Amicus Curiae Brief — Grimmett v. Brown

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Supreme Court of the United States

October Term 1995

TOM GRIMMETT, AS TRUSTEE FOR THE

BANKRUPTCY ESTATE OF

VINCENT SIRAGUSA, AND JOANNE SIRAGUSA,

Petitioners,

vs.

PATRICIA L. BROWN, PATRICIA L. BROWN, LTD., AND

BECKLEY, SINGLETON, DELANOY, JEMISON &

LIST, CHARTERED,

Respondents.

On Writ Of Certiorari

To The United States Court Of Appeals

For The Ninth Circuit

MOTION FOR LEAVE TO FILE BRIEF AND BRIEF

OF AMICUS CURIAE NATIONAL ASSOCIATION

OF SECURITIES AND COMMERCIAL LAW

ATTORNEYS (NASCAT) IN SUPPORT

OF PETITIONERS

Proressor G. Rosert BLakey Kevin P. Roppy

Notre Dame Law School Counsel of Record

South Bend, IN 46556 MivserGc Weiss BersHapD

Telephone: 219/631-5717 Hynes & LeracH LLP

355 South Grand Avenue

| een cosine Suite 4170

NASCAT Los Angeles, CA 90071

317 Massachusetts Telephone: 213/617-9007

Avenue, N.E.

Suite 200

Washington, DC 20002

Telephone: 202/789-3960

Counsel for Amicus Curiae

August 14, 1996

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MOTION FOR LEAVE TO FILE BRIEF

The National Association of Securities and Commer-

cial Law Attorneys (NASCAT), by counsel and pursuant

to Rules 37.1 and 37.3(b), hereby submits its Motion for

Leave to File a Brief as Amicus Curiae in support of

Petitioners. NASCAT respectfully submits that its Motion

should be granted for the following reasons:

1. NASCAT is an association of law firms and attor-

neys who litigate cases involving antitrust, commercial,

consumer, employee benefit, environmental, pension and

securities fraud claims in federal and state courts.

NASCAT’s members frequently represent victims of cor-

porate abuse, schemes to defraud and so-called “white

collar” criminal activity. In civil actions challenging such

wrongdoing, NASCAT’s meuibers not only seek compen-

sation for victims, but also attempt to deter wrongdoers,

modify corporate behavior and improve the access of

victims to justice. As part of these efforts, NASCAT advo-

cates the enactment and enforcement of effective state

and federal laws to prevent wrongful, fraudulent, decep-

tive and manipulative business practices.

2. NASCAT and its members have a profound inter-

est in the scope and bases of civil liability sought to be

imposed against wrongdoers under the Racketeer Influ-

enced and Corrupt Organizations Act (“RICO”), 18 U.S.C.

§§ 1961-1968. NASCAT’s members have represented the

victims of fraudulent schemes and so-called “white col-

lar” crime in many significant civil RICO actions brought

in recent years, including In re American Continental Corp./

Lincoln Sav. & Loan Sec. Litig., 794 F. Supp. 1424 (D. Ariz.

1992); In re Crazy Eddie Sec. Litig., 812 F. Supp. 338

(E.D.N.Y. 1993); and In re ZZZZ Best Sec. Litig., 864 F.

Supp. 960 (C.D. Cal. 1994). Because of their experience

representing the victims of fraud in civil RICO actions,

NASCAT’s members can offer a helpful perspective to

this Court in evaluating the arguments made by Peti-

tioners and Respondents in this case, which concerns the

appropriate accrual rule for the four-year statute of lim-

itations governing civil RICO actions.

3. In addition, counsel for NASCAT in this proceed-

ing have published numerous commentaries concerning

civil RICO litigation and jurisprudence. Professor G.

Robert Blakey is the author (or co-author) of numerous

law review articles concerning RICO, including G. Robert

Blakey & Thomas A. Perry, An Analysis of the Myths that

Bolster Efforts to Rewrite RICO and the Various Proposals for

Reform, 43 Vand. L. Rev. 851 (1990). NASCAT’s counsel of

record, Kevin P. Roddy, is the author (or co-author) of

numerous law review articles concerning civil RICO liti-

gation, and is the author of a two-volume treatise entitled

RICO in Business and Commercial Litigation (Shepard’s/

McGraw-Hill, Inc. 1991 & Cum. Supp. 1996). Their forth-

coming article, G. Robert Blakey & Kevin P. Roddy, Reflec-

tions on Reves v. Ernst & Young: Its Meaning and Impact on

Substantive, Accessory, Aiding and Abetting and Conspiracy

Liability, which will be published in the September 1996

issue of the American Criminal Law Review, addresses

(among other topics) the Question Presented in this case:

the proper accrual rule for the four-year statute of limita-

tions governing civil actions brought under § 1964(c) of

RICO, 18 U.S.C. § 1964(c).

4. NASCAT seeks to file the attached amicus curiae

brief because it supports reversal of the Ninth Circuit's

decision in this case. See Grimmett v. Brown, 75 F.3d 506

(9th Cir.), cert. granted, No. 95-1723, 1996 U.S. LEXIS 3909

(June 17, 1996). In the attached amicus brief, NASCAT

advocates this Court’s adoption of the “last predicate act”

rule of accrual followed by the Third Circuit in civil RICO

cases, as set forth in Keystone Ins. Co. v. Houghton, 863 F.2d

1125 (3d Cir. 1988). For the reasons stated in the attached

amicus brief, NASCAT respectfully submits that this is the

most appropriate rule of accrual and should be selected

by this Court as . uniform rule governing all civil RICO

actions.

5. This Court has the inherent authority to appoint

an amicus curiae, or “friend of the court,” to assist it in

analyzing and deciding a case. Lathrop v. Unidentified,

Wrecked & Abandoned Vessel, 817 F. Supp. 953, 960 n.10

(M.D. Fla. 1993); Resort Timeshare Resales, Inc. v. Stuart,

764 F. Supp. 1495, 1500 (S.D. Fla. 1991). This Court (and

the lower federal courts) have long recognized the benefi-

cial role that an amicus curiae such as NASCAT can play

by “alert[ing] the court to the legal contentions of con-

cerned bystanders,” Bethune Plaza, Inc. v. Lumpkin, 863

F.2d 525, 533 (7th Cir. 1988), and contributing to the

Court’s understanding of the issues before it. Harris v.

Pernsley, 820 F.2d 592, 603 (3d Cir.), cert. denied, 484 U.S.

947 (1987).

6. NASCAT has historically participated as amicus

curiae in cases arising under RICO, the federal securities

laws, state tort laws and the Employee Retirement

Income Security Act, and NASCAT has filed amicus curiae

briefs in this Court in numerous cases. See, e.g., Varity

Corp. v. Howe, No. 94-1471 (ERISA); BMW of North Amer-

ica, Inc. v. Gore, No. 94-896 (punitive damages); Curtiss-

Wright Corp. v. Schoonejongen, No. 93-1935 (ERISA); Plaut

v. Spendthrift Farm, Inc., No. 93-1121 (statute of limita-

tions); Gustafson v. Alloyd Co., No. 93-404 (securities

fraud); Boca Grande Club, Inc. v. Florida Power & Light Co.,

No. 93-180 (contribution); Central Bank of Denver, N.A. v.

First Interstate Bank of Denver, N.A., No. 92-854 (securities

fraud); TXO Production Corp. v. Alliance Resources, No.

92-479 (punitive damages); Musick, Peeler & Garrett v.

Employers Insurance of Wausau, No. 92-34 (contribution);

Reves v. Ernst & Young, No. 91-886 (RICO); and Holmes v.

Securities Investor Protection Corp., No. 90-727 (RICO).

NASCAT respectfully submits that its submission of the

attached brief as amicus curiae will assist the Court in

deciding the issues presented in this case.

7. Pursuant to Rule 37.3(b), counsel for NASCAT

sought and received written consent from Petitioners’

counsel to file the attached amicus curiae brief; however,

counsel for Respondents have refused to provide their

consent. Accordingly, NASCAT was compelled to file this

Motion for Leave to file the attached Brief as Amicus

Curiae.

For the reasons stated above, NASCAT respectfully

submits that its Motion for Leave to File a Brief as Amicus

Curiae should be granted.

DATED: August 14, 1996

Respectfully submitted,

Mivserc Weiss BersHap

Hynes & Leracnw LLP

Kevin P. Roppy

Counsel of Record

355 South Grand Avenue

Suite 4170

Los Angeles, CA 90071

Telephone: 213/617-9007

Proressor G. Rosert BLakey

Notre Dame Law School

South Bend, IN 46556

Telephone: 219/631-5717

JONATHAN W. CuNEO

General Counsel

NASCAT

317 Massachusetts Avenue, N.E.

Suite 200

Washington, DC 20002

Telephone: 202/789-3960

Counsel for Amicus Curiae

National Association of

Securities and Commercial Law

Attorneys (NASCAT)

No. 95-1729

In The

Supreme Court of the United States

October Term, 1995

TOM GRIMMETT, AS TRUSTEE FOR THE

BANKRUPTCY ESTATE OF

VINCENT SIRAGUSA, AND JOANNE SIRAGUSA,

Petitioners,

vs.

PATRICIA L. BROWN, PATRICIA L. BROWN, LTD., AND

BECKLEY, SINGLETON, DELANOY, JEMISON &

LIST, CHARTERED,

Respondents.

On Writ Of Certiorari

To The United States Court Of Appeals

For The Ninth Circuit

BRIEF OF AMICUS CURIAE NATIONAL

ASSOCIATION OF SECURITIES AND

COMMERCIAL LAW ATTORNEYS (NASCAT)

IN SUPPORT OF PETITIONERS

QUESTION PRESENTED

Does a civil action brought under § 1964(c) of the

Racketeer Influenced and Corrupt Organizations Act

(“RICO”), 18 U.S.C. § 1964(c), accrue when the victim

knows or should know that she was injured - even

though she does not know of the existence of a pattern of

racketeering activity - or only when she knows or should

know that her injury was caused by defendants and was,

in fact, part of a pattern of racketeering activity?

