The Lares v. Tobin

United States Court of Appeals
For the First Circuit
____________________
No. 99-1601
THE LARES GROUP, II; SHARON LARAMEE;
JOHN G. LARAMEE, INDIVIDUALLY AND AS GENERAL PARTNER,
Plaintiffs, Appellants,
v.
BENTLEY TOBIN, INDIVIDUALLY AND AS TRUSTEE OF
PINE STREET REALTY TRUST UNDER A DECLARATION OF
TRUST DATED JANUARY 8, 1988 AND AS THE GENERAL
PARTNER OF PINE STREET LIMITED PARTNERSHIP AND
INDIVIDUALLY; MATTHEW T. MARCELLO, III,
INDIVIDUALLY AND AS TRUSTEE OF PINE STREET REALTY
TRUST UNDER A DECLARATION OF TRUST DATED
JANUARY 8, 1988 AND AS THE GENERAL PARTNER OF
PINE STREET TRUST LIMITED PARTNERSHIP AND
INDIVIDUALLY; MICHAEL B. NULMAN, INDIVIDUALLY
AND AS TRUSTEE OF PINE STREET REALTY TRUST
UNDER A DECLARATION OF TRUST DATED JANUARY 8, 1988
AND AS THE GENERAL PARTNER OF PINE STREET TRUST
LIMITED PARTNERSHIP AND INDIVIDUALLY;
HINCKLEY, ALLEN & SNYDER, RHODE ISLAND LAW
PARTNERSHIP KNOWN AS HINCKLEY, ALLEN & SNYDER,
INDIVIDUALLY AND AS TRUSTEE OF PINE STREET REALTY
TRUST UNDER A DECLARATION OF TRUST DATED
JANUARY 8, 1988 AND AS THE GENERAL PARTNER OF PINE
STREET TRUST LIMITED PARTNERSHIP AND INDIVIDUALLY;
JOSEPH MOLLICONE, JR., INDIVIDUALLY AND AS TRUSTEE
OF PINE STREET REALTY TRUST UNDER A DECLARATION OF
TRUST DATED JANUARY 8, 1988 AND AS THE GENERAL
PARTNER OF PINE STREET TRUST LIMITED PARTNERSHIP
AND INDIVIDUALLY; JOSEPH DIBATTISTA, INDIVIDUALLY
AND AS TRUSTEE OF PINE STREET REALTY TRUST UNDER A
DECLARATION OF TRUST DATED JANUARY 8, 1988 AND AS
THE GENERAL PARTNER OF PINE STREET TRUST LIMITED
PARTNERSHIP AND INDIVIDUALLY; RODNEY M. BRUSINI;
EDWARD D. DIPRETE; HENRY W. FAZZANO;
ROBERT I. WEISBERG; EDWARD F. RICCI;
JOHN S. RENZA, SR.; JOHN J. KANE;
Defendants, Appellees,
____________________
-2-
HERBERT L. MILLER,
Defendant.
____________________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
[Hon. Ronald R. Lagueux, U.S. District Judge]
____________________
Before
Torruella, Chief Judge,
Boudin and Stahl, Circuit Judges.
_____________________
Mark G. Hamilton, House of Representatives, Office of Legislative
Counsel, with whom Evans J. Carter, and Hargraves, Karb, Wilcox &
Galvani, L.L.P. were on brief, for appellants.
Robert Corrente, with whom Charles D. Blackman, and Hinckley,
Allen & Snyder LLP were on brief, for appellees Bentley Tobin, Matthew
T. Marcello, III, Michael B. Nulman and Hinckley, Allen & Snyder LLP.
Karen A. Pelczarski, with whom Joseph V. Cavanagh, Jr., Blish &
Cavanagh, Herbert F. DeSimone, Jr. and DeSimone & Leach were on brief,
for appellees Joseph Dibattista and Matthew T. Marcello, III,
individually, as trustees of Pine Street Realty Trust, and as general
partners of Pine Street Trust Limited Partnership, and Edward F. Ricci.
Peter J. McGinn and Tillinghast Licht & Semonoff Ltd. on brief for
appellee Edward D. DiPrete.
John F. Dolan and Rice Dolan & Kershaw on brief for appellee John
S. Renza, Sr.
____________________
August 9, 2000
____________________
-3-
TORRUELLA, Chief Judge. This appeal arises from a civil suit
filed by plaintiffs-appellants – The Lares Group II, John G. Laramee,
and Sharon Laramee – against numerous defendants-appellees1 for an
alleged violation of the Racketeer Influenced and Corrupt Organizations
Act, 18 U.S.C. §§ 1961-1968 ("RICO"). The district court determined
that appellants' RICO claim was barred by the applicable four-year
statute of limitations, see Lares Group II v. Tobin, 47 F. Supp. 2d
223, 229-31 (D.R.I. 1999) (citing Agency Holding Corp. v. Malley-Duff
& Assocs., Inc., 483 U.S. 143, 156 (1987), and Rodríguez v. Banco
Central, 917 F.2d 664, 665 (1st Cir. 1990)), and declined to exercise
supplemental jurisdiction over appellants' remaining state law claims,
see id. at 235-36. For the reasons stated below, we affirm.
