Court Grants Defendant’s Motion to Dismiss Civil RICO Claim Finding Plaintiffs’ Claims Time-Barred As They Had Constructive Knowledge of Their Individual Injuries

Amory v. Giarla, 2021 WL 254192 (N.D. Cal., Jan. 26, 2021)

The court found that every single plaintiff’s claims for civil RICO relief was time-barred under the RICO statute of limitations. 

Plaintiffs are a group of artists and art buyers who either consigned their artwork or purchased artwork from defendant, a former gallerist, allegedly renowned, with various galleries in San Francisco. They allege that he misappropriated the proceeds from the sale or purchase of artwork entrusted to him for his own personal gain, abruptly closed all of his galleries after exhausting a Ponzi scheme to defraud them, and fled to Oregon with their property, which he held in trust, as a fiduciary. Plaintiffs allege breach of fiduciary duty and violations of RICO.

As a threshold matter, defendant contends that every single plaintiff’s claim is time barred. The linchpin of the RICO claim centers on defendant’s alleged acts of mail and/or wire fraud relating to plaintiffs Dennis, Mather, and Voskoboynikov. The statute of limitations for a civil RICO claim is four years. See Rotella v. Wood, 528 U.S. 549, 552 (2000). In Rotella, the Supreme Court held that the accrual clock for a civil RICO claim begins when a plaintiff knew or should have known of her injury. Notwithstanding that “a pattern of predicate acts may well be complex, concealed, or fraudulent,” it is the “discovery of the injury, not discovery of the other elements of a claim” that starts the clock. Id. at 553–56. Even so, a civil RICO claim is subject to equitable principles of tolling. Id. at 560.

The court discussed that the action was filed on July 30, 2020. Plaintiffs argued that the consignment of their artwork created a legal trust whereby defendant’s galleries held those artworks — and the proceeds from the sale of those artworks — in trust for their benefit. Plaintiff argue that their claims are not time barred because they “did not know of their injuries, nor should they have known of their injuries, until July 31, 2016, at the earliest, when they first learned via a viral Facebook post that [d]efendant had closed the [g]alleries, unilaterally and improperly terminated his consignment relationship with [them,] and fled California with their funds and/or artwork.” According to plaintiffs, their injuries lie “in the permanent loss of money and/or artwork owed to them by [d]efendant,” which did not occur until defendant severed the consignment trusts by closing the galleries and fleeing to Oregon with their property. They argue that they “had no reason to suspect that anything was amiss until at least” July 31, 2016 (id. at 12). “Until then, while the [g]alleries were still open, plaintiffs’ property was still held in trust with defendant” and there was no injury, they argue and did not have actual or constructive knowledge of defendant’s alleged fraud before July 31, 2016.   Alternatively, they argue that their RICO claim should be equitably tolled given defendant’s alleged fraudulent concealment.

 Constructive Knowledge

This order disagrees with both of plaintiffs’ arguments stating that plaintiffs’ claimed timing of their injury is intellectually dishonest as if defendant sold their consigned paintings and told plaintiffs so in 2010, they could file a suit to collect the money from the sale of the paintings in 2010, so long as the galleries remained open, notwithstanding their unsuccessful collection efforts all along.

Plaintiffs relied heavily upon Living Designs, Inc. v. E.I. Dupont de Nemours and Co., 431 F.3d 353 (9th Cir. 2005), but its facts were not directly analogous as unlike in Living Designs, plaintiffs Dennis, Mather, and Voskoboynikov circumstances demonstrate that they had constructive notice — if not actual knowledge — of defendant’s alleged fraud and their individual injuries more than four years before the filing of this action. To the extent that they argue that accrual should begin when they learned — via the Facebook post — that defendant had allegedly defrauded all of them (i.e., of his pattern of racketeering activity), that argument runs head long into Rotella’s holding that it is the “discovery of the injury, not discovery of the other elements of a claim” that starts the clock. 528 U.S at 553.

In conclusion, the three plaintiffs Dennis, Mather, and Voskoboynikov, had inquiry notice of their individual injuries — as they were not getting paid despite their collection efforts — and knew or should have known that defendant was stiffing them more than four years before they filed this action.

Equitable Tolling

Alternatively, plaintiffs argue their RICO claim should be equitably tolled due to defendant’s fraudulent concealment.  “To establish equitable tolling, … plaintiff[s] must plead with particularity that the defendant actively misled [them], and that [they] had neither actual nor constructive knowledge of the facts constituting [their] RICO claim despite [their] due diligence in trying to uncover those facts.” *10.  The allegations plaintiffs point to as being sufficient for equitable tolling are general allegations, not specific and particularized. They describe defendant’s alleged conduct in general terms, but they do not describe how any individual plaintiff, let alone how Dennis, Mather, and Voskoboynikov, in particular, were actively misled by defendant. Moreover, as already discussed, Dennis, Mather, and Voskoboynikov had at least constructive knowledge of defendant’s alleged predicate acts of wire fraud more than four years before the filing of this action. Accordingly, plaintiffs have not pled facts sufficient to justify equitable tolling. In the absence of any tolling, Dennis, Mather, and Voskoboynikov’s claims are all time barred.

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