200 F.3d 189 (3rd Cir. 1999), 98-7449, Annulli v Panikkar

Docket Nº:98-7449
Citation:200 F.3d 189
Party Name:DOMINICK ANNULLI AND JANET ANNULLI, HIS WIFE, INDIVIDUALLY AND TRADING AND DOING BUSINESS AS ANNULLI NURSERIES, APPELLANTS v. ANANDA K. PANIKKAR AND LINGA D. PANIKKAR, HIS WIFE, WILLIAM C. WRIGHT AND JOANNE WRIGHT, HIS WIFE; EVERGREEN EXPRESS, INC.; LAWRENCE D. WRIGHT AND LISA WRIGHT
Case Date:December 30, 1999
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit
 
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200 F.3d 189 (3rd Cir. 1999)

DOMINICK ANNULLI AND JANET ANNULLI, HIS WIFE, INDIVIDUALLY AND TRADING AND DOING BUSINESS AS ANNULLI NURSERIES, APPELLANTS

v.

ANANDA K. PANIKKAR AND LINGA D. PANIKKAR, HIS WIFE, WILLIAM C. WRIGHT AND JOANNE WRIGHT, HIS WIFE; EVERGREEN EXPRESS, INC.; LAWRENCE D. WRIGHT AND LISA WRIGHT

No. 98-7449

United States Court of Appeals, Third Circuit

December 30, 1999

Argued: November 4, 1999

On Appeal From the United States District Court For the Middle District of Pennsylvania (D.C. Civ. No. 96-cv-01161) District Judge: Honorable Malcolm Muir

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[Copyrighted Material Omitted]

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Counsel for Appellants: Franklin E. Kepner, Jr., Esquire (argued) Alice T.K. Corba, Esquire Kepner, Kepner & Corba 123 West Front Street Berwick, PA 18603

Counsel for Appellees: John J. Soroko, Esquire (argued) Teresa N. Cavenagh, Esquire Duane, Morris & Heckscher, Llp One Liberty Place Philadelphia, PA 19103-7396, Joseph P. Lenahan, Esquire Lenahan & Dempsey Suite 400, Kane Building 116 North Washington Avenue P.O. Box 234 Scranton, PA 18501-0234,

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Lisa Wilson, Esquire 251 Shadowlawn Avenue Mount Lebanon, PA 15216

Before: Becker, Chief Judge, Greenberg, and Cudahy,[*] Circuit Judges.

OPINION OF THE COURT

Becker, Chief Judge

The principal question presented by this appeal is whether torts, breaches of contract, and state law crimes--which are not enumerated in the Racketeering Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1961(1) --can be predicate acts of racketeering upon which a plaintiff can base a civil RICO claim under 18 U.S.C. § 1964(c). We would have thought the answer to this question obvious, but, as evidenced by the case at bar, the question begs for definitive resolution. Accordingly, we take this opportunity to make clear that a plaintiff in a civil RICO action cannot rely on a breach of contract, tortious interference with contract, or the Pennsylvania state law crime of theft by deception as predicate acts of racketeering activity under the federal RICO statute.

The appeal also requires that we clarify the time at which a cause of action accrues for statute-of-limitations purposes under the civil RICO statute. We confirm that the "injury and pattern" discovery rule announced by this Court in Keystone Ins. Co. v. Houghton, 863 F.2d 1125 (3d Cir. 1988), remains the law of the Circuit, notwithstanding the Supreme Court's decision in Klehr v. A.O. Smith Corp., 521 U.S. 179 (1997), which rejected an exception we had grafted on to Keystone's general rule. We note, however, that the Supreme Court has granted writ of certiorari in Rotella v. Wood, 147 F.3d 438 (5th Cir. 1998), cert. granted, 119 S.Ct. 1139 (1999), and will likely decide this Term what rule will control in the future: the injury and pattern discovery rule employed by this court of appeals and others; the "pure injury discovery" rule employed by other courts of appeals; the "injury rule" endorsed by Justices Scalia and Thomas in Klehr, 521 U.S. at 198 (Scalia, J., concurring); or some other rule.

Our determinations as to what constitutes a predicate act of racketeering activity and the time at which a civil RICO action accrues compel the conclusion that the District Court did not err in granting summary judgment for the defendants on plaintiffs-appellants' civil RICO claims. We further conclude that the District Court did not abuse its discretion under the supplemental jurisdiction statute, 28 U.S.C. § 1367(c), by dismissing plaintiffs' pendent state law claims after their predicate federal claims had been dismissed. Accordingly, the judgment of the District Court will be affirmed.

I. Factual Background and Procedural History

Doctors William Wright and Ananda Panikkar were friends and practicing physicians in Bloomsburg, Pennsylvania. Each owned adjoining land on the River Hill farm, where they grew Christmas trees for sale. Each man and his family also owned other tree farms. Wright's family formed a corporation to sell trees, Evergreen Express, Inc. (Evergreen), while Panikkar sold trees under his own name. Until 1989, both families participated in the management of their farms but employed outside help to do much of the work. This arrangement proved erratic and generally unprofitable.

