ROTELLA v. WOOD et al.
certiorari to the united states
court of appeals for the fifth circuit
No. 98-896. Argued
November 3, 1999--Decided February 23, 2000
Petitioner
Rotella was admitted to a private psychiatric
facility in 1985 and discharged in 1986. In 1994, the facility's parent company
and one of its directors pleaded guilty to criminal fraud related to improper
relationships and illegal agreements between the company and its doctors. Rotella learned of the plea that same year, and in 1997 he
filed a civil damages action under the Racketeer Influenced and Corrupt
Organizations Act (RICO), claiming that respondents, doctors and related
business entities, had conspired to keep him hospitalized to maximize their
profits. RICO makes it criminal "to conduct" an "enterprise's
affairs through a pattern of racketeering activity," 18 U. S. C.
§1962(c). A "pattern" requires at least two acts of racketeering
activity, the last of which occurred within 10 years after the commission of a
prior act. §1961(5). A person injured by a RICO violation may bring a civil
RICO action. §1964(c). The District Court granted respondents summary judgment
on the ground that the 4-year limitations period for civil RICO claims, see Agency
Holding Corp. v. Malley-Duff &
Associates, Inc., 483
U. S. 143, 156 , had expired in 1990, four
years after Rotella admitted discovering his injury.
In affirming, the Fifth Circuit rejected Rotella's
argument that the limitations period does not begin to run until a plaintiff
discovers (or should have discovered) both the injury and the pattern of
racketeering activity.
Held:
The
"injury and pattern discovery rule" invoked by Rotella
does not govern the start of the limitations period for civil RICO claims. Pp.
3-11.
(a)
In Malley-Duff, this Court based its
choice of a uniform 4-year statute of limitations period for civil RICO on a
Clayton Act analogy, but did not decide when the period began to run. In Malley-Duff' s wake, some Circuits, like the
Fifth, applied an injury discovery accrual rule starting the clock when a
plaintiff knew or should have known of his injury, while others applied the
injury and pattern discovery rule that Rotella seeks.
This Court has rejected the Third Circuit's "last predicate act"
rule, Klehr v. A. O. Smith Corp., 521
U. S. 179 , and now eliminates another
possibility. Pp. 3-4.
(b)
The injury and pattern discovery rule is unsound for a number of reasons. It
would extend the potential limitations period for most civil RICO cases well beyond
the time when a plaintiff's cause of action is complete. Under a provision
recognizing the possibility of predicate acts 10 years apart, even an injury
occurrence rule unsoftened by a discovery feature
could in theory open the door to proof of predicate acts occurring 10 years
before injury and 14 years before commencement of suit. A pattern discovery
rule would allow proof even more remote from time of trial and, hence,
litigation even more at odds with the basic policies of all limitations
provisions: repose, elimination of stale claims, and certainty about a
plaintiff's opportunity for recovery and a defendant's potential liabilities. See, e.g., Klehr, supra, at 187.
In the circumstance of medical malpractice, where the cry for a discovery rule
is loudest, the Court has been emphatic that the justification for such a rule
does not extend beyond the injury. United States v. Kubrick, 444
U. S. 111, 122 . A person suffering from
inadequate treatment is thus responsible for determining within the limitations
period then running whether the inadequacy was malpractice. There is no good
reason for accepting a lesser degree of responsibility on a RICO plaintiff's
part. The fact, as Rotella notes, that identifying a
pattern in civil RICO may require considerable effort does not place a RICO
plaintiff in a significantly different position from the malpractice victim,
who may be thwarted by ignorance of the details of treatment decisions or of
prevailing medical practice standards. This Court has also recognized that the
connection between fraud and civil RICO is an insufficient ground for
recognizing a limitations period beyond four years, Malley-Duff,
supra, at 149, and adopting Rotella's lenient
rule would amount to backtracking from Malley-Duff.
