Amicus Curiae Brief — Agency Holding Corp. v. Malley-Duff & Associates, Inc.

i)

ee

Nos. 86-497 and 86-531

IN THE

SUPREME COURT OF THE UNITED STATES

October Term, 1986

AGENCY HOLDING CORPORATION, et al.,

Petitioners,

Vv.

MALLEY - DUFF & ASSOCIATES, INC.,

Respondent.

CROWN LIFE INSURANCE COMPANY,

et al.,

Petitioners,

Vv.

MALLEY - DUFF & ASSOCIATES, INC.,

Respondent.

ON WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

MOTION FOR LEAVE TO FILE BRIEF OF

AMICUS CURIAE AND BRIEF OF AMICUS

CURIAE IN SUPPORT OF RESPONDENT

James G. Harrison

Lawrence D. Diehl

Robert A. Blackwood*

MARKS, STOKES & HARRISON

320 East Broadway

Post Office Box 170

Hopewell, Virginia 23860

(804) 458-0100

G. Robert Blakey

Notre Dame Law School

Notre Dame, Indiana 46615

(219) 239-5717

Counsel for Amicus Curiae

HMK Corporation

*Counsel of Record

TABLE OF CONTENTS

Table of Authorities

Motion for Leave to File

Brief of Amicus Curiae

Interest of Amicus Curiae

Summary of Argument

Argument

The Policy Considerations

Which Limitations Periods

Are Designed to Effectuate

and Serve Dictate That

Clarity to the Litigants

Is The Most Important Aspect

to Be Preserved.

The Civil RICO Cause of

Action Is Unique and Unlike

Any Pre-existing Statutory or

Common Law Action.

The Interest To Be Protect-

ed By Civil RICO Are Best

Served By a Uniform Limita-

tions Period.

Nationwide Uniformity Best

Serves To Protect the

Effectiveness of Civil RICO.

This Court's Decision in

Wilson v. Garcia Does Not

Compel the Conclusion that

Reference to State Law is

Required.

iii

11

13

16

20

The Legislative History of

Civil RICO Does Not Reveal

a Congressional Intent Against

Nationwide Uniformity. 23

The Most Significant Aspect

To Be Used To Characterize

Civil RICO Is Its Provision

for Treble Damages. 29

Reference to Federal Treble

Damage Statutes Illustrates

That the Limitations Period

Under the Clayton Act Is

the Most Analogous Period

and Should Be Applied to

Civil RICO. 31

Conclusion 34

ii

TABLE OF AUTHORITIES

A. Cases

A. J. Cunningham Packing Corp.

v. Congress Financial Corp.,

792 F.2d 330 (3rd Cir. 1986)

22

DelCostello v. International

Brotherhood of Teamsters, 462

U. S. 151 (1983)

4,6,17

HMK Corp. v. Walsey, 637

F.Supp. 710 (E.D. Va. 1986)

Malley - Duff & Associates,

Inc. v. Crown Life Insurance

Co., 792 F.2d 341 (3rd Cir.

1986) cert. granted (Dec. 1,

1986)

12,16

Russello v. United States, 464

U. S. 576 (1983)

12

Sedima, S.P.R.L. v. Imrex Co.,

“JU. 8. -, 105 8. Ce. 3275

(1985)

18,29,31

Silverberg v. Thomson McKinnon

Securities, Inc., 787 F.2d 1079

(6th Cir. 1986)

11,23

iii

Tellis v. United States

Fidelity & Guaranty Co.,

805 F.2d 741 (7th Cir. 1986)

23,29

Wilson v. Garcia, 471 U. S. 261

(1985)

14,16,20

B. Other Authorities

A.B.A. Section of Corporation,

Banking and Business Law,

Report of the Ad Hoc Civil RICO

Task Force (1985)

15

Note, A Uniform Limitations Period

for Civil RICO, 61 Notre Dame

L. Rev. 495 (1986)

33

Note, Treble Damages Under RICO:

Characterization and Computa-

tion, 61 N.D. Law Rev. 526

(1986)

11

iv

MOTION FOR LEAVE TO FILE

BRIEF OF AMICUS CURIAE

HMK Corporation, (hereinafter

referred to as "the applicant"),

by counsel, respectfully moves

this Court for leave to file the

following Brief of Amicus Curiae

in Nos. 86-497 and 86-531. The

questions of law which the

applicant believes have not been

presented and addressed by the

parties in Nos. 86-497 and 86-531,

and their relevancy to the

disposition of these cases is set

forth herein.

MOTION TO FILE BEYOND TIME LIMIT

The applicant moves this Court for

leave to file its Brief of Amicus

Curiae beyond the time limit. Counsel

inadvertently failed to use Saturday,

February 14, 1987 as a business day

for the Court and filed instead on

the next business day, Tuesday,

February 17, 1987.

