RICHARD J. RENNELL, JR. and R.E. FUND MANAGEMENT GROUP, LLC v. Randall K. Rowe

In the
United States Court of Appeals
For the Seventh Circuit
No. 10-1388
RICHARD J. RENNELL, JR. and
R.E. FUND MANAGEMENT GROUP, LLC,
Plaintiffs-Appellants,
v.
RANDALL K. ROWE, et al.,
Defendants-Appellees.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 09 C 2193—Rebecca R. Pallmeyer, Judge.
ARGUED SEPTEMBER 17, 2010—DECIDED MARCH 25, 2011
Before POSNER, KANNE, and WOOD, Circuit Judges.
WOOD, Circuit Judge. Richard Rennell and Randall
Rowe ran a company that managed manufactured-
housing communities. In 2007 Rowe bought out Rennell’s
interest in the joint venture. At the time, Rowe told
Rennell that he was terminating the joint venture and
essentially gave Rennell an offer he couldn’t refuse: either

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2 No. 10-1388
take approximately $300,000 and walk away, or walk
away with nothing. Rennell took the money, but he was
not pleased. He and his company, R.E. Fund responded
with this lawsuit against Rowe, Rowe’s existing
company, Green Courte, and Green Courte’s managers,
Stephen Wheeler and James Goldman. (We refer only
to “Rennell” and “Rowe” unless the context demands
otherwise.) Rennell alleged that Rowe’s heavy-handed
purchase technique amounted to extortion, in violation
of the Racketeer Influenced and Corrupt Organizations
Act (“RICO”), 18 U.S.C. §§ 1962(b), 1962(c) and 1964(c).
The district court dismissed, concluding that Rowe’s
conduct did not meet the definition of extortion under
the Hobbs Act, 18 U.S.C. § 1951. We affirm.
I
Rennell and Rowe first combined forces in 2004. They
created a joint venture that they called Green Courte R.E.
Fund, and through it they owned and managed manu-
factured-housing communities in New York, Michigan,
Pennsylvania, Wisconsin, and Minnesota. The joint-
venture agreement provided that Rowe’s company was
to supply most of the necessary financing for each com-
munity, while Rennell’s company would oversee opera-
tions and management. The duties and liabilities for
the management of Green Courte R.E. Fund’s properties
were recorded in property-management agreements,
which established that Rennell would be paid manage-
ment fees for each community; the fees would be between
3 and 4% of the gross revenue produced by that commu-

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No. 10-1388 3
nity. Rennell’s operations were successful, generating
profits and earning “excellent reviews” from Rowe.
A few years later, Wheeler joined Rowe’s company,
confusingly also called Green Courte (to be distinguished
from the joint venture, Green Courte R.E. Fund), as Man-
aging Director of Asset Management. Wheeler an-
nounced that, rather than continue the joint venture,
he would bring all property-management responsi-
bilities under the direct control of Green Courte. In No-
vember 2007, in order to bring Wheeler’s plan to fruition,
Rowe told Rennell that he was terminating their joint
venture. Rowe proposed that Rennell sign a termination
release, which included a promise not to sue Rowe in
exchange for payment. But the amount that Rowe
offered was quite low. While he had recently estimated
on a June 2007 loan application that the value of Rennell’s
share of the joint venture was $3.5 million, Rowe was
now offering Rennell only $282,980. Worse, Rowe gave
Rennell only 24 hours to decide whether he would sign
the release and warned that if Rennell refused to sign it
he would get nothing. Rowe also threatened to make
the termination public—a move that would have
harmed Rennell’s business prospects. Rennell agreed to
the terms of the release, and his share in the joint
venture reverted to Rowe.
But Rennell believed that he had been wronged. Soon
after, despite the promise not to sue, Rennell filed this
action, alleging that Rowe’s conduct was extortion. His
complaint described two different theories of liability
under civil RICO, as well as nine state-law claims. Rowe