IV.

TABLE OF CONTENTS

Page

INTEREST OF AMICUS CURIAE.............. 1

INTRODUCTION AND SUMMARY OF ARGU-

BEISE vo cocnuctcnnnccsdcnv tenons sesesnndpecucs 1

RETTIG Es 6 8 cc tei vsetddencdvccocedccctocses 2

A. Given The Conflicting Rules Adopted By

The Circuit Courts Following Malley-Duff, It

Is Appropriate For This Court To Elucidate

A Uniform Rule of Accrual For Civil RICO

AMMBEB. «0 cc ccccccecccccccvesesevecevecses 2

B. While The Majority Of The Circuit Courts

Have Adopted The “Injury Discovery” And

“Injury And Pattern Discovery Rules,” Their

Limitations Weigh Against Their Adoption

Dy Tite Cease oc ccccccccccccccccscccccces 5

C. This Court Should Adopt The “Last Predi-

cate Act” Accrual Rule Followed In The

Ws SED « c cncadetcsaucoueasuasbaeesas 17

D. RICO’s Express Purpose, Statutory Lan-

guage And Legislative History Mandate

Adoption Of The “Last Predicate Act”

AGUNG TED occ cccscccceccesscocesesconss 22

CE Gc occ ccc ceescccesenssocdessesencs 29

TABLE OF AUTHORITIES

Page

Cases

Agency Holding Corp. v. Malley-Duff & Assocs., Inc.,

Pee WP ETT s oF coceducascdccceoesseces: passim

Agristor Fin. Corp. v. Van Sickle, 967 F.2d 233 (6th

Gb SOUND cndandvsdcccndcvecscddboccsédbbasdeesosess 9

Anderson v. Consol-Pennsylvania Coal Co., 740 F.

ate 1126 (W.D. Pa. 1990), aff'd, 945 F.2d 394

(3d Cir. 1991), cert. denied, 502 U.S. 1075 (1992).... 19

Arab African Int'l Bank v. Epstein, 10 F.3d 168 (3d

GO DOU 0a ote erenehscincncqcadedicivcheatecdocecn 19

Association of Commonwealth Claimants v. Moylan,

FE Ce GON GE Ge BN e ccc cccccccctccccccccse 9

Bankers Trust Co. v. Rhoades, 859 F.2d 1096 (2d Cir.

1988), cert. denied, 490 U.S. 1007 (1989)........ passim

Bath v. Bushkin, Gaims, Gaines & Jonas, 913 F.2d 817

SED Gs MR CaS Wecdsoddeeeciscudaceetnne 8, 10, 21

Bingham v. Zolt, 66 F.3d 553 (2d Cir. 1995), cert.

denied, __ U.S. __, 116 S. Ct. 1418 (1996)........ 11

Bivens Gardens Office Bldg. v. Barnett Bank, 906 F.2d

1546 (11th Cir. 1990), cert. denied, 500 U.S. 910

SE sdde-adéthvuh obenecdbbehddhodbédienddceds passim

Caproni v. Prudential Sec., 15 F.3d 614 (6th Cir.

i swede eke debs bons Unckhae cowie tawes bless 6a 8, 9

Chardon v. Fumero Soto, 462 U.S. 650 (1983)......... 2, 4

Coal-Mac, Inc. v. JRM Coal Co., 743 F. Supp. 499

PY WE BEES vac cvnvccenccescocessacevesenceces 21

TABLE OF AUTHORITIES - Continued

Page

Cope v. Anderson, 333 U.S. 461 (1947)............00 00s 3

County of Cook v. Berger, 648 F. Supp. 4336 (N.D. Ill.

FO cvncctcccseccccocascsbouescecsedebeaséocesuct 23

Crowe v. Smith, 856 F. Supp. 1178 (W.D. La. 1994) .... 21

Cruden v. Bank of New York, 957 F.2d 961 (2d Cir.

SGTED. cb ovsccoconcdéavesssubasdeeeasdusissedees 11, 14

Davis v. Grusemeyer, 996 F.2d 617 (3d Cir. 1993) ..... 19

Deppe v. Tripp, 863 F.2d 1356 (7th Cir. 1988)......... 19

District 65 Retirement Trust for Members of the

Bureau of Wholesale Sales Representatives v. Pru-

dential Sec., 925 F. Supp. 1551 (N.D Ga. 1996) ...8, 13

Fineberg v. Credit Int'l Bancshares, 857 F. Supp. 338

GE. TREN. BIDE cc evovecdonecvndudivcnnccecevsoncess 19

Fisher v. Whiton, 317 U.S. 217 (1942).................. 3

Glessner v. Kenny, 952 F.2d 702 (3d Cir. 1991)... 12, 18, 19

Granite Falls Bank v. Henrikson, 924 F.2d 150 (8th

RR DOOSD vackctdnesd bcadcigvatesseecceneensvee passim

Greenberg v. Tomlin, 816 F. Supp. 1039 (E.D. Pa.

GOODS oo an ccnataedesbaccpenvedéunsndsivaatasesesss 20

Grimmett v. Brown, 75. F.3d 506, cert. granted, No.

95-1723, 1996 U.S. LEXIS 3909 (June 17, 1996)... .passim

Gurfein v. Sovereign Group, 826 F. Supp. 890 (E.D.

Pe Ws ca ban vensccududsceenacduadslueeiseee 19

H.]., Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229

PED cane onedae tes cetncddbseuduceéteeisccnaes passim

Havens Realty Corp. v. Coleman, 455 U.S. 363 (1983) .... 16

TABLE OF AUTHORITIES —- Continued

Page

In re American Continental Corp./Lincoln Sav. &

Loan Sec. Litig., 792 F. Supp. 1424 (D. Ariz. 1992).... 13

In re Integrated Resources Real Estate Ltd. Partner-

ships Sec. Litig., 850 F. Supp. 1105 (S.D.N.Y.

SOc dn bn bignederdneccagscsévevesnccedecacecces 11

In re Prudential Sec. Ltd. Partnerships Sec. Litig.,

[Current Binder] Fed. Sec. L. Rep. (CCH)

TD FRAO GILY, BGG) occ ccccccccccccee. 13, 14, 15

Indianapolis Hotel Investors, Ltd. v. Aircoa Equity

Interests, Inc., 733 F. Supp. 1406 (D. Colo. 1990) .... 21

Kearny v. Hudson Meadows Urban Renewal Corp.,

See eae CAO Ge Ce, BO) occ ccccccccsccvcccces 19

Keystone Ins. Co. v. Houghton, 863 F.2d 1125 (3d Cir.

Bene 0 hesasecccrcncoccesesnetcocencsssecves passim

Klehr v. A.O. Smith Corp., 875 F. Supp. 1342 (D.

Minn. 1995), aff'd, 87 F.3d 231 (8th Cir. 1996) ..... 12

Korman v. Trusthouse Forte PLC, 786 F. Supp. 458

SE EL COED 0 6:6 6 coe deb edGRGbSndeseenenevesneuee 19

La Porte Constr. Co. v. Bayshore Nat'l Bank, 805 F.2d

SE ED CON avine ccc cccdunucceconundescecss 5

Marshall & Ilsley Trust Co. v. Pate, 819 F.2d 806 (7th

GN MD sho ccbecWidtbedesuvecsveccscestusencevi 19

McCool v. Strata Oil Co., 972 F.2d 1452 (7th Cir.

Pa SUWerenbascusacesescncocsecdnentased 4, 5, 10, 28

NOW ov. Scheidler, 510 U.S. 249, 114 S. Ct. 798

SPO oC SOMEV cus KR Resi cdcbdconedidesdvecbéceciebie 17

TABLE OF AUTHORITIES - Continued

Page

Owens v. Wade, 789 F. Supp. 168 (E.D. Pa. 1992)..... 19

Panna v. Firstrust Sav. Bank, 749 F. Supp. 1372

(D.N.J. 1990), vacated on reconsideration, 760 F.

Supp. G2 CONG. BPE)... cocccsccccvccvwcsccccees 19

Panna v. Firstrust Sav. Bank, 760 F. Supp. 432

SNR: SUD ba Bb sdds Ldccvkodtosnesnstectioeenkak 19

Pocahontas Supreme Coal Co. v. Bethlehem Steel

Corp., 828 F.2d 211 (4th Cir. 1987) ..............4.. 5

Randolph County Fed. Sav. & Loan Ass’n v. Sutliffe,

775 F. Supp. 1113 (S.D. Ohio 1991)............2245: 9

Riddell v. Riddell Washington Corp., 866 F.2d 1480

ofa Bo errr re 5

Rodriguez v. Banco Cent., 917 F.2d 664 (ist Cir.

FOND vc cvccccduccecosnngaeeetaseaeseane 5, 10, 27, 28

Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479 (1985) .. . .passim

Shearin v. E.F. Hutton Group, Inc., 885 F.2d 1162 (3d

GRR: FD cece siccbentccedssntetentceshesencenasec

State Farm Mut. Auto Ins. Co. v. Ammann, 828 F.2d

|. be? 8. eee!!! 7,

Stitt v. Williams, 919 F.2d 516 (9th Cir. 1990) ........

United States v. Field, 432 F. Supp. 55 (S.D.N.Y.

1977), aff'd, 578 F.2d 1371 (2d Cir.), cert. dis-

ere

United States v. Kubrick, 444 U.S. 111 (1979) .........

United States v. Thomas, 991 F.2d 206 (5th Cir.), cert.

SO TD Wa Re Cs bh vise cscbcdrdstacesss

Vii

TABLE OF AUTHORITIES - Continued

Page

United States v. Torres Lopez, 851 F.2d 520 (1st Cir.

1988), cert. denied, 489 U.S. 1021 (1989)............ 25

United States v. Vogt, 910 F.2d 1184 (4th Cir. 1990),

cert. denied, 498 U.S. 1083 (1991).................. 25

Volk v. D.A. Davidson & Co., 816 F.2d 1406 (9th Cir.

