By Taylor Ey

On July 9, 2015, the Fourth Circuit issued its published opinion in the civil case of CVLR Performance Horses, Inc. v. Wynne.  This case was on appeal from the District Court for the Western District of Virginia, where Vicky Marsh and Karen Foster sought to intervene as plaintiffs in an action under 18 U.S.C. §§ 1961-68 (Racketeer Influenced and Corrupt Organizations Act or “RICO”), an action which was originally filed by CVLR Performance Horses, Inc. (“CVLR”) against John Wynne and his businesses.  The district court denied the motions to intervene filed by Marsh and Foster, and the Fourth Circuit affirmed.

Procedural History

On September 8, 2011, CVLR filed suit against Wynne alleging violations against RICO and Virginia state law.  CVLR claimed that Wynne and his businesses had a scheme to defraud CVLR when Wynne’s business, Rivermont Consultants, made loans to CVLR and held itself out as a bank.  Wynne filed a motion to dismiss for failure to state a claim, the district court granted the motion, and on appeal the Fourth Circuit remanded to the district court, stating that CVLR had stated a claim upon which relief can be granted.  In November 2013 Marsh and Foster sought to intervene as plaintiffs.  Marsh and Foster were mentioned in CVLR’s amended complaint as victims of Wynne’s RICO scheme.  They adopted the allegations in the amended complaint, and added individual RICO claims.

The district court denied their motions to intervene, explaining that their claims were barred by the four-year statute of limitations on private RICO claims.  The district court further stated that equitable tolling was not appropriate in this case because Marsh and Foster had failed to diligently pursue their claims and had not demonstrated extraordinary circumstances to warrant equitable relief.

Marsh and Foster timely appealed.  Shortly thereafter, CVLR and Wynne reached a settlement agreement, where both parties agreed to dismiss the action.

This case presented two issues before the Fourth Circuit.

Issue One: Whether the Settlement Agreement and Dismissal Renders This Appeal Moot

Wynne argued that because the underlying case was settled and dismissed, there is no remaining case or controversy, and therefore this appeal is moot.  Prior to this case, the Fourth Circuit had not decided whether the dismissal of an underlying case would render moot an appeal from the district court’s denial of a motion to intervene.  In making its determination, the Fourth Circuit looked to its sister circuits, the Third and Eleventh Circuits, that had decided the issue.   The Third and Eleventh Circuits, and Ninth and D.C. Circuits, have held that the dismissal of a case does not automatically render moot the appeal from a district court’s denial of a motion to intervene.

The Fourth Circuit adopted this position, reasoning that the resolution of an action between the original parties is not determinative of the defendant’s liability with respect to potential plaintiffs.  So long as the motion to intervene was made while the controversy is live and the disposition of the case does not provide the relief sought, then the court will have jurisdiction.

Issue Two: Whether the District Court Committed Reversible Error in Declining to Apply Equitable Tolling

The Court reviewed this question under an abuse of discretion standard.  The four year statute of limitations for private RICO claims begins on the date the plaintiff “discovered, or should have discovered, the injury.” Even though the record did not provide a specific date for when Marsh or Foster may have discovered, or should have discovered their injuries, the latest accrual date alleged was September 2008.  Thus, by the time Marsh and Foster filed their motions to intervene in November 2013, over five years had passed, and their claim would be barred by the statute of limitations.  Furthermore, they filed their motions over fourteen months after the statute of limitations had expired.

Marsh and Foster argued that the delay in filing did not bar relief under the doctrine of equitable tolling.  Under the doctrine of equitable tolling, Marsh and Foster had to demonstrate two things: (1) they had diligently pursued their rights, but (2) an extraordinary circumstance prevented them from timely filing.  The Fourth Circuit mentioned that it has long considered this equitable remedy an extraordinary one, and thus place a high burden on litigants seeking to benefit from its application.

According to the Fourth Circuit, Marsh and Foster made no attempt to file their claims at all between 2008 and 2013.  Further, they made no attempt to explain their delays in a manner that would suggest that they met the standard for diligently pursing their rights.  While the district court’s dismissal of CVLR’s case made it more difficult for Marsh and Foster, the Fourth Circuit was unconvinced that they would have been subject to sanctions under Rule 11 for filing.  Therefore, the Fourth Circuit explained, the district court did not err in its refusal to apply equitable tolling because Marsh and Foster failed to prove they had diligently pursued their rights under RICO and failed to show extraordinary circumstances prevented them from filing.

The Fourth Circuit Affirmed the District Court Decision

Because the Fourth Circuit holds that appeals from denial of motions to intervene are not rendered moot when the underlying case is dismissed, the Fourth Circuit denied Wynne’s motion to dismiss this appeal. However, the Fourth Circuit affirmed the district court’s refusal to apply the doctrine of equitable tolling, and subsequent denial of Marsh and Foster’s motions to intervene.