# Petition for Writ of Certiorari — Klehr v. AO Smith Corp. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0029%3A02 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 1997 - **Citation:** 521 U.S. 179 ## Text Sterane Gort, US 4) FILED 96 6683 OCT 25 19% No OFFICE OF THE CLERK Gu the Supreme Court of the Anited States October Term, 1996 MARVIN KLEHR AND MARY KLEHR Petitioners, Vv. A.O. SMITH CORPORATION AND A.O. SMITH HARVESTORE PRODUCTS, INC., Respondents. ON PETITION FOR WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE EIGHTH CIRCUIT PETITION FOR WRIT OF CERTIORARI Charles A. Bird Mary R. Vasaly Counsel of Record Maslon Edelman Borman Bird and Jacobsen & Brand 305 Ironwood Square 3300 Norwest Center 300 Third Avenue SE 90 South Seventh Street Rochester, MN 55904 Minneapolis, MN 55402 (507) 282-1503 (612) 672-8200 Of Counsel Malcolm McCune Maddin, Miller, and McCune 300 James Robertson Parkway Nashville, Tennessee 37201 (615) 254-8756 Counsel for Petitioner 1996 — Bachman Legal Printing & (612) 339-9618 @ FAX (612) 337-8053 yy) \ \ VY \ \ QUESTIONS PRESENTED l. When does a civil RICO claim accrue for statute of limitations purposes where the Respondent continues to commit predicate acts which cause Petitioners additional, continuous, or accumulating damages within four years of bringing suit? 2. Do affirmative continuing acts of fraud including continuous false advertisements coupled with active cover up of the fraud, act to equitably toll the statute of limitations in a civil RICO case whether or not Petitioners have exercised reasonable diligence to discover their claim? TABLE OF CONTENTS PAGE QUESTIONS PREGENTED .. wo icc ceeivet vueem i TABLE OF AUTHORITIES ................... . iv OPINIONS BELOW ....... Weir se 2 STATUTORY PROVISIONS INVOLVED .......... 2 STATEMENT OF THE CASE ........cccccccsccss 3 A. Defendant's Affirmative Concealment of the Fraud and Affirmative Continuing Fraudulent Representations Caused Damage and Prevented Petitioners from Discovering Fraud...... 3 B. a re 7 REASONS FOR GRANTING THE PETITION ...... 10 A. Accrual of the Statute of Limitations in RICO Cases for Continuing Unlawful Conduct That is a Cause CC DONG... 0 sub cus wenee 1] l. The accrual rules adopted by the circuit courts ase in CONTE ow icc cntivaseueneue 11 a The Court should delay action on this Petition until Grimmett v. Brown is decided. .... 12 cc eecces 13 The decision of the Eighth Circuit is EE ee 16 Continuous False Advertising and Active Concealment of Fraud Should Equitably Toll the Statute of Limitations in a Civil RICO thet be cesescseccesccccees 22 Appendix A--Opinion of Court of Appeals Appendix B--Opinion of District Court Appendix C--Order on Rehearing (July 29, 1996) Appendix D--Judgment of Circuit Court Appendix E--January 3, 1968, AO. Smith Internal Memo Appendix F--Fall 1989 and October 25, 1989, Harvestore Advertisements Appendix G--Selected Portions of Amended Complaint TABLE OF AUTHORITIES CASES PAGE(S) Agency Holding Corp.. v. Malley-Duff & Assoc.. Inc. SN IN fas cs cd en oeiuncsawkcceve 10 Agristor Leasing v. Saylor, 803 F.2d 1401 SE CG bow UEie ebb CbEEWedcccccccces 4 — \.0 Smith H Products. Inc.. 869 PO MUD i.e. 655004 Zidsceccccavce: 4 Bankers Trust Co. v. Rhoades, 859 F.2d 1096 (2d Cir. 1988), —Y “rea ae 11, 12, 17 Bath v. Bushkin, Gaims, Gaines & Jonas, 913 F.2d 817 EE, SEs title suka ddaeceses 1 ebes oe: 12, 14 Bingham vy. Zolt, 66 F.3d 553 (2d Cir. 1995) ....... 9,14 Bivens Gardens Office Bidg v. Barnett Bank, 906 F.2d 1546 SE Sa ee ee esa 12, 17 Caproni v. Prudential Securities, Inc., 15 F.3d 614 (6th Cir. BEEN. « cno.ceccedaadn Wehbe onsiitacesescans 11 Clute v. Davenport Co., 584 F. Supp 1562 (D. Conn "pre ee eee ee 20 7 —W-—1 "5 ~— RE -—~ wm ee ee ee First National Bank of Louisville vy. Brooks F UEP CUED cc cccccccccesccctens 4 Glessner vy. Kenny, 952 F.2d 702 (3d Cir. 1991) ... 14,17 Granite Falls Bank v. Henrikson, 924 F.2d 150 NS eh keds dec idé es dek 9,11, 12 Grimmett vy. Brown, 75 F.3d 506 (9th Cir. 1995) (cost. granted) ................. 11, 12, 13, 14, 17, 20 HJ Inc. v. Northwestern Bell Tel. 492 U.S. 229(1989) 18 Hohri v. United States, 782 F.2d 227 (D. C. Cir. 1986) . 20 Holmberg v. Armbrecht, 327 U.S. 392 (1946) ........ 10 Keystone Ins Co. vy. Houghton, 863 F.2d 1125 (3d Cir. EP A ee ee 9, 11, 12, 13, 16, 20 Klehr vy. A.O. Smith Corp. 875 F.Supp. 1342 (D. Minn. SBR a ee passim Sc ae eer Lollar vy. A.O. Smith Harvestore Products, Inc., 795 S.W.2d McCool y. Strata Oil Co. 972 F.2d 1452 (7th Cir. PDs x ocd cénccctcseusalstiteedineans 11, 12, 14 Pocahantas Supreme Coal Co. v. Bethlehem Steel, 828 F.2d 211 GD Ecdccavesduterededh dkddcccdvcces ll Religious Technology Center v. Wollersheim, 796 F.2d 1076 SE, bartin cea bceeseebeseeczectees 18 Riddell v. Riddell Washington Corp., 866 F.2d 1480 (D. C. Cir BE Sib. dk codes suntecsvattSt Jabtectas 11, 20 Robertson v. Seidman & Seidman, 609 F.2d 583 (2d Cir SOUUD so odds oda cdceoueivees Wes hees ick 19 Rodriguez v. Banco Cent., 917 F.2d 664 (1st Cir. Sian dindcdtih Amdiss ccldticks ies) 11, 12 Sedima, SP. RL. v. Imrex Co., 473 U.S. 479 (1985)... 19 Sperry v. Barggren, 523 F.2d 708 (7th Cir. 1975) ..... 19 State Farm Mut. Auto Ins Co. v. Ammann, 828 F.2d 4 SE BGs ohn dbs 6-odsddhaidieal 4c selise 16 kT RRR ree ae ree 13 STATUTES I ee, : ca. 5 ikea sect cebaveee eek. 2 nn eee ee ee 2 TPE | PETS 2,19 I, 5 ohh be dus Se eWoe déscces 2,3 a ee re Nk a 3 SEES ee ea 3 EE a ian a 3 Racketeer Influenced and Corrupt Organization Act, Ch. 96, §904(a), 84 Stat. 947(1970) ..........000000.... 18 MISCELLANEOUS Restatement (Second) of Torts §539, American Law Institute oe a 7 Restatement (Second) of Torts §542, American Law Institute EE nee a ee a 7 Restatement (Second) of Torts §546, American Law Insitute ee ee le eG 15 Humes, Rico and a Uniform Rule of Accrual, 99 Yale L. J. 1399 RE, ORE ee ey nang ea ee 14 ‘cae Co mee ee ke of / Holding C Mallev-Duff SE ED os co wcccwtrececccece 14 Stern et al, Supreme Court Practice, (7th Ed. 1993).... 13 IN THE SUPREME COURT OF THE UNITED STATES OCTOBER TERM, 1996 MARVIN KLEHR AND MARY KLEHR (Petitioners) v. A.O. SMITH CORPORATION AND A.O. SMITH HARVESTORE PRODUCTS, INC. (Respondents) Petition for Writ of Certiorari to the United States Court of Appeals for the Eighth Circuit Marvin Klehr and Mary Klehr respectfully petition for writ of certiorari to review the judgment of the United States Court of Appeals for the Eighth Circuit in this case. OPINIONS BELOW The Opinion of the Court of Appeals (App. A) is reported at 87 F.3d 231. The opinion of the district court (App.B) is reported at 875 F. Supp. 1342. JURISDICTION The Court of Appeals entered its judgment by denying the Petition for Rehearing on July 29, 1996 (App. C). The jurisdiction of this Court is invoked under 28 U.S.C. §1254(1). STATUTORY PROVISIONS INVOLVED 18 U.S.C. §1962(c) provides that "it shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt." “Racketeering activity" is defined in 18 U.S.C. §1961 to include “any act which is indictable under any of the following provisions of title 18, United States Code: ...section 1341 (relating to mail fraud), section 1343 (relating to wire fraud)..." 18 U.S.C. §1964(c) provides that “any person injured in his business or property by reason of a violation of section 1962 of this chapter may sue therefore in any appropriate United States district court and shall recover threefold the damages be sustains and the cost of the suit, including a reasonable attorney's fee." STATEMENT OF THE CASE Petitioners, husband and wife, are dairy farmers, who sued the Respondents in August, 1993 in U.S. District Court in Minnesota, alleging, among other things, a violation of the RICO statutes. They alleged they had been defrauded in (a) the purchase and (b) the subsequent continuing use and repair of an animal feed storage silo. The predicate acts underlying the RICO claim were mail and wire fraud. 18 U.S.C. §§1341, 1343. Jurisdiction of the Federal District Court was invoked under 18 U.S.C. §1964 (c) and 28 U.S.C. §1331 (general federal question jurisdiction). The district court dismissed the case on summary judgment based upon violation the statute of limitations. The Court of Appeals affirmed. A. Defendants Affirmative Concealment of the Fraud and Affirmative Continuing Fraudulent Representations Caused Damage and Prevented Petitioners from Discovering the Fraud. This case presents two distinct issues: (a) whether the appropriate rule of accrual of the statute of limitations for continuing RICO predicate acts occurring within 4 (four) years of the commencement of the lawsuit and (b) whether Respondents affirmative acts of concealment and continued fraudulent misrepresentations of the product to the Petitioners after the sale, equitably tolls the statute of limitations notwithstanding that Plaintiffs may have failed to exercise due diligence in discovering the fraud. The Petitioners purchased a Harvestore brand silo from MVBA, a local dealer for AO. Smith Harvestore Products, Inc. (hereafter "AOSHPI") in 1974. AOSHPI is a wholly owned subsidiary of A.O. Smith Corporation (hereafter "AOS") which holds many of the patents for the Harvestore silo and did the vast majority of the secret internal research through which it knew that the product was defective in design These design defects caused rapid deterioration of stored feeds. The design defects caused injury to the Petitioners’ livestock, loss of milk production, and continuing needless “repairs” to the silo and associated equipment. AOSHPI, through its local dealer and in other advertising venues, made numerous fraudulent claims through the use of the U.S. Mail and interstate wires concerning the ability of the silo to properly store and preserve feed. The fraudulent statements are set forth in the Amended Complaint (App. G-1 to G-29) and include claims that the silo would "prevent oxygen from contacting the feed", that the dealer (in this case MVBA) had access to all the research regarding the product, that good Harvestore feed smelled like "molasses", and that AOS engineers had solved the problem of structure breathing. These representations came to the Petitioners in the form of oral representations and a broadly based marketing campaign which included brochures, movies, the "Harvestore Farmer" magazine (published by AOSHPI) and advertisements in numerous national farm journals. [bid. The Respondents knew that the representations concerning the silo were false’ AOS had conducted 1 The product defects and fraudulent statements are documented in the Amended Complaint. App. G-30 to G-35. Junes and courts have found the representations regarding the Harvestore structures to be faise and courts have roundly critcized AOSHP' for its fraudulent actions and disregard for the truth. Included among those: Harvestore System, 488 N.W.2d 490 (Minn. Ct App. 1992) (review denied); Agnstor Leasing v. Savior, 803 F.2d 1401, 1403, 1408 (6th Cir. 1986) (retnal ordered to consider statute of limitations); 869 F.2d 264, 265-266 (6th Cir. 917 F.2d 480, 482 (10th Cir. 1990); Lollar y AO. Smith Harvestore Products. Inc. 795 S.W.2d 441, 442 (Mo. App. 1990) (app. to transfer 4 ee eee ——— a voluminous research on the Harvestore silo which contradicted the advertising claims. This research, at the direction of AOS, was all marked "secret and confidential." The general counsel for AOS had directed in 1968 that known defects in Harvestore silos should be protected from discovery in lawsuits by making sure that scientific studies be addressed to the AOS legal department, with copies to the true intended recipient, so that the company could falsely claim attorney/client privilege. App. E. This scheme was specifically intended to prevent discovery in civil suits concerning the known design defects in the Harvestore silo. None of this contradictory and extremely damaging internal research was ever communicated to MVBA (or any other dealers) nor to the farm customers. This was contrary to what had been represented in the advertising. See, e.g. G-29 and G-30 (Birth of a Harvestore film). Nor was this research ever published to the academic community, who were doing empirical research that ostensibly supported the false advertising claims. The Respondents then used the academic research in their advertising, but kept the contradictory and accurate internal studies secret. The Plaintiffs purchased the silo in 1974 based upon numerous fraudulent representations regarding the ability of the silo to properly preserve stored feed. App. G-1 to G-14. In spite of Respondents knowledge of the design defects in the silos, they not only sold the silos initially but also “continued to sell" the product and repairs for the product after it was purchased by the farm customer. This "continue to sell" campaign was a broad based marketing approach which included a continuous, free and unsolicited subscription to a "Harvestore” magazine. Each issue of this magazine included stories depicting extremely successful farmers from all over the country who attributed their success to their Harvestore silos. These magazines also included "Question and Answer" columns denied). in which proper management of the silo was represented to be the key to successful use of the silo. AOSHPI also falsely advertised in numerous other farm journals and publications, and provided false information to its dealers and directly to farmers. Through the dealers, AOSHPI orchestrated other “after sale" techniques such as farmer meetings, dealers training sessions, movies, and presentations at fairs and farm shows. This media barrage was specifically intended to "keep them sold." At the same time that this after sale campaign was convincing the Petitioners to look elsewhere on their farm for the source of their injury, the Respondents were continuing to engage in product research which established the falsity of the marketing campaign. This scientific research was actively concealed, and marked secret and confidential. Instead of publishing their own damning research as promised in the advertising, the Respondents published favorable empirical research from university professors who were also kept in the dark about the infirmities of the silo. The Petitioners in this case were continually duped by AOSHPI's post-sale predicate acts into believing their Harvestore was the "cadillac" of silos. The continuous barrage of after sale merchandising had its intended effect. App. G-14 to G-30. Petitioners were lulled into continuing to use the silo and spend more money on "repairs" to the Harvestore silo. In the case of the Petitioners, the