PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

POTOMAC ELECTRIC POWER COMPANY, 

Plaintiff-Appellant,

v.

ELECTRIC MOTOR AND SUPPLY,

INCORPORATED; RALPH FORCE;

 No. 00-2542 CHARLES M. RHODES,

Defendants-Appellees,

and

DARRYL PRICE,

Defendant. 

POTOMAC ELECTRIC POWER COMPANY, 

Plaintiff-Appellee,

v.

ELECTRIC MOTOR AND SUPPLY,

INCORPORATED; RALPH FORCE;

 No. 00-2557 CHARLES M. RHODES,

Defendants-Appellants,

and

DARRYL PRICE,

Defendant. 

Appeals from the United States District Court

for the District of Maryland at Baltimore.

Frederic N. Smalkin, District Judge.

(CA-98-2519-S)

Argued: June 6, 2001

Decided: August 10, 2001
Before WILLIAMS, KING, and GREGORY, Circuit Judges.

Affirmed in part, reversed in part, and remanded by published opinion. Judge Williams wrote the opinion, in which Judge King and

Judge Gregory joined. 

COUNSEL

ARGUED: James Patrick Gillece, Jr., MCGUIRE WOODS, L.L.P.,

Baltimore, Maryland, for Appellant. James Patrick Ulwick, KRAMON & GRAHAM, Baltimore, Maryland, for Appellees. ON

BRIEF: Robert R. Niccolini, MCGUIRE WOODS, L.L.P., Baltimore, Maryland, for Appellant. Bruce L. Marcus, MARCUS & BONSIB, Greenbelt, Maryland, for Appellee Force; Paul F. Kemp,

CATTERTON, KEMP & GREENBERG, Rockville, Maryland, for

Appellee Electric Motor. 

OPINION

WILLIAMS, Circuit Judge: 

Potomac Electric Power Co. (PEPCO) appeals the district court’s

grant of summary judgment to Electric Motor and Supply, Inc., Ralph

Force, and Charles Rhodes (collectively EMS) on its claims arising

under the private suit provisions of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C.A. § 1962, and EMS crossappeals from the district court’s failure to grant summary judgment

in EMS’s favor on the alternate ground of lack of proof of fraud and

its failure to dismiss the case on the ground of lack of "investment

injury." For the reasons that follow, we affirm in part, reverse in part,

and remand for additional proceedings. 

2 POTOMAC ELECTRIC POWER v. ELECTRIC MOTOR & SUPPLY
I.

A.

PEPCO is an electric utility company serving the Washington, D.C.

metropolitan area. EMS is a privately held corporation whose business is the repair of electric motors; its plant and office is in Altoona,

Pennsylvania. Ralph Force is the owner of EMS, and Charles Rhodes

is its Chief Engineer. From 1985 until 1996, EMS provided electric

motor repair services for PEPCO as a result of EMS’s successful bids

for PEPCO’s work. PEPCO generally sent its motors to EMS for

repair only after they failed. With rare exceptions, EMS returned the

motors to PEPCO in a repaired and working condition that passed

PEPCO’s internal inspection process. No evidence in the record indicates that any of the motors repaired by EMS had failed as of September, 1999. 

In March of 1994, PEPCO received an anonymous tip suggesting

that certain PEPCO employees had engaged in fraudulent bid-rigging

in conjunction with EMS employees. As a result, PEPCO commenced

an internal investigation that initially focused on bid-rigging but eventually broadened to include the issue of whether EMS had knowingly

failed to repair PEPCO’s motors pursuant to PEPCO’s specifications.

In August of 1994, PEPCO’s internal investigation concluded that

EMS had knowingly failed to perform PEPCO’s repairs as specified.

