Pelullo v. National Union Fire Insurance

Opinions of the United
2005 Decisions States Court of Appeals
for the Third Circuit
5-19-2005
Pelullo v. Natl Union Fire Ins
Precedential or Non-Precedential: Non-Precedential
Docket No. 04-2015
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Recommended Citation
"Pelullo v. Natl Union Fire Ins" (2005). 2005 Decisions. Paper 1157.
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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
____________
No. 04-2015
____________
LEONARD A. PELULLO;
PETER D. PELULLO TRUST;
ARIANNA G. PELULLO TRUST;
GII ENTERPRISES, INCORPORATED;
GROWTH FINANCIAL CORPORATION;
OLYMPIA RESOURCE CORPORATION;
OLYMPIA HOLDING CORPORATION;
OHA, INCORPORATED;
ONE PLAZA CORPORATION;
PETER F. PELULLO
v.
THE NATIONAL UNION FIRE INSURANCE
COMPANY OF PITTSBURGH, PA;
WILENTZ, GOLDMAN & SPITZER; KENNETH FALK;
ADORNO & ZEDER, P.A.; FRED SCHWARTZ;
HANK ADORNO; KERR, RUSSELL & WEBER, P.L.C.;
ROBERT GISSELL; D'AMATO & LYNCH;
LEWIS, D'AMATO, BRISBOIS & BISGAARD;
RICHARD GEORGE; ALFRED D'AGOSTINO*
Leonard A. Pelullo; Peter D. Pelullo Trust; Arianna Pelullo Trust;
G.I.I. Enterprises, Inc.; Growth Financial Corporation;
Olympia Resource Corporation; OHA, Inc.;
One Plaza Corporation; Peter F. Pelullo,
Appellants
(*Amended per order dated 12/14/04)
____________
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. No. 00-cv-05647)
District Judge: Honorable R. Barclay Surrick
____________
Submitted Under Third Circuit LAR 34.1(a)
May 12, 2005
Before: SLOVITER, FISHER and ALDISERT, Circuit Judges.
(Filed: May 19, 2005)
____________
OPINION OF THE COURT
____________
FISHER, Circuit Judge.
I. Standard of Review
This Court exercises plenary review over a district court’s decision to grant a
motion to dismiss. Malia v. Gen. Elec. Co., 23 F.3d 828, 830 (3d Cir. 1994). We accept
as true all factual allegations in the complaint and draw all reasonable inferences
therefrom in the light most favorable to the plaintiff. Lorenz v. CSX Corp., 1 F.3d 1406,
1411 (3d Cir. 1993). We may affirm only if it is certain that no relief could be granted
under any set of facts which could be proven. Id.II. Discussion
The factual background of this action, which is lengthy and complicated, was
thoroughly discussed by the District Court and is known to the parties. Accordingly, we
will focus in this opinion on the rationale for our decision.
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The Appellants in this matter – Leonard Pelullo; the Peter D. Pelullo Trust and the
Arianna G. Pelullo Trust (collectively, “Pelullo Trusts”); Peter F. Pelullo, trustee of the
Pelullo Trusts; and six corporations and/or businesses all owned, operated, and controlled
by the Pelullo Trusts (G.I.I. Enterprises, Inc., Growth Financial Corporation, Olympia
Resource Corporation, Olympia Holding Corporation, OHA, Inc., and One Plaza
Corporation) (collectively, “Plaintiffs”) – brought civil Racketeer Influenced and Corrupt
Organizations Act (“RICO”) claims under 18 U.S.C. § 1962(c) and (d) against an
insurance company, and several attorneys and law firms who previously represented
Plaintiffs in various business transactions and civil and criminal matters (collectively,
“Defendants”).1 Plaintiffs alleged a hub-and-spoke conspiracy between National Union
and the other Defendants “whose goal was to avoid or reduce criminal and civil liability
for the law firms’ and attorneys’ misconduct and breaches of fiduciary duty committed in
connection with their representation of Mr. Pelullo and the Pelullo Trusts, which in turn
would limit National Union’s exposure as the law firms’ insurer.” (Appellants’ Br. at 7.)
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The Defendants previously aligned themselves into four broad groups: (i) the
“National Union Defendants,” which include the National Union Fire Insurance Co. of
Pittsburgh, Pa.; the law firm of D’Amato & Lynch and two of its partners, Richard
George and Alfred D’Agostino; the law firm of Lewis, D’Amato, Brisbois & Bisgaard
LLP; and the law firm of Alston & Bird LLP and its attorney Theodore J. Sawicki; (ii) the
law firm of Wilentz, Goldman & Spitzer (“Wilentz”) and its partner Kenneth Falk;
(iii) the law firm of Adorno & Zeder, P.A., one of its partners, Hank Adorno, and another
of its attorneys, Fred Schwartz; and (iv) the law firm of Kerr, Russell, Weber, P.L.C. and
one of its attorneys, Robert Gissell (“Kerr Firm Defendants”). Notably, Plaintiffs have
withdrawn any appeal as against Alston & Bird LLP and its attorney, Theodore Sawicki.
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The District Court dismissed Plaintiffs’ Second Amended Complaint against the National
Union and Kerr Firm Defendants finding that Plaintiffs’ RICO claims were barred by the
statute of limitations. The District Court also dismissed Plaintiffs’ Second Amended
Complaint against the remaining Defendants for failure to allege facts supporting an
inference of proximate causation between the Defendants’ actions and Plaintiffs’ alleged
injuries.
