Richard Lund, Frank Audette, Peggy Audette, Paul John, Nancy John, Peggy Hubert, James K. Campbell, Virginia Campbell, Jeffrey Campbell v. Shearson/lehman/american Express, Inc., and Gary Morgan

Citations: 852 F.2d 182; 1988 U.S. App. LEXIS 9805Docket: 87-1920

Court: Court of Appeals for the Sixth Circuit; July 20, 1988; Federal Appellate Court

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Plaintiffs Richard Lund and others filed a civil RICO action against Shearson/Lehman/American Express, Inc. and Gary Morgan, claiming racketeering injuries due to misrepresented securities and undisclosed commissions from 1977 to 1981. The district court initially denied a motion to dismiss for untimeliness but later dismissed the case after the Supreme Court's ruling in Agency Holding Corp. v. Malley-Duff Associates, which established a four-year statute of limitations for civil RICO actions. The court determined that this ruling applied retroactively based on Chevron Oil Co. v. Huson criteria, concluding that Agency Holding did not represent a significant departure from prior law and that no clear statute of limitations existed for RICO actions in the Sixth Circuit at the time of filing. The Sixth Circuit affirmed the dismissal, emphasizing the general principle of applying the law in effect at the time a decision is rendered, with exceptions only for significant breaks from past precedent.

The Chevron Oil standard requires a "clear break" from past legal precedents for a new legal principle to be applied retroactively. If this requirement is not met, the rule is applied retrospectively without further consideration. To argue against retroactive application, one must demonstrate that the rule's purposes would not be served equitably by applying it to past cases and that such application would cause substantial unfairness. The exception to retroactivity is interpreted narrowly, as not every clarification by the Supreme Court signifies a clear break.

The inquiry focuses on whether Agency Holding constitutes a clear break from established precedent. A decision is considered a clear break if it overrules prior Supreme Court precedent, contradicts a clear implication from earlier rulings, or conflicts with uniform circuit court practices. The assessment concludes that Agency Holding does not represent a clear break, as the Supreme Court had never previously addressed the statute of limitations in civil RICO actions. 

Prior to Agency Holding, courts borrowed state statutory periods rather than applying a federal statute of limitations, leading to variations based on jurisdiction. This practice aligns with the guidance from Wilson v. Garcia, which emphasized uniformity in applying a single state limitations period to Section 1983 claims. While some courts applied Wilson to RICO actions, others, including the Sixth Circuit, did not, impacting the consistency of approaches. Therefore, although Agency Holding introduced a unified federal statute of limitations, the lack of consensus among circuits regarding the applicability of Wilson to RICO claims suggests that it does not signify a break from a clear trend, thus failing to meet the second prong of the Johnson criteria.

The third prong of the Johnson test is not satisfied due to a lack of consistency in appellate decisions regarding the statute of limitations for civil RICO actions. While most decisions favored a uniform statutory period, this court opted for a case-specific approach, which left plaintiffs without a clear basis for filing their action following the defendants' alleged wrongful activities. The court agrees with the district court's application of the Agency Holding decision retrospectively. Even if Agency Holding represented a significant shift from previous precedent, the appellants failed to demonstrate an inequitable outcome, particularly given the lengthy delay in initiating their claim. Before 1985, no Sixth Circuit case had addressed the statute of limitations issue, and the Silverberg ruling, which the appellants sought to invoke, was issued after the filing of their suit. Consequently, the plaintiffs could not establish justifiable reliance on Silverberg or any other precedent that would have extended their time to file a RICO claim. The court affirms the district court's decision in favor of the defendants.