United States Court of Appeals
For the First Circuit
No. 03-1095
IN RE: NEW ENGLAND LIFE INSURANCE COMPANY
SALES PRACTICES LITIGATION,
Debtor,
S-G METALS INDUSTRIES, INC., on its own behalf and
on behalf of all other parties similarly situated,
Plaintiff, Appellant,
v.
NEW ENGLAND LIFE INSURANCE COMPANY,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Robert E. Keeton, Senior U.S. District Judge]
Before
Torruella and Lipez, Circuit Judges,
and Schwarzer,* Senior District Judge.
Amy E. Bauman, with whom Patrick J. Stueve, Brian J. Madden
and Kenneth E. Nelson, was on brief for appellant S-G Metals
Industries, Inc.
Richard N. Bien, with whom Alok Ahuja and Jeff LaRiche, was on
brief for appellee New England Life Insurance Company.
October 6, 2003
*
Of the Northern District of California, sitting by
designation.
SCHWARZER, Senior District Judge. S-G Metals Industries,
Inc. (“S-G”) appeals from the dismissal of its seven-count
complaint against New England Life Insurance Company (“New
England”). S-G alleges that New England engaged in a fraudulent
scheme involving so-called “vanishing premiums” in the sale of
life insurance policies, and asserts claims for violation of the
Racketeer Influenced and Corrupt Organizations Act (“RICO”),
18 U.S.C. §§ 1961-1968, common law fraud and negligent
misrepresentation, negligent supervision, breach of contract and
breach of fiduciary duty. The District Court dismissed the claims
as time barred.1 The Court had jurisdiction under 28 U.S.C.
§§ 1331, 1367 and 1332, and we have jurisdiction under 28 U.S.C.
§ 1291. Having found S-G’s contention that the statutes of
limitations were tolled to be without merit, we affirm.
FACTUAL AND PROCEDURAL BACKGROUND
S-G’s claims arose out of its September 1985 purchase for
its employees of corporate life insurance policies issued by New
England. It alleges that New England fraudulently represented that
S-G would have to pay premiums for only six years, after which the
premiums would “vanish.” S-G claims that New England based this
projection on forecasts about dividend accumulations and
performance it knew to be “inflated and unsustainable.”
On August 17, 1990, New England sent written notice to
1
S-G did not appeal the dismissal of its contract claim.
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S-G that it would have to pay premiums for an additional three
years, moving any “vanishing point” beyond the six-year period
projected at the time of sale. From time to time thereafter, New
England sent written notices to S-G advising that it would have to
pay premiums for a limited number of additional years. In 1996, a
national class action was filed against New England, complaining of
allegedly fraudulent sales practices and naming a class that
included S-G. That action was settled in May 2000, but the
settlement class excluded claimants with corporate-owned policies
such as S-G. S-G then filed this action on March 12, 2002, in the
United States District Court for the District of Kansas. On
August 9, 2003, the case was transferred by the Judicial Panel on
Multi-District Litigation to the United States District Court for
the District of Massachusetts.
The District Court granted New England’s motion under
Federal Rule of Civil Procedure 12(b)(6) to dismiss all claims.
Applying Kansas law,2 it held that each claim was time barred. For
the fraud and misrepresentation claims, which have a two-year
statute of limitations under Kansas law, KAN . STAT . ANN . § 60-
513(a)(3) (2002), the Court applied the discovery rule to determine
the date on which the claim accrued. Under Kansas law, “[f]raud is
discovered at the time of actual discovery or when, with reasonable
diligence, the fraud could have been discovered.” Bagby v. Merrill
2
S-G does not contest the application of Kansas law.
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Lynch, Pierce, Fenner & Smith, 104 F. Supp. 2d 1294, 1299-1300
(D. Kan. 2000) (stating that “the statute begins to run when the
plaintiff has such information that a more thorough investigation
is warranted.”). The Court found that S-G had enough information
to warrant a more thorough investigation by August 1990 at the
latest, when New England notified it that premiums would not
“vanish” for another three years. At that point, the Court
reasoned, S-G knew or should have known that New England’s alleged
representations about the “vanishing points” were untrue. Applying
the two-year statute of limitations, the time for filing the fraud
and misrepresentation claims ran out in August 1992.
S-G’s tort claims are also governed by a two-year statute
of limitations. KAN . STAT . ANN . § 60-513(a)(4). The Court found for
the same reasons that S-G’s claim that New England negligently
supervised its agents in the sale of “vanishing premium” policies
was time barred. On similar reasoning, the Court held the RICO
claim time barred. Applying the four-year statute of limitations
for civil RICO claims and the discovery rule, see Rotella v. Wood,
528 U.S. 549, 554 (2000), the District Court held the claim time
barred because S-G discovered the wrong in 1990.
Finally, the Court rejected S-G’s contention that the
statute of limitations was tolled by fraudulent concealment or the
continuing wrong doctrine.
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DISCUSSION
S-G asserts that the District Court erred in rejecting
equitable tolling under the continuing wrong and fraudulent
concealment doctrines. Our review of the court's order granting
a motion to dismiss pursuant to Federal Rule of Civil Procedure
12(b)(6) is de novo. Blackstone Realty v. FDIC, 244 F.3d 193, 197
(1st Cir. 2001).