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4 No. 10-1388
responded with a motion to dismiss under Federal Rule
of Civil Procedure 12(b)(6), arguing that his conduct
was not extortion as a matter of law. The district court
agreed and granted the motion. Declining to exercise
supplemental jurisdiction, the court dismissed all of the
state-law claims. Rennell appeals.
II
A
We review de novo the district court’s conclusion that
Rennell failed to state a claim upon which relief can
be granted. Justice v. Town of Cicero, 577 F.3d 768, 771 (7th
Cir. 2009). To assess whether Rennell has presented
enough to go forward, “we construe the complaint in
the light most favorable to the plaintiff, accepting as true
all well-pleaded facts alleged, and drawing all possible
inferences in [his] favor.” Golden v. Helen Sigman & Associ-
ates, Ltd., 611 F.3d 356, 360 (7th Cir. 2010) (internal cita-
tions omitted).
Section 1962(b) of RICO makes it unlawful “for any
person through a pattern of racketeering activity . . . to
acquire or maintain, directly or indirectly, any interest
in or control of any enterprise which is engaged in, or
the activities which affect, interstate or foreign com-
merce.” 18 U.S.C. § 1962(b). Section 1962(c) adopts a
slightly different focus, stating that “[i]t shall be
unlawful for any person employed 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

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No. 10-1388 5
enterprise’s affairs through a pattern of racketeering
activity . . . .” Id. § 1962(c). In both provisions, “rack-
eteering activity” is defined to mean “any act or threat
involving . . . extortion,” among other state and federal
crimes. Id. § 1961(1). In turn, the Hobbs Act defines
the federal crime of extortion as “the obtaining of prop-
erty from another, with his consent, induced by wrong-
ful use of actual or threatened force, violence, or fear . . . .”
Id. § 1951(b)(2).
Rennell asserts that Rowe’s behavior fits the statutory
definition of extortion and thus establishes the predicate
pattern of racketeering required by RICO. RICO permits
a victim of racketeering activity to recover treble
damages and reasonable attorney’s fees in a civil action.
Id. § 1964(c). The central question here is whether
Rennell’s complaint describes extortion, or something
less than that. The district court took the latter ap-
proach, reasoning that the facts alleged by Rennell did not
demonstrate that Rowe’s buyout had been “wrongful” as
the Hobbs Act uses the term. Accordingly, it thought,
Rowe had not committed extortion and thus Rennell
had failed to state a claim under RICO. (The court said
nothing about the question whether the complaint de-
scribed the kind of pattern of racketeering that RICO
requires. We too put that issue to one side, since it is
unnecessary to the outcome.)
B
Distinguishing between hard bargaining and extortion
can be difficult. See, e.g., STUART P. GREEN, LYING, CHEAT-

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6 No. 10-1388
ING, AND STEALING: A MORAL THEORY OF WHITE-COLLAR
CRIME ch. 17 (2006). But the Supreme Court’s decision in
United States v. Enmons, 410 U.S. 396 (1973), and our
later decisions provide helpful guidance about what
activities constitute the federal crime of extortion under
the Hobbs Act.
Extortion is a federal crime, as we have noted, only
when property is obtained by consent “induced by wrong-
ful use of actual or threatened force, violence, or fear . . . .”
18 U.S.C. § 1951(b)(2). The Enmons Court considered
whether a union had committed extortion when its mem-
bers engaged in violent acts during a strike undertaken
to obtain raises from a utility company. Enmons, 410 U.S.
at 397. The Court reasoned that it would be redundant
to read the term “wrongful” in the Hobbs Act to
describe “force, violence, or fear,” which are always
wrongful. Id. at 399-400. Instead, it concluded that the
use of force, violence, or fear to obtain property is “wrong-
ful” for purposes of the statute only when the alleged
extortionist has no claim of right to that property. Id. at
400. Because the objective of the union’s strike was to
obtain compensation for which the striking workers
had a lawful claim, the workers had not committed extor-
tion under the Hobbs Act. Id. at 398, 410. While this may
seem odd at first glance, the Court emphasized that
the Hobbs Act was never intended to “reach violence
during a strike to achieve legitimate collective-bargaining
objectives.” Id. at 404.
We have understood Enmons to be limited to the
context of organized labor. In United States v. Castor, 937