SG a hs dc} of 50 SLA hae Cb bON hed hed nemeeemenittinien ide ode 3

Wilder v. Meyer, 779 F. Supp. 164 (S.D. Fla. 1991)..... 9

Zenith Radio Corp. v. Hazeltine Research, Inc., 401

Sa SED GOV ED oc cc ccd cvcsweecsccdWCRces vesectecces 2

STATUTES, RULES AND REGULATIONS

Organized Crime Control Act, Pub. L. No. 91-452,

§904(a), 84 Stat. 947 (1970) (codified at 18 U.S.C.

NE MUL 0 vn cckpcd etude beceabdbeoeebeceséoeiesas 22

18 U.S.C.

PED chet asad ce bdthvensies dehevsekeeesnaesean 6, 13

Se PE TOS Cad wicev Eves bevdupie ctdvcisgdlates passim

Thon. ss ukesheeviese sweden ths eneedechenseunn 17

PED ods bub Cebdvedhawercckcobesctvectedued 17, 21

0 RPI eer ee 17, 21

UTS 16 ssb.cdectevividoedbdcunennec 7, 17, 21, 25

Re bdhcdecdphs vend een be addiiewe skied 17, 21, 25

SD ED 06-008 s eoeuccevcetectdbvestochesetbens passim

Pub. L. No. 104-67, 109 Stat. 737 (1995)............. 13

viii

TABLE OF AUTHORITIES - Continued

Page

SECONDARY AUTHORITIES

Douglas E. Abrams, The Law of Civil RICO (Little

Brown & Co. 1991 & Cum. Supp. 1996) § 2.4... .passim

G. Robert Blakey & Kevin P. Roddy, Securities

Reform and RICO: A Lawyer's Dream, 23 RICO L.

Rptr. 802 (Jume 1996) ........ccceeeeeceecereccens 13

Donna A. Boswell, Comment, The Parameters of

Federal Common Law: The Case of Time Limitations

on Federal Causes of Action, 136 U. Pa. L. Rev.

SORT GRRE Pe ov cin wv decncnsdeenscoasbasedsnntios coe: 2

Michael Goldsmith, Civil RICO Reform: The Basis

for Compromise, 71 Minn. L. Rev. 827 (1987)........ 7

Edwin Scott Hackenberg, All the Myriad Ways:

Accrual of Civil RICO Claims in the Wake of

Agency Holding Corp. v. Malley-Duff, 48 La. L.

Pere. BOGS Coe ccc ccccccsvccesinecsacavenaeuner 4, 16

Mary S. Humes, RICO and a Uniform Rule of

Accrual, 99 Yale L.J. 1399 (1990)............06. passim

Paul B. O'Neill, “Mother of Mercy, Is This the Begin-

ning of RICO?”: The Proper Point of Accrual of a

Private Civil RICO Action, 65 N.Y.U. L. Rev. 172

(RGD) . oe vccccccccconscanscpeceneuseseeseeens 3, 7, 10

Salgado, The Time-Expired Civil RICO Claim and

Subsequent Predicate Acts, 68 Denver L. Rev. 445

CRORE) « ccccrdecccccoseccopeccsessesseeseseneseateses 3

Special Project — Time Bars in Specialized Federal

Common Law: Federal Rights of Action and State

Statutes of Limitations, 65 Cornell L. Rev. 1011

(TOGE) . 0 os cccccascccesesecesesesapeaneaneesenensed 2

Il. INTEREST OF AMICUS CURIAE

The interest of amicus curiae, the National Association

of Securities and Commercial Law Attorneys (NASCAT),

is set forth in the foregoing Motion.

Il. INTRODUCTION AND SUMMARY OF ARGU-

MENT

Since this Court’s decision nine years ago in Agency

Holding Corp. v. Malley-Duff & Assocs., Inc., 483 U.S. 143

(1987) (“Malley-Duff"), which held that a four-year limita-

tions period borrowed from federal antitrust law governs

civil actions brought under the Racketeer Influenced and

Corrupt Organizations Act (“RICO”), 18 U.S.C.

§§1961-1968, the circuit courts have adopted several con-

flicting rules governing when civil RICO actions accrue.

This case presents an opportunity for this Court to

resolve this split in the circuits and adopt a uniform rule

of accrual.

Many circuit courts have adopted the so-called

“injury discovery” rule, which holds that a civil RICO

claim accrues when a victim discovers (or should have

discovered) his injury, even if the existence of the remain-

ing elements of the RICO claim are unknown. A more

acceptable variation, the so-called “injury and pattern

discovery” rule, which has been adopted in other circuits,

ameliorates the unjust impact of the “injury discovery”

rule, but does not fully reflect RICO’s broad remedial

purposes, which are embodied in its statutory language

and legislative history. For the reasons stated herein,

NASCAT respectfully submits that the “last predicate

act” rule, which was ably elucidated by the Third Circuit

in Keystone Ins. Co. v. Houghton, 863 F.2d 1125, 1130-33 (3d

Cir. 1988) (“Keystone”), is the most appropriate accrual

rule and should be adopted by this Court.

Ill. ARGUMENT

A. Given The Conflicting Rules Adopted By The

Circuit Courts Following Malley-Duff, It Is

Appropriate For This Court To Elucidate A Uni-

form Rule of Accrual For Civil RICO Actions

When Congress enacted RICO in 1970, as is so often

the case, it failed to institute a specific limitations period

for actions brought under the statute. See Chardon v.

Fumero Soto, 462 U.S. 650, 667 (1983) (Rehnquist, J. dis-

senting) (“[flew areas of the law stand in greater need of

firmly defined, easily applied rules”). With regard to civil

RICO cases, the applicable limitations period remained

unsettled until this Court decided Malley-Duff, 483 U.S. at

156, which held that a uniform four-year period, as bor-

rowed from federal antitrust law in the Clayton Act, 15

U.S.C. §15(b), would be the applicable period for civil

RICO claims. Id.' This Court, however, expressly refused

to reach the question of when the four-year limitations

period begins to accrue? in a civil RICO action,’ leaving

the issue for the lower federal courts to try to resolve.

\ See generally Donna A. Boswell, Comment, The Parameters

of Federal Common Law: The Case of Time Limitations on Federal

Causes of Action, 136 U. Pa. L. Rev. 1447 (1987) (discussing

Malley-Duff in the context of federal jurisprudence on statutes of

limitations); Special Project - Time Bars in Specialized Federal

Common Law: Federal Rights of Action and State Statutes of

Limitations, 65 Cornell L. Rev. 1011, 1084-94 (1980) (discussion

qualifications to time bars, including accrual and tolling

doctrines).

2 “Accrual” refers to the point at which a cause of action

may be maintained. Black’s Law Dictionary 20-21 (6th ed. 1990).

The start of a limitations period and the accrual of a cause of

action are terms used synonymously by many courts. See, ¢.g.,

Zenith Radio Corp. v. Hazeitine Research, Inc., 401 U.S. 321, 338

(1971) (“Generally, a cause of action accrues and the statute

begins to run when a defendant commits an act that injures a

As the court below noted, see Grimmett v. Brown, 75

F.3d 506, 510 (9th Cir.), cert. granted, No. 95-1723, 1996

U.S. LEXIS 3909 (June 17, 1996), in the wake of Malley-

Duff the circuits have split on the question of when the

four-year limitations period begins to run to such an

extent that several differing theories of accrual have been

generated. See Granite Falls Bank v. Henrikson, 924 F.2d

150, 152 (8th Cir. 1991) (describing a “smorgasbord of

civil RICO accrual rules” from which to select the most

appropriate rule). While there is some common ground

plaintiff's business.” ) (citations omitted); see also United States v.

Kubrick, 444 U.S. 111, 122 (1979) (knowledge of injury and who

injured you); but see Volk v. D.A. Davidson & Co., 816 F.2d 1406,

1412 (9th Cir. 1987) (in cases where fraud is alleged, the claim

accrues when the plaintiff suffers injury, but the statute of

limitations does not run until the claim is discovered). Federal

law governs when the RICO cause of action accrues in this case.

See Cope v. Anderson, 331 U.S. 461, 464 (1947); Fisher v. Whiton,

317 U.S. 217, 218 (1942).

° In Malley-Duff, Justice O’Connor stated in pertinent part:

This litigation was filed on March 20, 1981, less than

four years after the earliest time Malley-Duff's RICO

action could have accrued - i.e., the date of Malley-

Duff's termination on February 13, 1978. Accordingly

the litigation was timely brought. Because it is clear

that Malley-Duff's RICO claims accrued within four

years of the time the complaint was filed, we have no

occasion to decide the appropriate time for accrual for

a RICO claim.

483 U.S. at 156-57.

* For commentary on the various accrual rules and their

ramifications in civil RICO litigation, see generally Douglas

Abrams, The Law of Civil RICO §2.4 (Little Brown & Co. 1991 &

Cum. Supp. 1996) (“Civil RICO”); Salgado, The Time-Expired

Civil RICO Claim and Subsequent Predicate Acts, 68 Denver L. Rev.

445 (1991); Paul B. O'Neill, “Mother of Mercy, Is This the

Beginning of RICO?”: The Proper Point of Accrual of a Private Civil

among the circuits concerning this issue because, in the

words of the Eighth Circuit, each one has “incorporated

the principle of discovery into the accrual rule governing

civil RICO actions in the particular circuit,” Granite Falls,

924 F.2d at 153; see also McCool v. Strata Oil Co., 972 F.2d

1452, 1465 (7th Cir. 1992) (“Every court that has consid-

ered an accrual rule for civil RICO has adopted some sort

of discovery rule.”), the circuits diverge over the “ques-

tion of what the plaintiff must actually or constructively

know before the limitations period will start to run.”

