The opinion of the court was delivered by: O'NEILL
Plaintiffs David S. Forbes, Richard D. Middleton, D. Bradford Park, Ulf Nilsson, and Douglas D. Smail are former National Hockey League players. Alleging that their union, the NHL Players Association ("NHLPA"), was co-opted by the NHL and pilfered by their own union leader for nearly two decades, plaintiffs bring this suit as a putative class action on behalf of all players employed by NHL teams between 1972 and 1991 against Alan R. Eagleson, former executive director of the NHLPA; several businesses owned or controlled by Eagleson, Jialson Holdings, Ltd., Sports Management, Ltd., Rae-Con Consultants, Ltd., and Eagleson, Ungerman, a law firm (the "Canadian defendants"); and the NHL, its Member Clubs, and two NHL officials, John Ziegler, President of the NHL from 1977 to 1992, and William W. Wirtz, Chairman of the Board of Governors of the NHL (the "NHL defendants").
Plaintiffs' two-count fourth-amended complaint charges defendants with racketeering activity in violation of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1964. Count I alleges, in essence, that the NHL defendants and Eagleson maintained a collusive, quid pro quo arrangement in violation of federal anti-bribery labor law pursuant to which Eagleson forsook the players' interests in collective bargaining with the NHL. Count II alleges that Eagleson and the Canadian defendants engaged in a variety of schemes to pilfer union funds in violation of anti- embezzlement and mail fraud statutes.
The NHL defendants and Eagleson have moved to dismiss or for summary judgment as to Count I on grounds that plaintiffs' claims are barred by the statute of limitations.
Fed. R. Civ. Proc. 12(b)(6), 56. The parties have presented substantial material extraneous to the pleadings in the course of extensive briefing on the motion and have been notified that the motion will be treated as one for summary judgment.
Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. Proc. 56(c). In resolving the motion, I view the evidence and all reasonable inferences to be drawn therefrom in favor of plaintiffs as the non-moving parties. See, e.g., Reitz v. County of Bucks, 125 F.3d 139, 143 (3d Cir. 1997).
Where the party moving for summary judgment bears the burden of proof, as defendants do with respect to their statute of limitations defense, the movant "must make an affirmative showing that it is entitled to summary judgment." McGrath v. City of Philadelphia, 864 F. Supp. 466, 473 (E.D. Pa. 1994); see also National State Bank v. Federal Reserve Bank, 979 F.2d 1579, 1581-82 (3d Cir. 1992). The "applicability of the statute of limitations usually implicates factual questions as to when plaintiff discovered or should have discovered the elements of the cause of action; accordingly, 'defendants bear a heavy burden in seeking to establish as a matter of law that the challenged claims are barred.'" Davis v. Grusemeyer, 996 F.2d 617, 623 n. 10 (3d Cir. 1993), quoting Van Buskirk v. Carey Canadian Mines, Ltd., 760 F.2d 481, 498 (3d Cir. 1985).
Civil RICO claims are subject to a four-year statute of limitations. Agency Holding Corp. v. Malley-Duff P Assoc., Inc., 483 U.S. 143, 97 L. Ed. 2d 121, 107 S. Ct. 2759 (1987). The question presented here is whether plaintiffs' claims accrued more than four years before they filed suit on November 7, 1995 -- that is, before November 7, 1991. If so, their claims are untimely unless the statute of limitations was tolled.
This is the second occasion on which I have been asked to determine whether plaintiffs' claims are barred by the statute of limitations. In denying defendants' previous motion, I relied upon the Third Circuit's unique "last predicate act" accrual rule for civil RICO as set forth in Keystone Ins. Co. v. Houghton, 863 F.2d 1125 (3d Cir. 1988). See 1996 WL 420829. That rule has since been invalidated by the Supreme Court's decision in Klehr v. A.O. Smith Corp., 521 U.S. 179, 117 S. Ct. 1984, 138 L. Ed. 2d 373 (1997), which plaintiffs concede applies retroactively to this case.
