Broker-Dealer Litigation - Greenberg Traurig LLP

J. RICO
J.
MLSMK Inv. Co. v. JP Morgan Chase & Co., 651 F.3d 268 (2d Cir. 2011).
In a suit brought by a Madoff investor, the Second Circuit ruled in a case of first
impression that the Private Securities Litigation Reform Act (“PSLRA”) bars a civil RICO
conspiracy claim predicated on allegations of aiding and abetting securities law violations. The
court ruled that the PSLRA prohibition at issue (18 U.S.C. § 1964(c)) – stating in relevant part
that “no person may rely upon any conduct that would have been actionable as fraud in the
purchase or sale of securities to establish a violation of section 1962” – applied even though the
defendant in this case could not have been sued under the securities laws for aiding and abetting
securities laws violations.
Ritchie Capital Mgmt., L.L.C. v. Jeffries, 653 F.3d 755 (8th Cir. 2011).
In a lawsuit claiming civil RICO violations arising out of an allegedly fraudulent
securities transaction against two individuals who worked for a bankrupt company in
receivership, the Eighth Circuit held that a federal receivership court’s injunction prohibiting
actions against the company did not apply to actions against the individuals who worked for the
company. The Eighth Circuit disagreed with the District Court – which had held that the
injunction applied to bar the suit – that the lawsuit would interfere with the possession of any
company documents, since the case would only involve the interpretation of those documents.
Milo v. Galante, 2011 WL 1214769 (D. Conn. Mar. 28, 2011).
Plaintiff brought civil RICO claims against defendant alleging that he misappropriated
funds in the trash companies that plaintiff and defendant co-owned (plaintiff was the minority
shareholder in the companies, defendant the majority shareholder). The court granted the
defendant’s motion to dismiss the RICO claims because they were time-barred, since plaintiff
did not bring them within four years after she should have known – from news reports – about
the conduct that gave rise to her claims. The court declined plaintiff’s request to toll the fouryear
limitations period based on defendant’s allegedly fraudulent concealment of the conduct,
because plaintiff did not offer any details about any supposed concealment; nor, the court found,
did she exercise diligence in seeking to discover her claim. The court also declined plaintiff’s
request to apply the “separate accrual rule,” which would allow the four-year RICO limitations
period to run afresh for each separate RICO act. In order for the limitations period to begin
anew, each act must be independent from one another; yet, plaintiff failed to alleged separate and
distinct fraudulent acts by defendant.
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