Maggio v. Gerard Freezer & Ice Co.

• Decision Date: 15 July 1987
• Docket Number: No. 86-2103,86-2103
• Citation: 824 F.2d 123
• Parties: Fed. Sec. L. Rep. P 93,310 Joseph L. MAGGIO, Plaintiff, Appellant, v. GERARD FREEZER & ICE CO., et al., Defendants, Appellees.
• Court: U.S. Court of Appeals — First Circuit

Page 123

824 F.2d 123

Fed. Sec. L. Rep. P 93,310

Joseph L. MAGGIO, Plaintiff, Appellant, v. GERARD FREEZER & ICE CO., et al., Defendants, Appellees.

No. 86-2103.

United States Court of Appeals, First Circuit.

Argued April 8, 1987.

Decided July 15, 1987.

Alexander Whiteside with whom Putnam, Bell & Russell, Boston, Mass., was on brief, for plaintiff, appellant.

Joseph L. Cotter with whom Margaret R. Hinkle, Paula M. Bagger and Goodwin, Procter & Hoar, Boston, Mass., were on brief, for defendant, appellee Gerard Freezer and Ice Co.

Michael D. Weisman with whom Robert D. Richman and Hill & Barlow, Boston, Mass., were on brief, for defendants, appellees Candeloro J. Maggio, Jr. and Peter R. Maggio.

Before COFFIN, Circuit Judge, MALETZ, ^* Senior Judge, and TORRUELLA, Circuit Judge.

COFFIN, Circuit Judge.

Plaintiff-appellant Joseph Maggio challenges a district court award of summary judgment in favor of Gerard Freezer & Ice Company ("Gerard Freezer") and several individual defendants. ¹ The court held that plaintiff's complaint, which alleges violations of section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. Sec. 78j(b), Rule 10b-5, 17 C.F.R. Sec. 240.10b-5, breach of fiduciary duty, and common law fraud, is barred by the applicable statute of limitations, Mass.Gen.L. ch. 260, Sec. 2A. ² As he did before the district court, plaintiff argues on appeal that the action was timely, because the statute of limitations should not have begun to run until the date in 1985 when plaintiff discovered certain documents that put him on notice of his claims.

I. Factual Setting.

Plaintiff Joseph Maggio is the son of Candeloro J. Maggio, Sr. ("Candeloro, Sr."), who founded Gerard Freezer & Ice Company with his three brothers in 1948. In 1964, Candeloro, Sr. learned that he was dying of cancer and began to make arrangements for the passing of corporate control to his three sons. At the time, he controlled 56 of the 152 outstanding shares of Gerard Freezer stock. His brothers, Leo Maggio and Peter Maggio, each owned 48 shares. On August 10, 1964, Candeloro, Sr. transferred twenty shares of Gerard Freezer stock, giving four shares each to his brothers Leo and Peter (increasing their holdings to 52 shares each) and twelve shares to his nephew, Roger Chomko. On the same day, he executed a will leaving his 36 remaining shares to be held in trust by his brother Leo for distribution to plaintiff and his two brothers, Candeloro, Jr. and Peter R. Maggio, when plaintiff, the youngest, attained twenty-five years of age.

Also on August 10, 1964, the recipients of the stock transfers--Leo Maggio, Peter Maggio, and Roger Chomko--entered agreements with Gerard (the "1964 Stock Repurchase Agreements") providing that Gerard would repurchase all of their stock upon death or termination of employment at a fixed price aggregating to $135,000. ³ By virtue of these agreements, Gerard Freezer also gained the right to purchase the shares at the same fixed price in the event of a proposed sale to a third party. Under the 1964 Stock Repurchase Agreements, therefore, the 36 shares held in trust for distribution to plaintiff and his two brothers were intended to represent 100 percent of Gerard Freezer's stock at some point in the future. In 1968, however, Gerard Freezer issued 50 new shares of stock, 25 each to plaintiff's uncles, Leo Maggio and Peter Maggio.

The event that forms the basis for plaintiff's claims in this litigation occurred in April, 1972, after Leo Maggio had released the 36 shares previously held in trust for plaintiff and his brothers. Gerard Freezer offered to purchase plaintiff's twelve shares in exchange for a payment of $30,000. Ignoring the advice of family members, plaintiff immediately accepted this offer and transferred his shares to the corporation. Plaintiff now contends, however, that this offer and transaction was part of a fraudulent scheme by certain of the individual defendants to gain control of the corporation. Under the terms of the 1964 Stock Repurchase Agreements, plaintiff's twelve shares would eventually have grown to represent not a meager six percent interest in the corporation, as in 1972, but one-third of Gerard Freezer's outstanding stock. In addition, the fixed prices set by the 1964 agreements ensured that the corporation's capital would not be significantly diminished by the repurchase of the shares. Plaintiff maintains that the defendants' failure to disclose the existence of the 1964 agreements left him ignorant of the enhanced value of his shares and, hence, vulnerable to the scheme.

