Opinion ID: 483247
Heading Depth: 3
Heading Rank: 2

Heading: Tolling as to the Sec. 1983 and RICO Claims

Text: 89 Plaintiffs do not challenge the district court's ruling that a three-year limitations period is applicable to their Sec. 1983 claims, but they contend that the running of that period was tolled by the pendency of their state court action and by duress by the defendants deterring the earlier pursuit of their claims. They contend also that, if the RICO claims are governed by CPLR Sec. 214(2)'s three-year limitations period, that period was likewise tolled. The district court ruled that there was no significant tolling of the statute. We agree with plaintiffs' contentions, for when a federal court looks to state law to determine the most appropriate statute of limitations, it must also, so long as federal policy is not thereby offended, apply the state's rules as to the tolling of the statute. Chardon v. Fumero Soto, 462 U.S. 650, 655-62, 103 S.Ct. 2611, 2615-19, 77 L.Ed.2d 74 (1983). New York law follows two tolling rules that are pertinent to this case. 90
91 In American Pipe & Construction Co. v. Utah, 414 U.S. 538, 94 S.Ct. 756, 38 L.Ed.2d 713 (1974) (American Pipe ), in the context of a private action to enforce the federal antitrust laws, the Supreme Court approved the intervention of third parties on whose claims the statute of limitations would otherwise have run, on the ground that the commencement of a class action suspends the applicable statute of limitations as to all asserted members of the class who would have been parties had the suit been permitted to continue as a class action. Id. at 554, 94 S.Ct. at 766. The Court reasoned that tolling was necessary to further the purposes of Fed.R.Civ.P. 23's provision for class actions, and that no injustice was done to the defendant, since the timely commencement of the class action against it provides adequate notice of the claims against it within the statutory period: 92 The policies of ensuring essential fairness to defendants and of barring a plaintiff who has slept on his rights, ... are satisfied when, as here, a named plaintiff who is found to be representative of a class commences a suit and thereby notifies the defendants not only of the substantive claims being brought against them, but also of the number and generic identities of the potential plaintiffs who may participate in the judgment. 93 Id. at 554-55, 94 S.Ct. at 766-67. 94 The American Pipe tolling principle applies also when the class action has been dismissed and those who would have been class members commence an independent suit. See Crown, Cork & Seal Co. v. Parker, 462 U.S. 345, 350-51, 103 S.Ct. 2392, 2395-96, 76 L.Ed.2d 628 (1983) (Crown, Cork ). The reason is that absent putative class members are expected and encouraged to remain passive during the early stages of the class action and to rely on the named plaintiffs to press their claims. Id. at 352-53, 103 S.Ct. at 2396-97; see also American Pipe, 414 U.S. at 552, 94 S.Ct. at 765. Not until a class is certified does a class member have any duty to take note of the suit or to exercise any responsibility with respect to it.... Id. An absent putative class member in an action where a class was never certified thus is not legally bound either by the named plaintiffs' choice of legal claims or by a dismissal for failure to allege sufficient facts to state a cause of action, even if that dismissal would have res judicata effect against the named plaintiffs. See Shelton v. Pargo, Inc., 582 F.2d 1298, 1314-15 (4th Cir.1978); Roman v. ESB, Inc., 550 F.2d 1343, 1355-56 (4th Cir.1976); 7B C. Wright, A. Miller & M. Kane, Federal Practice and Procedure Sec. 1789, at 243 (2d ed. 1986). 95 Notwithstanding the district court's belief that New York law does not provide for a toll of the statute of limitations during the pendency of a similar or related action, Memorandum of Decision and Order dated February 21, 1984, at 4, the New York courts have, in the interest of avoiding court congestion, wasted paperwork and expense, long embraced the principles of American Pipe. See Yollin v. Holland America Cruises, Inc., 97 A.D.2d 720, 720, 468 N.Y.S.2d 873, 875 (1st Dep't 1983) (Yollin) (We ... hold that the timely commencement of the action by plaintiff herein satisfied the purpose of the contractual limitation period as to all persons who might subsequently participate in the same suit as members of the class. See American Pipe.... ); Clifton Knolls Sewerage Disposal Co. v. Aulenbach, 88 A.D.2d 1024, 1025, 451 N.Y.S.2d 907, 908 (3d Dep't 1982) (the Statute of Limitations on each of plaintiff's claims was tolled during the pendency of [a prior] class action) (citing Sutton Carpet Cleaners v. Fireman's Ins. Co., 68 N.Y.S.2d 218, 224 (Sup.Ct. Bronx Co. 1947), aff'd, 273 A.D. 944, 78 N.Y.S.2d 565 (1st Dep't 1948), aff'd, 299 N.Y. 646, 87 N.E.2d 53 (1949)). In Sutton Carpet Cleaners, 68 N.Y.S.2d at 224, the court was faced with 79 individual actions, at least some of which apparently had not been timely filed, and one purported class action filed days before the running of the limitations period. The court noted that [t]he law undoubtedly is that a representative action timely brought saves all represented claims from the running of the statutory or contractual period of limitations, and ruled that tolling had occurred in the case before it even though the putative class plaintiff was not a proper representative of the class. See also 2 Weinstein-Korn-Miller, New York Civil Practice p 901.06, at 9-21 (1986) (filing of class actions tolls statute of limitations as to all members of class even if the class action is ultimately dismissed for reasons other than the fact that it was a frivolous action) (citing American Pipe ). 