While the Klehr Court invalidated the Third Circuit's last predicate act exception, it did not establish which of the remaining rules followed by the various Court of Appeals should be applied. The parties, unsurprisingly, disagree on what rule should be adopted in Klehr 's wake. Defendants argue for the "pure injury" accrual rule used in Clayton Act antitrust cases, pursuant to which a claim accrues and the limitations period begins to run as soon as the plaintiff is injured. See Klehr, 117 S. Ct. at 1995 (Scalia, J. concurring) (advocating adoption of pure injury accrual rule). Plaintiffs argue that, aside from its "last predicate act exception," Keystone remains good law and compels application of a discovery accrual rule pursuant to which a plaintiff must have notice of all elements of a RICO claim before the limitations period starts to run.
Keystone established both a general discovery accrual rule and a "last predicate act" exception as follows:
The limitations period for a civil RICO claim runs from the date the plaintiff knew or should have know that the elements of a civil RICO cause of action existed unless, as a part of the same pattern of racketeering activity, there is further injury to the plaintiff or further predicate acts occur, in which case the accrual period shall run from the time when the plaintiff knew or should have known of the last injury or the last predicate act which is part of the same pattern of racketeering activity. The last predicate act need not have resulted in injury to the plaintiff but must be part of the same 'pattern.'
Keystone, 863 F.2d at 1130 (emphasis added). The effect of the exception allowed plaintiffs to use any predicate act within the statute of limitations period to recover for any and all past injuries caused by a RICO conspiracy, no matter how much time had passed or what plaintiffs had known or should have known of their claims. It was rejected by the Supreme Court because, among other things, it potentially resulted in dramatically lengthened limitations periods and allowed plaintiffs to sleep on their claims while treble damages accumulated, contrary to civil RICO's purpose of encouraging private persons to investigate possible racketeering activity. Klehr, 117 S. Ct. at 1989- 90.
The Court did not, however, purport to disturb Keystone 's general rule (also known as the "injury plus source plus pattern" discovery rule) that the statute of limitations period for a civil RICO claim "runs from the date the plaintiff knew or should have know that the elements of a civil RICO cause of action existed." See Klehr, 117 S. Ct. at 1989, 1992. To the contrary, the Court expressly reserved judgment on whether a "discovery" accrual rule was appropriate for civil RICO cases, and if so, just what must be discovered for a claim to accrue. Klehr, 117 S. Ct. at 1992. Klehr does not, therefore, compel re-examination of the Third Circuit's general discovery rule.
Nor do I see any other reason to call into question the continued viability of the "injury plus source plus pattern" discovery rule. The Keystone Court adopted that rule, which is also followed by the Eighth Circuit and similar to the "injury plus pattern" rules followed in the Tenth and Eleventh Circuits, see Klehr, 117 S. Ct. at 1988-89, 1992, only after carefully reviewing and rejecting other accrual rules, such as that advocated by defendants, which look only to when an injury occurred or was discovered. The Court found these other rules inappropriate to the RICO context because they fail to take into account the central "pattern of racketeering activity" element of a RICO violation:
The Supreme Court . . . has made it clear that "the heart of any RICO complaint is the allegation of a pattern of racketeering." Malley-Duff, 107 S. Ct. at 2766 . . . In Sedima [v. Imrex Co.] the Supreme Court clarified the fact that "the essence of the violation is the commission of those [predicate] acts in connection with the conduct of an enterprise." 473 U.S. 479, 105 S. Ct.  at 3285. Given the Supreme Court's emphasis on the pattern element as the core of the violation, the simple discovery rule's focus on injury is misplaced.
863 F.2d at 1133 (alteration in original); see also Klehr, 117 S. Ct. at 1990 (noting in dicta that the injury accrual rule of the Clayton Act might not necessarily be appropriate for RICO cases because "civil RICO requires not just a single act, but rather a 'pattern' of acts"). I therefore conclude that it remains the law of this Circuit that a civil RICO claim accrues when the plaintiff "knew or should have known that the elements of a civil RICO cause of action existed." Accord Perlberger v. Perlberger, 1998 U.S. Dist. LEXIS 1964, 1998 WL 76310, *5 (E.D. Pa. 1998).
The elements of a RICO cause of action are the (1) conducting of (2) an enterprise (3) through a pattern of (4) racketeering activity (5) causing plaintiffs injury in their property or business. Alberci v. United States Dept. of Justice, 1992 WL 57922, *3 (E.D. Pa.); see also Keystone, 863 F.2d 1125, 1128; 18 U.S.C. §§ 1962, 1964.
