the proposed complaint by the standards imposed by these rules.
Tese and Sinclair say, among other things, that the amended complaint is barred because it does not show that the alleged injuries inflicted by Tese and Sinclair occurred within the applicable four-year period.
As noted above, under the Bankers Trust Co. case, the date on which a plaintiff's claim under RICO arises is the date when that plaintiff discovers or should have discovered the "specific injury" caused by defendant. Bankers Trust Co., 859 F.2d at 1103; see also Moeller v. Zaccaria, 831 F. Supp. 1046, 1051 (S.D.N.Y. 1993). The injuries that each plaintiff allegedly sustained are, according to the amended complaint, the loss of his or her investments, and the amounts assessed against him or her by reason of the disallowance of tax deductions by the Internal Revenue Service (paragraphs 117 and 131).
The amended complaint does not state the dates when these injuries for each plaintiff were sustained. This omission is curious given the Southern District of New York's recent holding in Landy v. Mitchell Petroleum Tech. Corp., 734 F. Supp. 608, 625 (S.D.N.Y. 1990), a case in which plaintiffs' counsel, Beigel & Sandler, represented another group of plaintiffs who claimed to have been defrauded by partnerships that offered tax deductions. The court stated that plaintiffs' knowledge of "their injury, the loss of their investment and any possible benefits from that investment . . . [occurred] . . . when the Internal Revenue Service disallowed their tax deductions." See also Mirman v. Berk & Michaels, 91 Civ. 8606, 1992 U.S. Dist. LEXIS 16707, at *11 (S.D.N.Y. Oct. 26, 1992) (also argued by Beigel & Sandler, holding that when plaintiffs had knowledge of IRS inquiry into arbitrage partnerships that failed as tax shelters, statute of limitations will not be tolled). It is not as if plaintiffs' attorneys are unfamiliar with this area of legal practice. They have represented plaintiffs in many other cases involving tax shelter partnerships. See, e.g., O'Brien v. National Property Analysts Partners, 719 F. Supp. 222 (S.D.N.Y. 1990), 740 F. Supp. 276 (S.D.N.Y. 1990), 936 F.2d 674 (2d Cir. 1991); Myers v. Finkle, 758 F. Supp. 1102 (E.D.Va. 1990), 950 F.2d 165 (4th Cir. 1991); Gurfein v. Sovereign Group, 826 F. Supp. 890 (E.D.Pa. 1993); Adler v. Berg Harmon Assocs., 790 F. Supp. 1222 (S.D.N.Y. 1992), 790 F. Supp. 1235 (S.D.N.Y. 1992), 816 F. Supp. 919 (S.D.N.Y. 1993); In Re Integrated resources Real Estate Ltd. Partnerships Secs. Litigation, 815 F. Supp. 620 (S.D.N.Y. 1993); Landy v. Heller, White & Co., 783 F. Supp. 125 (S.D.N.Y. 1991); Hastie v. American Agri-Corp, 774 F. Supp. 1251 (C.D.Ca. 1991); Duke v. Touche Ross & Co., 765 F. Supp. 69 (S.D.N.Y. 1991); Hayden v. Feldman, 753 F. Supp. 116 (S.D.N.Y. 1990); Dymm v. Cahill, 730 F. Supp. 1245 (S.D.N.Y. 1990); and the cases cited elsewhere in this Memorandum and Order.
It is not enough for plaintiffs to allege generally, as they do in paragraph 62 of the amended complaint, that they "were first on notice of the involvement of the defendants in the business of the Partnerships" in 1992. It appears that any injury to a plaintiff may have occurred much earlier.
Plaintiffs argue that the statute of limitations should be tolled. A RICO plaintiff may show fraudulent concealment sufficient to toll the running of the statute of limitations if the plaintiff establishes "either that the defendant took affirmative steps to prevent the plaintiff's discovery of his claim or injury or that the wrong itself was of such a nature as to be self-concealing." New York v. Hendrickson Bros., Inc., 840 F.2d 1065, 1083-84 (2d Cir.), cert. denied, 488 U.S. 848, 109 S. Ct. 128, 102 L. Ed. 2d 101 (1988) (Clayton Act claim); see also Bankers Trust Co., 859 F.2d at 1105 (noting that "standard tolling exceptions apply" in civil RICO action and citing Hendrickson Bros. as an example). In addition, a plaintiff must also show that plaintiff's remaining in ignorance of the injury was not due to his or her lack of diligence. New York v. Hendrickson Bros., Inc., 840 F.2d at 1083-84.
If a plaintiff was disallowed partnership deductions by the IRS, or had a partial or total loss of his partnership investment before April 2, 1989, that plaintiff was "injured" before that date. It seems unlikely that such a plaintiff could be deemed diligent without making further inquiry as to the existence of a claim against the defendants for such an injury, particularly if that plaintiff had some knowledge of the indictment of Manko for tax fraud and for "aiding and abetting the filing of false tax returns of limited partnership investors" as alleged in the complaint. See generally Landy, 734 F. Supp. at 625.
In any event the amended complaint makes no allegation of any affirmative acts of concealment by Tese and Sinclair of their activities in the months of July through October 1982, more than ten years before the filing of the complaint against them. The complaint alleges fraudulent concealment by defendants other than Tese and Sinclair. But as the Southern a District of New York has held in two recent arbitrage partnership-tax deduction cases in which Beigel & Sandler represented the plaintiffs, "the doctrine of fraudulent concealment tolls the statute of limitations only as to those defendants who committed the concealment." Griffin v. McNiff, 744 F. Supp. 1237, 1256 n.20 (S.D.N.Y. 1990) (quoting yet another Beigel & Sandler case, O'Brien v. National Property Analysts Partners, 719 F. Supp. 222, 232 (S.D.N.Y. 1989).
The motion to file the amended complaint against Tese and Sinclair is denied on the ground that plaintiff's allegations do not show it was brought within the applicable four-year statute of limitations. Plaintiffs may have leave to move to file a further amended complaint making, consistent with Rule 11 and with this decision, the requisite allegations.
The court does not now reach the other grounds urged by Tese and Sinclair to deny the motion, and reserves decision on the present application for Rule 11 sanctions.
The motion of Tese and Sinclair to dismiss the "amended complaint" as to them is granted. The motion of plaintiffs for leave to file a "second amended complaint" is denied with leave to file a further motion. So ordered.
Dated: Brooklyn, New York
December 29, 1993
Eugene H. Nickerson, U.S.D.J.
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