Álvarez-MauráS v. Banco Popular of Puerto Rico
919 F.3d 617
1st Cir.2019Background
- In 1998–1999 Álvarez opened brokerage accounts at Popular Securities (affiliate of Banco Popular) and invested about $1,000,000 to fund retirement and a modest monthly income stream.
- Between April 1999 and January 2000 four transfers totaling $419,632.43 were made from Álvarez’s accounts to a (closed) Banco Popular branch account; Álvarez alleges broker Alexander Garcia forged his signature and embezzled the funds.
- Álvarez received conflicting explanations over the years (market losses, that his initial deposit was only $600,000, internal investigations), and he received monthly income payments that masked the shortfall.
- Álvarez filed a FINRA arbitration claim in January 2012 (focused mainly on unsuitable investments and supervision). Popular Securities produced purported transfer authorizations; a forensic examiner later concluded the authorizations were prepared by Garcia and the signatures forged. FINRA dismissed Álvarez’s claim with prejudice in 2013.
- Álvarez pursued review in Puerto Rico courts and lost; he then filed federal civil RICO claims in October 2016 against Garcia and Banco Popular. Defendants moved to dismiss: Garcia on arbitration grounds; Banco Popular on statute-of-limitations grounds.
- The district court dismissed all claims; the First Circuit affirmed — compelling arbitration for claims against Garcia and holding the RICO claim against Banco Popular time-barred under the four-year RICO limitations rule.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Álvarez’s RICO claims against Garcia are arbitrable | Álvarez: RICO claims are federal statutory rights that can be pursued in federal court and are distinct from prior arbitration; not precluded | Garcia/Popular Securities: Broad arbitration clause covers "any controversy" related to transactions; federal policy favors arbitration | Arbitrable — claims against Garcia (and derivative claims against spouse/conjugal partnership) must be pursued in arbitration; dismissal without prejudice to arbitration affirmed |
| Whether the court lacks subject-matter jurisdiction due to arbitration | Álvarez: Arbitration does not remove federal jurisdiction to hear RICO claims | Defendants: Arbitration clause requires disputes to be arbitrated, so district court should dismiss/compel arbitration | Court treated motion as for arbitration enforcement; jurisdiction remained but dismissal/compel arbitration appropriate; outcome: dismissal without prejudice to arbitration |
| When RICO’s 4-year limitations period begins to run (accrual) | Álvarez: Accrual when he discovered forgery (Feb 2013); thus his Oct 2016 suit is timely; alternatively fraudulent concealment tolled limitations | Banco Popular: Álvarez knew or should have known of injury by Jan 2012 (or as early as 2009/2011) when shortfall was revealed and he filed FINRA claim; limitations bar applies | Held: Accrual occurs when plaintiff knew or should have known of the injury; Álvarez knew of the loss by Jan 2012 (at latest), so RICO claim against Banco Popular is time-barred; fraudulent concealment not found to save claim |
| Whether the accrual date is for jury determination | Álvarez: Fact question for jury; statute-of-limitations defense inappropriate on 12(b)(6) dismissal | Defendants: Facts in complaint establish accrual and bar the claim; dismissal appropriate where facts plainly show time-bar | Held: Court may dismiss where plaintiff’s own allegations make the defense manifest; here facts on the face of complaint show claim untimely, so dismissal proper |
Key Cases Cited
- Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, 473 U.S. 614 (U.S. 1985) (arbitration of statutory claims permissible; forum waiver but not substantive rights waiver)
- Rotella v. Wood, 528 U.S. 549 (U.S. 2000) (RICO limitations: accrual tied to discovery of injury, not discovery of pattern)
- Agency Holding Corp. v. Malley-Duff & Assocs., Inc., 483 U.S. 143 (U.S. 1987) (importing four-year limitations period into civil RICO actions)
- Lares Group, II v. Tobin, 221 F.3d 41 (1st Cir. 2000) (First Circuit adopts injury-discovery accrual rule for RICO)
- Young v. Lepone, 305 F.3d 1 (1st Cir. 2002) ("storm warnings" / inquiry notice standard for securities-related fraud discovery)
- Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (U.S. 2002) (question of arbitrability is for courts unless parties clearly and unmistakably delegate it to arbitrator)