UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
May 30, 1986
MALLEY-DUFF & ASSOCIATES, INC., APPELLANT,
CROWN LIFE INSURANCE CO., A CORP., AGENCY HOLDING CORP., AN ILLINOIS CORP., AGENCY HOLDING CORP., AN OHIO CORP., CLARKE BURTON LLOYD, INDIVIDUAL, KERRY PATRICK CRAIG, INDIVIDUAL, DIANE PARIANO, INDIVIDUAL, EHRMAN RATINI OGLEVEE & CRAIG, INC., A PENNSYLVANIA CORPORATION, ROBERT OGLEVEE, INDIVIDUAL
On Appeal from the United States District Court for the Western District of Pennsylvania (D.C. Civil No. 81-439).
Before: HIGGINBOTHAM, SLOVITER and MANSMANN, Circuit Judges.
A. LEON HIGGINBOTHAM, JR., Circuit Judge.
This is an appeal from a final summary judgment of the district court dismissing the complaint of appellant Malley-Duff & Associates, Inc. ("Malley-Duff"). For the reasons that follow, we will reverse and remand for further proceedings.
Until February 13, 1978, Malley-Duff was an agent of defendant Crown Life Insurance Company ("Crown Life") for a territory surrounding and including Pittsburgh, Pennsylvania. Crown Life required Malley-Duff to represent it exclusively. Malley-Duff alleges that defendants formed an "enterprise," the purpose of which was "to acquire, take over or eliminate various Crown agencies that had lucrative territories in the United States of America," and which did so by "false and fraudulent means and pretenses." The enterprise allegedly acquired Malley-Duff's agency by first imposing, nine months into the fiscal year 1977, a "bogus" production quota that could not be met, and then terminating the agency when it in fact failed to meet the quota. According to the complaint, the enterprise used similar means to acquire Crown Life agencies in Chicago, Peoria, Cleveland, Newark, Hartford, Denver, and elsewhere. It is further alleged that terminated agents were defrauded out of renewal commissions.
In April of 1978, Malley-Duff filed suit (" Malley-Duff I ") against defendants Crown Life, Lloyd, Craig, Agency Holding Company (Illinois), and Agency Holding Company (Ohio), as well as another individual not named in this suit, alleging violations of the federal antitrust laws and conspiracy to tortiously interfere with contract. The case was tried to a jury, but defendants won a directed verdict on the antitrust claims at the close of Malley-Duff's case. Malley-Duff won a verdict of $900,000 on the state conspiracy claim, but the jury concluded in answer to a special interrogatory that there was no tortious interference. On appeal, this court ordered a new trial, holding that there was sufficient evidence of a violation of § 1 of the Sherman Act to present a jury issue, and "that the verdict form answers on the remaining state law claims were inconsistent." Malley-Duff & Associates v. Crown Life Insurance Company, 734 F.2d 133, 136 (3d Cir.), cert. denied, 469 U.S. 1072, 105 S. Ct. 564, 83 L. Ed. 2d 505 (1984).
On March 20, 1981 -- prior to trial of Malley-Duff I -- Malley-Duff filed the instant complaint, alleging causes of action under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961-1968 (1982),*fn1 for conspiracy to interfere with civil rights, 42 U.S.C. § 1985,*fn2 and a pendent state civil conspiracy theory. The RICO claims can be divided into two categories: (1) claims arising out of the allegedly fraudulent termination of the agency;*fn3 and (2) claims arising out of alleged obstructions of justice by defendants in the course of the discovery phase of Malley-Duff I.*fn4 The § 1985 claims were based on the same allegedly obstructive conduct. The civil conspiracy count incorporated allegations involving both the termination and the obstructions of justice.
This case was consolidated with Malley-Duff I on November 2, 1981, but was severed on January 11, 1983, prior to trial. Defendants had filed a motion for summary judgment on July 29, 1982. On March 23, 1984, the district court granted defendants' motion and entered judgment for them on all counts. This appeal followed.*fn5
The district court dismissed Malley-Duff's RICO claims, to the extent they arose out of the allegedly fraudulent termination of its agency, on the ground that they were barred by the applicable statute of limitations. Because federal law does not provide a statute of limitations for civil RICO actions, the district court followed the settled practice of turning to the law of the forum state (in this case Pennsylvania) to "borrow" the limitations period for the state cause of action most closely analogous to Malley-Duff's claims.*fn6 See Board of Regents v. Tomanio, 446 U.S. 478, 483-84, 64 L. Ed. 2d 440, 100 S. Ct. 1790 (1980); Johnson v. Railway Express Agency, 421 U.S. 454, 462-63, 44 L. Ed. 2d 295, 95 S. Ct. 1716 (1975); see generally Note, Limitation Borrowing in Federal Courts, 77 Mich. L. Rev. 1127 (1979). The parties agreed that common law fraud was the state cause most analogous to these claims, but disagreed as to whether a two- or six-year limitations period governed such actions in Pennsylvania.*fn7 The district court held that the two-year statute applied, and that claims filed on March 20, 1981, relating to events that occurred in early 1978,*fn8 were therefore time-barred.
