CVLR Performance Horses, Inc. v. Wynne ( 2015 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 14-1021
CVLR PERFORMANCE HORSES, INC.,
Plaintiff,
VICKI L. MARSH,
Intervenor/Plaintiff,
and
KAREN FOSTER,
Intervenor/Plaintiff – Appellant,
v.
JOHN L. WYNNE; 1650 PARTNERS, LLC; RIVERMONT CONSULTANTS,
INC., f/k/a The Rivermont Banking Co., Inc.,
Defendants – Appellees,
and
OLD DOMINION NATIONAL BANK; ADVANTAGE TITLE & CLOSING LLC; S
& R FARM, LLC; RALPH BECK; SHANA LESTER, f/k/a Shana Beck,
Defendants.
No. 14-1022
CVLR PERFORMANCE HORSES, INC.,
Plaintiff,
KAREN FOSTER,
Intervenor/Plaintiff,
and
VICKI L. MARSH,
Intervenor/Plaintiff – Appellant,
v.
JOHN L. WYNNE; 1650 PARTNERS, LLC; RIVERMONT CONSULTANTS,
INC., f/k/a The Rivermont Banking Co., Inc.,
Defendants – Appellees,
and
OLD DOMINION NATIONAL BANK; ADVANTAGE TITLE & CLOSING LLC; S
& R FARM, LLC; RALPH BECK; SHANA LESTER, f/k/a Shana Beck,
Defendants.
Appeal from the United States District Court for the Western
District of Virginia, at Lynchburg. Norman K. Moon, Senior
District Judge. (6:11-cv-00035-NKM-RSB)
Argued: March 25, 2015 Decided: July 9, 2015
Before SHEDD, WYNN, and DIAZ, Circuit Judges.
Affirmed by published opinion. Judge Diaz wrote the opinion, in
which Judge Shedd and Judge Wynn joined.
ARGUED: Gary M. Bowman, Roanoke, Virginia, for Appellant. Chad
Allan Mooney, PETTY, LIVINGSTON, DAWSON & RICHARDS, Lynchburg,
Virginia, for Appellees. ON BRIEF: John E. Falcone, PETTY,
LIVINGSTON, DAWSON & RICHARDS, Lynchburg, Virginia, for Appellees.
2
DIAZ, Circuit Judge:
In November 2013, Appellants Karen Foster and Vicki Marsh
sought to intervene as plaintiffs in a civil RICO action brought
by CVLR Performance Horses, Inc. against John Wynne and his
businesses. The district court denied the motions, finding that
the statute of limitations on Appellants’ claims had run and that
equitable tolling was not appropriate under the circumstances.
Foster and Marsh timely appealed, but the underlying suit between
CVLR and Wynne settled and was dismissed by the district court
approximately ten weeks later, while this appeal was pending.
Wynne then moved to dismiss this appeal, arguing that the
settlement of the underlying action rendered the appeal moot. We
deferred consideration of the motion until the appeal was fully
briefed, and we now deny Wynne’s motion to dismiss and affirm the
district court’s denial of Appellants’ motions to intervene.
I.
On September 8, 2011, CVLR filed suit against John Wynne and
his solely owned companies, Rivermont Consultants, Inc. and 1650
Partners, LLC, alleging violations of the Racketeer Influenced and
Corrupt Organizations Act, 18 U.S.C. § 1961–68 (“RICO”), as well
as Virginia state law. In short, CVLR alleged that Wynne and his
companies engaged in a scheme to defraud CVLR by falsely
representing Rivermont Consultants as a bank, making loans to CVLR
3
under false pretenses, and committing insurance fraud. After CVLR
amended its complaint, Wynne moved to dismiss. The district court
granted Wynne’s motion, finding that CVLR failed to state a claim
under RICO. CVLR appealed and this court reversed, concluding
that CVLR had adequately pleaded its RICO claim.
About four months after we remanded CVLR’s action to the
district court (and more than two years after the case was first
filed), Appellants Foster and Marsh moved to intervene as
plaintiffs. Appellants are acquaintances of Wynne who were
allegedly victims of his financial schemes, including but not
limited to fraudulent home foreclosures. Although Foster and Marsh
are not mentioned in CVLR’s initial complaint, both are described
in the amended complaints as additional victims in Wynne’s alleged
RICO scheme. In their motions, Foster and Marsh adopted the
allegations of CVLR’s second amended complaint 1 and pleaded one
RICO count each, with Marsh adding one count of unjust enrichment.