Granite Falls, 924 F.2d at 153. As previously pointed out

by Petitioners, see Petition for Writ of Certiorari at 9, the

differing accrual rules followed in the lower federal

courts provide widely differing periods of time within

which an injured person or entity may investigate and

bring a civil RICO action; indeed, such differences are

frequently outcome determinative, as the facts of this case

demonstrate.

For the reasons stated herein, NASCAT respectfully

submits that it is the approprjate time (and this is the

appropriate case) for this Court to adopt a uniform rule

of accrual governing civil RICO actions. See Chardon, 462

U.S. at 669 (Rehnquist, J., dissenting). Although a numeri-

cal majority of the circuit courts have adopted the so-

called “injury discovery” and “injury and pattern discov-

ery rules,” see Part III.B, infra, given their limitations this

Court should follow the “last predicate act” accrual rule

announced by the Third Circuit in Keystone, 863 F.2d at

1130-33. See Part Il1.C-D, infra.

RICO Action, 65 N.Y.U.L. Rev. 172 (1990) (“Proper Point of

Accrual”); Mary S. Humes, RICO and a Uniform Rule of Accrual,

99 Yale L.J. 1399 (1990) (“Uniform Rule of Accrual”); Edwin Scott

Hackenberg, All the Myriad Ways: Accrual of Civil RICO Claims in

the Wake of Agency Holding Corp. v. Malley-Duff, 48 La. L. Rev.

1411 (1988) (“Accrual of Civil RICO Claims”).

B. While The Majority Of The Circuit Courts

Have Adopted The “Injury Discovery” And

“Injury And Pattern Discovery Rules,” Their

Limitations Weigh Against Their Adoption By

This Court

The First, Second, Fourth, Fifth, Seventh, Ninth and

District of Columbia Circuits employ an injury-based

accrual rule. Under this method, as the court below

explained, a civil RICO action accrues at the time plaintiff

discovered or should have discovered his, her, or its injury.

See Grimmett, 75 F.3d at 511 (“ ‘The limitations period [for

civil RICO actions] begins to run when a plaintiff knows

or should know of the injury which is the basis for the

action.’ “) (quoting Stitt v. Williams, 919 F.2d 516, 525 (9th

Cir. 1990)).° Significantly, under the “injury discovery”

rule a civil RICO plaintiff “need not discover that the

injury is part of a ‘pattern of racketeering’ for the period

to begin to run.” Grimmett, 75 F.3d at 510 (quoting

McCool, 972 F.2d at 1465).

The injustice of the so-called “injury discovery” rule

may be illustrated by a simple hypothetical situation

5 See also Rodriguez v. Banco Cent., 917 F.2d 664, 665 (1st Cir.

1990) (Breyer, Ch.J.) (“[T]he statute begins to run when a

plaintiff discovered, or should have discovered, his injury.”);

Bankers Trust Co. v. Rhoades, 859 F.2d 1096, 1102 (2d Cir. 1988)

(same), cert. denied, 490 U.S. 1007 (1989); Pocahontas Supreme Coal

Co. v. Bethlehem Steel Corp., 828 F.2d 211, 220 (4th Cir. 1987)

(RICO’s limitations period “begins to run when a plaintiff

knows or should know of the injury that underlies his cause of

action.”); La Porte Constr. Co. v. Bayshore Nat'l Bank, 805 F.2d

1254, 1256 (5th Cir. 1986) (same); McCool, 972 F.2d at 1464-65

(same); Riddell v. Riddell Washington Corp., 866 F.2d 1480, 1489-90

(D.C. Cir. 1989) (same); Abrams, Civil RICO, §2.4, at 61 (“A civil

RICO claim accrues when the plaintiff discovered or had reason

to discover the proprietary injury that is the basis of the claim.”)

(footnotes and citations omitted).

common to civil RICO actions: Suppose plaintiff suffers

an injury to his business or property in 1980 when defen-

dant commits an illegal act that constitutes a predicate act

of “racketeering activity.“© Assume that plaintiff dis-

covers that injury in 1984. Although injured, plaintiff has

no civil RICO action at this point because there is as yet

no “pattern of racketeering activity”; even under the

most liberal interpretation of the pattern requirement, at

least two predicate acts are necessary.” Assume further

that plaintiff sustains another injury caused by another

predicate act committed by defendant; plaintiff discovers

the second injury in 1990 and then files a civil RICO

action. Under the “injury discovery” accrual rule, it is

arguable that plaintiff would be unable to recover for the

1984 injury, even though he sustained two injuries caused

by predicate acts of racketeering occurring within ten

years of each other, the baseline requirement for a civil

6 See 18 U.S.C. §1961(1) (defining “racketeering activity” to

include such offenses as bribery, arson, extortion, and threats to

commit any of the above, as well as other activities already

criminalized elsewhere in the U.S. Code, such as mail fraud,

wire fraud, interstate transportation of stolen property,

embezzlement and bankruptcy fraud).

7 See 18 U.S.C. §1961(5) (defining “pattern of racketeering

activity”); H.J., Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 239

(1989) (“[T]o prove a pattern of racketeering activity a plaintiff

or prosecutor must show that the racketeering predicates are

related, and that they amount to or pose a threat of continued

criminal activity.”) (emphasis in ortginal); Sedima, S.P.R.L. v.

Imrex Co., 473 U.S. 479, 496 n.14 (1985) (“It is the factor of

continuity plus relationship which combines to produce a

pattern. .. . ‘criminal conduct forms a pattern if it embraces

criminal acts that have the same or similar purposes, results,

participants, victims, or methods of commission, or otherwise

are interrelated by distinguishing characteristics and are not

isolated events.’ ”) (emphasis in original; citation omitted).

RICO claim. See 18 U.S.C. §§1961(5), 1962(c) and 1964(c);

but see Grimmett, 75 F.3d at 512 (“[A] RICO cause of action

cannot accrue until all the elements exist.”). Courts

applying the “injury discovery” rule would hold that the

1984 discovery triggered the four-year limitations period,

so plaintiff’s civil RICO claim became time-barred in

1988, before he could allege a pattern of racketeering

activity that included the 1990 injury. See, e.g., State Farm

Mut. Auto Ins. Co. v. Ammann, 828 F.2d 4, 4-5 (9th Cir.

1987) (discovery of each injury triggers RICO’s four-yea:

statute of limitations beyond which plaintiff may noi

recover for such injury).

As a result of this possible injustice, the “injury dis-

covery” accrual rule is subject to well-justified criticism,®

® See O'Neill, Proper Point of Accrual, 65 N.Y.U.L. Rev. at

205-06 (“[U]nder the discovery rule it is possible that a plaintiff

could discover an injury caused by a defendant's racketeering

act and have the statute of limitations run on that injury prior to

the time of the commission of the second predicate act necessary

to perfect plaintiff's right to relief under the statute. The RICO

plaintiff might have part of his cause of action barred before he

ever has the opportunity to sue.”) (footnote omitted); Humes,

Uniform Rule of Accrual, 99 Yale L.J. at 1410 (noting that the

“injury discovery” accrual rule “may clash with the pattern

requirement” because “[i]f the claim accrues after the first

injury but before the plaintiff can state a pattern, plaintiff may

be time barred before he can state a claim. . . . Because of this

defect, the discovery rule cannot be reconciled completely with

the pattern requirement of RICO and is therefore not the best

accrual rule for RICO actions.”) (footnote omitted); Michael

Goldsmith, Civil RICO Reform: The Basis for Compromise, 71

Minn. L. Rev. 827, 879 (1987) (“Because a potential plaintiff has

not been injured under RICO until the pattern element has been

satisfied, it is inappropriate to start the limitations period before

the pattern is fully developed.”); Abrams, Civil RICO, §2.4, at 62

(“The discovery rule has encountered criticism because a civil

RICO plaintiff might suffer proprietary injury (and thus might

which the court below, of course, sidestepped. See Grimmett,

75 F.3d at 512. Recognizing the severe limitations inherent in

the “injury discovery” rule, the Third, Sixth, Eighth, Tenth

and Eleventh Circuits have adopted an accrual rule that

applies the general discovery rule to both the “pattern” ele-

ment and the “injury” element of the civil RICO cause of

action.? These courts find that a civil RICO action does not

accrue until “the plaintiff knows, or should have known, of

his injury and that the injury is part of a pattern of racketeering

activity.” Bivens Gardens, 906 F.2d at 1554 (emphasis added).

In the further words of the Eleventh Circuit:

We hold . . . that with respect to each inde-

pendent injury to the plaintiff, 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... .

Because a civil RICO plaintiff must prove that

his injury is part of a pattern of racketeering

activity, an injured party must know, or have

reason to know, that his injury is part of a pat-

tern before he can be expected to file a civil

RICO cause of action.

Id. at 1554-55 (emphasis added).’° In the court below,

Petitioners argued that the Ninth Circuit should adopt

discover or have reason to discover that injury) well before the

defendant commits sufficient predicate acts to constitute a

pattern of racketeering activity.”).

® See, e.g., Keystone, 863 F.2d at 1130-31; Caproni v. Prudential

Sec., 15 F.3d 614, 619-20 (6th Cir. 1994); Granite Falls, 924 F.2d at

154; Bath v. Bushkin, Gaims, Gaines & Jonas, 913 F.2d 817, 820-21

(10th Cir. 1990); Bivens Gardens Office Bldg. v. Barnett Bank, 906

F.2d 1546, 1553-54 (11th Cir. 1990), cert. denied, 500 U.S. 910

(1991).

10 See also District 65 Retirement Trust for Members of the

Bureau of Wholesale Sales Representatives v. Prudential Sec., 925 F.

the “injury and pattern discovery” rule followed in the

Sixth, Eighth, Tenth and Eleventh Circuits, and leveled

several compelling criticisms at the “injury discovery”

rule, see Grimmett, 75 F.3d at 511-12, which the court

below refused to heed.'! This case, however, presents this

Court with a fresh opportunity to determine which of

several competing accrual rules is the most appropriate

for civil RICO actions.

