Smith et al v. Allred et al
Filing
36
MEMORANDUM OPINION AND ORDER granting in part and denying in part defendants' 8 MOTION to Dismiss 1 Complaint; granting as to Plaintiffs' RICO claims based on acts committed before 3/14/2011, including plaintiffs' racketeering co unts numbered 1-19, and plaintiffs' § 1983 claims based on acts committed before 3/14/2013, including plaintiffs' counts numbered 1-36; denying all other respects to defendants' motion to dismiss. Signed by Judge John T. Copenhaver, Jr. on 3/31/2016. (cc: counsel of record; any unrepresented parties) (tmh)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF WEST VIRGINIA
AT CHARLESTON
CHRISTOPHER MACCORKLE SMITH,
and A.C.R. PROMOTIONS, INC.,
d/b/a Rough N’ Rowdy Brawl
d/b/a Ruckus in the Cage,
Plaintiffs,
v.
Civil Action No. 2:15-cv-06026
STEVEN A. ALLRED, individually
and in his official capacity,
DOUGLAS E. PAULEY, individually
and in his official capacity,
and BRIAN SIMPSON, individually
and in his official capacity,
Defendants.
MEMORANDUM OPINION AND ORDER
Pending is defendants’ motion to dismiss, filed July
6, 2015.
Background
Plaintiff A.C.R. Promotions, Inc., (“A.C.R.”) is a
West Virginia corporation engaged in the business of hosting and
promoting professional, semi-professional, and amateur combat
sports events, including both boxing and mixed martial arts
matches.
A.C.R. promotes events in West Virginia, as well as in
Virginia, North Carolina, Tennessee, Georgia, Alabama, and
Kentucky.
Plaintiff Christopher MacCorkle Smith (“Smith”) is
the president and owner of A.C.R.
He has been a licensed fight
promoter in West Virginia since 1996.
A.C.R.’s events in West Virginia are subject to
regulation and oversight by the West Virginia State Athletic
Commission (“the Commission”).1
The Commission has broad
authority to “issue and revoke [a] license to conduct, hold or
give boxing or sparring matches or exhibitions,” and “[n]o
boxing, sparring or exhibition may be conducted, held or given
within the state except pursuant to the commission's authority.”
W. Va. Code § 29-5A-3.
“Every license is subject to rules the
commission may prescribe.”
Id.
“Each member of the commission
[has] the privilege of being present at all exhibitions and
matches without charge therefor, and [must], when present, see
that the rules are strictly observed.”
W. Va. Code § 29-5A-16.
“[I]n the event that no member of the commission can be present,
the commission may appoint an inspector to be present . . .
which inspector [has] the same privilege . . . [as] a member of
the commission.”
without pay.”
Id.
“The [Commission’s] members . . . serve
W. Va. Code § 29-5A-1.
Defendants Steven A.
Allred (“Allred”), Douglas E. Pauley (“Pauley”), and Brian
1
Prior to 1999, the West Virginia State Athletic Commission was
called the West Virginia State Boxing Commission. See W. Va.
Code § 29-5A-1 (“The State Boxing Commission, heretofore
created, is hereby continued and renamed the State Athletic
Commission.”).
2
Simpson (“Simpson”)(collectively “the commissioners”) are either
current or former members of the Commission.
Plaintiffs contend that, after the death of
Commissioner Frank Hartenstein in 2008, “the West Virginia
Athletic Commission . . . became corrupted . . . and members of
the Commission [became] focused . . . on personal gain and
graft.”
Pl. Compl. ¶ 16-17.
They allege that, starting in
March 2009, the commissioners began using the power of their
official positions to “extort[] property and money” from the
plaintiffs.
Id. ¶ 26.
Specifically, plaintiffs charge the
commissioners with demanding fees in excess of those authorized
by the relevant state statute; hiring more officials (who must
be paid by fight promoters) than necessary or required;
demanding “VIP Passes” for family members, friends, business
associates and political allies; forcing promoters to pay fees
to the commissioners’ family members; and unethically assigning
themselves as judges and referees in prominent matches.
Id. ¶
17.
The plaintiffs initiated this action on May 11, 2015.
They contend that the commissioners’ conduct violated the
Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18
U.S.C. § 1961 et seq, through a pattern of violations of the
Hobbs Act, 18 U.S.C. § 1951 et seq, and the Federal Wire Fraud
3
Act, 18 U.S.C. § 1343 et seq.
They also claim that the
commissioners’ actions deprived them of their civil rights in
violation of 42 U.S.C. § 1983 (“Section 1983”).
In their
complaint, the plaintiffs set forth 61 specific counts of
“Racketeering Activity,” the earliest of which occurred on March
6, 2009, Pl. Compl. at * 10,2 and the latest on March 7, 2015,
id. at * 39.
These counts detail the commissioners’ alleged
“extort[ion] [of] property and money from Plaintiffs in
violation of [the Hobbs Act],” id. ¶ 26, as well as a small
number of Wire Fraud allegations.
It is further alleged that
each of these counts describes “specific racketeering activity .
. . prohibited by RICO.”
Id. ¶ 32.
Finally, plaintiffs assert
that “all actions that amount to RICO violations are also civil
rights violations . . . that have the effect of denying the
Plaintiffs of their civil rights under color of State law” and
therefore also constitute violations of Section 1983.
The commissioners have moved to dismiss.
Id. ¶ 80.
They argue
that plaintiffs’ claims are barred by the relevant statutes of
limitations.
In the alternative, they invoke the statutory
immunity provided by W. Va. Code § 55-7C-1.
2
The “Racketeering Activity Counts” set forth in the complaint
are interspaced among the complaint’s numbered paragraphs, but
are not assigned a paragraph number. Instead they are
independently numbered.
4
As specified by federal statute, “[t]he district
courts shall have original jurisdiction of all civil actions
arising under the Constitution, laws, or treaties of the United
States.”
28 U.S.C. § 1331.
Both RICO and Section 1983
expressly provide a cause of action for private citizens.
Accordingly, the court is properly invested with jurisdiction.
The Motion to Dismiss Standard
Federal Rule of Civil Procedure 8(a)(2) requires a
plaintiff’s complaint to contain “a short and plain statement of
the claim showing . . . entitle[ment] to relief.”
Fed. R. Civ.