Subsequent to the district court's decision, the Supreme Court of the United States decided Wilson v. Garcia, 471 U.S. 261, 105 S. Ct. 1938, 85 L. Ed. 2d 254 (1985), which established a three-part inquiry*fn9 to guide the selection of the statute of limitations that will govern a federal claim. First, we must determine whether it is state or federal law that controls the characterization of the claim. Second, we must decide whether all claims arising under a particular federal law "should be characterized in the same way, or whether they should be evaluated differently depending upon the varying factual circumstances and legal theories presented in each individual case." Finally, "we must characterize the essence of the claim in the pending case, and decide which state statute provides the most appropriate limiting principle." 105 S. Ct. at 1943. In the subsections that follow we engage in the prescribed inquiry.*fn10 Our function here is to legislate interstitially, and in doing so we are mindful of Justice Holmes' admonition that we are "confined from molar to molecular motions." Southern Pacific Co. v. Jensen, 244 U.S. 205, 221, 37 S. Ct. 524, 61 L. Ed. 1086 (1917) (dissent). We conclude that within each state all civil RICO claims should be characterized uniformly, in accordance with federal law, and that in Pennsylvania the most appropriate limitations period for all civil RICO claims is the six-year residual statute of limitations.
A. Controlling Law
In Wilson v. Garcia, which arose in New Mexico, the question whether state or federal law controlled the characterization of § 1983 claims was critical because the Supreme Court of New Mexico had definitively decided, as a matter of state law, that § 1983 claims should be analogized for limitations purposes to state claims brought under the New Mexico Torts Claim Act. DeVargas v. New Mexico, 97 N.M. 563, 642 P.2d 166 (1982). The United States Supreme Court held that DeVargas was not binding on federal courts. The Court noted that the "characterization of § 1983 for statute of limitations purposes is derived from the elements of the cause of action, and Congress' purpose in providing it. These, of course, are matters of federal law. Since federal law is available to decide the question, the language of [42 U.S.C.] § 1988 directs that the matter of characterization should be treated as a federal question." 105 S. Ct. at 1943. The court found further support in § 1988's*fn11 instruction that state law shall apply "so far as the same is not inconsistent with" federal law, observing that "Congress surely did not intend to assign to state courts and legislatures a conclusive role in the formative function of defining and characterizing the essential elements of a federal cause of action." 105 S. Ct. at 1944. In addition, the Court stated, "[i]n borrowing statutes of limitations for other federal claims, this Court has generally recognized that the problem of characterization 'is ultimately a question of federal law.'" Id. (quoting Auto Workers v. Hoosier Cardinal Corp., 383 U.S. 696, 706, 16 L. Ed. 2d 192, 86 S. Ct. 1107 (1966)) (footnote omitted).
We have found no decisions of the Pennsylvania Supreme Court, or any lower court, purporting to characterize RICO claims under Pennsylvania law for limitations purposes. Nonetheless, if state law were to control the characterization our function would be to predict how the Pennsylvania Supreme Court would act, rather than to apply the principles developed by the U.S. Supreme court in Wilson v. Garcia and other "borrowing" decisions. Thus, we cannot overlook this issue. Fortunately, we believe that resolution is quite clear. Though we cannot rely, as the Court did, on § 1988, we note that its borrowing principles are not unique -- the confluence of the Supremacy Clause and the Rules of Decision Act produce the same result in other cases: "If . . . federal law is both pertinent and valid, it applies because the supremacy clause of the Constitution so commands; if the federal law is impertinent or invalid, state law applies because Congress had so directed." Westen & Lehman, Is There Life for Erie After the Death of Diversity?, 78 Mich. L. Rev. 311, 316 (1980). Moreover, the federal interests in uniformity and having "firmly defined, easily applied rules," emphasized in Wilson v. Garcia, 105 S. Ct. at 1944 (quoting Chardon v. Fumero Soto, 462 U.S. 650, 667, 77 L. Ed. 2d 74, 103 S. Ct. 2611 (1983) (Rehnquist, J., dissenting)) apply with as much force to RICO as to other federal causes, such as § 1983, § 301 of the Labor Management Reporting Act, see Auto Workers, supra, or the federal antitrust laws, see Moviecolor Limited v. Eastman Kodak Co., 288 F.2d 80, 83-84 (2d Cir.), cert. denied, 368 U.S. 821 82 S. Ct. 39, 7 L. Ed. 2d 26 (1961). Wilson v. Garcia, 105 S. Ct. at 1944 n. 19. We conclude that federal law controls characterization of RICO claims for limitations purposes.
