United States District Court, E.D. Louisiana
March 13, 2015
STEPHEN P. FARMER ET AL
D&O CONTRACTORS, INC. ET AL
ORDER AND REASONS
LANCE M. AFRICK, District Judge.
Before the Court is a motion filed by defendants, D&O Contractors, Inc., John Michael O'Malley, and Daniel P. Wagner (collectively, the "D&O Defendants"), to dismiss the abovecaptioned matter pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. Defendants Jeff Difatta ("Difatta"), Lance Licciardi ("Licciardi"), and Randy Nunez ("Nunez") joined in the D&O Defendants' motion. Additionally, defendant, Perry M. Nicosia ("Nicosia"), filed a similar motion to dismiss pursuant to Rule 12(b)(6). Plaintiffs oppose all the motions to dismiss.
As discussed at the February 9, 2015 status conference, the Court, with the consent of counsel, considers the above-described motions to dismiss as motions for summary judgment. For the following reasons, such motions are GRANTED.
Also before the Court is a motion filed by Nicosia for sanctions pursuant to Rule 11. Plaintiffs oppose the motion. For the following reasons, such motion is DENIED.
Plaintiffs were debris-removal subcontractors who worked in St. Bernard Parish in the aftermath of Hurricane Katrina. Plaintiffs allege that defendants demanded "protection money" and wrongfully diverted payments for work that plaintiffs performed. This alleged activity eventually led plaintiff, Stephen P. Farmer ("Farmer"), to approach the FBI in June 2006 because he believed that he was the victim of a crime. Farmer agreed to operate as an FBI informant during its investigation into defendants' alleged activity. In October 2010, the FBI closed its investigation which did not result in any indictments.
After the close of the investigation, Farmer consulted counsel regarding his potential civil claims. Plaintiffs filed the original complaint in this matter on July 30, 2012, in the U.S. District Court for the Northern District of Mississippi,  asserting claims pursuant to the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq., and Louisiana's equivalent statute, the Louisiana Racketeering Act, La. Rev. Stat. § 15:1351 et seq.  On August 22, 2014, the above-captioned matter was transferred to this Court,  and the D&O Defendants' motion to dismiss, along with the joinders filed by Difatta, Licciardi, and Nunez, were taken under advisement by the Court on December 3, 2014.
Nicosia was added as a defendant in plaintiffs' first amended complaint which was filed on December 2, 2014. On January 13, 2015, before plaintiffs had even served him, Nicosia filed his motion for sanctions, and such motion was taken under advisement on February 4, 2015. Nicosia was eventually served on February 24, 2015.
Following the February 9, 2015 status conference, during which the Court advised counsel, without objection, that the motions to dismiss would be treated as motions for summary judgment, the parties were afforded the opportunity to file additional briefing and such motions were taken under advisement on February 18, 2015. Plaintiffs filed a second amended complaint on February 20, 2015. Nicosia filed his motion to dismiss on February 18, 2015, which was taken under advisement on February 25, 2015.
LAW AND ANALYSIS
I. Summary Judgment
A. Standard of Law
Summary judgment is proper when, after reviewing the pleadings, the discovery and disclosure materials on file, and any affidavits, the court determines that there is no genuine issue of material fact. See Fed.R.Civ.P. 56. "[A] party seeking summary judgment always bears the initial responsibility of informing the district court of the basis for its motion and identifying those portions of [the record] which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The party seeking summary judgment need not produce evidence negating the existence of material fact, but need only point out the absence of evidence supporting the other party's case. Id. ; Fontenot v. Upjohn Co., 780 F.2d 1190, 1195 (5th Cir. 1986).
Once the party seeking summary judgment carries its burden pursuant to Rule 56, the nonmoving party must come forward with specific facts showing that there is a genuine issue of material fact for trial. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). The showing of a genuine issue is not satisfied by creating "some metaphysical doubt as to the material facts, ' by conclusory allegations, ' by unsubstantiated assertions, ' or by only a scintilla' of evidence." Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (citations omitted). Instead, a genuine issue of material fact exists when the "evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The party responding to the motion for summary judgment may not rest upon the pleadings, but must identify specific facts that establish a genuine issue. Id. The nonmoving party's evidence, however, "is to be believed, and all justifiable inferences are to be drawn in [the nonmoving party's] favor." Id. at 255; see also Hunt v. Cromartie, 526 U.S. 541, 552 (1999).
All defendants contend that plaintiffs' claims are time-barred. "Civil RICO claims have a four-year statute of limitations." Joseph v. Bach & Wasserman, L.L.C., 487 F.Appx. 173, 176 (5th Cir. 2012); see also Rotella v. Wood, 528 U.S. 549, 552 (2000). The Fifth Circuit "has adopted an injury discovery rule, ' whereby a civil RICO claim accrues when the plaintiff discovers, or should have discovered, the injury.'" Joseph, 487 F.Appx. at 176 (quoting Love v. Nat'l Med. Enters., 230 F.3d 765, 773 (5th Cir. 2000)). "It is discovery of the injury, and not other elements of a RICO claim, that starts the limitations period running." Id. (citing Rotella, 528 U.S. at 556). "In Love, [the Fifth Circuit] also adopted the separate accrual rule, ' stating that [w]hen a pattern of RICO activity causes a continuing series of separate injuries, the separate accrual' rule allows a civil RICO claim to accrue for each injury when the plaintiff discovers, or should have discovered, that injury.'" Id. (quoting Love, 230 F.3d at 773).
