Alvarez-Mauras v. Banco Popular of PR

2019 | Cited 0 times | First Circuit | March 25, 2019

United States Court of Appeals For the First Circuit

No. 18-1051


Plaintiff, Appellant,



Defendants, Appellees.


[Hon. Bruce J. McGiverin, Magistrate Judge]


Howard, Chief Judge, Thompson and Kayatta, Circuit Judges.

Paul Vilaŕo Nelms, with whom Vilaŕo Law Offices was on brief, for appellant. Sara Vélez-Santiago and Néstor M. Méndez-Gómez, with whom José A. Alvarado-Vázquez and Pietrantoni Mendez & Alvarez LLC were on brief, for appellees.

March 25, 2019

THOMPSON, Circuit Judge.

Appellant Víctor Álvarez-Maurás ("Álvarez"), a building

contractor from Carolina, Puerto Rico, claims that his securities

broker, in collusion with the investment firm and affiliated bank,

pilfered over $400,000 from his investment account, and then

covered up the theft. His claims are brought under the Racketeer

Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C.

§§ 1962, 1964. The case reaches us on appeal after the district

court dismissed all of Álvarez's claims against all defendants, on

their Fed. R. Civ. P. 12 motion.

Álvarez's story begins way back in 1989 when Hurricane

Hugo ravaged the island of Puerto Rico.1 Responding to the

destruction, the Federal Emergency Management Agency hired Álvarez

to help in the rebuilding effort. Within a year, he had earned

over $1 million, which he used to purchase a certificate of deposit

from appellee Banco Popular of Puerto Rico, Inc. ("Banco Popular").

Several years later, thinking ahead to his retirement,2 Álvarez

approached appellee Alexander Garcia, a securities broker at Banco

Popular's affiliate Popular Securities, Inc. ("Popular

1This background comes from Álvarez's 2012 arbitration claim. In a different filing with the Commonwealth Court of First Instance, Álvarez alternatively cites repair work following Hurricane Georges in 1998 as the source of his fortune. Different attorneys drafted these discrepant filings. 2 Álvarez was born in 1943.

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Securities"). Álvarez had two investment objectives: he wanted

to get a modest monthly income stream; and he wanted to retire in

ten years' time, when he turned 65, and begin to draw down on the

balance. Sadly things did not go as Álvarez planned -- a third of

his money disappeared without a trace, allegedly embezzled by his

broker, Garcia.


When Álvarez3 discovered that a chunk of his money was

gone, he began a series of inquiries, of which more will be

detailed hereafter. Today, with the investigations complete and

the benefit of hindsight, a devious and deceitful scheme seems to

have emerged. Given that this is a motion to dismiss, unless

otherwise noted, we present the facts as set forth in Álvarez's

verified complaint.

Back in 1998, on December 17, Álvarez met with Garcia at

Popular Securities and opened two investment accounts, with an

initial investment of $875,000. Álvarez discussed his retirement

plans with Garcia, instructing Garcia to select conservative

securities which would safeguard his nest egg and allow for a

modest monthly income stream. On February 11, 1999, Álvarez met

According to Puerto Rican naming conventions, if a person 3

has two surnames, the first (the father's last name) is primary, and the second (the mother's maiden name) is subordinate. In keeping with this, we will use "Álvarez" to identify our appellant.

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with Garcia again and deposited an additional $125,000, bringing

his total investment to $1 million.4

At this second meeting, Garcia instructed Álvarez to

close his bank account at the Rio Piedras branch of Banco Popular,

and to open a new account at the Barbosa branch. Suspecting

nothing nefarious, Álvarez complied. Over the next several months,

between April 1999 and January 2000, Garcia made four fraudulent

transfers from Álvarez's investment accounts to the closed bank

account at the Rio Piedras branch, without Álvarez's knowledge or

consent. These four transfers totaled $419,632.43.5

With an eighth-grade education, no investment

background, and no English language skills, Álvarez had trouble

making heads or tails of his monthly brokerage account statements;

however, he was concerned in the first year after investing when

he noticed that the total value had gone down. When questioned

about the reason for the dip, Garcia reassured him, explaining

that market fluctuations would cause some ups and downs in the

total value, but that the full $1 million would be there when

Álvarez retired in 2009. Álvarez trusted Garcia and believed his

4 In some documents, the total amount is identified as $1,075,000. 5 $220,000.00 was transferred on April 20, 1999. $30,000.00 was transferred on November 2, 1999. $120,000.00 was transferred on December 28, 1999, and $49,632.43 was transferred on January 19, 2000.

