Nathaniel Joseph v. Bach & Wasserman, L.L.C

Case: 12-30206 Document: 00511970374 Page: 1 Date Filed: 08/27/2012
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
August 27, 2012
No. 12-30206 Lyle W. Cayce
Summary Calendar Clerk
NATHANIEL JOSEPH; KECIA JOSEPH; LUCINDA MITCHELL,
Plaintiffs-Appellants
v.
BACH & WASSERMAN, L.L.C.; GERALD WASSERMAN,
Defendants-Appellees
Appeal from the United States District Court for the
Eastern District of Louisiana
USDC No. 2:11-cv-1276
Before BENAVIDES, ELROD, and HAYNES, Circuit Judges.
PER CURIAM:*
Plaintiffs-Appellants Nathaniel and Kecia Joseph (“the Josephs”) and
Lucinda Mitchell appeal from the district court’s grant of Defendants-Appellees
Bach and Wasserman, L.L.C.’s and Gerald Wasserman’s motion to dismiss.
Because we find that the statute of limitations has run on their federal claim, we
AFFIRM.
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
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I. BACKGROUND
In May 2002, the Josephs received a settlement from a personal injury
matter. They invested the money in different ventures, including several retail
food trailers. They purchased two new food units for their business from
Customs Sales (“Customs”), paying for the smaller unit in full and leaving
$135,000 as a non-refundable deposit on the larger unit. The Josephs’ parents,
Frank and Lucinda Mitchell, continued to operate one of the food trailers with
the smaller unit, while the Josephs began to make improvements on their
property in Jean Lafitte, and on a 26-unit apartment complex they owned.
The larger food unit was delayed, and the Josephs ran into problems with
the improvements on their properties. Therefore, they advised Customs that
their financial condition had deteriorated and they would need more time to
come up with the balance due on the larger unit, which was now $175,000.
Customs told the Josephs that the deposit was non-refundable and they would
lose both the deposit and the unit if they did not pay the remainder upon
delivery, so the Josephs contacted Pontchartrain Mortgage seeking financial
assistance. They were unable to qualify for a personal or business loan, but
Pontchartrain Mortgage introduced them to Defendant-Appellee George
Wasserman for the purpose of either making them a small loan or purchasing
an existing loan. Customs then spoke to Wasserman, and the larger unit arrived
in a few days. Customs also told the Josephs that they would have two days to
complete the closing or return the unit if the balance was not paid.
The Josephs allege that Wasserman changed the terms of the loan he had
agreed to make them once the unit was delivered, knowing that they would feel
forced to comply or lose the unit and their deposit. Eventually, through a series
of vague and allegedly fraudulent transactions, Wasserman owned the Josephs’
fully-paid home and was leasing it back to them, had arranged for other
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investors to obtain mortgages on their property, had placed collateral mortgages
on the Josephs’ property, including the apartment complex and food trailers, and
was handling all Department of Housing and Urban Development (“HUD”)
documentation and monies on their mortgages. They also allege that
Wasserman did not put the Josephs on the insurance policy for the Jean Lafitte
property, though he charged them insurance premiums on that property and had
given them a lease that stated that they were included as insureds. By January
2004 Wasserman allegedly asserted that the Josephs owed him $375,000, and
he was requiring that they make monthly payments on that debt, though he was
collecting revenue from their assets at the same time.
The Plaintiffs-Appellants state that in February 2004, the Josephs learned
that they did not owe Wasserman $375,000, and that he had charged them
exorbitant fees on the sales and mortgages he had prepared for them. They had
an attorney request that Wasserman make a full accounting of their funds and
property, which he allegedly refused to do. Accordingly, in December 2004, the
Josephs filed suit against the Defendants-Appellees in Civil District Court for
the Parish of Orleans, and, in January 2005, Mitchell’s Fruit Stand, Inc., Frank
Mitchell, and Lucinda Mitchell filed a motion to intervene, adopting the
allegations contained in the Josephs’ petition. The state court granted an
Exception for Vagueness filed by the Defendants-Appellees, but gave the
Plaintiffs-Appellants fifteen days to cure the deficiencies in their pleadings, and
told them that it would dismiss their case with prejudice if they did not amend
their pleadings within that time. Fifteen days passed without the Plaintiffs-
Appellants filing an amended petition, and the state court therefore dismissed
their claims with prejudice.