Rotella's less demanding discovery rule would
also clash with the limitations imposed on Clayton Act suits. There is a clear
legislative record of congressional reliance on the Clayton Act when RICO was
under consideration, and the Clayton Act's injury-focused accrual rule was well
established by the time civil RICO was enacted. Both statutes share a common
congressional objective of encouraging civil litigation not merely to
compensate victims but also to turn them into private attorneys general,
supplementing Government efforts by undertaking litigation in the public good.
The Clayton Act analogy reflects Congress's clear intent to reject a
potentially longer basic rule under RICO. Neither of Rotella's
two remaining points--that this Court itself has undercut the Clayton Act
analogy; and that without a pattern discovery rule, some plaintiffs will be
barred from suit by Federal Rule of Civil Procedure 9(b), which requires that
fraud be pleaded with particularity--supports adoption of a more protracted
basic limitations period. Pp. 5-11.
147
F. 3d 438, affirmed.
Souter, J., delivered the opinion for a unanimous Court.
MARK ROTELLA, PETITIONER v. ANGELA M.
WOOD et al.
on writ of certiorari to
the united states court of appeals for the fifth circuit
[February 23, 2000]
Justice Souter delivered the opinion of the Court.
The
commencement of petitioner's civil treble-damages action under the Racketeer
Influenced and Corrupt Organizations Act (RICO) was timely only if the
so-called "injury and pattern discovery" rule governs the start of
the 4-year limitations period. We hold that it does not.
I
In
February 1985, petitioner, Mark Rotella, was admitted
to the Brookhaven Psychiatric Pavilion with a diagnosis of major depression. Rotella v. Pederson ,
144 F. 3d 892, 894 (CA5 1998). He was discharged in 1986. In 1994,
Brookhaven's parent company and one of its directors pleaded guilty to charges
of criminal fraud perpetrated through improper relationships and illegal
agreements between the company and its doctors. Rotella
learned of the plea agreement that same year, and in 1997 he filed a civil RICO
claim against respondents, a group of doctors and related business entities, in
Federal District Court. 1
RICO,
18 U. S. C. §§1961-1968 (1994 ed. and Supp. III), makes it criminal
"to conduct" an "enterprise's affairs through a pattern of
racketeering activity," 18 U. S. C. §1962(c), defined as
behavior that violates certain other laws, either enumerated federal statutes
or state laws addressing specified topics and bearing specified penalties, 18
U. S. C. §1961(1) (Supp. III). "Pattern" is also a defined
term requiring "at least two acts of racketeering activity ... , the last of which occurred within ten years ... after
the commission of a prior act of racketeering activity." 18 U. S. C. §1961(5).
RICO
provides for civil actions (like this one) by which "[a]ny person injured in his business or property" by a
RICO violation may seek treble damages and attorney's fees. 18
U. S. C. §1964(c) (Supp. III). Rotella
alleged such injury, in that respondents had conspired to admit, treat, and
retain him at Brookhaven not for any medical reason but simply to maximize
their profits. Respondents raised the statute of limitations as a defense and
sought summary judgment on the ground that the period for bringing the civil
action had expired before Rotella sued.
Agency Holding Corp. v. Malley-Duff
& Associates , Inc., 483
U. S. 143, 156 (1987), established a 4-year limitations period for
civil RICO claims. The District Court held that the period began when Rotella discovered his injury, which he concedes he did in
1986 at the latest. 147 F. 3d 438, 439 (CA5 1998).
Under this "injury discovery" rule, the limitations period expired in
1990, and the District Court accordingly ordered summary judgment for
respondents. Rotella appealed to the Fifth Circuit,
arguing that the RICO limitations period does not begin to run until the
plaintiff discovers (or should have discovered) both the injury and the pattern
of racketeering activity. After the Fifth Circuit ruled against him, ibid. , we granted
certiorari to address a split of authority among the Courts of Appeals, on
whether the limitations period is triggered in accordance with the "injury
and pattern discovery" rule invoked by Rotella. 526 U. S. 1003 (1999). We
now affirm.
