United States District Court, N.D. Illinois, Eastern Division
August 9, 2004.
SANDRA V. BOYLAN et al. Plaintiffs,
KEVIN McGEEVER et al. Defendants.
The opinion of the court was delivered by: JAMES HOLDERMAN, District Judge
MEMORANDUM OPINION AND ORDER
Before this court is defendant James McKiernan's ("McKiernan")
motion to dismiss plaintiffs' Sandra V. Boylan et al. complaint.
Plaintiffs complaint alleges a civil violation of
18 U.S.C. § 1961 et seq. ("RICO"), conversion, breach of fiduciary duty,
common law fraud, recklessness, and negligence against a number
of defendants, including McKiernan. The court's original
jurisdiction is predicated upon the federal RICO claim brought by
plaintiffs. (Compl. ¶ 4.) For the following reasons, the motion
to dismiss is granted.
Plaintiffs allege that the defendants, including McKiernan,
engaged in a "Scheme to Defraud, which began in or about January
1998 and continued until at least May 2000." (Compl. ¶ 1.) A
number of the defendants Douglas Johnson, Kevin McGeever, James
C. Sexton and James C. Sexton Jr. have recently been indicted
by the United States for criminal acts, including their conduct
alleged in this case. (Id. ¶ 3.) The defendants, by way of
fraud, induced the plaintiffs to deposit monies into the "P.B.
Global account," which was located at Landesbank, in the
Principality of Liechtenstein. (Id. Compl. ¶¶ 41-47.)
Plaintiffs periodically received official-looking, but false,
"bank statements" from the defendants regarding the P.B. Global
account. (Id. ¶ 48(A).) On February 10, 1999, plaintiffs
received a letter from the defendants. (Id. ¶ 48(B).) This
letter states that the defendants had told the plaintiffs to
expect "a distribution for the month ending January 31 ."
(Id. Ex. 4.) The plaintiffs were informed, however, that
"[u]nfortunately, the trade we authorize ran into problems having
to do with . . . privacy laws" in Liechtenstein. (Id.) The
letter went on to reassure the plaintiffs that "the rewards are
just around the corner." (Id.) Nearly two months later, on
March 29, 1999, plaintiffs received another letter from the
defendants. (Id. ¶ 48(c).) This letter informed the plaintiffs
that "Landesbank ha[d] taken full control of all funds, pending
the outcome of an independent audit and investigation" (Id. Ex.
5), and that "Landesbank has taken control of all monies in order
to protect you, the depositor." (Id. ¶ 48(c); Ex. 5.) The
letter further stated: "All funds are safe and the matter will be
resolved." (Id. Ex 5.) Unbeknownst to the plaintiffs, the P.B.
Global account had been closed more than a month prior to March
29, 1999, and all the funds in that account had been withdrawn
from Landesbank. (Id. ¶ 48(c).)
Plaintiffs' complaint also provides the following:
The Plaintiffs have been diligent in seeking to
ascertain how, when and by whom they were injured.
For example, in July of 1999, Martin Sterenbuch, one
of Plaintiffs' counsel herein ("Sterenbuch"),
retained an attorney in Liechtenstein, Dr. Hilmar
Hoch ("Hoch"), to investigate and determine what had
happened to the funds that the Plaintiffs had
deposited in the P.B. Global account. With Hoch's
assistance and at their initiative, a criminal
investigation was started in Liechtenstein
(Id. ¶ 94.) A declaration by Martin Sterenbuch, attached to
plaintiffs' response to the motion to dismiss, further provides
that Sterenbuch was hired in the summer of 1999, "for the purpose
of recovering funds . . . invested in the `P.B Global' investment
scheme describe in the Complaint." (P.'s Resp. Att. A. ¶ 2.)
Sterenbuch further provides in his declaration that the criminal
investigation initiated in Liechtenstein was initiated at the
request of the plaintiffs. (Id. ¶ 3.) In the course of that
criminal investigation, defendant James C. Sexton submitted a
statement, on or about October 19, 1999. (Id. ¶ 3.) The
statement submitted by James C. Sexton is dated October 13, 1999.
(P.'s Resp. Att. A(1) at "Page 7.")
STANDARD OF REVIEW
The court must accept "all well-pleaded allegations in the
complaint as true and draw all reasonable inferences in favor of
the plaintiff." Treadway v. Gateway Chevrolet Oldsmobile, Inc.,
362 F.3d 971, 981 (7th Cir. 2004). However, a plaintiff can plead
herself out of court by pleading facts that undermine the
allegations set forth in the complaint. McCormick v. City of
Chicago, 230 F.3d 319, 325 (7th Cir. 2000). "The statue of
limitations issue may be resolved definitively on the face of the
complaint when the plaintiff pleads too much and admits
definitively that the applicable limitations period has expired."
Barry Aviation Inc. v. Land O'Lakes Municipal Airport
Commission, No. 03-2605, slip op. at 9 (7th Cir. July 26, 2004).