last two predicate acts which caused damage took place in the fall of 1989, within 4 years of initiating suit in August, 1993. App. G-22, G-25; App. F. The Petitioners continued to use the silo until 1991. The post-sale ads not only reiterated the pre-sale claims but made new and different claims. They testified that the post-sale fraud caused them to overlook their silo as a source of any injury on their farm. Because the silos are supposedly “sealed” to prevent losses to the feed, the Petitioners were told not to open any doors or hatches. A sign on the side of the silo warned the Ts “ _—— — s Petitioners not to go inside because there is "not enough oxygen to support life." It is practically impossible for the farmer to visually inspect the bottom of the silo, where all the damage occurs to the feed. The mold created in the bottom of the silo is caused to "disappear" by the churning action of the unloader, so the Petitioners didn't see mold in the feed that was fed to the livestock. By continuing to use the silo, the Petitioners continued to incur injury for damaged livestock, and loss of milk production. The repairs to the silo continued until 1990, less than three years before suit was filed in August, 1993. The Petitioners discovered the causal connection between the Harvestore silo and their damages in March, 1991, when a university professor they had consulted removed an access panel on the silo and chopped through 2-3 feet of compacted feed in the bottom of the silo. By using a video camera with spotlight attached to a long pole, the professor discovered great quantities of mold in a void space immediately above the unloader. The professor demonstrated to Petitioner Marvin Klehr how none of this mold could be seen by the naked eye when it came out of the silo. B. Proceedings Below. The district court ruled that, because Petitioners were aware of the falsity of certain "non-actionable" representations,’ they were put on notice of possible fraud and therefore concluded that the Petitioners had not used reasonable diligence 2 “Non-actionable” because they constituted statements of opinion or related to future performance of the silo, which courts have traditionally held do not support claims of fraud. Restatement (Second) of Torts §§539,542. These included representations that the Petitioners would production and make more money. Petitioners Amended Compiaint was not based upon the non-actionable representations. See App. G. to investigate the fraud. Because more than six years (the state statute of limitations) had elapsed from the time the Petitioners should have discovered the actionable fraud, their state law fraud claims were held to be barred by the statute of limitations. The Court went on to hold that the RICO statute incorporated a similar due diligence requirement and therefore dismissed these claims as well. The district court said that the Petitioners did not exercise reasonable diligence to discover the fraud, and, even though they did not know of the fraud, fraudulent concealment would not work to toll the statute because they should have known. App. B-13. The district court ignored and did not discuss AOS attorney's scheme to address scientific studies concerning the Harvestore silos to the legal department to falsely obtain an attorney/client privilege in civil discovery proceedings. Supra, at p. 5; and App. E. Nor did the district court discuss the scheme of the Respondents to cover up its internal research program which continued to demonstrate the post-sale advertisements did not support equitable tolling (under state law principles) as a matter of law. The district court dismissed Petitioners’ RICO claims holding that Petitioners’ failure of due diligence caused the statute to run, stating that "the same facts which should have alerted them to the fraud also should have alerted them that the alleged misrepresentations and injuries were part of a pattern." The district court rejected Petitioners’ claims based upon the post-sale advertisements, concluding that the Petitioners suffered no new "independent injury" but rather just a “continuation of damages" that they had suffered since 1975. The district court ignored and did not address Petitioners’ claims that their injuries in later years were proximately caused by the advertisements published and relied upon by the Petitioners within the statute of limitations. identical reasoning. The Petitioners were required by the circuit court to affirmatively investigate facts that "might constitute & possible cause of action for fraud." App. A-11. (Emphasis added.) The circuit court did not address Petitioners’ argument that there was continuing unlawful conduct by the Respondents within 4 years of bringing suit, which conduct was a proximate alleged in the Complaint that they reasonably relied upon fraudulent post-sale advertising published less than 4 years before filing the Amended Complaint which was a substantial contributing cause of damages within the statute of limitations. Petitioners’ argument was misconstrued by the court as being a claim that any later injury automatically extended the statute of limitations on the original claim’. Petitioners’ true argument was that later predicate acts that caused damage would work to create a new claim. This is the separate accrual rule accepted by a majority of the circuit courts. Bingham vy. Zolt, 66 F.3d 553, 559 (2d Cir. 1995) (discussing conflict in the circuits and the separate accrual rule as adopted in the second circuit). Having recast Petitioners’ argument, the court of appeals rejected it on the basis of its rejection of the “last predicate act” rule, citing Granite Falls Bank v. Henrikson, 924 F.2d 150, 154 (8th Cir. 1991). The circuit court gave no consideration to the AOS scheme to cover up and prevent discovery of damaging internal research which directly contradicted the advertising claims App. E. The circuit court accepted the reasoning of the district court that new predicate acts in the form of post-sale advertising does not constitute concealment. The Petitioners’ failure of due diligence was held to completely preclude application of the federal equitable estoppel doctrine. App. A-17 at fn. 11. 3 This is the “last predicate act or injury” rule of the 3d circuit espoused in Keystone ina. Co. vy. Houghton, 863 F.2d 1125, 1126 (3d Cir. 1988). 9 REASONS FOR GRANTING THE PETITION This case involves two important issues: (1) accrual of the statute of limitations where there is continuing criminal conduct within the statute of limitations and (2) equitable tolling of the statute of limitations in civil RICO cases, where the Defendants have combined to actively conceal and cover up the fraud and also continue to falsely promote and advertise the product. In each of these areas, the decisions of the circuit courts are in conflict. This case presents an opportunity for the Court to clarify both of these muddied areas of the law. Two seminal cases of this Court are the starting point of discussion. In Agency Holding Corp. v. Malley-Duff & Assoc. Inc., 483 U.S. 143, 107 S. Ct. 2759, 97 L. Ed.2d 121 (1987), this Court held that the similarities in purpose and structure between RICO and the Clayton Act counseled in favor of RICO claims. The court stated, however, that it had “no occasion to decide the appropriate time of accrual for a RICO claim." Id., 486 U.S. at 156-157. This case directly addresses the unresolved issue of the correct rule of accrual of the statute of limitations in civil RICO cases where there is continuing In Holmberg v. Armbrecht, 327 U.S. 392, 397, 66 S.Ct. 582, 90 L. Ed. 743 (1946), this court decided that the doctrine of equitable tolling is read into every federal statute of limitation. The unresolved question squarely presented here is whether equitable tolling applies where Respondents have combined to actively conceal and cover up the underlying fraud, and have continued to affirmatively falsely promote and advertise the product to the customer, even though Petitioners 10 may not have acted with due diligence.‘ A. Accrual of the Statute of Limitations in RICO Cases for Continuing Unlawful Conduct That is a Cause of Damage. 1. The accrual rules adopted by the circuit courts are in conflict. In the absence of guidance from the Supreme Court, the lower courts have adopted a variety of RICO accrual doctrines. An “injury discovery" accrual rule was adopted by the First, Second, Fourth, Fifth, Seventh, Ninth and D.C. Circuits. Rodriguez vy. Banco Cent., 917 F.2d 664, 665 (ist Cir. 1990); Bankers Trust Co. vy. Rhoades, 859 F.2d 1096, 1102 (2d Cir. 1988) cert. den; Pocahantas Supreme Coal Co. v. Bethlehem Steel, 828 F.2d 211, 220 (4th Cir. 1987); LaPorte Const. Co. Inc. v. Bayshore Nat. Bank, 805 F.2d 1254, 1256 (Sth Cir. 1986); McCool v. Strata Oil Co., 972 F.2d 1452, 1464-65 (7th Cir. 1992); Grimmett v. Brown, 75 F.3d 506, 510-11 (9th Cir. 1995); Riddell v. Riddell Washington Corp, 866 F.2d 1480, 1489-90 (D.C. Cir. 1989). The Third, Sixth, Eighth, Tenth and Eleventh Circuits have adopted an “injury plus pattern discovery” accrual rule, with the Third Circuit's approach being broader and involving a “last predicate act or injury" approach. Keystone Ins Co. vy. Houghton, 863 F.2d at 1130-31 (3d Cir. 1988); Caproni v. Prudential Securities, Inc., 15 F.3d 614, 619- 620 (6th Cir. 1994); Granite Falls Bank v. Henrikson, 924 F.2d 4 it's not disputed that the Petiboners did not know of the fraud Whether Petiboners should have known of the fraud was hotly contested in the lower courts. The Petboners presented evidence that they hwed appropnate experts to heip them with thew investgaton of the cause of problems on them farm, including vetennanans and nutribonists, and were not able to discover the fraud over the 16 years the Harvestore silo was in use This investgaton included contacts with the local dealer, who bed to them about the reason for the occasional presence of moid in the feed. 1] 150, 154 (8th Cir. 1991); Bath vy Bushkin, Gaims, Gaines & Jonas, 913 F.2d 817, 820-821(10th Cir. 1990); Bivens Gardens Office Bidg vy. Bammett Bank, 906 F.2d 1546, 1553-54 (11th Cir. 1990). The latter rule has been criticized by other circuits. Compare Keystone Ins. Co. v. Houghton, with Granite Falls Bank vy Henrikson. In addition, some courts in both groups utilize a “separate accrual” rule, under which new predicate acts or injury can extend the statute of limitations. To date, some form of “separate accrual” rule has been adopted in the First, Second, Seventh, Eighth, Ninth, Tenth, and Eleventh circuits. See ¢.g Rodriguez, 917 F.2d at 666; Bankers Trust Co., 859 F.2d at 1102; McCool, 972 F.2d at 1464-66; Granite Falls Bank 924 F.2d at 154; Bath 913 F.2d at 820; Grimmett 75 F.3d at 510-11; Bivens, 906 F.2d at 1554-55. Predictably, the courts that have adopted the separate accrual rule do not agree in its courts require "new and independent injury”, but only when there are no new predicate acts. Some courts (such as the circuit court here) require new and independent injury even where there are new predicate acts. The courts also differ on what constitutes "new and independent" injury. Petitioners urge this court to adopt the “last predicate act" rule of Keystone If this Court rejects Keystone and instead adopts a "separate accrual” rule (where each new predicate act Causing injury gives rise to a new claim, but doesn't revive old claims), then Petitioners urge this Court to reject the corollary enunciated by the Eighth Circuit in this case that each new predicate act must also be accompanied by independent injury to avoid the bar of the statute of limitations. a. The Court should delay action on this Petition until Grimmett y. Brown is decided. Recently, this court accepted certiorari in a case from the 12 Ninth Circuit to address the obvious conflict in RICO accrual law. See Grimmett vy. Brown, 75 F.3d 506 (9th Cir. 1995), cert. granted, 64 U.S.L.W. 3830 (June 18, 1996). The ruling of this Court in Grimmett vy. Brown will likely affect the outcome in this case. The circuit court in Grimmett discussed the separate accrual rule and equitable tolling. The amici in Grimmett have urged adoption of the Keystone approach to accrual. Petitioners here urge the Court to clarify accrual law in Grimmett by adopting the Keystone rule, as it best represents the remedial purpose of the statute. See separate briefs on appeal of National Association of Securities and Commercial Law Attorneys (NASCAT) in Support of Petitioners and Plaintiffs Executive Committee, MDL No. 1069, and David L. Forbes Supporting Reversal. Because there is significant likelihood that this Court's decision in Grimmett will impact this case, Petitioners request that the court hold this case in abeyance until Grimmett is decided. See, Stern, et al, Supreme Court Practice (7th Ed, 1993) p. 358, citing United States v. American Broadcasting- Paramount Theaters, Inc. 383 U.S. 906 (1966) (ruling on certiorari delayed, and later denied). If this Court adopts the last predicate act rule of the Third Circuit, or clarifies the necessity of a "new and independent injury” under the separate accrual rule, the result in this case will be affected. The Court can then either remand to the Eighth Circuit for further proceedings consistent with this Court's decision in Grimmett or rule on this Petition. b. The Court should grant certiorari in this case. If this court does not provide a comprehensive rule concerning accrual in Grimmett, then -ertiorari should be accepted in this case to consider the best rule of accrual for new 13 predicate acts occurring within the statute of limitations. As noted above, conflict remains between the circuits as to whether a separate accrual rule should be based upon the "last predicate act" and whether new overt acts revive claims for past predicate acts. Many of the federal circuits have adopted the separate accrual rule for RICO claims under which a new claim accrues for continuing violations of the law, triggering a new four year limitations period, each time the Plaintiff discovers, or should have discovered, the operative event triggering accrual (that is, either injury or injury plus a pattern of racketeering activity). Supra, discussion at p. 12. This rule has various mutations, Co.. 972 F.2d 1452, 1464-66 (7th Cir. 1992) (discussing differing accrual rules, and stating “each wrongful act that causes injury is a new cause of action..."); Bath v. Bushkin, Gaims, Gaines, & Jonas, 913 F.2d 811, 820 (10th Cir. 1990) (discussing separate accrual rule where knowledge of pattern required); Humes, RICO