B. Uniform or Particularized Characterization?
In characterizing Malley-Duff's termination-related RICO claims as analogous to claims for common law fraud, the parties and the district court have followed the settled borrowing practice within this Circuit of parsing the particular factual allegations and legal theories supporting an individual federal claim, rather than looking to the federally-created cause of action for a broader analogy that could encompass all claims brought thereunder in a given state. In Wilson v. Garcia the Supreme Court adopted the latter approach in the context of § 1983 cases, and we believe that their reasoning suggests that the same approach should be followed with civil RICO.
In Wilson v. Garcia the Court noted that the practice of borrowing state statutes of limitations promotes the policy of repose, but that
when the federal claim differs from the state cause of action in fundamental respects, the State's choice of a specific period of limitation is, at best, only a rough approximation of "the point at which the interests in favor of protecting valid claims are outweighed by the interests in prohibiting the prosecution of stale ones."
105 S. Ct. at 1945 (quoting Johnson v. Railway Express Agency, 421 U.S. at 463-64). Section 1983, the Court stated, "can have no precise counterpart in state law . . . . Any analogies to those causes of action are bound to be imperfect." Id. (footnote omitted).
In this light, practical considerations help to explain why a simple, broad characterization of all § 1983 claims best fits the statute's remedial purpose. The experience of the courts that have predicated their choice of the correct statute of limitations on an analysis of the particular facts of each claim demonstrates that their approach inevitably breeds uncertainty and time-consuming litigation that is foreign to the central purpose of § 1983. Almost every § 1983 claim can be favorably analogized to more than one of the ancient common-law forms of action, each of which may be governed by a different statute of limitations . . . .
105 S. Ct. at 1945-46 (footnote omitted). *fn12 The Court also expressed a concern that the somewhat arbitrary selection of one analogy over another can appear result-oriented, and thereby undermine the appearance of neutral justice. 105 S. Ct. at 1945 n.24. The Court concluded that "the federal interests in uniformity, certainty, and the minimization of unnecessary litigation all support the conclusion that Congress favored this simple approach" of selecting "in each State, the one most appropriate statute of limitations for all § 1983 claims." 105 S. Ct. at 1947.
Civil RICO is as far removed from any traditional state cause of action as is § 1983.*fn13 This is well-illustrated by Durante Brothers and Sons v. Flushing National Bank, 755 F.2d 239 (2d Cir.), cert. denied, 473 U.S. 906, 105 S. Ct. 3530, 87 L. Ed. 2d 654 (1985), where the Court of Appeals rejected the district court's choice of a state statute of limitations for actions to recover an overcharge of interest in a RICO case predicated on collection of an unlawful debt. The court pointed out that this seemingly apt analogy dissolved when the elements of the RICO claim were closely examined:
In the context of the allegations made here, therefore, success on these counts would require proof that, inter alia, (1) there was a RICO enterprise, (2) its activities affected interstate commerce, (3) the individual defendants were employed by or associated with the enterprise, (4) the Bank used, in the operation of the enterprise, income derived from the collection of unlawful debts, and (5) the individual defendants participated in the conduct of affairs of the enterprise through the collection of unlawful debt. 18 U.S.C. § 1962(a) and (c). In addition, to prove that what was collected was an unlawful debt within the meaning of RICO, Durante would have to show that (6) the debt was unenforceable in whole or in part because of state or federal laws relating to usury, (7) the debt was incurred in connection with "the business of lending money . . . at a [usurious] rate," and (8) the usurious rate was at least twice the enforceable rate. Id. § 1961(6). And Durante would have to show that (9) as a result of the above confluence of facts, (10) it was injured in its business or property. Id. § 1964(c).
755 F.2d at 248.
The court went on to state:
The above listing of elements that must be proven in order to establish civil RICO liability for collection of an unlawful debt makes clear that the civil RICO action is not simply an action to recover excessive interest or to enforce a penalty for the overcharge. RICO is concerned with evils far more significant than the simple practice of usury . . . . In contrast, a state law claim . . . could be established without proof of nine of the ten listed elements of the civil RICO claim.