PEPCO principally alleges that its specifications required its

motors to be repaired using epoxy through a process called vacuum

pressure impregnation (VPI), and that two separate VPI treatments

were required. Evidence indicates that by at least 1992, PEPCO had

reminded EMS that its bid specifications required this "double VPI"

treatment. Richard Beegle, who was plant manager for EMS’s facility

in Altoona from May of 1991 until October of 1993, stated in an affidavit that after EMS received these specifications, it nonetheless performed only one VPI treatment, and used polyester instead of epoxy

in repairing the motors. Beegle further testified that EMS occasionally

applied an epoxy coating over the polyester to cover up noncompliance with PEPCO’s specifications, sometimes prepared false documentation for PEPCO showing that work had been performed using

epoxy and two VPI treatments, and falsified the results of tests

POTOMAC ELECTRIC POWER v. ELECTRIC MOTOR & SUPPLY 3
designed to evaluate the attributes of the repaired motor.1

 Tests performed for PEPCO by an outside company showed that at least two

motors repaired by EMS were repaired using polyester instead of

epoxy and then covered with epoxy in a manner that tended to conceal this fact. 

B.

On July 29, 1998, PEPCO filed suit under RICO, 18 U.S.C.A.

§ 1962 (West 2000), alleging that EMS engaged in fraudulent activities in the repair of PEPCO electric motors over a period of several

years. On January 20, 1999, EMS filed a motion to dismiss for failure

to state a claim under Federal Rule of Civil Procedure 12(b)(6), which

the district court granted in part and denied in part. The portion of the

district court’s ruling on the motion to dismiss that is under review

here is the district court’s denial of EMS’s motion to dismiss Count

I of PEPCO’s complaint on the basis that PEPCO failed to allege that

its injury derived from EMS’s use of racketeering proceeds. Following discovery, EMS filed two separate motions for summary judgment, one for lack of proof of fraud and the other for lack of proof

of damages. The district court granted the motion for summary judgment on the basis of lack of proof of damages and did not reach

EMS’s contention that summary judgment was also justified by lack

of proof of fraud. PEPCO timely appealed from the grant of summary

judgment, and EMS cross-appealed from the district court’s failure to

grant its motion for summary judgment for lack of proof of fraud, as

well as from the partial denial of its motion to dismiss. 

II.

A private RICO plaintiff only has standing to bring suit if he can

show damage to "business or property" proximately caused by the

1EMS claims that Beegle has "no admissible testimony." (Appellee’s

Br. at 12.) This putative evidentiary challenge, however, is in fact simply

a reflection of EMS’s statute of limitations argument, see infra Part III,

and because we find the record inadequately developed to resolve the

statute of limitations issue, we proceed on the assumption that Beegle’s

testimony is relevant and admissible. 

4 POTOMAC ELECTRIC POWER v. ELECTRIC MOTOR & SUPPLY
defendant’s RICO violation.2

See 18 U.S.C. § 1964(c) (providing that

a plaintiff must show that it was "injured in [its] business or property

by reason of a violation"); Caviness v. Derand Resources Corp., 983

F.2d 1295, 1305 (4th Cir. 1993) (stating that a plaintiff must show

"damage proximately caused by the violation"). PEPCO argues that

it adduced sufficient proof of the fact of injury to survive EMS’s

motion for summary judgment. 

The district court, however, found that PEPCO presented no evidence that the motors repaired by EMS failed more frequently, had

a shorter useful life, or were less valuable as a result of EMS’s

claimed failure to follow repair specifications. PEPCO claimed that

the proper measure of damages was the entire repair price, and thus,

it was simply entitled to the return of all funds paid to EMS for noncompliant repairs; the district court found this argument unpersuasive.

As a result, the district court held that the amount of damages was

"speculative and unprovable," precluding RICO liability. (J.A. at

645.) 

The district court correctly found that PEPCO adduced no evidence

that any motor repaired by EMS had failed or had not performed as

well due to EMS’s claimed fraud. Further, PEPCO’s argument that

the proper measure of its damages is the entire price paid for repairs

founders because PEPCO must produce evidence of the actual value

of the services that were rendered. See, e.g., Western Contracting

2

In this Circuit, a plaintiff need not show that the damages flowed from

the use or investment of the racketeering income, only that damages

flowed from racketeering activity itself. Busby v. Crown Supply, Inc.,

896 F.2d 833, 837 (4th Cir. 1990). Every other circuit to address the

issue has adopted an "investment use injury" requirement, holding that

a plaintiff’s damages must be caused by the defendant’s use of the proceeds of racketeering. See, e.g., Danielsen v. Burnside-Ott Aviation

Training Ctr., Inc., 941 F.2d 1220, 1230 (D.C. Cir. 1991) (rejecting the

Busby rule). Recognizing that the panel is bound by Busby, EMS nonetheless seeks to preserve the "investment use" issue for en banc review.