INTEREST OF AMICUS CURIAE

The applicant is the

plaintiff/appellant in a civil

action now pending before the

United States Court of Appeals for

the Fourth Circuit, styled HMK

Corporation v. John C. Walsey, et

al. (No. 86-3582). Among the

issues involved in this

controversy is the appropriate

selection of a limitations period

for civil RICO. The United States

District Court for the Eastern

District of Virginia, Richmond

Division ruled that the one-year

limitation available under Va.

Code Ann. §8.01-248 (Repl. Vol.

1984) was to be applied to all

civil RICO actions arising within

the Commonwealth of Virginia. The

argument advanced by the applicant

that federal law should be uti-

lized as the source of the limita-

tions period was rejected by the

district court. See HMK Corp. v.

Walsey, 637 F.Supp. 710 (E.D. Va.

1986). The questions of law ad-

dressed in the following Brief of

Amicus Curiae were raised by the

applicant before both the district

court and the United States Court

of Appeals for the Fourth Circuit.

The applicant desires to bring

to this Court's attention the

arguments which support a selec-

tion of a limitations period for

civil RICO by reference to federal

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law consistent with the reasoning

adopted by this Court in Del-

Costello v. International Brother-

hood of Teamsters, 462 U.S. 151,

158-63 (1983). These arguments

have not been addressed in the

briefs filed herein by

either petitioner.1] These

argument have been previously

considered herein, however, and

were addressed by Judge Sloviter

in his concurring opinion in the

court below. See 792 F.2d at 356.

1. The applicant obtained the

consent of the respondent to file

it Brief of Amicus Curiae. Due to

time limitations, the consent of

the petitioners was not obtained.

SUMMARY OF ARGUMENT

Congress has not always

provided the limitations period to

be applied to the substantive

rights that it has created. For

over 150 years, federal courts

have struggled with the question

of how long a litigant's claim

remains viable when the underlying

federal statute prescribes no

limitations period. In such in-

stances, the federal courts do not

assume that Congress intended that

there be no limitations period

applicable to the claim, but

rather that the most suitable

limitation be "borrowed" from

another source.

In determining the source and

specific limitations period to be

used for "borrowing", the policies

and purposes which limitations pe-

riods are designed to serve and

effectuate must be reviewed and

then applied to the particular

federal claim before the court.

From this analysis, the court can

determine whether reference to

state law or federal law for an

appropriate limitations period

best serves the ends which the

federal substantive law was

designed to achieve. In some

instances, reference to state law

as a source for a limitations

period provides an unsatisfactory

i hh re mer a tite lis Nan hatin

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6

method for enforcement of the

federal substantive right. In

such cases, this Court has

approved reference to federal law

to select an appropriate

limitations period. See, e.g.,

DelCostello v. International

Brotherhood of Teamsters, 462 U.S.

151 (1983). Once the appropriate

source for a limitations period is

deter-mined, the federal substan-

tive claim can then be analyzed

and characterized so that the most

analogous limitations period from

within that source can be deter-

mined and applied.

When such an analysis is

undertaken with regard to a civil

claim under the Racketeer Influ-

enced and Corrupt Organizations

Act (RICO), 18 U.S.C. §§ 1961-1968

(1982), the results favor refe-

rence to federal, rather than

state law as the appropriate

source for a limitations period.

Because of the unique multi-

transactional, and oftentimes

multi-jurisdictional, nature of

civil RICO, it is impossible to

obtain uniform or predictable

results when reference is made to

state law. The remedial goals of

civil RICO are not served but are

thwarted when state law is used as

a source for the limitations

period. When civil RICO is ana-

lyzed, it is the treble damage

provision that stands out as its

Ae te, Maen Sa tw th static hI iat th De ly

7

most significant aspect. Accord-

ingly, federal treble damage

statutes, which uniformly provide

for a four year limitation period,

serve as the most appropriate

limitations period to be applied

and should be applied by this

Court.

ARGUMENT

The Policy Considerations Which

Limitations Periods Are Designed

To Effectuate And Serve Dictate

That Clarity To The Litigants Is

the Most Important Aspect To Be

Preserved.

Limitations periods are de-

signed to effectuate and serve

several broad, overlapping goals.

The practical effect of a

limitations period is to deny

relief to the plaintiff if

sufficient time has elapsed

between the accrual of his cause

of action and the commencement of

his suit. This result occasion-

ally offends notions of fairness

and justice by allowing the

wrongdoer to escape liability and

leaving the injured party without

remedy or relief. To justify this

occasionally offensive result,

various justifications have been

articulated and various interests

of the plaintiff, the defendant,

the judicial system and society as

a whole have been identified as

being served by the imposition of

limitations periods.

