Rader v. Greenberg Traurig, LLP

• Decision Date: 23 June 2015
• Docket Number: No. 1 CA–CV 14–0299.,1 CA–CV 14–0299.
• Citation: Rader v. Greenberg Traurig, LLP, 237 Ariz. 433, 352 P.3d 465, 715 Ariz. Adv. Rep. 26 (Ariz. App. 2015)
• Parties: Robert and Katalin RADER, as individuals and as trustees for The Rader Family Trust dated September 6, 2002; Delbert and Heather Lewis, as individuals and as trustees for The Delbert R. Lewis Jr. Family Trust u/t/a dated December 31, 1997; Jane Bartelme, as an individual; Karen E. Lamb, as an individual and a trustee for The Karen E. Lamb Living Trust dated February 26, 2007; Mark Loberg, as an individual; David Stanton, as an individual and a trustee for The David Brian Stanton Revocable Trust dated August 25, 2004; Louis and Thelma Vazquez, as individuals; Walter J. Clarke, as an individual; Donald Fruchtman, as an individual; Tom and Nancy Lutz, as individuals; Susan Tharp and Michael Norman, as individuals and as trustees for The Norman Tharp Family Trust # 3 dated July 19, 2002; Jan Sterling, as an individual and a trustee for The Jan M. Sterling Living Trust dated January 4, 1995; David and Hanna Furst, as individuals and as trustees for the DHF Corporation Retirement Trust and the Furst Family Trust, Plaintiffs/Appellants, v. GREENBERG TRAURIG, LLP, a New York limited liability partnership, Defendant/Appellee.
• Court: Arizona Court of Appeals

237 Ariz. 433

352 P.3d 465

715 Ariz. Adv. Rep. 26

Robert and Katalin RADER, as individuals and as trustees for The Rader Family Trust dated September 6, 2002; Delbert and Heather Lewis, as individuals and as trustees for The Delbert R. Lewis Jr. Family Trust u/t/a dated December 31, 1997; Jane Bartelme, as an individual; Karen E. Lamb, as an individual and a trustee for The Karen E. Lamb Living Trust dated February 26, 2007; Mark Loberg, as an individual; David Stanton, as an individual and a trustee for The David Brian Stanton Revocable Trust dated August 25, 2004; Louis and Thelma Vazquez, as individuals; Walter J. Clarke, as an individual; Donald Fruchtman, as an individual; Tom and Nancy Lutz, as individuals; Susan Tharp and Michael Norman, as individuals and as trustees for The Norman Tharp Family Trust # 3 dated July 19, 2002; Jan Sterling, as an individual and a trustee for The Jan M. Sterling Living Trust dated January 4, 1995; David and Hanna Furst, as individuals and as trustees for the DHF Corporation Retirement Trust and the Furst Family Trust, Plaintiffs/Appellants

v.GREENBERG TRAURIG, LLP, a New York limited liability partnership, Defendant/Appellee.

No. 1 CA–CV 14–0299.

Court of Appeals of Arizona, Division 1.

June 23, 2015.

Johnson & Weaver, LLP, by Brett M. Weaver, Lrank J. Johnson, San Diego, Dessaules Law Group, by Jonathan A. Dessaules, Phoenix, Co–Counsel for Plaintiffs/Appellants.

Williams & Connolly LLP, By Kevin M. Downey, Kenneth C. Smurzynski, Colette T. Connor, Washington DC, Galbut & Galbut, P.C. By Martin R. Galbut, Michaile J. Berg, Phoenix, Co–Counsel for Defendant/Appellee.

Presiding Judge SAMUEL A. THUMMA delivered the opinion of the Court, in which Judge PATRICIA A. OROZCO and Judge MICHAEL J. BROWN joined.

OPINION

THUMMA, Judge:

¶ 1 Appellants challenge the superior court's dismissal of their claims against Greenberg Traurig, LLP as time-barred, asking this court to adopt cross-jurisdictional tolling. Because Appellants have not shown the superior court erred in granting Appellees' motion to dismiss, the dismissal is affirmed.

FACTS ¹ AND PROCEDURAL HISTORY

¶ 2 Mortgages Ltd., a now-bankrupt Arizona real estate investment company, solicited investors using private offering memoranda. In 2006, Mortgages Ltd. retained the law firm Greenberg Traurig to review and draft offering memoranda. Appellants claim they relied on these offering memoranda to invest in securities offered by Mortgages Ltd. between March 2006 and June 2008.

¶ 3 Scott M. Coles managed Mortgages Ltd. from 1997 until his suicide on June 2, 2008. Appellants allege that, “[b]y 2005, Mortgages Ltd. stood at the brink of bankruptcy” and, after issuance of an audit report for 2007, “Mortgages Ltd. was forced into bankruptcy” on June 20, 2008. On April 30, 2009, Appellants filed an action against the estate of Scott Coles in Maricopa County Superior Court. In December 2009, most Appellants entered into a written agreement with Greenberg Traurig tolling the application of “any statutes of limitations and/or any statutes of repose” against Greenberg Traurig from December 15, 2009 to December 15, 2010. This tolling agreement was not extended.

