Time-bars: RICO-criminal and civil-federal and state.

AuthorBlakey, G. Robert
PositionIII. Statutes of Limitations in Civil Rico Cases C. Determining the Point of Accrual 2. The Clayton Act Rule through D. Tolling of Civil Statutes of Limitations 1. Tolling, p. 1707-1753
  1. The Clayton Act Rule

    While the majority in Klehr was reluctant to decide finally on an accrual rule for civil RICO, Justice Scalia in his concurring opinion argued for the adoption of the Clayton Act or the injury-occurrence accrual rule. (338) In Zenith Radio Corp. v. Hazeltine Research, Inc., (339) the Court set out the accrual rule for claims under the Clayton Act:

    [A] cause of action accrues and the statute begins to run when a defendant commits an act that injures a plaintiff's business. In the context of a continuing conspiracy to violate the antitrust laws, ... this has usually been understood to mean that each time a plaintiff is injured by an act of the defendants a cause of action accrues to him to recover the damages caused by that act and that, as to those damages, the statute of limitations runs from the commission of the act. However, each separate cause of action that so accrues entitles a plaintiff to recover not only those damages which he has suffered at the date of accrual, but also those which he will suffer in the future from the particular invasion, including what he has suffered during and will predictably suffer after trial. (340) The Zenith Court made one exception to this accrual rule. If a plaintiff cannot recover future damages, because they are too speculative, "the cause of action for future damages, if they ever occur, will accrue only on the date they are suffered; thereafter the plaintiff may sue to recover them at any time within four years from the date they were inflicted." (341) The Court reasoned that without this exception, plaintiffs could not prove future damages within the limitations period, they would be unrecoverable, and that outcome would be contrary to congressional intent. (342) Thus, unless an exception applies, under the Clayton Act rule, the statute of limitations begins to run from the date of the unlawful act that injures the plaintiff's business. (343) Thus, the Clayton Act accrual rule, as decided in Zenith, is a "separate-accrual" rule. Each time the defendant injured the plaintiff by reason of a violation of the statute, he has a new claim for relief with a separate limitations period. Under the "separate-accrual," as applied to RICO, if a defendant injures a plaintiff multiple times by the same pattern of racketeering, he may only be able to recover for part of those injuries, depending on when he files his claim and various estoppel or tolling rules.

    In spite of Justice Scalia's concurring opinion in Klehr, no circuit court currently applies the Clayton Act accrual rule to civil RICO. (344) That said, the pure Clayton Act or injury-occurrence rule remains an "arguable fit" for RICO. Congress, after all, modeled RICO on the Clayton Act. So far; so good. On the other hand, the Court applies the modeling argument in light of the presence of other fit-factors, as in Malley-Duff for the length of the limitations period, but not, as in Tafflin on the antitrust parallel on whether federal jurisdiction for RICO is, in reference to the states, "exclusive" or "concurrent." Antitrust is; RICO is not. (345) Thus, by itself, the modeling argument is plausible, but neither determinative nor persuasive.

    Under the Clayton Act rule, a victim of a RICO violation has a four-year period within which he may sue for his injury to business or property. Moreover, if five years after a RICO violation, a plaintiff suffers injuries to his business or properties that previously were too speculative to prove, he could then sue for those injuries. (346) So far, so good. Nevertheless, considered as a whole, a "pure"--not carefully modified and tailored to RICO--Clayton Act or an injury-occurrence rule is not aptly suited to civil RICO, principally because it does not include a sufficient consideration of the pattern and enterprise elements, a point the Court alluded to in Klehr. (347)

