792 F.2d 341 (3rd Cir. 1986), 84-3228, Malley-Duff & Associates, Inc. v. Crown Life Ins. Co.

Docket Nº:84-3228.
Citation:792 F.2d 341
Party Name:MALLEY-DUFF & ASSOCIATES, INC. Appellant, v. CROWN LIFE INSURANCE CO., a Corp. Agency Holding Corp, an Illinois Corp. Agency Holding Corp, an Ohio Corp. Clarke Burton Lloyd, individual Kerry Patrick Craig, individual Diane Pariano, individual Ehrman Ratini Oglevee & Craig Inc., a Pennsylvania Corporation Robert Oglevee, individual.
Case Date:May 30, 1986
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit

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792 F.2d 341 (3rd Cir. 1986)



CROWN LIFE INSURANCE CO., a Corp. Agency Holding Corp, an

Illinois Corp. Agency Holding Corp, an Ohio Corp. Clarke

Burton Lloyd, individual Kerry Patrick Craig, individual

Diane Pariano, individual Ehrman Ratini Oglevee & Craig

Inc., a Pennsylvania Corporation Robert Oglevee, individual.

No. 84-3228.

United States Court of Appeals, Third Circuit

May 30, 1986

Argued Nov. 19, 1985.

As Amended June 10, 1986.

Rehearing Denied July 1, 1986.

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Alexander Black (argued), Robert W. Brown, Mindy J. Mulvihill, Buchanan, Ingersoll Professional Corp., Pittsburgh, Pa., for Crown Life Ins. and Clarke Burton Lloyd.

John H. Bingler, Jr. (argued), Glenn E. Bost, II, Thorp, Reed and Armstrong, Pittsburgh, Pa., for Agency Holding Corp. (Illinois); Agency Holding Corp. (Ohio); Kerry Patrick Craig; Diane Pariano; Ehrman Ratini Oglevee & Craig, Inc.; and Robert Oglevee.

Michael D. Fishbein, Levin and Fishbein, Philadelphia, Pa.,Michael P. Malakoff, Berger, Kapetan, Malakoff & Meyers, P.C., Pittsburgh, Pa., John Paul Curran, Curran, Mylotte, David & Fitzpatrick, Philadelphia, Pa., for amici curiae Peirce Trading Co.; A. J. Cunningham Packing Corp.; Chicago Dressed Beef Co.; Continental Food Products, Inc.; Florence Beef Co.

James H. McConomy, Eric A. Schaffer, Reed, Smith, Shaw and McClay, Pittsburgh, Pa., for amicus curiae Congress Financial Corp.

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H. Woodruff Turner, David A. Borkovic (argued), Kirkpatrick, Lockhart, Johnson and Hutchison, Pittsburgh, Pa., for appellant.



A. LEON HIGGINBOTHAM, Jr., Circuit Judge.

This is an appeal from a final summary judgment of the district court dismissing the complaint of appellant Malley-Duff & Associates, Inc. ("Malley-Duff"). For the reasons that follow, we will reverse and remand for further proceedings.


Until February 13, 1978, Malley-Duff was an agent of defendant Crown Life Insurance Company ("Crown Life") for a territory surrounding and including Pittsburgh, Pennsylvania. Crown Life required Malley-Duff to represent it exclusively. Malley-Duff alleges that defendants formed an "enterprise," the purpose of which was "to acquire, take over or eliminate various Crown agencies that had lucrative territories in the United States of America," and which did so by "false and fraudulent means and pretenses." The enterprise allegedly acquired Malley-Duff's agency by first imposing, nine months into the fiscal year 1977, a "bogus" production quota that could not be met, and then terminating the agency when it in fact failed to meet the quota. According to the complaint, the enterprise used similar means to acquire Crown Life agencies in Chicago, Peoria, Cleveland, Newark, Hartford, Denver, and elsewhere. It is further alleged that terminated agents were defrauded out of renewal commissions.

In April of 1978, Malley-Duff filed suit ("Malley-Duff I") against defendants Crown Life, Lloyd, Craig, Agency Holding Company (Illinois), and Agency Holding Company (Ohio), as well as another individual not named in this suit, alleging violations of the federal antitrust laws and conspiracy to tortiously interfere with contract. The case was tried to a jury, but defendants won a directed verdict on the antitrust claims at the close of Malley-Duff's case. Malley-Duff won a verdict of $900,000 on the state conspiracy claim, but the jury concluded in answer to a special interrogatory that there was no tortious interference. On appeal, this court ordered a new trial, holding that there was sufficient evidence of a violation of Sec. 1 of the Sherman Act to present a jury issue, and "that the verdict form answers on the remaining state law claims were inconsistent," Malley-Duff & Associates v. Crown Life Insurance Company, 734 F.2d 133, 136 (3d Cir.), cert. denied, --- U.S. ---, 105 S.Ct. 564, 83 L.Ed.2d 505 (1984).

