim, citing Tricontinental Industries, Ltd. v. Price-
waterhouseCoopers, LLP, 

(7th Cir. 2007).
   In Tricontinental, the defendants moved to dismiss the
plaintiffs’ amended complaint, and while that motion was
pending, the plaintiffs sought and obtained leave to file a
second amended complaint adding two new claims. The
plaintiffs’ second amended complaint, however, not only
added the proposed new claims but also supplemented
the allegations in the original claims. In dismissing the
claims asserted in the plaintiffs’ amended complaint, the
district court declined to consider the supplemental
allegations in the second amended complaint because
leave to replead those original claims had not been
granted. The court later dismissed the additional claims
in the second amended complaint. On appeal we
confined our review of the dismissed claims from the
first amended complaint to the allegations in that com-
plaint, rejecting the plaintiffs’ argument that we should
consider the supplemental allegations contained in the
second amended complaint. 

n.8. We reasoned
that because the district court had only granted leave to
add two new claims, not to replead the original claims, it
would be inappropriate to consider on appeal the sup-
plemental allegations contained in the second amended
complaint. 

is similar. The ICFA claim in Crichton’s
amended complaint was dismissed with prejudice;
Crichton was granted leave to replead only his common-
law fraud and RICO claims. Repleading (and attempting
to bolster) his ICFA claim in the second amended com-
6                                                 No. 07-3333

plaint “for the record” was thus gratuitous, and the
district court was within its discretion to ignore it. Accord-
ingly, we will review the common-law fraud and RICO
allegations contained in the second amended complaint
and confine our review of the ICFA claim to the allega-
tions in the amended complaint.


A. Standing under the ICFA
  The district court dismissed Crichton’s claim under the
ICFA because Crichton—a resident of Florida—lacked
standing to sue under the Illinois statute. The court
applied the test announced by the Illinois Supreme Court
in Avery v. State Farm Mutual Automobile Insurance Co.,

(Ill. 2005), which severely limited the
extraterritorial reach of the ICFA. The court held in
Avery that nonresident plaintiffs may sue under the
ICFA only if the circumstances relating to the alleged
fraudulent transaction occurred mostly in 

.
  More specifically, the Illinois Supreme Court held that
the ICFA did not create a cause of action for fraudulent
acts that had little or no connection to the state of Illinois.

a nonresident plaintiff to have
standing under the Act, the court required that “the
circumstances that relate to the disputed transaction
occur primarily and substantially in Illinois.” 

The court acknowledged that this was not a bright-line
rule but rather a highly fact-bound inquiry in which no
single factor would be dispositive. 

No. 07-3333                                               7

   The facts of Avery help illustrate the test’s operation.
There, the nonresident plaintiffs were consumers who
alleged that their automobile insurer had engaged in
fraudulent acts by supplying substitute parts on insured
repairs. Although the insurer had its headquarters in
Illinois, the court held that the consumers could not
avail themselves of the ICFA based on that fact alone. 

the relevant circumstances underlying the
alleged fraudulent activity in Avery had no connection to
Illinois: The consumers did not reside there; they
received repair estimates in their home states; those
repairs were made elsewhere; the alleged deception itself
took place in states other than Illinois; and the plaintiffs
communicated with local agents, not the home office in
Illinois. 

Bally Total Fitness Holding Corp., 

(Ill. App. Ct. 2007), provides another example of how
the Avery test operates. There, two nonresident plaintiffs
alleged that a health-club chain headquartered in Illinois
had violated the Act by refusing to cancel their mem-
berships. But as in Avery, the location of the health club’s
headquarters was not dispositive. 