    First, under the pure Clayton Act or injury-occurrence rule, the statute of limitations for RICO could potentially begin to run against the possible RICO plaintiff before the plaintiff possesses a valid RICO claim, an absurd result. (348) Assume a racketeer bombs the plaintiff's business to show to another business his power in an extortion plot on the other's business. The possible RICO plaintiff knows he is injured, but not who did it. Nor does he know why the bomber did it. He has no reason to look for a pattern, an enterprise, etc. "to trade up" his claim for relief under the common law to a RICO claim for relief. Try as diligently as possible, he may never know who bombed him or why, particularly if the other business pays off the racketeer. Putting aside tolling doctrines that might take care of the "who," under the pure Clayton Act or injury-occurrence rule, the statute runs from the injury, not discovery of the injury and the perpetrator. Moreover, RICO requires a "pattern" of racketeering activity. (349) In H. J. Inc. v. Northwestern Bell Telephone Co., (350) the Court indicated that two acts are "necessary," but not necessarily "sufficient" to form a "pattern." (351) Thus, the pure Clayton Act or injury-occurrence rule--unless modified, but then it would cease to be the Clayton Act rule--arguably starts the statute running on the plaintiffs injury, and it is quite possible that four years will pass before he knows that the racketeer was behind the series of bombings, either in the possible plaintiff's community or elsewhere. That information he may not know until the government indicts the bomber after the civil statute, but not the criminal statute, expires. Similarly, the defendant can injure the plaintiff before the defendant engages in sufficient predicate acts to constitute a "pattern." (352) The defendant could also direct the acts against businesses that are strangers to the possible RICO plaintiff. Moreover, if the perpetrator commits the predicate acts more than four years apart (nevertheless part of a related and continuing series, a theoretical, but not a practical possibility), a victim who the defendant injures by the first predicate act stands barred from bringing a civil RICO claim. Even if a victim is injured by subsequent, pattern-forming predicate acts, the victim, unless the Court modifies the rule, will be unable to recover under RICO for his initial injury under the separate accrual rule (presumably part of the Clayton Act or injury-occurrence rule under consideration), even though it is part of the same "pattern." Nothing in the language of RICO, its legislative history, or its policies creates this artificial barrier to RICO recovery. The plaintiff is diligent in trying to vindicate his rights. The putative defendant can plausibly claim no warranted policy of repose. The court cannot legitimately complain of staleness. Thus, under the pure Clayton Act or injury-occurrence rule--and that is the rule at issue here--victims may not recover for their RICO injuries, even though they are part of the same pattern that injured them, and some victims with RICO injuries will not recover under RICO at all. In sum, unless the Court substantially modifies and tailors the pure Clayton Act rule or injury-occurrence to RICO, it is a poor fit for RICO, despite its modeling on the Clayton Act. To make it work, the Court must add discovery principles, including separate accrual, and tolling doctrines to the pure injury-occurrence rule, but then, the new rule morphs into something else and not the Clayton Act rule. We are back to some form of the discovery rule, which is where the circuits are now.

  2. The Injury and Pattern Discovery Rule and Rotella v. Wood (353)

    Under the injury-and-pattern discovery rule, "a civil RICO cause of action begins to accrue as soon as the plaintiff discovers, or reasonably should have discovered, both the existence and source of his injury and that the injury is part of a pattern." (354) Before Rotella, four circuit courts used some form of this rule for civil RICO. (355) The injury-and-pattern discovery rule is a good fit for civil RICO. It warrants careful consideration by any court considering the issue without binding precedent settling the question. Because it takes into account the pattern element of RICO, the statute of limitations does not run before a RICO violation actually occurs. (356) Moreover, unlike the last-predicate-act rule, the injury-and-pattern discovery rule includes the doctrine of separate accrual. It does not permit plaintiffs to sit on their hands and watch the pattern parade pass by them; it does not let the heedless plaintiffs keep their claims for relief, while the interests of the defendants in repose or the courts in staleness languish. Once the plaintiff is aware (knows or should have known) that he has suffered an injury from a pattern of racketeering activity, he has his four-year limitations period (and no longer) within which to investigate his claim fully, do painstaking research on the law, draft his complaint (however complex) well, and to sue under RICO. To be sure, the rule frontloads the costs of RICO litigation, but the burden belongs there in the first instance. Not affording him adequate time raises the specter of hastily prepared RICO complaints or time-barfing valid complaints. Neither the defendant nor the court should relish unnecessarily arguing over whether the plaintiff has a valid RICO, or has it, but did not draft it well enough to pass muster on its first iteration...

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