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The rival gangster was a gangster who was part of the gang that was the rival to the gang run by Arnie "Eggs" Benedict in Chicago, Illinois in 1927. He fired a tommy gun in Benedict's speakeasy, leaving much of the premises damaged, but leaving Benedict, Marty McFly, Emmett Brown, "Mugsy" Tannen, "Battleship" Potempkin, and "Bathtub Jim" McFly unharmed.
After this incident, Benedict hired Marty to help his gang, as Doc had told him that Marty was the head of another gang from the east coast.