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explanation. And, in spite of the account statement

irregularities, Álvarez was in fact receiving a monthly income, as

he had requested.

In early 2009, when Álvarez was ready to retire, he met

with Garcia and learned that there was only $600,000 in his

investment accounts. Confronted once again about the fund balance,

Garcia shifted his explanation for the shortfall, telling Álvarez

that his initial investment had always been only $600,000.

Concerned, Álvarez requested an internal investigation. On

January 28, 2009, Popular Securities backed up Garcia's story that

Álvarez's initial investment was only $600,000. Alarmed by this

explanation, Álvarez requested a second investigation. This one

took two years to wrap up; concluding, on February 11, 2011, as

before, that Álvarez had only invested $600,000. After that,

Álvarez wrote a letter of complaint to Banco Popular's CEO but

received no response.


Álvarez next sought arbitration, pursuant to the

agreement he'd signed when he opened his accounts with Popular

Securities. We don't have a copy of the arbitration agreement,

but the district court quoted an excerpt, which it, in turn, lifted

from the judgment of the Puerto Rico commonwealth court. No party

has objected to the content of the text or the district court's

reliance on it. It states:

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All controversies that may arise between the undersigned [Álvarez] and you, as introducing or clearing broker, your agents, or employees, concerning any transaction or the construction, performance, or breach of this or any other agreement between us, whether such transaction or agreement was entered in prior, on, or subsequent to the date hereof, shall be determined by arbitration . . . .

Accordingly, on January 19, 2012, Álvarez, through

counsel, filed a claim for arbitration with the Financial Industry

Regulatory Authority ("FINRA"). The claim covered the conduct of

Garcia and Popular Securities only, because claims against Banco

Popular "are not allowed to be filed at" FINRA, according to

Álvarez; and, at any rate, the parties appear to concur that the

arbitration agreement does not cover Banco Popular. Instead, the

nineteen-page claim focuses almost exclusively on Garcia's

unsuitable investment decisions in choosing vehicles that were too

risky for Álvarez, given his age and investment goals. For

example, the claim states [verbatim]:

Respondents made an express guaranteed to Claimant of preservation of capital and monthly income return through out the life of the investment. Respondents knew or should have known that by investing Claimant retirement funds in the above mentioned were unsuitable recommendations, this in light of Claimant's age, life stage, risk tolerance and investment objectives which were conservative, preservation of capital and to receive monthly income.

The claim also alleges that Popular Securities failed to

sufficiently supervise Garcia's work. In one paragraph, Álvarez

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references the prior internal investigation "that erroneously

concluded that the initial amount invested was $600,000, rather

than $1,075,000, as of today there are $475,000 that still

unaccounted for." [sic]

During the course of the arbitration proceeding, FINRA

requested that Álvarez produce bank statements to demonstrate the

amount of his initial investment. He was unable to locate these

records. The record is silent as to what documents, if any, FINRA

requested from Popular Securities. Popular Securities' initial

response to Álvarez's claim attributed his losses to "the impact

of the financial crises at the world level in the securities

markets." However, during the proceedings, Popular Securities

took the opportunity to switch its cover-story yet again. Moving

on from its and Garcia's fabrications concerning the fluctuating

vagaries of the stock market and its subsequent assertions that

Álvarez only deposited $600,000, at the arbitration hearing,

Popular Securities came up with a new version: producing three

transfer documents, ostensibly showing that Álvarez had actually

authorized three out of four of Garcia's transfers to the (closed)

Rio Piedras bank account. There was no paperwork for the final

transfer of $49,632.43, which took place on January 19, 2000; nor

were there any bank statements, cancelled checks, microfilm,

computer records, or other internal bank or brokerage firm

documents reflecting any of the transfers.

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After being shown these putative transfer notices,

Álvarez hired a qualified forensic document examiner to peruse the

authorizations. The examiner submitted his completed report to

FINRA on February 20, 2013, and testified before the panel on March

12, 2013. He concluded that the authorizations were prepared by

Garcia in his own handwriting, and that Álvarez's signatures at

the bottom were actually forgeries. These conclusions were not

contested or contradicted by Garcia or Popular Securities; in fact,

Garcia even admitted the handwriting was his.

