Antitrust Law Daily Wrap Up, RICO—S.D. Fla.: Plumbing material supplier’s RICO claims against competitors may proceed, (Jun 12, 2014)

By Linda O’Brien, J.D., LL.M.

In an action by a plumbing materials supplier against three competitors for violations of the Racketeer Influenced and Corrupt Organizations Act (RICO) by allegedly engaging in an enterprise to misuse the county small business enterprise program to obtain construction contracts, the federal district court in West Palm Beach has denied the defendants’ motions to dismiss the supplier’s complaint (Corcel Corporation v. Ferguson Enterprises, Inc., June 11, 2014, Marra, K.).

Corcel Corporation, Ferguson Enterprises, and Line-Tec (LT) were in the plumbing supply and construction business. Corcel filed suit against Ferguson and LT, alleging that the two companies joined with prime construction contractor AKA Services to create two enterprises to fraudulently procure plumbing supply and construction contracts through the improper use of the county’s Small Business Enterprise (SME) program in violation of RICO. Corcel also alleged that the three companies executed a scheme by listing LT as an SBE subcontractor on construction contract bids, even though LT was certified as a SBE due to Ferguson and LT’s fraudulent actions. The district court’s dismissal of the complaint for lack of proximate cause was reversed and remanded on appeal. The defendants moved for dismissal on alternate grounds.

Statute of limitations. The court found that Corcel’s RICO claims were not barred by the statute of limitations. The statute of limitations for a RICO claim is four years and begins when the plaintiff knew or should have known it was injured. Corcel contended, under the separate accrual rule, that there were new and independent violations each time the defendants submitted fraudulent documentation to obtain construction contracts. In rejecting Ferguson’s argument that the continuation of the initial injury did not toll the limitations period, the court noted that the date of the accrual of the action was the date the plaintiff discovered in the injury. However, in this case, the court could not determine at the current stage of the litigation whether each subsequent contract awarded was a continuation of the initial injury to Corcel and therefore time-barred.

Collateral estoppel. Under state law, collateral estoppel applies if the identical issues were presented in a prior proceeding; there was a full and fair opportunity to litigate the issues in the prior proceeding; the issues in the prior litigation were a necessary part of the prior determination; the parties in the two proceedings were identical; and the issues were actually litigated in the prior proceeding. In rejecting LT’s argument that the doctrine of collateral estoppel precluded Corcel from asserting that LT was ineligible for SBE certification, the court noted that collateral estoppel was an affirmative defense and the plaintiff was not required to negate an affirmative defense in the complaint. Accordingly, any inquiry into whether LT was eligible for SBE certification could not be determined at the current stage of the litigation.

Racketeering activity. In rejecting AKA’s argument that the plaintiff failed to allege a pattern of racketeering activity, the court found that the plaintiff’s allegations that the defendants committed mail and wire fraud must be taken as true for purposes of a motion to dismiss. Furthermore, a determination whether exhibits attached to the complaint—demonstrating that the county state’s attorney decided there was insufficient evidence to prosecute—overcame the complaint’s allegations could not be made at the current state of the litigation. Similarly, the court could not determine as a matter of law that numerous predicate acts throughout a fourteen month period showed temporal continuity. Thus, the motions to dismiss by the three defendants were denied.

The case is No. 12-80896-CIV-MARRA.

Attorneys: Anya Cintron Stern (The Corona Law Firm) for Corcel Corporation, Inc. William Newton Shepherd (Holland & Knight LLP) for Ferguson Enterprises, Inc. Leonard Scott Feuer (Leonard Feuer, PA) for Line-Tec, Inc. Chase Adam Berger (Berger Firm PA) for AKA Services, Inc.

Companies: Corcel Corporation; Ferguson Enterprises, Inc.; Line-Tec, Inc.; AKA Services, Inc.

Cases: RICO FloridaNews