Tellis v. U.S. Fidelity & Guar. Co.

• Decision Date: 09 January 1987
• Docket Number: No. 85-2704,85-2704
• Citation: 805 F.2d 741
• Parties: , RICO Bus.Disp.Guide 6438 Michael TELLIS, Plaintiff-Appellant, v. UNITED STATES FIDELITY & GUARANTY COMPANY and Parker House Sausage Company, Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 741

805 F.2d 741

55 USLW 2282, RICO Bus.Disp.Guide 6438

Michael TELLIS, Plaintiff-Appellant, v.UNITED STATES FIDELITY & GUARANTY COMPANY and Parker House Sausage Company, Defendants-Appellees.

No. 85-2704.

United States Court of Appeals Seventh Circuit.

Argued April 1, 1986.

Decided Nov. 6, 1986.

Rehearing and Rehearing En Banc Denied Jan. 9, 1987.

Charles R. Purcell, Gerald C. Risner, Chicago, Ill., for plaintiff-appellant.

Nicholas H. Diacou, Epton, Mullin & Druth, Ltd., Chicago, Ill., for United States Fidelity and Guaranty Co.

Nancy Jo Arnold, Kralovec, Marquard, Doyle & Gibbons, Chtd. Chicago, Ill., for Parker House Sausage Co.

Before CUMMINGS, EASTERBROOK and RIPPLE, Circuit Judges.

CUMMINGS, Circuit Judge.

This case comes to us on appeal following the district court's grant of a motion by defendantsParker House Sausage Co.("Parker") and Parker's insurer, United States Fidelity & Guaranty Co. ("USF & G"), 625 F.Supp. 92, to dismiss plaintiffMichael Tellis' complaint.Plaintiff's complaint consisted of three counts, all based on the Racketeer Influenced and Corrupt Organizations Act,18 U.S.C. Secs. 1961 et seq.("RICO").This case gives us our first opportunity to determine the appropriate statute of limitations for a civil RICO claim.For the reasons stated herein, plaintiff's complaint is time-barred, and the dismissal of the complaint is affirmed on that basis only.

I

Our disposition of this case necessitates only a brief review of the facts as alleged by plaintiff.Plaintiff was employed by Parker from 1977 until May 21, 1979, when he was injured on the job.He subsequently required surgery and received disability payments from USF & G until February 1980.When plaintiff then sought to return to work, he was told that he had been discharged.

In March 1980, USF & G offered a lump-sum settlement payment to plaintiff, contingent upon the waiver of his claim against Parker under the Illinois Workers' Compensation Act.In order to induce plaintiff to accept this offer, the defendants told plaintiff that if he accepted this offer he would be returned to employment at Parker.Furthermore, to induce the Illinois Industrial Commission("Commission") to approve this proposed settlement, USF & G said that plaintiff would be returned to work at Parker at a "light duty" job.Plaintiff subsequently accepted this offer on March 20, 1980, and soon thereafter reported to work at Parker, but he was denied reemployment.

On May 24, 1983, plaintiff brought the instant complaint, which consists of three counts all based on civil RICO.He essentially alleged that the defendants defrauded him and the Commission by falsely representing that plaintiff would be returned to light-duty work at Parker.Defendants moved to dismiss plaintiff's claim pursuant to Fed.R.Civ.P. 12(b)(6), arguing that plaintiff's RICO claim is barred by the exclusivity provisions of the Illinois Workman's Compensation Act, and also that plaintiff's RICO claim is barred by the statute of limitations contained in Ill.Rev.Stats. ch. 110, p 13-202.The district court dismissed the complaint on the basis of the former argument.Both parties agree, however that this Court is free to reach the statute of limitations issue and decide the case on that basis.We therefore reach the important and recurring question of the appropriate statute of limitations period for a civil RICO claim.

II

The Supreme Court recently faced an analogous problem when it had to decide the appropriate statute of limitations for Sec. 1983 actions.Wilson v. Garcia, 471 U.S. 261, 105 S.Ct. 1938, 85 L.Ed.2d 254.There were two distinct aspects to the Court's analysis of the appropriate statute of limitations for a Sec. 1983 claim in Wilson.The first aspect is that state law is the appropriate source of law for determining the statute of limitations so long as it is consistent with federal law or policy to do so.Wilson, 105 S.Ct. at 1942.The second aspect is, given that state law is the appropriate source of law, how should one select the appropriate statute of limitations under state law?In response to this second aspect, the Court set down a three-part process.The first step is to determine whether state law or federal law governs the characterization of the federal claim for statute of limitations purposes.Wilson, 105 S.Ct. at 1943.The second step is, assuming that federal law applies, to determine whether all such federal claims (in the instant case all civil RICO claims) should be uniformly characterized, or should instead be characterized on a case-by-case basis depending on the particular facts and circumstances of each individual case.Id.The third step is to characterize the essence of the federal claim in the instant case and select the most appropriate state statute of limitations given this characterization.Id.