Notwithstanding these revelations, FINRA issued its

award on April 1, 2013, dismissing Álvarez's claims with prejudice

for failing to make out a prima facie case. In its ruling, FINRA

provided no explanation for its decision. At the same time, the

panel ordered Popular Securities to pay all the arbitration fees

($16,750), and disallowed its request for $70,000 in attorneys'

fees. Álvarez's filing fee of $1,425.00 was refunded to him. In

addition, FINRA denied Popular Securities' request to expunge the

complaint from Garcia's record.

Commonwealth courts

As Álvarez explains in his complaint, "[d]ue to the

inconsistent and contradictory 'Award' issued by FINRA," he

determined to pursue his claims with the Court of First Instance

of the Commonwealth of Puerto Rico, filing a complaint on May 15,

2013, which sought to vacate the FINRA award. On May 8, 2014, on

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Popular Securities' motion to dismiss, the court, in deference to

FINRA, confirmed the award. In accordance with Puerto Rico law

concerning arbitration awards,6 the court performed an extremely

limited review. Álvarez then appealed the decision to the

Commonwealth's Appeals Court on August 11, 2014. Again, FINRA's

award was confirmed. The appeal was denied again, on Álvarez's

motion for reconsideration, on December 8, 2014. Certiorari was

denied by the Supreme Court of Puerto Rico, which also issued

denials of two further reconsideration motions. Álvarez received

his final rejection from the Commonwealth courts on October 23,

2015, concluding this fruitless avenue of litigation.

District court litigation

A year later, on October 20, 2016, Álvarez filed his

federal RICO claims against Garcia7 and Banco Popular. Álvarez

6 In its judgment, the Court of First Instance explained that the Supreme Court of Puerto Rico has urged great deference to arbitration awards: [T]he arbitrator's appraisal of the facts is not reviewable, nor are errors presented which involve the consideration on the merits of matters of fact regarding evidence received by arbitrators. In addition, the mere erroneous appraisal of the evidence is not grounds for reviewing an arbitration award. Moreover, an award cannot be annulled merely for errors in judgment, whether in regards to the law or in regards to the facts. (internal citation omitted). 7 Álvarez also names as defendants Garcia's wife, Wanda O. Meléndez-Santos, and their "conjugal partnership." The Supreme

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claims that Garcia made the fraudulent transfers out of his

investment accounts, wrongfully forging Álvarez's signature; and

that the compliance department of Popular Securities, which he

alleges was "under the control and authority" of Banco Popular,

conducted two fraudulent investigations with "the sole purpose of

misleading Plaintiff into believing that he had only initially

deposited about $600,000." As Álvarez alleges, it was not until

February 20, 2013, when he saw the report from the forensic

examiner that he "learned Garcia had forged Plaintiff's name on

the transfers." The civil RICO statute, pursuant to which Álvarez

presses his claims, has a four-year statute of limitations. Agency

Holding Corp. v. Malley-Duff & Assocs., Inc., 483 U.S. 143 , 156


Garcia and Banco Popular moved to dismiss the complaint

based on a variety of grounds. The district court focused on two

of those arguments which it found dispositive: 1) that the claims

against Garcia must be dismissed, pursuant to Fed. R. Civ. P.

12(b)(1) (lack of subject matter jurisdiction), because those

claims are subject to the arbitration agreement; and 2) that the

claims against Banco Popular must be dismissed, pursuant to Fed.

R. Civ. P. 12(b)(6) (failure to state a claim upon which relief

Court of Puerto Rico has interpreted certain sections of its civil code to create liability against a conjugal partnership for debts incurred by one spouse, in some situations. See Cruz Viera v. Registrador, 18 P.R. Offic. Trans. 1046 , 1051-53 (1987).

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can be granted), because those claims are barred by RICO's statute

of limitations. The court embraced defendants' reasoning on these

arguments and granted the motion, dismissing all claims against

all defendants.

This brings us up to the present.


On appeal, Álvarez advances two principal arguments

relative to his RICO claims: first, he asserts that the

arbitration provision of his brokerage-account agreement should

not bar his RICO claims; and second, he challenges the district

court determination that the statute of limitation bars his RICO

claims. We take each argument in turn.

We review the court's decision de novo, focusing on the

complaint and treating all well-pled facts therein as true. Bell

Atlantic Corp. v. Twombly, 550 U.S. 544 , 555 (2007); Vartanian v.

Monsanto Co., 14 F.3d 697 , 700 (1st Cir. 1994). However, beyond

the allegations in the complaint, the court may consider certain

additional documents "the authenticity of which are not disputed

by the parties," making narrow exceptions to the general rule "for

official public records; for documents central to plaintiffs'

claim; or for documents sufficiently referred to in the complaint."