As this panel must follow Busby, EMS’s request to overrule that decision

must be raised to the en banc court and need not detain us longer. See

Laughlin v. Metro. Washington Airports Auth., 149 F.3d 253, 260 (4th

Cir. 1998) (stating that a panel cannot overrule a decision of a prior

panel). 

POTOMAC ELECTRIC POWER v. ELECTRIC MOTOR & SUPPLY 5
Corp. v. Bechtel Corp., 885 F.2d 1196, 1203-04 (4th Cir. 1989) (stating that even using Maryland’s "out-of-pocket" method for determining damages, plaintiff must produce evidence of the actual value of

the services rendered). Granting PEPCO a refund of the entire amount

paid for repairs would obviously confer on PEPCO a large windfall,

because even if the motors were not repaired in conformity with each

specification, it is undisputed that most of the work that PEPCO paid

for was performed by EMS and that the motors were returned in

repaired, working order. 

PEPCO nevertheless argues that it need not show that the motors’

performance was diminished or that the motors were less valuable as

a result of EMS’s failure to perform repairs as specified. We agree.

If a party specifically bargains for a service, is told that the service

has been performed, is charged for the service, and does not in fact

receive the service, it is not appropriate for courts to inquire into

whether the service "really" had value as a precondition to finding

that injury to business or property has occurred. See Hellenic Lines,

Ltd. v. O’Hearn, 523 F. Supp. 244, 248 (S.D.N.Y. 1981) (stating that

RICO injury is proved where a company demonstrated that "padded"

bills resulted in payment for services not rendered). If the evidence

indicates that a party paid value for a good or service, this fact is a

more reliable indicator that the service actually had value to the party

than the post hoc intuition of a court as to the good or service’s value.

John Morykon, EMS’s own witness, testified that PEPCO probably

was charged more for the repairs because the specifications were

higher than industry standards. Even if PEPCO’s asserted idiosyncratic specifications — requiring "double VPI treatments," etc. — did

absolutely nothing to improve the reliability of its motors, these specifications represented a service for which PEPCO bargained, paid, and

allegedly did not receive despite EMS’s representations to the contrary. PEPCO’s analogy is apt: If a consumer bargains for and pays

extra for an automotive transmission repair to be performed using

original manufacturer parts, an auto repair shop commits fraud if it

performs the repair using generic parts and tells the consumer that

original manufacturer parts were used, regardless of whether the

generic parts are actually less useful or reliable. 

Our conclusion is buttressed by the language of § 1964(c), which

confers RICO standing on "any person injured in his business or prop6 POTOMAC ELECTRIC POWER v. ELECTRIC MOTOR & SUPPLY
erty," not any person who can quantify the amount of the injury. The

best reading of § 1964(c)’s injury to business or property requirement

is that it refers to the fact of injury and not the amount. If PEPCO can

establish that EMS represented that it was complying with specifications and intentionally did not do so while charging a contract price

that reflected the specifications, PEPCO has been "injured in its property" to the extent of the difference between the amount it paid and

the amount it would have paid under specifications reflecting the

actual work performed. Even if the precise amount of its injury is not

susceptible of ready proof, it is clear that a reasonable finder of fact

could infer that some injury has occurred; that is, the finder of fact

could infer from the fact that the parties bargained for expensive additional procedures that the cost of those procedures influenced the contract price. 

The district court followed Ninth Circuit precedent holding that

quantifiable RICO damages are an essential prerequisite to core

RICO liability. See Oscar v. Univ. Students Coop. Ass’n, 965 F.2d

783, 785 (9th Cir. 1992). However, the district court’s statement of

its holding is inconsistent with the Ninth Circuit’s approach. See J.A.

at 642 ("the plaintiff . . . must show that he has suffered some compensable damage." (emphasis added)). Similarly, this Circuit has not

held that quantifiable damages are a necessary precondition to RICO

liability; instead, this Circuit has formulated the requirement in terms

of the necessity of proving some damages, not a specific amount.