The Louisiana Racketeering Act is subject to a five-year prescriptive period. La. Rev. Stat. § 15:1356(H); Ames v. Ohle, 97 So.3d 386, 391 (La.App. 4 Cir. 2012). "Prescription begins to run against a claimant when he obtains actual or constructive knowledge of facts indicating a cause of action." Ames, 97 So.3d at 394 (citing Barbe v. Am. Sugar Refining, Inc., 83 So.3d 75, 83 (La.App. 4 Cir. 2011), writ denied, 85 So.3d 92 (La. 2012)). "Constructive knowledge of facts indicating a cause of action is whatever notice is enough to excite attention and put the injured party on guard and call for further inquiry." Id.
According to Farmer,  the alleged "extortion scam actually began in the spring of 2006, " and Farmer "went to the FBI in June of 2006 when [he] could get no relief" despite his alleged "repeated protests for having to pay part of [his] FEMA earnings to locals in Saint Bernards [sic] Parrish [sic]." Defendants assert that Farmer was actually aware of his injury prior to June 2006, but that June 2006 is the latest possible date at which Farmer's RICO cause of action should be deemed to have accrued. Plaintiffs do not contest that they were aware of their causes of action by the time that Farmer approached the FBI. Accordingly, for the purposes of deciding these motions, the Court finds that plaintiffs' causes of action accrued no later than June 2006.
Because RICO is subject to a four-year statute of limitations, and because the Louisiana Racketeering Act is subject to a five-year prescriptive period, all of plaintiffs' claims prescribed in June 2010 and June 2011, respectively. As stated, the original complaint was not filed until July 30, 2012, over a year after plaintiffs' state law claims had prescribed. However, plaintiffs allege that "the doctrine of equitable tolling applies to all the[ir] claims... since, for example, the FBI unintentionally misled Plaintiff Farmer into believing he had a right to file his RICO action after the FBI investigation was completed. Plaintiff Farmer relied on that advice and information provided [to] him by the government that he had a right to file his RICO action after the FBI investigation was complete so as not to compromise the investigation."
"Equitable tolling applies principally where the plaintiff is actively misled by the defendant about the cause of action or is prevented in some other extraordinary way from asserting his rights.'" Jaso v. The Coca Cola Co., 435 F.Appx. 346, 357 (5th Cir. 2011) (quoting Rashidi v. Am. President Lines, 96 F.3d 124, 128 (5th Cir. 1996)); see also Lozano v. Montoya Alvarez, 134 S.Ct. 1224, 1231-32 (2014) ("As a general matter, equitable tolling pauses the running of, or tolls, ' a statute of limitations when a litigant has pursued his rights diligently but some extraordinary circumstance prevents him from bringing a timely action."). "But a plaintiff who fails to act diligently cannot invoke equitable principles to excuse that lack of diligence.'" Jaso, 435 F.Appx. at 357 (quoting Baldwin Cnty. Welcome Ctr. v. Brown, 446 U.S. 147, 152 (1984)). "[A] garden variety claim of excusable neglect' does not support equitable tolling." Rashidi, 96 F.3d at 128 (quoting Irwin v. Dep't of Veterans Affairs, 498 U.S. 89, 96 (1990)). "Where [the plaintiff] could have filed his claim properly with even a modicum of due diligence, we find no compelling equities to justify tolling." Id.
"The party who invokes equitable tolling bears the burden of demonstrating that it applies in his case." Ramirez v. City of San Antonio, 312 F.3d 178, 183 (5th Cir. 2002). "[T]hese equitable doctrines are to be applied sparingly.'" Id. (quoting Nat'l R.R. Passenger Corp. v. Morgan, 536 U.S. 101, 113 (2002)); see also Irwin, 498 U.S. at 96 ("Federal courts have typically extended equitable [tolling] relief only sparingly.")
Plaintiffs do not assert that they were actively misled by any defendants about their causes of action, nor have they produced any evidence that would support such an assertion. Accordingly, the question before the Court is whether plaintiffs acted diligently but were "prevented in some other extraordinary way from asserting [their] rights." Jaso, 435 F.Appx. at 357.
Farmer's co-plaintiffs' lack of diligence is apparent from the absence of any evidence indicating that they took any actions whatsoever while Farmer was participating in the FBI investigation. With respect to Farmer, himself, although assisting the FBI is commendable, the Court finds that he also failed to act diligently to protect his civil claims. Farmer admits that he did not consult an attorney until after the FBI investigation concluded. Although Farmer's counsel "indicated" to him that "equitable tolling should apply to [his] case, " Farmer has not produced any evidence to demonstrate that he tried to ascertain for himself the time limits on his claims until the investigation had already been completed. Instead, Farmer states that he "relied upon the advice of FBI agent Goodson and the FBI in not filing my lawsuit until after the FBI's investigation was completed, because I assumed that FBI investigators would know that I would still have the right to file my RICO case against Defendants after the FBI investigation was completed."