and a Uniform Rule of Accrual, 99 Yale LJ. 1399, 1412, n. 85 (1990) (criticizing the separate accrual rule), Hackenberg, Accrual of Civil RICO Claims, 48 La.L. Rev. 1411, 1414 (1988). The Second, Third, Ninth (in Grimmett) and now the Eighth Circuit in this case have adopted a “new and independent" injury precondition for separate accrual of RICO claims. Bingham vy. Zolt, 66 F.3d 553, 559 (2d Cir. 1995); Glessner vy. Kenny, 952 F.2d 702, 707-708 (3d Cir. 1991) (requiring a new and independent injury only when there are no new predicate acts within 4 years of bringing suit). The Eighth Circuit rule as applied to a case involving continuing and accumulating injury would permit a RICO defendant, such as the Respondents here, to perpetrate a fraud and, once the limitations period runs on the original fraud, to continue to perpetrate fraudulent acts and cause further injury, which 14 conduct is then protected from suit by the statute of limitations as long as the injuries flowing from the new acts of fraud are not "independent," i.e. qualitatively different from the previous injuries. In the present case, this means that the Petitioners, who were originally defrauded in 1974 in the sale of the silo, cannot sue the Respondents for the new fraudulent acts which occurred in the fall of 1989 and which caused further injury at that time, because the statute of limitations has run on the 1974 fraud. In other words, Petitioners’ statute of limitations for the 1989 predicate acts and any continuing injuries ran out before those acts and injuries even took place. This is a radical departure from the intent of the RICO statute, which is to prevent continuing pattern criminal conduct. This rule effectively insulates and encourages such unlawful conduct, an anomalous and indefensible result. The question is whether the 1989 predicate acts were a substantial contributing cause of the injuries occurring thereafter, but not necessarily the sole cause. Restatement (Second) of Torts §546 (discussing causation in the context of fraud) and comment b ("It is not, however, necessary that his reliance upon the truth of the fraudulent representation be the sole or even the predominant or decisive factor in influencing his conduct. It is not even necessary that he would not have acted or refrained from acting as he did unless he had relied on the misrepresentation. It is enough that the representation has played a substantial part, and so has been a substantial factor, in influencing his decision.") Both the pre-sale and post-sale ads were a cause of injury to the Petitioners in later periods. Therefore, attempting to identify either a single source of injury or requiring that the injuries be different in kind or quality only clouds the question. The simple issue is whether the later predicate acts were a contributing cause of some injury. If so, a new claim is created which has its own statute of limitations. 15 2. The decision of the Eighth Circuit is erroneous. The separate accrual rule, as first contemplated by then Judge Kennedy in his concurrence in State Farm Mut. Auto. Ins. Co. vy. Ammann, 828 F.2d 4 (9th Cir. 1987) provided as follows: The rule is that a cause of action accrues when period, even if a conspiracy was formed and other acts were committed outside of the limitations period. A corollary rule is that damages may not be recovered for injuries sustained as a result of acts committed outside of the limitations period. (Italics added). The “new and independent" injury requirement of separate accrual for RICO claims began as a reaction to the breadth of the Third Circuit's “last predicate act or injury" rule in Keystone Ins. Co. vy. Houghton, supra. In Keystone, the court held that either a new act or a new injury occurring within RICO claim. In that case, as in this one, there was an additional predicate act and injury within the four year period. The Keystone rule states: The limitations period for a civil RICO claim runs from the date the Plaintiff knew or should 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 the Plaintiff knew or should have known of the last injury or the last 16 predicate act which is part of the same pattern of racketeering activity. 863 F.2d at 1130. In Glessner vy. Kenny, 952 F.2d 702 (3d Cir. 1991), there predicate act. In that case, the court first established the "new and independent” injury requirement, purportedly relying on decisions from the Second and Eleventh Circuits. Bankers Trust Co. vy. Rhoades, 859 F.2d 1096 (2d Cir. 1988), cert den. 490 U.S. 1007 (1989); Bivens Garden Office Bidg v. Barnett, 906 F.2d 1546, 1555 (11th Cir. 1990). While neither Bankers Trust nor Bivens Gardens stand for a requirement of qualitatively different damages, both the Eighth Circuit (in this case, where years) and the Ninth Circuit (in Grimmett) now require such evidence to avoid the bar of the statute of limitations. The Eighth Circuit rule adopted in this case goes much further than the rule in Glessner, because it requires the Petitioner to show acts within the statute of limitations. This new rule creates in the tortfeasor/criminal a license to continually injure RICO victims once the original statute of limitations is past. Since the whole purpose of RICO is to eliminate pattern criminal conduct, the intent of the law will be perverted and largely nullified by placing the Courts in the dubious position of protecting RICO violators who are rendered immune from suit after the passage of the four year limitations period. Because the continuing pattern conduct is likely to be 5 in this case, there were new advertsements reed upon by the Plaintiffs in the fal, 1989 Harvestore Farmer magazine and an October 25, 1969 ad in @ natonal farm publication. App F Plaintiffs alleged injury flowing from these fraudulent advertsements As noted above, this does not mean that there were not other causes of the same injury. including the fraud perpetrated before the sale See discussion, supra at 15 17 the same, the injuries resulting from the conduct are often the same. To use the example cited in the Supreme Court's opinion in EL. Inc. v. Northwestern Bell Tel., 492 U.S. 229, 109 S. Ct. 2893, 106 L. Ed. 2d 195 (1989), if a RICO violator collected protection payments from merchants for more than four years, the RICO violator would have a complete limitations defense for his acts, even though payments were extracted within the four year period prior to suit. By requiring a RICO plaintiff to establish an “independent injury" i.e., that the original fraud played no part in the later injury or that the later injury was qualitatively different from the first injury, courts effectively authorize RICO violators to continue their past predicate acts and resulting damages into the future without the risk of incurring RICO liability. This makes no sense, especially when one considers that the majority of courts have ruled that a civil RICO plaintiff cannot seek injunctive relief under RICO. See, ¢.g., Religious Technology Center v. Wollersheim, 796 F.2d 1076 (9th Cir. 1986). Like any other civil plaintiff, a RICO plaintiff may decline to bring suit against a defendant for a long time for prudent reasons, including the risk and cost of litigation, the attendant publicity or notoriety, and the likely response of a defendant. There is little to recommend the contention that a plaintiff who delays bringing a RICO claim until after the expiration of the four year limitations period is thereafter by criminal acts of the defendant simply because they are the same type as previously suffered, or because the original predicate act was a part of the cause of those injuries. Petitioner's argument is in accord with the liberal construction policy espoused by the drafters of RICO. RICO states that “the provisions of this title shall be liberally construed to effectuate its remedial purpose.” Racketeer Influenced and Corrupt Organization Act, Ch 96, §904(a), 84 Stat. 947 (1970), 18 note following 18 U.S.C. §1961. "The statute's remedial purposes are nowhere more evident than in the provision of a private action for those injured by racketeering activity,” Sedima, SPRL. v. Imrex Co, 473 U.S. 479 (1985). The language of the statute, as well as “Congress’ self consciously expansive language and overall approach," mandate that RICO be read broadly. The Eighth Circuits’ requirement of an ee ne ee Statute B. Continuous False Advertising and Active Concealment of Fraud Should Equitably Toll the Statute of Limitations in a Civil RICO Case. 1. The circuit court's application of the federal equitable tolling doctrine conflicts with the rule in the Second and Seventh Circuits. Petitioners specifically plead fraudulent concealment coupled with continuing active fraud in the Amended Complaint. App. G-14 to G-35. The issue raised here is whether the Petitioners need to prove due diligence in discovering the fraud underlying the predicate acts where the Respondents have engaged in active concealment of the fraud while, at the same time, continuing to fraudulently promote the use and repair of the product to the consumer. The circuit court in this case did not address the claim of fraudulent concealment as a basis for federal equitable tolling except to conclude that, “the Klehr's doctrine.” App. A-17, fn. 11. A conflict exists between the rule applied by the circuit Pg emg epg . man, 609 F.2d 583, 593 (2d Cir, 1979), Sperry y. Barggren, 523 F.2d 708, 711 (7th Cir 19 1975). In these circuits, the plaintiff must due diligence only when the defeadent is involved ia “passive? concealment, i.e. where the defendant takes no further steps to disguise the fraud from the plaintiff. Clute v. Davenport, Co., 584 F. Supp 1562, 1578 n4 (D. Conn. 1984). The D.C. Circuit has attempted to reconcile these differences. Hohbri y. United States, 782 F.2d 227, 248, n. 54 (D. C. Cir. 1986); Riddell y. , 866 F.2d 1480, 1491 (DC. Cir. 1989). According to these cases, if there is fraudulent concealment, the defendant has the burden of proving something closer to actual notice to set the statute running. The deceptive conduct "may be as simple as a single lie." Riddell v. Riddell Washington Corp., supra, 866 F.2d at 1491. According to the Eighth Circuit, equitable tolling is never even a consideration where it can otherwise be determined there was a lack of due diligence. In other words, the Respondent's continuing fraud can be ignored if the Petitioners are negligent in discovering the original fraud. Moreover, the Eighth Circuit refused to even consider fraudulent concealment of the original fraud or continuous fraudulent advertisement of the product as relevant factors in determining whether Petitioners exercised due diligence. Under the Eighth Circuit's reasoning, the merest inquiry notice (that there “might be a possible fraud") triggers the statute, which cannot thereafter be stopped by a party's fraudulent concealment or other overt acts that effectively “lull” the plaintiff into taking no action. Not even the burden of proof is shifted. The facts in the record undeniably lead to a different result depending only on the this difference in application of the equitable tolling doctrine. If this Court rejects the Keystone rule in Grimmett, it will be particularly important for the Court to address equitable tolling in the RICO context. Plaintiffs in RICO cases will be faced with the loss of meritorious claims, and defendants will be 20 encouraged to cover up their fraud until the 4 year limitations period is past. The lower courts will be faced with numerous claims of tolling, and need the guidance of this Court regarding the correct rule to apply. 2. The decision of the Eighth Circuit is erroneous. The Petitioners in this case were continually duped, over the many years they owned the silo, into believing it was the “cadillac” of silos. There was a continuous barrage of “after sale" merchandising which had its intended effect. At the same to look elsewhere on their farm for the source of their injury, the Respondents were continuing to engage in product research which established the falsity of the marketing campaign. This scientific research was actively concealed, and marked secret and confidential. Instead of publishing their own damning research as promised in the advertising, the Respondents published favorable empirical research from university professors who were also kept in the dark about the infirmities of the silo. There is a stark contrast between a tortfeasor who, on the one hand violates the law and thereafter stands mute, and another tortfeasor who, after committing the original fraud, perpetrates additional fraud while, at the same time, actively concealing the original fraud. Such persons should, in equity, be treated differently. The former may justifiably take advantage of the "due diligence” principle which requires the plaintiff to act or lose his claim. The latter, because of his continuing violation, should suffer a penalty regardless of whether his victim has acted with due diligence. The continuing tortfeasor should have the burden of proving that the plaintiff actually knew of the fraud. This is a reasonable price to pay for the continued 21 is a better rule of law and should be adopted by the Supreme Court in civil RICO cases. CONCLUSION The petition for a writ of certiorari should be granted. Respectfully Submitted, Charles A. Bird Mary R. Vasaly Bird and Jacobsen Maslon Edelman Borman 305 Ironwood Square & Brand 300 Third Avenue SE 3300 Norwest Center Rochester, MN 55904 90 South Seventh Street (507) 282-1503 Minneapolis, MN 55402 Counsel of Record (612) 672-8200 Of Counsel Malcolm McCune 300 James Robertson Parkway Nashville, TN 37201 (615) 254-8756 Counsel for Petitioner A. Opinion of Court of Appeals...00000000000.0.0.occccccceeeees A-l B. Opinion of District Court...000000000000. 