Zafar Sheikh v. John Wheeler

United States Court of Appeals
For the Seventh Circuit
Chicago, Illinois 60604
Submitted October 18, 2019*
Decided October 18, 2019
Before
JOEL M. FLAUM, Circuit Judge
KENNETH F. RIPPLE, Circuit Judge
DIANE S. SYKES, Circuit Judge
No. 19‐1851
ZAFAR SHEIKH,
Plaintiff‐Appellant,
v.
JOHN WHEELER, et al.,
Defendants‐Appellees.
Appeal from the United States District
Court for the Northern District of Illinois,
Eastern Division.
No. 18 C 5037
Gary Feinerman,
Judge.
O R D E R
Zafar Sheikh obtained a loan to purchase a supermarket. He fell behind with the
mortgage payments, and the bank initiated foreclosure proceedings. He then filed suit,
alleging that various people and entities had conspired to defraud him. The district
court dismissed his complaint for failure to state a claim, and we affirm the judgment.
* We have agreed to decide this case without oral argument because the briefs
and record adequately present the facts and legal arguments, and oral argument would
not significantly aid the court. FED. R. A PP. P. 34(a)(2)(C).
NONPRECEDENTIAL DISPOSITION
To be cited only in accordance with Fed. R. App. P. 32.1

-- 1 of 5 --

No. 19‐1851 Page 2
We accept as true the well‐pleaded facts alleged in Sheikh’s complaint. See Bible
v. United Student Aid Funds, Inc., 799 F.3d 633, 639 (7th Cir. 2015). In 2015, Sheikh sought
to purchase a supermarket financed by a loan from Countryside Bank. Employees of the
bank told Sheikh that he should find “straw” borrowers with higher credit scores to
ensure that the loan would be approved. Sheikh and his business partner recruited two
of their relatives to be the named borrowers on the loan. The relatives lived thousands
of miles away, never met with the bank, and never operated the supermarket.
Countryside then hired an appraiser to determine the supermarket’s value. The
appraiser, who is purportedly independent but had worked “for” Countryside for
years, exaggerated the property’s value, allowing Countryside to offer Sheikh a bloated
loan for twice the value of the property. Countryside provided this overvaluation to the
Small Business Administration, which guaranteed the loan.
The executed loan listed the straw buyers as the borrowers. While Countryside
had initially assured Sheikh that he could change the named borrowers on the loan
ninety days after execution, once the loan closed, the bank told Sheikh that he would
have to pay $190,000 to change the names.
Then, two years later, the roof and the refrigeration system needed to be
replaced. The appraiser—who had failed to examine the roof or system the first time—
re‐evaluated the property and assessed its worth at about half of the original appraisal.
Sheikh paid for the repairs, after which he had trouble keeping up with his mortgage
payments. Countryside encouraged him to lease the business in order to keep the loan
current. After Sheikh found a prospective lessee, however, Countryside refused to
approve the lease. Instead, it foreclosed on the mortgage.
Countryside hired attorney Nancy Townsend for the foreclosure action.
Although Sheikh was not a named borrower, Townsend sued him in the foreclosure
case and brought baseless claims against him for theft and fraud in order to blackmail,
intimidate, and threaten him. Those claims were later withdrawn.
Sheikh then filed this lawsuit alleging a violation of the Racketeer Influenced and
Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1962; a conspiracy to hinder the
administration of justice (by filing false claims against him in the foreclosure
proceedings), 42 U.S.C. § 1985; violation of the False Claims Act, 31 U.S.C. § 3730; and
violations of a variety of state laws. Townsend, a named defendant, represented herself
and the other defendants (including her law firm) in the district court.

-- 2 of 5 --

No. 19‐1851 Page 3
Sheikh moved to disqualify Townsend as opposing counsel, arguing that she had
a conflict of interest with the other defendants because she would be a witness in the
case. The district court denied Sheikh’s motion without prejudice for being premature.
The defendants then moved to dismiss Sheikh’s complaint for failure to state a claim
under Federal Rule of Civil Procedure 12(b)(6). In response, Sheikh moved to amend his
complaint under Rule 15(a)(2), and the district court allowed him to do so.
The defendants again filed a motion to dismiss, which the district court granted.
First, regarding Sheikh’s RICO claim, the court concluded that Sheikh had failed to
sufficiently allege that the defendants formed an enterprise or engaged in a pattern of
racketeering activity. Next, the court dismissed Sheikh’s § 1985 claim, reasoning that
Sheikh had failed to plead any predicate civil rights violation. The court then dismissed
Sheikh’s allegation under the False Claims Act, concluding that Sheikh could not bring
a pro se claim under the act, that he had not complied with its procedural prerequisites,
and that he appeared to have brought the claim in order to harass the defendants.
Finally, because the court had dismissed all of Sheikh’s federal claims with prejudice, it
declined to exercise supplemental jurisdiction over his state‐law claims. The court
entered judgment for the defendants.
Sheikh filed a post‐judgment motion for reconsideration and for leave to amend
his complaint. The court denied the motion with no elaboration.
On appeal, Sheikh first argues that the district court erred in dismissing his RICO
claim. To plausibly plead a RICO violation, Sheikh needed to allege, in part, facts that
permit an inference that the defendants functioned as an “enterprise.” Bible, 799 F.3d at
655. RICO defines “enterprise” broadly to include any corporation, association, or
group of individuals associated in fact. 18 U.S.C. § 1961(4). Here, Sheikh contends that
he sufficiently alleged an association‐in‐fact enterprise consisting of the appraiser, bank,
Townsend, and Townsend’s law firm.
Sheikh’s complaint does not plausibly suggest that the defendants functioned as
an enterprise. Defendants in an association‐in‐fact enterprise must share structural
features like a common purpose, relationship, and longevity to permit them to pursue
the enterprise’s purpose. See Boyle v. United States, 556 U.S. 938, 946 (2009); Bible,
799 F.3d at 655–56. Sheikh alleged that the appraiser defrauded him during the
appraisal, that the bank defrauded him by issuing a bloated loan, and that Townsend
filed frivolous claims against him during the foreclosure proceedings. The complaint

