Opinion ID: 2720468
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Heading: Civil RICO Statute of Limitations

Text: RICO provides a private right of action in federal court for individuals injured in their business or property through fraudulent conduct. A RICO plaintiff must prove “(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.” Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 (1985). “The term ‘rackeetering activity’ is defined to include a host of so-called predicate acts,” Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639, 647 (2008), including “any act which is indictable under . . . section 1343 (relating to wire fraud).” 18 U.S.C. § 1961(1)(B). It thus sweeps in a number of traditional common law fraud claims if the requisite pattern and entity requirements are met. The Mafia, of course, is the quintessential racketeering enterprise, but normal businesses can also fall under RICO’s broad criminal and civil rubric. Civil RICO damages claims are subject to a four-year statute of limitations. Rotella v. Wood, 528 U.S. 549, 552 (2000); Agency Holding Corp. v. Malley-Duff & Assocs., 483 U.S. 143, 156 (1987). Barring actions after a fixed time, the Supreme Court has explained, serves the “basic policies of . . . repose, elimination of stale claims, and certainty about a plaintiff’s opportunity for recovery and a defendant’s potential liabilities.” Rotella, 528 U.S. at 555; see also Gabelli v. SEC, 133 S. Ct. 1216, 1221 (2013) (“Statutes of limitations are -10- intended to promote justice by preventing surprises through the revival of claims that have been allowed to slumber until evidence has been lost, memories have faded, and witnesses have disappeared.” (citations and internal quotation marks omitted)). The civil RICO limitations provision is particularly significant in light of civil RICO’s objective of “encouraging prompt litigation to combat racketeering.” Rotella, 528 U.S. at 557 n.3. Traditionally, a right “accrues”—starts the clock ticking on the limitations period—“when the plaintiff has a complete and present cause of action.” Gabelli, 133 S. Ct. at 1222 (citations and internal quotation marks omitted); Heimeshoff v. Hartford Life & Accident Ins. Co., 134 S. Ct. 604, 610 (2013) (“As a general matter, a statute of limitations begins to run when the cause of action ‘accrues’—that is, when the plaintiff can file suit and obtain relief.” (citations and internal quotation marks omitted)); Black’s Law Dictionary (9th ed. 2009) (defining “accrue” as “[t]o come into existence as an enforceable claim or right”). Under this rule, often called the “injury-occurrence rule,” a claim would “accrue” when the injury occurs, even if undiscovered. See Petrella v. Metro-GoldwynMayer, Inc., 134 S. Ct. 1962, 1969 n.4 (2014). But exceptions exist to the injury-occurrence rule where the nature of the harm or the cause of the harm is difficult to detect. Think of medical malpractice claims as the paradigmatic example. Fraud is another example of such an exception. See Merck & Co. v. Reynolds, 130 S. Ct. 1784, 1794 (2010) (“[W]here -11- a plaintiff has been injured by fraud and remains in ignorance of it without any fault or want of diligence or care on his part, the bar of the statute does not begin to run until the fraud is discovered.” (citations and internal quotation marks omitted)). In these exceptional cases, courts apply an injury-discovery rule, which provides that the injury “is deemed to be discovered when, in the exercise of reasonable diligence, it could have been discovered.” Id. (citations and internal quotation marks omitted); see also Gabelli, 133 S.Ct. at 1222. The rationale for the injury-discovery rule hinges on the deceptive nature of the injury. Absent an exception to the general injury-occurrence accrual rule, a perpetrator’s deceptive conduct could “prevent a plaintiff from even knowing that he or she has been defrauded” and produce the perverse result that “the law which was designed to prevent fraud could become the means by which it is made successful and secure.” Id. at 1221 (citations and internal quotation marks omitted). But the Supreme Court has emphasized that, although the injurydiscovery rule codifies the presumption that “equity tolls the statute of limitations in cases of fraud or concealment,” it does not stand for the “general presumption [that the injury-discovery rule is] applicable across all contexts.” TRW Inc. v. Andrews, 534 U.S. 19, 27 (2001) (emphasis added). 4 4 The Supreme Court has applied the injury-discovery rule in the limited context of latent disease and medical malpractice where “the cry for such a rule is loudest.” TRW Inc., 534 U.S. at 27 (citations and internal quotation marks omitted) (noting that these are the “only other cases” where the Supreme Court (continued...) -12- The RICO statute does not provide an accrual rule, and the Supreme Court has not weighed in definitively on the issue. But the Court has recognized that either the injury-discovery rule or the injury-occurrence rule will apply. See Rotella, 528 U.S. at 553–54; Dummar v. Lummis, 543 F.3d 614, 621 (10th Cir. 2008). In Rotella, the Court emphasized that RICO was patterned on the Clayton Act, which employs the injury-occurrence rule, and that analogies between RICO and the Clayton Act are particularly apt because both statutes share the common provenance of “encouraging civil litigation to supplement Government efforts to deter and penalize the respectively prohibited practices.” 