## Facts

- In 1974, Marvin and Mary Klehr, dairy farmers, purchased a Harvestore-brand silo manufactured and marketed by A.O. Smith-related entities.
- They alleged the silo was sold through misrepresentations that it would reduce oxygen exposure to feed, prevent spoilage, and increase milk production and profits.
- The Klehrs claimed the feed nonetheless became moldy and fermented, and their milk production and profits declined.
- They alleged a long-running scheme involving repeated misrepresentations and mail and wire fraud predicate acts, including conduct directed at them and others.
- They contended the defendants concealed the fraud, preventing them from becoming sufficiently suspicious to investigate and discover the alleged problem until 1991.
- In August 1993, they filed a civil RICO action seeking damages for injuries to their business or property.
- The district court dismissed the action as time-barred under the four-year limitations period; the Eighth Circuit affirmed using an “injury and pattern discovery” accrual rule and rejected fraudulent concealment tolling for lack of diligence.
- The Supreme Court granted review to resolve conflicts among lower courts regarding civil RICO accrual rules.

## Issues

1. What accrual and limitations framework governs civil RICO claims subject to a four-year statute of limitations borrowed from Clayton Act principles?
2. Whether a civil RICO claim may accrue under a “last predicate act” rule that delays limitations until the plaintiff knew or should have known of the last injury or last predicate act in the pattern.
3. Whether later predicate acts can extend limitations to permit recovery for earlier injuries otherwise outside the limitations period, and how traditional fraudulent concealment tolling fits within the correct framework.

## Decision

- The Supreme Court vacated the judgment and remanded.
- The Court rejected the “last predicate act” accrual rule as inconsistent with limitation principles and the Clayton Act model used for civil RICO.
- The Court stated that a civil RICO cause of action does not accrue until the plaintiff suffers injury to business or property and has reason to know of that injury.
- The Court declined to choose definitively between an “injury discovery” rule and an “injury and pattern discovery” rule, concluding it was sufficient to reject the “last predicate act” rule.
- The Court held that a plaintiff cannot use a new, independent predicate act to recover for injuries caused by earlier predicate acts occurring outside the limitations period.
- The Court indicated that traditional fraudulent concealment may toll limitations if the required elements, including due diligence, are shown, and remand was appropriate for reconsideration under the correct framework.

## Legal Principles

- Civil RICO claims are governed by a four-year statute of limitations modeled on Clayton Act treble-damages limitations principles.
- A civil RICO claim accrues only when the plaintiff suffers injury to business or property and knew or reasonably should have known of that injury.
- The “last predicate act” rule is improper because it can keep claims alive based on continuing racketeering activity even when the plaintiff’s injury is stale.
- A later predicate act may support recovery only for a new and independent injury within the limitations period; it cannot revive time-barred injuries from earlier predicate acts.
- Fraudulent concealment is a traditional equitable tolling doctrine that generally requires wrongful concealment, failure to discover operative facts within the limitations period, and due diligence by the plaintiff.

## Conclusion

The Court limited civil RICO accrual by rejecting a rule that would restart limitations with the last predicate act, tying accrual to discovery of the plaintiff’s injury and barring recovery for earlier, time-barred injuries merely because later predicate acts occurred, while leaving room for traditional fraudulent concealment tolling on a proper showing.


Klehr v. A.O. Smith Corp., 521 U.S. 179 (1997)