On appeal, Plaintiffs contend that the District Court erred in its determination that
their claims were time-barred, arguing that because the National Union and Kerr Firm
Defendants fraudulently concealed their activity comprising the alleged “hub-and-spoke”
conspiracy, the statute of limitations should be equitably tolled. Plaintiffs additionally
argue that the District Court erred in its determination that Plaintiffs lacked standing to
assert their RICO claims and thus failed to state any claims under either 18 U.S.C.
§ 1962(c) or (d) against the remaining Defendants.
A four-year statute of limitations is applied to civil RICO claims. Agency Holding
Corp. v. Malley-Duff & Assocs., 483 U.S. 143 (1987). The injury discovery rule controls
as to when the statute of limitations begins to run on a civil RICO claim. Rotella v.
Wood, 528 U.S. 549 (2000). That rule requires the statute to begin running when the
plaintiff knew or should have known of his injury. Id. Plaintiffs do not dispute that they
waited more than four years before instituting their lawsuit, but instead argue that the
Defendants’ fraudulent concealment of the existence of a RICO claim tolled the four-year
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limitations period and therefore preserved Plaintiffs’ right to file suit. Plaintiffs have
failed, however, to allege facts sufficient to support a claim of fraudulent concealment.
To establish fraudulent concealment for purposes of equitable tolling, a plaintiff
must prove three necessary elements – (1) “‘active misleading’” by the defendant;
(2) which prevents the plaintiff from recognizing the validity of her claim within the
limitations period; (3) where the plaintiff’s ignorance is not attributable to her lack of
“‘reasonable due diligence in attempting to uncover the relevant facts.’” Matthews v.
Kidder, Peabody & Co., 260 F.3d 239, 256 (3d Cir. 2001) (citing Forbes v. Eagleson, 228
F.3d 471, 486-88 (3d Cir. 2000)). Even assuming, as the District Court did, that the
National Union and Kerr Firm Defendants actively misled Plaintiffs, consistent with the
first prong of the Matthews analysis, Plaintiffs have failed to allege any facts which
support an inference that such active misleading prevented them from recognizing the
validity of their claims within the four-year statutory period or that the Plaintiffs’
ignorance was not attributable to their own lack of reasonable due diligence. “[W]hile
our standard of review requires us to accept as true all factual allegations in the
complaint, we need not accept as true unsupported conclusions and unwarranted
inferences.” Maio v. Aetna, Inc., 221 F.3d 472, 485 n.12 (3d Cir. 2000) (internal citations
omitted). Because Plaintiffs have submitted only unsupported conclusions, not actual
facts sufficient to support a claim of fraudulent concealment of their RICO claims, the
statutory period will not be equitably tolled.
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As to Plaintiffs’ second contention, i.e., that the District Court erred in its decision
to grant the remaining Defendants’ motions to dismiss, the Court finds Plaintiffs’
averments to be similarly lacking. RICO is primarily a criminal statute, however, it also
provides for civil remedies, including a cause of action for treble damages, available to
“[a]ny person injured in his business or property by reason of a violation of section 1962
. . . .” 18 U.S.C. § 1964(c); see also Seville Indus. Mach. Corp. v. Southmost Mach.
Corp., 742 F.2d 786, 789 (3d Cir. 1984). Thus, in addition to Article III constitutional
and prudential standing requirements, a plaintiff seeking recovery under RICO must
satisfy these additional criteria set forth in section 1964(c). Maio, 221 F.3d at 482-83.
“Extrapolating from this language, we read section 1964(c) as requiring a RICO plaintiff
to make two related but analytically distinct threshold showings relevant in this appeal:
(1) that the plaintiff suffered an injury to business or property; and (2) that the plaintiff’s
injury was proximately caused by the defendant’s violation of 18 U.S.C. § 1962.” Id. at
483 (citing First Nationwide Bank v. Gelt Funding Corp., 27 F.3d 763, 767 (2d Cir.
1994)).
Upon review of the record, it is clear that Plaintiffs have not alleged facts
sufficient to support an inference of proximate causation between Defendants’ actions
and Plaintiffs’ injuries. Plaintiffs allege injuries to their business and property due to
Defendants “subjecting them to a combination of criminal fines, restitution, and
forfeitures, extensive civil litigation, coerced settlements, civil judgments, and ruinous
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attorney fees so as to limit their financial and criminal liability.” (Appellant’s Br. at 8.)
The facts alleged, however, do not support an inference of a nexus between these specific
activities and Plaintiffs’ alleged injuries. Accordingly, because Plaintiffs have not shown
proximate causation, they lack standing to assert their RICO claims against these
Defendants and have failed to state claims under either 18 U.S.C. § 1962(c) or (d). See
Steamfitters Local Union No. 420 Welfare Fund v. Philip Morris, Inc., 171 F.3d 912, 921
(3d Cir. 1999) (dismissing action for failure to state a claim where plaintiff failed to
satisfy proximate causation requirements); Anderson v. Ayling, 396 F.3d 265, 271 (3d Cir.
2005) (same).
For these reasons, we will affirm the judgment of the District Court dismissing
Plaintiffs’ claims.
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