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RICO Statute of Limitations — Notice of Injury vs. Fraudulent Concealment — Disregard of Prior Order as Tolling Statute

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From Pecot v. S.F. Deputy Sheriff’s Ass’n, 2009 U.S. Dist. LEXIS 21710 (N.D. Cal. Mar. 6, 2009):

Civil RICO claims are subject to a four-year statute of limitations. Agency Holding Corp. v. Malley-Duff & Assocs., Inc., 483 U.S. 143, 156 (1987). "The limitations period for civil RICO actions begins to run when a plaintiff knows or should know of the injury which is the basis for the action." Living Designs, Inc. v. E.I. Dupont de Nemours & Co., 431 F.3d 353, 365 (9th Cir. 2005). "The plaintiff is deemed to have constructive knowledge of the injury when it had enough information to warrant an investigation which, if reasonably diligent, would have led to discovery of the fraud." Id. (internal quotations marks and citation omitted). Courts ordinarily leave "the question of whether a plaintiff knew or should have become aware of fraud to the jury." Id.

***

Although Plaintiffs oppose defendants' motion on the grounds of fraudulent concealment, the proper inquiry is whether the complaint alleges when the statute of limitations began to run, that is, whether the complaint alleges facts that establish as a matter of law that Plaintiffs knew or should have known of the fraud more than four years before the complaint was filed. See Living Designs, Inc., 431 F.3d at 365-66. ***

The complaint's allegations and attached exhibits demonstrate that prior to November 10, 2004 Plaintiffs had actual or at least constructive notice of defendants' scheme to use SFDSA [San Francisco Deputy Sheriff's Association] funds to pay Wong's mortgage. Plaintiffs allege that on September 8, 2004, plaintiff Owyang submitted written charges to the SFDSA Board of Directors seeking Wong's removal for, among other things, misappropriating SFDSA funds to pay his mortgage. The claim based on this injury is nonetheless not barred because the complaint also alleges that a committee appointed to investigate the charges determined that Wong had wrongfully misappropriated SFDSA funds and ordered him to repay those funds. Defendants do not cite any case that suggests that the statute of limitations continues to run even after the defendants have been ordered to "repay" their fraud and thus rectify the RICO injury. Thus, defendants have not proved that the statute of limitations bars Plaintiffs' RICO claim to the extent it is based on the use of SFDSA fund to pay Wong's mortgage.

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New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.
New York Attorneys JHA handles range the gamut of complex financial and commercial litigation and arbitration, including securities, RICO, corporate and contract disputes, credit default swaps, derivatives, and class, mass, and derivative actions. The firm also represents law firms in major disputes.

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