96 Notwithstanding the differences between the legal theories advanced by plaintiffs in the state court action and those advanced in the present action, we are persuaded that the American Pipe doctrine has applicability to the present action. The functional purpose of a statute of limitations is to prevent stale lawsuits, i.e., suits after evidence has been lost, memories have faded, and witnesses have disappeared. American Pipe, 414 U.S. at 554, 94 S.Ct. at 766. In American Pipe and Crown, Cork, 462 U.S. at 353, 103 S.Ct. at 2397, the Supreme Court held that tolling based on the filing of a prior class action is consistent with these purposes. Consequently, American Pipe tolling is properly extended to claims of absent class members that involve the same evidence, memories, and witnesses as were involved in the initial putative class action. See United Airlines, Inc. v. McDonald, 432 U.S. 385, 393-94 n. 14, 97 S.Ct. 2464, 2469-70, n. 14, 53 L.Ed.2d 423 (1977); Crown, Cork, 462 U.S. at 355, 103 S.Ct. at 2398 (Powell, J., concurring, joined by Rehnquist and O'Connor, JJ.); American Pipe, 414 U.S. at 562, 94 S.Ct. at 770 (Blackmun, J., concurring); Escott v. Barchris Construction Corp., 340 F.2d 731, 734 (2d Cir.) (tolling applies when through initial class action defendants were thus made aware of the nature of the evidence that would be needed at trial), cert. denied, 382 U.S. 816, 86 S.Ct. 37, 15 L.Ed.2d 63 (1965). 97 We conclude that the American Pipe doctrine, though not applicable to all of the defendants in the present case, see Parts IV.B.1 and V.A. below, is applicable to claims against the County. The state court action filed by Cullen and Jund, asserting that they, as County employees, had been coerced to contribute funds to the Nassau County Republican Party, purported to be brought on behalf of themselves and all others similarly situated. The factual basis of that action was the same as that asserted here, i.e., that contributions were coerced from County employees and noncontributors were punished. The defendants in the putative state class action were thus on notice to preserve evidence concerning their alleged coercion of contributions from that group of persons and their alleged reprisals against those who refused to contribute. Since the alleged wrongful acts are the same, the relevant evidence, memories, and witnesses with regard to these facts are the same for both actions. 98 Obviously there are differences between the state-law causes of action that were asserted in the putative state class action and the federal causes of action asserted here that are pertinent for some purposes: for example, the civil RICO elements that have a bearing on what state statute of limitations is most analogous, see Part III.C.1, supra. But these elements are entirely peripheral. The differences that distinguish a civil RICO cause of action from state-law causes of action for purposes of determining which statute of limitations to apply are not the sorts of elements that suggest that American Pipe tolling would be inconsistent with the functional goal of statutes of limitations. For example, no special preservation of witnesses or evidence would ordinarily be necessary as to the factors of effect on interstate commerce, degree of exposure to liability (single damages vs. treble damages plus attorneys' fees), the timing of the predicate acts (whether they occurred within a 10-year period), or the existence of a RICO enterprise. The degree of exposure is a matter of law; the dates of the predicate acts will be apparent from the proof of the occurrence of those acts; the questions of whether there was a RICO enterprise and whether any person's activities affected interstate commerce would ordinarily be questions of inference to be drawn from the proof of the background facts surrounding the challenged conduct. The challenged conduct is what is common to both the RICO and the state-law claims, and that is what the defendant must be alerted to in order to preserve its evidence, record its recollections, and keep track of its witnesses. The state court complaint clearly challenged the conduct that is at issue here, and we would be hard pressed to conclude that that complaint was not sufficient to alert the defendants sued there to preserve the evidence regarding that conduct. 99 Unlike Judge Meskill in his dissenting opinion, post, we do not regard the fact that the state court action was premised on different legal theories as a reason not to apply American Pipe tolling to save the claims of class members who were not named plaintiffs in the state court action. It is not a flaw under that doctrine that the first action did not alert the defendant to have its lawyers research the applicability of a particular statute or rule of common law. Indeed, limiting American Pipe tolling to the identical causes of action asserted in the initial class action would encourage and require absent class members to file protective motions to intervene and assert their new legal theories prior to class certification, thereby producing the very results the New York courts seek to prevent by such tolling, i.e., court congestion, wasted paperwork and expense. Yollin, 97 A.D.2d at 720, 468 N.Y.S.2d at 875; see also American Pipe, 414 U.S. at 553-54, 94 S.Ct. at 766-67; Crown, Cork, 462 U.S. at 350-51, 103 S.Ct. at 2395-96. 