755 F.2d at 248-49. We believe a similar analysis would apply to any RICO claim. Concepts such as RICO "enterprise" and "pattern of racketeering activity" were simply unknown to common law, and all federal crimes contain jurisdictional and other elements irrelevant to any state civil action. Thus, as with § 1983, any analogies to traditional state causes of action "are bound to be imperfect." Wilson v. Garcia, 105 S. Ct. at 1945.
This case provides abundant evidence that a particularized approach to borrowing statutes of limitations "inevitably breeds uncertainty and time-consuming litigation." Even RICO claims based on "garden variety" business disputes might be analogized to breach of contract, fraud, conversion, tortious interference with business relations, misappropriation of trade secrets, unfair competition, usury, disparagement, etc., with a multiplicity of applicable limitations periods. A state may even have different limitations periods for common law fraud and securities fraud. See also Eisenberg v. Gagnon, 564 F. Supp. 1347, 1353-54 (E.D. Pa. 1983), rev'd in part, 766 F.2d 770 (3d Cir.), cert. denied, 474 U.S. 946, 106 S. Ct. 343, 88 L. Ed. 2d 290 (1985). More extreme cases might include allegations sounding in assault, battery, false imprisonment, infliction of emotional distress, abuse of process, or trespass to land or chattels. The fact that RICO requires at least two predicate acts in all cases makes it even more likely that more than one analogy will have force in a given case.*fn14 "The current approach is virtually guaranteed to incite complex and expensive litigation over what should be a straightforward matter." A.B.A. Section of Corporation, Banking and Business Law, Report of the Ad Hoc Civil RICO Task Force 391-92 (1985) [hereinafter cited as " Task Force Report "].*fn15
In Wilson v. Garcia the Court stated that "the legislative purpose to create an effective remedy for an enforcement of federal civil rights is obstructed by uncertainty in the applicable statute of limitations, for scarce resources must be dissipated by useless litigation on collateral matters," 105 S. Ct. at 1947 (footnote omitted). Like § 1983, civil RICO was intended to be a useful remedial device and a supplement to criminal law enforcement in an area peculiarly in need of federal intervention. Sedima, 105 S. Ct. at 3286. As today's cases demonstrate, its effectiveness can be substantially thwarted by uncertainty, with the concommitant dissipation of legal resources. We hold, then, that in borrowing state limitations periods for civil RICO claims courts must select, in each state, the one most appropriate statute of limitations for all civil RICO claims. See also Electronic Relays v. Pascente, 610 F. Supp. 648 (N.D. Ill. 1985); Victoria Oil v. Lancaster Corp., 587 F. Supp. 429 (D. Colo. 1984). But see Silverberg v. Thomson McKinnon Securities, 787 F.2d 1079 (6th Cir. April 10, 1986).
C. The Applicable Limitations Period
The final stage in our inquiry is the selection of the one Pennsylvania limitations period that will govern all civil RICO actions arising there. This process of characterization cannot take place in a vacuum -- it would accomplish nothing to characterize civil RICO in a way that does not correspond to any existing Pennsylvania statute of limitations. Rather, we must, as the Supreme Court did in Wilson v. Garcia, choose the best out of the available candidates. We have been greatly aided in this process by the parties' thorough supplemental briefing.
In Wilson v. Garcia, the Supreme Court chose a state limitations period for "personal injury" actions to govern § 1983 cases in New Mexico.*fn16 Given that the Court had earlier conceded that characterization "will often be somewhat arbitrary," 105 S. Ct. at 1946 n.24, it should not be surprising that the Court did not present a very detailed rationalization for its choice. Nonetheless, there is some guidance to be extracted from their discussion.
The Court noted that "the atrocities that concerned Congress in 1871 plainly sounded in tort." 105 S. Ct. at 1948. Of the potential tort analogies, the Court stated that "Congress unquestionably would have considered the remedies established in the Civil Rights Act to be more analogous to tort claims for personal injury than, for example, to claims for damages to property or breach of contract." Id. The Court's basis for this categorical statement was the language of the fourteenth amendment: "no person shall be deprived of life, liberty or property . . . ." "A violation of that command is an injury to the individual rights of the person." Id. The only other point the Court mentioned as favoring the personal injury characterization was that:
General personal injury actions, sounding in tort, constitute a major part of the total volume of civil litigation in the state courts today, and probably did so in 1871 when § 1983 was enacted. It is most unlikely that the period of limitations applicable to such claims ever was, or ever would be, fixed in a way that would discriminate against federal claims, or be inconsistent with federal law in any respect.
