Background
Former ITT Technical Institute students alleged that Vervent, Inc., Activate Financial, LLC, and David Johnson participated in a RICO conspiracy involving the PEAKS private student-loan program. ITT created PEAKS to generate nonfederal revenue needed for compliance with the federal “90/10 Rule,” while privately guaranteeing substantial investor losses. Vervent serviced the loans, collected payments, communicated with borrowers, and reported account information to credit bureaus.
The borrowers filed suit on April 10, 2020. After a two-week trial, a jury found Vervent, Activate Financial, and Johnson liable and awarded $4 million for payments made between April 10, 2016, and September 2020. RICO’s treble-damages provision increased the award to $12 million. The district court denied the defendants’ motions for judgment as a matter of law, and the defendants appealed, arguing that the claims were untimely and that the borrowers had not established proximate causation.
The Court’s Holding
The Ninth Circuit affirmed. Viewing the evidence in the borrowers’ favor, the panel held that a reasonable jury could find they neither knew nor reasonably should have known of their fraud-based injuries more than four years before filing suit. Routine loan payments did not alone reveal an injury, and neither irregular loan paperwork nor complex government investigations compelled the conclusion that ordinary borrowers should have discovered the alleged fraud before April 10, 2016. The evidence supported finding that ITT’s public collapse and bankruptcy in September 2016 first made the problem reasonably apparent to borrowers.
The panel declined to decide the defendants’ proximate-causation argument on the merits. The district court’s summary-judgment ruling 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 proximate-causation challenge through an appropriate Rule 50 motion after the evidence was presented, they failed to preserve it for appellate review.
Key Takeaways
- A fraud-based civil RICO claim accrues when the plaintiff knew or reasonably should have known that the injury was fraudulently induced, not merely when an otherwise ordinary payment was made.
- Inquiry notice is contextual: ordinary student borrowers are not necessarily expected to draw the same conclusions from technical filings and regulatory investigations as sophisticated financial actors.
- A fact-dependent denial of summary judgment generally cannot be reviewed after a full trial unless the issue is properly preserved through Rule 50 practice.
Why It Matters
The decision clarifies how the Ninth Circuit’s injury-discovery rule applies when fraud conceals the character of a consumer’s financial injury. Public information about an institution’s accounting or regulatory troubles does not automatically start RICO’s limitations clock when that information would not alert a similarly situated consumer that the consumer’s own payments were fraudulently induced.
The opinion also underscores a critical appellate-preservation rule: a party seeking review of a fact-bound sufficiency issue after trial must properly raise that issue through Rule 50, rather than relying on an earlier summary-judgment motion.