Kansas Public Employees Retirement System v. Blackwell, Sanders, Matheny, Weary & Lombardi, L.C.

• Decision Date: 12 June 1997
• Docket Number: 96-3317 and 96-3680,Nos. 96-3262,s. 96-3262
• Citation: 114 F.3d 679
• Parties: KANSAS PUBLIC EMPLOYEES RETIREMENT SYSTEM, Plaintiff--Appellant, v. BLACKWELL, SANDERS, MATHENY, WEARY & LOMBARDI, L.C., a law partnership; William H. Sanders, Sr., individually and as the representative of a defendant class, Defendants-Appellees. KANSAS PUBLIC EMPLOYEES RETIREMENT SYSTEM, Plaintiff--Appellant, v. REIMER & KOGER ASSOCIATES, INC., a Kansas Corporation; Ronald Reimer, an individual; Kenneth H. Koger, an individual; Clifford W. Shinski, an individual; Brent Messick, an individual; Robert Crew, an individual; Sherman Dreiseszun, an individual; I.I. Ozar, an individual; Frank Sebree, an individual; Peat, Marwick, Mitchell & Co., an accountancy firm; KPMG Peat Marwick, an accountancy firm; Robert Spence, an individual; Thomas S. Morgan, co-executor of the estate of Frank S. Morgan; Marilyn J., co-executor of the estate of Frank Morgan, Defendants--Appellees, Shook, Hardy & Bacon, through C. Patrick McLarney, acting as a representative of an agreed upon class of partners in Shook, Hardy & Bacon, and for Shook, Hardy & Bacon P.C., Intervenor Defendant-Appellee. KANSAS PUBLIC EMPLOYEES RETIREMENT SYSTEM, Plaintiff--Appellant, v. BLACKWELL, SANDERS, MATHENY, WEARY & LOMBARDI, L.C., a law partnership; William H. Sanders, Sr., individually and as the representative of a defendant class, Defendants--Appellees. KANSAS PUBLIC EMPLOYEES RETIREMENT SYSTEM, Plaintiff--Appellant, v. REIMER & KOGER ASSOCIATES, INC., a Kansas Corporation; Ronald Reimer, an individual; Kenneth H. Koger, an individual; Clifford W. Shinski, an individual; Brent Messick, an individual; Robert Crew, an individual; Sherman Dreiseszun, an individual; I.I. Ozar, an individual; Frank Sebree, an individual; Peat, Marwick, Mitchell & Co., an accountancy firm, Defendants, KPMG Peat Marwick, an accountancy firm; Robert Spence, an individual, Defendants--Appellees, Thomas S. Morgan, co-executor of the estate of Frank S. Morgan; Marilyn J., co-executor of the estate of Frank Morgan, Defendants, Shook,
• Court: U.S. Court of Appeals — Eighth Circuit

Page 679

114 F.3d 679

KANSAS PUBLIC EMPLOYEES RETIREMENT SYSTEM, Plaintiff--Appellant, v. BLACKWELL, SANDERS, MATHENY, WEARY & LOMBARDI, L.C., a law

partnership; William H. Sanders, Sr.,

individually and as the representative

of a defendant class,

Defendants-Appellees.

KANSAS PUBLIC EMPLOYEES RETIREMENT SYSTEM, Plaintiff--Appellant, v. REIMER & KOGER ASSOCIATES, INC., a Kansas Corporation;

Ronald Reimer, an individual; Kenneth H. Koger, an

individual; Clifford W. Shinski, an individual; Brent

Messick, an individual; Robert Crew, an individual;

Sherman Dreiseszun, an individual; I.I. Ozar, an

individual; Frank Sebree, an individual; Peat, Marwick,

Mitchell & Co., an accountancy firm; KPMG Peat Marwick, an

accountancy firm; Robert Spence, an individual; Thomas S.

Morgan, co-executor of the estate of Frank S. Morgan;

Marilyn J., co-executor of the estate of Frank Morgan,

Defendants--Appellees,

Shook, Hardy & Bacon, through C. Patrick McLarney, acting as

a representative of an agreed upon class of partners in

Shook, Hardy & Bacon, and for Shook, Hardy & Bacon P.C.,

Intervenor Defendant-Appellee.