First, the limitations period

serves to protect the reasonable

expectations of the litigants.

The plaintiff is informed of the

period of time that he has to

prepare and bring his suit. The

NS ee ret

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9

defendant is informed of the

duration of his exposure to

liability. At the conclusion of

the limitation period, there comes

a time when either party can be

secure in his expectation that

"the slate has been wiped clean.”

In a society based upon thousands

of interpersonal transactions each

day, it is desirable for all

parties to a transaction or claim

to terminate contingent

liabilities at a specific, clearly

defined point in time.

Limitations periods also serve

the judicial system as matters of

convenience and credibility. With

increases in the caseload facing

the judiciary, limitations periods

reduce the number of potential

claims awaiting resolution. Those

claims in which it is more likely

that memories have faded or

documents and witnesses have been

lost are barred from further

litigation. Such a result

diminishes the risk of perjury or

fraud and allows judicial

decision-making to be based upon a

full and fair presentatior of the

facts.

It can never be forgotten,

however, that the selection and

application of a limitations pe-

riod involves matters and ques-

tions of procedure, not substance.

It is important, therefore, that

a

10

questions involving the selection

and application of a limitations

period involve as little

uncertainty as possible and that

courts, when faced with these

questions, follow principles of

law designed to bring clarity to

the questions before them. When

there is uncertainty regarding any

matter of law, further litigation,

with its attendant expense and

delay, is encouraged. When there

is uncertainty as to the outcome

of a dispute, the parties are less

likely to resolve the matter

between them. Rather than

protecting substantive rights,

uncertainty in the law results in

needless expense and delay. Such

uncertainty puts a premium on

creative lawyers and unlimited

financial resources and suddenly,

the law favors litigants who can

afford long and expensive litiga-

tion to the disadvantage of the

litigants whose substantive rights

were in need of statutory

protection.

Using clarity and the removal

of uncertainty as the most

important policy consideration of

a limitations period, all of the

various interests identified in

judicial decisions are served.

Courts are able to clearly signal

to potential plaintiffs the amount

of time that they have in which to

prepare and bring their claim.

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Defendants are clearly on notice

as to the time period for which

they are exposed to liability.

All parties to the claim or

transaction know the specific date

when contingent liabilities are

removed. When the selection and

application of the limitations

period is clear and not subject to

uncertainty and continuing

dispute, the judicial system is

able to devote its resources to

the substantive merits of the

dispute rather than permitting

justice to be delayed, or even

forestalled by litigation of

procedural matters.

The Civil RICO Cause of Action Is

Unique and Unlike Any Pre-existing

Statutory or Common Law Action

Contrary to the statement of

the United States Court of Appeals

for the Sixth Circuit in

Silverberg v. Thompson _ McKinnon

Securities, Inc., 787 F.2d 1079

(6th Cir. 1986), civil RICO is a

unique statute unlike causes of

action previously created by

statute or known at common law.

Unlike any single existing cause

of action, civil RICO has

application to a wide variety of

predicate acts. Reference to

§1961(1) reveals the breadth of

12

its scope. 2 Civil RICO has

application to widely varying

commercial transactions. These

include the acquisition or

establishment of an enterprise as

well as its conduct and operation.

While some nexus to interstate or

foreign commerce is required, no

other condition is provided that

would limit the application of

civil RICO to one sector of the

economy or protect another sector

of the economy from its reach.

Under civil RICO, conduct that

can only be punished as criminal

upon proof beyond a reasonable

doubt will nevertheless support

civil sanctions under a lesser

standard of proof. The remedy of

treble damages provided to the

successful plaintiff under

§1964(c) further illustrates the

uniqueness of the civil RICO

claim. See generally, Note,

Treble Damages Under RICO:

Characterization and Computation,

2. 18 U.S.C. §1861(1) defines

"racketeering activity" to include

nine state law felonies and

viol*etions of over 25 federal

statutes, including those

prohibiting bribery,

counterfeiting, embezzlement of

pension funds, gambling offenses,

obstruction of justice, interstate

transportation of stolen property

and labor crimes.

13

61 Notre Dame L Rev. 526 (1986).

Finally, the legislative history

of RICO also illustrates’ the

unique nature and character of

civil RICO. Congress intended

RICO to provide "new weapons of

unprecedented scope." Russello v.

United States, 464 U.S. 16, 26

(1983). In fact, it was the

failure of existing law that led

to the consideration and enactment

of RICO, as existing laws were

deemed to be inadequate.

The Interests To Be Protected by

Civil RICO Are Best Served By A

Uniform Limitations Period.

