Tolling

Superficially, the “discovery of injury and pattern” rule was revolutionary because it tied accrual to something other than a plaintiff’s discovery of injury. In their practical applications, however, equitable tolling principles largely eviscerated any material distinction between the “discovery of injury” and “discovery of injury and pattern” rules. As the Supreme Court noted in Rotella:

In rejecting pattern discovery as a rule, we do not unsettle the understanding that federal statutes of limitations are generally subject to equitable principles of tolling [citation omitted], and where a pattern remains obscure in the face of a plaintiff’s diligence in seeking to identify it, equitable tolling may be one answer to the plaintiff’s difficulty. . . . [Citation omitted.] The virtue of relying on equitable tolling lies in the very nature of such tolling as the exception, not the rule.

Id. at 560-61. Unlike accrual, that postpones the running of the statute of limitations until discovery of injury, a tolling doctrine, such as fraudulent concealment or duress, suspends the statute of limitations after it has begun to run. In a RICO claim based upon acts of extortion, the victim’s RICO claim usually accrues the first time the plaintiff pays money in response to an unlawful threat. By paying money in response to an unlawful threat, the plaintiff is clearly aware of his injury and extortion usually presents threats of indefinite duration (i.e., open-ended patterns of racketeering). For example, the threat pay me $1000 per week or I’ll break your legs, is an open-ended pattern based on a threat of indefinite duration. As soon as the plaintiff fails to pay $1000 per week, his legs will be broken regardless of whether that failure to pay occurs next week or in ten years. Thus, the statute of limitations begins to run as soon as the victim makes the first extorted payment. Suppose further, however, that after a year, the victim threatens to sue or report the extortion to the police, and the defendant replies: “if you report me or sue me, I’ll kill your whole family.” Under these circumstances, the four-year limitations period likely would have run for the first year of the scheme, but would have been tolled or suspended thereafter based on the defendant’s additional threat to kill the victim’s family if the victim brought a claim or filed a report. If the defendant were later arrested and jailed on unrelated charges, and the duress was then removed, the statute of limitations would restart, and the plaintiff would have only three years from the defendant’s imprisonment to bring his civil RICO claim.

The tolling doctrine of fraudulent concealment combined with the “discovery of injury” rule essentially reaches the same result as the “discovery of injury and pattern” rule. Under fraudulent concealment, the running of the statute of limitations is tolled when a defendant engages in some misleading, deceptive or otherwise contrived action or scheme, in the course of committing the wrong, that is designed to mask the existence of a cause of action. Riddell v. Riddell Washington Corp., 866 F.2d 1480, 1491 (D.C. Cir. 1989). A defendant could affirmatively conceal a cause of action by creating false invoices, two sets of books, or by simply lying. In short, for fraudulent concealment to apply, the defendant must simply do something of an affirmative nature designed to prevent discovery of the cause of action. Even if there is an affirmative act of fraudulent concealment, however, the running of the statute of limitations will not be tolled if the defendant can establish that the cause of action could have been discovered if the plaintiff had exercised reasonable diligence. Id. In Klehr, the Supreme Court affirmed the principle that a civil RICO plaintiff cannot take advantage of the doctrine of fraudulent concealment unless the plaintiff has exercised reasonable diligence in discovering the claim. 521 U.S. at 195-96.

Thus, assuming the plaintiff exercises reasonable diligence, the statute of limitations will be tolled (even if the plaintiff is aware of its injury but is unaware that the injury is the result of a pattern of racketeering activity) if the defendant engaged in some affirmative act to conceal the existence of the scheme to defraud. In the context of civil RICO claims based on schemes to defraud, seldom is a scheme to defraud committed in an open and notorious manner. To be effective, schemes to defraud must generally be concealed from the victim, so the doctrine of fraudulent concealment frequently postpones the statute of limitations under such circumstances.

If a plaintiff intends to rely on fraudulent concealment to toll the running of the statute of limitations, the plaintiff must plead the fraudulent concealment with particularity. Dummar v. Lummis, 543 F.3d 614, 621 (10th Cir. 2008).

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