105 S. Ct. at 1949.
We may also obtain some guidance from the Court's reasons for rejecting two other proposed analogies. First, the Court stated that the "relative scarcity of statutory claims when § 1983 was enacted makes it unlikely that Congress would have intended to apply the catchall periods of limitations for statutory claims that were later enacted by many states." 105 S. Ct. at 1948 (also nothing that § 1983 enforces constitutional, not only statutory, rights). Second, the Court rejected an analogy to state remedies for wrongs committed by public officials as it was the very inadequacy of such remedies, "that led Congress to enact the Civil Rights Act in the first place." 105 S. Ct. at 1949 (footnote omitted).
With this background, we proceed to consider the merits of various limitations periods available under Pennsylvania law.*fn17 The suggested candidates are the limitations periods for common law fraud,*fn18 for civil penalty or forfeiture, 42 Pa. Cons. Stat. Ann. § 5524 (a "potpourri" two-year statute of limitations), and the "catchall" six-year residual statute of limitations. Clearly, we should not expert an epiphany through which the "essence" of civil RICO is revealed to us. Rather, we can hope for no more than finding a workable rule that is consonant with the purposes of civil RICO, and defensible under reasonably neutral criteria of statutory construction.
Malley-Duff has suggested that common law fraud would provide a suitable analogy for all civil RICO claims. As one court has stated, however, "it is obvious that the common law fraud analogy falls far short of capturing the multitude of factual bases on which RICO can be based." Electronic Relays, 610 F. Supp. at 651. We, too, are reluctant to elevate one predicate act among many to the status of a uniform RICO characterization. Even if it is true, as Malley-Duff argues, that fraud is the predicate act upon which most civil RICO actions are premised, see also Task Force Report at 55-56, we must note that this trend has been the subject of increasing disquietude over the federalization of state common law. See Sedima, 105 S. Ct. at 3293 (Marshall, J., dissenting); 131 Cong. Rec. S10285-88 (1985) (Remarks of Sen. Hatch). Many current proposals to curtail civil RICO are directed to precisely this point. For example, Senate Bill 1521, 99th Cong., 1st Sess. (1985), would require at least one predicate act other than mail, wire, or securities fraud to make out a civil RICO claim.
Though the suggestion is not without some merit, we think that characterizing RICO as essentially a fraud action would be to have the tail wag the dog. We reject this approach.
Civil Penalty or Forfeiture
It is also suggested that RICO can be broadly analogized to actions for civil penalty or forfeiture. In Pennsylvania such actions are now governed by a two-year statute of limitations, 42 Pa. Cons. Stat. Ann. § 5524(5) (Purdon Supp. 1985), although at the time these cases were brought, it was a one-year period when brought by private parties, 42 Pa. Cons. Stat. Ann. § 5523(2) (1981).
We do not find this analogy forceful. Civil RICO is clearly not a forfeiture statute -- the recovery of a successful private plaintiff is based on the injury sustained ("threefold the damages he sustains and the cost of the suit, including a reasonable attorney's fee"), not on what the defendant has gained through illegal conduct. Nor do we think the treble damage provision is primarily intended as a penalty. See Task Force Report at 391. More important, it is an incentive for private attorneys general to bring suit. We would also be concerned that the one-year limitations period that would be applicable to this case if the forfeiture analogy were adopted may, because it is so short, contravene the broad remedial purposes of civil RICO. We decline to characterize civil RICO as a penal statute.
42 Pa. Cons. Stat. Ann. § 5524
Section 5524 is a two-year statute of limitations, covering a potpourri of civil actions. It provided at the time relevant to this appeal:
The following actions and proceedings must be commenced within two years:
(1) An action for assault, battery, false imprisonment, false arrest, malicious prosecution or malicious abuse of process.
(2) An action to recover damages for injuries to the person or for the death of an individual caused by the wrongful act or neglect of or unlawful violence or negligence of another.
(3) An action for taking, detaining or injuring personal property, including actions for specific recovery thereof.
(4) An action for waste or trespass of real property.
(5) An action upon a statute for civil penalty or forfeiture, where the action is given to a government unit.
(6) An action against any officer of any government unit for the nonpayment of money or the nondelivery of property collected upon execution or otherwise in his possession.
It is argued by amicus Congress Financial Corporation that this two-year period should be borrowed for civil RICO because "it is indisputable that almost all, if not all, of the predicate RICO acts . . . would be included, in a civil context, within § 5524."