Because
the plaintiffs resided elsewhere, purchased their club
memberships and used facilities in their home states, and
dealt with collection agencies outside Illinois, the court
held they lacked standing to sue under the ICFA. 

the same conclusion here. Crichton resides
in Florida, received promotional insurance materials
there, entered into and renewed his insurance there,
submitted claims there, and was allegedly deceived there.
8                                                   No. 07-3333

Golden Rule’s principal place of business is in Indiana, not
Illinois; and although it maintains a “home office” in
Illinois, from which it issues insurance policies, that
alone is not enough, under Avery, to confer nonresident
standing on Crichton to sue under the ICFA. On the
totality of the facts alleged here, we agree with the
district court that the circumstances of the alleged fraud-
ulent activity did not occur “primarily and substantially
in Illinois.” Accordingly, Crichton lacks standing to sue
under the ICFA.
   The district court also held that to the extent that
Crichton was asserting a claim under Florida’s consumer-
fraud statute, the claim must be dismissed because that
statute does not permit suits against insurers. See F LA.
S TAT. A NN. § 501.212(4) (West 2006) (“This part does not
apply to . . . (4) [a]ny person or activity regulated under
laws administered by . . . (a) [t]he Office of Insurance
Regulation of the Financial Services Commission; . . .
or (d) [a]ny person or activity regulated under the laws
administered by the former Department of Insur-
ance . . . .”). This determination was manifestly correct;
Golden Rule is an insurer under Florida law. W.S. Badcock
Corp. v. Myers, 

, 782-83 (Fla. Dist. Ct. App.
1996) (citing Prof’l Lens Plan, Inc. v. Dep’t of Ins., 

, 550 (Fla. Dist. Ct. App. 1980) and requiring that an
insurance provider have “(1) [a]n insurable interest; (2) [a]
risk of loss; (3) [a]n assumption of the risk by the insur[er];
(4) [a] general scheme to distribute the loss among the
larger group of persons bearing similar risks; [and]
(5) [t]he payment of a premium for the assumption
of risk”). Crichton’s statutory consumer-fraud claim—
No. 07-3333                                                       9

under the ICFA or its Florida analog—was properly
dismissed.


B. Common-Law Fraud
  The district court also properly concluded that Crichton
failed to state an actionable claim of common-law fraud.1
Crichton alleged that Golden Rule should have
disclosed that the renewal premiums on its group health
plans would ratchet upward throughout the life of his
policy because of its underwriting practice of closing
blocks of insurance to new enrollees and that its failure
to do so was fraudulent. These allegations amount to
a claim of fraudulent concealment or fraud-by-
nondisclosure; such a claim requires a duty to disclose on
the part of a defendant. See, e.g., Connick v. Suzuki Motor



1
  Conflicts-of-law analysis under Illinois law—which is the
appropriate substantive law of the district court’s forum state,
see Erie R.R. Co. v. Tompkins, 

, 71-80 (1938); see also
Klaxon Co. v. Stentor Elec. Mfg. Co., 

, 496 (1941)
(applying Erie to conflicts of laws)—might suggest that Florida’s
common law should apply to this claim because Florida has the
most significant relationship to the transaction. See Ingersoll v.
Klein, 

, 595-96 (Ill. 1970) (adopting a most-
significant-contacts rule in Illinois after discarding the doctrine
of lex loci delicti). There is, however, no conflict between
Florida and Illinois law in this area; the district court properly
chose to apply Illinois common law, the law of the forum
state. See, e.g., Int’l Adm’rs, Inc. v. Life Ins. Co. of N. Am., 

, 1376 n.4 (7th Cir. 1985).
10                                               No. 07-3333

Co., 

, 593 (Ill. 1996); AMPAT/Midwest, Inc. v.
Ill. Tool Works Inc., 

, 1040 (7th Cir. 1990)
(applying Illinois law). Where, as here, there is no
fiduciary relationship between the parties, see Nielsen v.
United Servs. Auto. Ass’n, 

, 531 (Ill. App. Ct.
1993) (“In Illinois, there is no fiduciary relationship be-
tween an insurance company and an insured.”); Overbey
v. Ill. Farmers Ins. Co., 

