The United States Supreme Court recently granted certiorari in a Fifth Circuit case dealing with the accrual of the four-year statute of limitations in civil RICO cases, as well as in an Eleventh Circuit case dealing with the issue of whether a whistleblower-plaintiff in a RICO conspiracy case must prove that the overt act by which he was injured was "an act of racketeering" (i.e., a predicate act). Both of these cases will be discussed at the Civil RICO Committee's business meeting during the ABA's Annual Meeting in Atlanta. This business meeting will take place on Monday, August 9 from 7:30 - 8:45 a.m.
In the Fifth Circuit case, Rotella v. Wood, 147 F.3d 438, 440 (5th Cir. 1998), cert. granted, 119 S. Ct. 1139 (1999), the Fifth Circuit joined the First, Second, Fourth, Seventh, and Ninth Circuits in holding that a RICO cause of action accrues upon the discovery of the RICO injury. Rotella declined to adopt the rule in the Eighth, Tenth, and Eleventh Circuits that a RICO cause of action accrues only upon the discovery of both the injury and the pattern of racketeering activity. Id. See also Klehr v. A.O. Smith Corp., 521 U.S. 179, 117 S. Ct. 1984, 1988-1989 (1997).
In 1997 the Supreme Court acknowledged, but declined to resolve, this split among the circuits in Klehr. Id. In that case, the Supreme Court invalidated the Third Circuit's approach, which required discovery of the last predicate act for accrual of a RICO cause of action. Id. It now appears certain that the accrual question will be finally resolved in its entirety.
In the Eleventh Circuit case, Beck v. Prupis, 162 F.3d 1090 (11th Cir. 1998), cert. granted, 119 S. Ct. 2046 (1999), Beck, a whistleblower-plaintiff, alleged that the defendants, directors of an insurance company, fired him based on false allegations relating to his job performance, alleging further that he was fired for discovering defendants' racketeering activity and thereby posing a threat to their illegal activities. Because Beck did not rely on the false reasons for his termination, he could not prove the predicate acts of mail or wire fraud (in the Eleventh Circuit, reasonable reliance is an essential element of the mail and wire fraud predicates to a civil RICO claim). Id. at 1097-1098. Thus, the Eleventh Circuit was called upon to decide the issue of whether a plaintiff bringing a civil RICO conspiracy claim must prove that the injury-producing overt act in furtherance of the conspiracy (the "fraudulent termination") was a predicate act. Id. at 1093. The Eleventh Circuit answered this question in the affirmative, and upheld the district court's grant of summary judgment to the defendants. Id.
In Beck, the Eleventh Circuit declined to follow cases from the Third, Fifth, and Seventh Circuits holding that a terminated whistleblower has standing to bring a claim under RICO's conspiracy provision, even if the whistleblower has no standing to bring a claim under RICO's substantive provisions. Id. at 1098, n.15. The Beck court also recognized the substantial debate among the circuits as to whether the overt act necessary for a RICO conspiracy must be a predicate act. Id. at 1098.
The Supreme Court's resolution of this issue will be significant in light of its fairly recent decision in Salinas v. United States, 522 U.S. 52, 118 S. Ct. 469 (1997). In Salinas, a criminal case, the Supreme Court unanimously decided that RICO's conspiracy provision does not require that the conspirator agree to commit personally the two or more predicate acts required for a substantive RICO violation. Rather, a RICO conspiracy conviction will be sustained if the conspirator knew about and agreed to facilitate the scheme.
The question remains to what extent the broad conspiracy principles articulated in Salinas apply to civil RICO claims. Beck distinguished civil and criminal conspiracy claims and specifically distinguished Salinas, holding that because a criminal RICO conspiracy has no overt act requirement, Salinas only applies to criminal RICO prosecutions. Id. at 1099 n.18. Thus, the Supreme Court's resolution of Beck will likely have a significant impact on civil RICO conspiracy claims.
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