Watterson v. Page, 987 F.2d 1 , 3 (1st Cir. 1993); see also Boateng

v. InterAmerican Univ., Inc., 210 F.3d 56 , 60 (1st Cir. 2000)

(stating that documents from prior state adjudications are

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"ordinarily" treated as public records). In this instance, in

order to fully understand the circumstances, we have reviewed (as

did the district court) undisputed and public documents from

Álvarez's arbitration proceeding, including his claim and the

award, as well as court memoranda and orders from earlier

proceedings. After hearing oral argument and undertaking a

thorough review of the record and the parties' submissions, we

affirm the district court's opinion and order.

Claims against Garcia -- the arbitration agreement8

Before us Álvarez reprises his district court argument

that his RICO claims are distinct from the claims litigated through

8As a threshold matter we note appellees have styled their motion to dismiss Álvarez's claims against Garcia as a motion to dismiss for lack of subject matter jurisdiction, under Fed. R. Civ. P. 12(b)(1), which the district court granted. Yet this circuit has consistently held that the existence of a valid arbitration agreement does not strip the court of jurisdiction. Skirchak v. Dynamics Research Corp., 508 F.3d 49 , 56 (1st Cir. 2007) (citing DiMercurio v. Sphere Drake Ins., PLC, 202 F.3d 71 , 77 (1st Cir. 2000)). Regardless, there is a split in authority as to whether claims such as appellees' must be brought pursuant to Rule 12's section (b)(1) or section (b)(6), that is, for failure to state a claim on which relief may be granted; or perhaps considered with an analysis "entirely separate from the Rule 12(b) rubric." Cortés-Ramos v. Sony Corp. of Am., 836 F.3d 128 , 130 (1st Cir. 2016) (quoting Cont'l Cas. Co. v. Am. Nat'l Ins. Co., 417 F.3d 727 , 732 (7th Cir. 2005)). In instances where the district court's ruling rests on evidentiary findings, this distinction may be important to our standard of review. See Valentin v. Hosp. Bella Vista, 254 F.3d 358 , 362-65 (1st Cir. 2001) (holding that an appeal of a Rule 12(b)(1) ruling that resolves a factual challenge must be reviewed with a deferential "clearly- erroneous" standard). Here, where there is no factual dispute, it is a distinction without a difference and our review is de novo.

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arbitration; specifically he says he is not trying to appeal the

arbitration award, but instead he wants to assert his rights under

the civil RICO statute on an entirely new batch of claims and to

vindicate those federal statutory rights in a federal forum. As

Álvarez argues, because RICO "confers jurisdiction on federal

district courts, 18 U.S.C. § 1964(c), this subject action is not

precluded by a previous arbitration award when no issue preclusion

or claim preclusion applies." Nor, as he adds, does this court

lack subject matter jurisdiction to hear his claims.

Countering, appellees maintain here, as they did below,

that Álvarez's claims against Garcia have already been adjudicated

through arbitration, and that, in any case, the present claims, if

not completely barred, are subject to the parties' arbitration


The question of arbitrability -- that is, whether or not

the parties have agreed to submit a dispute to arbitration -- is

"an issue for judicial determination [u]nless the parties clearly

and unmistakably provide otherwise." Howsam v. Dean Witter

Reynolds, Inc., 537 U.S. 79 , 83 (2002) (quoting AT&T Techs., Inc.

v. Communications Workers of Am., 475 U.S. 643 , 649 (1986)). One

seeking to enforce an arbitration agreement "must show that a valid

agreement to arbitrate exists, that the movant is entitled to

invoke the arbitration clause, that the other party is bound by

that clause, and that the claim asserted comes within the clause's

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scope." InterGen N.V. v. Grina, 344 F.3d 134 , 142 (1st Cir. 2003).

Here, there is no dispute that a valid arbitration agreement was

part of the brokerage contract Álvarez consummated with Popular

Securities back in 1999. And that provision is broad; it covers

all controversies between the parties, including Garcia's agents

or employees, "concerning any transaction or the construction,

performance, or breach of this or any other agreement between us

. . . ." Therefore, by its clear terms, Álvarez's RICO claims,

even though substantively different from the earlier claims

submitted to FINRA arbitration, fall within the expansive ambit of

this arbitration provision, meaning his assertions that his

statutory RICO claims may be pursued outside the arbitration

framework simply don't hold up. See Mitsubishi Motors Corp. v.