Supp. 1551, 1563-64 (N.D. Ga. 1996). The Bivens Gardens rule has

been followed in the Eighth Circuit, see Association of

Commonwealth Claimants v. Moylan, 71 F.3d 1398, 1402 (8th Cir.

1995), the Sixth Circuit, see Caproni, 15 F.3d at 619-20 (under the

“injury and pattern discovery” rule, the plaintiff must “discover

or be in a position to discover, the existence of a pattern of

racketeering activity in addition to the existence . . . of the

injury”) (emphasis added; footnote omitted); Agristor Fin. Corp.

v. Van Sickle, 967 F.2d 233, 240-42 (6th Cir. 1992) (civil RICO

claim time-barred under either “injury discovery” rule or

“injury and pattern discovery” rule), and the Tenth Circuit, see

note 9, supra; see also Wilder v. Meyer, 779 F. Supp. 164, 168 (S.D.

Fla. 1991); Randolph County Fed. Sav. & Loan Ass'n v. Sutliffe, 775

F. Supp. 1113, 1117-18 (S.D. Ohio 1991).

'! The Ninth Circuit panel, per Judge Hall, refused to

waver from the “injury discovery” rule, stating in pertinent

part:

We do not find Siragusa’s criticisms persuasive

enough to warrant abandonment of the “injury

discovery” rule. Moreover, the “injury discovery”

rule encourages diligence in RICO prosecutions and

insures that evidence remains fresh. For these

reasons, we reaffirm this Circuit’s rule that a civil

RICO cause of action arises when the plaintiff knows

or should know that she has been injured.

75 F.3d at 512.

Muddying the rough distinction between these

groups — i.e., injury-based accrual versus injury- and pat-

tern-based accrual!? — is the fact that some courts in both

groups utilize a “separate accrual” rule.'3 Under this rule,

each time a plaintiff suffers an independent RICO injury,

a new RICO cause of action accrues (a) when plaintiff

discovers or should have discovered his injury (“injury-

based” accrual), see, e.g., Bankers Trust, 859 F.2d at 1102; or

(b) when plaintiff discovers or should have discovered

12 Most commentators (see notes 4 and 8, supra) have

criticized these disparate rules of accrual and some have even

proposed alternative theories. See, e.g., O'Neill, Proper Point of

Accrual, 65 N.Y.U.L. Rev. at 234-36 (proposing the “pattern

formation rule” in which the running of the statutory period is

postponed until the plaintiff first discovers or should have

discovered the facts relating to two predicate acts necessary to

bring a civil RICO action).

13 In his concurrence in State Farm Mut. Auto. Ins. Co., 828

F.2d at 5, then-Judge Kennedy first applied the “separate

accrual” rule in the RICO context:

The rule is that a cause of action accrues when new

overt acts occur within the limitations period, even if

a conspiracy was formed and the other acts were

committed outside the limitations period. A corollary

rule is that damages may not be recovered for injuries

sustained as a result of acts committed outside the

limitations period.

Id. (citations omitted); see also Abrams, Civil RICO, §2.4, at 65. To

date, some form of the “separate accrual” rule has been adopted

by the First, Second, Seventh, Eighth, Tenth and Eleventh

Circuits. See, e.g., Rodriguez, 917 F.2d at 666; Bankers Trust, 859

F.2d at 1102; McCool, 972 F.2d at 1464-66; Granite Falls, 924 F.2d

at 154; Bath, 913 F.2d at 820; Bivens Gardens, 906 F.2d at 1554-55.

See also Grimmett, 75 F.3d at 510-11 (collecting cases). The

“separate accrual” rule is discussed and criticized in Humes,

Uniform Rule of Accrual, 99 Yale L.J. at 1411-13.

his injury and that the injury is part of a pattern (“injury-

and pattern-based” accrual), see, e.g., Bivens Gardens, 906 F.2d

at 1554-55. For example, in Bankers Trust the defendant offi-

cers of a bankrupt corporation (1) wrongfully concealed

assets during a 1974-76 bankruptcy proceeding; (2) con-

ducted harassing lawsuits in 1978-79 to prevent plaintiff

from vacating the fraudulently obtained bankruptcy plan;

and (3) fraudulently conveyed property in 1981. 859 F.2d at

1098-99. Plaintiffs incurred various legal fees and expenses

over time, besides the loss of the debt itself. (The loss of the

debt, although not time-barred, was dismissed without prej-

udice because its amount was speculative. See id. at 1105-06.)

Noting that in enacting RICO, Congress had in mind the

possibility of “multiple and independent [injuries] that occur

over a broad span of time,” the Second Circuit held that a

rule permitting a new cause of action to accrue with each

independent injury was “[t]he logical end result.” Id. at 1103.

Thus, the court adopted the “separate accrual” rule and

found that the final two injuries were “independent” of the

first. Id. at 1102-05."4

14 A necessary corollary of the separate accrual rule, as

developed in the Second Circuit, is that plaintiff may only

recover for injuries discovered or discoverable within four years

of the time suit is brought. See Bankers Trust, 859 F.2d at 1104-05.

“As long as separate and independent injuries continue to flow

from the underlying RICO violations — regardless of when those

violations occurred — plaintiff may wait indefinitely to sue, but

may then win compensation only for injuries discovered or

discoverable within the four-year ‘window’ before suit was

filed, together, of course, with any provable future damages.”

Bingham v. Zolt, 66 F.3d 553, 560 (2d Cir. 1995), cert. denied, __

U.S. __, 116 S. Ct. 1418 (1996) (citing Bankers Trust, 859 F.2d at

1193). See also Cruden v. Bank of New York, 957 F.2d 961, 977 (2d

Cir. 1992); In re Integrated Resources Real Estate Ltd. Partnerships

Sec. Litig., 850 F. Supp. 1105, 1116-19 (S.D.N.Y. 1993); Abrams,

Civil RICO, §2.4, at 63 (discussing “separate accrual” cases).

Another version of the “separate accrual” rule was

recognized by the Eleventh Circuit in Bivens Gardens,

where defendants were accused of committing three sets

of acts: (1) a wrongful takeover of a limited partnership

in 1975; (2) the mismanagement and diversion of the

partnership’s assets from 1975 to 1981; and (3) the sale of

a hotel, the partnership’s primary asset, at below fair

market value in 1981. 906 F.2d at 1549-51. The Eleventh

Circuit held that the mismanagement and subsequent sale

of the hotel were “new and independent” acts because

they “[were] not included among the injuries that natu-

rally flow from the wrongful takeover [in 1975].” Id. at

1551.

In subsequent cases, courts have recognized that

although separate limitations periods may accrue from

new injuries, the separate accrual “is limited to distinct

and independent injuries.”'5 In this case, the Ninth

Circuit held that acts in furtherance of Respondent’s

scheme to conceal Petitioner’s ex-husband’s interest in

1S Klehr v. A.O. Smith Corp., 875 F. Supp. 1342, 1352 (D.

Minn. 1995), aff'd, 87 F.3d 231 (8th Cir. 1996). For example, in

Glessner v. Kenny, 952 F.2d 702 (3d Cir. 1991), plaintiffs brought

their RICO actions in 1988 after defendants had ceased

production of an allegedly defective furnace in 1983, thus

ending the pattern of racketeering activity. Appealing the

dismissal of their RICO claims, plaintiffs argued that although

they first suffered injury, in the form of excessive repairs, prior

to the expiration of the four-year limitations period, they

suffered a “new and independent injury” in 1984 when they had

to replace the furnace. This new injury, they claimed, reset the

statute of limitations’ clock. Id. at 706-07. The Third Circuit

found that plaintiffs’ replacement of the furnace did not

constitute a new and distinct injury but, rather, a continuation

of their initial injury. Thus, “the mere continuation of damages

into a later period will not serve to extend the statute of

limitations.” Id. at 708.

the medical practice, which occurred after Petitioner had

filed her fraud complaint in the bankruptcy court, did not

result in any “new and independent” injuries so as to

start the four-year limitations period running anew on

the civil RICO claims. 75 F.3d at 513-14.

While the circuit courts have sought to justify the

“injury discovery” accrual rule, the “injury and pattern

discovery” rule and/or the “separate accrual” rule, their

vagaries mean that meritorious plaintiffs’ civil RICO

claims may be unjustifiably time-barred, such as in the

case at bar. The factual variations evident in civil RICO

litigation demonstrate the need for this Court to adopt a

uniform rule of accrual which takes into account the

different ways in which RICO claims manifest themselves

and accrue. For example, where plaintiff's civil RICO

claims are grounded in fraud and plaintiff has alleged

mail fraud, wire fraud and/or securities fraud as the

requisite predicate acts,!® the plaintiff has, in many cases,

sustained only a “single” (albeit economically significant)

injury from defendants’ course of illegal conduct. In those

cases (such as In re American Continental Corp./Lincoln Sav.

& Loan Sec. Litig., 792 F. Supp. 1424 (D. Ariz. 1992), a

securities fraud /civil RICO class action brought on behalf

16 See 18 U.S.C. §1961(1) (definition of “racketeering

activity”) and note 6, supra. Section 107 of the Private Securities

Litigation Reform Act of 1995, Pub. L. No. 104-67, 109 Stat. 737,

758 (1995), which took effect on December 22, 1995 and

amended §1964(c) of RICO to eliminate “fraud in the sale of

securities” as a predicate act of racketeering activity, does not

apply retroactively. See, e.g., District 65, 925 F. Supp. at 1566-70;

In re Prudential Sec. Ltd. Partnerships Sec. Litig., (Current Binder]

Fed. Sec. L. Rep. (CCH) ¥ 99,253, at 95,433-37 (S.D.N.Y. 1996).

