The opinion of the court was delivered by: MILTON I. SHADUR
MEMORANDUM OPINION AND ORDER
In February of this year Joseph Calabrese ("Calabrese") filed a Complaint against State Farm Mutual Automobile Insurance Company ("State Farm"), attempting to jump onto the RICO merry-go-round and to grab RICO's brass ring of treble damages and attorneys' fees. That effort proved unavailing -- centrifugal force (in the form of this Court's brief February 27, 1992 memorandum opinion and order (the "Opinion")) immediately threw Calabrese off of that merry-go-round because his Complaint had disclosed on its face the absence of subject matter jurisdiction in this District Court.
Nothing daunted, Calabrese's counsel again tried to get on board via a motion for reconsideration and for leave to file a First Amended Complaint (the motion was tendered to the Clerk of Court on March 9 of this year). When that motion was then presented in open court by Calabrese's lawyer, this Court (1) orally pointed out some of the continuing problematic areas of the First Amended Complaint, (2) furnished to Calabrese's lawyer a copy of the standing order that is in use in the United States District Court for the Western District of Pennsylvania and a number of other federal courts (an order that prescribes the form and content of a RICO case statement to be presented with every RICO complaint
), (3) directed counsel to file such a RICO statement on or before March 30 and (4) set the matter for a further status hearing at 9 a.m. April 6, 1992.
Calabrese's lawyer has timely filed a lengthy (32-page) RICO statement. That statement has served its intended function here: Although it discloses that there are a number of threshold problems or potential problems with Calabrese's new pleading, one of those in particular appears to be fatal at the outset.
At page 27 of the statement, Calabrese's counsel begins his account of "additional information offered to the court for consideration in the processing of these RICO claims" with this paragraph:
Plaintiff contends that the fraud has continued through the present day by virtue of the continued efforts by STATE FARM to enforce and uphold the originally obtained fraudulent award. Nonetheless, the act which was intended to complete the fraud upon Mr. Calabrese was the issuance of the arbitration award denying the uninsured motorist claim. That act was accomplished by the mailing of the award on March 6, 1987. The RICO complaint was filed in February of 1992 well within the 5 year statute of limitations.
But counsel is simply wrong: It has been definitively established since June of 1987 (coincidentally only a few months after Calabrese's purported RICO claims would have accrued) that the RICO statute of limitations is four years and not five years ( Agency Holding Corp. v. Malley-Duff & Associates, Inc., 483 U.S. 143, 97 L. Ed. 2d 121, 107 S. Ct. 2759 (1987)).
That then dooms Calabrese's RICO claims as barred by limitations, based on his own statement of the circumstances. In that respect it is necessary only to address first the question of when such RICO claims are deemed to have accrued in general terms, then perhaps whether that general rule is modified in this instance by Calabrese's contention of a continuing fraud on State Farm's part (but see n.2).
As for the concept of accrual of RICO claims, the majority rule (under RICO as under the Clayton Act, which was the analogous statute from which Malley-Duff drew the four-year limitations period) is that the cause of action accrues at the time the plaintiff discovered or should have discovered the injury (see such post-Malley-Duff cases as Rodriguez v. Banco Central, 917 F.2d 664, 666-68 (1st Cir. 1990); Riddell v. Riddell Washington Corp., 275 App. D.C. 362, 866 F.2d 1480, 1489-90 (D.C. Cir. 1989); Bankers Trust Co. v. Rhoades, 859 F.2d 1096, 1102-05 (2d Cir. 1988); Beneficial Standard Life Ins. Co. v. Madariaga, 851 F.2d 271, 275 (9th Cir. 1988), adhering to State Farm Mutual Automobile Ins. Co. v. Ammann, 828 F.2d 4, 5 (9th Cir. 1987); Pocahontas Supreme Coal Co. v. Bethlehem Steel Corp., 828 F.2d 211, 220 (4th Cir. 1987); and the affirmance without published opinion in Hofsetter v. Fletcher, 860 F.2d 1079 (6th Cir. 1988)). Several other circuits have added the fillip that in order to start the limitations clock ticking the plaintiff must also know, or at least should have known, that his or her injury was suffered as the result of conduct that was part of a pattern of racketeering activity (see Glessner v. Kenny, 952 F.2d 702, 706-08 (3d Cir. 1991); Granite Falls Bank v. Henrikson, 924 F.2d 150, 153-54 (8th Cir. 1991); Bath v. Bushkin, Gaims, Gaines and Jonas, 913 F.2d 817, 820-21 (10th Cir. 1990); and Bivens Gardens Office Building, Inc. v. Barnett Bank of Florida, Inc., 906 F.2d 1546, 1552-55 (11th Cir. 1990)).
As it turns out, it does not matter in this case which of those two approaches is adopted, for in Calabrese's situation the factor added by the minority view simply telescopes into the majority's discovery-of-plaintiff's-injury rule.
But because the issue is a recurring one on which so many Courts of Appeal (excluding our own) have opined, as have a number of this Court's colleagues, it is worth addressing here.
As between the two competing approaches, both of which have undergone a process of evolution (for example, Glessner modified the Third Circuit's prior approach in Keystone Ins. Co. v. Houghton, 863 F.2d 1125 (3d Cir. 1988) in light of the later Eleventh Circuit opinion in Bivens Garden), this Court opts for the developing minority view. It appears clearly preferable because the injury of which a RICO plaintiff complains is injury sustained not from the predicate acts simpliciter, but rather from the RICO violation. And because one essential ingredient of every RICO violation is a pattern of racketeering activity, it seems only reasonable that the discovery rule should apply to plaintiff's RICO injury (hence including the pattern of racketeering element) rather than simply to the sustained harm alone.
Having said that, however, this Court should make clear that what it does not view as an acceptable rule is one that has been announced by some of its colleagues in the Northern District of Illinois, under which the limitations time clock does not begin to run until discovery of the "last predicate act," which in turn serves to keep alive all potential RICO claims that preceded such discovery no matter how far back they may have been triggered. For the most part those decisions were motivated by the courts' concern over the possibility that the simple discovery-of-plaintiff's-injury rule could actually outlaw a claim before it arose (suppose for example that plaintiff has been injured by defendant's fraudulent conduct in year "x," but that defendant's other fraudulent activity necessary to a finding of a pattern of racketeering activity does not occur until year "x 5"). But any such concern, though perhaps understandable, does not call for a"last predicate act" rule:
1. In real world terms any prospect of the actual loss of a claim before it even ripens is highly remote -- if it exists at all. That hypothesized scenario would most likely fail to satisfy the "continuity" prong of the "continuity plus relationship' dichotomy as explicated by the Supreme Court in H.J. Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 106 L. Ed. 2d 195, 109 S. Ct. 2893 (1989). Thus it would certainly be rare that any such sequence of events would give rise to a RICO claim at all.
2. What is more likely is that enforcement of a discovery rule that focuses only on the date that the plaintiff has sustained harm would give plaintiff something less than four years to file suit if the existence of a pattern is not discoverable until later. To the extent that a concern of that nature has any force, though, the problem is really resolved by the approach that the minority of the Courts of Appeals have developed -- and for the most part that development took place after the ...