The district court denied Appellants’ motions to intervene.
The court explained that although intervention would otherwise be
proper, Appellants’ claims were barred by the four-year statute of
limitations on private civil RICO claims. The district court
further found that the “unusual” and “extraordinary” remedy of
1 After the case returned to the district court, CVLR was
permitted to amend its complaint for a second time.
4
equitable tolling was not appropriate, because Foster and Marsh
had not diligently pursued their claims or demonstrated any
extraordinary circumstances that would justify equitable relief.
Foster and Marsh timely appealed the district court’s judgment.
Shortly after Foster and Marsh appealed, CVLR and Wynne took
part in a settlement conference at which they agreed to dismiss
the action in its entirety. The district court formally dismissed
the case in a March 27, 2014 order. Thereafter, Wynne moved to
dismiss Appellants’ appeal, citing our decision in Chesapeake Bay
Foundation v. American Recovery Co., 769 F.2d 207 (4th Cir. 1985),
and arguing that the dismissal of the underlying action rendered
the appeal moot because Foster and Marsh could not possibly
intervene in a case that no longer exists. We elected to defer
ruling on the motion until after the parties fully briefed the
appeal.
II.
This appeal raises two questions. First, we must decide as
a threshold matter whether the settlement and dismissal of the
underlying case renders moot Appellants’ appeal of the denial of
their motions to intervene. If so, we lack subject matter
jurisdiction and must dismiss the appeal. If, however, the appeal
is not moot, we must decide whether the district court erred when
5
it denied Foster’s and Marsh’s motions to intervene as time-barred
and declined to apply equitable tolling.
A.
Because the case or controversy requirement “stems from the
Constitution, it may not be ignored for convenience’s sake.”
Incumaa v. Ozmint, 507 F.3d 281, 286 (4th Cir. 2007). We therefore
begin by considering Appellees’ contention that this appeal is
moot. Appellees argue that the dismissal of the underlying action
ended any remaining case or controversy, and that the appeal is
thus moot because “[i]t is a legal impossibility to intervene in[]
a case that does not exist.” Appellees’ Mot. to Dismiss at 4,
Foster v. Wynne, No. 14-1021 (4th Cir. Apr. 15, 2014), ECF No. 23.
We disagree.
The federal courts “are without power to decide questions
that cannot affect the rights of litigants in the case before
them.” DeFunis v. Odegaard, 416 U.S. 312, 316 (1974) (internal
quotation marks omitted). Thus, the parties’ stake in the outcome
of the case must exist not only at the case’s inception, but for
the entire duration of the proceedings. Litigation may become
moot during the pendency of an appeal when an intervening event
makes it impossible for the court to grant effective relief to the
prevailing party. Incumaa, 507 F.3d at 286.
Our circuit has not squarely addressed whether dismissal of
the underlying action automatically moots a pending appeal of the
6
district court’s denial of a motion to intervene, and our sister
circuits have differed in their approaches to the issue. The
Eleventh and Third Circuits have held that dismissal of the
underlying action does not moot an appeal of the denial of a motion
to intervene. See Purcell v. BankAtlantic Fin. Corp., 85 F.3d
1508, 1511 n.3 (11th Cir. 1996) (finding that settlement of the
case does not moot a preexisting appeal because the court could
“potentially grant [the appellant] effective relief” by giving it
standing to appeal the approval of the settlement); Neidig v.
Rendina, 298 F. App’x 115, 116 n.1 (3d Cir. 2008) (unpublished)
(allowing an appeal of the denial of a motion to intervene to move
forward despite the subsequent dismissal of the appeal of the
underlying action).
Several other circuits have followed suit, holding that
jurisdiction over an appeal lies as long as the motion to intervene
is made while the case is still live, although two courts have
rendered inconsistent decisions. See, e.g., DBSI/TRI IV Ltd.
P’ship v. United States, 465 F.3d 1031, 1037 (9th Cir. 2006)
(holding that the intervention controversy survived final judgment
in the underlying case because “if it were concluded on appeal
that the district court had erred . . . the applicant would have
standing to appeal the district court’s judgment”) (internal
quotation marks omitted); Alt. Research & Dev. Found. v. Veneman,
262 F.3d 406, 410 (D.C. Cir. 2001) (“[O]ur jurisdiction . . . is
7
not affected by the fact that the district court denied
intervention after the stipulated dismissal was entered; the
dismissal does not render the appeal moot.”); FDIC v. Jennings,
816 F.2d 1488, 1491 (10th Cir. 1987) (observing that the settlement
did not resolve the would-be intervenors’ claims, and that “[t]o
allow a settlement between parties to moot an extant
appeal . . . might well provide incentives for settlement that
would run contrary to the interests of justice”). 2 But see W.
