Grimmett v. Brown

PETITIONER: Grimmett
RESPONDENT: Brown
LOCATION: New York Board of Education Headquarters

DOCKET NO.: 95-1723
DECIDED BY: Rehnquist Court (1986-2005)
LOWER COURT: United States Court of Appeals for the Ninth Circuit

CITATION: 519 US 233 (1997)
ARGUED: Jan 06, 1997
DECIDED: Jan 14, 1997

ADVOCATES:
Philip A. Lacovara - on behalf of the Respondents
Richard Sauber - on behalf of the Petitioners

Facts of the case

In a divorce settlement, Joanne Siragusa forfeited her entitlement to one-half of her ex-husband's ownership share in Heart Institute of Nevada (HIN) in exchange for monthly payments. In 1987, ex-husband Vincent Siragusa defaulted on the monthly payments, declared bankruptcy, and relinquished his ownership share in HIN by reorganizing HIN into Cardiology Associates of Nevada. Joanne alleged that Vincent had filed bankruptcy in order to evade monthly payments and subsequently reorganized his company in order to undo her collateral in HIN. In 1994, Joanne sought a three-fold reimbursement for damages caused by Vincent's fraudulent actions in accordance with the Racketeer Influenced and Corrupt Organizations Act of 1970 (RICO). Tom Grimmett, the original trustee for the divorce settlement, prosecuted on behalf of Joanne. Patricia Brown, the consultant responsible for reorganizing HIN, defended Vincent.

The District Court dismissed Joanne's suit because it was based on actions that started in 1987. (RICO claims expire after four years.) Grimmett argued that the time limit should not have begun until Joanne discovered Vincent's "pattern" of fraud in 1990. The U.S. Court of Appeals for the Ninth Circuit ruled that Joanne's first court action against Vincent in 1989 signified the beginning of the time limit and thus her claim had expired. Grimmett appealed to the Supreme Court, citing disagreements among Circuit Courts as to when the four-year time limit began.

Question

Does the four-year time limit on a civil claim under the Racketeer Influenced and Corrupt Organizations Act of 1970 begin after a pattern of racketeering activity has been discovered by the plaintiff?

Media for Grimmett v. Brown

Audio Transcription for Oral Argument - January 06, 1997 in Grimmett v. Brown

William H. Rehnquist:

We'll hear argument next in Number 95-1723, Tom Grimmett v. Patricia Brown.

Mr. Sauber.

Richard Sauber:

Mr. Chief Justice, and may it please the Court:

Our client, Joanne Siragusa, possessed a debt owed to her by her husband--

Sandra Day O'Connor:

Are you also representing the trustee in bankruptcy?

Richard Sauber:

--Yes, we are, Justice O'Connor.

Sandra Day O'Connor:

Because the interests seem to diverge a little bit--

Richard Sauber:

I think the application--

Sandra Day O'Connor:

--and I was a little curious about how your argument was going to cover both.

Richard Sauber:

--The application on the first issue of the Banker's Trust issue, by definition, since it rests on a conclusion of the bankruptcy, I think only applies to her definition of injury at this point, and not to the trustee's interest.

The... her preexisting debt owed to her by her husband was not part of the racketeering scheme and not alleged to be so.

When he went into bankruptcy owing her somewhere in the neighborhood of $1.4 million as a result of a property settlement, that debt was a preexisting legitimate debt unrelated to the racketeering activity as alleged in the racketeering complaint.

Sandra Day O'Connor:

Well, could you tell us just preliminarily please whether Vincent Siragusa has... at one point the bankruptcy order had discharged Vincent Siragusa's debts.

Richard Sauber:

Yes.

He received a statutory preliminary discharge.

Sandra Day O'Connor:

Has that ever been... has an order come from the bankruptcy court changing that?

Richard Sauber:

Yes.

Joanne and--

Sandra Day O'Connor:

I didn't see it.

Richard Sauber:

--Joanne and the trustee objected within the 1 year of his statutory discharge, claiming that the discharge had been obtained by fraud.

That was the adversary complaint.

Ultimately in 1994 Vincent settled both with the estate and with Joanne individually and agreed that his discharge--

Sandra Day O'Connor:

But what order issued from the bankruptcy court reflecting any of that?

Richard Sauber:

--The... there is an order.

I don't believe it's in the record, but there is an order from the bankruptcy court accepting the settlement which includes giving up his discharge, so as of 1994 his preliminary discharge was revoked.

Sandra Day O'Connor:

So you say it is, but we won't find it anywhere in these papers?

Richard Sauber:

I don't believe it's in this record, no.

William H. Rehnquist:

A preliminary discharge is one that... could you explain that just very briefly?

Richard Sauber:

Yes, sir.

The preliminary discharge in a Chapter 7 bankruptcy is granted within a certain number of months as long as no one... none of the creditors of the trustee object.