DOIT, Inc. v. Touche, Ross & Co.

• Decision Date: 02 August 1996
• Docket Number: No. 930512,930512
• Parties: DOIT, INC., et al., Plaintiffs and Appellants, v. TOUCHE, ROSS & CO., et al., Defendants and Appellees.
• Court: Utah Supreme Court

Page 835

926 P.2d 835

DOIT, INC., et al., Plaintiffs and Appellants, v. TOUCHE, ROSS & CO., et al., Defendants and Appellees.

No. 930512.

Supreme Court of Utah.

Aug. 2, 1996.

Rehearing Denied Nov. 21, 1996.

George M. Haley, Robert L. Stolebarger, Greggory J. Savage, Salt Lake City, and Malcolm A. Misuraca, San Francisco, Cal., for plaintiffs.

William Downes, Dennis V. Haslam, Salt Lake City, for Larry H. Miller.

David E. Bean, Layton, for Merrill Bean.

Gary F. Bendinger, Milo Steven Marsden, Catherine L. Brabson, Wesley D. Felix, Salt Lake City, for Pete Marwick; Deloitte, Haskins & Sells; Touche, Ross & Co.; Peat, Marwick, Main & Co.

Edwin C. Barnes, Rodney G. Snow, Stephen B. Doxey, Salt Lake City, for Coopers and Lybrand.

Glen E. Davies, David W. Scofield, Salt Lake City, for Paul Frampton.

Thomas L. Kay, Mark O. Morris, Paul D. Newman, Salt Lake City, for Roy B. Moore, P.C. Moore, Sessions & Moore.

Jan Graham, Atty. Gen., Reed M. Stringham, Bryce H. Pettey, Asst. Attys. Gen., Salt Lake City, for State of Utah and Commissioner of Financial Institutions.

DURHAM, Justice:

DOIT, Inc., a Utah nonprofit corporation organized to represent the interests of the depositors of Utah's failed thrift institutions, and numerous other plaintiffs ¹ appeal from the trial court's entry of summary judgment dismissing the depositor class action and the receiver/liquidator actions against defendants. ² We reverse.

In reviewing the trial court's order granting summary judgment, ³ we consider the evidence and all inferences that may be reasonably drawn therefrom in the light most favorable to the losing parties. Thayne v. Beneficial Utah, Inc., 874 P.2d 120, 124 (Utah 1994).

I. FACTS

This case arises out of the collapse of the state-regulated thrift industry in the state of Utah. On July 31, 1986, the Utah Department of Financial Institutions (DFI) issued an order seizing the Industrial Loan Guaranty Corporation (ILGC) ⁴ and seven of the ILGC's member thrifts. ⁵ The DFI's order also mandated a freeze of all activity--except for minimal scheduled withdrawals--in the seized thrifts. On the same day, the DFI issued a "White Paper on the State of Utah's Response to the Plight of the Thrift and Loan Industry on July 31, 1986." The White Paper disclosed the ILGC's insolvency and suggested that the financial condition of the ILGC and its member thrifts had been concealed from depositors for years.

Consequently, on July 20, 1987, numerous depositors of the failed thrifts initiated this class action by filing a complaint against the State, the DFI, and the DFI Commissioner, George Sutton. ⁶ On December 7, 1987, the depositors filed a motion to amend the original complaint, along with a proposed amended complaint, seeking to name numerous additional defendants, including Larry H. Miller and three hundred "John Does" among whom were the unknown officers, managing personnel, and professional advisors of the ILGC and five of the failed thrifts. The trial court sua sponte denied the motion to amend but granted the depositors leave to file another amended complaint.

The depositors filed a second amended complaint on February 23, 1988. The trial court, however, dismissed this complaint without prejudice for failure to comply with Utah Rule of Civil Procedure 9(b), which requires that certain causes of action be pleaded with particularity. The trial court also ordered that the failed thrifts be realigned as plaintiffs rather than as defendants in the action.

Before the second amended complaint was dismissed, the State and its insurance carrier, California Union Insurance Company (Cal Union), reached a settlement with the depositors in which the State and Cal Union agreed to pay the depositors a total of forty-four million dollars. The settlement culminated in the Thrifts Settlement Financing Act, Utah Code Ann. §§ 7-21-1 to -10 (TSFA), which the Utah Legislature passed on October 7, 1988. The TSFA detailed the intricacies of the settlement agreement and how the settlement was to be funded. ⁷ It required that the depositors release the State, the DFI commissioner, the settling insurance carriers, and the officers and trustees of the ILGC from all liability. Utah Code Ann. § 7-21-5 (amended 1995). The TSFA also required the State and Cal Union to join in the depositor class action either as plaintiffs or under any other designation which the trial court determined adequately represented the State and Cal Union's interests and standing in the lawsuit. Utah Code Ann. § 7-21-4(5)(a).