II
Given
civil RICO's want of any express limitations
provision for civil enforcement actions, in Malley-Duff
we undertook to derive one and determined that the limitations period
should take no account of differences among the multifarious predicate acts of
racketeering activity covered by the statute. Although we chose a uniform
4-year period on a Clayton Act analogy, §4b, as added, 69 Stat. 283, 15
U. S. C. §15b, we did not decide when the period began to run, and
the question has divided the Courts of Appeals.
Three
distinct approaches emerged in the wake of Malley-Duff . Some
Circuits, like the Fifth in this case, applied an injury discovery accrual rule
starting the clock when a plaintiff knew or should have known of his injury.
See, e.g. ,
Grimmett v. Brown , 75
F. 3d 506, 511 (CA9 1996); McCool v. Strata Oil Co. , 972
F. 2d 1452, 1464-1465 (CA7 1992); Rodriguez v. Banco
Central Corp. , 917 F. 2d 664, 665-666 (CA1 1990); Bankers Trust
Co. v. Rhoades , 859 F. 2d 1096, 1102 (CA2 1988); Pocahontas
Supreme Coal Co. v. Bethlehem Steel Corp. , 828 F. 2d 211, 220
(CA4 1987).
Some
applied the injury and pattern discovery rule that Rotella
seeks, under which a civil RICO claim accrues only when the claimant discovers,
or should discover, both an injury and a pattern of RICO activity. See, e.g. , Caproni v. Prudential Securities, Inc. ,
15 F. 3d 614, 619-620 (CA6 1994); Granite Falls Bank v. Henrikson , 924 F. 2d 150, 154 (CA8
1991); Bath v. Bushkin, Gaims, Gaines & Jonas , 913 F. 2d 817, 820-821
(CA10 1990); Bivens Gardens Office
Building, Inc. v. Barnett Bank , 906 F. 2d 1546, 1554-1555
(CA11 1990).
The
Third Circuit applied a "last predicate act" rule, see Keystone
Ins. Co. v. Houghton , 863 F. 2d 1125,
1130 (CA3 1988). Under this rule, the period began to run as soon as the
plaintiff knew or should have known of the injury and the pattern of
racketeering activity, but began to run anew upon each predicate act forming
part of the same pattern.
In
Klehr v. A. O. Smith Corp. , 521
U. S. 179 (1997), we cut the possibilities by one, in rejecting the
last predicate act rule. Since a pattern of predicate acts can continue
indefinitely, with each separated by as many as 10 years, that rule might have
extended the limitations period to many decades, and so beyond any limit that
Congress could have contemplated. See ibid. Preserving
a right of action for such a vast stretch of time would have thwarted the basic
objective of repose underlying the very notion of a limitations period. See id.
, at 189 . The last predicate act
rule was likewise at odds with the model for civil RICO, the Clayton Act, under
which "generally, a cause of action accrues and the statute begins to run
when a defendant commits an act that injures a plaintiff's business." Zenith
Radio Corp. v. Hazeltine Research, Inc. , 401
U. S. 321, 338 (1971); Klehr ,
supra , at 188.
