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Decided: July 9, 2015

In a case related to a RICO action, the Fourth Circuit affirmed the district court’s denial of a motion to intervene, and denied the defendant’s motion to dismiss the appeal of the district court’s denial.

In September of 2011, CVLR Performance Horses, Inc. (“CVLR”) filed suit against John Wynne and his solely owned companies for RICO violations, claiming Wynne held out one of his companies as a bank, made loans under false pretenses, and engaged in insurance fraud.  Wynne moved to dismiss, and the district court granted his motion, finding CVLR failed to state a claim.  On appeal, the Fourth Circuit reversed, finding CVLR’s pleadings had stated a RICO claim, and remanded to the district court.  Four months later (more than two years after the original filing), Karen Foster and Vicki Marsh, acquaintances of Wynne who claimed injury from his financial dealings, moved to intervene as plaintiffs.  The district court denied Foster and Marsh’s motion, finding that the statute of limitations on RICO claims had passed, and equitable tolling was not warranted.  Foster and Marsh appealed.  CVLR and Wynne then settled their dispute, and the district court, per CVLR and Wynne’s agreement, dismissed the case.  Wynne then moved to dismiss Foster and Marsh’s appeal, arguing that the dismissal of CVLR’s case made Foster and Marsh’s appeal moot, since there was no longer a case in which to intervene.  

The Fourth Circuit first held that dismissal of CVLR’s case did not moot Foster and Marsh’s appeal.  The Fourth Circuit reasoned that Foster and Marsh made their motion to intervene, and appealed denial of that motion, before CVLR’s case against Wynne was dismissed.  The Court further reasoned that the settlement of CVLR’s case did not provide a remedy to Foster and Marsh, and if the Fourth Circuit were to reverse the denial of Foster and Marsh’s motion to intervene, Foster and Marsh would be able to pursue a claim against Wynne independent of CVLR’s case.  

The Fourth Circuit then held that the district court did not err in finding equitable tolling should not be applied to Foster and Marsh’s appeal.  The Fourth Circuit noted that, by their own admission, Foster and Marsh exceeded the RICO statute of limitations by at least 14 months.  The Fourth Circuit then found that equitable tolling was inappropriate in this case.  The Fourth Circuit noted that equitable tolling is an extraordinary remedy allowed where applicants have diligently pursued their rights, but been unable to timely file a claim due to extraordinary circumstances.  Here, the Fourth Circuit found that Foster and Marsh had not alleged taking any steps towards timely filing a RICO claim, and had not alleged that a claimed mental impairment (Marsh’s claimed autism) had any relation to the failure to timely file.  Further, the Fourth Circuit found that no extraordinary circumstances caused Foster and Marsh’s failure to timely file a claim.  Foster and Marsh claimed that the first dismissal of CVLR’s case (for failure to state a claim) was an extraordinary circumstance, because filing a claim against Wynne after the dismissal would have been subject to a Rule 11 sanction since the district court had found Wynne’s conduct did not violate RICO.  The Fourth Circuit disagreed, noting that while Foster and Marsh’s separate lawsuit against Wynne would likely have been dismissed in the wake of the dismissal of the CVLR case, Rule 11 allows for arguments based not only on existing law, but also on nonfrivolous arguments to modify or reverse existing law, and thus Foster and Marsh would likely not have faced faced Rule 11 sanctions for filing a separate lawsuit against Wynne.

Based on the above, the Fourth Circuit denied Wynne’s motion to dismiss Foster and Marsh’s appeal of the district court’s denial of their motion to intervene.  The Fourth Circuit affirmed the district court’s denial of Foster and Marsh’s motion to intervene.

Full Opinion

Katherine H. Flynn