, 1084 (Ill. App. Ct.
1988) (same), a duty to disclose may arise under
Illinois law if the defendant makes an affirmative state-
ment that it passes off as the whole truth while omitting
material facts that render the statement a misleading “half-
truth,” see Heider v. Leewards Creative Crafts, Inc., 

, 811 (Ill. App. Ct. 1993); Apotex Corp. v. Merck &
Co., 

, 149 (N.D. Ill. 2005).
  Here, Crichton alleged that Golden Rule made several
statements that he claims qualify as deceptive half-truths
giving rise to a duty to disclose: It referred to its
insurance as “group” insurance while failing to disclose
the effect of its practice of periodically closing blocks
of insurance to new members; it issued insurance certifi-
cates explaining the connection between claims costs and
the amount of time an insurance certificate has been in
place, but did not disclose its underwriting practice of
closing blocks of insurance; and it sent letters announcing
premium increases without explaining that the “real
reason” for those increases was the closure of blocks of
insurance to new enrollees. Critically, however, Crichton’s
allegations do not remotely suggest that any of these
communications from Golden Rule purported to be an
explanation of all of the underwriting factors that might
No. 07-3333                                                11

affect Crichton’s insurance premiums. By labeling its
insurance as “group” insurance, offering a summary of its
claims practices, and announcing annual premium in-
creases, Golden Rule did not purport to explain the “whole
truth” of its underwriting practices. See 

(noting that “a summary is just that, a summary”
and holding that such a summary “does not suggest
fraud”). That is, none of these alleged statements to
certificate-holders was represented to be a comprehen-
sive explanation of all factors affecting Golden Rule’s
insurance premiums. Accordingly, there are no allega-
tions giving rise to a duty to disclose, and Crichton’s
common-law fraud claim was properly dismissed.


C. RICO Claim
  Finally, the district court properly dismissed Crichton’s
claim under the RICO statute, 18 U.S.C. §§ 1961-1968. RICO
prohibits “any person employed by or associated with
any enterprise . . . to conduct or participate, directly or
indirectly, in the conduct of such enterprise’s affairs
through a pattern of racketeering activity.” 18 U.S.C.
§ 1962(c).
  We have held that “[a] RICO complaint must identify the
enterprise.” Richmond v. Nationwide Cassel L.P., 

,
645 (7th Cir. 1995). Crichton identifies the enterprise as the
Federation. Alternatively, Crichton alleges that Golden
Rule and the Federation, together, as two persons associ-
ated in fact, see 18 U.S.C. § 1961(4), made up the RICO
enterprise. An association-in-fact enterprise theory
requires that the association-in-fact “enterprise” and the
12                                                   No. 07-3333

person sought to be held liable be sufficiently distinct. See
Haroco, Inc. v. Am. Nat’l Bank & Trust Co. of Chi., 

, 401-02 (7th Cir. 1984); see also 

.
This is because RICO “liability depends on showing
that the defendants conducted or participated in the
conduct of the ‘enterprise’s affairs,’ not just their own
affairs.” Reves v. Ernst & Young, 

, 185 (1993).
  As to the first of these theories,2 the parties debate on
appeal whether Crichton’s allegations are sufficient
to state a claim that Golden Rule “conduct[ed] or
participat[ed] . . . in the conduct of [the Federation’s]
affairs.” If not, there is no need to address the remaining
elements of a RICO claim under § 1962(c). See Sedima,
S.P.R.L. v. Imrex Co., 

, 496-97 (1985) (requiring
“(1) conduct (2) of an enterprise (3) through a pattern (4)
of racketeering activity” to prove a violation of § 1962(c));
see also Goren v. New Vision Int’l, Inc., 

, 727
(7th Cir. 1998) (same).
  Crichton alleges that Golden Rule conducted and partici-
pated in the Federation (the alleged RICO enterprise) by



