Laffit Pincay, Jr. Christopher J. McCarron Plaintiffs-Appellees-Cross-Appellants v. Vincent S. Andrews Robert L. Andrews Vincent Andrews Management Corp. Defendants-Appellantscross-Appellees
Docket: 98-55217
Court: Court of Appeals for the Ninth Circuit; February 5, 2001; Federal Appellate Court
The case involves an appeal concerning whether the statute of limitations for claims under the civil Racketeer Influenced and Corrupt Organizations Act (RICO) begins when a plaintiff receives written disclosure of an alleged injury. Plaintiffs Lafitt Pincay and Christopher McCarron, both Hall of Fame jockeys, retained defendants Vincent Andrews, Robert Andrews, and their company, Vincent Andrews Management Corporation (VAMC), as investment advisors from 1969 to 1988. Pincay initially engaged Vincent's father in 1967, continuing with Vincent after he took over the business in 1969, with a fee structure of 5% of annual income. McCarron similarly started his arrangement in 1979.
During their partnerships, VAMC recommended various investments, many of which involved financial interests held by the Andrews. Several written disclosures outlined these interests, including agreements in 1972 and 1984 that specified compensation arrangements for the Andrews based on capital invested. Notably, a 1980 document explicitly stated that Robert Andrews would receive 5% of the capital contributions from investors. Pincay terminated his agreement in 1987, while McCarron did so in 1988. The case was heard before the Ninth Circuit Court of Appeals, with arguments presented on October 2, 2000, and a decision rendered on February 6, 2001.
In 1989, Pincay and McCarron sued the Andrews in the Federal District Court for the Central District of California, alleging breach of contract, breach of fiduciary duties, and mail and wire fraud under RICO. They claimed the Andrews unlawfully took over 5% of their annual income contrary to oral agreements, leading to the jury finding RICO liability. The jury awarded Pincay $670,685 and McCarron $313,000 in compensatory damages, with additional punitive damages of $2.25 million for Pincay and approximately $1.3 million for McCarron. The district court also granted attorneys' fees of $603,967 to Pincay and $255,986 to McCarron under RICO. Pincay and McCarron opted to seek treble damages under RICO instead of state law punitive damages.
The Andrews filed motions for judgment as a matter of law and for a new trial, claiming the statute of limitations had expired and questioning the evidence supporting the RICO claim and damages awarded. The district court denied these motions. Subsequently, both parties appealed, with the Andrews contesting the denial and Pincay and McCarron arguing against the election between RICO and state law damages.
The court first addressed the Andrews' argument regarding the statute of limitations, which is four years for civil RICO actions. Although the investments began in the 1970s and 1980s, the lawsuits were not filed until 1989. The jury determined that the statute of limitations had not expired, and the court applied the "injury discovery" rule, which starts the limitations period when a plaintiff knows or should know of the injury. The plaintiffs contended that the fiduciary relationship with the Andrews should prevent the statute from running, a position not supported by precedent, as demonstrated in Volk v. D.A. Davidson, where constructive notice was applied despite a fiduciary duty.
The case referenced, Conmar Corp. v. Mitsui, does not support the argument that constructive notice does not trigger the statute of limitations; its context pertains to fraudulent concealment rather than constructive notice. The distinction is significant, as fraudulent concealment can toll the statute of limitations, but it does not determine when the limitations period begins. The court reaffirms that constructive notice initiates the statute of limitations regardless of the existence of a fiduciary relationship. If it is established that no reasonable jury could find Pincay and McCarron lacked constructive notice of their injuries prior to 1985, the Andrews are entitled to judgment as a matter of law. Pincay and McCarron's alleged injury involved paying more than 5% of their annual income to the Andrews, and they had constructive knowledge sufficient to prompt an investigation due to written disclosures received, such as a 1980 document detailing compensation. This aligns with previous rulings, which indicate that receiving written disclosures can establish constructive notice. Consequently, unless the statute of limitations was tolled, Pincay and McCarron’s civil RICO claims are time-barred. They argue that the statute was tolled until 1988 due to the Andrews’ fraudulent concealment of information, but for this doctrine to apply, the plaintiffs must show affirmative conduct from the defendants that misled them regarding their claims.
Pincay and McCarron are unable to succeed on their fraudulent concealment claim because legal precedent requires plaintiffs to show they lacked both actual and constructive notice of the facts relevant to their claims. The court determined that Pincay and McCarron had constructive notice of their injuries before 1985, thereby barring their claim. Additionally, since the statute of limitations expired before 1989, the court did not need to address further evidence issues raised by the Andrews. Consequently, Pincay and McCarron's cross-appeal concerning the election of damages is deemed moot. The ruling specifically pertains to their civil RICO claims and does not affect the jury's verdict on their state law claims. The judgment for Pincay and McCarron is reversed. The Andrews had previously claimed that Pincay and McCarron's RICO claims were barred by a retroactive provision of the Private Securities Litigation Reform Act of 1995; however, the court had already ruled that this provision could not be applied retroactively. There was a noted jury instruction error regarding the statute of limitations, but the court concluded that it was inconsequential for the appeal since the jury’s finding indicated that the statute had not run regardless. The Supreme Court has altered certain standards for civil RICO but has preserved the "injury discovery" rule applicable in this case, while reserving judgment on the correctness of this standard. Lastly, the court emphasized that its review of the judgment as a matter of law follows the correct legal standards, not necessarily those provided to the jury.