On March 20, 1981--prior to trial of Malley-Duff I--Malley-Duff filed the instant complaint, alleging causes of action under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. Secs. 1961-1968 (1982), 1 for conspiracy to interfere

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with civil rights, 42 U.S.C. Sec. 1985, 2 and a pendent state civil conspiracy theory. The RICO claims can be divided into two categories: (1) claims arising out of the allegedly fraudulent termination of the agency; 3 and (2) claims arising out of alleged obstructions of justice by defendants in the course of the discovery phase of Malley-Duff I. 4 The Sec. 1985 claims were based on the same allegedly obstructive conduct. The civil conspiracy count incorporated allegations involving both the termination and the obstructions of justice.

This case was consolidated with Malley-Duff I on November 2, 1981, but was severed on January 11, 1983, prior to trial. Defendants had filed a motion for summary judgment on July 29, 1982. On March 23, 1984, the district court granted defendants' motion and entered judgment for them on all counts. This appeal followed. 5


The district court dismissed Malley-Duff's RICO claims, to the extent they arose out of the allegedly fraudulent termination of its agency, on the ground that they were barred by the applicable statute of limitations. Because federal law does not provide a statute of limitations for civil RICO actions, the district court followed the settled practice of turning to the law of the forum state (in this case Pennsylvania) to "borrow" the limitations period for the state cause of action most closely analogous to Malley-Duff's claims. 6 See Board of Regents v. Tomanio, 446 U.S. 478, 483-84, 100 S.Ct. 1790, 1794-95, 64 L.Ed.2d 440 (1980); Johnson v. Railway Express Agency, 421 U.S. 454, 462-63, 95 S.Ct. 1716, 1721, 44 L.Ed.2d 295 (1975); see generally Note, Limitation Borrowing in Federal Courts, 77 Mich.L.Rev. 1127 (1979). The parties agreed that common law fraud was the state cause most analogous to these claims, but disagreed as to whether a two- or six-year limitations period governed such actions in Pennsylvania. 7 The district court held that the two-year statute applied,

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and that claims filed on March 20, 1981, relating to events that occurred in early 1978, 8 were therefore time-barred.

Subsequent to the district court's decision, the Supreme Court of the United States decided Wilson v. Garcia, --- U.S. ----, 105 S.Ct. 1938, 85 L.Ed.2d 254 (1985), which established a three-part inquiry 9 to guide the selection of the statute of limitations that will govern a federal claim. First, we must determine whether it is state or federal law that controls the characterization of the claim. Second, we must decide whether all claims arising under a particular federal law "should be characterized in the same way, or whether they should be evaluated differently depending upon the varying factual circumstances and legal theories presented in each individual case." Finally, "we must characterize the essence of the claim in the pending case, and decide which state statute provides the most appropriate limiting principle." 105 S.Ct. at 1943. In the subsections that follow we engage in the prescribed inquiry. 10 Our function here is to legislate interstitially, and in doing so we are mindful of Justice Holmes' admonition that we are "confined from molar to molecular motions." Southern Pacific Co. v. Jenson, 244 U.S. 205, 221, 37 S.Ct. 524, 531, 61 L.Ed. 1086 (1917) (dissent). We conclude that within each state all civil RICO claims should be characterized uniformly, in accordance with federal law, and that in Pennsylvania the most appropriate limitations period for all civil RICO claims is the six-year residual statute of limitations.

  1. Controlling Law

    In Wilson v. Garcia, which arose in New Mexico, the question whether state or federal law controlled the characterization of Sec. 1983 claims was critical because the Supreme Court of New Mexico had definitively decided, as a matter of state law, that Sec. 1983 claims should be analogized for limitations purposes to state claims brought under the New Mexico Torts Claim Act. DeVargas v. New Mexico, 97 N.M. 563, 642 P.2d 166 (1982). The United States Supreme Court held that DeVargas was not binding on federal courts. The

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    Court noted that the "characterization of Sec. 1983 for statute of limitations purposes is derived from the elements of the cause of action, and Congress' purpose in providing it. These, of course, are matters of federal law. Since federal law is available to decide the question, the language of [42 U.S.C.] Sec. 1988 directs that the matter of characterization should be treated as a federal question." 105 S.Ct. at 1943. The court found further support in Sec. 1988's 11 instruction that state law shall apply "so far as the same is not inconsistent with" federal law, observing that "Congress surely did not intend to assign to state courts and legislatures a conclusive role in the formative function of defining and characterizing the essential elements of a federal cause of action." 105 S.Ct. at 1944. In addition, the Court stated, "[i]n borrowing statutes of limitations for other federal claims, this Court has generally recognized that the problem of characterization 'is ultimately a question of federal law.' " Id. (quoting Auto Workers v. Hoosier Cardinal Corp., 383 U.S. 696, 706, 86 S.Ct. 1107, 1113, 16 L.Ed.2d 192 (1966)) (footnote omitted).

    We have found no decisions of the Pennsylvania Supreme Court, or any lower court, purporting to characterize RICO claims under Pennsylvania law for limitations purposes. Nonetheless, if state law were to control the chartacterization our function would be to predict how the Pennsylvania...

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