Once the policy considerations

and principles which limitations

periods are designed to serve are

reviewed and the unique character

and nature of civil RICO is

recognized, the next step in the

selection process for the

appropriate limitations period is

to determine whether the interests

and goals of civil RICO are best

served by characterizing a claim

under civil ICO with reference to

the underlying facts in each case

or whether the interests to be

protected by RICO are best served

by a uniform characterization.

The United States Court of Appeals

for the Third Circuit in Malley-

Duff & Associates, Inc. v. Crown

Life Insurance Co., 792 F.2d 341

(3rd Cir.), cert. granted (Dec. l,

14

1986), recognized the need for

uniformity in determining the

limitations period to be applied

to civil RICO. Relying heavily

upon this Court's decision in

Wilson v. Garcia, 471 U.S. 261

(1985), the Third Circuit reasoned

that a uniform characterization of

civil RICO best fit and promoted

the remedial purposes of the

statute. When a particularized

approach was taken, i.e., an

approach which selected a

limitations period based upon the

particular facts of each case,

consistent, reliable results were

impossible to obtain as usually

two or more limitations periods

would apply. Reciting the

experience found by federal courts

in the handling of claims under 42

U.S.C. §1983 prior to Wilson v.

Garcia, the Third Circuit noted

that selection of the limitations

period based upon "an analysis of

the particular facts of each claim

deimonstrates that their approach

inevitably breeds uncertainty and

time-consuming litigation that is

foreign to the central purposes of

§1983." 792 F.2d at 347, quoting

Wilson v. Garcia, supra, 471 U.S.

at 272.

Applying this reasoning to

civil RICO, the Third Circuit

easily concluded that the

interests to be protected by civil

RICO were best served by a uniform

15

characterization and the

appiication of a single

limitations period to all civil

RICO claims without regard to the

underlying predicate acts relied

upon or the underlying factual

transaction from which the claim

arose. Concepts required to state

a claim under civil RICO, such as

"pattern of racketeering

activity", were unknown in the

statutory and common law which

predate RICO's enactment.

Consequently, factual analogies to

existing statutory or common law

claims were unlikely to produce

consistent or reliable results.

Specific factual claims could

easily be distorted by litigants

and their counsel to avoid the

application of one limitations

period and attempt to qualify for

another. Because civil RICO

requires the commission of at

least two predicate acts, a

selection process which focuses on

the specific factual basis of a

civil RICO claim was likely to

produce at least two or more

limitations periods which could be

applicable to the facts at hand.

The result of such a_ selection

process would be “complex and

expensive litigation over what

should be a straight forward

matter.” A.B.A. Section of

Corporation, Banking and Business

Law, Report of the Ad Hoc Civil

RICO Task Force 391-92 (1985).

16

The Third Circuit recognized in

Malley -Duff just as this Court

did in Wilson v. Garcia, that “the

legislative purpose to create an

effective remedy for an enforce-

ment of federal civil rights is

obstructed by uncertainty in the

applicable statute of limitations,

for scarce resources must be

dissipated by useless litigation

on collateral matters.” 792 F.2d

at 349, quoting with approval

Wilson v. Garcia, supra, 471 U.S.

at 275. The Third Circuit

concluded that civil RICO, like

claims under §1983, "was intended

to be a useful remedial device and

a supplement to criminal law

enforcement in an area peculiarly

in need of federal intervention.”

Id. As such, uniformity and the

selection of a uniform statute of

limitations best served to protect

its effectiveness.

Nationwide Uniformity Best Serves

To Protect the Effectiveness of

Civil RICO.

The United States Court of

Appeals for the Third Circuit

chose not to analyze in any depth

or detail whether state law or

federal law should serve as the

source for a limitations period

applicable to civil RICO. Having

set forth compelling arguments

that any selection process that

permitted uncertainty would

17

encourage litigation and thwart

the remedial purposes of civil

RICO and that the interest of

civil RICO were best served by

uniformity, the Third Circuit was

satisfied to conclude that a

single uniform limitations period

within the boundaries of a state

was sufficient. The same

reasoning that compels selection

of a single limitations period for

a particular state further compels

the conclusion that the best

choice is a single limitations pe-

riod applicable to all civil RICO

claims nationwide.

While resort to state law to

borrow a limitations period is

favored and has been traditionally

followed by federal courts, it

does not represent the only option

available. This Court recognized

in DelCostello v. International

Brotherhood of Teamsters, 462 U.

S. 151 (1983) that “when a rule

from elsewhere in federal law

clearly provides a closer analogy

than available state statutes, and

when the federal policies at stake

and the practicalities of

litigation make that rule a

significantly more appropriate

vehicle for interstitial

lawmaking, we have not hesitated

to turn away from state law." 462

U.S. at 172. In analyzing civil

RICO, there are several reasons to

find that federal law is "a

18

significantly more appropriate

vehicle" as well as_ several

reasons to find that the

application of state law is

inconsistent with the underlying

policies of the federal statute.