-- 3 of 5 --

No. 19‐1851 Page 4
does not allege, however, that the defendants joined together with a common purpose
to defraud him. See United Food & Comm. Workers v. Walgreen Co., 719 F.3d 849, 855
(7th Cir. 2013). Now on appeal, Sheikh contends that he pleaded that the defendants
acted in concert and performed their “assigned” roles. Those allegations were
conclusory, however, and do not allow a plausible inference that the defendants
worked together for the same unlawful purpose. See id. at 719 F.3d at 854–55. Instead,
Sheikh’s allegations are consistent with the defendants acting in their individual self‐
interests throughout the loan process. See Bible, 799 F.3d at 655–56 (collecting cases
distinguishing “run‐of‐the mill” commercial relationships from ventures pursuing
common interests); Walgreen Co., 719 F.3d at 854–55. Because Sheikh failed to plausibly
plead the existence of even an informal enterprise, he did not state a RICO claim.
Nor did Sheikh state a claim under the False Claims Act, 31 U.S.C. § 3730. A
private party who brings a claim under the act on behalf of the United States must be
represented by counsel, see Georgakis v. Ill. St. Univ., 722 F.3d 1075, 1077 (7th Cir. 2013);
Sheikh, however, was proceeding pro se. He contends that the district court should
have given him the opportunity to hire an attorney, but as the district court explained,
Sheikh also failed to comply with the procedural requirements of first filing the
complaint under seal with the government. See § 3730(b)(2). Further, the district court
concluded that Sheikh had not pleaded fraud with particularity, see United States ex rel.
Berkowitz v. Automation Aids, Inc., 896 F.3d 834, 839 (7th Cir. 2018), and that the claim
was frivolous and intended to harass the defendants. Dismissal with prejudice for all
the reasons cited by the district court was warranted. See Georgakis, 722 F.3d at 1078.
Next, Sheikh argues that he should have been granted leave to amend his
complaint. But the district court had already given him one opportunity. See Runnion ex
rel. Runnion v. Girl Scouts of Greater Chi., 786 F.3d 510, 519 (7th Cir. 2015) (“[A] plaintiff
… should be given at least one opportunity to try to amend her complaint before the
entire action is dismissed.”). The next time Sheikh moved for leave to amend, he did not
attach a proposed second amended complaint or explain how he would cure the
deficiencies identified by the district court. See Gonzalez‐Koeneke v. West, 791 F.3d 801,
807 (7th Cir. 2015). On appeal, Sheikh still does not explain how he could remedy his
complaint. See Pension Tr. Fund for Operating Eng’rs v. Kohl’s Corp., 895 F.3d 933, 942
(7th Cir. 2018) (“Reversal is inappropriate if the plaintiff cannot identify how it would
cure defects in its complaint.”). Therefore, the district court did not abuse its discretion
by denying Sheikh another opportunity to amend his complaint.

-- 4 of 5 --

No. 19‐1851 Page 5
Finally, Sheikh maintains that the district court erred by not disqualifying
Townsend from representing the other defendants. Although the Northern District of
Illinois generally prohibits a lawyer from being an advocate at a trial in which she is
likely to be a necessary witness, see N.D. ILL . L.R. 83.50 (incorporating MODEL R ULE OF
P ROF ’ L C ONDUCT r. 3.7 (A M. BAR A SS ’ N 1983)), that lawyer is not required to withdraw as
counsel as soon as a lawsuit is filed. See, e.g., Watkins v. Trans Union, LLC, 869 F.3d 514,
519 (7th Cir. 2017). Thus, the district court permissibly denied, without prejudice,
Sheikh’s early request to disqualify Townsend.
AFFIRMED

-- 5 of 5 --