100 In sum, because the asserted factual basis of the state court claims was the same as that of the claims asserted here and the County was made a defendant to that action, the running of the statute on the claims of the absent plaintiff class members against the County was thereby tolled. We note that the named plaintiffs in the state action, Cullen and Jund, assert here claims that accrued in 1974 and are therefore timely without regard to American Pipe tolling. 101 The time during which the running of the statute was tolled, on the American Pipe theory, was the period of the pendency of the state court action. That action was commenced on December 2, 1974. The complaint was dismissed by the trial court in February 1975, Cullen v. Margiotta, 81 Misc.2d 809, 367 N.Y.S.2d 638 (Sup.Ct.Nassau Co. 1975), and after that court's denials in 1975 and 1976 of motions for leave to replead and reargue, the dismissal was finally affirmed by the Appellate Division in October 1977. Cullen v. Margiotta, 59 A.D.2d 831, 399 N.Y.S.2d 160 (2d Dep't 1977). Hence, insofar as the American Pipe doctrine is concerned, the running of the statute of limitations was tolled from December 2, 1974, until October 1977, i.e., well past the December 14, 1976 commencement of the present action. Thus, the district court's ruling that all claims accruing prior to December 14, 1973, are time-barred was erroneous. Instead, plaintiffs are entitled to pursue here claims against the County that accrued as early as three years prior to the date of the commencement of the state court action, i.e., claims that accrued on or after December 2, 1971. 102 Further, as we next discuss, the running of the statute may, by virtue of a different theory, have been tolled for an even longer period. 103
104 The second New York doctrine that may be applicable to toll the running of the statute holds that when duress is part of the cause of action alleged, the statute of limitations is tolled until the duress has ended because the offensive conduct is regarded as a continuous wrong. Baratta v. Kozlowski, 94 A.D.2d 454, 458-59, 464 N.Y.S.2d 803, 806 (2d Dep't 1983) (citing Kamenitsky v. Corcoran, 97 Misc. 384, 388, 161 N.Y.S. 756, 759 (Sup.Ct.App. Term 1916), rev'd on other grounds, 177 A.D. 605, 164 N.Y.S. 297 (1st Dep't 1917)); accord Pacchiana v. Pacchiana, 94 A.D.2d 721, 462 N.Y.S.2d 256, 257 (2d Dep't 1983) (citing Kamenitsky v. Corcoran ); McLaughlin, Supplementary Practice Commentaries C 201:6, at 25 (McKinney Supp.1987). In Kamenitsky v. Corcoran, the plaintiff alleged that the defendant had repeatedly extorted money from him by threatening to cause the revocation of his license to do business unless payments were made. The court held that the statute of limitations on plaintiff's claim to recover the payments was tolled until the time when the [plaintiff's] compulsion through fear ceased. 97 Misc. at 388, 161 N.Y.S. at 959. Thus, the duration of the tolling under the duress theory is the period during which the duress continued. Id.; Baratta v. Kozlowski, 94 A.D.2d at 458-59, 404 N.Y.S.2d at 806. 105 Kamenitsky stands only for the proposition that duress tolls the running of a statute of limitations if duress against the plaintiff is an element of the cause of action asserted. If a plaintiff was under some duress from the defendant not to sue but duress is not part of the gravamen of his claim, New York courts do not toll the statute of limitations. Piper v. Hoard, 107 N.Y. 67, 70-72, 13 N.E. 626 (1887) (duress does not toll statute on claim for fraud); Baratta v. Kozlowski, 94 A.D.2d at 459-60, 404 N.Y.S.2d at 806-07 (threat to kill does not toll statute on claim for conversion of property); Stadtman v. Cambere, 73 A.D.2d 501, 422 N.Y.S.2d 102, 103 (1st Dep't 1979) (threat to have plaintiff fired does not toll statute on claim for conversion of property). 106 The tolling-by-duress principle has evident potential application to the present action. Plaintiffs' principal complaint is that, as part of defendants' annual fund-raising campaign, employees of the Town and the County were coerced to make payments of one percent of their salaries in order to gain promotions or other employment benefits. The contention is that these forced payments both (1) constituted extortion within the meaning of the Hobbs Act, 18 U.S.C. Sec. 1951 (1982), see, e.g., United States v. Margiotta, 688 F.2d at 134; United States v. Brecht, 540 F.2d 45, 51 (2d Cir.1976), cert. denied, 429 U.S. 1123, 97 S.Ct. 1160, 51 L.Ed.2d 573 (1977); United States v. Daley, 564 F.2d 645, 648 (2d Cir.1977), cert. denied, 435 U.S. 933, 98 S.Ct. 1508, 55 L.Ed.2d 530 (1978), thereby providing the predicate racketeering activity needed to sustain a civil RICO claim, and (2) deprived them of their First Amendment rights to associate with the political parties of their choice, which is the gravamen of their claims under Sec. 1983. Plaintiffs seek refunds of their coerced contributions. As duress is clearly an element of these claims, the court erred in ruling that all claims accruing earlier than December 14, 1973, were automatically barred. 