Eric Alden knew something funny was going on at the Wyoming liquor store that he managed and operated. In 2005, the store’s accountant notified him that beer purchases had exceeded beer sales for some time. Mr. Alden also learned about significant discrepancies between the invoices of one of the store’s suppliers, Orrison Distributing, and the store’s beer sales. He “wondered about it” but did not look into the matter further.
The store’s mysterious losses on beer continued through August 2007, when Mr. Alden finally decided to investigate. He conducted inventories over an 11-day period which him to believe that an Orrison employee was stealing beer. He then installed video cameras, and caught the employee red-handed.
It turns out that the Orrison salesman, Gary Kirchhefer, had been ordering extra cases of beer on the store’s account. When he delivered the beer to the store, he would take the extra cases and sell them to two bars at a discount, pocketing the money for himself.
The store filed a RICO lawsuit in August 2011 against Kirchhefer and the bars who had benefited from buying the stolen beer, but the trial court dismissed the case because RICO’s four-year statute of limitations had expired.
In an opinion by Judge Tymkovich, the Tenth Circuit affirmed. See Robert L. Kronlein Trust v. Kirchhefer (Aug. 25, 2014). The opinion is basically a primer on the difference between the injury-occurrence rule, which holds that a claim accrues when injury occurs, and the injury-discovery rule, under which a claim accrues when the injury is discovered.
The Court held that the store’s claims were barred under either rule. The injury occurred in 2005, and even though Mr. Alden didn’t discover the scheme until August 2007, he was on inquiry notice as of 2005, when he realized that there was a problem with the store’s beer sales. A reasonable store operator would have done begun investigating, and thus the store was not entitled to benefit from the injury-discovery rule.
The lesson for business owners is that if you think your business has a problem, “wondering about it” probably isn’t the right approach.