                                                                                                                           Opinions of the United
2005 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


5-19-2005

Pelullo v. Natl Union Fire Ins
Precedential or Non-Precedential: Non-Precedential

Docket No. 04-2015




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"Pelullo v. Natl Union Fire Ins" (2005). 2005 Decisions. Paper 1157.
http://digitalcommons.law.villanova.edu/thirdcircuit_2005/1157


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                                                   NOT PRECEDENTIAL

        UNITED STATES COURT OF APPEALS
             FOR THE THIRD CIRCUIT
                  ____________

                       No. 04-2015
                      ____________

               LEONARD A. PELULLO;
              PETER D. PELULLO TRUST;
           ARIANNA G. PELULLO TRUST;
         GII ENTERPRISES, INCORPORATED;
        GROWTH FINANCIAL CORPORATION;
        OLYMPIA RESOURCE CORPORATION;
        OLYMPIA HOLDING CORPORATION;
                OHA, INCORPORATED;
             ONE PLAZA CORPORATION;
                 PETER F. PELULLO

                             v.

    THE NATIONAL UNION FIRE INSURANCE
        COMPANY OF PITTSBURGH, PA;
WILENTZ, GOLDMAN & SPITZER; KENNETH FALK;
   ADORNO & ZEDER, P.A.; FRED SCHWARTZ;
HANK ADORNO; KERR, RUSSELL & WEBER, P.L.C.;
     ROBERT GISSELL; D'AMATO & LYNCH;
   LEWIS, D'AMATO, BRISBOIS & BISGAARD;
   RICHARD GEORGE; ALFRED D'AGOSTINO*

Leonard A. Pelullo; Peter D. Pelullo Trust; Arianna Pelullo Trust;
    G.I.I. Enterprises, Inc.; Growth Financial Corporation;
          Olympia Resource Corporation; OHA, Inc.;
            One Plaza Corporation; Peter F. Pelullo,

                                  Appellants

                    (*Amended per order dated 12/14/04)
                      ____________
                     On Appeal from the United States District Court
                         for the Eastern District of Pennsylvania
                                 (D.C. No. 00-cv-05647)
                      District Judge: Honorable R. Barclay Surrick
                                      ____________

                        Submitted Under Third Circuit LAR 34.1(a)
                                     May 12, 2005

             Before: SLOVITER, FISHER and ALDISERT, Circuit Judges.

                                   (Filed: May 19, 2005)
                                       ____________

                                OPINION OF THE COURT
                                     ____________

FISHER, Circuit Judge.

                                  I. Standard of Review

       This Court exercises plenary review over a district court’s decision to grant a

motion to dismiss. Malia v. Gen. Elec. Co., 23 F.3d 828, 830 (3d Cir. 1994). We accept

as true all factual allegations in the complaint and draw all reasonable inferences

therefrom in the light most favorable to the plaintiff. Lorenz v. CSX Corp., 1 F.3d 1406,

1411 (3d Cir. 1993). We may affirm only if it is certain that no relief could be granted

under any set of facts which could be proven. Id.

                                       II. Discussion

       The factual background of this action, which is lengthy and complicated, was

thoroughly discussed by the District Court and is known to the parties. Accordingly, we

will focus in this opinion on the rationale for our decision.

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       The Appellants in this matter – Leonard Pelullo; the Peter D. Pelullo Trust and the

Arianna G. Pelullo Trust (collectively, “Pelullo Trusts”); Peter F. Pelullo, trustee of the

Pelullo Trusts; and six corporations and/or businesses all owned, operated, and controlled

by the Pelullo Trusts (G.I.I. Enterprises, Inc., Growth Financial Corporation, Olympia

Resource Corporation, Olympia Holding Corporation, OHA, Inc., and One Plaza

Corporation) (collectively, “Plaintiffs”) – brought civil Racketeer Influenced and Corrupt

Organizations Act (“RICO”) claims under 18 U.S.C. § 1962(c) and (d) against an

insurance company, and several attorneys and law firms who previously represented

Plaintiffs in various business transactions and civil and criminal matters (collectively,

“Defendants”).1 Plaintiffs alleged a hub-and-spoke conspiracy between National Union

and the other Defendants “whose goal was to avoid or reduce criminal and civil liability

for the law firms’ and attorneys’ misconduct and breaches of fiduciary duty committed in

connection with their representation of Mr. Pelullo and the Pelullo Trusts, which in turn

would limit National Union’s exposure as the law firms’ insurer.” (Appellants’ Br. at 7.)




       1
          The Defendants previously aligned themselves into four broad groups: (i) the
“National Union Defendants,” which include the National Union Fire Insurance Co. of
Pittsburgh, Pa.; the law firm of D’Amato & Lynch and two of its partners, Richard
George and Alfred D’Agostino; the law firm of Lewis, D’Amato, Brisbois & Bisgaard
LLP; and the law firm of Alston & Bird LLP and its attorney Theodore J. Sawicki; (ii) the
law firm of Wilentz, Goldman & Spitzer (“Wilentz”) and its partner Kenneth Falk;
(iii) the law firm of Adorno & Zeder, P.A., one of its partners, Hank Adorno, and another
of its attorneys, Fred Schwartz; and (iv) the law firm of Kerr, Russell, Weber, P.L.C. and
one of its attorneys, Robert Gissell (“Kerr Firm Defendants”). Notably, Plaintiffs have
withdrawn any appeal as against Alston & Bird LLP and its attorney, Theodore Sawicki.