We find this proposal without merit. The premise that most, "if not all," RICO predicate acts would be covered by this statute is transparently false. Most RICO predicate acts, such as gambling, obstruction of law enforcement, sports bribery, narcotic trafficking, violations of restrictions on payments and loans to unions, interstate transportation of stolen property, or trafficking in contraband cigarettes, simply do not correspond to private causes of action under common law. As one court, seeking to find a civil RICO analogy under Colorado law has stated: "The search for a precise definition may be futile, however, since Colorado's statutes of limitations retain the language of common law forms of action." Victoria Oil, 587 F. Supp. at 431.
More fundamentally, this proposal does not even do what Wilson commands, i.e., characterize the federal cause of action. Rather, it seeks to take advantage of the fortuitous circumstance that a number of potential state law analogies share a common limitations period. Such an approach will provide little guidance for the resolution of this problem in other states, and may prove particularly vulnerable to changes in the state statute of limitations scheme. We reject this approach.
"Catchall" Limitations Period
Like most states, Pennsylvania has enacted a residual "catchall" statute of limitations for actions, primarily based on statute, that are not governed by any more specific period of limitations. It provided at the time this case was filed:
The following actions and proceedings must be commenced within six years:
(6) Any civil action or proceeding which is neither subject to another limitation specified in this subchapter nor excluded from the application of a period of limitation by section 5531 (relating to no limitation).
42 Pa. Cons. Stat. Ann. § 5527 (Purdon 1981).*fn19 In Wilson v. Garcia, the Court considered, but rejected, the application of such a catchall statute to § 1983 claims:
The relative scarcity of statutory claims when § 1983 was enacted makes it unlikely that Congress would have intended to apply the catchall periods of limitations for statutory claims that were later enacted by many states. Section 1983, of course, is a statute, but it only provides a remedy and does not itself create any substantive rights . . . . Although a few § 1983 claims are based on statutory rights, . . . most involve much more . . . . These guarantees of liberty are among the rights possessed by every individual in civilized society, and not privileges extended to the people by the legislature.
105 S. Ct. at 1948-49 (footnote omitted).
The Court's reasons for rejecting this analogy in the § 1983 context simply do not apply to RICO. RICO was enacted in 1970, long after statutory causes of action and corresponding catchall limitations periods became commonplace. Thus, it would not be disingenuous (or anachronistic) to suggest that Congress might have approved of borrowing such statutes. Second, RICO is a strictly statutory remedy to enforce statutory rights. Thus, Wilson v. Garcia does not foreclose this court from adopting § 5527 for civil RICO actions arising in Pennsylvania.
The A.B.A. Task Force on Civil RICO specifically approved of cases characterizing RICO in this way:
There are two varying approaches to characterizing RICO claims. Most courts use the state limitations period applicable to state law claims most similar to the predicate offenses alleged as part of the RICO claim. These cases in effect assume that the thrust of the RICO claim is to compensate injury caused by the underlying predicate offenses. In contrast, a few courts view RICO claims more broadly as a special statutory cause of action as to which the predicate offenses are only one element. These courts opt for the use of a state statute, if available, applying generally to all statutory causes of action that have no express statute of limitations.
The latter approach seems more consistent with the overall concept of RICO than the former. RICO is manifestly directed towards activities that go beyond the mere commission of predicate offenses, and many courts have balked at the concept of RICO as simply a new or alternative civil remedy for the underlying criminal violations.
Task Force Report at 389-91 (emphasis in original). See also Compton v. Ide, 732 F.2d 1429 (9th Cir. 1984); Teltronics Services v. Anaconda-Ericsson, Inc., 587 F. Supp. 724 (E.D.N.Y. 1984), aff'd, 762 F.2d 185 (2d Cir. 1985); Seawell v. Miller Brewing Co., 576 F. Supp. 424 (M.D.N.C. 1983). See also Durante Brothers, supra, (applying catchall statute to case before court); Creamer v. General Teamsters Local Union, 579 F. Supp. 1284 (D. Del. 1984) (same).
Such an approach, moreover, recognizes that civil RICO is truly sui generis and that particular claims cannot be readily analogized to causes of action known at common law -- the very observation that led us to search for a uniform limitations period in the first place. And like personal injury statutes, the catchall statutes are particularly unlikely to be fixed in a manner that would discriminate against federal claims. Thus, we hold that civil RICO actions arising in Pennsylvania shall be governed by the six-year limitations period of 42 Pa. Cons. Stat. Ann. § 5527. Because it is clear that the acts relating to the termination of Malley-Duff's agency occurred within six years of the time this action was filed, we will reverse the district court's dismissal of the RICO claims arising out of these alleged acts.*fn20
The district court dismissed the RICO claims predicated on the alleged obstructions of justice in Malley-Duff I because, it held, interference with a lawsuit did not constitute an injury to "business or property" within the meaning of RICO. We believe, especially in light of the Supreme Court's intervening decision in Sedima, that this constituted reversible error.