The
decision in Klehr left two candidates
favored by various Courts of Appeals: some form of the injury discovery rule
(preferred by a majority of Circuits to have considered it), and the injury and
pattern discovery rule. Today, guided by principles enunciated in Klehr ,
we eliminate the latter. 2
III
We
think the minority injury and pattern discovery rule unsound for a number of
reasons. We start with the realization that under the provision recognizing the
possibility of finding a pattern of racketeering in predicate acts 10 years
apart, even an injury occurrence rule unsoftened by a
discovery feature could in theory open the door to proof of predicate acts
occurring 10 years before injury and 14 before commencement of litigation. A
pattern discovery rule would allow proof of a defendant's acts even more remote
from time of trial and, hence, litigation even more at odds with the basic
policies of all limitations provisions: repose, elimination of stale claims,
and certainty about a plaintiff's opportunity for recovery and a defendant's
potential liabilities. See, e.g., Klehr , supra, at
187; Malley-Duff , 483
U. S., at 150 , 156; Wilson v. Garcia , 471
U. S. 261, 270 , 271 (1985).
How
long is too long is, of course, a matter of judgment based on experience, and
it gives us great pause that the injury and pattern discovery rule is an
extension of the traditional federal accrual rule of injury discovery, and
unwarranted by the injury discovery rule's rationale. Federal courts, to be
sure, generally apply a discovery accrual rule when a statute is silent on the
issue, as civil RICO is here. Klehr , supra, at 191 (citing Connors v. Hallmark
& Son Coal Co. , 935 F. 2d 336, 342 (CADC 1991), and 1 C. Corman, Limitation of Actions §6.5.5.1, p. 449
(1991)). But in applying a discovery accrual rule, we have been at pains to
explain that discovery of the injury, not discovery of the other elements of a
claim, is what starts the clock. In the circumstance of medical malpractice,
where the cry for a discovery rule is loudest, we have been emphatic that the
justification for a discovery rule does not extend beyond the injury:
"We
are unconvinced that for statute of limitations purposes a plaintiff's
ignorance of his legal rights and his ignorance of the fact of his injury or
its cause should receive identical treatment. That he has been injured in fact
may be unknown or unknowable until the injury manifests itself; and the facts
about causation may be in the control of the putative defendant, unavailable to
the plaintiff or at least very difficult to obtain. The prospect is not so
bleak for a plaintiff in possession of the critical facts that he has been hurt
and who has inflicted the injury. He is no longer at the mercy of the latter.
There are others who can
tell him if he has been wronged, and he need only ask." United
States v. Kubrick, 444
U. S. 111, 122 (1979).
A
person suffering from inadequate treatment is thus responsible for determining
within the limitations period then running whether the inadequacy was
malpractice.
We
see no good reason for accepting a lesser degree of responsibility on the part
of a RICO plaintiff. It is true, of course, as Rotella
points out, that RICO has a unique pattern requirement, see Malley-Duff
, supra, at 154 ("[T]he heart of any RICO complaint is the
allegation of a pattern of racketeering"); H. J. Inc. v. Northwestern
Bell Telephone Co., 492
U. S. 229, 236 (1989) (referring to "RICO's
key requirement of a pattern of racketeering"). And it is true as well
that a pattern of predicate acts may well be complex, concealed, or fraudulent.
But identifying professional negligence may also be a matter of real
complexity, and its discovery is not required before the statute starts
running. Kubrick, supra, at 122, 124. Although
we said that the potential malpractice plaintiff "need only ask" if
he has been wronged by a doctor, considerable enquiry and investigation may be
necessary before he can make a responsible judgment about the actionability of the unsuccessful treatment he received.
The fact, then, that a considerable effort may be required before a RICO
plaintiff can tell whether a pattern of racketeering is demonstrable does not
place him in a significantly different position from the malpractice victim. A
RICO plaintiff's ability to investigate the cause of his injuries is no more
impaired by his ignorance of the underlying RICO pattern than a malpractice
plaintiff is thwarted by ignorance of the details of treatment decisions or of
prevailing standards of medical practice.
Nor
does Rotella's argument gain strength from the fact
that some patterns of racketeering will include fraud, which is generally
associated with a different accrual rule; we have already found the connection
between civil RICO and fraud to be an insufficient ground for recognizing a
limitations period beyond four years, Malley-Duff , supra, at
149, and the lenient rule Rotella seeks would amount
to backsliding from Malley-Duff.
What
is equally bad is that a less demanding basic discovery rule than federal law
generally applies would clash with the limitations imposed on Clayton Act
suits. This is important because, as we have previously noted, there is a clear
legislative record of congressional reliance on the Clayton Act when RICO was
under consideration, see Sedima, S. P. R.