First, civil RICO by definition

is multi-transactional; it

requires the commission of two or

more predicate acts without regard

to the location of their

commission. In order to satisfy

the various definitions of

"pattern" that have been developed

since this Court's ruling in

Sedima, S.P.R.L. v. Imrex Co.,-

U.S. -, 105 S.Ct. 3275 (1985),

some separateness in time and

place between the two or more

predicate acts is required.

Second, some nexus to interstate

or foreign commerce is required as

a jurisdictional element of a

civil RICO claim. Therefore, in

most claims under civil RICO the

conduct complained of will cross

state boundaries and the pattern

of racketeering activity will be

subject to multiple limitations

periods. A litigant will have a

choice of forums in which to bring

19

his claim and based upon the

manner in which the claim is

drafted, the litigant can

influence which limitations period

to which his claim is to be held.3

Just as uncertainty as to the

limitations period to be applied

within a state was seen as

thwarting the remedial purposes of

civil RICO, so will the

uncertainty of which limitations

period is to be applied in a

multi-jurisdictional claim. Just

as litigants are encouraged to

distort their claims to _ take

advantage of one of several

limitations periods within a

state, likewise, they would be

encouraged to distort their claims

to take advantage of a forum that

presents a more favorable limita-

tions period. This process

focuses attention on matters of

procedure rather than the pro-

tection of substantive rights and

favors litigants who can afford

long and expensive litigation to

the disadvantage of the poor and

moderate litigants. Likewise,

uniformity which ends at the state

3. As an example, the Third

Circuit noted in Malley - Duff

supra, 792 F.2d at 353, n.20 that

the allegations of Malley - Duff

involved conduct in Cleveland,

Ohio, Chicago, Illinois and other

cities.

20

boundary encourages forum-shopping

which is also to the disadvantage

of the poor. Anytime that there

is uncertainty, whether within a

state or within a multi-state

transaction, the remedial purposes

which civil RICO was enacted to

serve are not advanced but are

thwarted.

This Court's Decision in Wilson v.

Garcia Does Not Compel_ the

Conclusion that Reference to State

Law is Required.

As discussed by Judge Sloviter

in his concurring opinion in

Malley - Duff, there are reasons,

consistent with this Court's

analysis in Wilson v. Garcia,

which favor the federal law result

adopted in DelCostello rather than

the state law approach taken in

Wilson v. Garcia. Wilson v.

Garcia involved the selection

process for the limitations period

to be applied to claims under 42

U.S.C. §1983. A comparison of

§1983 claims with elements of a

claim under civil RICO reveal that

the policy considerations which

made reference to state law

appropriate in Wilson v. Garcia do

not apply and are not present in

civil RICO. Claims under §1983

usually involve a single act or

transaction. Civil RICO by de-

finition requires two or more acts

which are separated in time and

PN ee

21

place. In claims under §1983, the

injury likely occurs at a single

time and single place. Such a

single-event injury under civil

RICO is insufficient to establish

a pattern. By definition, a claim

under §1983 requires the presence

of state action and for that

reason is usually limited to a

single state or governmental

locality. A claim under §1983

does not require a nexus to or an

affect upon interstate commerce.

Of course, under civil RICO, the

requirement of an effect upon

interstate commerce is. present

while a requirement for state

action is not. Because of the

distinct differences between the

cause of action under §1983 and

civil RICO, it is clear that the

result in Wilson v. Garcia is not

applicable here.

Unlike §1983 which could be

universally analyzed to a tort

action for recovery of damages for

personal injuries, civil RICO

presents no such universally

available or readily apparent

state law analogy. As was evident

by the opinion of the majority in

Malley - Duff, there is usually no

closely analogous state claim or

state limitations period that

could be readily agreed upon. A

review of the prolific litigation

in federal courts regarding the

selection of a limitations period

22

further illustrates that no

clearly recognized choice has

emerged.

To the extent any specific

analogy has been accepted more

often than others, it is the

"catch - all" limitations period

utilized by the majority in Malley

- Duff. There are several

reasons, however, for rejecting

this approach. First, this Court

in Wilson v. Garcia rejected the

use of a "catch - all" statute for

application to claims under §1983.

Second, the absence of a "catch-

all" limitations period in some

states distinguishes it from the

personal injury characterization

used in Wilson v. Garcia.

Finally, several states have short

periods assigned to their "catch-

all" statute which would be

inconsistent with the federal

intention and policy to utilize

civil RICO as_an additional

enforcement tool.>

3. Judge Sloviter in his

concurring opinion in A. J.