McKiernan argues that plaintiffs' RICO claim must be dismissed
pursuant to the statute of limitations. A four-year statute of
limitations is applicable in civil RICO cases. Levine v.
Prudential Bache Props., Inc. 855 F.Supp. 924, 942 (N.D. Ill.
1994). In the Seventh Circuit, "a RICO claim accrues when the
plaintiff discovers her injury even if she has not yet discovered
the pattern of racketeering." McCool v. Strata Oil Co.,
972 F.2d 1452, 1465 (7th Cir. 1992). Discovery occurs when a
plaintiff knows or should have known her injury. Barry Aviation
Inc., No. 03-2605, slip op. at 9. "[A]s to accrual, . . . [the Seventh Circuit and the
Supreme Court] maintain that there is an important distinction
between discovery of an injury and discovery of a cause of
action. Id.; see also United States v. Kubrick,
444 U.S. 111, 123, 100 S.Ct. 352, 360 (1979) (holding that an action under
the Federal Tort Claims Act "accrues" on discovery of injury, not
on discovery of negligence). "The pattern element of RICO gives
rise to the cause of action, but is not the injury itself."
McCool, 972 F.2d at 1465.
The complaint makes clear that the plaintiffs expected to
receive monies from the defendants by January 31, 1999. When no
monies materialized on that date plaintiffs were given a number
of reassurances. The complaint also makes clear that "more than a
month" before March 29, 1999, the P.B. Global account had been
closed and all the funds had been withdrawn. Months after the
P.B. Global account had been closed, in July of 1999, plaintiffs
hired an attorney for the purpose of recovering the funds from
the P.B. Global account. The attorney plaintiffs hired retained
counsel in Liechtenstein to assist in that investigation. After
retaining the attorney in Liechtenstein, plaintiffs requested
that a criminal investigation be initiated in Liechtenstein.
(Compl. ¶ 94) ("at their initiative, a criminal investigation was
started in Liechtenstein.") This criminal investigation must have
been initiated prior to October 19, 1999, when James C. Sexton
submitted a statement to the court administering the
investigation. (Pl.'s Resp. Ex. A ¶ 4.) Furthermore, Sterenbuch's
statement indicates that the criminal investigation was begun in
the summer of 1999. Thus, it is clear that plaintiffs requested a
criminal investigation to commence in the summer of 1999, and at
the absolute latest some time before October 19, 1999. Both dates
are four years before the complaint was filed.
Based upon these facts, as alleged in plaintiff's complaint and
in their memorandum before the court, the court finds that
plaintiffs knew or should have known of their injury at least
prior to October 19, 1999, and almost certainly during the summer of 1999.
In February and March of 1999 the plaintiffs were still being
reassured that their investments were safe. However, by July of
1999 plaintiffs had become sufficiently suspicious of why they
had not received distributions to hire an attorney to
investigate. Finally, almost certainly in the summer of 1999, and
in any event no later than October 19, 1999, plaintiffs requested
that a criminal investigation be commenced. At that point the
only reasonable inference is that plaintiffs knew or should have
known they had been injured and knew that the injury was likely
due to criminal conduct.
The court is not swayed by plaintiffs single argument that they
"did not know all the facts" prior to October 26, 1999. (Pl.'s
Resp. at 9.) As McColl makes clear, all the plaintiff need know
is that he or she was injured, the plaintiff need not be aware of
all the facts surrounding that injury and even need not be aware
that the injury was caused by a civil conspiracy. McCool,
972 F.2d at 1465. "Investors need not know how or by whom they were
defrauded for the statute to begin to run. They need only have
notice of facts indicating a probability that they were defrauded
in some manner." Levine 855 F.Supp. at 942.
Accordingly, plaintiffs civil RICO claim, filed on October 23,
2003, is barred by RICO's four year statute of limitations. The
court declines to exercise supplemental jurisdiction over
plaintiffs remaining state law claims. Wright v. Associated Ins.
Cos., 29 F.3d 1244, 1250 (7th Cir. 1994) (citation omitted)
("[T]he general rule is that, when all federal claims are
dismissed before trial, the district court should relinquish
jurisdiction over pendent state-law claims rather than resolving
them on the merits."). CONCLUSION
Accordingly, the RICO claim is dismissed and this court
declines to exercise supplemental jurisdiction over plaintiffs
remaining state law claims. This case is terminated. Any pending
motions are moot. JUDGMENT IN A CIVIL CASE
 Jury Verdict. This action came before the Court for a trial
by jury. The issues have been tried and the jury rendered its
[x] Decision by Court. This action came to trial or hearing
before the Court. The issues have been tried or heard and a
decision has been rendered.
IT IS HEREBY ORDERED AND ADJUDGED that the RICO claim is
dismissed and this court declines to exercise supplemental
jurisdiction over plaintiffs' remaining state law claims. This
action is terminated.
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