528 U.S. at 557. The Rotella Court also rejected the notion that “the connection between civil RICO and fraud” necessarily justifies the adoption of an accrual rule specific to fraud. Id. at 557 (“Nor does Rotella’s argument gain strength from the fact that some patterns of racketeering will include fraud, which is generally associated with a different accrual rule; we have already found the connection between civil RICO and fraud to be an insufficient ground for recognizing a limitations period beyond four years.”). But even so, the Supreme Court explicitly refused to “settle upon a 4 (...continued) has recognized a discovery rule). Thus, a tort victim’s claim under these causes of action accrues at the time the plaintiff reasonably discovers or should have discovered his injury and its cause, not simply at the time of the plaintiff’s injury regardless of its discovery. United States v. Kubrick, 444 U.S. 109, 120 (1979); Urie v. Thompson, 337 U.S. 163 (1949). -13- final rule,” because the merits of the injury-occurrence rule had not been adequately presented to the Court. Id. at 554 n.2. We have yet to adopt either an injury-discovery or injury-occurrence rule for a civil RICO claim in this circuit. Dummar, 543 F.3d at 621. But almost every other circuit currently applies some form of the injury-discovery rule to civil RICO claims. 5 Most of these courts have done so simply based on the principle that “[f]ederal courts . . . generally apply a discovery accrual rule when a statute is silent on the issue, as civil RICO is here,” Rotella, 528 U.S. at 555, although the Supreme Court has expressly refused to adopt that view as its own. See TRW Inc., 534 U.S. at 27. While we have yet to adopt an accrual rule for civil RICO cases, we have applied the injury-discovery rule to claims brought under the Federal Tort Claims Act (FTCA) and medical malpractice cases. Plaza Speedway v. United States, 311 F.3d 1262, 1267 (10th Cir. 2002). But we apply the injury-discovery rule only in the “exceptional case” where a “reasonably diligent plaintiff could not 5 See, e.g., Lares Grp. II v. Tobin, 221 F.3d 41, 44–45 (1st Cir. 2000); Cohen v. S.A.C. Trading Corp., 711 F.3d 353, 361 (2d Cir. 2013); Mathews v. Kidder, Peabody & Co., 260 F.3d 239, 250 (3d Cir. 2001); Pocahontas Supreme Coal Co. v. Bethlehem Steel Corp., 828 F.2d 211, 220 (4th Cir. 1987); Boulmay v. Rampart 920, Inc., 124 F. App’x 889, 891 (5th Cir. 2005); Sims v. Ohio Cas. Ins. Co., 151 F. App’x 433, 435–36 (6th Cir. 2005); Jay E. Hayden Found. v. First Neighbor Bank, N.A., 610 F.3d 382, 386–87 (7th Cir. 2010); Klehr v. A.O. Smith Corp., 87 F.3d 231, 238–39 (8th Cir. 1996), aff’d, 521 U.S. 179 (1997); Pincay v. Andrews, 238 F.3d 1106, 1109 (9th Cir. 2001); Pac. Harbor Capital, Inc. v. Barnett Bank, N.A., 252 F.3d 1246, 1251 (11th Cir. 2001); Riddell v. Riddell Wash. Corp., 866 F.2d 1480, 1489–90 (D.C. Cir. 1989). -14- immediately know of the injury and its cause.” Cannon v. United States, 338 F.3d 1183, 1190 (10th Cir. 2003) (citing Plaza Speedway, 311 F.3d at 1268); accord Bayless v. United States, __ F.3d __, No. 12-4120, 2014 WL 1663082, at  (10th Cir. 2014); Arvayo v. United States, 766 F.2d 1416, 1421 (10th Cir. 1985). And in applying the injury-discovery rule to these “exceptional cases,” we have consistently emphasized that the rule only “‘protects plaintiffs who are blamelessly unaware of their claim because the injury has not yet manifested itself or because the facts establishing a causal link between the injury and [the cause of the injury] are in the control of the tortfeasor or otherwise not evident.’” Bayless, 2014 WL 1663082, at  (quoting Plaza Speedway, 311 F.3d at 1267). Absent exceptional circumstances, the general injury-occurrence rule governs the statute of limitations for FTCA claims. Id. (“The general accrual rule for FTCA claims is the ‘injury-occurrence rule,’ where the tort claim accrues on the date of injury.” (citations and internal quotation marks omitted)). We need not decide in this case which accrual rule governs civil RICO claims because Kroenlein’s claims are barred under either the injury-occurrence or the injury-discovery rule. Under the injury-occurrence rule, the RICO “injury” to Kroenlein’s business occurred when Kirchhefer began stealing beer from J&B in 2005. Under the injury-discovery rule, Kroenlein’s claims accrued when the Aldens knew or should have known of their injury. As we explain below, the -15- undisputed facts in this case show that, through the exercise of reasonable diligence, Kroenlein should have discovered Kirchhefer’s theft within four years of September 2005, the point at which Eric Alden admitted he was aware of significant discrepancies between beer sales and purchases that were not due to seasonal variations. We therefore conclude that under either accrual rule, Kroenlein’s civil RICO claims are time-barred.