Coast Seafood Processors Ass’n v. Nat. Res. Def. Council, Inc.,
643 F.3d 701, 704 (9th Cir. 2011) (dismissing appeal as moot after
final judgment was entered in the underlying case because the court
“cannot grant [the appellant] any ‘effective relief’” when “the
underlying litigation is over”); Energy Transp. Grp., Inc. v. Mar.
Admin., 956 F.2d 1206, 1210 (D.C. Cir. 1992) (same). Finally, the
Second Circuit has held in an unpublished decision that an appeal
of the denial of a motion to intervene is immediately mooted when
2The Tenth Circuit’s ruling in Jennings can be contrasted
usefully with its decision in Tosco Corp. v. Hodel, 804 F.2d 590,
592 (10th Cir. 1986), in which the court dismissed the appeal of
the denial of a motion to intervene as moot when the motion was
not filed in the district court until after the case had already
been settled and dismissed. Most courts that have considered
situations similar to Tosco agree that when the motion to intervene
is not filed until after the underlying case is fully resolved,
that motion is moot. See, e.g., GMAC Comm. Mortg. Corp. v. LaSalle
Bank Nat’l Ass’n, 213 F.R.D. 150, 150 (S.D.N.Y. 2003) (dismissing
an attempt to intervene as moot when intervention was sought on
the same day the underlying case was dismissed).
8
the underlying case is dismissed. Kunz v. N.Y. State Comm’n on
Judicial Misconduct, 155 F. App’x 21, 22 (2d Cir. 2005).
In the case before us, the underlying action that was the
subject of Appellants’ motions to intervene was dismissed
following the settlement between CVLR and Wynne. However, this is
not a case akin to Tosco or GMAC in which the would-be intervenors
failed to assert their rights until after the underlying case was
concluded. To the contrary, the case was live when Appellants
moved to intervene, and remained so when the district court denied
the motions and Appellants appealed to this court.
We find more persuasive the reasoning of those courts holding
that dismissal of the underlying action does not automatically
moot a preexisting appeal of the denial of a motion to intervene.
This is so because in many cases, the resolution of an action
between the original parties is not determinative of the
defendant’s liability with respect to other potential plaintiffs.
In these circumstances, when the motion to intervene is made while
the controversy is live and the subsequent disposition of the case
does not provide the relief sought by the would-be intervenors
(for example, money damages, as Appellants seek here), we can
provide an effective remedy on appeal and therefore have
jurisdiction.
Contrary to Appellees’ argument, we do not find that this
case is controlled by our decision in Chesapeake Bay Foundation.
9
In that case, plaintiff environmental groups filed suit against
the defendant, alleging violations of discharge permits under the
Clean Water Act, on the same day the government initiated an
enforcement action against the defendant on the same subject
matter. 769 F.2d at 208. The district court granted the
defendant’s motion to dismiss the complaint as duplicative of the
government’s action, and subsequently denied the plaintiffs’
motion to intervene in the government’s suit. Id. The plaintiffs
appealed both rulings, but the government and the defendant
negotiated a consent decree during the pendency of the appeal.
Id. at 209. Despite finding that the plaintiffs had an “express
statutory right[]” to intervene, we held (and the plaintiffs
effectively agreed) that the settlement mooted the appeal because
it provided all of the relief that the plaintiffs sought. Id.The decree required that the defendant cease the operations at
issue and abandon its discharge permits, a resolution that
plaintiffs conceded was “a ‘good’ settlement to which they ha[d]
no objections.” Id.Critically, the settlement of the underlying action in the
instant case did not provide Appellants the relief they sought.
Were we to reverse the district court’s denial of the motions to
intervene, Appellants could pursue their claims for damages
against Wynne independently of CVLR’s now-settled case. See Atkins
v. State Bd. of Educ., 418 F.2d 874, 876 (4th Cir. 1969)
10
(“Ordinarily intervention cannot be used to revive a law suit, but
a court may treat intervention as a separate action, especially
when the intervenor has an independent basis for jurisdiction.”).
