On Appeal from the United States District Court for the Western District of Pennsylvania (D.C. Civ. No. 84-2061). On Appeal from the United States District Court for the Western District of Pennsylvania (D.C. Civ. No. 84-2063).
Before: HIGGINBOTHAM, SLOVITER and MANSMANN, Circuit Judges.
A. LEON HIGGINBOTHAM, JR., Circuit Judge.
This is an appeal from a final judgment of the district court dismissing the complaints in these consolidated cases as time-barred. For the reasons that follow, we will reverse and remand for further proceedings.
On August 29, 1984, plaintiff A.J. Cunningham Packing Corp., Chicago Dressed Beef Co., Inc., Continental Food Products, Inc. and Florence Beef Company field an action against Congress Financial Corporation ("Congress") and Philadelphia National Bank "(PNB") alleging, in a three count complaint, that defendants had violated the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961-1968 (1982), and were liable for common law deceit and negligent misrepresentation. Plaintiff Pierce Trading Company filed a separate but essentially identical complaint on the same day. Simultaneously with the filing of their answers on November 8, 1984, defendants moved for summary judgment. The motions were limited in scope to their statute of limitations defense.
In the submissions made in connection with the summary judgment motion, the parties agreed that plaintiffs were on notice of the facts giving rise to their claims for relief in January 1981, more than two but less than six years before the action was commenced. Accordingly, there was no disputed material issue of fact and the parties thus presented a question of law for resolution by the district court pursuant to Fed. R. Civ. P. 56.
For purposes of ruling on the motions for summary judgment, defendants did not contest any of the material assertions of plaintiff's complaints. Essentially, they were as follows: In the fall of 1979, American International Meat Company ("AIMC") and American International Meat Importers ("AIMI") were formed to engage in the meat brokerage business. Both companies were highly leveraged and undercapitalized. They were financed by a line of credit supplied by Congress which was secured the AIMI/AIMC inventory and accounts receivable. During 1980, the financial condition of AIMI and AIMC steadily deteriorated to a position of insolvency. By the end of 1980, Congress had extended credit to AIMI/AIMC in excess of the inventory and accounts receivable reasonably available to repay the obligation to Congress. Although defendants knew AIMI and AIMC were insolvent, they repeatedly represented to various meat suppliers, including plaintiffs, that the companies were solvent in order to induce such suppliers to provide meat to AIMI which Congress could in turn use pursuant to its security agreement to satisfy the AIMI/AIMC debt without compensation to the suppliers. In reliance on these representations, plaintiffs sold approximately two million dollars worth of meat to AIMI on credit between late December 1980 and early January 1981. AIMI and AIMC thereupon filed petitions under Chapter 11 of the Bankruptcy Act which were later converted to liquidation proceedings under Chapter 7 of the Bankruptcy Code. The proceeds of the meat sold by plaintiffs to AIMI were used to completely satisfy the debt to Congress. Plaintiffs were left without any compensation for the two million dollars of meat they had sold to AIMI.
On May 28, 1985, the District Court decided the motions for summary judgment. The appropriate period of limitations applicable to all claims, the court held, was the Pennsylvania statute applying to fraud claims. The court acknowledged that there was a split of authority among the district courts in the Third Circuit on the question whether in enacting a revised statute of limitations scheme in 1976, the Pennsylvania legislature intended to reduce the six-year period of limitations that had traditionally been applicable to fraud claims arising in the Commonwealth. Finding such an intent, it concluded that a two-year period of limitations applicable to actions "for taking, detaining or injuring personal property" applied to fraud claims which accrued after the effective date of the statute. Accordingly, on this basis only, summary judgment was entered against the plaintiffs, and their claims were dismissed. Thereafter, plaintiffs timely filed a motion for reconsideration of the district court's order, which was denied. Plaintiffs timely filed notices of appeal from the district court's order denying reconsideration. We expedited the briefing of these appeals and scheduled them for argument in tandem with Malley-Duff Assoc. v. Crown Life Insurance Co., 792 F.2d 341 (3d Cir. 1986).