Caviness, 983 F.2d at 1305 (requiring a showing of "damage proximately caused by the violation"). PEPCO argues that at a minimum,

it has demonstrated some damage and argues that in the absence of

proof of a specific amount, it is entitled to nominal damages, which

would trigger an award of attorney’s fees. Indeed, under analogous

provisions of the Clayton Act, the Second Circuit has upheld just such

an award of nominal damages and attorney’s fees. United States Football League v. National Football League, 887 F.2d 408, 411 (2d Cir.

1989). Cf. McDonnell v. Miller Oil Co., 134 F.3d 638, 640-41 (4th

Cir. 1998) (suggesting that nominal damages may be appropriate

under the Family and Medical Leave Act, but noting that a reduction

in the award of attorney’s fees may be warranted when only nominal

damages are proven); Rosario v. Livaditis, 963 F.2d 1013, 1021 (7th

Cir. 1992) (remanding for a new trial on damages because in a RICO

case, the jury found liability but "did not award even nominal damPOTOMAC ELECTRIC POWER v. ELECTRIC MOTOR & SUPPLY 7
ages on the RICO counts"). EMS, in its reply brief, provides no case

law or argument as to why nominal damages is not a viable concept

under civil RICO. Thus, we conclude that the district court erred in

granting summary judgment on the basis of inability to prove the

amount of damages; if the motors were not repaired according to

specifications some amount of damage likely is present, even if

PEPCO cannot prove the amount, and a nominal amount of damage

is adequate to support liability. 

III.

EMS argues as an alternative ground for affirmance that PEPCO

failed to create a triable issue of fact as to whether EMS fraudulently

repaired PEPCO’s motors on more than one occasion; the district

court did not reach this issue, granting summary judgment instead on

the ground of lack of proof of injury. Private RICO suits are governed

by a four-year statute of limitations, which runs from the date when

the plaintiff discovered, or should have discovered, the injury. Klehr

v. A.O. Smith Corp., 521 U.S. 179, 183 (1997); Rotella v. Wood, 528

U.S. 549, 555 (2000) (discovery of injury, not of other elements of

the claim, starts the statute of limitations clock). As EMS notes,

PEPCO may not "bootstrap" time-barred claims by linking them to

later, non-time-barred claims. Klehr, 521 U.S. at 190. Here, EMS

asserts that PEPCO was on notice of the potential violations by at

least March of 1994, while PEPCO claims it did not have, and should

not have had, knowledge until August of 1994. Since PEPCO filed its

complaint on July 29, 1998, the application of the statute of limitations essentially turns on the question of whether, with respect to each

alleged injury, PEPCO knew or should have known of its injury prior

to July 29, 1994. Because the evidence is in conflict relative to when

PEPCO discovered or should have discovered EMS’s alleged fraudulent repair practices, because resolving these conflicts will involve a

fact-intensive determination, and because the district court has not

grappled with the detailed factual evidence regarding when PEPCO

knew or should have known about each separate alleged incident, we

believe it would be unwise to resolve this issue for the first time on

appeal; instead, the district court should resolve it on remand. 

Assuming that predicate acts occurring before July 1994 are not

time-barred, the testimony of EMS employee Richard Beegle clearly

8 POTOMAC ELECTRIC POWER v. ELECTRIC MOTOR & SUPPLY
creates a disputed issue of material fact as to fraud;3

 Beegle states that

from May 1991 to October 1993, when he was an EMS employee, he

witnessed a host of knowing failures to repair motors in accordance

with specifications and observed EMS staff filling out fraudulent

paperwork stating to PEPCO that work had been performed when it

had not been. Further, EMS’s time entry reports often state that only

one VPI treatment was performed on a given motor when other documentation reflects that two treatments were performed. EMS argues

that these time entry reports were prepared for internal purposes and

are not accurate; but this is an issue for the trier of fact. If PEPCO’s

statute of limitations argument is correct on the facts in this case,

which have not been fully developed relative to this issue, there is

adequate proof of more than one instance of fraud to survive summary judgment. 