The district court relied on the analysis of Judge Garrity in Van Schaick v. Church of Scientology, 535 F. Supp. 1125 (D. Mass. 1982), wherein he concluded that "persons injured in their business or property" should be read as meaning "business persons engaged in conventional commercial activity who allegedly suffered commercial injury" and that civil RICO should be "confined. . . . to business loss from racketeering injuries." 535 F. Supp. at 1136-37. Interference with a lawsuit, the district court here said, was not such an injury. It went on to state that there were sound policy reasons for construing RICO as not permitting this claim: "There are other remedies available to plaintiff for such wrongs; e.g., discovery sanctions, evidentiary inferences in the original suit, contempt citations, and referral to the proper authorities for criminal investigation. The lure of lucrative treble damages under RICO is too great to permit recovery for such conduct as an injury to the person's 'property.' An enormous multiplicity of suits could result from holding otherwise." App. at 20a.
Though the district court's concerns are substantial ones, we do not believe its analysis can be squared with RICO as it is written or as construed in Sedima. If RICO's reference to injury to "business or property" is to be given meaning, RICO standing cannot be limited to "business" injuries only. We would certainly think, for example, that an individual harmed in his or her personal property by loan-sharking activities should have a civil remedy under RICO. A cause of action, of course, is a form of "property," and when it arises out of the termination of a business, we think it is not unfair to characterize conduct tending to impair it as "business injury." The unwritten "racketeering injury" requirement -- analogous to the requirement of competitive injury for antitrust standing -- was specifically addressed, and rejected, by the Supreme Court in Sedima :
Underlying the Court of Appeals' holding was its distress at the "extraordinary, if not outrageous," uses to which civil RICO has been put. 741 F.2d at 487. Instead of being used against mobsters and organized criminals, it has become a tool for everyday fraud cases brought against "respected and legitimate 'enterprises.'" Ibid. Yet Congress wanted to reach both "legitimate" and "illegitimate" enterprises . . . . The former enjoy neither an inherent incapacity for criminal activity nor immunity from its consequences. The fact that § 1964(c) is used against respected businesses allegedly engaged in a pattern of specifically identified criminal conduct is hardly a sufficient reason for assuming that the provision is being misconstrued. Nor does it reveal that "ambiguity" discovered by the court below. "The fact that RICO has been applied in situations not expressly anticipated by Congress does not demonstrate ambiguity. It demonstrates breadth." Haroco, Inc. v. American National Bank & Trust Co. of Chicago, [747 F.2d 384, 398 (7th Cir. 1984)].
It is true that private civil actions under the statute are being brought almost solely against such defendants, rather than against the archetypal, intimidating mobster. Yet this defect -- if defect it is -- is inherent in the statute as written, and its correction must lie with Congress. It is not for the judiciary to eliminate the private action in situations where Congress has provided it simply because plaintiffs are not taking advantage of it in its more difficult applications.
We nonetheless recognize that, in its private civil version, RICO is evolving into something quite different from the original conception of its enactors. See generally [ Task Force Report ] at 55-69. Though sharing the doubts of the Court of Appeals about this increasing divergence, we cannot agree with either its diagnosis or its remedy. The "extraordinary" uses to which civil RICO has been put appear to be primarily the result of the breadth of the predicate offenses, in particular the inclusion of wire, mail, and securities fraud, and the failure of Congress and the courts to develop a meaningful concept of "pattern." We do not believe that the amorphous standing requirement imposed by the Second Circuit effectively responds to these problems, or that it is a form of statutory amendment appropriately undertaken by the courts.
105 S. Ct. at 3287 (footnote omitted).
Nor do we agree with the district court that because litigants have other potential remedies for obstructive conduct such as that alleged here, there can be no remedy under RICO. We must assume that by including obstruction of justice among the RICO predicate acts, Congress envisioned the statute being used, where all other requirements are met, to supplement remedies already available for such conduct.*fn21 Certainly, the possibility of a criminal prosecution cannot be sufficient reason for denying a civil RICO remedy - such a rule would eviscerate civil RICO entirely, since all predicate acts are, by definition, crimes. See footnote 1 supra. We hold that Malley-Duff's allegations of "great expenses, delays and inconvenience . . . in its prosecution of the First Lawsuit" were a sufficient pleading of injury to business or property to give Malley-Duff RICO standing. See also Miller v. Glen & Helen Aircraft, Inc., 777 F.2d 496 (9th Cir. 1985).