Thus, plaintiffs' claims accrued and the statute of limitations began to run when they discovered or should have discovered that defendants had possibly engaged in conduct constituting the alleged pattern of racketeering and that this conduct had possibly caused them injury.
"Awareness that each element comprising a RICO claim is present is crucial while cognizance of the legal implication of these facts, that is, that there is a civil RICO cause of action, is irrelevant." Keystone, 863 at 1128.
Plaintiffs contend they did not and could not learn sufficient facts to bring this action until 1994 due to defendants' fraudulent concealment. Fraudulent concealment is an equitable tolling doctrine read into every federal statute of limitations.
Davis v. Grusemeyer, 996 F.2d 617, 624 (3d Cir. 1993). Fraudulent concealment will toll the running of the limitations period "only if it misleads a plaintiff into thinking that he does not have a cause of action. 'The doctrine . . . does not come into play, whatever the lengths to which a defendant has gone to conceal the wrongs, if a plaintiff is on notice of a potential claim.'" Id. at 624 (quoting Hobson v. Wilson, 237 U.S. App. D.C. 219, 737 F.2d 1, 35 (D.C. Cir. 1984). To successfully invoke the doctrine, plaintiffs must therefore show not only that they remained ignorant of their cause of action into the limitations period, but that their ignorance was not due to their own lack of reasonable diligence. Klehr, 117 S. Ct. at 1993; Davis, 996 F.2d at 625. Since "the means of knowledge are the same thing in effect as knowledge itself," Wood v. Carpenter, 101 U.S. (11 Otto) 135, 25 L. Ed. 807 (1879), plaintiffs will be charged with notice of their claim if they had both inquiry notice and means reasonably at hand to discover facts necessary to assert their claim.
Insofar as plaintiffs contend that defendants concealed facts essential to their cause of action, I think it clear that the doctrine of fraudulent concealment adds nothing to analysis of the timeliness of plaintiffs' claim not already implicit in the RICO discovery rule. Like the discovery rule, fraudulent concealment will delay the running of the statute of limitations until plaintiffs discovered, or in the exercise of reasonable diligence should have discovered, all the elements essential to their RICO claim. See, e.g. Hodges v. National Basketball Assoc., 1998 U.S. Dist. LEXIS 475, 1998 WL 26183 at *3 (N.D. Ill. 1998) (doctrine of fraudulent concealment tolls the statute of limitations when defendants have successfully concealed "vital information bearing on the existence of [a] claim"). To the extent that a defendant's concealing efforts succeed, "they postpone the date of accrual by preventing the plaintiff from discovering that he is a victim of a fraud . . . They are thus within the domain of the discovery rule." Cada v. Baxter Healthcare Corp., 920 F.2d 446, 450-51 (7th Cir. 1990); see also Holmberg v. Armbrecht, 327 U.S. 392, 397, 90 L. Ed. 743, 66 S. Ct. 582 (1946) ("where a plaintiff has been injured by fraud and 'remains in ignorance of it without any fault or want of diligence or care on his part, the bar of the statute does not begin to run until the fraud is discovered, though there be no special circumstances or efforts on the part of the party committing the fraud to conceal it from the knowledge of the other party'") (quoting Bailey v. Glover, 88 U.S. 342, 21 Wall. 342, 348, 22 L. Ed. 636 (1874)).
However, plaintiffs might also be understood as invoking "fraudulent concealment" in another sense -- one which "presupposes that the plaintiff had discovered, or, as required by the discovery rule, should have discovered, that the defendant injured him, and denotes efforts by the defendant -- above and beyond the wrongdoing upon which the plaintiff's claim is founded--to prevent the plaintiff from suing in time." Cada, 920 F.2d at 451. For example, an age- discrimination plaintiff presented with forged documents seeming to negate any reason he might have had to think his firing was related to his age would have a good case for tolling the statute of limitations. Id.
In this second sense, then, fraudulent concealment refers to a defendant's affirmative (and successful) efforts to mislead the plaintiff as to the nature or significance of facts which would have shown the existence of a claim. However, as with the discovery rule and equitable tolling, a plaintiff who is not reasonably diligent in attempting to discover his or her claims will not enjoy the tolling of the limitations period simply because the defendant engaged in fraudulent concealment. Klehr, 117 S. Ct. at 1993.
