Antitrust Law Daily Wrap Up, RICO—S.D. N.Y.: Figure skater fails to state RICO claims against talent agency, accountants, and others, (May 7, 2014)

By Linda O’Brien, J.D., LL.M.

Figure skater Oksana Baiul failed to state Racketeer Influenced and Corrupt Organizations Act (RICO) claims against an entertainment talent agency, accountants, and other individuals and entities for allegedly engaging in an enterprise to divert compensation due Baiul into their own accounts, the federal district court in New York City has held (Baiul v. William Morris Agency, LLC, May 6, 2014, Forrest, K.).

In 1994, Oksana Baiul signed contracts with the William Morris Agency (WMA) to represent her in all fields and media throughout the world. WMA and various individuals signed agreements, which appointed WMA as Baiul’s agent with respect to her services in the entertainment industry and established the terms and conditions of compensation for her services. Accounting firm Wallin Simon & Black (Wallin) was hired to handle Baiul’s business and financial affairs in 1997. WMA sent Baiul at least 20 earnings history reports until their contractual relationship ended in 2000.

Baiul filed suit against WMA, Wallin, and several individuals and entities, alleging RICO violations, fraud, breach of contract, breach of fiduciary duty, and conversion. Baiul alleged that WMA, and other individuals and entities, formed a criminal enterprise to divert compensation from performances, endorsements, royalties, and merchandising agreements that Baiul should have received to their own accounts. Baiul asserted that she exclusively relied on persons associated with the enterprise for business decisions, including interpretation of the various agreements she signed. Baiul also alleged that Wallin concealed the thefts and destroyed evidence to protect the enterprise. The defendants moved for dismissal.

RICO. The court found that Baiul’s RICO claims were barred by the statute of limitations. The statute of limitations for a RICO claim is four years and is triggered when the plaintiff discovers or should have discovered the underlying pattern of racketeering activity. Baiul’s alleged that the defendants stole funds and assets from her from 1993 through 2012 and that her RICO claim was timely because the defendants fraudulently concealed their conduct until 2011 when she hired a new business manager who conducted an investigation into her finances. However, Baiul was on inquiry notice of her fraud allegations as of at least 2000, when circumstances suggested the probability that she had been defrauded and a duty of inquiry arose, according to the court. Prior to the termination of her relationship with WMA, Baiul was involved in numerous performances and endorsements, yet allegedly received no payments for those undertakings. Her receipt of more than 20 earnings history reports that she claimed were fraudulent would have put a person of ordinary intelligence on notice of the alleged pattern of nonpayment by the defendants.

Additionally, the doctrine of fraudulent concealment did not toll the statute of limitations because Baiul did not exercise reasonable due diligence to uncover the alleged fraud. She alleged no facts to explain why she failed to investigate the alleged fraud prior to 2011, when she hired a new business manager. Moreover, Baiul conceded the she received the earnings history reports from WMA during a period when she alleged she received no payments. Her failure to conduct any investigation until 2011, despite being on notice of the possibility of fraud for eleven years, did not amount to reasonable diligence, the court concluded.

The case is No. 13-Civ. 8683 (KBF).

Attorneys: Raymond James Markovich for Oksana Baiul. John Anthony Piskora (Loeb & Loeb LLP) for William Morris Agency, LLC. Joseph John Vitale (Cohen, Weiss and Simon LLP) for The Screen Actors Guild-American Federation of Television and Radio Artists.

Companies: William Morris Agency, LLC

Cases: RICO NewYorkNews