Lanny J. McCaleb v. A. O. Smith Corp.

200 F.3d 747

• Court: Court of Appeals for the Eleventh Circuit
• Decided: January 12, 2000
• Docket: 99-12901
• Status: Published

Opinion

[PUBLISH]

IN THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT ________________________

No. 99-12901 Non-Argument Calendar _______________________ D. C. Docket No. 98-J-1431-J

LANNY J. MCCALEB, an individual; MALCOM I. HENRY, SR., an individual; TOM CORNELIUS, an individual, WILLIAM LAMAR O’FARRELL, an individual; JOAN O’FARRELL, an individual; ALTA S. BARNETT, an individual, ROBERT VERNON BARNETT, JR., an individual; and JIMMY C. ROMINE, an individual Plaintiffs-Appellants, versus

A.O. SMITH CORPORATION, A.O. SMITH HARVESTORE PRODUCTS INC., and A.O. SMITH CORPORATION, d/b/a A.O. SMITH HARVESTORE PRODUCTS, INC., Defendants-Appellees. ________________________

Appeal from the United States District Court for the Northern District of Alabama _________________________ (January 12, 2000)

Before BIRCH, CARNES and WILSON, Circuit Judges. WILSON, Circuit Judge:

This is an appeal from the district court’s grant of summary judgment for A.O.

Smith Corporation and A.O. Smith Harvestore Products, Inc. For the reasons below,

we affirm.

I. BACKGROUND

Lanny J. McCaleb; Malcom I. Henry, Sr.; Tom Cornelius; William Lamar

O’Farrell; Joan O’Farrell; Alta Barnett; Robert Barnett and Jimmy C. Romine,

Appellants, are farmers (hereinafter referred to collectively as “the farmers”). A.O.

Smith Corporation (“A.O. Smith”) designs, manufactures and markets farm equipment

and other products. A.O. Smith Harvestore Products, Inc. (“A.O. Smith Harvestore”)

was a subsidiary of and is now a division of A.O. Smith.

The farmers allege that the Appellees contacted them regarding the lease or

purchase of Harvestore silos to store feed for their livestock and represented that the

silos were “oxygen limiting.” The farmers claim that these representations were

fraudulent, that they purchased or leased Harvestore systems based on these

representations, and that A.O. Smith and A.O. Smith Harvestore engaged in a “pattern

of racketeering activity” in violation of 18 U.S.C. § 1962(c). The farmers allege that

as a direct and proximate cause of the actions of A.O. Smith and A.O. Smith

Harvestore they experienced depressed milk production, breeding problems with their

2 livestock, deteriorated physical condition of the dairy herds, decreased income from

lower production, and added costs of dealing with the developing problems with the

herd and the costs of the Harvestore lease.

A.O. Smith and A.O. Smith Harvestore moved for summary judgment, and the

district court granted their motion. This appeal followed. The issue on appeal is

whether the district court erred in granting summary judgment because the RICO

claims were time-barred and because the record did not contain any evidence of injury

or damages. We determine that the civil RICO actions of all farmers except Jimmy

Romine were time-barred under the applicable statute of limitations. Therefore, we

need not reach the issue of whether the record contains evidence of injury or damage.

However, with respect to Romine’s action, we determine that the absence of evidence

regarding an essential element of the case supports summary judgment.

II. DISCUSSION

Standard of Review

We review a district court’s application of a statute of limitations and its grant

of summary judgment de novo. We apply the same standard used by the district court.

M.H.D. v. Westminster Sch., 172 F.3d 797, 802 n.13 (11th Cir. 1999). Summary

judgment is appropriate when there are no genuine issues of material fact and the

movant is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(c).

3 RICO

The farmers allege that A.O. Smith and A.O. Smith Harvestore “participated

in the conduct of the affairs of the enterprise through a pattern or [sic] racketeering

activity, in violation of 18 U.S.C. § 1962(c).” Section 1962 is known as the Racketeer

Influenced and Corrupt Organizations Act (RICO) and “makes it a crime ‘to conduct’

an ‘enterprise’s affairs through a pattern of racketeering activity.’” Klehr v. A.O. Smith

Corp., 521 U.S. 179, 183 (1997). “Racketeering activity” is any activity that violates

certain enumerated laws, including certain types of fraud. See id. (citing 18 U.S.C.