With these principles in mind, I turn to plaintiffs' allegations and the evidence defendants contend shows that plaintiffs had or should have had notice of their claim prior to November 7, 1991.
Defendant R. Alan Eagleson was executive director of the NHLPA, the exclusive bargaining unit of NHL players, from the union's inception in 1967 until the end of 1991. Essentially singlehandedly, he operated the union's daily business and conducted the players' collective bargaining negotiations with the NHL. He also engaged in business for himself as an agent and lawyer representing players and even management personnel in their individual contract negotiations with club owners.
Plaintiffs allege that from 1976 through 1991 the NHL defendants gave Eagleson unsupervised control of a joint NHL-NHLPA venture which participated in international hockey tournaments. They also granted permission for NHL players to participate in the extra-NHL events, which would otherwise have been prohibited by the players' contracts. The participation of the best NHL players was essential to the success of the tournaments. (Comp. P 28.)
As head of the joint venture and as chief negotiator for the International Committee of Hockey Canada, a non-profit organization which negotiated international hockey events for Canada, Eagleson organized some two dozen or more tournaments from 1976 to 1991, including five Canada Cups and nearly annual World Championships and Soviet Union team exhibition tours. For each Canada Cup, Hockey Canada was to be paid the first $ 600,000 of net tournament proceeds after expenses and 15% of net revenues above $ 2 million. All other net revenues were to be split equally between the NHL clubs and the NHLPA.
The NHL players earned little additional pay for playing in the tournaments and were induced to participate on the understanding that they would be benefiting their pension fund. In fact, plaintiffs allege, with Eagleson's assent the NHL defendants simply reduced their contributions to the pension fund by however much the players contributed through international hockey.
Eagleson allegedly used his control over international hockey to enrich himself and his associates. He (1) directed revenue from sales of television and rinkboard advertising rights to himself and associates; (2) appropriated air travel passes obtained from Air Canada in exchange for advertising rights for his personal use and that of family and associates; (3) charged excessive rents for office space; and (4) obtained excessive reimbursement for the legal services of his law firm and for the services and expenses of employees of other of his private businesses who were "lent" to the international hockey venture to coordinate the tournaments. Many of these schemes reduced the net proceeds to be divided between the NHLPA and the NHL pursuant to their joint venture. (Comp. PP 36-42).
In addition, from 1977 to 1986 the NHL defendants gave Eagleson the power to place the NHL's disability insurance policies for the players. (He also controlled the NHLPA's insurance funds.) Eagleson allegedly used his control over the disability insurance funds to extort personal benefits from insurance brokers and sham legal fees from players seeking disability benefits. (P 43.)
The crux of plaintiffs' claim against the NHL defendants is that they knew that Eagleson was using his control of international hockey and NHL disability insurance funds to enrich himself, but nonetheless allowed him to continue to exercise these powers unconstrained. (Comp. PP 44, 47, 49-50, 64.) This acquiescence, plaintiffs allege, amounted to a pattern of violations of § 302 of the Labor-Management Relations Act (LMRA), 29 U.S.C. § 186. Violations of § 302 constitute predicate acts of racketeering under 18 U.S.C. § 1961(1)(C) (defining as a "racketeering activity" any act indictable under 29 U.S.C. § 186). (Comp. PP 46, 63.)
Section 302 prohibits employers, employer associations, and their agents from paying money or any other "thing of value" to employee representatives, and prohibits employee representatives from accepting any such payment.
29 U.S.C. § 186(a), (b). Plaintiffs allege that the NHL defendants violated § 302(a) each time they permitted NHL players to participate in an international tournament, gave Eagleson unsupervised control over a tournament and its revenues, failed to hold Eagleson accountable for the revenues and/or overlooked his financial improprieties, and allowed him control over placement of the NHL's disability insurance premiums. Concomitantly, Eagleson allegedly violated § 302(b) every time he accepted control of an international tournament or the purchase of disability insurance. (Comp. PP 47-49.)
In return for the NHL defendants' facilitation of and acquiescence in his self-enriching schemes, Eagleson allegedly betrayed the interests of the players in collective bargaining. Without attempting to gain concessions in return or marshal the players' collective leverage, he agreed to the 1979 merger of the NHL and World Hockey Association (WHA), lack of free agency, supplemental drafts, equalization rules, and non-disclosure of players' salaries; he acquiesced in the removal of player representatives from the board of the players' pension funds and in the owners' practice of offsetting pension contributions by the amount the players contributed via international hockey; and he agreed to inadequate minimum salaries. As a result, the players' compensation was substantially suppressed from what it would have been had they been represented by an un-compromised and aggressive union negotiator. (Comp. PP 51-52.)