Cunningham Packing Corp. v.

Congress Financial Corp., 792 F.2d

30,3 40 (3rd Cir. 1536) , which

was filed on the same date as

Malley - Duff, noted: "Although

Pennsylvania's catch-all of six

other states might have a short

catch-all which would be

23

Consequently, there is nothing

in the language or the reasoning

in Wilson v. Garcia that would

limit the selection of a

limitations period for civil RICO

to those available under state

law. To the contrary, there are

strong policy considerations which

favor a uniform limitations period

which is applicable to civil RICO

claims nationwide and which is

applied uniformly without regard

to the state in which the

underlying transaction occurred.

The Legislative History of Civil

RICO Does Not Reveal a

Congressional Intent Against

Nationwide Uniformity.

The United States Court of

Appeals for the Sixth Circuit in

Silverberg v. Thompson McKinnon

Securities, Inc., supra, 787 F.2d

at 1083, places great weight on

its view of civil RICO's

legislative history that "Congress

specifically considered and

rejected the enactment of a

inconsistent with federal policy

--+-" See also Tellis v. United

States Fidelity & Guaranty Co.,

805 F.2d 741, 749 (7th Cir. 1986)

(Ripple, J., Dissenting). Some

"catch-all" statutes expire in as

short a period as one year such as

the limitation applied in HMK

Corp. v. Walsey, 637 F.Supp. 710

(E.D. Va. 1986).

limitations period for civil RICO

actions, thus declining to adopt a

uniform limitations period for all

RICO claims." Such is not the

case.

It is incorrect to suggest, as

the Second Circuit did in Sedima,

that while RICO "for the most part

originated in the Senate", the

civil provisions permitting suit

by private persons “originated in

the House." Sedima, S.P.R.L. v.

Imrex, Co. 7 F.2d 2, 488,

rev'a, = UV. 8 =, 105 8$.Ct. 3275

(1985). A review of the

legislative history of the 1970

Act demonstrates the misconceived

character of this view. First,

Congress acted deliberately in its

enactment of the Organized Crime

Control Act. Congressional

investigations, presidential

commissions, and bar associations

played major roles. The process

originated in the hearings and

reports of the Kefauver Committee.

The American Bar Association

formed its Organized Crime

Commission and participated

actively in the process, recom-

mending model legislation. ® In

6, See, e.g., 2 Organized

Crime and Law Enforcement (1953)

(Final Report By and Model Acts

Prepared for The ABA Commission on

Organized Crime); Organized Crime

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1967, the President's Commission

on Law Enforcement and

Administration of Justice made the

key recommendation that led to

RICO when it urged that Congress

adopt antitrust type remedies to

control underworld activities,

particularly in legitimate

business. In response, Senator

Hruska and Congressman (now

Virginia Supreme Court Justice)

Poff introduced companion

legislation that included criminal

and civil sanctions and public and

private enforcement mechanisms in

both Houses of the Congress. See

e.g., S. 2048, 90th Cong., list

Sess. (1967); 113 Cong. Rec.

17,999 (1967). The ABA carefully

studied the bills and endorsed

their private relief concepts, but

recommended that the Congress

draft RICO outside of the

antitrust statutes to give its

Control: Hearings Before Subcomm.

No. 5, douse Comm. on Judiciary,

91st Cong., 2d Sess. 579-85 (1970)

(hereinafter House Hearings.).

7. The Challenge of Crime in

a Free Society: Final Report of

the President's Commission on Law

Enforcement and Administration of

Justice 208 (1967) ("techniques

-+. especially valuable because

they require a less rigid standard

of proof").

7 oe : iat ' a - -

Se eee ee ie Deis pes

24

remedies and provisions a broader

impact then that which would be

appropriate in the regulation of

the market under antitrust

concepts. The ABA presented these

recommendations to the House and

the Senate in 1969.8

Additionally, the National

Commission on Reform of the

Federal Criminal Law undertook

similar studies. The Commission

included Congressman Poff as its

vice-chairman, and Senators

McClellan and Hruska, as well as

Congressman (now Judge) Mikva.

Subsequently, Senator Hruska and

Congressman Poff drafted new

legislation that took the ABA at

its word. They introduced this

legislation in both Houses.? The

Senate held hearings at which the

ABA orally presented its favorable

views. The President also

endorsed the legislation while it

was being processed in The Senate

8. Measures Relating to

Organized Crime: Hearings Before

the Subcomm. on Crim. Laws and

Procedures, Senate Comm. on

Judiciary, 9lst Cong., list Sess.

259 (statement), 556 (report)

(1969); House Hearings at 537

(statement), 147 (report).