KANSAS PUBLIC EMPLOYEES RETIREMENT SYSTEM, Plaintiff--Appellant, v. BLACKWELL, SANDERS, MATHENY, WEARY & LOMBARDI, L.C., a law

partnership; William H. Sanders, Sr.,

individually and as the representative

of a defendant class,

Defendants--Appellees.

KANSAS PUBLIC EMPLOYEES RETIREMENT SYSTEM, Plaintiff--Appellant, v. REIMER & KOGER ASSOCIATES, INC., a Kansas Corporation;

Ronald Reimer, an individual; Kenneth H. Koger, an

individual; Clifford W. Shinski, an individual; Brent

Messick, an individual; Robert Crew, an individual;

Sherman Dreiseszun, an individual; I.I. Ozar, an

individual; Frank Sebree, an individual; Peat, Marwick,

Mitchell & Co., an accountancy firm, Defendants,

KPMG Peat Marwick, an accountancy firm; Robert Spence, an

individual, Defendants--Appellees,

Thomas S. Morgan, co-executor of the estate of Frank S.

Morgan; Marilyn J., co-executor of the estate of

Frank Morgan, Defendants,

Shook, Hardy & Bacon, through C. Patrick McLarney, acting as

a representative of an agreed upon class of

partners in Shook, Hardy & Bacon, and

for Shook, Hardy & Bacon P.C.,

Intervenor Defendant.

Nos. 96-3262, 96-3317 and 96-3680.

United States Court of Appeals,

Eighth Circuit.

Submitted March 13, 1997.

Decided May 13, 1997.

Rehearing and Suggestion for Rehearing En Banc Denied June 12, 1997.

Kenneth Philip Ross, Chicago, IL, argued (Robert F. Coleman, Eugene J. Schiltz, Elizabeth R. Schenkier, Timothy K. McPike, Eugene I. Pavalon, Geoffrey L. Gifford, Chicago, IL, on the brief), for Appellant.

Charles Walter German, Kansas City, Missouri, argued (Brant M. Laue, Joel P. Fahnestock, Robert J. Campbell, Elizabeth Drill Nay, Kansas City, Missouri, on the brief), for Appellees Marilyn J., Thomas S. Morgan, I.I. Ozar, and Sherman Dreiseszun in No. 96-3317.

Jeffrey R. Tone, Chicago, IL, argued (William F. Floyd, Nancy A. Temple and Hille R. Sheppard, Chicago, IL, and Donald W. Rose, New York City, on the brief), for Appellees in No. 96-3680.

R. Lawrence Ward, Kansas City, Missouri, argued (Russell S. Jones, Jr., and William E. Quirk, Kansas City, Missouri, on the brief), for Appellees William H. Sanders, Blackwell and Sanders in No. 96-3262.

Kathleen A. Hardee and Carol Z. Smith, Kansas City, Missouri, on the brief, for Appellee Kenneth Koger in No. 96-3680.

Gregory F. Maher, James M. Yeretsky and Brian G. Boos, Kansas City, Missouri, on the brief, for Appellees Reimer & Koger Assoc., Inc., Clifford Shinski, Robert Crew, Brent Messick in No. 96-3317.

John K. Villa, Mary G. Clark and Eric A. Kuhl, Washington, DC, Gene E. Voigts, and Robert W. McKinley, Kansas City, Missouri, on the brief, for Appellees Shook, Hardy & Bacon, Frank P. Sebree in No. 96-3317.

Before McMILLIAN, JOHN R. GIBSON, and BOWMAN, Circuit Judges.

JOHN R. GIBSON, Circuit Judge.

Kansas Public Employees Retirement System, known as KPERS, appeals from the district court's ¹ entry of an adverse summary judgment in its case against its investment advisers, ² accountants, ³ lawyers, ⁴ one of its own trustees, ⁵ and the former directors ⁶ of Home Savings Association, arising out of KPERS's investment in Home Savings, a failed thrift institution. In an earlier appeal, we held that KPERS's claims were not governed by a ten-year Kansas statute of limitation, but that Missouri choice of law provisions controlled. KPERS v. Reimer & Koger Assocs., 61 F.3d 608 (8th Cir.1995) (KPERS III ), cert. denied, --- U.S. ----, 116 S.Ct. 915, 133 L.Ed.2d 845 (1996). Under the Missouri borrowing statute, KPERS's claims are barred if they would be untimely under the two- and three-year statutes provided by Kansas law. Id. We remanded to the district court to determine whether KPERS's claims were barred by the Kansas statutes. The district court held that KPERS's claims are time-barred under Kansas law. ⁷ KPERS argues that the court should not have applied the Kansas statutes of limitation to KPERS's claims, because its claims are exempt from all statutes of limitation. Further, KPERS argues that, even if the claims are subject to the statutes of limitation, the district court erred in applying the statutes of limitation to the facts of this case, specifically that it misconstrued Kansas law concerning when a cause of action accrues, overlooked disputed fact issues, and failed to consider all of KPERS's claims against its accountants. We affirm the judgments of the district court.

