Preserve Petrified Forest Land Investors LLC et al v. Renzi et al

Filing 24

ORDER denying 16 Motion to Dismiss for Failure to State a Claim; denying 18 Motion to Dismiss. Signed by Judge David G Campbell on 2/12/2013.(NVO)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Preserve Petrified Forrest, et al.,
Plaintiffs,

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ORDER

v.

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No. CV-12-08140-PHX-DGC

Richard G. Renzi, et al.,
Defendants.

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Before the Court are motions to dismiss from Defendants James Sandlin and Terry

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Russell (Doc. 16) and Defendants Richard G. Renzi and Roberta Renzi (Doc. 18). All

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Defendants argue that the claims are barred by the statute of limitations. Plaintiffs filed a

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consolidated response to both motions on December 7, 2012 (Doc. 21) and Defendants

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filed a reply (Doc. 23). No party has requested oral argument. For the reasons that

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follow, the court will deny the motions to dismiss.

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I.

Background.

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Plaintiffs bring claims under the Racketeer Influenced and Corrupt Organizations

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Act (“RICO”), 18 U.S.C. § 1961 et. seq. They claim that on May 5, 2005, American

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Land Holdings, LLC agreed to purchase 480 acres of property from Defendants Sandlin

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and Russell for $4.5 million dollars, a price which allegedly was grossly inflated.

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Doc. 21 at 2. Plaintiffs maintain that the land was sold at the inflated price “through a

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pattern of racketeering activity involving extortion, honest services wire fraud, money

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laundering, and various monetary transactions involving criminally derived property.”

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Doc. 21 at 2. Two defendants, Renzi and Sandlin, were indicted for their conduct related

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to Plaintiffs’ claims on February 21, 2008, and are still awaiting trial. Doc. 1 ¶¶ 207,

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212. Defendants argue that Plaintiff’s civil RICO claims are barred by the statute of

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limitations.

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II.

Legal Standard.

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When analyzing a complaint for failure to state a claim to relief under Rule

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12(b)(6), the well-pled factual allegations are taken as true and construed in the light

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most favorable to the nonmoving party. Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th

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Cir. 2009). “[T]he statute of limitations defense. . . may be raised by a motion to dismiss

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. . . [i]f the running of the statute is apparent on the face of the complaint.” Jablon v.

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Dean Witter & Co., 614 F.2d 677, 682 (9th Cir. 1980) (citing Graham v. Taubman, 610

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F.2d 821 (9th Cir. 1979)). However, even if the relevant dates alleged in the complaint

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are beyond the statutory period, the “‘complaint cannot be dismissed unless it appears

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beyond doubt that the plaintiff can prove no set of facts that would establish the

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timeliness of the claim.’” Hernandez v. City of El Monte, 138 F.3d 393, 402 (9th Cir.

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1998) (quoting Supermail Cargo, Inc. v. United States, 68 F.3d 1204, 1206 (9th Cir.

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1995); see Cervantes v. City of San Diego, 5 F.3d 1273, 1275 (9th Cir. 1993).

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III.

Analysis.

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In Agency Holding Corp. v. Malley-Duff & Assocs., Inc., 483 U.S. 143, 146 (1987)

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(“Malley-Duff”), the Supreme Court borrowed the four-year statute of limitations from

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the Clayton Act, 15 U.S.C. § 15, and applied it to the RICO civil enforcement provision

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because RICO did not provide an express statute of limitations. The Supreme Court

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borrowed the limitations period from the Clayton Act because it offered “the closest

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analogy to civil RICO” – both statues are “designed to remedy economic injury by

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providing for the recovery of treble damages, costs, and attorney’s fees.” Malley-Duff,

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483 U.S. at 150-51.

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In RICO cases, the statute of limitations begins to run when the plaintiff discovers

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his injury. Grimmett v. Brown, 75 F.3d 506, 511 (9th Cir. 1996). Defendants argue that

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Plaintiffs must have discovered their injury no later than one of three dates: the closing

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date of the property sale (October, 7, 2005), the day the last predicate act was committed

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(November 18, 2005), or the day the original indictment was returned against Renzi and

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Sandlin (February 21, 2008). Each of these dates falls more than four years before the

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date when Plaintiffs filed this suit.

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Plaintiffs do not contest the date on which they discovered the injury, but rather

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argue that the statute of limitations should be tolled because Defendants were indicted in

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a parallel prosecution initiated before the four-year statute had run. The Clayton Act,

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from which the Supreme Court borrowed the four-year statute of limitations, contains a

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provision that suspends the running of a statute of limitations on a private right of action

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during the pendency of a criminal proceeding instituted by the United States and for one

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year thereafter if the private right of action is based in whole or in part on any matter

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complained of in the criminal proceeding. 15 U.S.C. § 16(i). Plaintiffs argue that

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borrowing the four-year statute of limitations from the Clayton Act should require courts

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to borrow tolling provisions which Plaintiffs view as part and parcel of the statute of

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limitations.