For the purpose of determining the applicable state statute of limitations, the district court analogized plaintiffs' federal RICO claim to an action for common law fraud. Because it found that fraud was subject to a two-year limitation under Pennsylvania law at the time this cause of action accrued, the district court held that the RICO claim was time-barred. Subsequently, in Malley-Duff, we held that within each state all RICO claims, regardless of the specific factual allegations, should be subject to a uniform period of limitations, and that in Pennsylvania that period is the six-year "catchall" statute of limitations. For the reasons stated in Malley-Duff, we hold that the six-year statute applies to the RICO count, and that the district court erred in granting summary judgment on that claim.
We are now squarely faced with the difficult question of Pennsylvania law that we reserved in footnote 7 of Malley-Duff : What period of limitations governed common law fraud claims that accrued after June 27, 1978, the effective date of the Judicial Code of 1976, Act No. 42, 1976 Pa. Laws 586 (which substantially revised and modernized Pennsylvania's prior limitations scheme, under which a six-year period was applied to fraud claims), but before February 18, 1983, the effective date of 1982 amendments to the Judicial Code, Act No. 326, 1982 Pa. Laws. 1409 § 201 (which expressly applied a two-year limitation to fraud claims)? This Court has previously noted that under the 1976 Judicial Code it is "unclear" whether the two-year period applicable to actions for "taking, detaining or injuring personal property . . ." 42 Pa. Con. Stat. Ann § 5524(3) (Purdon 1981), or the six-year catchall provision. 42 Pa. Cons. Stat. Ann. § 5527(6) (Purdon 1981) applied to an action based on common law fraud. Biggans v. Bache Halsey Stuart Shields, 638 F.2d 605, 607 n.2 (3d Cir. 1980). The many district courts within this circuit that have reached the issue are divided.*fn1 Both sides have presented, in addition to an impressive array of authority, cogent arguments of statutory construction in favor of their respective positions. On balance, however, we are persuaded that if the Pennsylvania Supreme Court were confronted with the question, it would hold that plaintiffs' common law fraud claims are governed by a six-year statute of limitations, and therefore are timely filed.
It will be helpful to first review some statutory history. The following statute of limitations, enacted in 1713, remained on the books until 1978:
All actions of trespass quare clausum fregit, all actions of detinue, trover and replevin, for taking away goods and cattle, all actions upon account and upon the case (other than such accounts as concern the trade of merchandise between merchant and merchant, their factors or servants, all actions debt, grounded upon any lending, or contract without specialty, all actions of debt, for arrearage of rent, except the proprietaries' quit-rents, and all actions of trespass, of assault, menace, battery, wounding and imprisonment, or any of them, which shall be sued or brought at any time after the five and twentieth day of April, which shall be in the year of our Lord one thousand seven hundred and thirteen, shall be commence and sued within the time and limitation hereafter expressed, and not after; that is to say, the said actions upon the case, other than for slander, and the said actions for account, and the said actions for trespass, debt, detinue and replevin, for goods or cattle, and the said actions of trespass quare clausum fregit within three years after the said five and twentieth day of April next, or within six years next after the cause of such actions or suit, and not after. And the said actions of trespass, of assault, menace, battery, wounding, imprisonment, or any of them, within one year next after the said five and twentieth day of April next, or within two years next after the cause of such actions or suit, and not after; and the said actions upon the case for words, within one year next after the words spoken, and not after.
Act of March 27, 1713, 1 Sm. L. 76 (repealed by Act No. 53, 1978 Pa. Law 202, § 2). Fraud was viewed as coming within the six-year limitation of this statute. See Home Life Insurance Co. v. Greenspan, 360 Pa. 542, 63 A.2d 72 (1949); Flach v. Integrity Trust Co., 134 Pa. Super. 456, 4 A.2d 212 (1939).
In 1976, as part of an extensive reform of Pennsylvania's judiciary was enacted. As before, there was no express mention of actions for fraud. Two provisions, however, have been advanced as governing fraud claims. Section 5524, as enacted in 1976, provided:
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 of neglect 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 a civil penalty or forfeiture, where the action is ...