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ELECTRONICS RELAYS

May 21, 1985

ELECTRONIC RELAYS (INDIA) PVT. LTD., PLAINTIFF,
v.
JOSEPH E. PASCENTE, ET AL., DEFENDANTS. GANJAM MOKSHAGUNDAM DEVICES PVT. LTD., PLAINTIFF, V. JOSEPH E. PASCENTE, ET AL., DEFENDANTS.



The opinion of the court was delivered by: William T. Hart, District Judge.

MEMORANDUM OPINION AND ORDER

Defendant Joseph E. Pascente has filed these motions to dismiss against these two consolidated cases. For convenience, the cases, which are numbered 84 C 6128 and 84 C 6129, will be referred to as "6128" and "6129", respectively. Jurisdiction over both cases exists under both 28 U.S.C. § 1331 and 1332.

Count 2 of 6128 and count 3 of 6129 allege violations of RICO, 18 U.S.C. § 1961 et seq. The two counts are indistinguishable for purposes of deciding this motion. Pascente's first argument is that the various mail and wire communications alleged in those counts as predicate acts show on their face that they cannot be used to make out a RICO claim. Apparently copies of each of the communications exist, and although no such copies are attached to the complaint Pascente has attached them to his motion, citing several cases in which courts in other circuits have considered material referenced by but not included in the complaint in deciding a motion to dismiss. See, e.g., Interstate Natural Gas Co. v. Southern California Gas Co., 209 F.2d 380, 384 (9th Cir. 1953). In this circuit, however, the rule is that "consideration of a motion to dismiss is limited to the pleadings." Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 1107 (7th Cir. 1984), cert. denied, ___ U.S. ___, 105 S.Ct. 1758, 84 L.Ed.2d 821 (1985). Even if the rule were otherwise it is obvious that the communications reveal very little on their face, thus requiring the parties to make unsupported assertions concerning the facts surrounding the communications. Perhaps the legal effect of those communications could be resolved by summary judgment motion, but this court refuses to bypass summary judgment procedures by addressing the issues on this motion to dismiss.

Pascente's next argument is that the RICO counts fail to adequately plead a pattern of racketeering activity because there is no "factual statement similar to a bill of particulars" setting forth the predicate acts. Bache Halsey Stuart Shields, Inc. v. Tracy Collins Bank and Trust Co., 558 F. Supp. 1042, 1046 (D.Utah 1983). As plaintiffs point out, however, (and as Pascente seems to concede by the silence of his reply brief) our appellate court has refused to require such specificity in the pleadings. Haroco, Inc. v. American National Bank and Trust Co., 747 F.2d 384, 404 (7th Cir. 1984), cert. granted, ___ U.S. ___, 105 S.Ct. 902, 83 L.Ed.2d 917 (1985).

Pascente's final argument is that the RICO counts are barred by the statute of limitations. Where, as with RICO, "Congress has not established a time limitation for a federal cause of action, the settled practice has been to adopt a local time limitation as federal law if it is not inconsistent with federal law or policy to do so." Wilson v. Garcia, ___ U.S. ___, 105 S.Ct. 1938, 1942, 85 L.Ed.2d 254 (1985). See also Vallone v. Local Union 705, 755 F.2d 520, 521 (7th Cir. 1984).

Wilson, which dealt with a statute (42 U.S.C. § 1983) very similar to RICO for purposes of this issue, sets forth the steps to follow in deciding what statute of limitations should govern a federal cause of action that contains no limitation period. See 105 S.Ct. 1943. First, the court must determine whether one limitations period should apply to all RICO actions or whether different periods should apply depending on the particular facts of the case. Second, the court must characterize the RICO action before it (or RICO actions generally, depending on the answer to the first question), or to put it another way, the court must analogize RICO to a state cause of action. Third, the court must determine what state limitations period applies to the kind of action the court has found RICO to be. Finally, the court must determine whether that period is inconsistent with the policies of RICO, and if so what limitations period better serves those policies. (On that last point see also DelCostello v. International Brotherhood of Teamsters, 462 U.S. 151, 103 S.Ct. 2281, 76 L.Ed.2d 476 (1983)).