Because a ruling in Appellants’ favor on the merits of their appeal
would provide them effective relief, we have jurisdiction.
B.
We turn next to Appellants’ argument that the district court
reversibly erred by declining to apply equitable tolling, which
would have allowed Appellants to intervene after the statute of
limitations on their claims had expired. We review a district
court’s decision not to apply equitable tolling for abuse of
discretion, Chao v. Va. Dep’t of Transp., 291 F.3d 276, 279–80
(4th Cir. 2002), and will affirm unless the district court acted
arbitrarily or in reliance on erroneous factual or legal premises,
James v. Jacobson, 6 F.3d 233, 239 (4th Cir. 1993).
The statute of limitations on private civil RICO claims is
four years, beginning on the date the plaintiff “discovered, or
should have discovered, the injury.” Potomac Elec. Power Co. v.
Elec. Motor & Supply, Inc., 262 F.3d 260, 266 (4th Cir. 2001). 3
Although it is unclear from the limited record when exactly
Appellants’ RICO claims accrued, the latest accrual date alleged
3 Appellants do not appeal the district court’s ruling with
respect to Marsh’s unjust enrichment claim.
11
falls in September 2008. See CVLR Performance Horses, Inc. v.
Wynne, No. 6:11-cv-00035, 2013 WL 6409894, at *4 (W.D. Va. Dec. 9,
2013); Appellants’ Br. at 17, 18, 32. Thus, even under Appellants’
own timeline, the four-year statute of limitations had run by the
time they moved to intervene in November 2013.
Appellants argue that although their motions to intervene
were not filed until fourteen months after the statute of
limitations expired, the delay does not bar relief under the
doctrine of equitable tolling. To qualify for equitable tolling,
Appellants must show that (1) they diligently pursued their rights,
but (2) an extraordinary circumstance prevented them from timely
filing their claim. Holland v. Florida, 560 U.S. 631, 649 (2010).
Equitable tolling has long been considered an extraordinary remedy
in this circuit, and litigants face a considerable burden to
demonstrate that it applies. Harris v. Hutchinson, 209 F.3d 325,
330 (4th Cir. 2000) (explaining that reprieve from the statute of
limitations must be “guarded and infrequent,” and “reserved for
those rare instances where--due to circumstances external to the
party’s own conduct--it would be unconscionable to enforce the
limitation period . . . and gross injustice would result”).
The district court’s refusal to apply equitable tolling was
not an abuse of discretion because Appellants did not demonstrate
diligent pursuit of their rights or extraordinary circumstances
sufficient to excuse their delay. With respect to the first prong,
12
Appellants contend that they diligently pursued their rights by
doing the following: (1) Foster filed for bankruptcy and initiated
a separate state proceeding against Wynne to enjoin the foreclosure
of her home; (2) Foster objected to Wynne’s attempt to evict her
from her home, alleging that that the foreclosure sale was a sham;
(3) Foster noted in her bankruptcy schedules that she planned to
file a RICO case against Wynne; and (4) Marsh “repeatedly, and
continuously . . . complained to the federal and state criminal
authorities, to the banking regulatory agencies . . . and to the
courts of South Carolina” that Wynne had injured her, Appellants’
Br. at 32. Notably absent from Appellants’ allegations, however,
is any indication that either Foster or Marsh took any steps toward
actually filing a RICO claim.
Although we have declined to establish rigid guidelines for
assessing diligence in this context, we have explained that
diligence can be demonstrated by actions like “filing a defective
pleading during the statutory period.” United States v. Babb, 54
F. App’x 772, 774 (4th Cir. 2003) (unpublished). Foster and Marsh
do not allege that they made any attempts to file a RICO claim
between the time their claims accrued in 2008 and the filing of
their motions to intervene in November 2013. They do not say that
they were unaware of the existence of CVLR’s suit, or that they
endeavored to pursue their RICO claims in a separate proceeding
but were thwarted. Nor have Appellants explained why, after we
13
reversed the district court’s dismissal of CVLR’s complaint and
remanded the action, they waited four months before moving to
intervene. 4
Appellants insist that, at the very least, the district court
should have held an evidentiary hearing to determine the extent of
their diligence, particularly with respect to Marsh, whom they
describe as autistic. They claim that this case is similar to
Forbess v. Franke, in which the Ninth Circuit held that a mentally
ill petitioner was entitled to equitable tolling because his
delusions prevented him from filing suit in a timely manner. 749
F.3d 837 (9th Cir. 2014).
