Background
Former ITT Technical Institute students brought a putative class action alleging that Vervent, its affiliate Activate Financial, and Vervent owner and CEO David Johnson participated in a RICO enterprise connected to ITT’s PEAKS private student-loan program. The students alleged that the program generated non-federal revenue to help ITT appear compliant with the federal 90/10 Rule while concealing ITT-backed guarantees and the program’s deteriorating financial condition.
Vervent serviced the PEAKS loans, including processing payments and collection efforts. The plaintiffs sued in April 2020. After a two-week trial, a jury found for the plaintiffs on their RICO claims, awarded $4 million in damages for loan payments made between April 2016 and September 2020, and the award was trebled to $12 million. The district court denied Vervent’s post-trial Rule 50(b) motion and entered judgment for the plaintiffs.
The Court’s Holding
The Ninth Circuit affirmed. It 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 they filed suit. Under the civil RICO injury-discovery rule, the relevant question was when the borrowers discovered, or should have discovered, that their loan payments were fraudulently induced—not merely when they began making otherwise ordinary loan payments.
The court concluded that irregular loan paperwork and pre-2016 CFPB and SEC investigations did not compel a finding of inquiry notice. A reasonable jury could find that those investigations centered on ITT’s accounting and financial disclosures, rather than fraud involving Vervent’s servicing of borrowers’ loans, and that ordinary borrowers did not learn enough until ITT’s September 2016 collapse. The court also declined to consider the defendants’ proximate-cause argument because the summary-judgment ruling turned on factual disputes and defendants did not preserve that specific post-trial challenge through Rule 50.
Key Takeaways
- In a concealed-fraud civil RICO case, accrual may depend on when a plaintiff knew or reasonably should have known the fraud-induced nature of the injury.
- Complex regulatory investigations and irregular loan documents do not necessarily put ordinary consumers on inquiry notice.
- A fact-bound summary-judgment denial generally cannot be appealed after trial without a properly preserved Rule 50 challenge.
Why It Matters
The decision reinforces that RICO’s four-year limitations period does not require consumers to detect concealed financial fraud merely because they are making payments or could have encountered complex public regulatory materials.
It also underscores the procedural importance of renewing fact-dependent sufficiency arguments after trial. Parties cannot rely on a pretrial summary-judgment challenge to obtain appellate review of factual issues resolved by a jury.