Friday, October 24, 2008

Dummar’s RICO Claims Against Administrators of Howard Hughes Estate Barred

This posting was written by Mark Engstrom, Editor of CCH RICO Business Disputes Guide.

A federal civil RICO claim brought by Melvin Dummar could not proceed against an administrator of the estate of billionaire Howard Hughes and a former senior officer of various enterprises that were founded by Hughes, the U.S. Court of Appeals in Denver has ruled. The claim was barred by RICO's four-year statute of limitations.

The case involved a scenario depicted in the Oscar-award-winning 1980 movie, “Melvin and Howard.”

The plaintiff, Melvin Dummar, allegedly found a bloodied and disheveled Hughes lying semi-conscious in a rural road in the Nevada desert. Dummar claimed that he had helped Hughes by waking him and driving him to a Las Vegas Hotel. Shortly after Hughes's death, a stranger allegedly delivered to Dummar an envelope containing a holographic will that purportedly gave Dummar a 1/16 share of the Hughes estate.

Although a Nevada jury rejected the will in 1978, Dummar filed suit in 2006, alleging that the defendants had conspired to conceal evidence that would have validated the will. Absent the defendants' alleged wrongdoing, Dummar would have inherited $156 million.

According to Dummar, a pilot had flown the reclusive Hughes from Las Vegas to a brothel in the Nevada desert on the same day that Dummar had rescued him, and the pilot had returned to Las Vegas without Hughes. When the pilot accepted an executive position with another company, he was ordered to surrender his flight logs and company records so that "all references to Hughes as a passenger could be removed." The pilot then signed a non-disclosure agreement, which, until recently, he had honored.

Misconduct Surrounding Jury Verdict

Dummar's complaint identified grievous misconduct surrounding the 1978 jury verdict. The defendants' alleged misconduct included: (1) a pattern of threats against potential witnesses for Dummar; (2) the forgiveness of the jury foreman's debts to Hughes's casinos; (3) the foreman's use of typewritten notes that were purportedly prepared at his home from handwritten trial notes; and (4) the subornation of perjury through bribes and threats to Hughes's close aides.

The appeals court reasoned that Dummar's injury—and its discovery—had occurred the moment that the jury returned its verdict finding that the will was invalid. Accordingly, the limitations period began to run in 1978, when the verdict was rendered --28 years before the lawsuit was filed.

Tolling of Limitations Period—Fraudulent Concealment

Dummar, argued, however, that fraudulent concealment had tolled the limitations period. His complaint listed three acts to support the application of equitable tolling: (1) the perjury and misleading testimony of Hughes's aides; (2) the destruction of flight log evidence; and (3) the "ongoing understanding" about the enforceability of non-disclosure agreements that were signed by employees of various Hughes entities. None of these acts, however, were sufficient to allege fraudulent concealment, in the court's view.

First, the perjury of Hughes's aides may have misled the jury, but it would not have misled Dummar. Moreover, witness tampering in a state-court proceeding was not a racketeering activity under the federal RICO statute. Second, the alteration of the flight logs may have concealed evidence that corroborated Dummar's testimony, but it should not have prevented Dummar from knowing any element of his RICO claim. Third, non-disclosure agreements were not, by themselves, fraudulent, and Dummar did not allege that the agreements required anyone to make misrepresentations of any sort.

Even if Dummar had characterized as fraudulent concealment his allegations that the defendants had ordered, bribed, and coerced Hughes's aides to commit perjury, he failed to allege that he had acquired evidence of this misconduct during the four-year limitations period that preceded his complaint, the court observed. If those allegations were based on information that was acquired less than four years before the suit was filed, his complaint needed to assert that.

State RICO Claim

Dummar also alleged violations of Nevada's civil RICO provisions. However, the asserted violations—extortion, perjury, and the submission of false evidence—all occurred before, during, or immediately after the 1978 trial, and Nevada's civil RICO provisions required one of the predicate acts to have occurred after the effective date of the statute: July 1, 1983. Consequently, the court held that Dummar's complaint failed to state a viable cause of action.

The decision is Dummar v. Lummis, CCH RICO Business Disputes Guide ¶11,551.

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