0c ccccccccceceeeeseeeeen B-! C. Order on Rehearing (July 29, 1996) 0000000000... C-1 D. Judgment of Circuit Court 0000000. eccccccceeeeeeees D-1 E. January 3, 1968--A.O. Smith Internal Memo .............. E-1 F. Fall 1989 and October 25, 1989, Harvestore EE F-] ee G-1 United States Court of Appeals FOR THE EIGHTH CIRCUIT No. 95-1355 Marvin Klehr and Mary Klehr; Plaintiffs- Appellants, William G. Olson, Appeal from the United * States District Court for Vv. * the District of Intervenor, A.O. Smith Corporation; ° A.O. Smith Harvestore Products, * Inc., Jointly and Severally, ° > * Defendants-Appellees. MVBA Harvestore Systems, Movant. Submitted: October 18, 1995 Filed: June 6, 1996 A-l Before FAGG, HEANEY, and HANSEN, Circuit Judges. HANSEN, Circuit Judge. Marvin Klehr and Mary Klehr (Klehrs) appeal from the district court's’ entry of summary judgment against them on their various Minnesota state law and Racketeer Influenced and Corrupt Organizations Act ("RICO") claims. These claims are premised upon alleged misrepresentations made by defendant A.O. Smith Harvestore Products, Inc., a subsidiary of defendant A.O. Smith Corporation (collectively "AOSHPI"), and AOSHPI's authorized local dealer, MVBA Harvestore Systems, concerning a Harvestore silo that the Klehrs purchased. The district court ruled that the Klehrs' claims were barred by the statute of limitations. Klehr v_ A.O. Smith Corp., 875 F. Supp. 1342 (D. Minn. 1995). We affirm. L The Klehrs operate a dairy farm in Minnesota. In approximately 1974, they purchased a Harvestore silo manufactured and marketed by AOSHPI and sold by MVBA. Richard Deutsch, a salesman for MVBA, provided the Klehrs with information about Harvestore silos before and after the Klehrs purchased the Harvestore, and he also served as their local contact when they had problems with the unit. The fulcrum for the Klehrs’ claims relates to certain representations made by AOSHPI concerning a Harvestore silo's unique “oxygen limiting" feature. Marvin Klehr was an experienced dairy farmer and knew that mold and spoilage in ' The Honorable Michael J. Davis, United States District Judge for the District of Minnesota. A-2 livestock feed are caused due to the feed's exposure to oxygen, and that moldy and spoiled feed would be harmful to his dairy herd if fed to it. According to the Klehrs, AOSHPI represented that because the Harvestore silos were sealed, feed stored in the unit would have almost no exposure to oxygen, thereby virtually eliminating problems with moldy or spoiled feed.? This would result in higher feed quality, which in turn would eliminate the need to add protein supplements to the herd's daily feed ration. It would also improve the health of the herd and increase milk production at a rate of three to five pounds of milk per cow per day. All of these purported benefits would ultimately increase the profitability of the Klehrs' dairy operation. Although a Harvestore silo was considerably more expensive than a conventional stave silo, which the Klehrs also considered purchasing, it was explained to the Klehrs that Harvestore's unique “oxygen limiting" feature justified the higher cost of the unit and that the unit would pay for itself in four to five years. The Klehrs recognized, however, that all of the promised virtues of a Harvestore unit hinged upon the efficacy of the structure's “oxygen-limiting" feature. Despite AOSHPI's_ representations, the Klehrs experienced a myriad of problems after the Harvestore unit was installed. In July and August of 1976, Marvin Klehr observed white chunks of mold in the haylage’ he removed from the unit. He contacted Deutsch, who assured him that the mold was normal and simply the product of a minute quantity of oxygen that entered the top hatch of the unit when ? Some of AOSHPI's promotional materials apparently likened a Harvestore silo to a giant sealed fruit jar. > "Haylage” in the context of this case refers to chopped alfalfa silage stored in a silo at a designated moisture content to promote fermentation . A-3 it was being filled‘ Deutsch explained that the Klehrs could expect a thin layer of mold each time the Harvestore was filled because of the small amount of oxygen that would flow into the unit during the filling process. The Klehrs accepted this explanation. In the spring of 1977, Marvin Klehr again noticed chunks of mold in the feed and also observed that the feed had become unusually dark brown and smelled musty. Marvin Klehr loaded the spoiled feed into a manure spreader and dumped it on one of his fields. Marvin Klehr made the same observations in the spring of 1978 and undertook the same action. This process was repeated each spring, with the amount of moldy or spoiled feed always ranging from one to two manure spreader loads. _ The Klehrs' dairy herd also began suffering from various health problems after the Klehrs started feeding the herd haylage stored in the structure. Some of the health problems had not previously afflicted the herd, while other maladies began occurring with much greater frequency. These ailments included: displaced abomasums or “twisted stomachs," "foot problems," swelling and bruises around the * A Harvestore silo is filled through an open hatch at the top of the structure and unloaded by way of a chain-type unloader at the bottom of the unit. During the unloading process, so-called "breather bags” at the top of the silo expand to prevent oxygen from entering. * The only exception to this process was that in ximatel spring of 1982, Marvin Kiehr noticed a much greater yr 1 pb and spoiled feed than he had previously observed. The feed was much darker brown and contained significantly more and larger chunks of mold. He immediately ceased feeding his dairy herd feed from the Harvestore unit and subsequently emptied approximately 12 manure spreader loads of spoiled feed from the unit. Deutsch and AOSHPI officials later made repairs to the unit. Thereafter, the process returned to what it had previously been -- one to two manure spreader loads of spoiled or moldy feed emptied from the unit each spring. A-4 joints in the cows’ hind legs, cows "going off feed,” unusually thin and unthrifty cows, cows having rough hair coats and dull eyes, a higher rate of uterine infections, and more diarrhea and digestive problems than normal. Further, the Klehrs' herd began having certain breeding and reproductive problems, such as poor conception rates, longer calving intervals, and spontaneous abortions. Additionally, the Klehrs never realized the numerous benefits AOSHPI represented the Harvestore unit would provide, namely, an increase in milk production, elimination of protein supplements, and ultimately, an increase in profitability of the dairy operation. In fact, although their dairy operation had been profitable prior to their purchase of the Harvestore, the Klehrs experienced financial hardship after they started using the Harvestore. Despite all of this, the Klehrs never questioned Deutsch about the inability to eliminate protein supplements or the lack of increase in milk production or profitability until 1990. The Klehrs did consult a number of nutritionists and veterinarians during the years after they purchased the Harvestore concerning several of the herd's health and reproductive problems, but they never asked these consultants whether the Harvestore could have been the source of the problems. Finally, the Klehrs did not examine records which they possessed which would have illustrated to them that their herd's milk production was below that of other local herds and that the herd's milk production and the profitability of the dairy operation had not increased since the Harvestore was installed. In 1991, Marvin Klehr saw an article in a Minneapolis, Minnesota, newspaper regarding a claim concerning a Harvestore unit that had been made against AOSHPI in Minnesota state court. Marvin Klehr subsequently contacted a University of Minnesota veterinarian, Dr. William Olson, about a health problem with his herd; in April of 1991, Dr. Olson visited the Klehrs' farm. Dr. Olson and Marvin Klehr A-5 subsequently looked inside the Harvestore and observed large amounts of moldy and spoiled feed. This was the first time feed was still being stored in the unit. The Klehrs later commenced this action on August 27, 1993, alleging Minnesota common law fraud and negligent representation claims, violations of certain Minnesota consumer statutes, and violations of RICO. AOSHPI moved the claims were barred by the statute of limitations. The district court granted AOSHPI's motions. Klehr, 875 F. Supp. at 1345. The Klehrs appeal. II. We review dence. the district court's grant of summary judgment. Maitlan rs inn., 43 F.3d 357, 360 (8th Cir. 1994), Samay judgment is appropriate if the record, when viewed in the light most favorable to the nonmoving party, reveals that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). A We turn our attention first to the Klehrs’ Minnesota common law fraud claims, which are governed by a six-year statute of limitations. See Minn. Stat. Ann. § 541.05(6) (West 1988).° Under this statute, the cause of action accrues, thereby triggering the limitations period, upon “the discovery by the aggrieved party of the facts constituting the fraud." Id. _ tt sagan to hase dala, wo seston da.aaun Go Giewiet courts interpretation of Minnesota law Michals Ame: Arizor 66 F.3d 993, 995 (8th Cir 1995). A-6 The Minnesota Supreme Court has construed this statute as imposing a standard of objective reasonableness upon a plaintiff to discover the facts constituting the fraud. Bustad v. Bustad, 116 N.W.2d 552, 555 (Minn. 1962). “[T)he facts constituting the fraud are deemed to have been discovered when, with reasonable diligence, they could and ought to have been discovered." Blegen v. Monarch Life Ins. Co., 365 N.W.2d 356, 357 (Minn. Ct. App. 1985) (quotations omitted). “A plaintiff must exercise reasonable diligence when he or she has notice of a possible cause of action for fraud." Buller v. A.O. Smith Harvestore Prods. Inc., 518 N.W.2d 537, 542 (Minn. 1994). A “party need not know the details of the evidence establishing a cause of action, only that the cause of action exists” in order for the limitations period to commence. Id. (quoting Hydra-Mac, Inc. v. Onan Corp,, 450 N.W.2d 913, 919 (Minn. 1990)). A failure to actually discover the fraud will not toll the limitations period if such a failure is inconsistent with this reasonable diligence standard Blegen, 365 N.W.2d at 357. The Klehrs bear the burden of showing that they did not, and that with reasonable diligence they could not, discover the facts constituting the fraud earlier than August 27, 1987, six years prior to the time this action was filed. Id. A plaintiff's due diligence in the statute of limitations context is is oreinariy a question of fact. e | es ToC 880 F.2d 995, 999 (8th Cir. 1989). ‘Where Gb cuiienndlanves no room for reasonable minds to differ on the issue, however, ee eo a ee | Te nc., 992 F.2d 813, 817 (8th Cir 1993) The Klehrs argue that they did not become aware of the facts constituting the fraud until April of 1991, when Marvin Klehr, accompanied by Dr. Olson, looked inside the silo for the first time during feed storage and observed large amounts of mold in the feed. The Klehrs submit that they questioned A-7 Deutsch about the presence of mold and spoilage in the feed and that at various times they consulted numerous veterinarians and nutritionists concerning the heuwili and reproductive problems that their dairy herd was experiencing. Based on these actions, the Klehrs assert that a fact question to determine the facts constituting the fraud. We disagree. Shortly after they began using the Harvestore unit to store haylage, the Klehrs encountered problems that were directly contrary to AOSHPI's representations concerning the benefits a Harvestore unit would provide. AOSHPI represented to the Klehrs that using a Harvestore to store feed for their dairy spoiled feed. However, beginning in July of 1976 and continuing each subsequent year, Marvin Klehr observed mold in the feed which had been extracted from the unit; further, beginning in the spring of 1978, Marvin Klehr annually emptied one to two manure spreader loads of moldy or spoiled feed from the unit. Further, contrary to AOSHPI's representations of improved herd health, herd health actually deteriorated. The herd also began experiencing heretofore unencountered breeding and reproductive problems. The Klehrs consulted with a number of nutritionists and veterinarians over the years, but they never asked any of these consultants whether the feed fed from the Harvestore silo could have been the source of the herd’s health and reproductive problems. Similarly, it was represented to the Klehrs that one of the chief virtues of a Harvestore was that it would dramatically improve the quality of the feed such that protein supplements would become unnecessary, the Klehrs, however, were never able to reduce or eliminate protein supplements to the herd's daily feed ration. In addition promises of increased milk production and profitability of the dairy operation went unfulfilled; in fact, while the Klehrs’ dairy operation had been A-8 profitable prior to the purchase of the Harvestore, thereafter profits were not large enough. The Kiehrs failed to examine increases in milk production and profitability, and that the herd's milk production was subpar compared to other local dairy herds. The Klehrs did not question Deutsch or AOSHP! officials until 1990, some 16 years after putting the Harvestore to use, about the lack of an increase in milk production and profitability of the dairy operation, and the inability to eliminate protein supplements from the herd's daily feed ration. The Klehrs assert that health or reproductive problems in a dairy farming operation can be caused by a myriad of factors inherent in dairy farming and therefore determining the precise source of the problem is impossible. Setting aside the other promised benefits concerning the Harvestore which never came to pass (moldy and spoiled feed, inability to eliminate protein supplements), in this case the Klehrs’ herd suffered numerous health and reproductive problems shortly after the Klehrs started to feed the herd haylage stored in the Harvestore unit. After encountering these problems, the Klehrs were on notice of a possible cause of action for fraud and were required to conduct a reasonably diligent investigation -- perhaps by inspecting the silo during feed storage (which they did for the first time in 1991 and observed the prevalence of mold), by questioning Deutsch or AOSHP! representatives concerning why the dairy operation was not the Harvestore could be the source of the problems. Their failure to do so is simply inconsistent with Minnesota's inquiry notice standard, under which plaintiffs are required to exercise reasonable diligence to discover the facts which may constitute the fraud. We hold that, as a matter of law, the Klehrs, by A-9 exercising reasonable diligence, should have discovered the facts constituting the alleged fraud prior to August 27, 1987. This case is distinguishable from our holding in Hines, where we were called upon to decide whether the Missouri statute of limitations barred the plaintiffs’ common law fraud claims in connection with several Harvestore silos. 