Soler Chrysler-Plymouth, Inc., 473 U.S. 614 , 628 (1985) ("By

agreeing to arbitrate a statutory claim, a party does not forgo

the substantive rights afforded by the statute; it only submits to

their resolution in an arbitral, rather than a judicial, forum.").9

So, we conclude, as did the district court, that the

federal claims against Garcia in this forum must be dismissed

Adding strength to appellees' side of the ledger is a strong 9

federal policy favoring arbitration; "any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration." Mitsubishi, 473 U.S. at 626 (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 , 24-25 (1983)); see also KKW Enterprises, Inc. v. Gloria Jean's Gourmet Coffees Franchising Corp., 184 F.3d 43 , 49 (1st Cir. 1999).

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without prejudice to Álvarez pursuing them in arbitration, if that

avenue remains available. See Cortés-Ramos, 836 F.3d at 130 ("[I]n

light of the District Court's order compelling arbitration,

Cortés's claims have not been extinguished but have been merely

left to the arbitrator" (internal alterations and quotations

omitted)). Further, as the district court correctly held, because

Álvarez's claims against Garcia's wife and the couple's conjugal

partnership are derivative of the claims against Garcia, those

claims are dismissed as well. See e.g., González-Álvarez v.

Rivero-Cubano, 426 F.3d 422 , 429 n.7 (1st Cir. 2005).

Claims against Banco Popular -- RICO claims

Banco Popular was not a party to the arbitration

agreement binding Álvarez, Garcia and Popular Securities.10

Consequently, that agreement imposes no bar to Álvarez's claims

against Banco Popular.11 Nonetheless, we are confronted with the

timeliness of Álvarez's filing. On the issue of RICO's four-year

Álvarez makes a third argument on appeal. One of appellees' 10

grounds for their motion to dismiss was that Álvarez's failure to join Popular Securities as a defendant mandated dismissal of his complaint under Fed. R. Civ. P. 12(b)(7), for failure to join a necessary party under Rule 19. Álvarez responded to this argument in an addendum filed with the district court, and he rehashes the same argument in his appellate brief. Because we affirm the district court's ruling on other grounds, we do not address this argument. That is, at least, absent circumstances not present here. 11

See Next Step Med. Co., Inc. v. Johnson & Johnson Int'l, 619 F.3d 67 , 71-72 (1st Cir. 2010).

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statute of limitations, Álvarez disputes the district court's

assessment that he knew or should have known about his injury no

later than January 19, 2012, when he filed his FINRA claim.

Instead, he argues that his claims are not time barred because he

did not know of his injury until February 20, 2013, when his

forensic examiner revealed Garcia's forgery.12 Additionally,

Álvarez also contends that up to that point, despite his diligent

efforts to get to the bottom of what happened to his money, he was

kept in the dark, thanks to Garcia's various lies and

misrepresentations. His final point on this particular issue is

that the determination of when he learned of his injury should not

be decided at the motion-to-dismiss juncture, but, rather, is a

matter to be decided by a jury. After considering afresh Álvarez's

arguments, we conclude, like the district court, that these claims

are precluded by RICO's four-year statute of limitations. We


The Racketeer Influenced and Corrupt Organizations Act

provides not only for criminal penalties, but also for civil

remedies for plaintiffs who can prove an injury caused by a pattern

of racketeering activity by an enterprise. 18 U.S.C. §§ 1962,

1964; Home Orthopedics Corp. v. Rodríguez, 781 F.3d 521 , 528 (1st

Cir. 2015). RICO itself does not specify a statute of limitations.

This lawsuit was filed October 20, 2016 -- within four 12

years of Álvarez's proposed start-the-clock date.