P. 8(a)(2); Erickson v. Pardus, 551 U.S. 89, 93 (2007).
Rule
12(b)(6) correspondingly permits a defendant to challenge a
complaint when it “fail[s] to state a claim upon which relief
can be granted . . . .”
Fed. R. Civ. P. 12(b)(6).
The required “short and plain statement” must provide
“‘fair notice of what the . . . claim is and the grounds upon
which it rests.’”
Bell Atlantic Corp. v. Twombly, 550 U.S. 544,
545 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957),
overruled on other grounds, Twombly, 550 U.S. at 563); see also
Anderson v. Sara Lee Corp., 508 F.3d 181, 188 (4th Cir. 2007).
The showing of an “entitlement to relief” must amount to “more
than labels and conclusions . . . .”
5
Twombly, 550 U.S. at 555.
“[A] formulaic recitation of the elements of a cause of action
will not do.”
Id.; Giarratano v. Johnson, 521 F.3d 298, 304
(4th Cir. 2008).
To survive a motion to dismiss, “a complaint
must contain sufficient factual matter, accepted as true, to
‘state a claim to relief that is plausible on its face.’”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly,
550 U.S. at 570); see also Monroe v. City of Charlottesville,
579 F.3d 380, 386 (4th Cir. 2009).
When evaluating the motion, a district court is
required to “‘accept as true all of the factual allegations
contained in the complaint . . . .’”
Erickson, 551 U.S. at 94
(quoting Twombly, 550 U.S. at 555-556); see also South Carolina
Dept. Of Health And Environmental Control v. Commerce and
Industry Ins. Co., 372 F.3d 245, 255 (4th Cir. 2004) (quoting
Franks v. Ross, 313 F.3d 184, 192 (4th Cir. 2002)).
Factual
allegations are to be distinguished from legal conclusions,
which the court need not accept as true.
Iqbal, 556 U.S. at 678
(“the tenet that a court must accept as true all of the
allegations contained in a complaint is inapplicable to legal
conclusions”).
The court must also “draw[] all reasonable . . .
inferences from th[e] facts in the plaintiff’s favor . . . .”
Edwards v. City of Goldsboro, 178 F.3d 231, 244 (4th Cir. 1999).
6
Discussion
The court addresses the defendants’ arguments for
dismissal.
A. Immunity under W. Va. Code § 55-7C-1
First, defendants argue that W. Va. Code § 55-7C-1, et
seq., grants them immunity from the claims in this lawsuit.
Section 55-7C-3 states as follows:
[A] qualified director shall not be held personally
liable for negligence, either through act or omission,
or whether actual or imputed, in the performance of
managerial functions performed on behalf of a
volunteer organization or entity: Provided, That this
section shall not exempt a qualified director from
liability when he or she is found to be grossly
negligent in the performance of his or her duties.
Section 55-7C-2(3) defines a “qualified director” as “an
individual who serves without compensation for personal services
as an officer, member or director of a board, commission,
committee, agency or other nonprofit organization which is a
volunteer organization or entity.”
A “volunteer organization or
entity” includes “[t]he state or any political subdivision or
subdivisions thereof.”
W. Va. Code § 55-7C-2(4).
And
“managerial function” is defined to include “the act or acts of
a qualified director, whereby such qualified director, through
direction, regulation or administration, exercises government
7
[sic], control, or superintendence of the affairs of a volunteer
organization or entity.”
W. Va. Code § 55-7C-2(1).
Defendants claim that the Commission, as an arm of the
state, is a “volunteer organization or entity,” that the
commissioners are therefore “qualified directors,” and that this
lawsuit arises from conduct performed while fulfilling
“managerial functions.”
Defendants are not immune under W. Va. Code § 55-7C-3,
however, because the statute provides immunity only from
negligence.
Section 55-7C-3 states that directors “shall not be
held personally liable for negligence,” and the provision does
not extend even to gross negligence.
W. Va. Code § 55-7C-3
(“[T]his section shall not exempt a qualified director from
liability when he or she is found to be grossly negligent in the
performance of his or her duties.”).
The statute does not clarify whether “negligence”
refers only to the tort of negligence, or to any liability from
negligent conduct.
The court will review plaintiffs’ claims to
determine whether any may succeed upon proof of merely negligent
conduct.
8
The complaint first alleges that defendants violated
the RICO Act, which prohibits persons from “conduct[ing] or
participat[ing] . . . in the conduct of [an] enterprise’s
affairs through a pattern of racketeering activity.”
U.S.C. § 1962.
See 18
The statute defines “racketeering activity” as
any one of a list of crimes, see 18 U.S.C. § 1961, and clarifies
that a “pattern” of such activity “requires at least two acts of
racketeering activity” within ten years of each other.
U.S.C. § 1961.
18
Courts often refer to the enumerated
“racketeering activity” crimes as RICO “predicate acts.”
One possible predicate act is a violation of the Hobbs
Act, 18 U.S.C. § 1951, a statute that criminalizes “extortion,”
defined as “the obtaining of property from another, with his
consent, induced by wrongful use of actual or threatened force,
violence, or fear, or under color of official right.”
§ 1951.
18 U.S.C.
To show that defendants engaged in a “pattern of
racketeering activity,” plaintiffs allege that defendants
committed sixty violations of the Hobbs Act in “extort[ing]
money and other things of value from Plaintiffs” by using “the
power of their official offices.”3
3
Pl. Compl. ¶ 16.
Plaintiffs include sixty-one “Racketeering Activity Counts,” as
well as one additional, non-numbered claim of racketeering
activity in ¶¶ 33-45, for a total of sixty-two violations. As
discussed below, Count 56 alleges a violation of 18 U.S.C. §
9
To show that a defendant has violated the Hobbs Act by
obtaining property under color of official right, the government
in a criminal case must demonstrate that “a public official has
obtained a payment to which he was not entitled, knowing that
the payment was made in return for official acts.”
United States, 504 U.S. 255, 268 (1992).
Evans v.
Thus, courts have
described the core of a Hobbs Act violation as “a quid pro quo”
between the official and a payor.