§ 1961(1)). A “pattern” is established by “at least two acts of racketeering activity .

. . the last of which occurred within ten years . . . after the commission of a prior act

of racketeering activity.” Klehr, 521 U.S. at 183 (citing 18 U.S.C. § 1961(5)).

Civil RICO Statute of Limitations

Section 1964(c) is known as the civil RICO provision. It permits “‘[a]ny person

injured in his business or property by reason of a violation’ of RICO’s criminal

provisions to recover treble damages and attorney’s fees.” Klehr, 521 U.S. at 183

(quoting 18 U.S.C. § 1964(c)). The statute of limitations for civil RICO actions is

four years. See Klehr, 521 U.S. at 183. A civil RICO action “begins to accrue as soon

as the plaintiff discovers, or reasonably should have discovered, both the existence

and source of his injury and that the injury is part of a pattern.” Bivens Gardens

4 Office Bldg., Inc. v. Barnett Bank, Inc., 906 F.2d 1546, 1554-55 (11th Cir. 1990).

This requirement is in accordance with the four year statute of limitations established

by the United States Supreme Court because it requires “plaintiffs to pursue the civil

RICO remedy within four years of the time when they discovered, or reasonably

should have discovered, that they are entitled to civil RICO damages for their injury.”

Id. at 1555. The farmers filed their cause of action on June 4, 1998. To

determine whether their cause of action is time-barred because it began to accrue

before June 4, 1994, four years preceding the filing of the action, we must make two

inquiries: (1) when did the farmers discover or when reasonably should they have

discovered A.O. Smith and AO. Smith Harvestore as the sources of the alleged

injuries to their livestock and milk production; and (2) when did the farmers discover

or when reasonably should they have discovered that the alleged misrepresentations

about the oxygen-limiting capabilities of the silos that caused the alleged injuries to

their livestock and milk production were part of a pattern of racketeering activity?

The farmers contend that they could not ascertain the source of their alleged

injuries because of the misrepresentations of A.O. Smith and A.O. Smith Harvestore.

This contention is unpersuasive. It is undisputed that A.O. Smith and A.O. Smith

Harvestore sold the silos to the farmers. Therefore, they can be the only source to

which the alleged injuries can be traced.

5 The record demonstrates that each farmer should have known that the alleged

misrepresentations causing their injuries were part of a pattern of racketeering. They

allege that they received advertising and magazines containing representations about

the Harvestore silos’ oxygen-limiting capabilities. They also allege that A.O. Smith

and A.O. Smith Harvestore repeatedly made fraudulent misrepresentations about the

silos’ oxygen-limiting capacities. We agree with the district court that they should

have discovered the pattern upon which their RICO claims are premised at the same

time that they should have discovered their alleged injuries. See, e.g., Klehr v. A.O.

Smith Corp., 87 F.3d 231, 239 (8th Cir. 1996), aff’d, 521 U.S. 179 (1997) (plaintiffs

received “numerous promotional materials and advertisements” that should have put

them on notice that the misrepresentations were part of a pattern of racketeering

activity).

In our inquiry regarding when the source of the alleged injuries and the pattern

of racketeering should have been discovered, we examine the record and consider

each farmer individually because each had a different experience with the Harvestore

silos.

Malcolm Henry testified that he discontinued using the silos in 1983 for reasons

unrelated to the silos. He was satisfied with the silos. In 1983, he knew that oxygen

was entering one of the silos after he discovered that the feed inside was on fire. He

6 reasonably should have discovered the source of his alleged injuries in 1983. He had

until 1987 to file his RICO claim. He failed to do so; thus, his action is time-barred.

Tom Cornelius testified that he saw blackened corn in his silo in the mid-1980's

and a Harvestore salesman told him that oxygen was entering the silo through the

unloader door. Mr. and Mrs. Barnett first noticed discolored corn from the silo in the

mid to late 1980's, perhaps in 1984. Construing the evidence in the light most

favorable to the farmers, if we assume that they first saw the blackened corn in the late

1980's, for example 1987, then they had until 1991 to file their claim. Their failure

to do so renders the claims time-barred.