107 We note also that, although the actual applicability of the tolling-by-duress principle to any given class member depends on a factual finding of duress on him within three years of the commencement of suit, as a general matter the existence of duress was, to a substantial degree, supported at the liability trial. The jury found that the Town, the Town Committee, and the County Committee had engaged in a practice and procedure of the coercive solicitation of contributions, and that a substantial number of [Town employees] generally underst[oo]d that they were expected to contribute about one percent of their annual salaries to the Republican Party and fear[ed] that if they failed or refused to [do so] they would lose opportunities for promotion, overtime and other requests for favorable consideration. (Interrogatories 1(a), (b), (d), and (e).) The jury found that these three defendants were aware, or should reasonably have foreseen, that they were exploiting the employees' fears (interrogatory 3), and found that in all of the 11 specific instances queried in the interrogatories, employees had made payments that were induced by such fear (interrogatories 7 and 8). A factfinder could also reasonably infer that a person who made a payment under duress in order to gain or preserve employment benefits was unlikely to feel free to bring suit immediately thereafter. Thus, although a cause of action for refund may have accrued at a certain time, the duress factor may well have prevented the statute from running for some time thereafter, perhaps until the next demand was made, or until a demand was made but rejected. For example, an employee who made a contribution under duress in early 1973 may have been under duress until the next demand for an annual contribution was made in early 1974; if this were found, the statute would have been tolled until early 1974, and the pursuit of his claim for refund in the present action would be timely notwithstanding its accrual prior to December 14, 1973. In other words, a claim that accrued prior to December 14, 1973, was timely asserted in the present case if the duress that induced the payments continued at least until December 14, 1973. As another example, the jury found that five persons had been coerced to make payments in 1974; if those persons also made payments under duress from defendants prior to December 14, 1973, the jury could infer that that duress was continuous, and the claim for recovery of those earlier payments would not be time-barred. 108 Though the timeliness of the claims described in some of these illustrations may have become irrelevant as to the County on account of its exoneration by the jury with respect to its activities during the period covered by the trial of the liability issues, the principle is discussed here because, as set forth in the preceding section, the American Pipe doctrine makes timely all claims of plaintiff class members against the County that accrued on or after December 2, 1971. The combined effect of American Pipe and the tolling-by-duress principle is to make timely those claims against the County of which duress is an element even if they accrued prior to December 2, 1971, if the duress continued at least to that date. 109 We stress, however, that the duress theory is not available to toll all of the claims of all of the class members. First, some of those persons contend that although contributions were coercively solicited, they refused to contribute. Their claims for lost job opportunities, while still cognizable under civil RICO and Sec. 1983, do not involve capitulation to duress but rather are claims for retaliation on account of their rejection of improper demands. We do not believe that New York law extends the tolling-by-duress principle this far. Further, since the tolling lasts only so long as the duress lasts, there may be class members to whom the principle does not apply because they made no payments under duress within three years of the commencement of suit on these claims. For example, the jury found that several employees made induced payments in the period 1968 to 1970. If these employees made no further payments under duress, the tolling may well have ended not later than 1970. Since the state court action was not begun until 1974, the claims of these employees would, by hypothesis, already have been barred by the three-year statute of limitations. 110 As to the claims to which the tolling-by-duress principle is applicable, there seems, in theory, to be no limit as to how old a claim might be timely. We note, however, that plaintiffs' amended complaint requests refunds of sums coercively collected since 1971. As a practical matter, therefore, assuming there has been no amendment to this pleading, we regard claims that accrued prior to January 1, 1971, as not being at issue. 111 In sum, we conclude that New York's tolling-by-duress principle has some application to the present action and may well permit the pursuit of many claims that the district court ruled were time-barred. The fact-specific nature of the duress contention means that on this appeal we can give the district court only the above general guidance. We leave it to the court on remand to determine, either summarily where there are no genuine questions of material fact on these duress issues or after a trial at which these questions are put to the jury, which plaintiffs, if any, are entitled to the benefit of the New York rule that where duress is part of the cause of action, it tolls the statute of limitations for as long as the duress continues. 112