In addition, the TSFA mandated that any further claims against other potentially responsible parties which arose out of the thrift failures could not be litigated unless a "Thrifts Panel" (the panel) first authorized them. Utah Code Ann. § 7-21-4(5)(e). The panel would have "binding power to authorize or refuse to authorize any litigation in these claims, whether arising from the interests of the depositor class, the state, or the settling carriers." Utah Code Ann. § 7-21-7(1). This included all claims "arising from or related to the thrift institutions, the guaranty corporation, or their insolvencies, regardless of whether or when the claims or actions are filed or asserted," or "whether ... the state or depositors are parties." Utah Code Ann. § 7-21-4(5).

By July 31, 1989, the panel had not been assembled, and thus, plaintiffs' claims had not been authorized for litigation. Nonetheless, plaintiffs filed a third amended complaint. In this complaint, plaintiffs acknowledged that they were required to comply with the provisions of the TSFA before they could litigate their claims. In addition, plaintiffs attempted to add Touche, Ross & Co. (Touche); Peat, Marwick, Main & Co. (Peat); Deloitte, Haskins & Sells (Deloitte); and Coopers & Lybrand (C & L) as defendants, replacing prior fictitious designations. However, the complaint was never served on any defendant and thus was deemed dismissed pursuant to Utah Rule Civil Procedure 4(b) (1989). ⁸

Subsequently, in December 1990, the panel was assembled. It required that all proposed claims be filed no later than February 25, 1991. As part of this process, plaintiffs submitted a "proposed form of complaint," seeking authorization of seventy-five causes of action. On November 7 and 8, the panel held oral argument to determine which claims to authorize for litigation. The TSFA required that the panel, in making its determination, consider, among other factors, (1) whether the claims appeared to be grounded in fact, sanctioned by existing law, or supported by a good faith argument for the extension, modification, or reversal of existing law, and (2) whether equitable considerations warranted continued litigation. Utah Code Ann. § 7-21-7(3)(a)-(b). On February 10, 1992, the panel issued a report. It approved most claims but barred litigation of "[c]laims alleging liability premised on audit opinions that were either adverse or 'going concern' opinions" ⁹ on the ground that adverse or "going concern" audit opinions should have put the ILGC and the State on notice of problems at the thrifts. The panel further refused to authorize litigation of claims premised on an alleged duty of an accountant to be a "whistle blower" to the depositors or the public.

On May 19, 1992, following the issuance of the panel report, plaintiffs, including for the first time the ILGC, filed their fourth amended complaint, alleging sixty-two separate causes of action against defendants Touche, Peat, Deloitte, C & L, and Miller. Moreover, it was the first complaint to specifically name Roy B. Moore, Merrill Bean, and Paul Frampton as defendants. The complaint alleged claims sounding in negligence, civil conspiracy, state securities violations, and fraud. All defendants except Bean and Frampton filed motions to dismiss in October 1992. These motions asserted that plaintiffs' claims were barred by statutes of limitations, laches, lack of standing on the part of the State and Cal Union, and lack of panel authorization.

The trial court heard defendants' motions on April 1, 1993, and issued its formal memorandum decision and order on August 31 1993. The trial court dismissed plaintiffs' fourth amended complaint with prejudice, ruling that all applicable statutes of limitations had expired. ¹⁰ Additionally, the court noted that supplemental grounds existed for dismissing some of plaintiffs' claims, namely, laches, standing, and lack of panel authorization.

Plaintiffs appeal, arguing that the trial court erred in determining that (1) their claims were time-barred under all applicable statutes of limitations, (2) some claims were barred by laches, (3) the State and Cal Union lacked standing to assert claims against these defendants, and (4) certain claims were barred because (a) plaintiffs failed to submit the claims to the panel for authorization as the TSFA required, or (b) if the claims were submitted, the panel specifically barred litigation of these claims.

II. STANDARD OF REVIEW

Summary judgment is appropriate in cases in which there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Utah R.Civ.P. 56(c); Winegar v. Froerer Corp., 813 P.2d 104, 107 (Utah 1991). "[I]n reviewing a grant of summary judgment, we analyze the facts and all reasonable inferences drawn therefrom in the light most favorable to the nonmoving party." Higgins v. Salt Lake County, 855 P.2d 231, 233 (Utah 1993). Because the determination of whether summary judgment is appropriate presents a question of law, we accord no deference to the trial court's decision and instead review it for correctness. Blue Cross & Blue Shield v. State, 779 P.2d 634, 636 (Utah 1989).

III. CLAIMS AGAINST ACCOUNTANT DEFENDANTS

Plaintiffs allege several causes of action against defendants Touche, Peat, Deloitte, and C & L (collectively, accountant defendants). Plaintiffs specifically allege that the accountant defendants' actions...