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

AuthorBlakey, G. Robert
PositionIII. Statutes of Limitations in Civil Rico Cases D. Tolling of Civil Statutes of Limitations 2. Laches through Conclusion, with footnotes, p. 1754-1784
  1. Laches

    Laches is a doctrine in equity that bars a plaintiff's claim if the plaintiff's tardiness unjustly prejudices the defendant. A party raising the, laches defense must prove "(1) lack of diligence by the party against whom the defense is asserted, and (2) prejudice to the party asserting the defense." (489)

    Historically, in line with the rule of nullum tempus occurit regi, the doctrine of laches was not applicable to the United States unless otherwise directed by Congress. The Court first discussed the rationale behind adopting this rule in United States v. Thompson. (490) In that case, the government sued the defendant--the superintendent of Indian affairs in Minnesota--for converting over $10,000 of federal money into personal profit. The government did not file the case within the six-year statute of limitations period established by the Minnesota state statute. (491) While the lower court barred the suit in favor of the defendant, the Court was "at a loss to imagine the reasoning by which the result announced was reached." (492) The Court went on to explain that as "[t]he king was held never to be included" in statutes of limitation or laches, so too, does the national governement fall outside its scope. (493) First, the government serves to protect the public interest; thus, "the public should not suffer by negligence of his servants." (494) Additionally, if the United States was subject to the varied statutes of limitations of each state, "[t]he government of the Union would in this respect be at the mercy of the States." (495) As such, the Court held that the national government, unless otherwise specified by Congress, falls outside the scope of statutes of limitation or laches. (496)

    Nevertheless, the Court allowed for an exception to the general rule that the government is immune from the doctrine of laches or statutes of limitation. In United States v. Beebe, (497) the Court reaffirmed its earlier stance on the rule, (498) but weakened its force by "justly and wisely" applying laches against the United States. (499) In Beebe, the government filed suit on behalf of private citizens that failed to bring suit themselves, to set aside an allegedly fraudulently obtained patent. (500) The government's role in the case was not to protect a public right or interest, but a private right between two citizens. (501) In such circumstances, courts can and should subject the government to equitable doctrines, including laches. Accordingly,

    [W] hen the government is a mere formal complainant in a suit, not for the purpose of asserting any public right or protecting any public interest, rifle, or property, but merely to form a conduit through which one private person can conduct litigation against another private person, a court of equity will not be restrained from administering the equities existing between the real parties by any exemption of the [g]overnment designed for the protection of the rights of the United States alone. (502) The policy behind immunizing the government from a laches or a statute of limitations defense is based upon the courts' protection of a public right in the hand of the government. If the government seeks to protect a private right, the public would not suffer from the negligence of governmental officers; thus, it removes the rationale and the rule for the doctrine exempting the sovereign from the defense of laches or statutes of limitation. (503)

    Over one hundred years later, the Court still applies the same principle with relation to the statute of limitation and laches. In United States v. Sulin, (504) the Court reaffirmed its position that neither a statute of limitations nor a laches defense applies against the government when acting in its sovereign capacity. There, the government, through the Federal Housing Administrator, became the assignee of a claim against the administratrix of J.F. Andrew's estate. (505) Mr. Andrew executed a promissory note under the National Housing Act, and upon default, the note found its way to the Federal Housing Administrator. After Mr. Andrew's death, the administratrix, by publication, gave notice to creditors to bring claims against the estate within eight months, as is required by state law. (506) The government, however, filed its claim eleven months after the administratrix published the notice. (507) Despite the late filing, the Court reversed the lower court's holding that the government's claim was too late. (508) The Court held that not only is it "well settled that the United States is not bound by state statutes of limitation or subject to the defense of laches," but that "It]he same rule applies whether the United States brings its suit in its own courts or in a state court." (509) So long as the government "becomes entitled to a claim, acting in its governmental capacity," (510) then neither statutes of limitation nor laches bars the claimp. (511)