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No. 10-1388 7
F.2d 293 (7th Cir. 1991), we considered the defendant
Castor’s efforts to engage Smokey Mountain Chew, a
maker of chewing tobacco substitutes, in a marketing
agreement. Castor used the threat of force to bring
Smokey Mountain Chew on board. Id. at 295. We held
that the Enmons claim-of-right defense did not apply.
“Whatever the contours of that defense may be,” we
said, “they do not reach extortions based on threats of
physical violence outside the labor context. . . . [Y]ou
cannot beat someone up to collect a debt, even if you
believe he owes it to you.” Id. at 299 (internal citations
omitted).
Along similar lines, we have held that a defendant can
be liable under the Hobbs Act for the wrongful exploita-
tion of fear to obtain property, even if there is no
explicit threat. See United States v. Lisinski, 728 F.2d 887, 891
(7th Cir. 1984). The defendant in Lisinski demanded
money from a restaurant owner who was in danger of
losing his liquor license, in exchange for the defendant’s
efforts to influence the Illinois Liquor Control Commis-
sion. Even though the defendant had not explicitly threat-
ened the restaurant owner, we found that the wrongful
use of fear and the lack of any claim of right to the
victim’s property could be extortion under the Hobbs
Act. Id. at 892.
In sum, extortion under the Hobbs Act can occur
outside of the labor context when a person uses physical
violence or the threat of violence to obtain property,
whether or not the defendant has a claim to the property.
If a defendant has no claim of right to property, the use

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8 No. 10-1388
of fear to obtain that property—including the fear of
economic loss—may also amount to extortion. In
contrast, where the defendant has a claim of right to
property and exerts economic pressure to obtain that
property, that conduct is not extortion and no violation of
the Hobbs Act has occurred. See United States v. Sturm,
870 F.2d 769, 773 (1st Cir. 1989); Brokerage Concepts, Inc. v.
U.S. Healthcare, Inc., 140 F.3d 494, 523-24 (3d Cir. 1998).
We consider Rennell’s assertions against this backdrop.
C
Rennell offers two principal reasons why his case
states a claim under RICO. First, he says, Rowe had no
claim of right to Rennell’s interest in the joint venture
(i.e., the property that Rowe obtained). Second, Rennell
asserts that Rowe’s use of economic fear to obtain the
interest was not legitimate. Because Rowe’s putative
extortive conduct concerns an effort to obtain property
through fear of economic loss, and not physical violence,
Enmons requires us to turn first to the question whether
Rowe had a claim of right to Rennell’s interest in the
joint venture. The answer depends on the contractual
arrangements between the two.
Rowe argues briefly that Rennell never had a compensa-
ble property interest in the joint venture. But he does not
develop this point; instead, both parties focus on the
question whether Rowe was authorized to terminate
the joint venture without cause. If he was, Rennell con-
cedes, then nothing happened that could be labeled
“extortion.” Two tiers of contracts are pertinent: the

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No. 10-1388 9
agreement between Rennell and Rowe that set
out both parties’ rights in the joint venture; and the prop-
erty-management agreements that governed the manu-
factured-housing communities the joint venture man-
aged. The joint-venture agreement provided several
grounds on which either Rennell or Rowe could ter-
minate the entire enterprise “for cause.” Critically for
our purposes, the “termination of any property man-
agement agreement between [Rennell] and [Rowe]”
provided the basis for Rowe to terminate the joint-
venture agreement “for cause.” (Emphasis added.) In
contrast, each property-management agreement con-
tained two grounds for termination without cause. The
first permitted either party to terminate any property-
management agreement with 30 days’ notice. Under this
provision, if Rowe terminated, he was required to pay
all of the costs related to personnel hired by Rennell to
manage the community in question. The second provided
that if Rowe terminated with less than 30 days’ notice,
Rowe was required to pay Rennell both the personnel
costs and a pro rata share of the management fees.
The result was that Rowe could terminate any of the
property-management agreements by paying Rennell
fees and costs, and then terminate the overarching joint-
venture agreement because a property-management
agreement had been terminated.
Rennell argues that the property-management agree-
ments could be terminated only for cause; and because
there was no cause, their termination cannot provide
the basis for the termination of the joint-venture agree-
ment. He notes that the alleged without-cause provi-
sions in the property-management agreements are

