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Professional ice hockey players who said their former union head had illegal collusive agreements with the National Hockey League and pilfered their union funds have lost their bid to revive a class action RICO suit against their teams. In Forbes v. Eagleson, a unanimous three-judge panel of the 3rd U.S. Circuit Court of Appeals upheld a 1998 decision by Senior U.S. District Judge Thomas N. O’Neill Jr. that said the four-year statute of limitations ran out before they sued. O’Neill found that the players weren’t entitled to a tolling of the statute of limitations since they were put on notice of the alleged fraud by an article in Sports Illustrated and newspaper articles that detailed the alleged frauds. The 3rd Circuit’s decision is significant because it announced a new rule for determining when the statute of limitations begins to run in RICO cases — the injury-discovery rule. In the suit, five players sought to represent a class of all players who worked between 1972 and 1991, the period when attorney R. Alan Eagleson served as executive director of their union, the National Hockey League Players Association. The suit claimed that the union was co-opted by the National Hockey League and that Eagleson stole from union funds for nearly two decades. Named as defendants in the suit were Eagleson; his law firm, Eagleson Ungerman; several businesses owned or controlled by Eagleson; the NHL; its member clubs; and two NHL officials, John Ziegler, president of the NHL from 1977 to 1992, and William W. Wirtz, chairman of the board of governors of the NHL. The complaint alleged that the NHL defendants and Eagleson maintained a collusive, quid pro quo arrangement in violation of federal anti-bribery labor law in which Eagleson forsook the players’ interests in collective bargaining with the NHL. The defendants moved to dismiss the RICO claim as barred by the statute of limitations. O’Neill found that the question for the court was whether the players’ claims had accrued more than four years before they filed suit on Nov. 7, 1995. The NHL argued that the players should have had knowledge of their cause of action by September 1991 at the latest, based on a 1984 Sports Illustrated expos� of Eagleson; a 1989 report on Eagleson’s stewardship of the union; a complaint filed by two players with the Alberta Labor Relations Board in June 1991; and a series of investigative articles on the NHL and the union published in September 1991 by The Eagle-Tribune newspaper in Lawrence, Mass. The Sports Illustrated report said: “There’s evidence that Eagleson has at times abused his multiple powers as head of the NHLPA, chief negotiator for Hockey Canada (the nonprofit corporation that administers Canada’s participation in major international events) and personal representative of many of the NHL’s stars specifically for his personal gain and the gain of his friends. “… Eagleson rules hockey from atop a sort of international pyramid, because he’s likely to be negotiating today against the side he’ll be representing at a different bargaining table tomorrow. Ultimately, Eagleson’s or his clients’ interests are represented on virtually every side of every deal in hockey.” The players, however, insisted they did not and could not get reliable information to plead their claims until a federal grand jury indicted Eagleson in 1994, charging him with 32 counts of racketeering, embezzlement, receiving kickbacks, mail fraud and obstruction of justice. Eagleson ultimately pleaded guilty to some of the charges. O’Neill found that the players had adequate information from several sources, including the Sports Illustrated report, to file suit before November 1991. “Even the most cursory of perusals of any one of these three publications would have revealed to plaintiffs the gist of their claim: Eagleson was enriching himself by means of international hockey and the disability insurance, and the NHL defendants knew so but apparently took no action to remove those opportunities from him,” O’Neill wrote. The indictment of Eagleson, he said, “simply reiterated or elaborated upon Eagleson’s self-enriching schemes already detailed or hinted at years earlier in the Sports Illustrated and The Eagle-Tribune articles and Garvey report, and none of what little information it did reveal was essential to plaintiffs’ claims.” Now the 3rd Circuit has ruled that O’Neill’s analysis was correct and that the clock had clearly run before the players filed suit. EVOLVING LAW Senior U.S. Circuit Judge Morton I. Greenberg found that the law has been evolving in recent years on the issue of when the statute of limitations begins to run in RICO cases. Although the 3rd Circuit previously employed a deferential, plaintiff-friendly standard, Greenberg said the U.S. Supreme Court has twice rejected the 3rd Circuit’s approach. The RICO statute does not include any limitations period for civil claims, Greenberg said, but the Supreme Court held in Agency Holding Corp. v. Malley-Duff Associates that the four-year limitations period in civil antitrust actions seeking treble damages under the Clayton Act is applicable to RICO. That conclusion, however, did not establish when the statute of limitations starts running on a RICO claim, Greenberg said. The 3rd Circuit first tackled the question in 1988 in Keystone Insurance Co. v. Houghton, holding that the clock starts running when the plaintiff knows or should know that the elements of a RICO cause of action exist. The test was very favorable to plaintiffs because it also allowed the clock to begin running at the time of the “last predicate act.” But Greenberg found that Keystone Insurance is no longer good law due to two Supreme Court opinions — Klehr v. A.O. Smith Corp. in 1997 and Rotella v. Wood in 2000. In Klehr, the justices specifically rejected the “last predicate act” portion of Keystone on the ground that it “creates a limitations period that is longer than Congress could have contemplated.” At the time, other federal appellate courts had adopted one of two accrual rules for RICO claims. In the “injury and pattern discovery” rule, a RICO claim accrued when the plaintiff should have discovered both the existence and source of his injury and that the injury is part of a pattern of racketeering activity. And in the “injury discovery” rule, the clock started as soon as the plaintiff discovered his injury. The Klehr court declined to resolve the conflict, however, choosing instead to leave the matter for another day because either test was fatal to Klehr’s case. In the wake of Klehr, the 3rd Circuit in Annulli v. Panikkar chose to follow the “injury and pattern discovery” rule, effective keeping the Keystone test but withdrawing the “last predicate act” exception. Earlier this year, however, the Supreme Court in Rotella rejected the “injury and pattern discovery” rule. But once again, the justices dodged the ultimate question and resolved the case by saying only that it eventually would adopt one of two accrual rules — an “injury discovery” rule or an “injury occurrence rule,” under which knowledge of injury would be irrelevant. Greenberg found that Rotella forced the 3rd Circuit once again to announce a new RICO accrual rule “even though we are aware that the Supreme Court ultimately may accept or reject our choice.” In an opinion joined by U.S. Circuit Judges Richard L. Nygaard and Jane R. Roth, Green said the court chose to adopt the injury-discovery rule because it is “in harmony with the general notion that a discovery rule applies whenever a federal statute of limitation is silent on the issue.” Under the injury-discovery rule, Greenberg said, courts must determine when the plaintiffs knew or should have known of their injury. The new test, he said, is “more adverse to plaintiffs” than the one applied by O’Neill. Applying the new test, Greenberg found that O’Neill was correct in holding that the published articles about Eagleson’s misconduct should have put the players on notice of their claim. “The plaintiffs knew of sufficient facts to support their claim at least six years before they filed this case. In particular, they certainly knew of Eagleson’s poor representation of them and that, with the cooperation of the NHL defendants, he was profiting from international hockey through use of the players’ labors,” Greenberg wrote. “Although it is true that Eagleson denied wrongdoing, nonetheless, his denials do not allow plaintiffs, who were aware of their potential claim, to allege ignorance,” Greenberg wrote.

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