BACKGROUND
The facts in this case were thoroughly addressed by the
district court. See id. at 225-28. For purposes of this appeal, we
need only briefly summarize that lengthy discussion.
A. Factual Background
In 1988, appellants attempted to lease an office building
owned by them to the Rhode Island Department of Employment and
1 Defendants-appellees are Bentley Tobin, Matthew T. Marcello, III,
Michael B. Nulman, a Rhode Island law partnership known as Hinckley,
Allen & Snyder, Joseph Mollicone, Jr., Joseph DiBattista, all
individually and as trustees of Pine Street Realty Trust under a
Declaration of Trust dated January 8, 1988, and as the General Partners
of Pine Street Trust Limited Partnership; and Rodney M. Brusini, Edward
D. Diprete, Henry W. Fazzano, Edward F. Ricci, and John S. Renza, Sr.
-4-
Training. The State, however, eventually elected to lease another
building, which was owned by several of the named defendants.
Appellants regarded the circumstances surrounding the selection process
as dubious and publicly demanded an official investigation. In
addition to writing letters to several newspapers calling into doubt
the propriety of the lease, appellants contacted numerous public
officials including representatives of the Governor's Office, the Rhode
Island Department of the Attorney General, the United States Attorney
for the District of Rhode Island, and Rhode Island's congressional
delegation. These pleas for investigation began in late 1988 and
continued into 1989. Six years later, on August 30, 1995, appellants
initiated this law suit following public revelations of official
corruption reaching into the highest levels of the Rhode Island state
government.
B. Procedural Background
Appellants seek civil damages resulting from the failed
attempt to secure the state lease. The amended complaint names rival
building owners, officials of the State, as well as attorneys and
bankers involved in the lease, as defendants in the suit. The sole
federal claim is for an alleged violation of RICO, see 18 U.S.C. §§
1961-1968, and is premised upon the allegation that appellants were
denied state business because the defendants were participants in a
complex scheme of rigging the building selection process through
-5-
bribery and extortion. In addition to appellants' RICO claim, the
amended complaint also contains numerous state law causes of action.
After conducting substantial discovery, appellees moved the
district court for summary judgment. On April 19, 1999, the court
granted appellees' motions, holding, in relevant part, that (1) the
statute of limitations had expired on appellants' RICO claim; and (2)
supplemental jurisdiction over appellants' state law claims would be
denied, following dismissal of all federal claims. See generally Lares
Group II, 47 F. Supp. 2d 223. This appeal followed.
DISCUSSION
On February 23, 2000, the United States Supreme Court issued
an opinion in Rotella v. Wood, 120 S. Ct. 1075 (2000). The dispositive
question here is identical to that addressed in Rotella, namely,
whether the four-year statute of limitations applicable to civil RICO
claims is governed by (1) the "injury discovery" accrual rule, which
states that the statutory clock begins to run when a plaintiff knew, or
should have known, of his injury; or (2) the "injury and pattern
discovery" rule favored by appellants, under which a civil RICO claim
accrues only when the claimant discovers, or should have discovered,
both an injury and a pattern of RICO activity. See id. at 1079-80.
Resolving a circuit split, the Rotella Court rejected the injury and
pattern discovery rule applied by a minority of the courts of appeals.
See id. at 1080. While the Court declined to "settle upon a final
-6-
rule," see id. at 1080 n.2, it nevertheless left intact – at least on
facts such as those presented here – the injury discovery accrual rule
followed by the First Circuit, see Rodríguez v. Banco Central, 917 F.2d
664, 665 (1st Cir. 1990), and correctly applied by the district court
in this case, see generally Lares Group II, 47 F. Supp. 2d 223.
Accordingly, we need not belabor the issue and may quickly dispose of
this case.
In Agency Holding Corp. v. Malley-Duff & Assocs., Inc., 483
U.S. 143, 156 (1987), the Supreme Court held that a civil RICO claim is
subject to a four-year statute of limitations. See also Klehr v. A.O.
Smith Corp., 521 U.S. 179, 183 (1997); Rodríguez, 917 F.2d at 665. The
Court, however, left open the question of accrual. See Klehr, 521 U.S.
at 189. This left the federal appellate courts free to part company,
which we invariably did.
The First Circuit, in addition to the Second, Fourth, Fifth,
Seventh, and Ninth Circuits, "applied an injury discovery accrual rule
starting the clock when a plaintiff knew or should have known of his
injury." Rotella, 120 S. Ct. at 1080 (citing cases). The Sixth,
Tenth, and Eleventh Circuits, on the other hand, "applied the injury
and pattern discovery rule . . . , under which a civil RICO claim
accrues only when the claimant discovers, or should discover, both an
injury and a pattern of RICO activity." Id. (citing cases). The Third
Circuit chose yet another approach, adopting a "last predicate act"
-7-
rule. Keystone Ins. Co. v. Houghton, 863 F.2d 1125, 1130 (3d Cir.
1988). Under the Third Circuit's formulation, the statute of
limitations "began to run as soon as the plaintiff knew or should have
known of the injury and the pattern of racketeering activity, but began
to run anew upon each predicate act forming part of the same pattern."
