Appeal from final jugment of the United States District Court for the Eastern District of New York, entered following a jury trial before Eugene H. Nickerson, Judge, and from interlocutory rulings dismissing certain claims under the Racketeer Influenced Corrupt Organizations Act, 18 U.S.C. § 1961, et seq., and the federal banking laws, 12 U.S.C. § 1, et seq., as barred by statutes of limitations or as unproven. Affirmed in part, vacated and remanded in part.
Lumbard, Mansfield, and Kearse, Circuit Judges.
Plaintiff Durante Bros. and Sons, Inc. ("Durante"), appeals from a final judgment of the United States District Court for the Eastern District of New York, Eugene H. Nickerson, Judge, entered after a jury trial, dismissing its complaint against defendants Flushing National Bank ("Flushing" or the "Bank"), Jack Farber, and Richard Gelman, alleging violations of, inter alia, the Racketeer Influenced Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961, et seq. (1982), et seq. (1982), and the federal banking laws, 12 U.S.C. § 1, et seq. (1982). The district court granted summary judgment dismissing certain of the RICO and banking law claims on the grounds that they were barred by statutes of limitations; it directed a verdict as to certain other claims for lack of proof; and it set aside a jury verdict against Flushing for fraud, on the ground that that verdict was unsupportable in light of the jury's verdict in favor of Farber on essentially the same claim of fraud. On appeal, Durante contends principally that the district court applied the incorrect statutes of limitations and that it erred in dismissing Durante's other claims for failure of proof and for inconsistency in the jury's verdicts. We find merit only in the contention that the court erred in dismissing the RICO claims on statute of limitations grounds, and we vacate the judgment dismissing counts 1, 3, and 5 of the complaint and remand for further proceedings on those claims.
The action, commenced on May 21, 1980, centers on certain loans made by Flushing from 1974 through 1976 to (1) Durante, (2) Louis Durante, Sr. ("Louis Sr."), father of Durante's sole stockholder, and (3) Jerder Realty Services, Inc. ("Jerder"), a real estate development company of which Louis Sr. was a principal. As set forth in somewhat greater detail in the discussion sections below, the amended complaint ("complaint") alleged that as the Bank's loans to Jerder soured, the Bank, Farber (its chairman, chief executive officer, and controlling shareholder), and Gelman (its executive vice president) conspired to offset Flushing's anticipated losses by causing the Bank to make loans to Durante at usurious rates of interest.
The complaint contained six counts (1-6) asserting federal claims and eleven counts (7-17) asserting state law claims. The federal law claims included the assertions that various actions by the defendants constituted the collection of unlawful debts, in violation of RICO, 18 U.S.C. §§ 1962(a), (c), and (d) (counts 1, 3, and 5); that defendants caused Flushing to charge unlawful rates of interest on the loans, in violation of 12 U.S.C. § 85, and to falsify its records and its reports to regulatory agencies, in violation of 12 U.S.C. § 161 and 18 U.S.C. § - 1005 and 1014 (1982) (counts 2 and 4); and that in mailing monthly bank statements and a letter to Durante, defendants repeatedly violated the mail fraud statute, 18 U.S.C. § 1341 (1982), and thereby engaged in a pattern of racketeering activity, in violation of RICO, 18 U.S.C. §§ 1962(a), (c), and (d) (count 6).
Prior to trial, defendants moved to dismiss the six federal counts. They contended that counts 1, 3, and 5 were barred by the one-year statute of limitations found in N.Y. Civ. Prac. Law ("CPLR") § 215(6) (McKinney 1972 & Supp. 1983-1984) and that counts 2 and 4 either were barred by the two-year statute of limitations provided by 12 U.S.C. § 86 or were brought under provisions that gave Durante no standing to sue. They contended that count 6 failed to state a claim upon which relief may be granted under RICO because the alleged mailings were not for the purpose of furthering the alleged scheme and hence did not violate the mail fraud statute, and therefore count 6 did not allege valid predicate acts upon which liability for "racketeering activity" could be premised. The district court granted the motions to dismiss as to counts 1 through 5, but denied the motion as to count 6.
In a memorandum and order dated September 27, 1983, reported at 571 F. Supp. 489 (E.D.N.Y. 1983), the court upheld the defendants' statute of limitations defenses and deferred decision on the issue of standing. With regard to RICO counts 1, 3, and 5, which asserted that defendants had engaged in the collection of unlawful debts, the court noted that RICO itself contains no statute of limitations provisions, and it therefore sought the most appropriate state statute of limitations. On the premise that an action based on the collection of an unlawful debt was most like a state law action for usury, the court concluded that the appropriate statute of limitations was that found in CPLR § 215(6), which provides that actions to recover any overcharge of interest or to enforce a penalty for such an overcharge must be commenced within one year of the accrual of the cause of action. Since suit had been commenced some 2 1/2 years after the last alleged interest overpayment was made, the court found counts 1, 3, and 5 barred.
The court rejected defendants' contention that count 6 of the complaint failed to state a claim under RICO. It ruled that the matter of whether or not the mailings of bank statements and letters were "for the purpose of executing" the alleged scheme was a question of fact that could not be decided on a motion for summary judgment.
As to counts 2 and 4, the court held that the portions of those counts that claimed that Durante had been charged an unlawful rate of interest in violation of 12 U.S.C. § 85 were analogous to a claim to recover damages arising out of the payment of usurious interest, and it therefore applied the one-year statute of limitations found in § 215(6). As to the portions of counts 2 and 4 that asserted that defendants' falsification of records and reports violated 12 U.S.C. § 161 and 18 U.S.C. §§ 1005 and 1014, the court deferred its ruling on defendants' contention that Durante had no standing to complain of such acts, observing that the papers before it did not indicate that there was any causal connection between the alleged falsifications and the injury complained of. The court stated that it would rule on the motion to dismiss these claims after Durante had made an offer of proof as to causation.