9. See, e.g., S. 1623, 91st

Cong., lst Sess. (1969); 115 Cong.

Rec. 6,995-96 (1969).

25

and specifically called for

antitrust-type remedies in his

"Message on Organized Crime."

As a result of the hearings,

Senators McClellan and Hruska,

after consultation with

Congressman Poff, introduced S.

1861. 115 Cong. Rec. 9,566-68

(1969). While S. 1861 did not

include an express private claim

for relief, it is erroneous to

conclude that S. 1861 did nox give

rise to an implied claim for

relief, or to argue that the

sponsors of the legislation had

rejected the concept of the

private attorney general. Not one

word in the remarks introducing

the legislation supports this pro-

position.19 the bill itself

said in its Statement of Findings

and Policy that it included "other

relief." 115 Cong. Rec. 9,568

(1969). The legislation was

termed "remedial" and its “liberal

10, When Senator McClellan

introduced S. 1861, for example,

he said he did not want to see the

"great complexity of antitrust law

enforcement" introduced into the

construction of RICO. 115 Cong.

Rec. 9,567 (1969). That

"complexity" is, of course, the

jurisprudence on standing, which

is applicable to private, not

public enforcement.

26

construction" was mandated. Id. at

9,571. Accordingly, it should be

concluded that the Organized Crime

Control Act, as amended in Title

IX to include the text of S. 1861,

and as passed by the Senate, gave

rise to an implied private claim

for relief.11 Not one word of

legislative history can be cited

to establish that Senators

McClellan or Hruska - or any other

senators - spoke against such a

private claim for relief. The

Organized Crime Control Act then

passed the Senate by a vote of 73

to 1. 116 Cong. Rec. 972 (1970).

While the legislation was

pending in the House, the

President asked the ABA to study

it. The ABA's views were

presented to the House Committee

in oral testimony by its

president-elect, Edward L. Wright.

He called for the House to restore

to the bill the treble damage

provision that had appeared in

S.1623. House Hearings, at 543-

44. The Committee was well aware

11, See generally, Johnson,

Predator Rights: Multiple Remedies

for Wall Street Sharks Under the

Securities Laws and RICO 10 J. of

Corp. Law 3 (1984), Note,

Availability of Equitable Relief

in Cause of Action Under RICO 59

Notre Dame L. Rev. 945 (1981).

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27

of the scope of the bill as passed

by the Senate, since the

Association of the Bar of the City

of New York. had objected in

testimony before the House

Judiciary Committee to its reach

beyond “organized crime,"

including its application to "any

securities fraud case." House

Hearings, at 294. Moreover,

Senator McClellan took the floor

and called to the Senate's

attention the ABA's

recommendations; he explicitly

characterized its recommendation

for the restoration of the treble

damage provision as a

"constructive contribution." 116

Cong. Rec. 25,190 (1970).

The House Committee reported

the Organized Crime Control Act in

the enacted language. H. R. Rep.

No. 1549, 91st Cong., 2d Sess. 56-

58 (1970). Dissenting committee

members, including Congressman

Mikva, specifically objected to

the private civil provisions'

breadth, because the provisions

were not limited to "organized

crime." The dissenting members

noted that the provisions were "a

tool to be employed for all." Id.

at 187. They also stressed the

burden that this breadth might

place on the courts. Id.

During the vigorous House

debate, Congressman Steiger of-

28

fered a comprehensive amendment

that included seven different

provisions, not a single subject

matter amendment relating only to

statute of limitations as

Silverberg implies. 787 F.2d at

1083) .7t¢ Congressman Poff

suggested that Steiger withdraw

his amendment and Congressman

Steiger quickly agreed. 116 Cong.

Rec. at 35,346-47 (1970). The

amendment was not “rejected” as

Silverberg noted. As such, little

can be inferred from the failure

to adopt the Steiger amendment.

Certainly, no Congressional intent

against nationwide uniformity can

be ascertained from Congressional

in action.

12. The Steiger amendment

contained provisions that would

have provided that no amount in

controversy was required,

clarified the availability of

equity relief, included a claim

for relief for damages for the

government, repeated the private

claim for treble damage relief,

authorized the attorney general to

intervene in private litigation,

provided for non-mutual estoppel

between government criminal and

private civil cases, and imposed a

uniform federal statute of

limitations on RICO suits. 116

Cong. Rec. 35,346 (1970).

29

The Most Significant Aspect To Be

Used To Characterize Civil RICO Is

Its Provision for Treble Damages.

The treble damage provision

under civil RICO, 3S 8.8.C.

