2005 D e c i sion s O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit 5-19-2005 

# Pelullo v . Natl Union Fire Ins P r e c e de nt i al or N on-P r e c e de nt i al : N on-P r e c e de nt i al D ocke t N o . 04-2015

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w . vi ll anova . e du . Re c omme nde d C it at ion " P elullo v . Natl U nion F ir e In s " (2005). 2005 D e cisio n s . P ape r 1157. http://d i git alc ommon s .l a

w . vi ll anova . e du/thir dc ir c uit_2005/1157NOT P RE CE DE NT I AL UN I TED STATES CO UR T OF A PP EALS F O R T H E T H IR D C IR C U IT

____________ N o. 04- 2015

____________ L E ONAR D A. P E L UL L O; PETE R D . PELULLO TRU ST; AR I AN NA G. PELULLO TRU ST; GI I E NT E RP RI S E S , I NC OR P OR AT E D; GR OWTH F I NANC I AL CO RP OR AT I ON; OL YM P I A R E S OUR CE CO RP OR AT I ON; OL YM P I A HOL DI NG C OR P OR AT I ON; OHA, I NC OR P OR AT E D; ONE P L AZ A C OR P OR AT I ON; PETE R F. PELULLO

v. THE NATI ONA L UNI ON FI RE I NSURANCE CO M P ANY OF P I T T S BU RG H, P A; WI L E NT Z , GOL DM AN & S P I T Z E R; KE NNE T H F AL K; AD OR NO & ZEDER, P. A. ; FRED SCH W AR TZ; H A N K A D O R N O ; K E R R , R U S S E L L & W E B E R , P .L .C .; RO BE RT GI S S E L L ; D' AM AT O & L YNC H; L E WI S , D' AM AT O, BR I S BO I S & BI S GAAR D; RI CH AR D GE OR GE ; AL F RE D D' AGOS T I NO* L e o n a rd A . P e lu llo ; P e ter D . P e lu llo T ru st; A ria n n a P e lu llo T ru st; G . I . I . E nt erpr i s es , I nc. ; G r ow th Fi nanci al C orpor at i on; O lym p ia R e s o u rc e C o rp o ra tio n ; O H A , In c .; O ne Pl aza C orpor at i on; Pet erF. Pel ul l o, A p p e llan ts ( *A m ended pe ror derdat ed 12/ 14/ 04)

____________2 O n A p p ea l from the U n it ed S tat es D istri ct C o u rt f o r th e E a ste rn D istric t o f P e n n sy lv a n ia ( D . C . N o. 00- cv- 05647) D i s tr i ctJ udge: H onor abl e R . B ar cl aySur r i ck

____________ Subm i t t ed U nderT hi r d C i r cui tL A R 34. 1( a)

M ay12, 2005 B e f o re : S L O V IT E R , F IS H E R a n d A L D IS E R T , C i r cui tJudges .

( Fi l ed: M ay19, 2005)

____________ OPI NI ON O F THE COURT

____________ F IS H E R , C i r cui tJudge . I . St andard of R evi ew T h is C o u rt e x e rc ise s p len a ryre v iew o v e r a d istric t co u rt’s d e c isio n to g ra n t a m o tio n to d is m is s . Mal i a v. G en. E l ec. C o. , 23 F. 3d 828, 830 ( 3d C i r . 1994) . W e ac cept as true al l fac tual al l egat i ons i n t he compl ai ntand dr aw al l r eas onabl e i nfer ence s th e re f ro m in th e lig h t m o s t f

a v o ra b le to th e p la in tif

f. Lore nzv. CSX

C or p. , 1 F. 3d 1406, 1411 ( 3d C i r . 1993) . W e mayaff i r m onl yi f i ti s cert ai n thatno r el i ef c oul d be gr ant ed u n d e r a n ys e t o f