On October 3, 1983, just prior to the start of trial, the court held a hearing to permit Durante to make its offer of proof. Finding the offer insufficient, the court dismissed the remainder of counts 2 and 4. In addition, the court dissmissed counts 10, 11, and 13 as state law usury claims barred by the statute of limitations, CPLR § 215(6).
C. Trial, the Directed Verdicts, and Judgment NOV
The parties proceeded to trial on the remaining counts of the complaint. At the close of the evidence, the court directed a verdict for the defendants on counts 7 (conspiracy), 12 (duress), 14 (breach of fiduciary duty), 15 (negligence), 16 (breach of contract), and 17 (negligent misrepresentation). The only counts submitted to the jury were counts 6 (RICO racketeering), 8 (fraud by Farber), and 9 (fraud by the Bank).
The jury, after deliberating for two days, returned a verdict in favor of the defendants on count 6, a verdict in favor of Farber on count 8, and a verdict of $175,000 in favor of Durante against the Bank on count 9. Flushing moved for judgment notwithstanding the verdict against it or for a new trial. By a memorandum and order dated January 17, 1984, the court set aside the verdict on the ground that it was unsupportable in light of the jury's conclusion that Durante had failed to prove fraud on the part of Farber. The court declined to order a new trial, and judgment was entered in favor of defendants, dismissing the complaint in its entirety.
On this appeal, Durante contends principally (1) that the court applied the wrong statutes of limitations in dismissing the RICO claims asserted in counts 1, 3, and 5 of the complaint and the banking claims under 12 U.S.C. § 93 asserted in counts 2 and 4; (2) that the court erred in dismissing the remainder of counts 2 and 4 for lack of causation; (3) that the jury's verdict against the Bank on count 9 was not inconsistant with its verdict in favor of Farber on count 8, but that if there was an inconsistency, it did not warrant entry of judgment notwithstanding the verdict ("judgment NOV") but only the granting of a new trial; and (4) that there was sufficient evidence supporting counts 7, 12, 16, and 17 to require their submission to the jury. In addition, Durante asserts various claims of error in the court's evidentiary rulings and instructions to the jury. It asks that we remand for a new trial of all counts except counts 10, 11, and 13, or alternatively that we reinstate the verdict against the Bank on count 9.
We find merit only in the contention that the court applied the wrong statute of limitations to the RICO claims asserted in counts 1, 3, and 5. Accordingly, the judgment dismissing those counts is vacated and the matter is remanded for further proceedings as set forth below.
II. THE BANKING LAW CLAIMS
In counts 2 and 4, Durante claimed that Farber and Gelman (A) violated the federal banking laws by causing Flushing to charge more than the lawful rate of interest allowed under 12 U.S.C. § 85, and (B) caused the Bank to make false reports to banking authorities in violation of 12 U.S.C. § 161 and 18 U.S.C. §§ 1005 and 1014. We conclude that insofar as these counts were grounded in the alleged violation of § 85, they were time-barred; insofar far as they were based on the other claimed violations, they were properly dismissed for lack of any showing of causation between the alleged violation and the claimed injury to Durante.
A. Statute of Limitations
Section 85 of 12 U.S.C., through reference to state laws and Federal Reserve Bank rates, sets a ceiling on the rate of interest that a national bank may charge. Section 86 of 12 U.S.C. allows an individual who has paid interest at a rate in excess of that allowed under § 85 to bring an action to recover from the bank twice the amount of interest paid. Defendants contend that § 86's action to recover double interest is the exclusive remedy for a violation of § 85, and they point out that § 86 provides that such an action must be commenced within two years of the occurrence of the usurious transaction. Since the present action was commenced some 2 1/2 years after Durante made its last payment of allegedly usurious interest, Durante argues that counts 2 and 4 should be deemed brought under 12 U.S.C. § 93, which provides that any person may sue the director of a national bank for damages sustained in consequence of a knowing violation of the federal banking laws. Since Title 12 contains no provision specifying a statute of limitations with respect to an action brought under § 93, Durante contends that the appropriate state statute of limitations was the three-year 1983-1984) for actions brought to enforce a liability created by statute.
The district court found it unnecessary to determine whether § 86 provides the exclusive remedy for a violation of § 85, since it concluded that even if counts 2 and 4 were deemed brought under § 93, they were, to the extent that they relied on the claimed violation of § 85, time-barred because the most analogous state statute of limitations was the one-year period provided by CPLR § 215(6) for claims of usury. Though we disagree with the court's application of the CPLR, we too find it unnecessary to determine the exclusiveness of the remedy provided by § 86, since we conclude that even in a suit brought under § 93, the time within which a claim dependent on a violation of § 85 must be brought is governed by 12 U.S.C. § 86.
Where Congress has created a private right of action but has not specifically stated the time within which the action may be brought, the court must seek out the most appropriate statute of limitations. In so doing, it should look first to federal law for a relevant limitations provision, turning to state law only if there is no relevant federal period. See Board of Regents v. Tomanio, 446 U.S. 478, 485, 64 L. Ed. 2d 440, 100 S. Ct. 1790 (1980) (appropriate state period applied "since there was no specifically stated or otherwise relevant federal statute of limitations for the federal ...