IV.

PEPCO further argues that it may obtain recission and other equitable remedies under civil RICO. As a threshold matter, while PEPCO

argues on appeal that it is entitled to equitable recission, restitution,

and constructive trust, before the district court, PEPCO argued only

for recission and not for restitution or constructive trust. We decline

to consider PEPCO’s restitution and constructive trust arguments, as

these arguments were not raised below. Bregman, Berbert &

Schwartz, L.L.C. v. United States, 145 F.3d 664, 670 n.8 (4th Cir.

1998). 

Recission ordinarily involves a judicial termination of a party’s

contract obligations; it is a court-ordered "unwinding" of a contract,

with the goal of returning the parties to the status quo prior to contracting. Lazorcak v. Feuerstein, 273 Md. 69, 75 (1974). Given that

the contract at issue is a contract for services, recission in the declaratory or injunctive sense is simply not feasible; a court cannot order

PEPCO’s motors "un-repaired," which would be necessary in order

fully to undo the contract.4See Leaf Co. v. Montgomery County, 70

3

In fact, at oral argument, counsel for EMS conceded that summary

judgment on the ground of lack of proof of fraud would be inappropriate

if EMS’s statute of limitations argument were found to be meritless. 

4Given the infeasibility of declaratory or injunctive relief in this case,

we have no occasion to consider the parties’ arguments as to whether

POTOMAC ELECTRIC POWER v. ELECTRIC MOTOR & SUPPLY 9
Md. App. 170, 180 (1987) ("The contract is one for services already

performed, which is not susceptible of recission."). PEPCO also

requests a recission "measure of damages" in which PEPCO simply

receives money damages equal to the amount which it paid minus the

fair value of services performed. This approach is, in essence, a

request for a compensatory money damages award, and it is subject

to the same infirmity that plagues PEPCO’s entire case, namely

PEPCO’s inability to quantify the value of the services that EMS

allegedly did not perform. See Volckmann v. Edwards, 642 F. Supp.

109, 115 (N.D. Cal. 1986) (recission available in private RICO where

"it amount[s] to out-of-pocket losses — damages, in essence"); Western Contracting Corp. v. Bechtel Corp., 885 F.2d 1196, 1204 (4th Cir.

1989) (stating that under Maryland’s essentially recissionary "out of

pocket" method for determining damages, the plaintiff must produce

evidence of the actual value of the services rendered).5

V.

Because PEPCO adduced sufficient proof of the fact of injury to

its business or property to survive summary judgment, we reverse the

district court’s grant of summary judgment to EMS on the basis of

lack of proof of damages. We remand to the district court to consider

EMS’s motion for summary judgment based on lack of proof of fraud.

Because we are bound by circuit precedent, we are constrained not to

equitable relief is available in a private civil RICO action, and reserve for

another day the question of whether relief which goes beyond a purely

compensatory measure of money damages is available in private civil

RICO actions. Compare Religious Tech. Ctr. v. Wollersheim, 796 F.2d

1076, 1084 (9th Cir. 1986) (concluding that injunctive relief is not available in private civil RICO actions), with Chambers Dev. Co. v.

Browning-Ferris Indus., 590 F. Supp. 1528, 1540-41 (W.D. Pa. 1984)

(holding that injunctive relief is available in private civil RICO actions).

5PEPCO suggested at oral argument that when the recissionary measure of money damages is used, the burden shifts to EMS to prove the

fair market value of the services rendered. PEPCO provides no authority

for this assertion, and we believe that Western Contracting Corp. v.

Bechtel Corp, 885 F.2d 1196, 1204 (4th Cir. 1989), provides a contrary

rule for fraud cases. 

10 POTOMAC ELECTRIC POWER v. ELECTRIC MOTOR & SUPPLY
take up EMS’s request that we hold that "investment use injury" is an

essential prerequisite of a civil RICO action. Finally, we hold that

PEPCO is not entitled to recission. 

AFFIRMED IN PART, REVERSED

IN PART, AND REMANDED

POTOMAC ELECTRIC POWER v. ELECTRIC MOTOR & SUPPLY 11