United States v. Hairston, 46
F.3d 361, 365 (4th Cir. 1995); see also United States v. Ellis,
91 F.3d 135, at *5 (4th Cir. 1996) (unpublished)(“In McCormick
[v. United States, 500 U.S. 257 (1991),] . . . the Supreme Court
held that a quid pro quo jury instruction is required under the
Hobbs Act in cases where a person is alleged to have acted under
the color of official right and received a ‘campaign
contribution’ in return for the performance of, or abstaining
from an official act. . . . Thereafter, in Evans, the Supreme
Court extended the holding of McCormick to non-campaign
contribution cases.”).
In discussing the “quid pro quo” requirement, cases
appear to require either knowledge that a payment was made in
return for an official act, or intent that it be so made.
1343, the Wire Fraud statute, not of the Hobbs Act, and the
violations described in ¶¶ 33-45 also allege a Wire Fraud
violation.
10
See
Hairston, 46 F.3d at 365 (stating a requirement that an
“official has obtained a payment . . . knowing that the payment
was made . . . for official acts.”)(emphasis added)(quoting
Evans, 504 U.S. at 268); see also Hairston, 46 F.3d at 365 (“The
requirement of a quid pro quo means that . . . a public official
. . . intends the payor to believe that absent payment the
official is likely to abuse his office . . . to the detriment .
. . of the prospective payor or to give the prospective payor
less favorable treatment.”)(emphasis added)(quoting Evans, 504
U.S. at 274)(Kennedy, J., concurring).
The Fourth Circuit’s
recent opinion in United States v. McDonnell, which reviewed
non-Hobbs-Act cases to inform its understanding of the quid pro
quo requirement, appears to have held that intent is required.
792 F.3d 478, 514 (4th Cir. 2015), cert. granted 136 S.Ct. 891
(2016)(“[T]he term ‘quid pro quo’ refers to ‘an intent on the
part of the public official to perform acts on his payor’s
behalf.’”)(quoting United States v. Jefferson, 674 F.3d 332, 358
(4th Cir. 2012)); McDonnell, 792 F.3d at 518 (“Next we turn to
whether the Government presented evidence sufficient to support
a conclusion that there was a corrupt quid pro quo, ‘a specific
intent to give or receive something of value in exchange for an
official act.’”)(quoting United States v. Sun-Diamond Growers of
California, 526 U.S. 398, 404-05 (1999)); but see McDonnell, 792
F.3d at 514 (approving of defendant’s Hobbs Act jury instruction
11
stating that defendant “must have ‘obtained a thing of value to
which he was not entitled, knowing that the thing of value was
given in return for official action.’”).
Because a Hobbs Act violation requires acceptance of a
payment with knowledge that it has been made in return for an
official act, or intent that it be so made, negligent conduct
obviously cannot ground a conviction under the statute.
See,
e.g., Negligence, Black’s Law Dictionary (10th ed.
2014)(defining “negligence,” in part, as “[t]he failure to
exercise the standard of care that a reasonably prudent person
would have exercised in a similar situation”); General
Requirements of Culpability, Model Penal Code § 2.02 (stating
that negligence requires only that a person “should be aware of
a substantial and unjustifiable risk”).
An official who accepts
a payment with either knowledge or intent that the payor
believes an official act has been purchased goes beyond merely
failing to exercise due care.
The commissioners are thus not
immune from any RICO claims stemming from Hobbs Act violations.
The complaint also includes an additional, nonnumbered count, see Pl. Compl. ¶ 45, as well as Racketeering
Count 56, which both allege violations of the Federal Wire Fraud
Act, 18 U.S.C. § 1343, 1346.
These violations would trigger
12
recovery under the RICO statute in the same manner as the Hobbs
Act.
The Wire Fraud Statute states that
Whoever, having devised or intending to devise any
scheme or artifice to defraud, or for obtaining money
or property by means of false or fraudulent pretenses,
representations, or promises, transmits or causes to
be transmitted by means of wire, radio, or television
communication in interstate or foreign commerce, any
writings, signs, signals, pictures, or sounds for the
purpose of executing such scheme or artifice, shall be
fined under this title or imprisoned not more than 20
years, or both.
18 U.S.C. § 1343.
“To establish a scheme to defraud, ‘the
government must prove that the defendant[ ] acted with the
specific intent to defraud.’”
U.S. v. Wynn, 684 F.3d 473, 478
(4th Cir. 2012)(quoting United States v. Godwin, 272 F.3d 659,
666 (4th Cir. 2001))(emphasis in original); see also United
States v. Stalnaker, 571 F.3d 428, 436 (5th Cir. 2009)(“Wire
fraud is a specific-intent crime requiring proof that the
defendant knew the scheme involved false representations, which
related to material information.”)(internal quotation marks and
citations omitted).
Because at least one element of Wire Fraud
requires proof of specific intent, defendants cannot commit it
through negligence alone.
Thus, the commissioners are not
immune from any RICO claims based on these violations.
Plaintiffs also allege violations of 42 U.S.C. § 1983.
The court notes that plaintiffs are not completely clear as to
13
the constitutional or statutory provision(s) that ground their §
1983 claims, but defendants have failed to raise any questions
about the claims on that basis.
The complaint states the
following as to the § 1983 claims:
80. All actions that amount to RICO violations are
also civil rights violations in that they have the
effect of denying the Plaintiffs of their civil rights
under color of State law pursuant to 42 U.S.C. § 1983.
81. The various specific acts of harassment such as
destroying or attempting to destroy Plaintiffs'
business, deliberately sabotaging the Williamson
television presentation, and making it virtually
impossible for Plaintiffs to engage in their legal
business of promoting MMA events all similarly
constitute the denial of Plaintiff’s civil rights
under color of State law pursuant to 42 U.S.C. §1983.
Pl. Compl. ¶ 80-81.
The claims appear to focus on RICO
violations themselves, as well as the Hobbs Act and Wire Fraud
Act violations supporting the RICO claims.
The complaint’s
language may also suggest that plaintiffs suffered
constitutional violations, the more usual origin of § 1983
claims.
To the extent that the § 1983 violations are based on
the RICO claim, they must be proven based on the violations
giving rise to that claim - a pattern of Hobbs Act or Wire Fraud
violations.
Thus, the commissioners have no immunity from any §
1983 claim based on violations of the RICO statute.
14
Similarly,
to the extent that the § 1983 claims are based directly on the
violations underlying the RICO claim, rather than the RICO claim
itself, those violations also plainly require conduct more
culpable than negligence, as previously discussed.