Making such an assumption is not the hallmark of diligence-consultation with a competent attorney would have advised Farmer of the time limitations on his claims before they became an issue. Although Farmer now asserts that the FBI unintentionally misled him,  he has not offered a reason for failing to consult counsel or otherwise investigate and confirm the FBI's purported assertions regarding his civil claims. Accordingly, because "a garden variety claim of excusable neglect' does not support equitable tolling, " Rashidi, 96 F.3d at 128, the Court finds that Farmer's actions in pursuing his claims fall short of the diligence that was required of him.
Even if Farmer had acted diligently, the Court would find that he was not "prevented in some other extraordinary way from asserting his rights." See Jaso, 435 F.Appx. at 357. Farmer was free to end his participation in the FBI investigation and/or file his complaint at any time. According to FBI Agent Goodson:
When Mr. Farmer indicated to me that he intended to file a civil RICO lawsuit, I advised him that pursuing a civil action would likely compromise the criminal investigation. Mr. Farmer concurred that he did not want to compromise the ongoing investigation and indicated that he would delay filing a civil complaint until after the criminal investigation was complete[.]
Similarly, Farmer asserts, "During the course of my cooperation and assistance with the FBI investigation I was repeatedly advised by the FBI that it would be preferable for me to wait to file civil claims regarding the extortionate conduct they were investigating so I would not compromise the government's investigation."
Farmer's former employee, Jerry Baker, observed some of these discussions:
I was present with Stephen Farmer and the FBI on several occasions throughout the investigation when the FBI agents advised Stephen Farmer that they would prefer that he not file his civil claims that are now before this Court until after their investigation. The FBI indicated to Stephen Farmer that he would be able to file his civil claims after the investigation and if he filed his civil case claims during the ongoing investigation the investigation could be compromised.
According to Farmer's own statement, he was never prevented by the FBI from filing his claims. He participated voluntarily in the FBI investigation, and he chose to forego pursuing his civil claims in order to protect that investigation. Although Farmer contends that he received incorrect legal advice from the FBI, nothing prevented Farmer from consulting counsel to research and corroborate Agent Goodson's purported statements, and it was still Farmer's choice to delay pursuing his civil claims. Unfortunately, Farmer's choice did not toll the statute of limitations with respect to his causes of action.
Nicosia has moved for sanctions against plaintiffs' counsel because he allegedly "completely ignored existing rules and legal precedent when [he] filed [plaintiffs'] Amended Complaint, as Plaintiffs' claims against Mr. Nicosia are clearly time-barred and would not relate back to the initial Complaint, even if this Court were to find that the Complaint is somehow not time-barred." Nicosia contends that "the legal position taken by Plaintiffs it too implausible to insulate Plaintiffs' counsel from sanctions under Rule 11."
Rule 11 requires in pertinent part that in any "pleading, written motion, or other paper" submitted to the Court, "the claims, defenses, and other legal contentions are warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law." Fed.R.Civ.P. 11(b)(2). "If, after notice and a reasonable opportunity to respond, the court determines that Rule 11(b) has been violated, the court may  impose an appropriate sanction on any attorney, law firm, or party that violated the rule or is responsible for the violation." Fed.R.Civ.P. 11(c)(1) (emphasis added).
"Rule 11 imposes an objective standard of reasonableness under the circumstances.'" Pillar Panama, S.A. v. DeLape, 326 F.Appx. 740, 744 n.5 (5th Cir. 2009) (quoting Thomas, 836 F.2d at 873). "[T]he imposition or denial of sanctions of necessity involves a fact-intensive inquiry into the circumstances surrounding the activity alleged to be a violation of Rule 11.'" Skidmore Energy, Inc. v. KPMG, 455 F.3d 564, 566 (5th Cir. 2006) (quoting Thomas, 836 F.2d at 873). "Because Rule 11 is not intended to chill an attorney's enthusiasm or creativity in pursuing factual or legal theories, ' an attorney need not advance a winning argument to avoid Rule 11 sanctions." LaSalle Nat'l Bank of Chicago v. County of DuPage, 10 F.3d 1333, 1338 (7th Cir. 1993) (quoting Brubaker v. City of Richmond, 943 F.2d 1363, 1378 (4th Cir. 1991)).
Under the unique circumstances of this case, the Court declines to find that plaintiffs' counsel breached his Rule 11 obligations. The Court finds that no award of sanctions is warranted.
For the foregoing reasons,
IT IS ORDERED that the motions for summary judgment are GRANTED and that all federal and state claims in the above-captioned matter are DISMISSED WITH PREJUDICE.
IT IS FURTHER ORDERED that the motion for Rule 11 sanctions is DENIED.
IT IS FURTHER ORDERED that the motion to continue certain deadlines is DISMISSED AS MOOT.