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10 No. 10-1388
labeled as “Notice” provisions in the contract. These
“Notice” provisions discuss only what is required if a
party terminates without cause. There is no separate
provision, he points out, affirmatively allowing a party
to terminate without cause. Second, Rennell speculates
that the “fleeting references” to termination without
cause that appear in the agreement were “remnants”
from some earlier version that the parties rejected. At
most, he urges, they create an ambiguity that must be
resolved by a trier of fact.
Both arguments fail to persuade. First, it would be odd
to read these “Notice” provisions discussing the require-
ments for terminating without cause as a back-handed
way of saying that termination without cause is impos-
sible. Consider an analogy: Suppose a fruit-market
owner says to a customer, “If you take a peach, you
must pay me a dollar.” The customer picks up the
peach—dollar in hand—and the owner barks, “Hey, not so
fast. I said that if you take a peach, you have to pay me a
dollar. But I never said that you actually could take a
peach!” The customer would rightly feel misled, since
the common-sense meaning of the first sentence is
simply to set the stage for a sale. But Rennell is asking
for the same kind of twist: he wants us to read these
provisions as explaining what Rowe must do if he were
allowed to terminate without cause, but not as some-
thing indicating that Rowe generally has the right to
terminate without cause. We are not prepared to accept
such a strained interpretation. See Chi. Bd. Options
Exch., Inc. v. Conn. Gen. Life Ins. Co., 713 F.2d 254, 258 (7th
Cir. 1983) (“[W]e will [not] follow a literal interpreta-

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No. 10-1388 11
tion when [to do so] would lead to an unreasonable
or absurd result.”).
We are equally unpersuaded by Rennell’s effort to
shape the contractual language to his liking. There is a
notable difference in the property-management agree-
ments between the terms allowing termination without
cause and those addressing for-cause terminations.
The former expressly require Rowe only to pay costs to
Rennell if Rowe terminates without cause, while the
latter impose the higher burden of demonstrating accept-
able cause. There is therefore nothing superfluous
about the for-cause provisions. Rennell effectively con-
cedes that his argument requires us at worst to
pretend that the without-cause provisions are not in
the contract, and at best to find the contract ambiguous.
We see no reason to take either of those paths, in light
of the straightforward interpretation that is possible.
See Kim v. Carter’s Inc., 598 F.3d 362, 364 (7th Cir. 2010)
(stating that courts avoid interpreting agreements in a way
that would nullify provisions or render them meaningless).
All of this means that Rowe did have a right, under the
property-management agreements, to terminate without
cause, and once he did that, he also had a right to
terminate the joint-venture agreement.
This brings us to Rennell’s second argument: Rowe
failed properly to terminate the property-management
agreements because he did not pay what was due. This
was more than a simple breach of contract, Rennell con-
tends, because the amount Rowe offered was so deficient
that it was extortionate. The choice between 8% of

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12 No. 10-1388
what was owed and zero was no choice at all. As further
proof that this was extortion, Rennell asserts that Rowe’s
“offer” was accompanied by the threat that Rowe
would run him out of the business. Thus, Rennell con-
cludes, even if Rowe had a claim of right, his use of
economic fear was illegitimate and thus qualified as
extortion.
As we have already explained, there is nothing wrong
as a matter of theory with this point. One could imagine
a case, along the lines of Castor, where the use of
economic fear to obtain property would be so unrea-
sonable that a claim-of-right defense would not insulate
the actor from extortion liability under the Hobbs Act.
But this is not that case. Even taking the pleadings favor-
ably to Rennell, Rowe was engaged in nothing more
than unpleasant hard dealing. Rennell alleges only that
he was offered a very low price. He remained free to
reject it and to sue for breach of contract. As for defama-
tion, Rennell has alleged only that Rowe threatened to
spread the word about the termination of the relation-
ship and that this publicity would hamper or prevent
Rennell from continuing in the business. But a truthful
report about the end of a joint venture, even if detri-
mental to someone’s business interests, is not defamatory,
nor does it add anything to the extortion accusations.
We realize that Rennell believes that Rowe dealt badly
with him. We take Rennell at his word that Rowe’s
actions amounted to economic duress. Rowe may also
have breached his duties under the contracts and acted
in violation of the general duty of good faith and fair

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No. 10-1388 13
dealing, among other things. But those claims should be
pursued through state-law theories of contract and,
perhaps, tort—not civil RICO. We note as well that
Rennell’s state-law claims are still alive, because the
district court dismissed them without prejudice when
it relinquished its supplementary jurisdiction. The state
courts are the right place to sort out this business dispute.
We therefore AFFIRM the judgment of the district court.
3-25-11

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