Before we can apply these two aspects of Wilson to the instant case, we must note that Sec. 1983 has its own rules of decision statute, 42 U.S.C. Sec. 1988, upon which the Supreme Court relied in Wilson.By contrast, RICO lacks a statute analogous to 42 U.S.C. Sec. 1988.However, a close examination of the role that 42 U.S.C. Sec. 1988 played in Wilson indicates that this Court is fully justified in applying these two aspects of Wilson to civil RICO claims despite the lack of a statute analogous to 42 U.S.C. Sec. 1988.

The first aspect of Wilson that we apply to the instant case is the proper source of law for determining the appropriate statute of limitations for a federal claim that lacks its own explicit limitation period.In analyzing this aspect of the issue, the Supreme Court noted that it was "settled practice" to adopt a local statute of limitations period so long as it was not inconsistent with federal law or policy to do so.Wilson, 105 S.Ct. at 1942.Although the Court further noted that 42 U.S.C. Sec. 1988 supported this approach, it is clear that there is strong support for this approach independent of 42 U.S.C. Sec. 1988.

The second aspect of Wilson that we apply to the instant case is, given that state law is the appropriate source of law, how should a court select the appropriate statute of limitations under state law?In fashioning a three-part process as a general method for selecting the appropriate state statute of limitations for a federal cause of action which lacks its own time limitation, the Court did not base its decision on 42 U.S.C. Sec. 1988.Wilson, 105 S.Ct. at 1943.The Court relied on 42 U.S.C. Sec. 1988 only when it applied this general method to the task of selecting the appropriate state statute of limitations for Sec. 1983 claims.Since 42 U.S.C. Sec. 1988 was not the basis for the general method espoused in Wilson, there is no reason this general method should not apply to the selection of the appropriate state statute of limitations for civil RICO claims.We therefore both use Illinois law as the appropriate source of law for determining the statute of limitations in the instant case and apply the three-step process set forth in Wilson to make this determination.

In Wilson, the Supreme Court held that federal law governed the characterization of a Sec. 1983 claim for statute of limitations purposes.We reach the same conclusion regarding a civil RICO claim for similar reasons.As a general matter the problem of characterizing a federal claim for statutory purposes has usually been held to be a question of federal law.Wilson, 105 S.Ct. at 1944.Additionally, the federal interests in uniformity and firmly-defined-but-easily-applied rules, relied on by the Supreme Court in Wilson, apply with equal force here and warrant the conclusion that federal law governs the characterization of RICO claims for statute of limitations purposes.Malley-Duff & Associates v. Crown Life Insurance Co., 792 F.2d 341, 346(3d Cir.1986).

The second step is to determine whether courts should characterize all federal RICO claims in the same way, thereby resulting in a uniform statute of limitations period for all RICO claims, or instead characterize each individual RICO claim differently depending on the facts and circumstances of the particular RICO claim, thereby resulting in varying statute of limitations periods for RICO claims.The vast majority of courts have selected a uniform characterization of all RICO claims.Of the circuit courts of appeals that have faced this issue, the Third Circuit has adopted a uniform characterization, Malley-Duff & Associates v. Crown Life Insurance Co., 792 F.2d 341, 349(3d Cir.1986), while the Eleventh Circuit has noted in dicta that after Wilson the case-by-case approach might well be foreclosed, Hunt v. American Bank & Trust Co., 783 F.2d 1011, 1014 n. 5(11th Cir.1986).Only the Sixth Circuit has adopted a case-by-case approach.Silverberg v. Thomson McKinnon Securities, Inc., 787 F.2d 1079, 1083(6th Cir.1986).At the district court level, almost all the courts facing the issue have followed the uniform approach.See, e.g., Davis v. A.G. Edwards & Sons, Inc., 635 F.Supp. 707, 711(W.D.La.1986);Argosy v. Bradley, 628 F.Supp. 1359, 1360-1361(D.Utah1986);Morley v. Cohen, 610 F.Supp. 798, 809(D.Md.1985);Victoria Oil Co. v. Lancaster Corp., 587 F.Supp. 429, 431(D.Colo.1984).The same holds true for the district courts in this Circuit.See, e.g., Ambrosino v. Rodman & Renshaw, Inc., 635 F.Supp. 968, 973-974(N.D.Ill.1986);Hennessey v. Connecticut General Life Ins. Co., No. 84 C 10582(N.D.Ill.June 19, 1986);Davis v. Smith, 635 F.Supp. 459, 462(N.D.Ill.1985);Electronic Relays (India) Pvt. Ltd. v. Pascente, 610 F.Supp. 648, 650(N.D.Ill.1985);Baselski v. Paine, Webber, Jackson & Curtis, Inc., No. 80 C 3157(N.D.Ill.Nov. 22, 1985);Long Grove Country Club Estates v. Village of Long Grove, No. 82 C 6868(N.D.Ill.Oct. 7, 1985);Bolingbrook Properties II v. Irvin, No. 84 C 10480(N.D.Ill.Aug. 8, 1985);Traylor v. Central States, Southeast & Southwest Areas Pension...