On May 28, 2011, the Plaintiffs-Appellants filed a complaint in federal
district court, alleging violations of the Racketeer Influenced and Corrupt
Organizations Act, 18 U.S.C. §§ 1961-68 (“RICO”), and also bringing state-law
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claims for intentional infliction of emotional distress, fraud, theft and
misrepresentation, violations of the Louisiana Unfair Trade Practices and
Consumer Protection Act, and violations of the Louisiana Racketeering Act. The
Defendants-Appellees filed a motion to dismiss, or, in the alternative, motion for
summary judgment, which the Plaintiffs-Appellants opposed. On February 8,
2012, the district court granted the Defendants-Appellees’ motion to dismiss the
Plaintiffs-Appellants’ RICO claim, and it declined to exercise supplemental
jurisdiction over their state-law claims. The Plaintiffs-Appellants timely filed
this appeal.1
II. STANDARD OF REVIEW
We review a district court’s grant of a motion to dismiss de novo,
“accepting all well-pleaded facts as true and viewing those facts in the light most
favorable to the plaintiff.” Bustos v. Martini Club Inc., 599 F.3d 458, 461 (5th
Cir. 2010) (quotation marks and citation omitted). When the ground for
dismissal is a statute of limitations, it must be “evident from the plaintiff’s
pleadings that the action is barred and the pleadings fail to raise some basis for
tolling or the like.” Jones v. Alcoa, Inc., 339 F.3d 359, 366 (5th Cir. 2003).
III. ANALYSIS
The district court dismissed the Plaintiffs-Appellants’ RICO claim on the
basis that it was time-barred. Civil RICO claims have a four-year statute of
limitations. Rotella v. Wood, 528 U.S. 549, 552 (2000); Agency Holding Corp. v.
Malley-Duff & Assoc., Inc., 483 U.S. 143, 156 (1987). This Circuit has adopted
an “injury discovery rule,” whereby “a civil RICO claim accrues when the
plaintiff discovers, or should have discovered, the injury.” Love v. Nat’l Med.
Enters., 230 F.3d 765, 773 (5th Cir. 2000) (citing Rotella v. Wood, 147 F.3d 438,
400 (5th Cir. 1998), aff’d. 528 U.S. 549 (2000)). It is discovery of the injury, and
1
The Plaintiffs-Appellants appeal only the district court’s dismissal of their RICO
claim.
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not other elements of a RICO claim, that starts the limitations period running.
Rotella, 528 U.S. at 556. In Love, this Court also adopted the “separate accrual
rule,” stating that “[w]hen a pattern of RICO activity causes a continuing series
of separate injuries, the ‘separate accrual’ rule allows a civil RICO claim to
accrue for each injury when the plaintiff discovers, or should have discovered,
that injury.” 230 F.3d at 773.
The district court found that the Josephs’ state-court petition alleged the
same injuries as those complained of in this suit, such that they had no new and
independent injuries after December 2004, when the state-court petition was
filed. Similarly, the court held that the latest the statute could have begun to
run against Mitchell was January 2005, when she filed her petition in
intervention in the state-court suit. Thus, the Plaintiffs-Appellants’ federal
complaint, filed in May 2011, was well beyond the four-year statute of
limitations. The court also found that even if, as alleged, Wasserman had
continued to conceal information from the Plaintiffs-Appellants after 2004,
“[a]lleged concealment . . . does not constitute the accrual of a new injury.”
On appeal, the Plaintiffs-Appellants argue that their claims are timely
under both the injury discovery and separate accrual rules. As to the former,
they rely on Burnett v. New York Central Railroad Company, in which the
Supreme Court held that the plaintiff’s state-court suit tolled the federal statute
of limitations on a Federal Employers’ Liability Act (“FELA”) claim. 380 U.S.