Although plaintiff seeks relief for transgressions allegedly committed in 1972, he neglected to commence this action until September, 1985. He seeks to justify this thirteen year delay by contending that he was completely unaware of his claim until November, 1983, when he first learned of the existence of the 1964 Stock Repurchase Agreements, and not actually on notice of his claim until May, 1985, when he discovered copies of the 1964 Stock Repurchase Agreements in the record of a lawsuit brought by his brothers against the corporation four years earlier. His position in response to defendants' limitations defense, therefore, is that his action did not accrue (or that the statute of limitations was tolled) until he found, or at least became aware of, the 1964 agreements.

The district court nevertheless granted defendants' renewed motion for summary judgment on November 7, 1986, resting its decision on alternative grounds. First, the court held that plaintiff's response to defendants' summary judgment motion did not conform to the requirements of District of Massachusetts Local Rule 18, which requires "a concise statement" of the disputed material facts together with references to the record. This failure led the court to treat as undisputed every fact listed in defendants' Local Rule 18 filing and to rule that, on those facts, plaintiff's action was barred by the statute of limitations. Second, the court held that, even considering only the facts expressly admitted by plaintiff, and construing those facts in the light most favorable to the plaintiff, no reasonable factfinder could find that plaintiff had commenced his action in a timely fashion. Having reviewed the materials presented to the district court, we fully agree with this second, broader conclusion and therefore have no occasion to address the dispute concerning the interpretation of Local Rule 18.

II. Propriety of Summary Judgment.

Under Federal Rule of Civil Procedure 56, summary judgment is appropriate if "there is no genuine issue as to any material fact and ... the moving party is entitled to judgment as a matter of law." Both sets of defendants filed statements of undisputed material facts with the district court to accompany their renewed motions for summary judgment. Plaintiff, however, did not respond by formally challenging the defendants' statements of facts. Instead, he first restated the "essential elements" of each fact identified by defendants as follows:

(a) Plaintiff understood that it had been his father's intention that his uncles' stock would be returned to Gerard Freezer following their deaths, and that control of the company would pass to the plaintiff, his brothers and their cousin, Roger Chomko;

(b) Plaintiff's brother Candeloro objected in 1968 that proposed issuances of new shares to his uncles would upset his father's plans;

(c) In 1972, plaintiff attended a meeting at which the shareholders discussed repurchase agreements covering all of the company's stock, pursuant to which the purchase price of plaintiff's shares would be $50,000;

(d) Certain of the defendants, including Leo Maggio, Peter Maggio, Candeloro Maggio, Jr., and Antonio Iovino, told plaintiff that he should not sell his Gerard Freezer shares;

(e) Plaintiff learned that his brother Candeloro was displeased about certain stock issuances as being contrary to their father's intentions;

(f) Plaintiff learned that his brothers had filed a lawsuit, and understood it to relate, among other things, to stock issuances that had been made contrary to his father's intentions;

(g) Plaintiff did not attempt to learn how his father's plans had been memorialized until May, 1985.

Plaintiff then admitted that he did not dispute any of these facts as recharacterized in his memorandum.

Even assuming that plaintiff's differences with defendants' initial version of these facts were sufficient to place certain issues in dispute, these disputed facts would preclude an award of summary judgment only if they were also material to the issue of whether the statute of limitations bars plaintiff's action. In his supplementary memorandum in opposition to defendants' renewed motions for summary judgment, plaintiff has essentially cited four factual differences that could be viewed as genuine issues of fact. ⁴ We therefore consider below the materiality of each of these potential factual disputes.

First, plaintiff disagrees with defendants' characterization of his knowledge of the 1968 stock issuance. Plaintiff admits hearing his brother voice disapproval of the stock issuance on the ground that it violated his father's intentions. He also admits participating in family conversations between 1972 and 1981 regarding whether his father's wishes had been compromised by the stock issuance. He claims, however, that defendants' version of these two facts improperly attributes to him the knowledge that the intentions violated by the 1968 stock issuance concerned the future control of Gerard, and thus the value of his stock. Plaintiff contends he knew only that the stock issuance was thought to violate his father's intentions for some unspecified reason relating to the ownership of Gerard Freezer as he had left it. In our view, this distinction--even if it amounts to a genuine factual dispute--is wholly immaterial. Plaintiff has explicitly admitted knowing that his father intended for...