Seeing the forest: a holistic view of the RICO statute of limitations.

• Author: McNeill, Carli

INTRODUCTION

"Though rarely the subject of sustained scholarly attention, the law concerning statutes of limitations fairly bristles with subtle, intricate, often misunderstood issues...." (1) Admittedly, the statute of limitations for the Racketeer Influenced and Corrupt Organizations Act (2) (RICO) is not one of the hottest topics among legal commentators; yet, the importance of the statute of limitations in civil RICO cases can hardly be overstated. Even a defendant who has admittedly (even criminally) violated RICO cannot be held civilly liable if the injured party does not file a timely complaint. This is true of all civil causes of action, but the consequences are three times as great for plaintiffs in civil RICO cases because triple damages are at stake. Simply put, in a civil RICO case, the difference between a timely and an untimely complaint can be the difference between recovering nothing and recovering triple damages. Thus, determining whether the plaintiff has brought suit within the limitations period is critical for both plaintiffs and defendants.

Statutes of limitations contain three discrete aspects: (1) length of the limitations period, (2) accrual, and (3) tolling. These three aspects work in concert. It simply does not make sense to view them in isolation. (3) This certainly is not a new revelation, but it is too often ignored. Indeed, forty years after the passage of RICO, courts have still not developed a coherent and comprehensive view of the RICO statute of limitations that includes all three aspects. Commentators, too, have failed to propose a complete and coherent view of the RICO statute of limitations. This is not to say that commentators have ignored the RICO statute of limitations. Rather, they have tended to focus on single, discrete aspects of the RICO statute of limitations; specifically, commentators have generally focused on which limitations period courts should adopt (4) (the RICO statute does not contain its own statute of limitations) and when the RICO statute of limitations should accrue. (5)

Now that both of these issues have (for all practical purposes) been settled, (6) this Note takes up the last statute of limitations issue, tolling, and examines it in conjunction with the other two aspects of the RICO statute of limitations. By so doing, this Note will offer a comprehensive view of the RICO statute of limitations that is consistent not only with the current state of the law but also with the purposes of statutes of limitations generally. Part I of this Note discusses the purposes of statutes of limitations. Part II discusses how the law has developed regarding the length of the RICO limitations period and when it accrues as well as the problems that arise when the discovery accrual rule is applied to civil RICO claims. Part III identifies tolling doctrines that courts can use to solve the problems associated with the discovery accrual rule and proposes a new tolling rule for RICO taken from the Clayton Antitrust Act. The Conclusion summarizes how taking into account all three aspects of the RICO statute of limitations leads to a complete and coherent timeliness rule that is fair to plaintiffs and defendants alike.

1. THE PURPOSES OF CIVIL STATUTES OF LIMITATIONS

   The overarching aim of statutes of limitations is to balance the needs of plaintiffs against those of defendants and of society. As a general matter, plaintiffs should be able to sue for compensation when injured, but at some point the defendant's "right to be free of stale claims ... prevail[s] over the [victim's] right to prosecute them." (7) Thus, the primary purpose of statutes of limitations is to give plaintiffs an incentive to litigate claims without unreasonable delay. (8) In so doing, statutes of limitations benefit defendants by providing repose when the plaintiff has slept on his claim. (9) Furthermore, statutes of limitations protect defendants from having to defend themselves against stale (and perhaps even fraudulent) charges when so much time has passed that evidence has been lost. (10) Statutes of limitations also provide certainty to potential defendants, notifying them of the length of their exposure to liability. (11) The certainty and finality provided by statutes of limitations benefits society as well by letting bygones be bygones and allowing everyone to move on. (12) More specifically, society is benefitted when courts are relieved of the burden of trying stale cases. (13)