I. THE CONTINUING WRONG DOCTRINE
S-G contends that the statute of limitations was tolled
from 1985 until 1998, when it cancelled the policies, by reason of
New England’s repeated false representations concerning the
“vanishing” point of premiums. It argues that the 1990 notice that
additional premiums would be due was itself fraudulent and that the
allegations in its complaint that it was kept in the dark about New
England’s fraudulent scheme raise triable issues of fact.
We agree with the District Court that when S-G received
written notice from New England in August 1990 that premiums would
be due for three more years, it had information that New England
had misrepresented the “vanishing point” and that the financial
information initially provided was incorrect. At that point, under
Kansas’s discovery rule, it had sufficient information to know that
a more thorough investigation was warranted. See Bagby, 104 F.
Supp. 2d at 1300.
Citing Tiberi v. Cigna Corp., 89 F.3d 1423 (10th Cir.
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1996), S-G would have us apply the continuing wrong doctrine to
toll the statute of limitations. But S-G’s reliance on Tiberi is
misplaced. In Tiberi, the court acknowledged that “the running of
the statute of limitations in cases of fraud may be suspended by a
repetition or continuation of the false representations which keeps
the defrauded person in ignorance of the fraud.” Id. at 1431
(quoting 54 C.J.S. Limitations of Actions § 195 (1987)). The court
went on, however, to explain: “Thus, Tiberi cannot be penalized for
his delay if CIGNA’s misrepresentations prevented him from
ascertaining the cause of his injury.” Id. (emphasis added).
Tiberi involved an action by an insurance agent against an
insurance company, charging the latter with breach of contract and
fraud arising out of an exclusive dealing arrangement between the
parties. The gravamen of the action was that the insurance company
had secretly withdrawn from and undermined the arrangement while
continually assuring the agent that it would continue to support
him. Reversing summary judgment, the court found:
Tiberi had no reason to believe that he was
being defrauded because CIGNA had given him
every assurance that it would compensate him
for his losses and reward him for remaining a
COMPAR agent. Tiberi’s allegations that CIGNA
made these assurances while planning to
dismantle the program constitute a continuing
tort.
Id.
The instant case bears no resemblance to Tiberi. While
S-G asserts that New England made repeated false representations
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about vanishing points through 1998, it makes no claim that it
received assurances from New England or that it was prevented from
investigating the cause of its losses. To the contrary, S-G
received so-called Premium Offset Statements from New England
throughout the period, showing that premiums would be due for years
to come. Thus, S-G was not “lulled” into foregoing legal action by
New England’s false representations that the premiums would
“vanish” in the future. “[T]he [continuing wrong] doctrine cannot
be employed where the plaintiff's injury is ‘definite and
discoverable, and nothing prevented the plaintiff from coming
forward to seek redress.’” Id. (quoting Wilson v. Giesen, 956 F.2d
738, 743 (7th Cir. 1992)). Because S-G’s alleged injury was
“definite and discoverable” by August 1990 the statute of
limitations was not tolled by the continuing wrong doctrine.
II. THE FRAUDULENT CONCEALMENT DOCTRINE
S-G further contends that the statute of limitations was
tolled by New England’s fraudulent concealment of its wrongful
actions. It offers a litany of deceptive practices, which it
alleges concealed the fraudulent nature of the “vanishing premium”
scheme. The August 1990 notice, it argues, was simply another
fraudulent statement that contradicted earlier statements but did
not reveal the fraud.
S-G’s argument is not availing. “Under Kansas law, in
order to constitute concealment of a cause of action within the
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general rule tolling the statute of limitations, there must be
something of an affirmative nature designed to prevent, and which
does prevent, discovery of the cause of action.” Wichita v. U.S.
Gypsum Co., 72 F.3d 1491, 1499 (10th Cir. 1996) (citing Baker v.
Board of Regents, 991 F.2d 628, 633 (10th Cir. 1993); Friends Univ.
v. W.R. Grace & Co., 608 P.2d 936, 941 (Kan. 1980)). A plaintiff
seeking to make use of the doctrine must “show [its] ignorance was
not the result of [its] lack of diligence, but was due to
affirmative acts or active deception to conceal facts giving rise
to the claim.” Wichita, 72 F.3d at 1499. New England did not
prevent discovery of S-G’s cause of action; on the contrary, its
August 1990 notice told S-G that its representation that premiums
would “vanish” after six years was false. S-G may not have known
all the means by which the scheme was implemented but it knew facts
that gave rise to its claim.
S-G also argues that the fraudulent concealment doctrine
tolled the four-year statute of limitations on its RICO claim. We
assume for purposes of discussion that equitable tolling doctrines
apply to civil RICO claims. See Rotella, 528 U.S. at 560-61 (“In
rejecting pattern discovery as a basic rule [for the RICO statute
of limitations], we do not unsettle the understanding that federal
statutes of limitations are generally subject to equitable
principles of tolling . . . .”). The statute on a RICO claim runs
from the date the plaintiff discovered or should have discovered
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the injury. Potomac Elec. Power Co. v. Electric Motor & Supply,
Inc., 262 F.3d 260, 266 (4th Cir. 2001) (citing Klehr v. A.O. Smith
Corp., 521 U.S. 179, 183 (1997)). For the reasons discussed above,
the fraudulent concealment doctrine did not toll the statute on
S-G’s RICO claim.
CONCLUSION
For the reasons stated, we affirm the judgment of the
district court.
AFFIRMED.
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