Completing Klehr v. A.O. Smith Corp., and Resolving the Oddity and Lingering Questions of Civil RICO Statute of Limitations Accrual

I. INTRODUCTION Civil RICO1 was left limitations-naked2 when enacted Congress in 1970, and remained that way until Supreme Court clothed statute with a four-year statute limitations period in a 1987 case, Agency Holding Corp. v. Malley-Duff & Associates.3 But Malley-Duff Court did not determine when that limitations period should begin to run.4 In wake Malley-Duff decision, federal courts delineated essentially three conflicting rules for civil RICO statute limitations accrual.5 Thus, for over ten years, RICO litigants have been asking: When does civil RICO statute limitations accrue? Many anticipated Supreme Court would answer this lingering question in Klehr v. A.O. Smith Corp.,s a decision handed down a little more than a week before Court took its 1997 summer recess.7 But instead answering question and resolving conflict, Court in Klehr merely struck down Third Circuit's last predicate act rule.8 And so the question, Justice Scalia pointed out in his concurrence, remain[ed] unanswered.9 The differing accrual rules that have developed since MalleyDuff reflect tensions inherent in civil RICO limitations period issue. Although Klehr Court gave an indication how it would resolve these tensions, it left more questions lingering about an acceptable rule than it answered. This Note answers those lingering questions and uses reasoning Klehr to establish an analytical framework for an acceptable civil RICO statute limitations accrual rule. Part II this Note gives a background to civil RICO statute limitations issue and lays out competing circuit rules that developed after Malley-Duff Part III examines Klehr, specifically nature petitioners' civil RICO claim and Court's reasoning in its rejection Third Circuit's last predicate act rule. Part IV analyzes Klehr decision according to underlying principles a statute limitations, namely recovery and repose,lo and uses Court's reasoning to resolve questions that Malley-Duff and Klehr Courts left lingering. Part V lays out a final accrual rule that completes what Supreme Court started in Malley-Duff in accordance with limitations first principles, Klehr, and civil RICO. II. BACKGROUND A. RICO's Development The substantive provisions RICO, contained in 18 U.S.C. 1962(a)-(d), prohibit: (a) investing monies earned through a pattern racketeering in an enterprise engaged in interstate commerce, (b) acquiring an interest, through a pattern racketeering, in an enterprise engaged in interstate commerce, (c) conducting affairs, through a pattern racketeering, an enterprise engaged in interstate commerce, or (d) conspiring to violate any above prohibitions.ll The RICO statute provides a private civil action which plaintiffs may recover treble damages and attorney's fees for injury by reason a violation of these substantive provisions.l2 The elements that a RICO plaintiff needs to allege in a claim are essentially same under all provisions, except for conspiracy prohibition.l3 For an 18 U.S.C. 1962(c) cause action, most commonly used prohibition,l4 a civil RICO plaintiff must allege all following: (1) conduct (2) an enterprise (3) through a pattern (4) racketeering activity (known as `predicate acts') (5) causing injury to plaintiff's `business or property.'15 The purposes RICO are well-documented. RICO provides enhanced sanctions and new remedies to deal with unlawful activities those engaged in organized crime.ls While RICO was primarily conceived as a criminal statute,l7 Congress included civil remedy provision to hold violators financially responsible to businesses they harm,ls to encourage private attorneys general enforcement actions and, ultimately, to curb organized crime's expansion into sphere legitimate commercial enterprise. …