L. v. Imrex Co., 473
U. S. 479, 489 (1985), and we have recognized before that the Clayton
Act's injury-focused accrual rule was well established by the time civil RICO
was enacted. Klehr , 521
U. S., at 189 . In rejecting a significantly different focus under
RICO, therefore, we are honoring an analogy that Congress itself accepted and
relied upon, and one that promotes the objectives of civil RICO as readily as
it furthers the objects of the Clayton Act. Both statutes share a common
congressional objective of encouraging civil litigation to supplement Government
efforts to deter and penalize the respectively prohibited practices. The object
of civil RICO is thus not merely to compensate victims but to turn them into
prosecutors, "private attorneys general," dedicated to eliminating
racketeering activity. 3 Id. , at 187
(citing Malley-Duff , 483
U. S., at 151 ) (civil RICO specifically has a "further purpose [of]
encouraging potential private plaintiffs diligently to investigate"). The
provision for treble damages is accordingly justified by the expected benefit
of suppressing racketeering activity, an object pursued the sooner the better.
It would, accordingly, be strange to provide an unusually long basic
limitations period that could only have the effect of postponing whatever
public benefit civil RICO might realize. The Clayton Act avoids any such policy
conflict by its accrual rule that "generally, a cause of action accrues
and the statute begins to run when a defendant commits an act that injures a
plaintiff's business," Zenith Radio Corp. v. Hazeltine
Research, Inc., 401
U. S., at 338 , and the Clayton Act analogy reflects the clear intent
of Congress to reject a potentially longer basic rule under RICO.
In
sum, any accrual rule softened by a pattern discovery feature would undercut
every single policy we have mentioned. By tying the start of the limitations
period to a plaintiff's reasonable discovery of a pattern rather than to the
point of injury or its reasonable discovery, the rule would extend the
potential limitations period for most civil RICO cases well beyond the time
when a plaintiff's cause of action is complete, 4 as
this case shows. Rotella does not deny that he knew
of his injury in 1986 when it occurred, or that his civil RICO claim was
complete and subject to suit at that time. But under Rotella's
rule, the clock would have started only in 1994, when he discovered the pattern
of predicate acts (his assumption being that he could not reasonably have been
expected to discover them sooner). A limitations period that would have begun
to run only eight years after a claim became ripe would bar repose, prove a
godsend to stale claims, and doom any hope of certainty in identifying
potential liability. Whatever disputes may arise about pinpointing the moment a
plaintiff should have discovered an injury to himself would be dwarfed by the
controversy inherent in divining when a plaintiff should have discovered a
racketeering pattern that might well be complex, concealed or fraudulent, and
involve harm to parties wholly unrelated to an injured plaintiff. The fact, as Rotella notes, that difficulty in identifying a pattern is inherent
in civil RICO, see H. J. Inc., 492
U. S., at 235 , n. 2 (collecting cases),
only reinforces our reluctance to parlay the necessary complexity of RICO into
worse trouble in applying its limitations rule. Cf. Wilson
, 471
U. S., at 270 (discussing need for firmly defined, easily applied
rules). A pattern discovery rule would patently disserve the congressional
objective of a civil enforcement scheme parallel to the Clayton Act regime,
aimed at rewarding the swift who undertake litigation in the public good.
Rotella has two remaining points about which a word should
be said. We have already encountered his argument that differences between RICO
and the Clayton Act render their analogy inapt, and we have explained why
neither the RICO pattern requirement nor the occurrence of fraud in RICO patterns
is a good reason to ignore the Clayton Act model, see supra
, at 6-7. Here it remains only to respond to Rotella's
argument that we ourselves undercut the force of the Clayton Act analogy when
we held that RICO had no racketeering injury requirement comparable to the
antitrust injury requirement under the Clayton Act, see Sedima
, supra , at 495. This point not only fails to support but even cuts
against Rotella's position. By eliminating the
complication of anything like an antitrust injury element we have, to that
extent, recognized a simpler RICO cause of action than its Clayton Act
counterpart, and RICO's comparative simplicity in
this respect surely does not support the adoption of a more protracted basic
limitations period.