Count V of Malley-Duff's complaint, based on 42 U.S.C. § 1985(2), see footnote 2 supra, alleged intimidation of a trial judge, intimidation of plaintiff's counsel, intimidation of witnesses, destruction of evidence, and subornation of perjury, all in the context of the pretrial stages of Malley-Duff I. Relying on this court's decision in Brawer v. Horowitz, 535 F.2d 830 (3d Cir. 1976), where we held that only acts directly affecting parties, witnesses or jurors - and not other acts that may merely influence the proceedings - are cognizable under this statute, the district court summarily dismissed all but the witness intimidation allegations. Malley-Duff does not seem to seriously challenge this holding, and we affirm it.
The district court went on, however, to dismiss the remaining § 1985(2) allegations on the ground that the complaint did not allege that any witnesses was actually deterred from testifying "in court," but rather complained of delays, expenses, inconvenience, and the suppression of evidence during the pretrial phase. We think this is a crabbed and unwarranted reading of the statute. The language "in any court" is not as plain as the district court seemed to surmise and cannot be read so literally -- a case may be described as "in" a certain court, even though no actual "courtroom" proceedings take place. Similarly, we think that a person asked to provide discovery in such a case, regardless of where or in what form, is of these purposes a witness "in" the court. Indeed, the statute distinguishes between being deterred from "attending such court" and from "testifying to any matter pending therein." As a policy matter, we think the statute's less than pellucid language should be read with a view to the fact that pretrial proceedings in 1870 did not have the importance they have today. Because cases can be won or lost, or their value substantially diminished, as a result of intimidation that affects witnesses' willingness or ability to provide discovery, we hold that the statute applies.*fn22
The case the district court relied on in holding that pretrial intimidation does not give rise to a cause of action under § 1985(2) is not on point. Kimble v. D.J. McDuffy, Inc. 648 F.2d 340 (5th Cir.) (in banc), cert. denied, 454 U.S. 1110, 70 L. Ed. 2d 651, 102 S. Ct. 687 (1981) involved a claim that employees were terminated for having filed worker's compensation claims. The statute refers to retaliation for giving testimony, not for the filing of complaints. Thus, the Fifth Circuit could not square the case before it with the language of the statute.
A case closer to this one is Chahal v. Paine Webber, 725 F.2d 20 (2d Cir. 1984), where the § 1985(2) claim alleged that the defendants had conspired to intimidate an expert witness into withdrawing from the case. The underlying case had not gone to trial when the § 1985(2) claim was brought, but nonetheless the court of appeals found a claim stated. Contrary to the district court here, which held that the only cognizable injuries are the actual failure of a witness to appear at trial, resulting in diminished recovery or loss of a lawsuit, the Second Circuit found it sufficient to allege as injury "the $1,410 paid to [the expert] for his services and cost of preparing him to assist in [the underlying] action. In any event one need not suffer monetary damage to prevail in an action for denial of civil rights." 725 F.2d at 24.
We agree with the Second Circuit that "the essential allegations of 1985(2) claim of witness intimidation are (1) a conspiracy between two or more persons (2) to deter a witness by force, intimidation or threat from attending court or testifying freely in any pending matter, which (3) results in injury to the plaintiffs." 725 F.2d at 23. See also Miller v. Glen & Helen Aircraft, 777 F.2d at 498. Under this standard, Malley-Duff's allegations are sufficient to state a § 1985(2) claim of witness intimidation.*fn23
Having dismissed all of Malley-Duff's federal claims, the district court exercised its discretion and dismissed its pendent state claim for civil conspiracy as well. Because we reverse the dismissals of the federal claims, we will also reinstate the pendent claim for further consideration, intimidating no view as it its sufficiency, timeliness, or merits.
For the reasons stated in the foregoing opinion, we will reverse the judgment of the district court and remand the case for further proceedings consistent with this opinion.
SLOVITER, Circuit Judge, Concurring in the judgment.
I join in Parts I, III, and IV of the majority opinion. As set forth in my concurring opinion in A.J. Cunningham Packing Corp. v. Congress Financial Corp., Nos. 85-3380, 85-3366, filed today, I disagree with the majority's approach in looking to state statutes of limitations to find one applicable to civil RICO claims. Instead, I would apply the four year statute set forth in section 4 of the Clayton Act, 15 U.S.C. § 15b. The argument that a federal statute of limitations should govern was not presented by plaintiffs in this action. Nonetheless, my comments in A.J. Cunningham are equally applicable to the issue presented here.
Because the plaintiffs in this case filed their complaint within four years of the date that their claim accrued, I agree with the majority that their complaint was filed timely and I therefore concur in the majority's reversal of the judgment of the district court and remand for further proceedings.