424 (1965). Plaintiffs-Appellants’ reliance on Burnett is misplaced, however.
Beyond the fact that Burnett dealt with FELA and not RICO, the plaintiff in that
case had initially filed his FELA claim in state court, within the limitations
period. Id. at 424-45. When his state suit was dismissed on the basis of
improper venue, he refiled in federal court eight days later, but the district court
held that the suit was untimely under the FELA three-year statute of
limitations, and the Court of Appeals affirmed. Id. at 425. The Supreme Court
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reversed, holding that “when a plaintiff begins a timely FELA action in a state
court having jurisdiction, and serves the defendant with process and plaintiff’s
case is dismissed for improper venue, the FELA limitation is tolled during the
pendency of the state suit.” Id. at 434-35. Here, the Plaintiffs-Appellants waited
six years to file an action in federal court, rather than doing it almost
immediately, as did the plaintiff in Burnett. See Baldwin Cnty. Welcome Ctr. v.
Brown, 466 U.S. 147, 151 (1984) (“One who fails to act diligently cannot invoke
equitable principles to excuse that lack of diligence.”); Covey v. Ark. River Co.,
865 F.2d 660, 662 (5th Cir. 1989) (stating that “factors to consider in
determining whether to apply equitable tolling include diligence on the part of
the party bringing the action, and timely service of process”). Furthermore, the
Plaintiffs-Appellants did not file a RICO claim in state court. Instead, their
state-court action involved only state-law claims. Therefore, whether or not the
state-court action is still open on appeal, as they claim, it would not toll the
statute of limitations on this separate federal claim, such that Burnett is
inapposite.
The Plaintiffs-Appellants also argue that Wasserman fraudulently
concealed his actions and their consequences and continues to do so, such that
the Plaintiffs-Appellants “are still in the dark regarding their injuries and the
extent of those injuries.” Under the doctrine of fraudulent concealment, “the
limitations period is tolled until the plaintiff discovers, or with reasonable
diligence should have discovered, the concealed fraud.” Love, 230 F.3d at 779.
However, based on the Plaintiffs-Appellants’ complaint, as well as their brief to
this Court, they have suffered no injury due to an action taken by Wasserman
since March 2004, and they ceased making payments to him early that year as
well. In addition, as the district court found, their federal complaint tracks that
filed in state court, word-for-word in places, and alleges no new injuries incurred
after the filing of their state-court petition. See Warden v. Barnett, 252 F.3d
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1356, at *1 (5th Cir. 2001) (unpublished) (“The state court complaint makes clear
that at the time it was filed Barnett was aware of the alleged injury, i.e., the
misappropriation of his stock, that is the basis of the RICO claim brought in
federal court seven years later. We agree with the district court’s conclusion
that the state court suit alleged ‘the same basic facts’ and ‘the same basic
grounds’ as the federal RICO claim. Barnett claims that Parker and Nichols
engaged in fraudulent concealment of their wrongful conduct. But if Barnett
knew in 1991 that these third-party defendants had misappropriated his stock,
then under the injury discovery rule he was aware of his injury and the
limitations period ran long before the 1998 federal RICO claim was filed.”).
The Plaintiffs-Appellants further claim that Wasserman’s continuing
illegal possession of their property is a continuing tort, and the separate accrual
rule applies. They point to Love for support, but that case is distinguishable. In
Love, Blue Cross Blue Shield of Texas (“BCBST”) sued National Medical
Enterprises (“NME”), a corporation running psychiatric hospitals, alleging that
NME had used deceptive practices to recruit patients and had based discharge
decisions on insurance coverage. 230 F.3d at 768. NME argued that the statute
of limitations had run on BCBST’s RICO claim. We held, however, that the
separate accrual rule applied, and BCBST could maintain suit for allegedly
fraudulent insurance claims submitted within the limitations period, even
though NME’s scheme to defraud had allegedly arisen prior to that time. We
reasoned that “[e]ach time BCBST became obligated to pay a fraudulent
(assumed) insurance claim submitted by Appellees, BCBST suffered an injury
‘to its business or property’, within the meaning of [the RICO statute].” Love,
230 F.3d at 775. Here, however, Plaintiffs-Appellants have not shown any harm
or injury from the alleged illegal possession occurring within the limitations
period. Consequently, there have been no new injuries equivalent to the
fraudulent claims paid by BCBST. C.f. Jaso v. The Coca Cola Co., 435 Fed.