    While most circuits, as required, continue to adhere to the Court's doctrine, (512) other circuits question the breadth of the nullum tempus occurit regi principle and argue for a more limited rule. In Farmers Home Administration v. Muirhead. (513) for example, the Fifth Circuit advocates for a more narrow use of the principle that immunizes the government from the equitable defense of laches. In that case, defendants executed promissory notes in favor of the Farmers Home Administration ("FmHA")--a nationwide federal loan program. (514) After sending two notices of acceleration and a demand for payment, the FmHA initiated foreclosure proceedings. (515) The Fifth Circuit held statutes of limitations--state or federal--and the defense of laches not to run against the federal government. Despite this ruling, that court commented on its disagreement with the principle in the context of federal loan programs. (516) The Fifth Circuit argued that the nullum tempus rule "is far more appropriate to essential sovereign functions than to the federal government's role as a lender to veterans, small business owners, farmers, and disaster victims among others." (517) The court argued that public policy supports running the statute of limitations and allowing for the defense of laches against the federal government in its role as lender. In these circumstances, the court posited, the new rule would encourage the government to act promptly, and it could not enforce ancient mortgages. (518) While the Fifth Circuit adhered to the ancient principle, it introduced a more limited view--exemption from the statute of limitations and defense of laches only for essential sovereign functions. How the essential sovereign functions doctrine will modify laches in the RICO context remains unknown, but the doctrine is spreading to other circuits, (519) and it may mark the end of the broad reign of nullum tempus occurit regi.

    More significant, other decisions move beyond dicta, squarely break with precedent, and restrict the government's exemption from laches. The Seventh Circuit in National Labor Relations Board v. P*I*E Nationwide, Inc., (520) for example, holds that laches applies to suits by the government. "Following dictum in Occidental Life Ins. Co. v. EEOC ... laches is generally and we think correctly assumed to be applicable to suits by government agencies as well as by private parties." (521) In United States v. Administrative Enterprises, Inc., (522) the Seventh Circuit suggests the application of laches to the government is a "completely unsettled" question, (523) a dubious proposition at best in light of the unbroken line of Supreme Court decisions from the founding of the United States. The case involved a summons issued by the Internal Revenue Service that the United States sought to enforce three and a half years after its issuance. (524) The summons was not subject to a statute of limitations; thus, the appellants had to rely on the doctrine of laches. (525) While the court denied the defense, because the alleged unjustifiable delay did not prejudice the defendant, (526) it introduced a new exception to the nullum tempus doctrine: prejudicial instances of egregious delay. (527) The court relied in the main on its own earlier rulings to buttress its new exception. (528) While the Seventh Circuits continues the tradition of the Fifth Circuit in swimming against the expansive doctrine exempting the government from the defense of laches, the overwhelming majority of circuit court decisions continue to follow the federal common law supported now by centuries of precedent.

    1. Case Study: Time-bars in Florida Under RICO

    Famously, Justice Holmes argued in dissent in Black & White Taxicab & Transfer Co. v. Brown & Yellow Taxicab & Transfer Co. (529) that "a general common law" did not exist. Only the law of a particular jurisdiction was "law." He wrote:

    The common law so far as it is enforced in a State, whether called common law or not, is not the common law generally but the law of that State existing by the authority of that State without regard to what it may have been in England or anywhere else. It may be adopted by statute in place of another system previously in force. But a general adoption of it does not prevent the State Courts from refusing to follow the English decisions upon a matter where the local conditions are different. (530) Without passing on the general cogency of Justice Holmes's positivist's predilections, his point that you need to look at a body of law within a particular jurisdiction ultimately to evaluate how legal ideas work themselves out makes eminent good sense. The best state jurisdiction to examine to see how the RICO idea and time-bars interact is Florida.

    Florida was one of the first to enact RICO-type legislation and to make a major effort to implement it. The legislature enacted the legislation in 1977. It included in its statute provisions that not only provided for a period of limitations, but also for the point of accrual. When it passed its RICO...

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