Eagleson negotiated collective bargains between the NHL and the NHLPA signed in 1976, 1981, 1984, and 1988. The last Eagleson-negotiated collective bargain expired in September 1991 and Eagleson's employment with the NHLPA terminated in December 1991.
As evidence that plaintiffs had or should have had knowledge of their cause of action by September 1991, at the latest, defendants point to a 1984 Sports Illustrated expose of Eagleson; a 1989 report on Eagleson's stewardship of the union (the "Garvey report") issued by investigators acting at the behest of a large number of hockey players; a complaint filed on behalf of two players with the Alberta Labor Relations Board in June 1991 seeking to void the players' collective bargaining agreement on grounds of collusion between the union and the NHL; and a series of investigative articles on the NHL and the union published in September 1991 by The Eagle-Tribune of Lawrence, Massachusetts.
Plaintiffs, on the other hand, contend that they did not and could not obtain sufficient, verifiable information to know and plead their claims until a federal grand jury indictment was issued in 1994 charging Eagleson with 32 counts of racketeering, embezzlement from a labor union, receipt of kickbacks affecting an employee welfare benefit plan, mail fraud, and obstruction of justice.
The Sports Illustrated article, published in July 1984 and entitled "The Man Who Rules Hockey," began with these assertions, among others:
From an unshakable power base rooted in 17 years of near-dictatorial rule as executive director of the NHL Players' Association, and fueled by what one associate calls "an ego the size of Guatemala," Eagleson, 51, has spread his personal and corporate influence from his Toronto offices into virtually every aspect of hockey in which there's a dollar to be made. Because he holds the ultimate bargaining chip-- 100% of the world's best professional hockey players--scarcely anything of import can happen in the sport without the approval, if not the direct participation, of Eagleson.
However, there's evidence that Eagleson has at times abused his multiple powers as head of the NHLPA, chief negotiator for Hockey Canada (the nonprofit corporation that administers Canada's participation in major international events) and personal representative of many of the NHL's stars specifically for his personal gain and the gain of his friends.
. . . . Eagleson rules hockey from atop a sort of international pyramid, because he's likely to be negotiating today against the side he'll be representing at a different bargaining table tomorrow. Ultimately, Eagleson's or his clients' interests are represented on virtually every side of every deal in hockey.
. . . . As executive director of the NHLPA, Eagleson speaks for all 480 of the league's players on all manner of issues: their insurance coverage, pension plan, licensing contracts, individual grievances against clubs and, most important, collective bargaining agreement with the NHL. When a new NHLPA-NHL contract is worked out--with never more than a lovers' quarrel cropping up, quite unlike recent negotiations in pro football, baseball and basketball--Eagleson immediately becomes an agent for the partnership of players and owners in international hockey and joins forces with Hockey Canada to arrange such competitions as the six-nation Canada Cup tournament, which grossed $ 6 million in 1981 and will be staged again this September.
(Daly Aff., Ex. B. at 62.)
The article reported "a number of instances in which Eagleson appears to have used his position for his own or his friends' personal gain." (Id. at 66.) In addition to evidence of a pattern of self-dealing in his representation and financial counseling of individual player-clients, the article reported that Eagleson apparently enriched himself in administering international hockey and players' disability insurance funds.
The article quoted at length a sports insurance broker to the effect that Eagleson extorted personal benefits, such as insurance policies for himself and his family and sham fees for his law firm, in exchange for placing disability insurance with the broker. Another broker suggested he was subject to similar demands. Two former players, Bob Dailey and Glen Sharpley, claimed Eagleson had demanded improper fees from them to collect on their union and NHL disability insurance policies. Both were apparently charged for the expenses of an insurance executive who flew to the U.S. from London to discuss their insurance matters, yet the executive, Bernard Warren, maintained that his firm had paid for his expenses. (Id. at 66-69)
As to international hockey, the article alluded to a possible collusive link between Eagleson's control of the tournaments and his representation of the ...