Lanny McCaleb testified that the quality of the feed in the silos met his

expectations. He had mechanical problems with the silo’s unloader and steel floor,

which were unrelated to the allegations against the appellants. McCaleb used the silo

from 1980-1984. He stopped using the silo in 1984 due to the cost of repairs. He

testified that he did not know that the silo was not oxygen-limiting until he had notice

of the class-action lawsuit. There were never any problems with the quality of his

feed, but he noticed mold and spoilage. The most favorable construction of the

evidence suggests that he should have discovered the source of his alleged injuries in

1984 when he stopped using the silo. He had until 1988 to file his claim. His failure

to do so renders the claim time-barred.

7 Mr. and Mrs. O’Farrell used their silos for thirteen years. During this period,

they were satisfied with them. They stopped using them in 1983 or 1984 when they

sold their herd. In retrospect, Mr. O’Farrell believes that problems with the feed may

have caused declines in his herd’s milk production during the 1970s. From 1972-

1984, he saw some mold coming out of the silo. Even the most generous construction

of the evidence would require the O’Farrells to have discovered their alleged injuries’

source and the pattern of conduct to which it is traced in 1984 when they sold their

herd. They had until 1988 to file their action. Because they did not, it is time-barred.

The civil RICO claims of all farmers except Jimmy Romine are time-barred.

The farmers did not investigate the problems with the feed or try to ascertain their

cause. The limitations period for civil RICO claims was not tolled because the

farmers were not reasonably diligent in trying to discover their cause of action. See

Klehr v. A.O. Smith Corp., 521 U.S. 179, 194 (1997) (lack of reasonable diligence

precludes tolling of statute of limitations based on fraudulent concealment).

Jimmy Romine used his silo from 1984 until 1998 when he sold his hog

business. He was satisfied with the quality of the feed and even had it tested

periodically. The tests never indicated damage to the feed. He first saw black kernels

of corn and water coming out of the silo in 1998. His civil RICO claim was filed in

1998. Although his claim is not time-barred, the record indicates that he cannot

8 demonstrate an essential element of the cause of action. Summary judgment is proper

when the movant shows an absence of evidence to support an essential element of the

nonmovant’s case. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). There is

no liability if a RICO violator has not caused injury. See Bivens Gardens Office

Bldg., Inc. v. Barnett Bank, 906 F.2d 1546, 1550 n.7 (11th Cir. 1990) (quoting

Sedima, S.P.R.L. v. Imtrex Co., 473 U.S. 479, 496-97 (1985)). A civil RICO action

requires a plaintiff to prove more than “but for” causation of injury; it requires

proximate causation. See Beck v. Prupis, 162 F.3d 1090, 1095-96 (11th Cir. 1998)

(citing Holmes v. Securities Investor Protection Corp., 503 U.S. 258, 268 (1992)),

cert. granted, ___U.S.___, 119 S.Ct. 2046, 144 L.Ed. 2d 213 (1999). ‘“[A] factor is

a proximate cause if it is a substantial factor in the sequence of responsible

causation.’” Beck, 162 F.3d at 1096 (quoting Cox v. Administrator United States Steel

& Carnegie, 17 F.3d 1386, 1399 (11th Cir. 1994)); see also Bivens Gardens Office

Bldg. v. Barnett Bank, Inc., 140 F.3d 898, 906 (11th Cir. 1998) (injuries must be “the

direct result of the alleged racketeering activity”).

Romine never saw any mold or spoilage in his feed, and he never had to throw

any of it away. He has no evidence that Harvestore caused damage to his feed or

livestock. The record does not contain evidence of any injury or damage to Romine.

Even if it did, Romine cannot prove that the alleged wrongful conduct of A.O. Smith

9 and A.O. Smith Harvestore proximately caused the injury. He never inspected the

silo to determine what caused the feed to blacken in 1998. He never tested the silo to

determine if any problems could be fixed by routine maintenance. While he used the

silo, he performed almost no maintenance on it and never inspected it for leaks.

III. CONCLUSION

With the exception of Jimmy Romine, the farmers should have discovered the

source of their alleged injuries and that the actions proximately causing their alleged

injuries were part of an alleged pattern of racketeering before June 4, 1994, four years

preceding the filing of the civil RICO action. The civil RICO claims are time-barred.

Summary judgment on Jimmy Romine’s claim is appropriate because the record fails

to support the injury and causation elements of his case. For the foregoing reasons,

we AFFIRM the district court’s order granting summary judgment to A.O. Smith and

A.O. Smith Harvestore.

AFFIRMED.