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However, in 1987, the Supreme Court stepped in "to resolve the

important question of the appropriate statute of limitations for

civil enforcement actions brought under RICO," importing therein

the four-year deadline found in the civil enforcement provision of

the Clayton Act, which regulates anti-competitive business

practices in the marketplace. Malley-Duff, 483 U.S. at 146, 156;

15 U.S.C. § 15b.

Since the Malley-Duff ruling, much of the debate over

RICO time limits has centered on the identification of the event

that triggers the running of the statute. The Supreme Court has

again shed light on the dispute. First, in Klehr v. A. O. Smith

Corp., the Court rejected the "last predicate act rule," which

pegged the start of the four-year clock to the last act of

racketeering, restarting the clock whenever a new episode of

racketeering took place. 521 U.S. 179 , 187 (1997). Then, in

Rotella v. Wood, the Court considered another theory that had

gained some traction around the country: the "injury and pattern

discovery rule," which started the running of the statute when

"the claimant discovers, or should discover, both an injury and a

pattern of RICO activity." 528 U.S. 549 , 553-56 (2000). The

Rotella Court flat out rejected a limitation rule tied in any way

to the discovery of a pattern of racketeering:

By tying the start of the limitations period to a plaintiff's reasonable discovery of a pattern rather than to the point of injury or

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its reasonable discovery, the rule would extend the potential limitations period for most civil RICO cases well beyond the time when a plaintiff's cause of action is complete . . . .

Id. at 558. Instead the court once again trained its sights on

the Clayton Act and determined the "injury discovery accrual rule"

(the details of which we'll flesh out in a moment) to be the best

starting point. Id. at 553-54.13

Some seven years before the Supreme Court decided

Rotella, we had already noted our adoption of the injury discovery

accrual rule for civil RICO violations. In Rodriguez v. Banco

Central, we concluded that the RICO statute of limitations begins

to run "when a plaintiff knew or should have known of his injury."

917 F.2d 664 , 666 (1st Cir. 1990). This means "discovery of the

injury, not discovery of the other elements of a claim, is what

starts the clock." Lares Group, II v. Tobin, 221 F.3d 41 , 44 (1st

Cir. 2000) (quoting Rotella, 528 U.S. at 555). As the district

court astutely reasoned in its first-tier scrutiny of the Lares

Group's claims: "In this circuit, the meter begins to tick when

the plaintiff discovers the injury, even if the plaintiff is

unaware of the precise acts of racketeering that caused the

injury." Lares Group, II v. Tobin, 47 F. Supp. 2d 223 , 230 (D.R.I.

13The Court left the door open to the adoption of "the 'injury occurrence' rule, under which discovery [of the injury] would be irrelevant." Rotella, 528 U.S. at 554 n.2.

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1999), aff'd, 221 F.3d 41 (2000). Post Lares Group, in the

analogous context of securities fraud, we elaborated about the

moment the claimant should know of his or her injury: in Young v.

Lepone, we talked about "storm warnings" that would put a

reasonable investor on "inquiry notice" that fraud may have

occurred. 305 F.3d 1 , 8 (1st Cir. 2002). As we explained:

The first step in the pavane requires a reviewing court to ascertain whether, when, and to what extent, storm warnings actually existed in a given situation. Because sufficient storm warnings would lead a reasonable investor to check carefully into the possibility of fraud, this step necessarily entails a determination as to whether a harbinger, or series of harbingers, should have alerted a similarly situated investor that fraud was in the wind.


The "known or should have known" analysis includes both

subjective and objective components. In the context of securities

fraud, we wrote: "We have recently emphasized, moreover, that

whether a plaintiff should have discovered the fraud is an

objective question requiring the court to determine if the

plaintiff possessed such knowledge as would alert a reasonable

investor to the possibility of fraud." Maggio v. Gerard Freezer

& Ice Co., 824 F.2d 123 , 128 (1st Cir. 1987) (internal quotations


That being said, there is an equitable principle, as

Álvarez points out, that sometimes works to extend the four-year

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clock. According to the doctrine of fraudulent concealment, the

statute of limitations may be temporarily tolled during such time

that the perpetrator purposefully and successfully conceals his or

her misconduct from its victim. Berkson v. Del Monte Corp., 743

F.2d 53 , 55 (1st Cir. 1984). Again in the context of the Clayton

Act, we have held that the doctrine of fraudulent concealment may

be invoked when a claimant can establish three elements: 1)

wrongful concealment by defendants of their actions; and 2) failure

of the claimant to discover, within the limitations period, the

operative facts which form the basis of the cause of action; 3)

despite the claimant's diligent efforts to discover the facts.

Id. The doctrine has since been applied to RICO claims as well.

See, e.g., Harry v. Countrywide Home Loans, Inc., 902 F.3d 16 , 18-

19 (1st Cir. 2018); Lares Group, 47 F. Supp. 2d at 231; Hodas v.

Sherburne, Powers & Needham, 938 F. Supp. 60 , 63 (D. Mass. 1996),

aff'd, 114 F.3d 1169 (1st Cir. 1997); see also Banco Central, 917

F.2d at 668 (explaining that the court could "easily imagine" the

doctrine of fraudulent concealment being applied in RICO cases).