If the § 1983 claims refer to constitutional
violations, the most likely provision to be implicated would be
the Due Process Clause of the Fourteenth Amendment.
Pl. Compl.
¶ 81 (noting “acts of harassment such as destroying or
attempting to destroy Plaintiffs' business . . . and making it
virtually impossible for Plaintiffs to engage in their legal
business”).
Because “the Due Process Clause is simply not
implicated by a negligent act of an official causing unintended
loss of or injury to life, liberty, or property,” Jean v.
Collins, 221 F.3d 656, 660 (4th Cir. 2000)(Wilkinson, J.,
concurring)(quoting Daniels v. Williams, 474 U.S. 327, 328
(1986)), plaintiffs could not succeed on such a claim based on a
finding of negligence alone.
Defendants counter that they “attempted to follow the
intent of West Virginia law to secure individuals to officiate .
. . and to compensate those individuals at market rates to
further that purpose.”
Def. Repl. at *9.
Thus, in defendants’
view, the complaint “amounts to a claim of negligent performance
of official duties . . . .”
Id.
15
Defendants’ statement that they acted in good faith,
however, does not convert plaintiffs’ causes of action into
negligence claims.
Cf. Weigle v. Pifer, No. 2:14-CV-15087, 2015
WL 5972433, at *14 (S.D.W. Va. Oct. 14, 2015)(“[A] mere
allegation of negligence does not turn an intentional tort into
negligent conduct.”)(quoting Benavidez v. United States, 177
F.3d 927, 931 (10th Cir.1999)).
The court thus rejects defendants’ claim of immunity
under state law.
B. Statutes of Limitations
Defendants also argue that plaintiffs’ claims under
both RICO and Section 1983 are time-barred.
1.
RICO Claims
“The statute of limitations on private civil RICO
claims is four years, beginning on the date the plaintiff
‘discovered, or should have discovered, the injury.’”
CVLR
Performance Horses, Inc. v. Wynne, 792 F.3d 469, 476 (4th Cir.
2015) cert. denied sub nom. Marsh v. Wynne, 136 S. Ct. 693
(2015) and cert. denied sub nom. Foster v. Wynne, 136 S. Ct. 693
(2015)(quoting Potomac Elec. Power Co. v. Elec. Motor & Supply,
Inc., 262 F.3d 260, 266 (4th Cir.2001)).
16
See also Potomac Elec.
Power, 262 F.3d at 266 (“Since PEPCO filed its complaint on July
29, 1998, the application of the statute of limitations
essentially turns on the question of whether, with respect to
each alleged injury, PEPCO knew or should have known of its
injury prior to July 29, 1994.”).
This case was brought on March 14, 2015,4 and
plaintiffs have alleged sixty-two RICO violations, see supra
note 3, beginning on March 6, 2009 and continuing until March 7,
2015.
Under the rule stated in Wynne and Potomac Elec. Power,
plaintiffs may not recover for any injuries that they
“discovered, or should have discovered,” before March 14, 2011.
Plaintiffs allege that the defendants made direct, clear demands
of money or property, and plaintiffs do not suggest that they
4
Although the complaint was filed in this court on May 11, 2015,
plaintiffs gave the state notice of the lawsuit pursuant to W.
Va. Code § 55-17-3 on March 14, 2015, see Pl. Compl. ¶ 14. The
statute dictates that “any applicable statute of limitations is
tolled for thirty days from the date the notice is provided and,
if received by the government agency as evidenced by the return
receipt of the certified mail, for thirty days from the date of
the returned receipt.” § 55-17-3(a)(2). Although plaintiffs
have not presented any argument regarding the state statute, or
any direct evidence of the date of a return receipt, defendants
appear to agree, in their briefing of this motion, that March 14
is the relevant date for determining which claims are timely.
See Def. Mem. in Supp. of Mot. to Dismiss at *2 (“Plaintiffs
filed this instant action on March 14, 2015.”), *10
(“Plaintiffs’ applicable statutes of limitations began to run on
March 6-7, 2009 and Plaintiffs did not file this action until
March 14, 2015, more than six years later.”). The court thus
accepts, for purposes of this motion, that the lawsuit was filed
on March 14, 2015.
17
were ignorant of any of the violations.
Thus, each violation
was “discovered” at the time it was committed.
Consequently,
plaintiffs’ racketeering counts 1-19, which cover the period up
to January 15, 2011, are time-barred.
Count 20, which took
place on February 3-4 of 2012, as well as all following
allegations, remain operative.
Both parties argue that the limitations rule should
not apply in this straightforward way.
Plaintiffs contend that
“[t]he entire history of the violations has been pled to show
that this is an intentional, ‘continuing tort’ that began in
2009 and continued through 2015.”
Dismiss at *3.
Pl. Resp. to Def. Mot. to
They argue that West Virginia state law holds
“that when there is a ‘continuing tort,’ the statute of
limitations begins to run only when the most recent activity
occurs.”
Id.
As the defense points out, the United States Supreme
Court has explicitly considered plaintiffs’ argument.
In Klehr
v. A.O. Smith Corp., the Court reviewed a rule developed by the
Third Circuit, which stated that if, “as a part of the same
pattern of racketeering activity, there is further injury to the
plaintiff or further predicate acts occur, [...] the accrual
period shall run from the time when the plaintiff knew or should
have known of the last injury or the last predicate act which is
18
part of the same pattern of racketeering activity.”
521 U.S.
179, 186 (1997)(quoting Keystone Ins. Co. v. Houghton, 863 F.2d
1125, 1130 (3d Cir. 1988)).
The “last predicate act” rule
allowed a plaintiff to sue based on every action within a
racketeering pattern so long as one of the actions fell within
the last four years.
See Klehr, 521 U.S. at 186-87 (“[W]e
assume . . . that this rule means that as long as [the
defendants] committed one predicate act within the limitations
period (i.e., the four years preceding suit), the [plaintiffs]
can recover, not just for any added harm caused them by that
late-committed act, but for all the harm caused them by all the
acts that make up the total ‘pattern.’”).
The “last predicate
act” theory, in short, is precisely the rule proposed by
plaintiffs.
See Pl. Resp. to Def. Mot. to Dismiss at *3 (“[T]he
statute of limitations begins to run only when the most recent
activity occurs.”).