2
  Crichton notes that the district court did not readdress this
theory in its second order. Golden Rule responds that the
district court did not do so because it had already rejected this
theory in its first order. True, but the district court dismissed
this claim without prejudice, allowing Crichton to replead it.
The district court’s failure to revisit this theory of potential
RICO liability in its second order does not affect our review,
however; we may affirm on any basis in the record. E.g.,
Slaney v. Int’l Amateur Athletic Fed’n, 

, 597 (7th Cir.
2001).
No. 07-3333                                                 13

helping the Federation draft new bylaws, assisting it in
setting the dues that Golden Rule would subsequently
collect from certificate-holders on its behalf, and control-
ling the marketing information disseminated by
the Federation about Golden Rule’s health-insurance
products. These allegations are insufficient to state a
RICO claim. The statute does not penalize tangential
involvement in an enterprise; a plaintiff must plead and
prove that a defendant took some part in directing
or conducting the alleged “enterprise” such that it
“participate[d] in the operation or management of the
enterprise itself.” 

; see also 

. Allegations that a defendant had a business
relationship with the putative RICO enterprise or that a
defendant performed services for that enterprise do not
suffice. Slaney v. Int’l Amateur Athletic Fed’n, 

, 597 (7th Cir. 2001); 

.
  Here, Crichton has done little more than plead facts
suggesting the existence of the marketing relationship
between the Federation and Golden Rule. Assisting in
the setting and collection of membership dues on the
Federation’s behalf and controlling the content of its own
insurance promotional materials are activities consistent
with the existence of a business partnership, not the
prototypical RICO violation in which the defendant
seizes control of an enterprise to accomplish an illegal
purpose by using the enterprise’s resources, contacts,
and appearance of legitimacy. Fitzgerald v. Chrysler Corp.,

, 227 (7th Cir. 1997). Likewise, that Golden
Rule is alleged to have assisted the Federation in
redrafting its bylaws suggests only that Golden Rule
14                                             No. 07-3333

performed a service for the Federation. These allegations,
taken individually or together, are insufficient to state a
claim that Golden Rule controlled the operation or man-
agement of the Federation.
  For similar reasons, Crichton’s allegations under the
alternative theory of an association-in-fact enterprise are
also insufficient. As we have noted, an association-in-fact
enterprise must be meaningfully distinct from the
entities that comprise it such that the entity sought to be
held liable can be said to have controlled and conducted
the enterprise rather than merely its own affairs. See

; 

;

.
  Here, Crichton has done no more than describe the
ordinary operation of a garden-variety marketing arrange-
ment between Golden Rule and the Federation. His
allegations of the Federation’s role suggest it was merely
a conduit for the sale of Golden Rule’s insurance. This is
not what RICO penalizes. See 

.
What Crichton alleges here is a fraud perpetrated by
Golden Rule, not an association-in-fact enterprise
directed and controlled by Golden Rule. That is, Crichton’s
claim “begins and ends” with the fraud allegedly com-
mitted by Golden Rule. 

. This
is insufficient to state a RICO claim based on an
association-in-fact enterprise.
  We also note that Crichton failed to adequately plead
an association-in-fact enterprise because he has not
pleaded an organizational structure or hierarchy for the
alleged association-in-fact enterprise. Stachon v. United
No. 07-3333                                              15

Consumers Club, Inc., 

, 675-77 (7th Cir. 2000);

. His allegations describe
nothing more than the terms of an agreement between
Golden Rule and the Federation to market Golden Rule’s
health insurance to the Federation’s members. A RICO
enterprise is more than a combination of persons who
commit alleged predicate acts of racketeering; “there must
be ‘an organization with a structure and goals separate
from the predicate acts themselves.’” 

(quoting United States v. Masters, 

, 1367
(7th Cir. 1991)). Allegations of this sort are missing here.
Accordingly, the district court was right to dismiss
Crichton’s RICO claim.
                                                 A FFIRMED.




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