Rotella, 120 S. Ct. at 1080.
In Klehr v. A.O. Smith Corp., the Supreme Court "cut the
possibilities by one, in rejecting the last predicate act rule"
espoused by the Third Circuit. Rotella, 120 S. Ct. at 1080. The Court
reasoned, in part, that "[s]ince a pattern of predicate acts can
continue indefinitely, with each separated by as many as 10 years, that
rule might have extended the limitations period to many decades, and so
beyond any limit that Congress could have contemplated." Id.
Following Klehr, two possibilities remained. As a result,
the Court was called upon to once again address the accrual question in
Rotella, where, as indicated, it rejected the injury and pattern
discovery rule. The Court carefully explained its reasoning, stating:
By tying the start of the limitations period to
a plaintiff's reasonable discovery of a pattern
rather than to the point of injury or its
reasonable discovery, the [injury plus pattern]
rule would extend the potential limitations
period for most civil RICO cases well beyond the
time when a plaintiff's cause of action is
complete, as this case shows . . . .
[Accordingly, the injury plus pattern rule] would
bar repose, prove a godsend to stale claims, and
-8-
doom any hope of certainty in identifying
potential liability.
Id. at 1082-83 (footnote omitted).
Under the principles announced in Rotella, Rodríguez v. Banco
Central remains the law of this Circuit. In Rodríguez, we held:
After considering the arguments, we find that we
agree with the majority view, which ties
"accrual" to the time a plaintiff knew or should
have known of his injury. We shall follow the
principles adopted by the Second Circuit in
Bankers Trust Co. v. Rhoades, 859 F.2d 1096 (2d
Cir. 1988).
917 F.2d at 665. In Bankers Trust, the Second Circuit stated "we . .
. hold that each time a plaintiff suffers an injury caused by a
violation of 18 U.S.C. § 1962, a cause of action to recover damages
based on that injury accrues to plaintiff at the time he discovered or
should have discovered the injury." 859 F.2d at 1102.
In addition, we note that in Rotella the Supreme Court
indicated that "in applying a discovery accrual rule, . . . discovery
of the injury, not discovery of the other elements of a claim, is what
starts the clock." 120 S. Ct. at 1081. While we recognize that in
Rotella the Supreme Court did not affirmatively adopt the injury
discovery rule, we nonetheless believe that this passage is instructive
and accurately reflects the law of this Circuit.
In this case, the record contains ample evidence that
appellants knew of their injury prior to the statutory period. First,
-9-
appellants learned that they were not awarded the subject lease in
November 1988. Thereafter, in 1988 and continuing into 1989,
appellants complained about the lease award to the Governor's office,
to Cranston Mayor James Taft, to the State Director of Administration,
to members of Congress, to the United States Attorney for the District
of Rhode Island, to the Rhode Island Attorney General, to the
Providence Journal, to the Warwick Beacon, and to Eastland Bank. In
addition, in 1990, The Lares Group II was placed into receivership and
Laramee filed a lender liability action against Eastland Bank, accusing
the bank and its officials of complicity in the lease deal. Given this
evidence, the district court correctly determined that appellants knew
of their injury prior to August 30, 1991. Consequently, since this
action was not filed until August 30, 1995, appellants' RICO claim is
barred by the applicable four-year statute of limitations as a matter
of law. See Rotella, 120 S. Ct. at 1080; Rodríguez, 917 F.2d at 665.
In reaching this conclusion, we are mindful that the record
in this case clearly indicates that appellants' cause of action was
complete at the time of their injury. Rotella was premised on a
similar record, as the Supreme Court carefully explained:
Some Circuits apply injury and pattern discovery
out of fear that when the injury precedes a
second predicate act, the limitations period
might otherwise expire before the pattern is
created. Respondents argue that this overlooks
the cardinal principle that a limitations period
-10-
does not begin to run until the cause of action
is complete.
The quandary is hypothetical here; Rotella does
not dispute that his injury in 1986 completed the
elements of his cause of action. Hence, we need
not and do not decide whether civil RICO allows
for a cause of action when a second predicate act
follows the injury, or what limitations accrual
rule might apply in such a case.
120 S. Ct. at 1083 n.4 (citations omitted). We follow suit here,
leaving open the possibility that a different accrual rule may apply
where a plaintiff's injury does not complete her cause of action.
Finally, because appellants' federal RICO claim constituted
the sole basis for subject matter jurisdiction in this case, the
district court acted well within its broad discretion in dismissing
without prejudice appellants' supplemental state law claims. See,
e.g., Newman v. Burgin, 930 F.2d 955, 965 (1st Cir. 1991). Appellants'
contention that the district court intentionally delayed issuing its
decision until after the applicable state statutes of limitations may
have expired on many of appellants' state law claims is spurious.
Furthermore, as a matter of law, "[w]e are not prepared to say that,
where other features of a case support dismissal, a federal district
court (to dismiss the claim) also must be certain a plaintiff with
pendent state-law claims can proceed in state court." Id. We need not
analyze this claim any further.
CONCLUSION
-11-
For the reasons stated above, we affirm.
-12-