KPERS is the pension fund for certain employees of the state of Kansas. In 1983 Governor John Carlin began to promote the use of KPERS money to stimulate the Kansas economy. KPERS's investment consultants, Callan Associates, Inc., advised KPERS in 1983 that investing public pension fund moneys as venture capital to promote regional business would be a high-risk undertaking. Callan advised KPERS not to embark on such a program, but to stick to "more traditional investments." Carlin appointed a Kansas City businessman, Michael Russell, to KPERS's board of trustees. Russell became chairman of KPERS's board in August 1985. Russell was a friend and business associate of Kansas City banker Frank Morgan.

In 1985, KPERS established a special "Kansas Investment Fund" to make direct investments in Kansas ventures. About the same time, Morgan and his uncle, Sherman Dreiseszun, bought Home Savings, an ailing thrift institution based in Kansas City. As part of the acquisition, Morgan and Dreiseszun entered into an agreement with the Federal Home Loan Bank Board in which they agreed that Home Savings would not engage in transactions with other banks affiliated with Morgan and Dreiseszun. Because Morgan and Dreiseszun were the "standby purchasers" of Home Savings stock, this agreement is known as the "standby purchaser agreement." Russell became a member of the Home Savings board of directors. He and his businesses had borrowed large amounts from Home Savings.

KPERS conducted its investments through outside investment advisors, one of which was Reimer & Koger. Relations between KPERS and Reimer & Koger were governed by a Special Investment Advisory Services Agreement, which incorporated the "prudent man" standard for investing KPERS's money. After Russell became chairman of KPERS's board, Frank Morgan invited Reimer & Koger's principal, Kenneth Koger, to invest $25 million of KPERS's money in Home Savings. Koger only had authority to invest $15 million of KPERS's money without board approval, but on December 31, 1985, Koger committed to invest that amount in Home Savings subordinated debentures. Koger noted in a memo sent to KPERS's executive secretary that Russell was on Home Savings's board and that "something would have to be done about that." Accordingly, Russell resigned from Home Savings's board on February 12, 1986. Koger then invested KPERS's $15 million in Home Savings subordinated debentures on May 2, 1986. Reimer & Koger retained Blackwell Sanders to do the legal work for this investment. As counsel for Home Savings, Frank Sebree of Shook Hardy issued an opinion of counsel in connection with the investment, stating that to the "best of our knowledge and belief, the Association is not in violation of ... any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to it."

Morgan next approached Koger about investing $50 million in Home Savings. Because this investment exceeded Koger's investment authority, Koger had to go to the KPERS board for permission to make the investment. On June 6, 1986, Koger wrote a letter to Russell proffering the $50 million investment; Koger's letter stated that the purpose of the investment would be to finance Home Savings's acquisition of a $1 billion St. Louis savings and loan. Russell telephoned the other members of the KPERS board to obtain approval of the investment, and the trustees voted in favor of the investment. In June 1986 Home Savings bid on the St. Louis savings and loan. By the fall of 1986, Home Savings knew it had lost the bid. On September 30, 1986, because the parties were not prepared to close on the debentures, KPERS invested in Home Savings short term promissory notes; the notes were exchanged for subordinate debentures of Home Savings on October 24, 1986. As part of the issuance of the debentures, Sebree again issued an opinion of counsel to KPERS in which he stated that Home Savings was not in violation of any agreement or regulation to his knowledge. However, in actuality, Home Savings had been cited by the bank examiners in its most recent examination for excessive investment in a subsidiary corporation.

On November 13, 1986 the Kansas City Star reported that KPERS had made the $50 million investment in Home Savings. The article quoted Koger as saying that Home Savings had considered buying an unnamed St. Louis savings and loan, but that Home Savings had "pretty much dropped [that acquisition] from...