June 17, 2019

Tenth Circuit: Plaintiff Failed to Exercise Due Diligence to Discover Theft; RICO Limitations Period Expired

The Tenth Circuit Court of Appeals issued its opinion in Robert L. Kroenlein Trust v. Kirchhefer on Monday, August 25, 2014.

Robert L. Kroenlein owned and operated J&B Liquors, a liquor store in Wyoming, through the Robert L. Kroenlein Trust. When Kroenlein died, his daughter became trustee, and his son-in-law, Eric Alden, took over management of the store. Alden lived in another town and left the operations of the store to another manager. During this time, the store purchased Anheuser Busch products from a distributor named Orrison through a salesman named Kirchhefer. Unbeknownst to Alden, Kirchhefer was operating a scheme in which he would order more beer than J&B needed and then steal the extra beer and sell it to other bars. As early as 2005, J&B’s accountants discovered that beer purchases exceeded sales. Eventually, Alden discovered that Kirchhefer was the thief, set up security cameras to capture the theft, and called law enforcement.

On August 15, 2011, Alden filed a complaint through the Kroenlein Trust against Kirchhefer, the bars to which he was selling the stolen beer, and the owners of the bars, alleging two state law claims and six RICO claims. According to the complaint, the defendants engaged in a pattern of racketeering by committing wire fraud. The district court granted summary judgment to defendants on the grounds that all of Kroenlein’s RICO claims were time-barred. The district court also determined that no “enterprise” existed between Kirchhefer and the other defendants, and therefore the RICO claims were barred on this alternative ground as well.

Kroenlein appealed, alleging the district court erred in determining its claims were time-barred. Kroenlein argued there was no way for it to have discovered its injury prior to August 31, 2007, and alternatively the limitations period was equitably tolled by defendants’ fraudulent concealment. The Tenth Circuit disagreed, concluding that had Kroenlein exercised due diligence it would have discovered the fraud as early as September 2005 under the injury-discovery rule. RICO’s four-year statute of limitations expired in 2009. RICO requires only discovery of harm, not discovery of the source of harm. Kroenlein’s equitable tolling for fraudulent concealment claims also failed because the undisputed evidence failed to support that by the exercise of due diligence plaintiff could not have known a cause of action may have existed.

The district court’s summary judgment was affirmed.

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