880 F.2d at 995. We held in Hines that a factual dispute existed concerning when the plaintiffs’ cause of action accrued under Missouri law because there was a conflict in the evidence concerning when the plaintiffs should have known that the Harvestore silos were not operating as AOSHPI represented. Id. at 998. Notwithstanding Hines, our analysis in this case, which concerns Minnesota state law claims, is governed by the teachings of the Minnesota Supreme Court concerning the interpretation and application of that state's discovery accrual rule, of particular import is that court's recent decision in Buller, which, like this case, involved the application of the statute of limitations involving a claim of fraud in connection with a Harvestore silo. Our analysis is also guided by the Minnesota federal district court's holding in Veldhuizen, wherein that court addressed the precise issues in front of us in another case involving a Harvestore silo. The analysis expounded in these cases makes clear that the Klehrs’ cause of action accrued long before August 27, 1987. Thus, our Hines decision, in which we were called upon to interpret Missouri's discovery rule, is not controlling here. In any event, to the extent that Hines applies, there we relied upon evidence that water had leaked into the Harvestore due to cracks in the structure and had possibly come into contact with the feed stored within; thus, the plaintiffs would have been unable to determine whether the silo, if it had been properly sealed, nevertheless could not live up to AOSHPI's representations that moldy and spoiled feed would be eliminated. The Klehrs, however, have made no similar showing that their silo had cracks that may have permitted A-10 water to come into contact with the stored feed, and which would create a question of fact as to the cause of the moldy or spoiled feed.’ The Klehrs also contend that the statute of limitations did not commence until they were aware that the Harvestore unit had a design defect that prevented it from performing as represented. Such a standard, however, is wholly inconsistent with the Minnesota Supreme Court's teaching that the requirement of reasonable diligence imposes an affirmative duty to investigate upon a party who is aware of facts that might constitute a possible cause of action for fraud. Buller, 518 N.W.2d at 542; Hydra-Mac, 450 N.W.2d at 919 ("A party need not know the details of the evidence establishing the cause of action, only that the cause of action exists."). We find persuasive the following statement from Veldhuizen, where the court addressed this precise issue “The limitations period does not wait to run until the [plaintiffs] were able to make a causal connection between the failure of the silo to perform as promised and a particular design defect." Veldhuizen v_ A.O. Smith Corp., 839 F. Supp. 669, 676 (D. Minn. 1993). Thus, we reject the Klehrs’ argument that the limitations period did not commence until they were able to pinpoint the design flaw that prevented the Harvestore from performing as represented * ” Both parties cite a number of cases from other jurisdictions dealing with the Harvestore litigation. Sec, ¢g.. Horn vy. A.O. Smith Corp., 50 F.3d 1365 (™ os. wy yy 1994 WL 178111 or No. 86-4230- R (D. Kan. 1990), lohnstor 5 sit ‘orp., Civ. No. 84-4421-S (D. Kan. 1987). oyey pe oy eee somewhat helpful, again our analysis is governed by the Minnesota Supreme Court's interpretation of Minnesota's discovery accrual rule applicable to fraud claims. * Likewise, we reject as meritless the Kichrs’ assertion that their “failure to realize non-actionable predictions of future performance” did A-11 The Klehrs contend that AOSHPI fraudulently concealed their fraud cause of action and therefore the statute of limitations should be tolled. "Fraudulent concealment ‘tolls the statute of limitations until the party discovers, or has a reasonable opportunity to discover, the concealed defect.” Buller, 518 N.W.2d at 542 (quoting Hydra-Mac, Inc., 450 N.W.2d at 918). The limitations period is tolled, however, “only if it is the very existence of the facts which establish the cause of action which are fraudulently concealed." Hydra- Mac, Inc., 450 N.W.2d at 91819. “Merely establishing that a defendant had intentionally concealed the alleged defects is insufficient; the claimant must establish that it was actually unaware that the defect existed before a finding of fraudulent concealment can be sustained." Id Further, there must be something of an affirmative nature designed to prevent, and which does prevent, discovery of the cause of action” for fraudulent concealment to apply. Wild v. Rarig, 234 N.W.2d 775, 795 (Minn. 1975) (quoting 54 C.J.S. Limitations of Actions § 206f). The Klehrs bear the burden of showing that AOSHPI concealed the fraud and that the concealment itself could not have been discovered sooner by exercising reasonable diligence. Buller, 518 N.W. 2d at 542-43. The Klehrs contend that material fact issues remain concerning whether AOSHPI knew that the Harvestore silos not trigger the statute of limitations. (Kiehrs' brief at 21.) The problems the Kiehrs actually experienced shortly after they started using the Harvestore should have put them on notice that AOSHP!'s representations concerning the unit were false, regardless of whether While the Klehrs may not have been required to immediately file suit to conduct a reasonable further investigation, which, as we have outlined in detail, they failed to do. A-12 were defective and deliberately concealed the defects from them through oral representations, written materials sent to Klehrs attended. The Klehrs also contend that suggestions made by Deutsch and representatives of AOSHPI concerning methods to improve the dairy operation served to conceal the defects from them. According to the Klehrs, these misrepresentations prevented them from discovering the fraud, and accordingly the statute of limitations should be tolled during the period these continuing misrepresentations were made. These arguments are unpersuasive quite simply because the Klehrs have made no showing that AOSHPI affirmatively concealed from them the existence of facts which would have supported their cause of action for fraud. As chronicled in detail above, the Klehrs were aware as early as 1976, when Marvin Klehr saw mold in feed taken from the Harvestore, that the silo was not performing as promised. The oral and written representations the Klehrs rely on to support their fraudulent concealment argument did not, and indeed could not, prevent them from discovering that AOSHPI's promises concerning the virtues of a Harvestore unit did not come to pass. See Miles, 992 F.2d at 816 (rejecting claim of fraudulent concealment in connection with Harvestore because of impossibility for defendants to conceal facts giving rise to cause of action when the evidence was in the plaintiff's own yard); Veldhuizen, 839 F. Supp. at 675 ("providing the [plaintiffs] with the post-sale materials does not rise to the level of affirmative concealment necessary to toll the statute of limitations."). Id. See also Buller, 518 N.W. 2d at 543 (rejecting fraudulent concealment claim based on post-sale advertising materials because plaintiff knew that Harvestore was not performing as represented). In short, the Klehrs’ lack A-13 of diligence precludes us from tolling the statute of limitations due to fraudulent concealment.” Il. The Klehrs argue that the district court erred by holding that their civil RICO claims were barred by the statute of limitations. Civil RICO claims are governed by a four-year statute of limitations. Association of Commonwealth Claimants v. Moylan, 71 F.3d 1398, 1402 (8th Cir. 1995). This circuit employs a discovery accrual standard to civil RICO claims; under this standard, such an 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." Id. (inner quotes omitted)'” The date when the injury and the pattern should have been discovered is subject to a standard of reasonableness, id., not unlike the standard for fraud claims outlined above. Thus, it is incumbent upon the Klehrs to show that it would not have been reasonable to discover the * We likewise reject the Klehrs’ claims that, in the alternative, AOSHPI is equitably estopped from asserting the statute of limitations because of the repairs that were made to the Harvestore silo in approximately 1982. There is no evidence that AOSHPI represented that these repairs would cure the myriad of problems outlined above that the Klehrs had been experiencing. In any event, the Klehrs admit that after the repairs were made the same problems which they previously experienced continued. Thus, equitable estoppel is inapplicable in this case. '° The Kiehrs assert a claim under 18 U.S.C. § 1962(a) for injury resulting from the reinvestment of income from the RICO enterprise in addition to their claim under 18 U.S.C. § 1962(c) based on a pattern of by the same discovery accrual rule, and we will assume, without deciding. that the same accrual rule applies to both causes of action. A-14 existence, source, and pattern of their injury by August 27, 1989. The Klehrs’' RICO claims are premised on allegedly received through the mail from AOSHPI on a continuous basis before and after they purchased the Harvestore. The Klehrs claim that AOSHPI distributed similar materials to individuals throughout the United States during this period) They contend that these materials made the same fraudulent misrepresentations concerning the attributes and the benefits of Harvestore silos that they relied on in deciding to purchase However, we agree with the district court that the facts which should have put the Klehrs on notice of a possible cause of action for fraud should also have alerted them to the existence, source, and pattern of the injury for their RICO claim. As noted above, the Kiehrs knew or should have known shortly after purchasing the Harvestore that AOSHPI's representations concerning the silo's attributes were simply not coming true and thus should have recognized the existence and source of their injury. Likewise, given that the Klehrs received numerous promotional materials and advertisements in the mail before and after they purchased the silo, they should have known that the misrepresentations were part of a pattern of suspected racketeering activity. We believe that the Klehrs should have determined that the representations were part of a pattern of racketeering activity when they should have identified the Harvestore as the cause and source of their problems. See Agristor v. Financial Corp. v. Van Sickle, 967 F.2d. 233, 241-42 (6th Cir. 1992) (stating in analogous case that “as a matter of law, [the plaintiff] should have determined that the representations were part of a pattern at the same time it should have discovered that the silos caused the alleged problems on the dairy farm."). A-15 The Klehrs urge us to adopt “a separate accrual rule," which would permit them to recover damages for predicate for similar damages caused by similar predicate acts outside of the four-year period are time-barred. In essence, then, the Klehrs request that we adopt the “last predicate act" accrual rule outlined by the Third Circuit in 863 F.2d 1125, 1126 (3d Cir. 1988), or a variation thereof. However, in Granite Falls Bank v. Henrikson, 924 F.2d 150, 154 (8th Cir. 1991), we declined to adopt such an “open- ended" standard, observing that it was inconsistent with "the underlying policy of a statute of limitations requiring due diligence on the part of the plaintiff" 924 F.2d at 154. Instead, we adopted an approach under which a plaintiff has four years to bring his claim from the point in time that he knew, or in exercising reasonable diligence should have known, of the existence and source of his injury and that the injury was part of a pattern, or his RICO claims are forever barred. Id. The principles expounded in Granite Falls preclude us from adopting the standard that the Klehrs propose. We likewise reject the Klehrs’ related assertion that their RICO claims are revived because of the "continuing damage” they sustained into the limitations period through the continued use, operation, and repair of the Harvestore silo. Again, Granite Falls provides the governing principle: it makes clear that a civil RICO action accrues with respect to “each independent injury" to the plaintiff 924 F.2d at 154. The Klehrs would have us hold that each advertisement or promotional material that was sent to them or that they observed constitutes a separate "injury." However, these injuries are not “independent injuries” because they are all of the same type, flow from the same source, and are part of one cognizable pattern of conduct AOSHPI's alleged misrepresentations regarding the Harvestore unit. We believe A-16 that these separate, discrete "injuries" that the Klehrs identify are more appropriately categorized as one single, continuous injury that was sustained sometime in the 1970s and for which 1989. See Glessner v. Kenny, 952 F.2d 702, 708 (3d Cir. 1992) ("the mere continuation of damages into a later period will not serve to extend the statute of limitations."). Thus, the Klehrs’ civil RICO claims are time-barred." IV. We have examined the Klehrs' numerous other arguments and determine that they lack merit for the reasons given by the experienced district judge in his well-reasoned opinion. Accordingly, for the reasons enumerated above, we affirm the district court's grant of summary judgment to AOSHPI. A true copy. Attest. CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT. '' We reject the Klehrs’ argument that federal equitable tolling principles save their claim from being barred by the statute of limitations. The Klehrs’ failure to act with due diligence precludes the application of this doctrine. See Johnson v_ United States Postal Service, 861 F.2d 1475, 1481 (10th Cir. 1988), cern. denied 493 U.S. 811 (1989). See also Wilson v. United States Government, 23 F.3d 559, 561 (ist Cir 1994) ("{flederal courts have allowed equitable tolling only sparingly "). A-17 UNITED STATES DISTRICT COURT DISTRICT OF MINNESOTA THIRD DIVISION Marvin Kiehr and Mary Klehr, Plaintiffs, Civil No. 3-94-424 v. MEMORANDUM OPINION AND ORDER A.O. Smith Corporation and A.O. Smith Harvestore Products, Inc., Jointly and Severally, Defendants. INTRODUCTION This action arises out of plaintiffs Marvin and Mary Klehr's purchase of a Harvestore silo in July, 1974. Plaintiffs claim that Defendants misrepresented material facts with respect to the characteristics of the Harvestore silo, causing the Klehrs damage. Before the Court is Defendant A.O. Smith Harvestore Products, Inc.'s ("AOSHPI") motion for summary judgment on all of Plaintiffs’ claims based upon the expiration of the applicable statutes of limitations. Defendants argue that the action is time-barred because Plaintiffs failed to commence their lawsuit until August 23, 1993, nineteen years after purchasing the silo. For the following reasons and based upon all records, files and proceedings herein, Defendant's motion for summary judgment will be granted. B-] FACTUAL BACKGROUND lL. Plaintiffs' Purchase of the Harvestore Silo The Klehrs purchased a 25 x 80 foot Harvestore silo on July 15, 1974, and began to use it in the summer of 1975." The Klehrs stored chopped alfalfa haylage and occasionally silage in the silo. Richard Deutsch, a salesperson for MVBA Harvestore Systems, sold the silo to the Klehrs. Deutsch supplied the Klehrs with literature and films representing the qualities and benefits of the Harvestore silos. The Klehrs claim that they purchased the Harvestore based upon the following representations: 1. That A.O. Smith Corporation was a one-hundred year old company that "backed" the product and that AOSHPI was twenty-five years old and had the backing of A.O. Smith. 