In 1989, Wright contacted Dominick Annulli, who was experienced in the tree farm business, and told him that he needed someone to manage his farm and to maintain and sell his trees. Annulli and Wright

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signed a written contract prepared by Wright's son, Lawrence, a lawyer, which provided that for a four-year term Annulli would be responsible for maintaining and selling Evergreen's trees. In return, Annulli would receive any profits from those sales after he paid Evergreen a base fee for each tree sold. During the course of the negotiations, Wright introduced Annulli to Panikkar, who agreed orally to enter into a similar arrangement with Annulli. Annulli successfully managed the farms for the next two years. In addition to selling Christmas trees, he expanded the Wrights' and the Panikkars' businesses to the non-holiday season by developing a market in dug and balled nursery stock trees. This new venture proved quite profitable for the families and Annulli, and it enabled the farms to have a stream of income year-round.

Not all remained merry, however, in the Christmas tree business. Annulli alleges that, although the Wrights' and Panikkars' farms were becoming quite successful, Wright's son, Lawrence, made Annulli's life miserable by constantly interfering with Annulli's management duties. Frustrated with Lawrence's intrusiveness, Annulli wrote to Wright and Evergreen on April 6, 1991, requesting that they terminate their agreement before the end of the term. Annulli's offer was not accepted, and he was told by the Wrights that they expected him to meet his obligations for the next two years.

Four months later, the Wrights and Evergreen "accepted" Annulli's offer to terminate the contract. They did so after a summer during which Annulli had labored and spent his own money to maintain the Wrights' trees. Annulli submits that the Wrights' acceptance of his offer to terminate was not only legally invalid, but was motivated by the Wrights' unlawful desire to profit at his expense. Annulli submitted an affidavit prepared by one George Bellum, who represented that Wright had offered him a job to manage the Wrights' farms while Annulli was still engaged in doing so. Bellum also asserted that Lawrence Wright explained that the reason for replacing Annulli with Bellum was that, under their contract, Annulli was making all the money and the Wrights wanted to reap these profits.1 Additionally, Bellum claimed that, after Annulli's contract was terminated, Lawrence Wright and his brother, Lee, tried to enlist Bellum in an attempt to use a price list stolen from Annulli to steal Annulli's customers for nursery stock trees.

Believing that the Wrights' actions constituted a breach of contract, Annulli sued Evergreen in Pennsylvania state court in November 1991. The case was purged from the state court's docket after two years for lack of prosecution. While Annulli's case against Evergreen languished in state court, Annulli's contractual relationship with Panikkar continued. Wright, who lived next to one of Panikkar's farms, began calling Panikkar and informing him that Annulli was not maintaining the Panikkars' trees, and that he was cutting and selling their trees without informing him. Panikkar visited his tree farms, and upon discovering what he perceived to be neglect, informed Annulli that he needed to take better care to meet his contractual obligations. The neglect is said to have persisted, and Panikkar terminated his agreement with Annulli in the Spring of 1993. Since then, the Wrights have performed maintenance and managerial duties at the Panikkars' farms.

In November 1994, Annulli filed suit against Panikkar and his wife in Pennsylvania state court for breach of contract.2

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On June 4, 1996, Annulli deposed Panikkar, who testified regarding his connection with the Wrights and about Wright's reports that Annulli was not doing his job properly. Based on this deposition and an interpretation of Panikkar's testimony that led to the conclusion that the Wrights and Panikkars had conspired to defraud Annulli, Annulli filed an amended complaint on July 15, 1996. The complaint added Wright, his wife, two of their children, and Evergreen as defendants. Annulli pled breach of contract claims against the Panikkars; he asserted claims against Evergreen and the Wrights for tortious interference with the Panikkar-Annulli contract; and he alleged that the Wrights and Panikkars had engaged in conspiracy and defrauded him. Annulli demanded four million dollars in damages for anticipated lost profits from his share of the trees on the Panikkar farms which Annulli had planted and maintained, but which the Wrights and Panikkars were now selling.

On June 24, 1996, Annulli began proceedings against the Wrights, Panikkars, and Evergreen (hereinafter "the Defendants") in the District Court for the Middle District of Pennsylvania; he averred civil RICO claims as well as pendent state law claims. (Annulli's counsel represented at oral argument that these state law claims are currently pending in state court.) In his RICO action, Annulli alleged that the Wrights and the Panikkars engaged in a conspiracy between 1983 and 1993 to steal Annulli's services and expertise. He alleged that he first discovered this conspiracy and pattern of racketeering during the June 4, 1996 deposition of Panikkar.

The Defendants moved for summary judgment, and the District Court granted it based on the statute-of-limitations defense they had...

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