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Few federal courts have addressed this issue, and it appears that no Ninth Circuit

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court has ever had occasion to do so. Two district courts outside the Ninth Circuit have

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considered the question, reaching different conclusions.

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In Pension Fund-Mid-Jersey Trucking Indus. v. Omni Funding Group, 687 F.

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Supp. 962 (D.N.J. 1988), the court applied the Clayton Act’s tolling provision to a RICO

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civil enforcement claim, finding that there was a “clear line of authority which requires

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that where a statue of limitations is borrowed, the tolling and suspension provisions

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which are part of that statute must likewise be applied.” Id. at 964. The district court

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noted that the purpose of the tolling provision in the Clayton Act was to allow private

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plaintiffs to benefit from the Government’s prior litigation and that a similar purpose

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could be served in the RICO civil enforcement context. Id. at 964-65. Ultimately, the

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court concluded that the tolling provisions and the statute of limitations were

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“inextricably intertwined” and that similarities that justified borrowing the statute of

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limitations from the Clayton Act also justified borrowing the tolling provision that

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modified the statute of limitations. Id.

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The district court in Kerman v. Chenery Associates, Inc., No.3:06CV-338-S, 2011

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WL 1106736 (W.D. Ky. Mar. 23, 2011), reached the opposite conclusion, finding that

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“the existence of an on-going criminal prosecution does not toll the running of the

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limitations period with respect to . . . RICO claims.” Id. at *3. The court noted that the

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holding in Pension Fund had not been followed by any other court (though it did not cite

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any cases where the issue had been presented), and declined to follow it “[i]n the absence

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of any binding authority.” Id. The court also noted that even if borrowed, the tolling

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provision would not apply because the four-year statute had run before the parallel

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criminal action was initiated. Id. at *4.

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In Malley-Duff, the Supreme Court did not address the applicability of 15 U.S.C.

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§ 16(i)’s tolling provision to RICO civil enforcement claims. With regard to statutes of

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limitations generally, the Supreme Court has held that “[a]ny period of limitation . . . is

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understood fully only in the context of the various circumstances that suspend it from

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running against a particular cause of action.” Johnson v. Railway Express Agency, Inc.,

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421 U.S. 454, 463 (1975). Furthermore, in the context of borrowing state statutes of

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limitations to govern federal causes of action, the Supreme Court has held that, “In

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virtually all statutes of limitations the chronological length for the limitation period is

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interrelated with provisions regarding tolling, revival, and questions of application.

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Courts thus should not unravel state limitations rules unless their full application would

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defeat the goals of the federal statute at issue.” Hardin v. Straub, 490 U.S. 536 (1989).

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At least one commentator has recommended that federal courts apply 15 U.S.C. § 16(i) to

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RICO civil enforcement claims. Carli McNeill, Note, Seeing the Forest: A Holistic View

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of the Rico Statute of Limitations, 85 Notre Dame L. Rev. 1231, 1260 (2010). Justice

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Scalia has also recommended that when courts adopt an analogous claim’s statute of

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limitations they should adopt it “whole, with all its accoutrements.” Klehr v. A.O. Smith

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Corp., 521 U.S. 179, 196 (1997) (Scalia, J, concurring in part and concurring in the

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judgment).

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The Court concludes that the tolling provision in 15 U.S.C. § 16(i) applies to the

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RICO civil enforcement provisions. The Supreme Court did not arbitrarily select the

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Clayton Act’s statute of limitations for RICO civil enforcement cases; it chose the

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statutory scheme most similar to RICO claims. The Court found that the Clayton Act and

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RICO both are “designed to remedy economic injury by providing for the recovery of

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treble damages, costs, and attorney’s fees.” Malley-Duff, 483 U.S. at 150-51. If the

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similarity of the statutes provides a basis for adopting the Clayton Act’s limitations

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period, it also provides a basis for adopting the tolling provision that is an integral part of

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that limitations period. Defendants have identified no distinction between Clayton Act

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and RICO violations that would suggest the tolling provision is suited only to Clayton

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Act remedies. The provision was designed by Congress to afford private litigants the

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benefits of prior government litigation, thereby conserving judicial resources. S. Rep.

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No. 84-6192, reprinted in 1955 U.S.C.C.A.N. 2328, 2332. That rationale applies equally

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well to RICO civil enforcement actions.

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“accoutrements” by applying the chronological length of the limitations period while

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ignoring statutory provisions clearly designed to alter that length.

The Court will not unravel interrelated

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Because the tolling provision applies, the Court finds that the statute of limitations

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was tolled as of February 21, 2008, the date of Defendant’s indictment. Even if the

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injury was discovered on the date of the sale, May 5, 2005, the statute of limitations had

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not run by February 21, 2008.

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IT IS ORDERED that Defendants’ motions to dismiss (Docs. 16, 18) are denied.

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Dated this 12th day of February, 2013.

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