f a c ts w h ic h c o u ld b e p ro v e n . I d. I I . D i s cus s i on T he fa ctual backgr ound of thi s act i on, w hi ch i s l engthyand compl i cat ed, w as th o r o u g h l yd i s c u s s e d b yth e Di s tr i c tCo u r ta n d i s k n o wn t o th e p a r t i e s . Ac c o r d i n g l y , we w i l l focus i n t hi s opi ni on on the r at i onal e forourdeci s i on.T he D efe ndant s pr evi ous l yal i gned themsel ves i nt o fourbr oad gr oups : ( i ) the 1 “N at i onal U ni on D efe ndant s , ” w hi ch i ncl ude the N at i onal U ni on Fi r e I ns ur ance C o. of P ittsbu rgh , P a.; the law firm o f D ’A m ato & L yn ch an d tw o o f it s p artne rs, R icha rd G eo rge an d A lfred D ’A g o sti n o ; th e law firm o f L ew is, D ’A m ato, B ri sb o is & B isga ard L L P; and the l aw fi r m of A l s t on & B i r d L L P and i t s att orneyT heodor e J . Saw i cki ; ( i i ) t he l aw fi r m of W i l ent z, G ol dm an & Spi t zer( “W i l ent z”) and i t s partnerK enneth Fal k; ( i i i ) the l aw fi r m of A dorno & Z eder , P. A . , one of i t s partner s , H ank A dorno, and another of i t s att orney s , Fr ed Schw art z; and ( i v) the l aw fi r m of K err , R us s el l , W eber , P. L . C . and one of i t s att orney s , R obertG i s s el l ( “K errFi r m D efe ndant s ”) . N ot abl y , Pl ai nt i ffs have w ith d ra w n a n ya p p e a l as a g a in st A lsto n & B ird L L P a n d its a tto rn e y , T h e o d o re S a w ick i. 3 T he A ppel l ant s i n t hi s m att er– L eonar d Pel ul l o; the Pet erD . Pel ul l o T rus tand the A r i anna G . Pel ul l o T rus t( col l ect i vel y , “Pel ul l o T rus t s ”) ; Pet erF. Pel ul l o, trus t ee of the Pel ul l o T rus t s ; and s i x corpor at i ons and/ orbus i nes s es al l ow ned, oper at ed, and contr ol l ed b yth e P e lu llo T ru sts (G .I.I. E n terp rise s, In c ., G ro w th F in a n c ial C o rp o ra tio n , O lym p ia R es our ce Corpor at i on, O l ym pi a H ol di ng C orpor at i on, O H A , I nc. , and O ne Pl aza C orpor at i on) ( col l ect i vel y , “Pl ai nt i ffs ”) – br oughtci vi l R acke t eerI nfl uence d and C or rupt O r gani zat i ons A ct( “R I C O ”) cl ai m s under18 U . S. C . § 1962( c) and ( d) agai ns tan i ns ur ance company , and s ever al att orney s and l aw fi r m s w ho pr evi ous l yr epr es ent ed P l a i n t i f f s i n v a r i o u s b u s i n e s s tr a n s a c t i o n s a n d c i v i l a n d c r i m i n a l m a t t e r s ( c o l l e c t i v e l y, “D efe ndant s ”) . Pl ai nt i ffs al l eged a hub- and- s poke cons pi r acybetw een N at i onal U ni on 1 a n d th e o th e r D e f

e n d a n ts “ w h o se g o a l w a s to a v o id o r re d u c e c rim in a l an d c iv il l iab ili ty f o r th e law f

irm s’ a n d a tto rn e y s’ m isc o n d u c t an d b re a c h e s o f f id u c iar yd u tyc o m m itt e d in co n n ec ti o n w ith their rep rese n tat ion o f M r. P elullo an d the P elullo T rusts, w h ich in turn w o u ld li m itN ati o n al U n ion ’s ex p o su re a s the law firm s’ i n su rer. ” (A p p ell an ts’ B r. at 7.)4

T he D i s tr i ctC our tdi s m i s s ed Pl ai nt i ffs ’ Second A m ended Com pl ai ntagai ns tthe N at i onal U ni on and K errFi r m D efe ndant s fi ndi ng thatPl ai nt i ffs ’ R I C O cl ai m s w er e barr ed byt he s t atut e of l i m i t at i ons . T he D i s tr i ctC our tal s o di s m i s s ed Pl ai nt i ffs ’ Second A m ended C om pl ai ntagai ns tthe r emai ni ng D efe ndant s forfai l ur e t o al l ege f act s s uppor t i ng an i nfer ence of pr oxi m at e ca us at i on betw een the D efe ndant s ’ act i ons and Pl ai nt i ffs ’ al l eged i njur i es. O n appea l , Pl ai nt i ffs cont end thatthe D i s tr i ctC our terr ed i n i t s det erm i nat i on t hat their claim s w ere ti m e-b arred , arg u ing that b ec au se th e N ati o n al U n ion an d K err F irm D efe ndant s fr audul ent l yconce al ed thei ract i vi tycompri s i ng the al l eged “ hub- and- s poke” c o n sp ira c y , the sta tu te o f lim itatio n s s h o u ld b e e q u itab lyto lled . P lain tiff s a d d iti o n a lly a rg u e th a t th e D istric t C o u rt e rre d in its d e ter m in a tio n th a t P lain tiff s la c k e d sta n d in g to a s s e r tth e i rRI CO c l a i ms a n d th u s f a i l e d t o s t a t e a n yc l a i ms u n d e re i th e r1 8 U. S . C. § 1 96 2(c) or ( d) agai nstthe rem ai ning D efen dan t s. A f o u r- y e a r s ta tu te o f