                                              3
The District Court dismissed Plaintiffs’ Second Amended Complaint against the National

Union and Kerr Firm Defendants finding that Plaintiffs’ RICO claims were barred by the

statute of limitations. The District Court also dismissed Plaintiffs’ Second Amended

Complaint against the remaining Defendants for failure to allege facts supporting an

inference of proximate causation between the Defendants’ actions and Plaintiffs’ alleged

injuries.

       On appeal, Plaintiffs contend that the District Court erred in its determination that

their claims were time-barred, arguing that because the National Union and Kerr Firm

Defendants fraudulently concealed their activity comprising the alleged “hub-and-spoke”

conspiracy, the statute of limitations should be equitably tolled. Plaintiffs additionally

argue that the District Court erred in its determination that Plaintiffs lacked standing to

assert their RICO claims and thus failed to state any claims under either 18 U.S.C.

§ 1962(c) or (d) against the remaining Defendants.

       A four-year statute of limitations is applied to civil RICO claims. Agency Holding

Corp. v. Malley-Duff & Assocs., 483 U.S. 143 (1987). The injury discovery rule controls

as to when the statute of limitations begins to run on a civil RICO claim. Rotella v.

Wood, 528 U.S. 549 (2000). That rule requires the statute to begin running when the

plaintiff knew or should have known of his injury. Id. Plaintiffs do not dispute that they

waited more than four years before instituting their lawsuit, but instead argue that the

Defendants’ fraudulent concealment of the existence of a RICO claim tolled the four-year



                                              4
limitations period and therefore preserved Plaintiffs’ right to file suit. Plaintiffs have

failed, however, to allege facts sufficient to support a claim of fraudulent concealment.

       To establish fraudulent concealment for purposes of equitable tolling, a plaintiff

must prove three necessary elements – (1) “‘active misleading’” by the defendant;

(2) which prevents the plaintiff from recognizing the validity of her claim within the

limitations period; (3) where the plaintiff’s ignorance is not attributable to her lack of

“‘reasonable due diligence in attempting to uncover the relevant facts.’” Matthews v.

Kidder, Peabody & Co., 260 F.3d 239, 256 (3d Cir. 2001) (citing Forbes v. Eagleson, 228

F.3d 471, 486-88 (3d Cir. 2000)). Even assuming, as the District Court did, that the

National Union and Kerr Firm Defendants actively misled Plaintiffs, consistent with the

first prong of the Matthews analysis, Plaintiffs have failed to allege any facts which

support an inference that such active misleading prevented them from recognizing the

validity of their claims within the four-year statutory period or that the Plaintiffs’

ignorance was not attributable to their own lack of reasonable due diligence. “[W]hile

our standard of review requires us to accept as true all factual allegations in the

complaint, we need not accept as true unsupported conclusions and unwarranted

inferences.” Maio v. Aetna, Inc., 221 F.3d 472, 485 n.12 (3d Cir. 2000) (internal citations

omitted). Because Plaintiffs have submitted only unsupported conclusions, not actual

facts sufficient to support a claim of fraudulent concealment of their RICO claims, the

statutory period will not be equitably tolled.



                                                 5
       As to Plaintiffs’ second contention, i.e., that the District Court erred in its decision

to grant the remaining Defendants’ motions to dismiss, the Court finds Plaintiffs’

averments to be similarly lacking. RICO is primarily a criminal statute, however, it also

provides for civil remedies, including a cause of action for treble damages, available to

“[a]ny person injured in his business or property by reason of a violation of section 1962

. . . .” 18 U.S.C. § 1964(c); see also Seville Indus. Mach. Corp. v. Southmost Mach.

Corp., 742 F.2d 786, 789 (3d Cir. 1984). Thus, in addition to Article III constitutional

and prudential standing requirements, a plaintiff seeking recovery under RICO must

satisfy these additional criteria set forth in section 1964(c). Maio, 221 F.3d at 482-83.

“Extrapolating from this language, we read section 1964(c) as requiring a RICO plaintiff

to make two related but analytically distinct threshold showings relevant in this appeal:

(1) that the plaintiff suffered an injury to business or property; and (2) that the plaintiff’s

injury was proximately caused by the defendant’s violation of 18 U.S.C. § 1962.” Id. at

483 (citing First Nationwide Bank v. Gelt Funding Corp., 27 F.3d 763, 767 (2d Cir.

1994)).

       Upon review of the record, it is clear that Plaintiffs have not alleged facts

sufficient to support an inference of proximate causation between Defendants’ actions

and Plaintiffs’ injuries. Plaintiffs allege injuries to their business and property due to

Defendants “subjecting them to a combination of criminal fines, restitution, and

forfeitures, extensive civil litigation, coerced settlements, civil judgments, and ruinous



                                               6
attorney fees so as to limit their financial and criminal liability.” (Appellant’s Br. at 8.)

The facts alleged, however, do not support an inference of a nexus between these specific

activities and Plaintiffs’ alleged injuries. Accordingly, because Plaintiffs have not shown

proximate causation, they lack standing to assert their RICO claims against these

Defendants and have failed to state claims under either 18 U.S.C. § 1962(c) or (d). See

Steamfitters Local Union No. 420 Welfare Fund v. Philip Morris, Inc., 171 F.3d 912, 921

(3d Cir. 1999) (dismissing action for failure to state a claim where plaintiff failed to

satisfy proximate causation requirements); Anderson v. Ayling, 396 F.3d 265, 271 (3d Cir.

2005) (same).

       For these reasons, we will affirm the judgment of the District Court dismissing

Plaintiffs’ claims.




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