The Supreme Court held in Klehr, however, that the
Third Circuit’s “last predicate act” rule “is not a proper
interpretation of the law.”
Id. at 187.
The Court noted, in
particular, that “a series of predicate acts (including acts
occurring at up to 10–year intervals) can continue
indefinitely,” and so the rule, “in principle, lengthens the
limitations period dramatically. It thereby conflicts with a
19
basic objective — repose — that underlies limitations periods.”
Id.
Plaintiffs’ proposed rule, which is essentially the “last
predicate rule” rejected in Klehr, thus fails.
Defendants contend, on the other hand, that all of
plaintiffs’ RICO injuries, even those within the last four
years, are time-barred because the pattern of activity began
more than four years ago.
See Def. Mem. in Supp. of Mot. to
Dismiss at *8 (“[Because] Plaintiffs' [actions] accrued starting
in March of 2009, the applicable statutes of limitations in all
of Plaintiffs' claims expired more than two years prior to the
filing of Plaintiffs' . . . Complaint. For this, and the reasons
stated above, Plaintiffs claims must be dismissed as time
barred.”).
Defendants do not, however, cite any doctrine
supporting this theory, and a great deal of authority directly
contradicts it.
See, e.g., Lehman v. Lucom, 727 F.3d 1326, 1331
(11th Cir. 2013)(“[I]f a new RICO predicate act gives rise to a
new and independent injury, the statute of limitations clock
will start over for the damages caused by the new act.”);
Grimmett v. Brown, 75 F.3d 506, 512 (9th Cir. 1996)(“[A] cause
of action accrues when new overt acts occur within the
limitations period, even if a conspiracy was formed and other
acts were committed outside the limitations period.”); Klehr,
521 U.S. at 190 (“[S]ome Circuits have adopted a ‘separate
20
accrual’ rule in civil RICO cases, under which the commission of
a separable, new predicate act within a 4–year limitations
period permits a plaintiff to recover for the additional damages
caused by that act. . . . Thus, the Klehrs may point to new
predicate acts that took place after [the date four years before
the start of their lawsuit] . . . .”); cf. In re Cotton Yarn
Antitrust Litig., 505 F.3d 274, 290-91 (4th Cir. 2007)(“Thus, in
cases like this one involving allegations of ‘a price-fixing
conspiracy that brings about a series of unlawfully high priced
sales over a period of years, each overt act that is part of the
violation and that injures the plaintiff, e.g., each sale to the
plaintiff, starts the statutory period running again.’”)(quoting
Klehr, 521 U.S. at 189).5
5
These “separate accrual” doctrines are similar to the
distinctive version of the “continuing violation” doctrine that
the Fourth Circuit has applied outside the RICO context. “In
general,” under Fourth Circuit rules, “‘[t]o establish a
continuing violation [...] the plaintiff must establish that the
unconstitutional or illegal act was a [...] fixed and continuing
practice.’” Nat'l Advert. Co. v. City of Raleigh, 947 F.2d
1158, 1166 (4th Cir. 1991)(quoting Perez v. Laredo Junior
College, 706 F.2d 731, 733 (5th Cir. 1983)). “The challenged
action must [also] be repeated within the statute of limitations
period.” Nat'l Advert. Co., 947 F.2d at 1167. “If . . . the
statutory violation does not occur at a single moment but in a
series of separate acts and if the same alleged violation was
committed at the time of each act, then the limitations period
begins anew with each violation and only those violations
preceding the filing of the complaint by the full limitations
period are foreclosed.” Id.
The Fourth Circuit’s doctrine suggests that, because
plaintiffs’ claim is based on separate violations, each one
21
If defendants’ contrary analysis were accepted, a
racketeering operation could violate the law repeatedly and
indefinitely, immune from civil liability, if the victims failed
to sue within the first four years of its operation.
Defendants’ theory has no basis in any relevant legal materials,
and the court thus rejects it.
The court concludes that plaintiffs’ racketeering
counts 1-19 are time-barred, but that their RICO claim remains
viable on the basis of the other predicate acts described in the
complaint.
2.
Section 1983 Claims
Section 1983 claims are subject to the limitations
period applied by the forum state to personal injury actions.
Wilson v. Garcia, 471 U.S. 261, 280 (1985); see also Owens v.
Okure, 488 U.S. 235 (1989)(holding that “where a state has one
or more statutes of limitations for certain enumerated
intentional torts, and a residual statute for all other personal
injury actions . . . the residual or general personal injury
statute . . . applies” to Section 1983 claims).
In West
accrued separately rather than all of the claims accruing at the
time that the first injury occurred. Id. Again, this view is
consistent with the rules cited above.
22
Virginia, Section 1983 claims are subject to the two-year period
set forth in W. Va. Code § 55-2-12.
See e.g., Sattler v.
Johnson, 857 F.2d 224, 226-27 (4th Cir. 1988); Bell ex rel. Bell
v. Bd. of Educ. of County of Fayette, 290 F. Supp. 2d 701
(S.D.W.Va. 2003).
“[E]ven though the limitation period is borrowed from
state law, the question of when a cause of action accrues under
42 U.S.C. § 1983 remains one of federal law.”
Nasim v. Warden,
Maryland House of Correction, 64 F.3d 951, 955 (4th Cir.
1995)(en banc)(emphasis in original)(citing Cox v. Stanton, 529
F.2d 47, 50 (4th Cir. 1975)).
“[T]o determine the date of
accrual for a particular § 1983 claim, a court must look to the
common-law tort that is most analogous to the plaintiff's § 1983
claim and determine the date on which the limitations period for
this most analogous tort claim would begin to run.”
Owens v.
Baltimore City State's Attorneys Office, 767 F.3d 379, 389 (4th
Cir. 2014)(quoting Wallace v. Kato, 549 U.S. 384, 388 (2007)),
cert. denied sub nom. Baltimore City Police Dep't v. Owens, 135
S. Ct. 1893 (2015).
Based on the accrual of typical common-law
tort claims, “‘it is the standard rule that accrual [for § 1983
claims] occurs when the plaintiff has a complete and present
cause of action’ against a defendant — that is, when the
plaintiff knows or has reason to know of his injury.”
23
Owens,
767 F.3d at 389 (quoting Wallace v. Kato, 549 U.S. 384, 388
(2007)).