See generally G. Robert Blakey & Kevin P. Roddy, Securities

Reform and RICO: A Lawyer's Dream, 23 RICO L. Rptr. 802, 812-16

(June 1996).

of 23,000 defrauded investors who lost hundreds of mil-

lions of dollars when worthless subordinated debentures

issued by a holding company and sold in the branches of

a thrift institution controlled by now-twice-convicted

felon Charles H. Keating, Jr. went into default), plaintiffs

are injured only once by the alleged pattern of racketeer-

ing activity.!7 In more complex cases, such as Prudential

Securities, | 99,253, at 95,432-33, a securities fraud /civil

RICO class action brought on behalf of more than 100,000

investors who lost hundreds of millions of dollars when

they were fraudulently induced to invest in limited part-

nerships worth substantially less than represented by the

general partners/promoters, the existence of multiple

injuries resulting from virtually innumerable predicate

acts complicates the accrual question. Id.1* The four-year

17 A similar fact pattern was presented to the Second

Circuit in Cruden, 957 F.2d at 977-78, a civil RICO action brought

by debenture holders, where Judge Cardamone succinctly

stated the applicable rule:

Plaintiffs were injured within the meaning of

§1964(c) [of RICO] when Computer and International

defaulted in 1983. Hence, regardless of when other

RICO violations may have occurred, plaintiffs’ RICO

cause of action accrued at the time of default, and the

four-year statute of limitations began to run on the

action at that time.

Id. (emphasis in original). As the Third Circuit recognized in

Keystone, 863 F.2d at 1133, “(t]he [injury discovery accrual] rule

is an effective rule where the facts indicate that there was one

victim and each element and all predicate acts of a RICO

violation were present at the same time.” That fact pattern,

however, is not typical of sophisticated schemes to defrau*.

18 In Prudential Securities, plaintiffs and the members of the

class invested in six limited partnerships formed between 1985

and 1991. Applying the discovery rule followed in the Second

Circuit, see Bankers Trust, 859 F.2d at 1103, and note 14, supra,

period begins to run on each of the injuries when that

injury is discovered, but the application of the “injury

discovery” rule of accrual to the multiple injury case

results in a divisible cause of action, making it likely that

a plaintiff's meritorious claim may be partially barred by

the statute of limitations when she has suffered multiple

injuries arising from multiple predicate acts extending

over a period of time.'®

Senior Judge Pollack analyzed the accrual of the investors’ civil

RICO claims:

The statute of limitations did not begin to run on

the date that investors received prospectuses in the

limited partnerships, but at the date investors were in

possession of sufficient information to suggest the

probability of fraud. This did not occur until, at

earliest, October, 1990, when capital losses were first

suffered as a result of the sale of Polaris aircraft.

Indeed, the record currently before the Court contains

no indication that investors even learned of these

capital losses until January of 1992, when the format

of Prudential’s monthly statements was altered so

that the value of investments was no longer recorded

at par. Thus, it cannot be determined at this stage of

the case as a matter of law that investors in any of the

Polaris limited partnerships were on notice of their

»juries at a point four years prior to the filing of this

suit on June 8, 1994.

7 99,253, at 95,433.

*° As one commentator has criticized the “separate accrual”

rule:

[CJjourts adopting the separate accrual discovery rule

seem to have overlooked the implications of this rule

for plaintiff's remedy. Under the separate accrual

discovery rule, plaintiff may only recover damages

for those acts that took place within the four years

before he filed his claim. This corollary for damages

effectively diminishes any advantages derived from

Both the “injury discovery” rule and the “injury and

pattern discovery” rule lead invariably to the dismissal of

meritorious civil RICO claims. Neither accrual rule —- even

when tempered by the “separate accrual” jurisprudence

developed in the Second Circuit - is (or can be) easily

tailored to RICO’s statutory language or the public policy

underlying the statute. NASCAT respectfully submits

that the uniform rule of accrual to be adopted by this

Court must match RICO’s statutory language, legislative

purpose, and the elements of civil RICO actions that have

been repeatedly recognized by this Court and the lower

federal courts. As set forth below, the only accrual rule

that properly fits those parameters is the “last predicate

act” accrual rule followed in the Third Circuit. See Havens

Realty Corp. v. Coleman, 455 U.S. 363, 380-81 (1983) (five

different incidents alleged in “pattern or practice” in

violation of Fair Housing Act; only first four incidents

involved plaintiff Coleman, but the limitations period for

“continuing violations” ran from the last incident; noting

allowing the plaintiff time to discovery his injury: The

damages corollary put forth in the concurrence

subtracts the time allowed to discover the action from

the four year statute of limitations.

If the last act occurred in 1982, and the injury not

discovered until 1984, plaintiff does not have four

years from the discovery of the injury in which to file

a claim; if he waits until 1988, he will be barred, as no

injuries occurred after 1982. If he is to recover

damages, Penge Mere 2 hice de thee ng

discovery of the injury in which to bring his claim.

Humes, Uniform Rule of Accrual, 99 Yale L.J. at 1412 and n.85; see

also Hackenberg, Accrual of Civil RICO Claims, 48 La. L. Rev. at

1414 (same).

that “wooden application” of statute “ignores the con-

tinuing nature of the alleged violation, [and] only under-

mines the broad remedial intent of Congress embodied in

the Act”) (citations omitted).

C. This Court Should Adopt The “Last Predicate

Act” Accrual Rule Followed In The Third Cir-

cuit

The Third Circuit was the first federal appeals court

to depart from the injury-based accrual civil RICO rules

and apply discovery principles to the pattern of racketeer-

ing activity element of a RICO cause of action.”° The “last

predicate act” accrual rule employed in the Third Circuit,

as announced in Keystone, 863 F.2d at 1130-31, states that

the limitations period for a civil RICO claim

runs from the date the plaintiff knew or should

20 RICO renders criminally and civilly liable “any person”

who uses or invests income derived “from a pattern of

racketeering activity” to acquire an interest in or to operate an

enterprise engaged in interstate commerce, 18 U.S.C. §1962(a);

who acquires or maintains an interest in or control of such an

enterprise “through a pattern of racketeering activity,” §1962(b);

who, being employed by or associated with such an

conducts or participates in the conduct of its affairs “through a

pattern of racketeering activity,” §1962(c); or, finally, who

conspires to violate the first three subsections of §1962,

§1962(d). See H.J., Inc., 492 U.S. at 232-33. Thus, a violation of

Section 1962(c) “requires (1) conduct (2) of an enterprise (3)

through a pattern (4) of racketeering activity... . In addition, the

plaintiff only has standing if, and only can recover to the extent

that, he has been injured in his business or property by the

conduct constituting the violation.” Sedima, 473 U.S. at 496; see

also NOW v. Scheidler, 510 U.S. 249, 114 S. Ct. 798, 803-04 (1994).

While “pattern” is usually the key element, other elements (i.¢.,

investment or use) may be crucial in certain situations. See 18

U.S.C. §1962(a); Shearin v. E.F. Hutton Group, Inc., 885 F.2d 1162,

1165 (3d Cir. 1989) (elements of §1962(a) claim).

have known that the elements of the civil RICO

cause of action existed unless, as a part of the same

pattern of racketeering activity, there is further

injury to the plaintiff or further predicate acts occur,

in which case the accrual period shall run from the

time when the plaintiff knew or should have known

of the last injury or the last predicate act which is

part of the same pattern of racketeering activity. The

last predicate act need not have resulted in injury to

the plaintiff but must be part of the same pattern. If

the complaint was filed within four years of the last

injury or the last predicate act, the plaintiff may

recover for injuries caused by the other predicate acts

which occurred outside an earlier limitations period

but which are part of the same “pattern.”

Id. (emphasis added). In Keystone, plaintiff alleged an

ongoing pattern of racketeering activity that continued at

least until September 1983, when an act of mail fraud was

committed for which defendants were criminally con-

victed and sentenced in 1986. Plaintiff filed its RICO

claim one month later, in July 1986. Id. at 1127. Reversing

the district court’s decision (which had ruled the claim

untimely under a so-called “last injury discovery” rule),

the Third Circuit held that plaintiff's RICO claim was

timely filed under the “last predicate act” accrual rule. In

reaching this conclusion, the court (per Judge Mansmann)

carefully examined RICO’s express purpose, statutory

language and legislative history, as well as the elements

and injury requirement of a civil RICO action. Id. at

1127-33.21 See also Glessner, 952 F.2d at 706-07 (explicating

21 In Keystone, plaintiff was not injured by every predicate

act that constituted the pattern of racketeering activity alleged

in the complaint. Nevertheless, for purposes of RICO claim

accrual, the Third Circuit held that plaintiff's RICO claim was

not time-barred because the last predicate act, which did not

injure plaintiff, was part of the pattern that injured plaintiff and

———— ee. —

Keystone rule); Gurfein v. Sovereign Group, 826 F. Supp. 890,

909 (E.D. Pa. 1993) (same).?? In reaching this conclusion,

the Third Circuit recognized that “the essential problem”

with the so-called “injury-based” civil RICO accrual rules

fell within the limitations period. 863 F.2d at 1130. Likewise, for

purposes of RICO standing, this Court (and the lower federal

courts) have found that a plaintiff need not be injured by every

predicate act. See Sedima, 473 U.S. at 495; Deppe v. Tripp, 863 F.2d

1356, 1366 (7th Cir. 1988); Kearny v. Hudson Meadows Urban

Renewal Corp., 829 F.2d 1263, 1268 (3d Cir. 1987); Marshall &

llsley Trust Co. v. Pate, 819 F.2d 806, 810 (7th Cir. 1987); Panna v.

Firstrust Sav. Bank, 760 F. Supp. 432, 437 & n.6 (D.N.J. 1991).

22 Althoug': Keystone’s “last predicate act” accrual rule

appears more liberal than the injury-based or injury- and

pattern-based accrual rules followed in other circuits, both the

Third Circuit and district courts therein have not hesitated to

dismiss civil RICO claims that were not timely brought. See, ¢.g.,

Arab African Int'l Bank v. Epstein, 10 F.3d 168, 174-75 (3d Cir.

1993) (rejecting proposed RICO amendment to complaint as

untimely); Davis v. Grusemeyer, 996 F.2d 617, 622-27 (3d Cir.