lim ita tio n s is a p p lie d to c iv il R IC O c la im s . A gency H oldi ng C orp. v. Malley-D uff

& A ssocs. , 4 8 3 U .S . 1 4 3 (1 9 8 7 ). T h e in ju ryd isc o v e ryru le c o n tro ls a s to w h e n th e s ta tu te o f lim ita tio n s b e g in s to ru n o n a c iv il R IC O c la im . R ot el la v. W ood , 528 U . S. 549 ( 2000) . T hatrul e r equi r es the s t atut e t o begi n runni ng w hen the p la in tif f k n e w o r s h o u ld h a v e k n o w n o f h is in ju ry. I d. Pl ai nt i ffs do notdi s put e thatt hey w ai t ed more than foury ear s befor e i ns t i tut i ng thei rl aw s ui t , buti ns t ead a r gue thatthe D efe ndant s ’ fr audul entconce al m entof the exi s t ence of a RICO cl ai m t ol l ed the four - y ear5

l i m i t at i ons per i od and ther efor e pr es erved Pl ai nt i ffs ’ r i ghtt o fi l e s ui t . Pl ai nt i ffs have f a iled , h o w e v e r, to a lleg e f a c ts s u f f icie n t to su p p o rt a c laim o f f ra u d u len t co n c e a lm e n t. T o es t abl i s h fr audul entconce al m entforpurpos es of equi t abl e t ol l i ng, a pl ai nt i ff m u st p ro v e th re e n e c e ss a rye lem e n ts – (1 ) “ ‘a c tiv e m isle a d in g ’” b yth e d e f e n d a n t; ( 2) w hi ch pr event s the pl ai nt i ff f r om r ecogni zi ng the val i di tyof hercl ai m w i thi n the l i m i t at i ons per i od; ( 3) w her e the pl ai nt i ff’ s i gnor ance i s notattr i but abl e t o herl ack of

“‘ r eas onabl e due di l i gence i n att empt i ng t o uncoverthe r el evantfac t s . ’ ” M at thew s v. K i dder, P eabody & C o. , 260 F. 3d 239, 256 ( 3d C i r . 2001) ( ci t i ng For bes v. E agl es on , 228 F. 3d 471, 486- 88 ( 3d C i r . 2000) ) . E ven as s um i ng, as the D i s tr i ctC our tdi d, thatthe N at i onal U ni on and K errFi r m D efe ndant s act i vel ym i s l ed Pl ai nt i ffs , cons i s t entw i th t he fi r s tpr ong of the Ma t th e ws anal y s i s , Pl ai nt i ffs have f ai l ed t o al l ege a nyfac t s w hi ch s uppor tan i nfer ence thats uch ac t i ve mi s l eadi ng pr event ed them from r ecogni zi ng the vali dityof thei r cl ai m s w i thin the fo ur- y ear s t atutoryperi od or that the P l ai nti ffs’ ig n o ra n c e w a s n o t attrib u tab le to th e ir o w n lac k o f re a so n a b le d u e d ili g e n c e . “[ W ]h ile ours t andar d of r evi ew r equi r es us t o acc eptas true al l fac tual al l egat i ons i n the compl ai nt , w e nee d notacc eptas true uns uppor t ed conc l us i ons and unw arr ant ed i nfer ence s . ” Mai o v. A etna, I nc. , 221 F. 3d 472, 485 n. 12 ( 3d C i r . 2000) ( i nt ernal ci t at i ons om i t t ed) . B eca us e Pl ai nt i ffs have s ubm i t t ed onl yuns uppor t ed conc l us i ons , notactual fac t s s uffi ci entt o s uppor ta cl ai m of fr audul entconce al m entof thei rR I C O cl ai m s , the s t atut oryper i od w i l l notbe equi t abl yt ol l ed.6