Keeping in mind these notions about a claimant's

discovery of his injury and a malfeasor's efforts to conceal his

misdeeds, we turn now to the specifics of the case before us.

Álvarez asserts that his injury did not accrue until he

learned of Garcia's forgeries from the forensic document examiner

in February 2013. Misinterpreting (our characterization) certain

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language in Rotella, he argues that the actual moment that triggers

the running of the statute is the point at which he knows "that he

has been hurt and who has inflicted the injury." Rotella, 528

U.S. at 556. And, Álvarez goes on, because he did not know of his

injury until February 2013, he need not rely on the doctrine of

fraudulent concealment to toll the statute of limitations because

his injury accrual date falls within the four-year statutory time


Alternatively, Álvarez argues that Garcia did engage in

fraudulent concealment, successfully preventing Álvarez from

suspecting that his money had been stolen until February 2013. To

demonstrate his state of mind during this time, Álvarez points to

his arbitration complaint, filed with FINRA in January 2012, in

which he claimed only that Garcia chose unsuitably risky

investments for him. While he had been told by Garcia and Popular

Securities that some of his original investment was "unaccounted

for," this was a far cry from knowing that he had been robbed of

$419,632.43. Until Álvarez got the report from the forensic

examiner, he thought that maybe there was some kind of accounting

error. And he adds, defendants continue to conceal their fraud to

this day.

According to Álvarez's characterization of the timeline,

first Garcia lied about the market fluctuations, then Popular

Securities ("with the knowledge of the CEO and Board Chairman of

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the Defendant Bank") undertook two "fraudulent investigations,"

which "misled and obfuscated the matter by only focusing on minor

losses associated with the investment activities of $600,000."

Álvarez reiterates that "as a completely unsophisticated

investor," he had no knowledge that he had been defrauded until

after he filed the FINRA claim and the facts came to light. In

support of his argument, Álvarez cites to a district court case

from this circuit that he says holds that a mere denial of

wrongdoing may be sufficient to establish fraudulent concealment,

if the plaintiff cannot, or does not, discover the fraud with

reasonable diligence, In re Atlantic. Fin. Mgmt., Inc. Securities

Litigation, 718 F. Supp. 1003 , 1011 (D. Mass. 1988).

For their part, appellees maintain that Álvarez knew of

his "monetary losses" in January 2009, when he met with Garcia to

discuss his imminent retirement and learned that his account held

only $600K. At the very latest, after Popular Securities concluded

its second internal investigation in February 2011, Álvarez

demonstrated that he knew of his injury when he wrote a letter to

Banco Popular's CEO, which according to Álvarez's complaint was

admittedly "about the embezzlement activities." As for fraudulent

concealment, appellees concede that Garcia's misrepresentations

prior to 2009 may have operated to conceal Garcia's actions. But,

in 2009, when Garcia told him that his investment was only $600K,

Álvarez knew or should have known about his alleged injury.

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Our take

Regrettably for Álvarez we think Garcia and Banco

Popular have the better arguments. Our de novo review leads us to

conclude Álvarez knew of his injury, at the very latest, by the

time he filed his claim with FINRA in January 2012. Indeed, it is

because of his injury that he filed the FINRA claim.14 Although

he did not know the criminal methods Garcia had employed in order

to steal his money, Álvarez knew that his funds had disappeared.

Álvarez's reliance on certain language from Rotella --

that the injury accrues when the claimant knows "that he has been

hurt and who has inflicted the injury" -- is misplaced. 528 U.S.

at 556. The phrase cited from Rotella is itself lifted from United

States v. Kubrick, 444 U.S. 111 , 122 (1979), a medical malpractice

case. And, the implication that the claimant must know specifics

about who inflicted the injury is a misreading of Rotella's core

holding (and is inconsistent with First Circuit RICO precedent).

For example, immediately before the Rotella Court quotes from

Kubrick, it writes, ". . . in applying a discovery accrual rule,

we have been at pains to explain that discovery of the injury, not

discovery of the other elements of a claim, is what starts the

Arguably Álvarez knew of his injury even earlier, but we 14

are willing to allow that Garcia, through his misrepresentations, and Popular Securities, through its sorry and deficient internal investigations, successfully concealed the injury from Álvarez until the second investigation concluded in February 2011.