2. That MVBA Harvestore Systems representatives were authorized Harvestore dealers and were the repository of all research regarding the Harvestore silos. 3. Because of a unique “oxygen-limiting” breather bag, no oxygen would contact the feed during storage, resulting in better feed quality, 4. Because oxygen would not contact the feed, there would be no spoiled and moldy feed from the Harvestore silo; 5. Because of the higher quality feed, Plaintiffs would have healthier cows, realize an increase in milk production of three to five pounds per cow per day, and be able to ' In 1955, Marvin Klehr's father purchased a second Harvestore silo which has been in use on the Kliehr farm from 1955 to the present. This silo is not part of the lawsuit. B-2 significantly reduce or eliminate the protein supplements in their rations, and 6. Plaintiffs would realize more profits and as a result the silo would pay for itself in four to five years. Marvin Klehr ("M.K.") Dep. at 149-169, 183, 611-12. All of feature, which constituted the most important factor in the Klehrs’ decision to purchase the Harvestcre silo over a cheaper stave silo. Id. at 761-62. Prior to 1974, Marvin Klehr was an experienced farmer. He concedes that he knew before 1974 that exposure of feed to oxygen causes mold and spoilage and that feeding animals spoiled and moldy feed could harm the animals. Id. at 114-19, 124. Il. Plaintiffs’ Experience With the Harvestore Silo A. Feed Quality and Appearance Defendants represented that because of the oxygen- limiting breather bag, no oxygen would contact the feed, yielding higher quality feed than conventional silos. Based on these representations, Plaintiffs did not expect to observe mold in feed stored in the Harvestore silo. Id. at 150-67, 611-12. Beginning in 1976, however, Klehr observed in the feed a few white chunks of mold, about the size of a spoon. Concerned about the mold, Klehr inquired of Deutsch as to the cause. Deutsch explained that the mold came from the top layer on the silo and was “normal.” According to Deutsch, at the time of filling oxygen entered the silo long enough to cause "a little damage." Deutsch dep. at 293-95. Deutsch told Klehr to expect a light layer of mold between each filling Klehr accepted Deutsch's explanation. Klehr observed light layers of mold between layers and in the spring each of the following years thereafter. Klehr also noticed within weeks of each filling that the feed turned a B-3 the change in color or odor significant, however, based upon Harvestore's advertising brochures. Advertisements for the silo described Harvestore haylage as “mildly-fermented, molasses-like feed" Ex. 1 to M.K. Aff According to Harvestore, the fermented smell enticed the cows to eat a lot of the feed. Klehr, therefore, believed that the brown, In the spring of 1977, at the end of the feed from the 1976 harvest, Klehr again saw mold, ranging from the size of a quarter to the size of a half dollar, and noticed that the feed had turned much darker brown in color and smelled musty. M.K. Dep. at 297-99. Kiehr loaded the spoiled feed into his manure spreader and dumped it in the field. Subsequently, each time Klehr emptied the silo he hauled about two spreader loads of spoiled feed out to the field. He considered one or of dumping about two spreader loads of spoiled, moldy feed in the field every spring thereafter. Id. at 349. One spring, between 1979 and 1982, Kiehr observed that the spoilage occurred earlier than usual, the feed became much darker brown and contained significantly more and larger chunks of mold. Id. at 311-12. Klehr immediately shut down the silo and stopped feeding that feed to the cows. He hauled approximately twelve spreader loads out to the field, as opposed to the usual two loads. Id. at 313. That year, Klehr spoke to Deutsch about the heavy spoilage. Deutsch and other MVBA representatives checked Klehr's silo and fixed a broken breather bag. They then pressure tested the silo and reported to Kiehr that it was repaired Id at 319-20 Subsequently, the feed returned to “normal,” requiring Klehr to dump one or two spreader loads when cleaning the silo in the spring. B-4 B. Herd Health In the years following his purchase of the Harvestore, Klehr experienced numerous ailments with his herd. Around 1980, Klehr noticed that his herd began to have diarrhea and digestive problems, although it occasionally had suffered diarrhea, or “winter dysentery,” in the past. M.K. dep. at 413. Beginning after 1975 the herd had problems with displaced abomasums, or “twisted stomachs." Klehr had not experi- enced this problem prior to 1975. He consulted his veterinarian, Dr. Klimmek, who advised Klehr that the feed was too finely chopped. Id. at 420-22. Dr. Klimmek did not indicate that the problem with the consistency of the feed was caused by the feed storage unit. Id. In approximately 1983, Kliehr noticed his cows “going off feed." The feed representative adjusted the rations to resolve this problem. The representative did not associate this problem with the silo, rather, Kiehr believed he was feeding his cows too much. Id. at 416-19. Klehr observed an increase in uterine infections beginning around 1980. Klehr recently had doubled the size of his herd from forty-five to ninety, even with the larger herd, however, the percentage of uterine infections significantly increased. Id. at 427. Klehr spoke to his feed salesmen about the problem several times. They concluded that the cows lacked “some type of vitamin." Id. The feed salesmen added Selenium in addition to vitamins A, D, and E to the diet. Id. at 429. Also in 1980, the herd began to experience foot problems. Klehr's feed salesman added minerals to the rations to treat the problem. In about 1977 Kiehr observed swelling around the joints on the cows’ hind legs. He hed never seen this condition prior to 1977. Klehr's veterinarians operated on some of the cows, but were unable to diagnose the cause. His veterinarians did not connect the leg problems to the Harvestore silos B-5 After 1975 Klehr also noticed that his cows were thin and at 440-41. Klehr's feed salesmen told him “they knew that these cows were still lacking something.” Id. at 445-56. They advised Klehr to alter his ration so that the cows would get “a little bit more grain, or a little bit more feed." Id. at 444. Again, no one related the unthriftiness or the dull appearance to the Harvestore silo. In the years after 1975, Kliehr experienced significant the problems occurred over a period of time and did not “hit him overnight,” they increased subsequent to the purchase of the Harvestore. Kiehr observed, for example, a problem with premature abortions. When asked when this problem began, Klehr stated, “It's been a long time. I guess looking back, maybe at the start of the Harvestore system, yes." M_.K. dep. at 479. Klehr recalls his herd's conception rate during the years he used the Harvestore as “very poor,” and he was “very dissatisfied with it. Id at 535. The Dairy Herd Improvement Association ("DHIA") records, which Klehr received monthly during this time period, confirmed the poor conception rate. Klehr believed this problem had existed for ten years prior to filing his state court lawsuit in 1991 Id. at 535-36. After purchasing the Harvestore, Kliehr also observed long calving intervals compared to reported averages for Minnesota farmers. Id at 464-65. Klehr investigated the reproduction problems with his veterinarians and feed salesmen, who increased vitamin E and Selenium in the rations. The veterinarians pregnancy tested the cows and told Klehr that some cows had cysts, none, however, indicated that the problems related to the silo B-6 D. Milk Production Klehr testified that during the period he used the Harvestore silo, he believed he received the expected increase in milk production. M.K. Dep. at 384-89. Whenever Klehr noticed a decrease in milk production, he attributed the problem to factors other than the Harvestore silo. For example, Klehr believed that his increase in his herd from forty-five to ninety cows depressed the milk production. He also voluntarily reduced his production for eighteen months in accordance with a dairy diversion program. Finally, Klehr attributed any depression of milk production to his herd's health problems, such as the foot problems and uterine infections. In contrast to his belief that he received the expected increase in milk production from Harvestore, Klehr determined, after reviewing the DHIA records, that his production “was not going anywhere over the years." Id. at 512. These DHIA records were available to Kiehr monthly during the entire period he used the Harvestore silos. Id. at 513. Klehr did not complain about his milk production to anyone until 1990, when he told Deutsch that he should be producing more milk. Id. at 378-79. F. Protein Savin Contrary to Harvestore's representations that the silo would eliminate the need for protein supplements, Klehr at all times had to add protein to the rations. Id. at 699-701. Klehr inquired of Deutsch regarding his failure to realize protein savings. Deutsch explained that due to increased production in recent years, the cows required more protein. Id. at 713. Klehr testified that he believed the need to supplement the feed with protein was due to various reasons, such as the way he B-7 was “putting up” his haylage or that his fields were not clean enough. Id. at 700-701. G. Profitabili During the period he used the Harvestore silo, Klehr believed he was receiving the promised profits. M.K. dep. at 644. After filing the state court lawsuit, however, Klehr reviewed his DHIA records and determined that the representations of increased profitability were false. Id. at 511-12. Klehr received DHIA records outlining his profits the entire time he used the silo. Mary Klehr testified that Plaintiffs experienced extreme financial hardship from the early 1980's to 1991 or 1992 due to low milk production. Mary Klehr Dep. at 23, 104-106. When asked about profits incurred or lost in specific years, Klehr testified: At the end of the year, I had an enterprise of hogs, milk, crops, and who knows whatever else. It was all thrown into one kitty, and I never once thought it was because of my Harvestore not giving me the profit or not doing what it was supposed to. Could have been the bad hogs, or bad weather, bad crops... . . I farmed long enough that you cannot project ahead a whole year what you think you are going to get, because it never comes out that way. You take what the good Lord gives you. Id. at 688-89. Ill. Discovery of the Alleged Defect Plaintiffs allege that Defendants continued to misrepresent to them the characteristics of the Harvestore silos after the purchase. They claim to have received fraudulent B-8 representations in the mail from 1969-91, specifically twenty pieces of advertising before the purchase and thirty-eight pieces of advertising after the purchase. Amended Complaint TV 10, 15, 16. Plaintiffs contend that A.O. Smith Corporation knew of the alleged design flaws in the Harvestore silo since the 1960's, but deliberately concealed the defects from consumers. Plaintiffs claim that Defendants’ conduct in concealing the deficiencies in the silos while continuing to misrepresent their qualities, prevented them from discovering the defect in the Harvestore silo as the source of the problems with their herd. In 1991, however, Klehr saw an article in a Minneapolis newspaper regarding a verdict against AOSHPI in Olmsted County, Minnesota. Shortly thereafter, Klehr contacted the University of Minnesota about a mastitis problem with his herd. The University referred Kiehr to Dr. William Olson, a veterinarian and Ph.D. In April 1991, Olson visited the Klehr farm and looked inside the Harvestore silo. This was the first time Kiehr had looked in the silo prior to unloading. They observed large amounts of mold. Klehr claims that at that point, in April 1991, he realized for the first time that he had been feeding his herd moldy feed for fifteen years and that the spoiled feed had caused his herd significant health problems See M.K. Aff. ¥ 10; Olson Aff. 4 2A-B, 7. Plaintiffs commenced this action on August 27, 1993, alleging: common law fraud (Counts | and II); violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO") (Counts III and IV), common law negligent misrepresentation (Count V); and violations of Minnesota Statute sections 325F.67, 325F.68-70, 325D.13, 325D.44 (Counts VI-IX).’ Plaintiffs previously filed an action in state court alleging all but the federal RICO claims. On August 18, 1993, Plaintiffs voluntarily dismussed the state court action pursuant to Minnesota Rule of Civil Procedure 41.01. Plaintiffs then filed suit in federal court against DISCUSSION I. STANDARD FOR SUMMARY JUDGMENT Under Federal Rule of Civil Procedure 56, a moving party is entitled to summary judgment if the evidence shows that “there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” 477 U.S. 317, 322 (1986). The moving party bears the initial burden of establishing the non- existence of a genuine issue of material fact. Id. at 323, City of Mt. Pleasant, Jowa v. Assoc. Elec. Co-op., 838 F.2d 268, 273 (8th Cir. 1988). Once it meets that burden, the non- moving party may not then “rest upon the mere allegations or denials of his pleading, but . . must set forth specific facts showing that there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). If, based upon the evidence, a reasonable jury could not return a verdict for the non-moving party, summary judgment is appropriate. Id. at 248. ll. FRAUD CLAIM A. Discovery of Fraud Under Minnesota law, a party must commence a cause of action for fraud within six years from the date of “discovery by the aggrieved party of the facts constituting the fraud." Minn. Stat. § 541.05 subd. 1(6). The date of discovery is subject to a standard of reasonableness. Bustad v. Bustad, 116 N.W.2d 552, 555 (Minn. 1962); Blegen v. Monarch Life Ins. Co., 365 N.W. 2d 356, 357 (Minn. Ct. App. 1985). Thus, “the facts AOSHPI, but dropped the claims against MVBA Harvestore, a B-10 constituting the fraud are deemed to have been discovered when, with reasonable diligence they-could and ought to have been discovered." Bustad, 365 N.W. 2d at 357 (citations omitted). A party's failure actually to discover the fraud will not toll the statute of limitations if such failure of discovery is "inconsistent with reasonable diligence." Id. The plaintiff carries the burden of proving that he did not, and could not through the exercise of reasonable diligence, discover the fraud within six years before commencement of the action. Blegen, 365 N.W.2d at 357. The Court recognizes that “normally in a statute of limitations context fraudulent concealment and a plaintiff's due diligence are questions of fact unsuited for summary judgment." waame x. A.D) Sale Meneame Eeate..ia, 99° F.2d 995, 999 (8th Cir. 1989). Where “the evidence leaves no room for a reasonable difference of opinion,” however, the district court properly may resolve fact issues as a matter of law. Miles v_ A.O. Smith Harvestore Prods., Inc., 992 F.2d 813, 817 (8th Cir. 1993). The Klehrs commenced this action on August 27, 1993. If, therefore, the statute of limitations for fraud began to run prior to August 27, 1987, Counts I and II will be time-barred. Defendants contend that the Kliehrs knew or should have known shortly after they began using the Harvestore that the silo did not perform as represented and that they were not receiving the promised benefits. The Klehrs maintain that they did not discover the facts constituting the fraud until April 1991, when Dr. Olson visited the farm and Klehr for the first time saw the moldy feed inside the silo. They assert that they exercised reasonable diligence in attempting to determine the cause of the problems they experienced with their herd over the years. The evidence shows that the Klehrs should have known shortly after using the Harvestore silo that they were not B-11 receiving the represented benefits which induced them to purchase the silo. Mr. Kiehr, an experienced farmer, knew that exposure to oxygen causes mold and spoilage harmful to animals. Despite Harvestore's representation that the breather bag would prevent oxygen from contacting the feed and thus of mold in his feed. The mold persisted each year Klehr operated the Harvestore. Each year he dumped spoiled feed in the field. The year Kiehr noticed a significant increase in mold, along with a darker color and more pungent smell, he recognized the potential harm to his herd and dumped twelve spreader loads of spoiled feed in his field. M.K. dep. at 311- 12. The entire time he observed chunks of mold in his feed, Klehr's herd experienced numerous health problems. Contrary to Defendant's representations that feed from the Harvestore would result in healthier cows, Kiehr saw an increase in digestive problems, uterus infections, foot and leg problems and displaced abomasums. Klehr's cows had dull coats and eyes and were thin and unthrifty. Additionally, the conception rates during his use of the silo were very poor and he experienced increased miscarriages and long calving intervals. Although certain health problems had occurred prior to 1975, Klehr concedes that many problems increased after the purchase of the silo and that others began for the first time after 1975. While the deterioration in herd health and decrease in reproduction rates did not “hit [Klehr] overnight," these problems, directly contrary to Harvestore's representations, should have been apparent to Klehr at the latest by the early 1980s Additionally, Klehr concedes that he never realized any protein savings by using the Harvestore. In stark contrast to the advertisements, Klehr had to supplement the feed with protein at all times. Despite added protein and other vitamins, B-12 his cows remained unthrifty and “were still lacking something." Klehr contends that he reasonably investigated with his problem he experienced with his herd. He maintains that because his experts failed to attribute the problems to the silo, he should not be charged with knowledge that the Harvestore was the source. Although Klehr's experts failed explicitly to link the Harvestore to the problems with his herd, nothing prevented Klehr from discovering the connection. Klehr knew that oxygen caused mold and that spoiled feed could harm cows. In light of the numerous health and reproduction problems he experienced over the years, Klehr should have included the silo among the potential sources of his problems. Despite contrary explanations, Klehr should have made the connection and taken further steps to investigate the silo as the potential cause. As stated in Veldhuizen v A.O. Smith Corp., 839 F. Supp. 669, 676 (D Minn 1993), “[t]}he limitations period does not wait to run until the plaintiffs were able to make a causal connection between the failure of the silo to perform as promised and a particular design defect." Rather, the Kiehrs had an affirmative duty to investigate the silo as a cause; the failure to do so is inconsistent with their duty of reasonable diligence See Blegen. 365 N W 2d at 357. See also Johnston vy. Agnstor Credit Corp , Civ. No. 84-4421-S (D. Kan. 1987) (“It appears from the record that the Johnstons did everything but check their new equipment, such action is not enough to satisfy the requirement that the fraud not be discoverable until December 1982") Although the Klehrs did not actually discover the causal connection between the silo and the problems with their herd until April 1991, they should have realized well before 1987 that the representations regarding the characteristics of the Harvestore silos were false B-13 fy : f gE rE ii Te HH 7 : id TE: Let The Court holds that Plaintiffs should have discovered, through the exercise of reasonable diligence, any fraud committed by Defendants long before 1987. B. Fraudulent Concealment Plaintiffs also argue that the statute of limitations should be toiled because Defendants fraudulently concealed the cause of action. “Fraudulent concealment tolls the statute of limitations until the party discovers, or has a reasonable opportunity to discover, the concealed defect." Hydra-Mac, Inc. v. Onan Corp., 450 N W.2d 913, 918 (Minn. 1990). The limitations period is tolled, however, “only if it is the very existence of the facts which establish the cause of action which are fraudulently concealed." Id at 918-19. Further, “there must be something of an affirmative nature designed to prevent, and which does prevent, discovery of the cause of action.” Wild v. Rarig, 234 N.W.2d 775, 795 (Minn. 1975). Showing that a defendant fraudulently concealed an alleged defect is insufficient, a plaintiff must show that he actually was unaware of the existence of the defect before the statute of limitations will be tolled. Hydra-Mac, 450 N.W.2d at 919. B-14 The Klehrs contend that Defendants knew the Harvestore silos were defective and deliberately concealed the defects from them. They assert that Defendants, through fraudulent advertising, misrepresented the characteristics of the misrepresentations, the Klehrs claim, concealed the defect and prevented discovery of the fraud; therefore, the statute of limitations should be tolled under the doctrine of fraudulent concealment. The Court finds that the fraudulent concealment doctrine does not apply to toll the statute of limitations. Defendants here took no affirmative steps which prevented discovery of the very facts establishing the cause of action. "“[P]roviding the [Klehrs] with the post-sale materials does not rise to the level of affirmative concealment necessary to toll the statute of limitations." Veldhuizen, 839 F. Supp. at 675. Moreover, the post-sale advertisements could not have concealed from the Klehrs the facts constituting the alleged fraud, namely that the Harvestore did not perform as represented. The Klehrs had only to look at the feed coming from the silo and observe the health of their herd to know that they were not getting better quality feed, protein savings and healthier cows. Further, they had only to look at the monthly DHIA reports to recognize that the promised increase in milk production and profits had not materialized. As the court stated in Miles v. A.O. Smith Harvestore Products, Inc., In the present case, Harvestore took no steps to conceal the facts giving rise to appellant's cause of action. It would have been impossible. for Harvestore to have done so--the evidence was in appellant's yard, in daily use for the feeding of her animals. Appellant by the exercise of reasonable diligence should have realized that Harvestore had misrepresented the qualities of the silos. B-15 Miles, 992 F.2d at 816. Additionally, any management suggestions by Harvestore representatives did not, as a matter of law, rise to the level of Klehr's management of the silo nor attributed the mold, health problems or low milk production to Klehr's mismanagement. MLK. dep. at 325-28, 332-35, 710-12. Defendants did not affirmatively act with a design to prevent, and did not prevent, Plaintiffs’ discovery of the facts establishing their cause of action. Accordingly, the statute of limitations will not be tolled for fraudulent concealment. Il. RICO CLAIMS Plaintiffs also allege RICO violations under 18 U.S.C. §§ 1962(a)’ and (c).* A four year statute of limitations applies to civil RICO claims. Agency Holding Corp. v. Malley-Duff & Associates, Inc., 483 U.S. 143, 156-57 (1987). Plaintiffs’ RICO claims are thus barred if the statute of limitations began to run prior to August 27, 1989. A civil RICO claim accrues from the time that the plaintiff “discovers, or reasonably ’ Section 1962(a) provides in relevant part, It shall be unlawful for any person who has received any income derived, directly or indirectly, from a pattern of racketeering activity _. , © use or invest, directly or indirectly, any part of such income, or the proceeds of such income, in acquisition of any interest in, or the establishment or operation of, any enterprise which is engaged in... interstate or foreign commerce. * Section 1962(c) provides, It shall be unlawful for any person employed by or associated with any enterprise engaged in . . . interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity... . “ B-16 should have discovered, both the existence and source of his injury and that the injury is part of a pattern."’ Granite Falls 2 SS F.2d 150, a 2 906 F.2d 1546, 1384-55 (1th Cir. 1990), cart. denied $00 U.S. 910 (1991)). As with the statute of limitations for fraud, the date when the injury and the pattern should have been discovered is subject to a standard of reasonableness. Id: Veldhuizen v_ A.O. Smith Corp, Civ. No. 4-92-1131 (D. Minn. Dec. 30, 1993). As evidence of a pattern of racketeering, Plaintiffs allege receiving from Defendants twenty pieces of fraudulent advertising through the mail prior to their purchase of the Harvestore, and thirty-eight pieces of fraudulent advertising subsequent to the purchase. Plaintiffs allege a pattern of fraudulent representations by Defendants continuing for a period of more than twenty years. The Court finds that Plaintiffs should have discovered the existence and source of the alleged injury and that the injury was part of a pattern at the same time they should have discovered the fraud) The same facts which should have alerted them to the fraud also should have alerted them that the alleged misrepresentations and injuries were part of a pattern. See AgnStor Financial Corp v. Van Sickle, 967 F.2d 233, 242 (6th Cir. 1992) (“as a matter of law [the plaintiff] should have determined that the representations were part of a pattern at the sane time it should have discovered that the silos caused the alleged problems on the dairy farm") * Plaintiffs cite no authonty for their contenuon that the discovery accrual rule applies to Section 1962(c) but not to 1962(a). Because under both sections the injury results from the defendant's pattern of racketeering activity. the discovery accrual rule will apply to both RICO claims B-17 rule set forth in Bivens Gardens and Granite Falls, a new cause of action accrues each time a party suffers an injury caused by a violation of 18 U.S.C. § 1962. Because they suffered damages until 1991, Plaintiffs maintain, a new RICO claim accrued with their last injury, rendering their 1993 lawsuit timely. injuries, the separate accrual is limited to distinct and independent injuries. Glessner v. Kenny, 952 F.2d 702, 707 (3rd Cir. 1991), Bankers Trust Co. v. Rhoades, 859 F.2d 1096, 1103 (2nd Cir. 1988), cert. denied, 490 U.S. 1007 (1989). In Glessner, the plaintiffs brought their RICO actions in 1988 after the defendants had ceased production of an allegedly defective furnace in 1983, thus ending the pattern of racketeering. The plaintiffs argued that although they first suffered injury, in the form of excessive repairs, prior to the expiration of the four year statute of limitations, 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’ Glessner, 952 F.2d at 706-07. The court found that the plaintiffs’ replacement of the furnace did not constitute a new and distinct injury but rather a continuation of their initial injury. As the court stated, “the mere continuation of damages into a later period will not serve to extend the statute of limitations.” Id. at 708. Similarly, the injury allegedly suffered by the Klehrs through 1991 does not qualify as an independent and distinct injury, but rather a continuation of the damages they suffered since using the Harvestore silo in 1975. Their injury arises out of Defendants’ initial alleged wrongdoing, namely the fraudulent misrepresentations Because the Kiehrs should have discovered the existence and source of this injury and that it was part of a pattern at the sane time as they should have discovered the fraud, long before August 