In Wilson, the Court determined that actions under 42 U.S.C. § 1983 should be given one characterization so that at least in a given state all § 1983 actions would be governed by one limitations period. 105 S.Ct. at 1947. Otherwise, the Court noted, choosing a statute of limitations would become a source of "uncertainty, and unproductive and ever increasing litigation" that would reduce the effectiveness of § 1983 by dissipating scarce resources over "useless litigation on collateral matters" (id.) and work injustice on both sides (id. at n. 34). See also Beard v. Robinson, 563 F.2d 331, 337 (7th Cir. 1977), cert. denied, 438 U.S. 907, 98 S.Ct. 3125, 57 L.Ed.2d 1149 (1978) (voicing similar concerns). These concerns are just as strong in a civil RICO case. As with § 1983, RICO actions can be brought on a great variety of facts, so that in many cases the lawyers will be able to argue that 2 or more limitations periods apply. Also as with § 1983, different limitations periods could be applied to actions with different facts in the same state, and sometimes even in the same case.*fn1 Therefore, this court concludes that one characterization must be adopted for all RICO actions in this state.

Choosing the proper characterization for civil RICO claims is a matter of federal law. 105 S.Ct. at 1944 and n.19. That characterization is "derived from the elements of the cause of action, and Congress' purpose in providing it." Id. at 1943. Characterizations of RICO by courts searching for a statute of limitations vary. The first court to consider this issue apparently analogized RICO to the antitrust laws and therefore applied the 1-year period applicable to antitrust claims in Louisiana. Ingram Corp. v. J. Ray McDermott & Co., 495 F. Supp. 1321, 1324 n.4 (E.D.La. 1980). Another court suggested that the 5-year period for the forum state's own version of RICO should govern, Delta Coal Program v. Libman, 554 F. Supp. 684, 690 n. 2 (N.D. Ga. 1982), aff'd on other grounds, 743 F.2d 852 (11th Cir. 1984). The other courts that have applied one limitations period to all RICO actions have applied some sort of catch-all statute. See Durante Bros. & Sons, Inc. v. Flushing Nat. Bank, 755 F.2d 239, 248-49 (2d Cir. 1985) (finding that RICO has no state-law analog, court applies New York's 3-year limit on actions to enforce a liability created by statute); Compton v. Ide, 732 F.2d 1429, 1433 (9th Cir. 1984) (California's 3-year period for actions based on statute); Victoria Oil Co. v. Lancaster Corp., 587 F. Supp. 429, 431-32 (D.Col. 1984) (Colorado's 3-year period for all actions not otherwise provided for); Seawell v. Miller Brewing Co., 576 F. Supp. 424, 427 (M.D.N.C. 1983) (North Carolina's 3-year period for claims based on either a federal or state statute). The remaining decisions have characterized a RICO action according to the particular facts pleaded as predicate acts. Steven Operating, Inc. v. Home State Savings, 105 F.R.D. 7, 11 (S.D. Ohio 1984) (Ohio's 4-year period for common-law fraud); Burns v. Erserk, 591 F. Supp. 837, 843-44 (D.Minn. 1984) (3-year period for securities fraud); Clute v. Davenport Co., 584 F. Supp. 1562, 1577 (D.Conn. 1984) (Connecticut's 2-year period for securities actions); D'Iorio v. Adonizio, 554 F. Supp. 222, 232 (M.D.Pa. 1982) (Pennsylvania's 6-year period for common-law fraud); State Farm Fire and Casualty Co. v. Estate of Caton, 540 F. Supp. 673, 684-85 (N.D.Ind. 1982) (Indiana's 6-year period for common-law fraud); Gilbert v. Bagley, Fed.Sec.L.Rep. (CCH) par. 99,483 (N.D.N.C. Sept. 17, 1982) (North Carolina's 2-year period for securities fraud); Willcutts v. Jefferson Trust and Savings Bank of Peoria, No. 74-329 (C.D.Ill. April 21, 1982) (Illinois's 5-year period for common-law fraud).