A s t o Pl ai nt i ffs ’ s econd c ont ent i on, i . e. , thatthe D i s tr i ctC our terr ed i n i t s deci s i on t o g rantthe rem ai ning D efen dan t s’ m oti on s t o d i sm i ss, the C ou rtfi nd s Plai nti ffs’ averm ents t o b e si m i l arl yl acking. R IC O i s pri m ari l ya cri m i nal s t atute, ho w ever, i tal so p ro v id e s f

o r c iv il rem e d ies , inc lu d in g a c a u se o f a c tio n f o r tre b le d a m a g e s, a v a ilab le to “[a ] nyper s on i nj ur ed i n hi s bus i nes s orpr opertybyr eas on of a vi ol at i on of s ect i on 1962

. . . . ” 1 8 U .S .C . § 1 9 6 4 (c ); s ee al s o Sevi l l e I

ndus . Mach. C or

p. v. Southm os tMach. C or p. , 742 F. 2d 786, 789 ( 3d C i r . 1984) . T hus , i n addi t i on t o A r t i cl e I I I cons t i tut i onal and pruden t i al st and i ng requi rem ents , a plai nti ff seeking recove ryun der R IC O m ust s a tis f yth e s e a d d itio n a l c ri te ri a s e t f o rt h in s e c tio n 1 9 6 4 (c ). M a io , 2 2 1 F .3 d a t 4 8 2 -8 3 . “Ext r apol at i ng fr om thi s l anguage , w e r ead s ect i on 1964( c) as r equi r i ng a R I C O pl ai nt i ff to m a k e tw o re late d b u t an a lytica llyd istin c t th re sh o ld sh o w in g s re lev a n t in th is a p p e a l: (1) tha t th e p lai n ti ff

su ff ere d an injuryto b u sine ss o r pro p erty ; and (2) tha t th e p lai n ti ff ’s i nj uryw as pr oxi m at el ycaus ed bythe def endant ’ s vi ol at i on of 18 U . S. C . § 1962. ” Id . at 483 ( ci t i ng F i rs tN

at i onw i de Bank v. G el tFundi ng C or p. , 2 7 F . 3 d 7 6 3 , 7 6 7 (2d C ir . 1 9 9 4 )). U p o n re v iew o f

th e re c o rd , itis c lea r th a t P lain tiff s h a v e n o t alle g e d f

a c ts s uffi ci entt o s uppor tan i nfer ence of pr oxi m at e ca us at i on betw een D efe ndant s ’ act i ons a n d P lain tiff

s’ in ju rie s. P lain tiff

s a lleg e in

ju rie s to th e ir b u sin e ss a n d p ro p e rtyd u e to D efe ndant s “s ubj ect i ng them t o a combi nat i on of cr i m i nal fi nes , r es t i tut i on, and for fei tur es , ext ens i ve ci vi l l i t i gat i on, coer ced s ett l ement s , ci vi l j udgm ent s , and rui nous7

att o rne yfe es so as to li m ittheir fina n cial an d crim inal li ab il ity . ” (A p p ell an t’ s B r. at 8.) T h e f a c ts a lleg e d , h o w e v e r, d o n o t su p p o rt a n in f e re n c e o f a n e x u s b e tw e e n th e se sp e c if ic a c t i v i t i e s a n d P l a i n t i f

f s ’ a l l e g e d i n

j u r i e s . Ac c o r d i n g l y , b e c a u s e P l a i n t i f f s h a v e n o ts h o wn proxim at e causati on , theyl ack st and i ng t o asser ttheirR IC O cl ai m s agai nstthese D e f e n d a n ts a n d h a v e f

a ile d to s ta te c la im s u n d e r e ith e r 1 8 U .S .C . § 1 9 6 2 (c ) o r ( d ). See St eam f i t t ers LocalU

ni on N o. 420 W el f ar e Fund v. P hi l i

p Mor r is , I

nc. , 171 F. 3d 912, 921 (3 d C ir. 1 9 9 9 ) (d ism iss in g a c tio n f o r f a ilu re to sta te a c laim w h e re p lain tiff f a iled to sa tisf yp ro x im a te c a u sa tio n re q u ire m e n ts); A nders on v. A yl i ng , 3 9 6 F . 3 d 2 6 5 , 2 7 1 (3d C ir . 2 0 0 5 ) (sam e). Forthes e r eas ons , w e w i l l aff i r m the j udgm entof the D i s tr i ctC our tdi s m i s s i ng P l ai nti ffs’ cl ai m s.