   How can legislatures and courts appropriately balance the interests of plaintiffs, defendants, and society when dealing with a statute of limitations issue? The most important thing legislatures and courts can do is keep in mind that a statute of limitations is not just a number. There are three aspects to every statute of limitations: (1) the length of the limitations period, (2) the point at which the limitations period begins to run (accrual), and (3) circumstances that toll the limitations period. When a legislature or court faces a decision that affects any of these three aspects, it must consider the purposes behind statutes of limitations because decisions about accrual and tolling implicate the purposes of statutes of limitations just as much as the determination of the length of the limitations period. Furthermore, legislatures and courts must be aware of how the three aspects of statutes of limitations work together. For example, when a legislature is determining what the length of the limitations period should be, it cannot appropriately balance the interests of plaintiffs, defendants, and society without also considering when the limitations period should accrue because "any period of limitation is utterly meaningless without specification of the event that starts it running." (14) Perhaps this seems like an obvious point, but legislatures continually enact statutes of limitations without any reference to when the limitations period should accrue or be tolled. (15)

2. WHERE ARE WE Now? (AND How DID WE GET HERE?)

   When Congress passed the RICO Act in 1970, it included a civil cause of action but no statute of limitations. As a result, for forty years, courts have struggled with RICO statute of limitations issues. The first major problem courts confronted was determining what limitations period to apply to RICO. The second problem was determining when that limitations period begins to run (accrue). This Part traces how the courts have dealt with these two problems.

   1. Length of the Limitations Period

      1. Before Agency Holding Corp. v. Malley-Duff & Associates, Inc.

         Before 1987, when the Supreme Court decided Agency Holding Corp. v. Malley-Duff & Associates, Inc., (16) civil RICO cases did not have a clearly applicable limitations period. (17) One might assume that by passing RICO without a statute of limitations Congress intended that no statute of limitations should govern civil RICO claims; however, courts have not taken this approach. Except in rare circumstances, when a federal cause of action lacks an express limitations period, courts assume that a limitations period should apply and adopt the most closely analogous limitations period provided by state law. (18) In theory, at least, adopting state limitations periods ensures that some limitations period will apply to bar stale federal claims and thus vindicate the rationales in favor of statutes of limitations. (19) In practice, though, the adoption of state limitations periods tends to undermine the purposes of statutes of limitations and lead to forum shopping and unfairness.

         As a general matter, applying state statutes of limitations to federal causes of action promotes uncertainty and a lack of uniformity. (20) This is because limitations periods vary from state to state so the application of state statutes of limitations to a federal cause of action will necessarily lead to diverse limitations periods applying to the same federal cause of action. This, however, is the least of the complications. The statute of limitations for a given federal cause of action may also vary among different districts within states and even case to case depending on how the federal district courts characterize the cause of action and apply state borrowing statutes. (21) This lack of uniformity and certainty can make it almost impossible for plaintiffs to determine when they are required to file their claims and for defendants and society to benefit from the repose that statutes of limitations are supposed to provide. (22) Furthermore, this complicated area of law increases litigation, thereby delaying a final decision on the merits of the case--a problem that statutes of limitations, as bright-line rules, are supposed to prevent. (23) The lack of uniformity can also lead to forum shopping and unfairness. Finally, adopting state limitations periods for federal causes of action is inherently problematic because state legislatures design state limitations periods with state interests and particular state causes of action in mind. Thus, applying a state limitations period to a federal cause of action may frustrate the purposes of the federal cause of action. These problems associated with applying state limitations periods to federal causes of action were all on display when, before Malley-Duff courts tried to apply state statutes of limitations to civil RICO cases. (24)

      2. Agency Holding Corp. v. Malley-Duff & Associates, Inc.

         In light of all the problems associated with applying state statutes of limitations to civil RICO claims, the Supreme Court, in 1987, finally undertook to provide a uniform limitations period for civil RICO.

         The facts of Malley-Duff are nondescript. Malley-Duff & Associates, Inc. ("Malley-Duff") was an agent of Crown Life Insurance Company ("Crown Life") engaged in selling insurance in the Pittsburgh area. (25) When Malley-Duff failed to meet its annual production quota, Crown Life terminated its agency. (26) Malley-Duff then filed suit...