§1964(c), has been recognized as

its most significant aspect. See,

e.g. Tellis v. United States

Fidelity & Guaranty Co., 805 F.2d

741, 745 (7th Cir. 1986). It is

the treble damage provision that

draws most RICO plaintiffs to rely

upon the RICO civil action.1!3 It

13 Traditionally, damages

have been classified into one of

two catagories: compensatory or

punitive. Treble damages under

civil RICO, however, do not fit

within either category. Like

compensatory damages, treble

damages under civil RICO are

mandatory once the plaintiff

establishes the right to recovery

and the extent of injury. While

the intent of treble damages is to

compensate the plaintiff, they go

beyond traditional compensatory

damages and make the plaintiff

whole for any accumulative harm,

i.e., harm falling outside the

range of legal damages as being

too speculative or indeterminate

for traditional damage principles.

Unlike punitive damages, treble

damages under civil RICO are not

discretionary in amount or award.

>

30

is the treble damage provision

that was intended to provide an

incentive to private citizens to

help law enforcement authorities

police racketeering activity. The

significance of the treble damage

provision as the core of civil

RICO was recognized by this Court

in Sedima, supra, 105 S. Ct. at

3280-81.

Congress modeled civil RICO's

treble damage provision after the

anti-trust treble damage

provision, §4 of the Clayton Act,

15 U.S. C. §15 (1982). This

reflected a need to adopt a

remedial scheme that would curtail

and eventually eradicate the

expansion of crime into the

country's economy. In order to

avoid restrictive principles in

the anti-trust laws, however,

Congress enacted civil RICO

separate from the Clayton Act.

The legislative history of §1964

(c) reveals that the foremost

intent of Congress in enacting

this provision was remedial, not

penal. It was the congressional

intent to compensate the victims

of racketeering activity. The

statute itself contains the

They are not based upon an amount

necessary to punish the wrongdoer

and are not dependent upon willful

Or wanton conduct.

31

directive that its provisions

"shall be liberally construed to

effectuate its remedial purposes."

The modern interpretation of the

treble damage provisions contained

both in civil RICO, and its model

found in the Clayton Act,

therefore, is that they are

remedial in nature. Accordingly,

when looking for a federal

limitations period to apply to

civil RICO reference to penal

statutes and the limitations

periods applicable thereto are not

consistent with the remedial

purposes of civil RICO and should

not be utilized. Rather, statutes

which contain analogous treble

damage provisions better serve as

reference points.

Reference to Federal Treble Damage

Statutes Illustrates that the

Limitation Period Under the

Clayton Act Is The Most Analogous

Period and Should Be Applied to

Civil RICO

Once the analysis concludes

that national uniformity is the

best choice and that the most

significant aspect of civil RICO

is its treble damage remedy,

reference to other federal treble

damage claims provides the various

32

choices available.14 The clearest

analogy to RICO is the federal

antitrust statutes. Civil RICO is

a remedy provided by Congress to

discourage repeated criminal

behavior that results in economic

injury and to fully compensate the

victims of that injury for all

accumulated harm. The civil

remedy under §4 of the Clayton Act

serves the same purpose. Both

civil RICO and §4 of the Clayton

Act seek to provide private civil

actions for persons “injured in

their business or property." Both

utilize the same statutory

language. The same goals, to

remedy competitive injuries to

business and to compensate victims

for accumulative harm, underlie

both statutes. Most importantly,

Congress uses §4 of the Clayton

Act as the model for the civil

provisions of RICO as recognized

by this Court in Sedima, S.P.R.L.

V. Imrex, supra, 105 S. Ct. at

3280-81, 32 n.8. Consequently,

the limitations period found at 15

U.S.C. §15b should be uniformly

14. Of those federal treble

damage statutes which contain a

limitations period, the period

selected uniformly is four years.

See 12 U.S.C. §1464(9)(3) (Home

Owners' Loan Act); 12 U.S.C. §1977

(Bank Holding Company Act); 15

U.S.C. §15b (Clayton Act).

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ggp2.ed to all civil RICO actions.

15, See generally Note, A

uniform Limitations Period for

Civil RICO, 61 Notre Dame L. Rev.

495 (1986).

34

CONCLUSION

For the foregoing reasons, the

applicant respectfully requests

that this Court determine that the

interests of RICO are best served

by a uniform limitations period

applicable to all civil RICO

actions nationwide and that the

four-year limitation contained in

15 U. S. C. §15b be selected and

uniformily applied.

Respectfully submitted,

James G. Harrison

Lawrence D. Diehl

Robert A. Blackwood*

MARKS, STOKES & HARRISON

320 East Broadway

Post Office Box 170

Hopewell, Virginia 23860

(804) 458-0100

G. Robert Blakey

Notre Dame Law School

Notre Dame, Indiana 46615

(219) 239-5717

Counsel for Amicus Curiae

HMK Corporation

*Counsel of Record