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clock." Rotella, 528 U.S. at 555. Citing this very sentence, we

wrote in Lares Group, "We . . . believe that this passage is

instructive and accurately reflects the law of this Circuit."

Lares Group, 221 F.3d at 44.

Similarly unpersuasive is Álvarez's reference to

Atlantic Fin. Mgmt. for the proposition that a perpetrator's denial

of wrongdoing, even without additional affirmative acts, may be

sufficient to establish fraudulent concealment. 718 F. Supp. at

1010-11. Be that as it may, what is determinative in Álvarez's

case is that, despite Garcia's stonewalling, there were enough

warning signs to put Álvarez, or a reasonable investor in his

situation, on notice that something was seriously amiss, that is,

"[w]hen telltale warning signs augur that fraud is afoot, . . .

such signs, if sufficiently portentous, may as a matter of law be

deemed to alert a reasonable investor to the possibility of

fraudulent conduct." Young, 305 F.3d at 8.

In light of the "telltale warning signs," we find that

Álvarez knew or should have known of his injury no later than

January 2012, making his October 2016 RICO complaint out of time.

Jury question

Lastly, Álvarez argues that the issue of when he knew or

should have known of his injury is a question that must be resolved

"at a later point by the trier of fact," and that his claims may

not be dismissed without providing an opportunity for a factfinder

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to weigh the evidence. Continuing on, he argues further that a

defendant may only raise the statute of limitations as a defense,

and the court may only grant a motion to dismiss, "when the facts

that give rise to the defense are clear from the face of the

complaint." Appellees point to LaChapelle v. Berkshire Life Ins.

Co., which stated that "[g]ranting a motion to dismiss based on a

limitations defense is entirely appropriate when the pleader's

allegations leave no doubt that an asserted claim is time-barred."

142 F.3d 507 , 509 (1st Cir. 1998) (breach of contract).

Indeed, as Álvarez argues, often the issues of what a

claimant knew and when he knew it are determined by a jury or other

factfinder. See, e.g., Young, 305 F.3d at 9; Santiago Hodge v.

Parke Davis & Co., 909 F.2d 628 , 633 (1st Cir. 1990). However, it

is well settled in this circuit that a motion to dismiss may be

granted on the basis of an affirmative defense, such as the statute

of limitations, as long as "the facts establishing the defense

[are] clear 'on the face of the plaintiff's pleadings.'"

Blackstone Realty LLC v. FDIC, 244 F.3d 193 , 197 (1st Cir. 2001)

(quoting Aldahonda-Rivera v. Parke Davis_& Co., 882 F.2d 590 , 592

(1st Cir. 1989)); see also LaChapelle, 142 F.3d at 509.

As the district court noted, "the facts are

unassailable." We agree. The facts, as presented in Álvarez's

complaint, clearly establish that he knew, or should have known,

of his injury more than four years before he filed his RICO claims.

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Consequently, the RICO claims against Banco Popular must be


The outcome of this case no doubt seems harsh. As

described in his complaint, Mr. Álvarez's situation is

unfortunate: he apparently was victimized by someone he trusted

to act in his best interests. Nevertheless, four years is a

relatively lengthy statute of limitations; and a claimant's

ability to reach back in time to address past grievances must have

some boundaries. The Supreme Court has often cited the "basic

policies of all limitations provisions: repose, elimination of

stale claims, and certainty about a plaintiff's opportunity for

recovery and a defendant's potential liabilities." Rotella, 528

U.S. at 555; see also Gabelli v. SEC, 568 U.S. 442 , 448 (2013)

("Statutes of limitations are intended to promote justice by

preventing surprises through the revival of claims that have been

allowed to slumber until evidence has been lost, memories have

faded, and witnesses have disappeared. They provide security and

stability to human affairs." (internal quotations and citations

omitted)). The actions that form the basis of the present

complaint started in 1999; that is a long time ago indeed.


We hold that the claims brought by Victor Álvarez-Maurás

against appellee Alexander Garcia may only be resolved through

arbitration, subject to the binding agreement between the parties.

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Because the claims against Alexander Garcia's wife, Wanda O.

Meléndez-Santos, and the couple's conjugal partnership are

derivative of the claims against Garcia, those claims are also

subject to the arbitration agreement. Álvarez's claims against

appellee Banco Popular of Puerto Rico are out of time, pursuant to

18 U.S.C. § 1964. Consequently, we affirm the district court's

ruling, dismissing all claims against all defendants.

Costs to appellees.

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