In Wilson, the Court determined that at the time § 1983 was passed Congress's concern was with "the campaign of violence and deception in the South, fomented by the Ku Klux Klan, which was denying decent citizens their civil and political rights." Id. 105 S.Ct. at 1947. Recognizing that § 1983 was applicable to a broad range of harms, the Court nonetheless concluded that because § 1983 was designed to protect personal rights, Congress would have considered the closest analogy to be a personal injury action. Id. at 1948.

In analyzing RICO, "the legislative history forcefully supports the view that the major purpose of [RICO] is to address the infiltration of legitimate business by organized crime." United States v. Turkette, 452 U.S. 576, 591, 101 S.Ct. 2524, 2532, 69 L.Ed.2d 246 (1981). The main mechanism for achieving that end was to be the criminal provisions of RICO. Indeed, the civil provisions of RICO went virtually undiscussed and seemingly unnoticed by Congress. Sedima, S.P.R.L. v. Imrex Co., 741 F.2d 482, 488-92 (2d Cir. 1984), cert. granted, ___ U.S. ___, 105 S.Ct. 901, 83 L.Ed.2d 917 (1985). The only comment revealing Congress's intent in adding the civil provisions to RICO was made by Congressman Poff, who stated that

  at the suggestion of the gentleman from Arizona
  (Mr. Steiger) and also the American Bar
  Association and others, the committee has
  provided that private persons injured by reason
  of a violation of the title may recover treble
  damages in Federal courts — another example of the
  antitrust remedy being adapted for use against
  organized criminality.

116 Cong.Rec. 35295 (1970). That comment suggests that Congress viewed the treble damages provision as civil RICO's most distinctive feature. That suggestion is certainly consistent with the nature of RICO. In most, if not all, RICO cases there exist state-law remedies for the same conduct that forms the basis of the RICO count. RICO's attractiveness, what sets it apart from the other available legal theories, is not the wrong but the remedy. Thus, to the extent Congress had any intent in adding the civil provisions to RICO, Congress intended the treble damages provision to provide the incentive necessary to cause private citizens to assist the government in eradicating organized crime. Therefore, this court concludes that for purposes of choosing the proper statute of limitations RICO should be characterized as a treble damages action.

The other possible analogies offered by plaintiffs are not persuasive. Plaintiffs argue that their case is most like a common law fraud action, citing Eisenberg v. Gagnon, 564 F. Supp. 1347, 1354 (E.D.Penn. 1983). However, this court has already decided that only one limitations period should be used for all RICO actions, and it is obvious that the common law fraud analogy falls far short of capturing the multitude of factual bases on which RICO can be based.

Plaintiffs seem to suggest that the 5-year period for criminal RICO, 18 U.S.C. § 3282, should apply to civil RICO also. One commentator has also suggested that solution, Note, Civil RICO: Searching for the Appropriate Statute of Limitations in Actions Under Section 1964(c), 14 Loy. U.Chi.L.J. 765, 793-94 (1983), but the only court to consider a criminal statute of limitations has rejected that approach. D'Iorio v. Adonizio, 554 F. Supp. 222, 232 (M.D.Pa. 1982). This court agrees with D'Iorio. Though civil and criminal RICO are alike in obvious and significant ways, the considerations that go into striking the balance between repose and enforcement are (also obviously) different for criminal and civil actions. For example, criminal prosecutions for violations of the antitrust and securities laws are governed by the 5-year period of 18 U.S.C. § 3282, United States v. Portsmouth Paving Co., 694 F.2d 312, 324 (4th Cir. 1982) (antitrust); United States v. Jensen, 608 F.2d 1349, 1355 (10th Cir. 1979) (securities), but civil actions under those laws have 4 and 3 year periods, respectively. 15 U.S.C. § 15(b) (4 years for civil antitrust); Suslick v. Rothschild Securities Corp., 741 F.2d 1000, ...


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