Finally,
Rotella returns to his point that RICO patterns will
involve fraud in many cases, when he argues that unless a pattern discovery
rule is recognized a RICO plaintiff will sometimes be barred from suit by
Federal Rule of Civil Procedure 9(b), which provides that fraud must be pleaded
with particularity. While we will assume that Rule 9(b) will exact some cost,
we are wary of allowing speculation about that cost to control the resolution
of the issue here. Rotella has presented no case in
which Rule 9(b) has effectively barred a claim like his, and he ignores the
flexibility provided by Rule 11(b)(3), allowing
pleadings based on evidence reasonably anticipated after further investigation
or discovery. See, e.g. ,
Corley v. Rosewood Care Center, Inc. of Peoria , 142 F. 3d 1041,
1050-1051 (CA7 1998) (relaxing particularity requirements of Rule 9(b) where
RICO plaintiff lacks access to all facts necessary to detail claim). It is not
that we mean to reject Rotella's concern about
allowing "blameless ignorance" to defeat a claim, Urie
v. Thompson , 337
U. S. 163, 170 (1949); we simply do not think such a concern should
control the decision about the basic limitations rule. In rejecting pattern
discovery as a basic rule, we do not unsettle the understanding that federal
statutes of limitations are generally subject to equitable principles of
tolling, see Holmberg v. Armbrecht ,
327
U. S. 392, 397 (1946), 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, complementing Federal Rule of
Civil Procedure 11(b)(3). See ibid.; see
generally Klehr , 521
U. S., at 192 -193 (noting distinctions between different equitable
devices). The virtue of relying on equitable tolling lies in the very nature of
such tolling as the exception, not the rule.
The
judgment of the Court of Appeals is affirmed.
It is so ordered.
FOOTNOTES
Footnote
1
Rotella alleged that "a group of doctors and their
related business entities ... improperly conspir[ed] to admit, treat, and retain him at Brookhaven Psychiatric
Pavilion for reasons related to their own financial interests rather than the
patient's psychiatric condition." 147 F. 3d 438,
439 (CA5 1998). As injuries, he alleged, among other things, confinement
for an excessive period because of the conspiracy to draw down his and other
patients' insurance coverage, loss of a number of personal items, and
fraudulent charges for unnecessary treatment. Brief for Petitioner 3; App.
20-24.
Footnote
2
We
do not, however, settle upon a final rule. In addition to the possibilities
entertained in the Courts of Appeals, J ustice
S calia has espoused an
"injury occurrence" rule, under which discovery would be irrelevant, Klehr v. A. O. Smith Corp. , 521
U. S. 179, 198 (1997) (opinion concurring in part and concurring in
judgment), and our decision in Klehr leaves
open the possibility of a straight injury occurrence rule. Amicus American
Council of Life Insurance urges us to adopt this injury occurrence rule in this
case, see Brief for American Council of Life Insurance as Amicus Curiae 5-14,
but the parties have not focused on this option and we would not pass upon it
without more attentive advocacy.
Footnote
3
This
objective of encouraging prompt litigation to combat racketeering is the most
obvious answer to Rotella's argument that the injury
and pattern discovery rule should be adopted because "RICO is to be read
broadly" and " `liberally construed to effectuate its remedial
purposes,' " Sedima , S. P. R.
L. v. Imrex Co. , 473
U. S. 479, 497-498 (1985) (quoting Pub. L. 91-452,
§904(a), 84 Stat. 947).
Footnote
4
Some
Circuits apply injury and pattern discovery out of fear that when the injury
precedes a second predicate act, the limitations period might otherwise expire
before the pattern is created. E.g. , Granite Falls Bank v. Henrikson , 924 F. 2d 150, 154 (CA8
1991). Respondents argue that this overlooks the cardinal principle that a
limitations period does not begin to run until the cause of action is complete.
Rawlings v. Ray, 312
U. S. 96, 98 (1941); see also United States v. Lindsay, 346
U. S. 568, 569 (1954); Clark v. Iowa City, 20 Wall. 583, 589 (1875).
The
quandary is hypothetical here; Rotella does not
dispute that his injury in 1986 completed the elements of his cause of action.
Hence, we need not and do not decide whether civil RICO allows for a cause of
action when a second predicate act follows the injury, or what limitations
accrual rule might apply in such a case. In any event, doubt about whether a harm might be actionable before a pattern is complete is a
weak justification for the cost of a general pattern discovery rule.