1989, their RICO claims are time-barred ° IV. STATUTORY CLAIMS Counts VI through IX of Plaintiffs’ Amended Complaint assert claims for violations of the Minnesota False Statement in Advertisement statute (Minn. Stat. § 325F.67), the Minnesota Consumer Fraud Act (Minn. Stat. § 325F.68-70), the Unlawful Trade Practices Act (Minn. Stat. § 325D.13), and the Uniform Deceptive Trade Practices Act (Minn. Stat. § 325D.44). Minnesota Statute section 541.05 subd. 1(2) imposes a six year statute of limitations for claims based on liability created by statute This provision does not include a discovery allowance as does the statute of limitations applicable to fraud claims. Minn. Stat. §541.05 subd. 1(2): Veldhuizen, 839 F. Supp. at 677. Thus, the six year limitations period commenced on the date of sale, 1974, when each of the alleged statutory violations occurred Id. Accordingly, Plaintiffs’ statutory claims are time-barred. Vv. NEGLIGENCE CLAIM Plaintiffs allege in Count V a claim for negligent musrepresentation Under Minnesota law, a six year limitations period applies to negligence claims. Minn. Stat §541.05 subd 1(5) The statute of limitations begins to run * For the same reasons as set forth with respect tc the common law fraud claims, the doctrine of fraudulent concealment does not apply to toll the statute of limitations under RICO. Even under the federal fraudulent concealment doctnne. the limitauons penod will not be tolled unless the fraudulent concealment *musieads a plaintiff into thinking that he does not have a cause of action * Davis v. Grusemeyer, 996 F.2d 617, 624 (3rd Cir. 1993). As discussed supra. Defendants did not conceal the facts constututing the cause of action B-19 on negligence claims “when the negligent act or omission causes injury on which the injured party could maintain an action.” Wittmer v. Ruegemer, 419 N.W.2d 493, 496 (Minn. 1988). Because Plaintiffs, alleged injuries began immediately after using the silo in 1975, the six year statute of limitations Even if not barred by the statute of limitations, Plaintiffs N.W.2d 159, 162 (Minn. 1981) ("economic losses that arise out of commercial transactions, except those involving personal injury or damage to other property, are not recoverable under the tort theories of negligence or strict products liability") As a matter of law, the damages claimed by the Klehrs are non-recoverable economic loss. Veldhuizen, 839 F. Supp. at 677. Under either theory, therefore, Plaintiffs’ claim for negligence alleged in Count V will be dismissed. CONCLUSION Based on the foregoing and all the files, records and proceedings herein, the defendants’ Motion for Summary Judgment (Doc. No. 120) is GRANTED and Plaintiffs’ Complaint is DISMISSED WITH PREJUDICE. LET JUDGMENT BE ENTERED ACCORDINGLY. Dated: January _6 .1995 v/s MICHAEL J. DAVIS, Judge United States District Court B-20 on UNITED STATES COURT OF APPEALS FOR THE EIGHTH CIRCUIT No. 95-135SMNST Marvin Klehr; Mary Kiehr; © > Appellants, ° * Appeal from the William G. Olson, * United States * District Court for the Intervenor, * District of Minnesota * Vv. ° - A.O. Smith Corporation, A.O. Smith * Harverstore Products, Inc., ° Jointly and Severally, ° > Appellees ‘ The petition for rehearing filed by the appellants’ has been considered by the court and is denied. July 29, 1996 Order Entered at the Direction of the Court: s/Michael E. Gans Clerk, U.S. Court of Appeals, Eighth Circuit. C-] Mr. Charles A. Bird BIRD & JACOBSEN 305 Ironwood Square 300 Third Avenue, S.E. Rochester, MN 55904 95-1355/mam of Minnesota August 12, 1996 RECORD OF DOCKET TEXT 3:94-cv-00424 Klehr v. A O Smith Corp DOCKET ENTRY CERTIFIED COPY OF OPINION & JUDGMENT FROM USCA ( Fagg) ( Heaney) ( Hansen) - J; filed 6/6/96 that the judgment of the District Court in this cause is affirmed in accordance with the opinion of the Eighth Circuit. [223-1] (17pgs) (cc. All Counsel) Mandate issued 8/9/96 Hon. Michael J Davis, Judge THIS NOTICE SENT TO ALL COUNSEL D-| fi : i } LAW DEPARTMENT Date: January 3, 1968 Attention: Messrs. L. B. Sinith From: James N. Johnson U. T. Kuechle Dept. 0116 A. D. Hyde Location: Milwaukee M. E. Morgan R. F. McGinn R. C. Smith Howard Johnson Cloy Knodt During the development by the plaintiffs of the evidentiary facets of their cases in the California courts, the most prolific source for such development, to which they turned again and again, was the voluminous reports and memoranda issued by one department or division head to another, or by division or department heads to outsiders, such as dealers. In many respects, these memos formed every bit as much damning evidence as did any of the advertisements or promotional pieces upon which the plaintiffs sought to rely Admittedly, a large corporation such as ours moves forward, even though slowly, it appears sometimes, on exchange of pieces of paper No one knows more poignantly, than do lawyers, how necessary writings sometimes may be in order that points of view can be clearly expressed and accurately memorialized We will be the first to insist that writings, in many cases, are absolutely necessary. E-1 However, in times such as those through which Harvestore is passing, and when it appears that its mechanical problems are yet far from solution, | suggest that the writings Product failures and the claims made against the Company in connection therewith, along with any responsibility of the Company's undertaking to correct such failures, all are matters of appropriate reference to the Law Department for analysis and suggestion They are a joint problem between administrative engineering, sales, and law, but, ultimately, reflect the possible legal claims and attending litigation Therefore, their joint assessment and correction under the supervision of the Law Department is not only proper as a matter of form, but also as a matter of substance, and any writings in connection therewith, so long as they are addressed to the Law Department with copies to the responsible administrative engineering or sales executive involved, will be secure from seizure Therefore, | earnestly solicit your cooperation to frame —_ memos in the manner | have suggested _~ ve, So — ing th ddr h the copies to the ee executives will Area the — > move forward without fear of having, the substance of the memos being used against us in litigation S/S James N. Johnson JNJ: byh O0FE ts COMM CT On REQUESTED Nes Drovg’ you hs Complimentary Copy of Havesios Sytem Farmeng wih ine hope thet he ntormavon 1 Comas.; wl! Rep you Tere yOu ‘ermung more promadie You desley wl De happy \o ar ewe! 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Nevace OPE es Om Nee eo ge ety fe ee eppetiemes Opportunities HARVESTORE Get © PURNING Sher or he Guanes sheed At the 1900 SEMINAR ty THE SUN wet take 5 4 Close inom ot how you's be farming m ihe years te come Youll neve auth sold ‘¥ ee ee oe ee 8 foe —_———— ee ee ee ee | oN eee andl —- —_ Sem om Cee ee oo me ee een eS Scented ne ee emeree © ery mere ae Fe PRD Be Ot eee me aes OO gee —e — Simran wt Tee Sue = —_ > Od we wesee Orinee em cr 6 ee ee © ree tree Smee ere Comam 4 60115 F-3 a) UNITED STATES DISTRICT COURT DISTRICT OF MINNESOTA Marvin Klehr and Case No.: 4-93-822 (JMR) Mary Klehr, Plaintiffs, AMEND iD COMPLAINT Jury trial demanded Vv. A.O. Smith Corporation and A.O. Smith Harvestore Products, Inc., Jointly and Severally, Defendants Plaintiffs, Marvin and Mary Klehr, by and through their attorneys, as noted below, state the following as their claims in this matter [Paragraphs |-9 deleted] 10. From 1969 up to the date of sale on or about July 15, 1974, AOS, AOSHPI and/or MVBA, both directly and indirectly furnished the Plaintiffs with various sales literature, including, but not limited to (a) Printed materials from AOSHPI and AOS regarding the Harvestore structure, which included the following: (1) On or about January 25, 1974, Plaintiffs received, in the U.S. Mail, the “Hoards Dairyman"” magazine which, at page 105, was an advertisement entitled, " Twenty-five Years Ago it All Started With Just One" made and published by Defendants. This advertisement falsely represents that AOSHPI was a twenty-five-year-old company. This ad led Plaintiffs to believe that they were dealing with a single company they knew as "A.O. Smith" that had been around for Plaintiffs to purchase the silo because they believed they were dealing with a very reliable company that had been in business for many years. In reliance upon this representa-tion, Plaintiffs purchased the silo and suffered damages. (2) In December, 1972, through the U.S. Mail, Plaintiffs received the Harvestore, Farmer, 1973 Buyer's Guide issue, made and published by Defendants (Vol. 11, No. 6), which includes a postage-paid return card for additional Harvestore product information, and states, at Page 6, that Harvestores prevent oxygen from contacting the feed Plaintiffs believe they may have also received this item at the State Fair in August, 1973, and/or personally from Mr. Deutsch in the summer of 1973. It also has a diagram of the top of a Harvestore structure which shows air going in and out of the breather bags but not in and out of the pressure relief valve or unloader door, thereby falsely implying that no ambient air can reach the stored feed through normal daily use. At page 10 of the Buyer's Guide is a description of the Harvestore dealer It states the dealer is a professional in farm management and also says that if the dealer “doesn't have the answers himself. he can call on the experts at AO. Smith Harvestore to help get the answers." Plaintiffs believed and relied upon the design of the silo as described Plaintiffs believe that, through the dealer, they had access to all the research and knowledge of the experts at ACO. Smith Harvestore. Such Buyer's Guide G-2 issue, and the representations contained therein that were made by A.O. Smith and AOSHPI, were relied upon by the Plaintiffs in purchasing the silo and as a result suffered damages. (3) In January, 1974, through the U.S. Mail, and also personally from Richard Deutsch, a salesman of MVBA, Plaintiffs received the 1974 Harvestore Farmer Buyer's Guide, (Volume 13, No. 1.), which was made and published by A.O. Smith and AOSHPI in written form. Such Buyer's Guide issue contains false representations, on Pages 4-5, that Harvestore silos prevent oxygen from coming into contact with the feed, and contains false depictions of Harvestore silos, which have no reference to the pressure relief value and/or air coming in through the unloader door. On page 2223 of the Buyer's Guide it states that the network of dealers supports Harvestore owners. It states the dealers are experts in techniques of planting, cropping, harvesting, animal nutrition, farm counseling, installing and service. It says salesman and service workers are trained at "Harvestore's headquarters in Arlington Heights, Illinois." This ad caused Plaintiffs to be very confident in the design and follow-up service available. Plaintiffs believed the dealers, who were trained by A.O. Smith, knew everything A.O. Smith knew about the product and could answer all questions about the silo. This advertisement was relied upon by the Plaintiffs in purchasing the silo and caused them to suffer damages as a result of the use of the silo upon their farm (4) Sometime in the early 1970's, before the purchase of the silo, Plaintiffs received, in the U.S. Mail, a brochure entitled "Smile When You Call it a Silo", made and published by A.O. Smith and AOSHPI. Such brochure is in written form and falsely states, at Page 2, that Harvestore silos virtually eliminate storage losses. Said brochure also contains a G-3 ; 3 : coupon, which solicits mail inquiries regarding the Harvestore System. Plaintiffs relied on this ad in purchasing the silo, and suffered damages as a result of using the silo on their farm. (5) Sometime in the early 1970's, before the purchase of the silo, Plaintiffs received, in the U.S. Mail, from AOSHPI, a brochure entitled, "Revolution in Blue", made and published by A.O. Smith and AOSHPI. Such brochure falsely states, at Page 2, that oxygen-free storage can be maintained in a Harvestore silo and refers to A.O. Smith as backing the product. At Page 4, there is reference to marine hatches, sealing of joints, and a breather system that prevents oxygen from contacting the feed and spoiling it. At Page 5 are photographs of the breather bag system which, it is falsely claimed, prevents oxygen from contacting the feed, but no reference to a relief valve or unloader door. At page 8 is a description of the services available from the dealer. It states that A.O. Smith has participated in dozens of research projects "and the results are available to you from your Harvestore representative". It says "Harvestore researchers" have data from all over the country that is available from the Harvestore representative. Plaintiffs believed that all research done by Defendants was available to the dealers, including MVBA, and was in support of Defendants design claim (air doesn't touch the feed). Plaintiffs relied on these representations in purchasing the silo, and suffered damages as a result of using the silo their farm. Plaintiffs now know this is false because the damaging research was kept secret and confidential by Defendants and never disclosed to the dealer organization, including MVBA. (6) When Plaintiffs took over the farm, on January 1, 1969, there existed on the farm a "Here's How" operator's manual for their smaller Harvestore silo, which was made and published by A.O. Smith and AOSHPI, and contained G-4 numerous false representations relating to oxygen-free storage, to the air-tight silo solving the problem of air coming in during feeding, and falsely comparing a Harvestore to a fruit jar, and also containing a warranty card for use through the mails. (See Pages 2-3, 2-4, 3-9, 4-8, 5-6, 6-6.) At page 22 it states the Harvestore dealer has all. the answers because the dealer is backed by one of the most experienced and talented staff in the agricultural industry. It states that AOSHPI has experts in research and engineering, whose findings are passed along to the dealer, who can make them available to the farmer. These representations are false because Harvestore silos are neither oxygen free nor oxygen limiting. In addition, Defendants did not "pass along" to the dealers the internal research showing the design flaws (see paragraph 26). Plaintiffs reviewed this operator's manual over the years preceding the 1974 purchase [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0029%3A02. Public record. Not legal advice.