But the “standard rule” admits of a few exceptions.
For example, a section 1983 claim for a wrongful conviction does
not accrue until the conviction is invalidated, because claims
for malicious prosecution, which are “the closest analogy” in
tort law, do not accrue until “termination of the prior criminal
proceeding in favor of the accused.”
477, 486 (1994).
Heck v. Humphrey, 512 U.S.
Similarly, because they are analogous to the
tort of false imprisonment, section 1983 claims for wrongful
arrest do not accrue until the individual is released or his
detention becomes lawful.
Wallace, 549 U.S. at 389-92 (holding
that “false imprisonment consists of detention without legal
process, [and] a false imprisonment ends once the victim becomes
held pursuant to such process,” and that false imprisonment
claim brought by unlawfully arrested plaintiff accrued “when
[plaintiff] appeared before the examining magistrate and was
bound over for trial,” because his detention then became
legal)(emphasis in original).
The rule requiring courts to “look to the common-law
tort that is most analogous to the plaintiff's § 1983 claim”
originated somewhat recently.
See Heck v. Humphrey, 512 U.S.
477; Wallace v. Kato, 549 U.S. 384.
24
Traditionally, all § 1983
claims were said to accrue “when the plaintiff knows or has
reason to know of his injury.”
It is unclear whether the newer doctrine announced in
Heck and Wallace, requiring courts to look for tort-law
analogues of a plaintiff’s claims, governs § 1983 claims based
on violations of federal statutes rather than the Constitution.
Heck and Wallace devised an accrual point for constitutional
claims that have no natural accrual time, and did so by looking
to other laws with well-settled accrual rules.
But in cases
where a statutory violation grounds the § 1983 claim, the
statute, or accompanying judicial decisions, may well give a
clear answer to when the claim accrues, and the resort to tort
law may be unnecessary.
The Supreme Court suggested, however,
that Heck and Wallace flowed from deep connections between §
1983 and tort law.
See Heck, 512 U.S. at 483 (“We have
repeatedly noted that 42 U.S.C. § 1983 creates a species of tort
liability.
Over the centuries the common law of torts has
developed a set of rules to implement the principle that a
person should be compensated fairly for injuries caused by the
violation of his legal rights.
These rules, defining the
elements of damages and the prerequisites for their recovery,
provide the appropriate starting point for the inquiry under §
1983 as well.
Thus, to determine whether there is any bar to
25
the present suit, we look first to the common law of
torts.”)(internal citations and quotations omitted).
Reference
to tort rules may thus be required even where an underlying
federal statute provides a clear accrual rule that could be
transferred to a § 1983 claim based on a violation of that
statute.
To apply the most-analogous-tort rule, the court must
review plaintiffs’ claims.
The court described, above,
plaintiffs’ § 1983 claims, as well as the uncertainty about
their exact statutory or constitutional bases at this time.
See
Pl. Compl. ¶ 80-81 (stating that plaintiffs’ civil rights were
violated by “[a]ll actions that amount to RICO violations” as
well as “specific acts of harassment such as destroying or
attempting to destroy Plaintiffs' business, deliberately
sabotaging the Williamson television presentation, and making it
virtually impossible for Plaintiffs to engage in their legal
business”).
The complaint suggests that the § 1983 violations
flow from the RICO claim, the predicate acts underlying the RICO
claim, and possible constitutional claims, such as deprivations
of property in violation of the Fourteenth Amendment.
All of
the violations relate, however, to the officials’ wrongful
demands for plaintiffs’ money and assets, including requiring
cash payments and free tickets, and interference with
26
plaintiffs’ rights to their businesses and property.
As
described above, the acts arose from defendants’ abuse of their
government office.
These allegations of thievery and interference with
business assets are most similar to the common-law tort of
conversion.
See Restatement (Second) of Torts § 222A
(1965)(“Conversion is an intentional exercise of dominion or
control over a chattel which so seriously interferes with the
right of another to control it that the actor may justly be
required to pay the other the full value of the
chattel.”)(emphasis added).
In particular, the scenarios
described by plaintiffs appear analogous to conversion
accomplished by fraud or duress.
Restatement (Second) of Torts
§ 252A (1965)(“Consent to possession of a chattel obtained by
fraud or duress is not effective to prevent recovery for
trespass to the chattel or for conversion against any one other
than a bona fide purchaser of the chattel.”).
In this case, it is alleged that the officials
intentionally took money and other property, including tickets
and intangible rights to seating, from plaintiffs, thus
“intentional[ly]” “exercis[ing] . . . dominion or control over
[plaintiffs’] chattel[s].”
222A.
Restatement (Second) of Torts §
They did not give the property back at any time, and thus
27
“so seriously interfere[d] with the right of [plaintiffs] to
control it that the [defendants] may justly be required to pay
the other the full value.”
Id.
Moreover, the officials made
their demands based on a claim that they had the right to do so,
and threatened to destroy plaintiffs’ business if they did not
comply, see Pl. Compl. ¶ 16, thus “obtain[ing] by fraud or
duress” any “[c]onsent” they received “to possession of [the]
chattel[s].”
Restatement (Second) of Torts § 252A.
Although
some courts have held that the tort of conversion does not apply
to claims for general stolen funds that are not specifically
identifiable, see, e.g., Shahood v. Cavin, 154 Cal. App. 2d 745,
747 (1957), conversion is nevertheless the tort “most analogous
to” the claims in this case.
Traditionally, an action for conversion accrued at
the time of the conversion.
54 C.J.S. Limitations of Actions §
254 (2016)(“A cause of action for conversion ordinarily accrues
at, and the statute of limitations begin[s] to run from, the
date of the conversion, and according to some authority, this is
the rule even if the true owner is unaware that the chattel is
missing. . . . Moreover, the running of the limitations will not
be tolled because of fraudulent concealment where the plaintiff
was on notice or reasonably should have been on notice of the
alleged conversion.”); 18 Am. Jur. 2d Conversion § 105
28
(2016)(“Where an action is founded on a wrongful conversion of
goods, the statute of limitations generally begins to run from
the time of the conversion even if the conversion is not
discovered by the plaintiff until later.”).
Recent cases, on
the other hand, appear to hold that the cause of action accrues
when the injury is discovered.
