Background
Former ITT Technical Institute students alleged that Vervent, Inc., its subsidiary Activate Financial, LLC, and company executive David Johnson participated in a RICO conspiracy involving the PEAKS private student-loan program. According to the plaintiffs, ITT created the program to generate non-federal revenue needed for regulatory compliance while concealing the program’s true financial structure and risks. Vervent serviced the loans, collected payments, communicated with borrowers, and reported account information to credit bureaus.
The students filed suit on April 10, 2020. After a two-week trial, a jury found the defendants liable and awarded $4 million for payments made between April 10, 2016, and September 2020, which the district court trebled to $12 million under RICO. The defendants appealed, arguing that the claims accrued too early to satisfy RICO’s four-year limitations period and that the plaintiffs had not established proximate causation.
The Court’s Holding
The Ninth Circuit affirmed. Applying RICO’s injury-discovery rule, the panel held that sufficient evidence supported the jury’s finding that the borrowers neither knew nor reasonably should have known of their fraud-based injuries more than four years before filing suit. Routine loan payments did not themselves provide notice of injury because the alleged injury arose from the concealed, fraud-induced nature of the payment obligations. Loan-document irregularities and pre-2016 government investigations likewise did not compel a finding that ordinary borrowers should have discovered the alleged fraud.
The panel did not reach the merits of the defendants’ proximate-causation argument. The district court’s summary-judgment ruling on causation rested on disputed facts, so it was not a purely legal ruling that remained reviewable after trial. Because the defendants did not renew their specific causation challenge through a proper Rule 50 motion at the end of trial, they failed to preserve it for appellate review.
Key Takeaways
- In a concealed-fraud RICO case, the limitations period begins when the plaintiff knew or reasonably should have known of the fraud-induced injury, not merely when an otherwise ordinary payment occurred.
- Inquiry notice is contextual: complex regulatory proceedings or irregular paperwork may not alert ordinary consumers to a sophisticated financial fraud.
- A fact-dependent issue rejected at summary judgment generally must be preserved through an appropriate Rule 50 motion after trial to remain reviewable on appeal.
Why It Matters
The decision clarifies that RICO’s injury-discovery rule does not require ordinary borrowers to infer concealed fraud from routine financial obligations, technical filings, or regulatory investigations that do not clearly reveal wrongdoing affecting their own loans. Courts assessing inquiry notice must consider what a similarly situated plaintiff reasonably would have understood.
The opinion also underscores a critical trial-preservation rule: after a full jury trial, parties ordinarily cannot obtain appellate review of fact-bound summary-judgment rulings unless they properly renew the issue under Rule 50.