As an initial matter, it is within the sound discretion of
the district court to dispose of a motion without a hearing. Fed.
R. Civ. P. 78(b). And unlike in Forbess, Appellants have not
pleaded any connection between Marsh’s alleged mental impairment
and their failure to file a RICO claim during the limitations
period, either in their motions to intervene or on appeal. Nor
4 Foster and Marsh make much of the district court’s comment
that even if a qualifying extraordinary circumstance occurred in
April 2012 when CVLR’s case was erroneously dismissed, Appellants
still “waited for more than three and a half years” before taking
any action to pursue their rights. See Wynne, 2013 WL 6409894, at
*4. Contrary to Appellants’ repeated assertions that the district
court effectively shortened the statute of limitations by six
months, the district court was merely observing that Appellants’
failure to take any action at all between September 2008 and April
2012 weighed against a finding of diligence.
14
does Forbess stand for the principle that an evidentiary hearing
is required in any case involving a party with a mental impairment.
To the contrary, the Forbess court relied on the test enunciated
in Bills v. Clark, 628 F.3d 1092 (9th Cir. 2010), which requires
a showing that the impairment (1) was “so severe that the
petitioner was unable personally . . . to understand the need to
timely file,” and (2) “made it impossible under the totality of
the circumstances to meet the filing deadline despite petitioner’s
diligence.” Forbess, 749 F.3d at 840. Because Appellants have
not pleaded any link between Marsh’s alleged mental condition and
their late filings, the district court did not abuse its discretion
by foregoing a hearing.
Appellants have also failed to show that extraordinary
circumstances prevented them from filing their claims during the
limitations period. Tolling is proper “where the petitioner has
in some extraordinary way . . . been prevented from asserting his
or her rights,” although the doctrine “does not lend itself to
bright-line rules.” Harris, 209 F.3d at 330 (internal quotation
marks omitted). The circumstances preventing a party from pursuing
his or her rights must be “external to the party’s own conduct.”
Id. For example, extraordinary circumstances have been found when
parties lack access to the courts entirely. See Chao v. Va. Dep’t
of Transp., 157 F. Supp. 2d 681, 697 n.8 (E.D. Va. 2001), aff’d in
part, rev’d in part, 291 F.3d 276 (observing that limited access
15
to the courts during wartime is an extraordinary circumstance).
Extraordinary circumstances may also exist when a plaintiff is
“prevented from asserting [his or her] claims by some kind of
wrongful conduct on the part of the defendant.” Harris, 209 F.3d
at 330. In addition, we have found extraordinary circumstances
when the statute of limitations ran after a party received a
favorable (but later determined to be erroneous) administrative
disposition of her claim. See Nealon v. Stone, 958 F.2d 584, 593
(4th Cir. 1992) (applying equitable tolling because the plaintiff
“had no reason at [the time the statute ran] to doubt that the
Army would follow the EEOC’s determination”).
Appellants say that after the dismissal of CVLR’s claim in
April 2012, they were “prohibited” from filing their own claim or
moving to intervene in CVLR’s case because they would have “been
subject to Rule 11 sanctions for asserting a RICO claim against
Wynne, when the court had already held . . . that Wynne’s conduct
did not meet RICO’s continuity requirement.” Appellants’ Br. at
28. They thus contend that the dismissal of CVLR’s case was an
“extraordinary circumstance” that prevented them from asserting
their rights because it rendered their claims unwarranted under
existing law. This argument is unavailing.
We agree with the district court that the dismissal created
a difficult situation for Appellants as potential intervenors, and
acknowledge the likelihood that a separately filed complaint would
16
have been dismissed. But we also find it implausible that
Appellants would have faced Rule 11 sanctions for filing a pleading
after the dismissal of CVLR’s suit in order to preserve their
rights during the limitations period, particularly because Rule 11
permits filings based not only on existing law, but also on
nonfrivolous arguments for the modification or reversal of
existing law. Fed. R. Civ. P. 11(b)(2). Accordingly, we agree
with the district court that no extraordinary circumstances
existed that warranted equitable tolling.
III.
For the reasons given, we deny Appellees’ motion to dismiss
this appeal, and affirm the district court’s denial of Appellants’
motions to intervene.
AFFIRMED
17