See Dan B. Dobbs, Paul T. Hayden
and Ellen M. Bublick, The Law of Torts § 74 (2d ed.)(“In the
case of conversion of ordinary chattels, the older rule starts
the statute of limitations running at the time of conversion,
not at the time the conversion was or should have been
discovered.
However, a number of contemporary cases, sometimes
under the impetus of a statute, have supported the discovery
rule, holding that the cause of action accrues only when the
owner discovered or should have discovered the conversion.”).
In the present action, these two rules lead to the
same result.
Plaintiffs do not suggest that they were ignorant
of the commissioners’ demands.
They discovered the injuries
when they occurred, and so, under either rule, the cause of
action accrued at the time of the injuries.
The conclusion
would have been the same under the rule operative before Heck
and Wallace, which asked “when the plaintiff knows or has reason
to know of his injury.”
It also aligns with the rule for RICO
claim accrual, which is discussed above.
29
Thus, even if there is
a question of whether the Heck and Wallace decisions apply to
limitations on § 1983 claims that are based on statutory rather
than constitutional violations, the question is academic in this
case.
The inquiry does not end there, however.
With respect
to the § 1983 claims, the court must once again consider
plaintiffs’ argument that the entire set of violations was part
of a “continuing violation” under West Virginia’s rules for
limitations on actions, and that this rule saves their claims
from otherwise applicable time bars.
Such an argument may have
greater purchase for § 1983 claims than it does in the RICO
setting, as no case forecloses a § 1983 plaintiff from relying
on the continuing violation theory.6
Under West Virginia law, “continuing misconduct . . .
serves to toll the statute of limitations under the continuing
tort doctrine.”
Roberts v. W. Virginia Am. Water Co., 221 W.
Va. 373, 378 (2007).
“Where a tort involves a continuing or
6
Whether a § 1983 plaintiff may take advantage of West
Virginia’s “continuing violation” doctrine depends on whether it
is an accrual rule or a tolling rule. The distinction matters
because accrual rules are drawn from federal law, while tolling
rules are drawn from state law. See Wallace, 549 U.S. at 394
(noting that federal courts “have generally referred to state
law for tolling rules, just as we have for the length of
statutes of limitations”). Because the court concludes that
plaintiffs may not benefit from the West Virginia tolling
doctrine, however, there is no need to address this question.
30
repeated injury, the cause of action accrues at and the statute
of limitations begins to run from the date of the last injury or
when the tortious overt acts or omissions cease.”
Roberts v. W.
Virginia Am. Water Co., 221 W. Va. at 378 (quoting Graham v.
Beverage, 211 W.Va. 466 (2002)); see also EQT Gathering Equity,
LLC v. Fountain Place, LLC, No. 2:09-0069, 2011 WL 5419452, at
*3 (S.D.W. Va. Nov. 9, 2011)(discussing contours of doctrine).
Under this rule, a plaintiff may sue for an entire series of
continuing tort violations, so long as the last violation falls
within the limitation period.
Roberts, 221 W. Va. at 375.
Such
was the case in Graham v. Beverage, where defendant developers
installed a defective storm water drainage system, and then
continued, over time, to act negligently by failing to repair
it.
211 W.Va. at 476-77.
The court did “not find the
negligence claim time-barred because the alleged negligence of
the [developers] complained of by the [plaintiffs] constitutes
continuing wrongful conduct from which continuing injuries
emanate.”
Id. at 477.
West Virginia law has grappled with situations
comparable to the one at present, where a plaintiff alleges that
a multitude of illegal acts occurred over a period of time.
In
Copier Word Processing Supply, Inc. v. WesBanco Bank, Inc., the
Supreme Court of Appeals of West Virginia considered whether a
31
bank’s acceptance of hundreds of deposits from a secretary
repeatedly embezzling from her employer constituted a continuing
tort.
220 W. Va. 39, 40-42 (2006).
Largely on the authority of
DeRocchis v. Matlack, Inc., 194 W.Va. 417 (1995), the court in
Copier Word stated that “a ‘continuing cause of action’ is found
in ‘a situation where events, which for all practical purposes
are identical, occur repeatedly, at short intervals, in a
consistent, connected, rhythmic manner,’ and that ‘similar, but
separate’ injuries each give rise to a separate and distinct
cause of action.”
Copier Word, 220 W. Va. at 45 (quoting
DeRocchis, 194 W.Va. at 423 n. 4).
The court thus found that
the bank’s repeated acts – alleged as repeated torts of
conversion – “were carried out repeatedly over time, [but] each
conversion was a discrete act, a single transaction involving a
specifically individual negotiable instrument.”
Copier Word,
220 W. Va. at 46.
The Copier Word court drew a contrast between the
bank’s individual, separate acts, which were not a continuing
violation, and “instances where a wrongful act was sustained
over time, causing continuing damages.”
Id. at 44.
The court
looked, in particular, to the cases of Graham v. Beverage, 211
W.Va. at 476, and Handley v. Town of Shinnston, 169 W.Va. 617
(1982), both of which involved defectively-installed water
32
equipment that defendants negligently failed to repair over a
long period of time.
In both Graham and Handley, the
defendants’ actions essentially consisted of an ongoing act that
created continuing damages.
Copier Word, 220 W. Va. at 44
(noting that the cases involved “a wrongful act [that] was
sustained over time”)(emphasis added).
This feature of the
cases – of a single, continuing act as opposed to multiple,
separate acts – formed the basis for the explanation as to when
the continuing violation doctrine would be permitted.
West Virginia’s Supreme Court of Appeals has come to
similar conclusions in other cases involving discrete injuries
rather than an ongoing act.
See, e.g., Smith v. Raven Hocking
Coal Corp., 199 W. Va. 620 (1997)(coal mining company’s pattern
of blasting near farmer’s land should be viewed as a set of
separate acts, not as a single continuing violation); Auber v.
Jellen, 196 W. Va. 168 (1996)(doctor’s series of incorrect
diagnoses of a patient were separate acts, rather than a single
continuing violation); DeRocchis, 194 W.Va. 417, 423 n.4 (noting
that worker’s exposures to chemical fumes were “sporadic and
nonconsistent,” and thus “separate causes of action” rather than
a continuing violation).
The court has confronted at least one
case presenting a close call between separate, individual acts
and a single continuing act made up of “events, which for all
33
practical purposes are identical, occur repeatedly, at short
intervals, in a consistent, connected, rhythmic manner.”