1993) (RICO claims were untimely notwithstanding defendants’

alleged fraudulent concealment of predicate acts); Glessner, 952

F.2d at 708 (plaintiffs’ alleged “further injury” was not a “new

and distinct injury from the initial injury”); Fineberg v. Credit

Int'l Bancshares, 857 F. Supp. 338, 349 (D. Del. 1994) (predicate

acts that allegedly prolonged limitations period were not

“related to” and in “continuity with” pattern of racketeering

activity alleged by plaintiff); Owens v. Wade, 789 F. Supp. 168,

172-75 (E.D. Pa. 1992) (same); Korman v. Trusthouse Forte PLC,

786 F. Supp. 458, 462-66 (E.D. Pa. 1992) (same); Panna v. Firstrust

Sav. Bank, 749 F. Supp. 1372, 1377-78 (D.N.J. 1990) (applying

Keystone and finding civil RICO claims time-barred), vacated on

reconsideration, 760 F. Supp. 432, 437-38 (D.N.J. 1991) (applying

Keystone and finding RICO claims timely); Anderson v. Consol-

Pennsylvania Coal Co., 740 F. Supp. 1126, 1130-31 (W.D. Pa. 1990)

(allegations of fraudulent concealment were insufficient to

defeat defendants’ claim that plaintiffs had “actual notice of

their claims” more than four years before filing suit), aff'd, 945

F.2d 394 (3d Cir. 1991), cert. denied, 502 U.S. 1075 (1992).

lies in the fact that RICO is a crime of associa-

tion, which is violated, inter alia, by “any per-

son . . . associated with any enterprise . . . the

activities of which affect . . . commerce, con-

ductling] . . . [the] enterprise’s affairs through a

pattern of racketeering.” 18 U.S.C. §1962(c).

Therefore the discovery rule must apply to the

pattern element as well as the injury element. If

the plaintiff does not discover until, for exam-

ple, five years after the first injury to that plain-

tiff, that the injury or injuries were part of a

pattern of racketeering, then that plaintiff couid

not bring a successful civil RICO action using

the last injury discovery rule. Thus, the last

injury discovery rule would not effectively ful-

fill the purpose of the statute where predicate

acts which are part of the same “pattern” and

_whick do not injure the plaintiff occur after the

last injury to the plaintiff.

843 F.2d at 1129-30. See also Greenberg v. Tomlin, 816 F.

Supp. 1039, 1051 (E.D. Pa. 1993) (plaintiff's RICO limita-

tions period “must be measured from the time it knew or

should have known of the pattern of racketeering activ-

ity” because if the plaintiff’s “knowledge of injury arises

solely from a single predicate act,” it will have “discov-

ered the injury but not the pattern”).

Recognizing that “(t]he primary source of RICO’s

unique character is its pattern requirement,” Granite Falls,

924 F.2d at 153, three sister circuits have followed Key-

stone in applying discovery principles to both the injury

23 In Malley-Duff, 483 U.S. at 154, this Court made it clear

that “the heart of any RICO complaint is the allegation of a

pattern of racketeering.” (Emphasis in original). In Sedima, 473

U.S. at 497, this Court clarified the fact that “the essence of the

violation is the commission of those [predicate] acts in

connection with the conduct of an enterprise.” See also Keystone,

863 F.2d at 1133 (“Given the Supreme Court’s emphasis on the

and pattern elements for accrual purposes. See id. at 154

(Eighth Circuit); Bath, 913 F.2d at 820 (Tenth Circuit);

Bivens Gardens, 906 F.2d at 1553-54 (Eleventh Circuit).

None of these courts, however, adopted the “last predi-

cate act” discovery element of the Keystone accrual rule.

In Bivens Gardens, the Eleventh Circuit distinguished Key-

stone factually and incorporated a limiting “separate

accrual” exception to its rule. 906 F.2d at 1554-55. In

Granite Falls, the Eighth Circuit embraced the Bivens Gar-

dens “separate accrual” rule, stating that “the Bivens Gar-

dens rule better reflects the underlying policy of a statute

of limitations requiring diligence on the part of the plain-

tiff than does the seemingly more open-ended rule fash-

ioned by the Third Circuit in Keystone.” 924 F.2d at 154. In

Bath, the Tenth Circuit adopted the Bivens Gardens rule

without commenting on the Keystone rule. 913 F.2d at

820.24

The unique nature of a civil RICO cause of action,

which requires allegation and proof of injuries caused by

a pattern of racketeering activity, see 18 U.S.C. §1962(a),

(b), (c) and (d) and notes 7 and 20, supra, at the very least

mandates this Court’s adoption of the injury- and pat-

tern-based accrual rule followed in the Third, Sixth,

pattern element [in Malley-Duff and Sedima] as the core of the

violation, the [injury] discovery rule’s focus on injury is

misplaced.”).

24 District courts in several circuits have adopted all or part

of the Keystone “last predicate act” accrual rule. See, e.g., Crowe v.

Smith, 856 F. Supp. 1178, 1184-85 (W.D. La. 1994) (following

Keystone); Coal-Mac, Inc. v. JRM Coal Co., 743 F. Supp. 499, 501

(E.D. Ky. 1990) (approving of Keystone insofar as it held that a

civil RICO claim accrues when the plaintiff knows or should

know of the existence of all elements of the claim); Indianapolis

Hotel Investors, Ltd. v. Aircoa Equity Interests, Inc., 733 F. Supp.

1406, 1408-10 (D. Colo. 1990) (same).

Eighth, Tenth and Eleventh Circuits (see notes 9-10,

supra), and, NASCAT respectfully submits, the “last pred-

icate act” rule elucidated by the Third Circuit in Keystone,

859 F.2d at 1130-31.25

D. RICO’s Express Purpose, Statutory Language

And Legislative History Mandate Adoption Of

The “Last Predicate Act” Accrual Rule

Any accrual rule that this Court recognizes for civil

RICO cases must be reconciled with the statute’s defini-

tional section, which provides that a “pattern of rack-

eteering activity” requires “at least two acts of

racketeering activity . . . the last of which occurred within

ten years .. . after the commission of a prior act of racketeering

activity.” 18 U.S.C. §1961(5) (emphasis added). See H.J.,

Inc., 492 U.S. at 237 (observing that §1961(5) “places an

outer limit on the concept of a pattern of racketeering

activity that is broad indeed”). Remarking on this statu-

tory provision, in Keystone the Third Circuit stated that

“the accrual rule we fashion must take the specific lan-

guage of the statute into account.” 863 F.2d at 1132. As a

result, in the words of Judge Mansmann:

[T]here is inherent in the statute a ten year limit

on the point at which the last predicate act for

purposes of accrual may occur. Congress in

25 Bolstering the determination that the Keystone last

predicate act discovery rule is the appropriate civil RICO

accrual rule is Congress’ dictate that RICO “shall be liberally

construed to effectuate its remedial purposes.” Organized

Crime Control Act, Pub. L. No. 91-452, §904(a), 84 Stat. 947

(1970) (codified at 18 U.S.C. §1961 note). Moreover, this Court

made clear in Sedima that this dictate of Congress, coupled with

“Congress’ self-consciously expansive language and overali

approach” mandate that “RICO is to be read broadly.” 473 U.S.

at 498.

enacting the ten year limit must have envisioned

causes of action which would involve patterns of

racketeering extending over that period of time. It

would be inconsistent with this breadth of defini-

tion for us to state that we will look to the past ten

years to see if a civil RICO claim exists but if we

find ten years of racketeering activity, all related

and all perpetrated by the same defendants, we

will provide a remedy only to those who were

victimized within the past four years. To do so

would encroach upon and limit a legislatively-

enacted scheme to provide recovery for racketeer-

ing injuries. See 18 U.S.C. §1961(5), 1964(c).

Id. at 1132-33 (footnote omitted).76 In Keystone, the Third

Circuit correctly concluded that §1961(5) of RICO,

26 In H.J., Inc., 492 U.S. at 242, this Court posited a

hypothetical illustration of a RICO “pattern of racketeering

activity” involving multiple victims, stating in pertinent part:

Suppose a hoodlum were to sell “insurance” to a

neighborhood's storekeepers to cover them against

breakage of their windows, telling his victims he

would be reappearing each month to collect the

“premium” that would continue their “coverage.”

Though the number of related predicates involved

may be small and they may occur close together in

time, the racketeering acts themselves include a

specific threat of repetition extending indefinitely

into the future, and thus supply the requisite threat of

continuity.

Id. Given “the federal interest in providing relief to those who

are injured by a course of continuous and related conduct, it

would be incongruous to bar, on statute of limitations grounds,

recovery for predicate acts taking place outside the limitations

period and permitting recovery only for those within the

limitations period.” County of Cook v. Berger, 648 F. Supp. 4336,

435 (N.D. Ill. 1986). In that case, the district court determined

that since “it is the continuing nature of the violation that is the

very essence of a RICO claim,” id. at 435 n.1, the statute of

coupled with the fact that “[iJt is the continuing nature of

the violation which distinguishes a RICO claim from

claims arising simply from a predicate act . . . require[d]

the [“last predicate act” discovery] rule [it] announce[d].”

Id. at 1131.

Of the several characterizations of the civil RICO

claim that have been made,”” the most applicable is that

of RICO as a continuing violation. In Keystone, 863 F.2d at

limitations would run from the “last overt act” committed as

part of the pattern, and Judge Kocoras rejected defendant's

contention that the statute of limitations should run from the

time when the County of Cook knew, or should have known, of

its injury.

27 In the words of one commentator:

A court faced with determining an appropriate

rule of accrual would first “characterize” the claim.

The first step in the analysis should consider whether

the RICO claim is characterized best as (1) an action to

recover for a continuing violation, or (2) an action to

recover for harms caused by particular predicate acts,

many of which are kept secret from the plaintiff at the

time of injury. If RICO is primarily an action to

recover for a continuing violation, then the claim

should not accrue until the plaintiff can allege a

pattern. But if compensating injury was the main

concern of the RICO drafters, then the claim should

accrue upon injury or when plaintiff becomes aware

of such injury.