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App’x 346, 355 (5th Cir. 2011) (per curiam) (stating that the appellant “has
alleged that individual acts of racketeering occurred within the limitations
period”).
Even if Wasserman continued to make a profit off of the Plaintiffs-
Appellants’ property that he allegedly illegally possessed, it is the initial taking
of that property, not any further actions Wasserman took with it, that
constitutes a RICO injury. See Warden, 252 F.3d at *1 (“We agree with the
district court that the initial theft or misappropriation of Barnett’s stock is his
injury, and that further alleged acts of appellees, such as placing the proceeds
of the sale of the stock in a trust, do not amount to new and independent injuries
subject to separate limitations periods.”). Thus, though Wasserman may have
concealed how much money he made off of the Plaintiffs-Appellants’ property,
there are no allegations that he has taken any property, or collected money on
their behalf, since 2004.
Plaintiffs-Appellants do allege that in February 2011 Nathaniel Joseph
contacted an insurance agent to get an update on a 2005 lawsuit against the
Plaintiffs-Appellants regarding the Jean Lafitte property, and found out that the
Josephs had never been added as insureds on the property. The Plaintiffs-
Appellants allege that under the Josephs’ lease agreement with Wasserman,
they were to pay for additional insurance on the property and were to be listed
as insureds on the policy. Obviously, an injury arising in February 2011 would
be timely for purposes of a federal RICO claim filed in May of that year.
However, we do not find that this injury arose in February 2011, or was
concealed from Plaintiffs-Appellants until that date. Instead, they should have
been aware of their status as insureds in May 2005, when they were sued by two
people injured on the property. Furthermore, the Defendants-Appellees note
that Wasserman and the insurance company asserted a cross-claim and third-
party demand against the Josephs and Mitchell in that suit, which clearly
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should have put them on notice that they were not covered under the insurance
policy at issue.2 Accordingly, we find that the Plaintiffs-Appellants should have
discovered in 2005 that they were not covered under the insurance policy on the
Jean Lafitte property, such that the statute of limitations on that claim has run,
as well.
Finally, Plaintiffs-Appellants argue that the district court should have
permitted them to amend their complaint, rather than dismissing their case
with prejudice. However, they never requested leave to amend from the district
court, nor have they indicated what they would add to their complaint if allowed
to amend. We therefore find that the district court properly dismissed the RICO
claim without giving the Plaintiffs-Appellants the opportunity to amend their
complaint. See Griego v. Bexar Cnty., TX, 244 F.3d 133, at *1 (5th Cir. 2000)
(per curiam) (“Griego did not request leave to amend in the district court, and
in his appellate brief he indicates that his initial complaint was adequate.
Further, in his brief he has failed to suggest with any specificity what could be
added to his claim if he were allowed to replead. Accordingly, the dismissal of
Griego’s complaint without affording him a chance to amend was proper.”).
IV. CONCLUSION
For the foregoing reasons, we AFFIRM the district court’s dismissal of
Plaintiffs-Appellants’ suit.
2
The Defendants-Appellees reference a copy of the third-party complaint in the record
in support of their argument. In general, a court may only look to “the complaint, any
documents attached to the complaint, and any documents attached to the motion to dismiss
that are central to the claim and referenced by the complaint” when reviewing a 12(b)(6)
motion to dismiss. Lone Star Fund V (U.S.), L.P. v. Barclays Bank PLC, 594 F.3d 383, 387
(5th Cir. 2010). However, the court may take judicial notice of matters of public record. Funk
v. Stryker Corp., 631 F.3d 777 (5th Cir. 2011). Here, the document referenced is a pleading
filed with a Louisiana state district court, and it is a matter of public record.
9