See
Taylor v. Culloden Public Service Dist., 214 W. Va. 639
(2003)(holding that repeated discharges of waste water from
treatment facility over time constituted continuing tort); see
also Copier Word 220 W. Va. at 44, n.7 (discussing waste water
discharges in Taylor as “a continuing act”).
And perhaps
because of some difficulties in applying the rule neatly,
decisions of whether to use the doctrine have not always been
free of criticism.
See Copier Word 220 W. Va. at 49-50
(Starcher, J. dissenting); id. at 50 (Albright, J., dissenting).
In light of Copier Word and similar opinions such as
Auber and Raven Hocking Coal, however, the case at bar, which
alleges separate, repeated acts, rather than a single,
continuing act, may not benefit from the continuing injury
doctrine.
See W.W. McDonald Land Co. v. EQT Prod. Co., 983 F.
Supp. 2d 790, 811 (S.D.W. Va. 2013), opinion clarified (Jan. 21,
2014)(“The continuing tort theory will not apply to toll the
statute of limitations, even though the plaintiff brings tort
actions, where the injuries were multiple and periodic, not
continuing.”)(citing Copier Word, 220 W.Va. 39).
Plaintiffs
plainly allege specific, individual instances, all similar but
slightly different from one another, in which defendants took
34
their property or otherwise interfered with the running of their
business.
For example, some of plaintiffs’ counts allege
extortion of money – though in different amounts, see, e.g., Pl.
Compl. at *36 (officials charging four times permissible
amount); *38 (officials charging twice the permissible amount) –
and others allege demands for different types of property, see,
e.g., Pl. Compl. at *26 (alleging demand of VIP passes).
The
demands were made by different persons, and there were also time
periods of months or years between some of the demands.
See,
e.g., Pl. Compl. at *16 (no actions alleged between January 2011
and February 2012).
The events were not, in short, “events,
which for all practical purposes are identical, occur[ring]
repeatedly, at short intervals, in a consistent, connected,
rhythmic manner.”
Although the alleged actions in this case
formed an ongoing pattern, that was also true in Copier Word,
where the secretary embezzled money pursuant to a clear pattern
over time.
Copier Word, 220 W.Va. at 41 (“Copier alleges that,
over the years, Ms. Hendrickson repeated this process at least
721 times, embezzling approximately $472,000.00 . . . .”).
The
fact that defendants’ individual acts were part of a pattern or
scheme does not make them a single, continuing act rather than
“similar, but separate” acts.
Copier Word, 220 W. Va. at 45.
35
It is true that this case differs from Copier Word in
that the RICO statute allows plaintiffs to sue based on an
entire “pattern of racketeering activity” using one legal claim.
This quirk of the RICO law, however, does not change the
underlying nature of West Virginia’s continuing violation
doctrine.
The court in Copier Word focused heavily on the
character of the defendants’ acts themselves, rather than
whether they could be brought as one or many legal claims.
See
Copier Word 220 W. Va. at 45 (stating that “a ‘continuing cause
of action’ is found in a situation where events . . . occur
repeatedly . . . and . . . that ‘similar, but separate’ injuries
each give rise to a separate and distinct cause of action.”); 46
(“each conversion was a discrete act”); 44 (noting that doctrine
applies in “instances where a wrongful act was sustained over
time, causing continuing damages”)(emphasis added to all
quotations).
The contrary rule would grant the plaintiff’s
choice of legal theory a significance most undeserved.
For
example, if the Copier Word plaintiff had brought suit alleging
a conspiracy to commit all of the conversions, rather than for
the conversions themselves, the entire set of acts could then
form the basis for one legal claim.
To hold that conversions
may not use the tolling doctrine, but that conspiracy to commit
the same set of conversions may take advantage of it, would
elevate form over substance.
The same logic applies to the use
36
of the doctrine with a RICO claim rather than a set of
individual statutory violations.
The same observation applies to plaintiffs’ argument
that an allegation of Wire Fraud should allow them to take
advantage of West Virginia’s continuing violation doctrine.
Plaintiffs’ response to defendants’ motion drew particular
attention to one of the RICO predicate acts mentioned in the
complaint – the wire fraud alleged in Count 56:
Joanna Hardwick in connivance with the Defendants,
having devised a scheme or artifice to defraud, in
violation of 18 U.S.C. §§ 1343, obtained ten (10)
Rough N' Rowdy ringside VIP/Guest Passes by means of
false or fraudulent pretenses and representations
transmitted by interstate wire, to wit: a
representation that such tickets were required to be
provided to the West Virginia Athletic Commission
officials. Said demand was transmitted and or caused
to be transmitted by means of emails to Christopher M.
Smith, for the purpose of executing said scheme.
Pl. Compl. at *32-33.
Again, despite plaintiffs’
suggestion that this incident formed part of a larger plan
or scheme to defraud, the complaint alleges an individual
act of extortion in which ten tickets were procured.
It is
thus similar to one of the many conversions in the Copier
Word scheme.
As stated above, such a pattern does not
implicate the continuing violation doctrine.
37
Plaintiffs thus may not take advantage of the
continuing violations doctrine to toll the two-year statute of
limitations.
Because this case was filed on March 14, 2015,
plaintiffs may recover under § 1983 only for injuries suffered
on or after March 14, 2013.
This appears to exclude plaintiffs’
racketeering counts 1-36, while leaving intact counts 37-61,
along with any other miscellaneous, non-numbered events
occurring during the relevant time period, including the events
described in ¶¶ 39-45 of the complaint.
Conclusion
For the foregoing reasons, the court ORDERS that
defendants’ motion to dismiss should be, and it hereby is,
granted, with respect to the following:
Plaintiffs’ RICO claims based on acts committed before
March 14, 2011, including plaintiffs’ racketeering counts
numbered 1-19; and
Plaintiffs’ § 1983 claims based on acts committed before
March 14, 2013, including plaintiffs’ racketeering counts
numbered 1-36.
38
In all other respects, the court ORDERS that
defendants’ motion to dismiss should be, and it hereby is,
denied.
The Clerk is directed to transmit copies of this order
to all counsel of record and any unrepresented parties.
ENTER: March 31, 2016
John T. Copenhaver, Jr.
United States District Judge
39
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