Humes, Uniform Rule of Accrual, 99 Yale L.J. at 1405 (footnotes

omitted). “Neither characterization is entirely satisfactory”

because “[t]he pattern requirement suggests the RICO action is

similar to a continuing violation, but the nature of the predicate

acts suggests that RICO is similar to an action to recover for

fraud.” Id. Indeed, in Malley-Duff, 483 U.S. at 152, this Court

held that the predicate acts that establish racketeering activity

under RICO are “far-ranging and cannot be reduced to a single

generic characterization.”

1131, the Third Circuit relied in part on the district

court’s decision in United States v. Field, 432 F. Supp. 55

(S.D.N.Y. 1977), aff'd, 578 F.2d 1371 (2d Cir.), cert. dis-

missed, 439 U.S. 801 (1978), where Judge Lasker, when

examining a criminal RICO violation, explained:

[RICO] provides an example of a continuing offense

for purposes of computing the time at which the

statute of limitations begins to run. The “nature of

the crime . . . is such that Congress must assur-

edly have intended that it be treated as a con-

tinuing one.” Toussie v. United States, 397 U.S.

112, 115 (1970). The language of [RICO], which

makes a pattern of conduct the essence of the

crime, “clearly contemplates a prolonged course

of conduct.” Id. at 120. Like the statute of limita-

tions for conspiracies, which runs from the date

of the last overt act, Grunewald v. United States,

353 U.S. 391, 396-97 (1957), the statute of limita-

tions for violations of [RICO] runs from the date

of the last alleged act of racketeering activity.

432 F. Supp. at 59 (emphasis added; parallel citations

omitted). In criminal RICO cases brought under §1962(c),

the statute of limitations begins to run from the date of

the last predicate act of racketeering activity, see, e.g.,

United States v. Torres Lopez, 851 F.2d 520, 524-25 (1st Cir.

1988), cert. denied, 489 U.S. 1021 (1989); on the other hand,

in prosecutions under §1962(a), the statute begins to run

on the last date of use or investment of income derived

from a pattern of racketeering activity, rather than on the

date of the last predicate act of racketeering activity, see

United States v. Vogt, 910 F.2d 1184, 1196-97 (4th Cir. 1990),

cert. denied, 498 U.S. 1083 (1991). In Keystone, the Third

Circuit stated that “[a]n interesting analogy to the [“last

predicate act”] rule which we announce is the accrual

rule in RICO conspiracy cases,” noting that “in §1962(d)

conspiracy cases, no overt act need be proven.” 863 F.2d

at 1132 (citations omitted). Therefore, “the statute of lim-

itations in conspiracy cases where no overt act need be

proven, such as a RICO conspiracy, does not run from

commission of the last overt act; the conspiracy may be

deemed to continue as long as its purposes have neither

been abandoned nor fully accomplished.” Id.76

With the exception of the Third Circuit in Keystone,

863 F.2d at 1129-30, and the Eighth Circuit in Granite Falls,

924 F.2d at 154, none of the circuit courts addressing the

accrual issue have reconciled their respective accrual

rules with the express language of §1961(5) of RICO. In

Granite Falls, the Eighth Circuit reasoned that

[a] violation of [§]1962 results not merely from a

single act of racketeering activity but from a

pattern of racketeering activity, which by defini-

tion requires at least two predicate acts occur-

ring within a ten year period. In selecting a term

of ten years within which predicate acts could

28 As Judge Mansmann continued the analogy:

The Supreme Court has determined that a

conspiracy requiring an overt act is deemed complete

for statute of limitations purposes at the time of

completion of the last overt act. The period of

limitations in conspiracy cases requiring an overt act

is tolled by each overt act done pursuant to the

agreement. ...

By analogy the last predicate act of a pattern of

racketeering activity is an appropriate place for civil

RICO causes of action to accrue. As the court in

County of Cook stated, “[t}he principles of conspiracy

law ought clearly to apply, and so long as any of the

predicate acts occur within the limitations period, a

defendant should have to answer for all of his related

and continual acts of harm.” 648 F. Supp. at 435.

Keystone, 863 F.2d at 1132 (emphasis in original; citations

omitted).

occur to establish the pattern requirement, Con-

gress must have contemplated recovery for

remote acts and even for remote injuries.

924 F.2d at 154. Yet, in the next paragraph, the court

rejected the “seemingly more open-ended” Keystone

accrual rule and adopted the rule of “separate accrual”

elucidated by the Eleventh Circuit in Bivens Gardens. Id.

In Rodriguez, the First Circuit briefly addressed

§1961(5) of RICO, noting that the Keystone accrual rule,

when applied in conjunction with §1961(5), could poten-

tially allow an injured RICO plaintiff fourteen years to

bring suit. 917 F.2d at 664. The First Circuit found this

“difficult to reconcile” with this Court’s “determination

that ‘there is a need for a uniform statute of limitations

for civil RICO’ lest ‘the memories of witnesses . . . fade[]

or evidence [be] . . . lost.” Id. at 667 (quoting Malley-Duff,

483 U.S. at 156). NASCAT respectfully submits that the

Rodriguez court misapprehended this Court’s decision in

Malley-Duff for several reasons. First, in Rodriguez the

First Circuit voiced concern over loss of evidence and

witnesses’ memories in response to Justice Scalia’s posi-

tion in his dissent in Malley-Duff that no statute of limita-

tions should apply if state codes fail to furnish an

appropriate limitations period. 483 U.S. at 170 (Scalia, J.,

dissenting), not in reference to the need for a uniform

statute of limitations. Id. at 155-56. Second, in Malley-Duff -

this Court answered the need for a uniform statute of

limitations for civil RICO by establishing a four-year

limitations period; however, as noted above (see note 3,

supra), this Court expressly reserved the limitations issue,

thereby emphasizing the importance of separating these

issues. Id. at 156-57. Additionally, the First Circuit's

apparent concern in Rodriguez, 917 F.2d at 667, that a

plaintiff might have fourteen years in which to sue under

RICO after defendants committed their first predicate

criminal act against him neglects to consider the fact that

this right to sue only extends if the defendants continue to

commit criminal acts against him.

In Rodriguez, the First Circuit concluded its criticism

of the breadth deliberately accorded by §1961(5) of RICO

by stating that “[i]n any event, we do not know why a

knowledgeable plaintiff should have fourteen, rather

than four years to bring suit.” 917 F.2d at 667. However,

“this defect — if defect it is — is inherent in the statute as

written, and its correction must lie with Congress.” Sed-

ima, 473 U.S. at 499; see also United States v. Thomas, 991

F.2d 206, 215 (5th Cir.), cert. denied, 510 U.S. 1014 (1993)

(“Actual or potential aberrant results, however, do not

excuse reading (or writing) anything into or out of a

statute that Congress has so consciously adopted.”).

Moreover, the First Circuit’s assertion ignores the fact

that until the second predicate act is committed — a time

which might be years after the first predicate act is com-

mitted — plaintiff cannot allege a pattern of racketeering

activity and, under this Court’s (and the lower federal

courts’) formulation of the applicable elements, no viable

civil RICO claim exists. See H.J., Inc., 492 U.S. at 239;

Grimmett, 75 F.3d at 512; McCool, 972 F.2d at 1465 (a RICO

cause of action cannot accrue until all of the elements

exist).

NASCAT respectfully submits that to the extent the

circuit courts other than the Third Circuit have discussed

and analyzed the “last predicate act” rule announced in

Keystone, their rejection of that rule is unconvincing and

should not preclude this Court from giving the Third

Circuit’s extensive discussion of the issue, 863 F.2d at

1127-35, its careful consideration.”?

29 As noted above (see note 8, supra), commentators have

uniformly criticized the “injury discovery” rule followed by the

IV. CONCLUSION

Given RICO’s statutory language, the unique nature

of the civil RICO cause of action and the elements

required to assert a claim, adoption of the injury- and

pattern-based accrual rule followed in the Third, Sixth,

Eighth, Tenth and Eleventh Circuits, supplemented by the

“last predicate act” discovery rule elucidated by the

Third Circuit in Keystone, 863 F.2d at 1130-33, is mandated

court below; however, commentators have recognized the

validity of the Keystone accrual rule:

[T}he last predicate act discovery rule adopted by the

Third Circuit seems the most sensible rule for RICO

accrual... By running the statute of limitations from

the discovery of the last predicate act of the

defendant, and by allowing recovery for the entire

pattern of injurious acts, the last predicate act

discovery rule recognizes the competing

characterizations of RICO as an action to recover for a

continuing violation and as an action to recover for

injury caused by fraud. This method of accrual also

maintains a balance of plaintiffs’ and defendants’

rights, as it limits recovery to those acts falling within

the meaning of “pattern,” which by definition cannot

occur more than ten years before the last predicate

act....

Because it accounts for the two competing

characterizations of RICO while maintaining a

balance between plaintiffs’ and defendants’ rights,

the last predicate act discovery rule provides the best

solution to the complex problem of determining when

a RICO cause of action accrues.

Humes, Uniform Rule of Accrual, 99 Yale L.J. at 1418.

in this case. For the reasons stated herein, the decision of

the court below should be reversed.

DATED: August 14, 1996 Respectfully submitted,

Mivserc Weiss BersHaD

Hynes & Leracw LLP

Kevin P. Roppy

Counsel of Record

355 South Grand Avenue

Suite 4170

Los Angeles, CA 90071

Telephone: 213/617-9007

Proressor G. Rosert BLAKEY

Notre Dame Law School

South Bend, IN 46556

Telephone: 219/631-5717

JONATHAN W. CuNEO

General Counsel

NASCAT

317 Massachusetts Avenue,

N.E.

Suite 200

Washington, DC 20002

Telephone: 202/789-3960

Counsel for Amicus Curiae

National Association

of Securities and

Commercial Law

Attorneys (NASCAT)

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