¶ 4 On May 11, 2010, Mortgages Ltd. investors filed a putative class action against Greenberg Traurig and others in the United States District Court for the District of Arizona, captioned Facciola v. Greenberg Traurig LLP, No. 10–CV–1025 (the Facciola Action). In March 2012, the putative class in the Facciola Action was certified and Appellants were class members. After discovery and motion practice, the court in the Facciola Action preliminarily approved a settlement reached with Greenberg Traurig. Appellants later filed a notice of intent to opt out of that settlement. On August 31, 2012, the same day the court in the Facciola Action “confirmed that [Appellants] had properly excluded themselves from” the class and the settlement with Greenberg Traurig, Appellants filed this action.

¶ 5 Appellants' complaint in this action asserted five claims against Greenberg Traurig: (1) primary statutory liability under Arizona Revised Statutes (A.R.S.) section 44–2003(A) (2015);² (2) aiding and abetting “common law securities fraud;” (3) aiding and abetting breach of fiduciary duty; (4) intentional misrepresentation and (5) negligent misrepresentation and nondisclosure.

Greenberg Traurig moved to dismiss, arguing Appellants' claims: (1) generally were subject to a two-year limitations period (with the intentional misrepresentation claim subject to a three-year limitations period); (2) accrued on Mortgage Ltd.'s June 20, 2008 bankruptcy; and (3) were time-barred, given this case was not filed until August 31, 2012. Appellants argued the limitations period was “tolled during the entire time that they were members of the Facciola ” Action (from May 11, 2010 until August 31, 2012), making their claims timely. After briefing and oral argument, the superior court rejected Appellants' tolling arguments and granted Greenberg Traurig's motion to dismiss, finding Appellants' claims were time-barred.

¶ 6 This court has jurisdiction over Appellants' timely appeal from the resulting judgment pursuant to the Arizona Constitution, Article 6, Section 9, and A.R.S. §§ 12–2101(A)(1) and –120.21(A)(1).

DISCUSSION

¶ 7 The sole issue on appeal is whether Arizona should adopt cross-jurisdictional tolling, whereby the filing of a class action in one jurisdiction tolls the limitations period for claims by class members in a different jurisdiction during the pendency of the class action. If cross-jurisdictional tolling does not apply, Appellants do not dispute that their claims are time-barred. Because this involves a purely legal issue, this court's review is de novo. US W. Commc'ns, Inc. v. Ariz. Corp. Comm'n, 201 Ariz. 242, 244 ¶ 7, 34 P.3d 351, 353 (2001) ; see also Andrews ex rel. Woodard v. Eddie's Place, Inc., 199 Ariz. 240, 241 ¶ 1, 16 P.3d 801, 802 (App.2000) (applying de novo review to grant of motion to dismiss claims as time-barred). To claim the benefit of tolling of a limitations period, “the burden is on the plaintiff to show the statute should be tolled.” Ulibarri v. Gerstenberger, 178 Ariz. 151, 155, 871 P.2d 698, 702 (App.1993) (citation omitted).

I. Intra–Jurisdictional And Cross–Jurisdictional Tolling.

¶ 8 Intra-jurisdictional tolling, whereby the filing of a class action may toll the limitations period for claims by class members in the same jurisdiction during the pendency of the class action, was first recognized in American Pipe & Constr. Co. v. Utah, 414 U.S. 538, 94 S.Ct. 756, 38 L.Ed.2d 713 (1974). See generally David Bober, Comment, Cross–Jurisdictional Tolling: When and Whether a State Court Should Toll Its Statute of Limitations Based on the Filing of a Class Action in Another Jurisdiction, 32 Seton Hall L.Rev. 617 (2002). In American Pipe, the State of Utah filed a timely putative class action alleging civil antitrust violations. 414 U.S. at 541–42, 94 S.Ct. 756. Several months later, the district court ruled the case could not proceed as a class action under Federal Rule of Civil Procedure 23 because the putative class was not “ ‘so numerous that joinder of all members was impracticable.’ ” Id. at 543, 94 S.Ct. 756 (citation omitted). Days later, purported members of the putative class moved to intervene as plaintiffs. Id. at 543–44, 94 S.Ct. 756. The district court, however, denied intervention, finding any claims by the putative interveners were time-barred. Id. at 544, 94 S.Ct. 756.

¶ 9 On those facts, the United States Supreme Court recognized what has become known as intra-jurisdictional tolling.

We hold that in this posture, at least where class action status has been denied solely because of failure to demonstrate that “the class is so numerous that joinder of all members is impracticable,” the commencement of the original class suit tolls the running of the statute for all purported members of the class who make timely motions to intervene after the court has found the suit inappropriate for class action status.

Id. at 552–53, 94 S.Ct. 756. American Pipe added that failing to recognize this type of tolling during the pendency of a putative class action where class certification was denied based on a lack of numerosity would create mischief and unnecessary litigation and “deprive Rule 23 class actions of the efficiency and economy of litigation which is a principal purpose of the procedure.” Id. at 553–54, 94 S.Ct. 756.

Potential class members would be induced to file protective motions to intervene or to join in the event that a class was later found unsuitable. In cases such as this one, where the determination to disallow the class action was made upon considerations that may vary with such subtle factors as experience with prior similar litigation or the current status of a court's docket, a rule requiring successful anticipation of the determination of the viability of the class would breed needless duplication of motions.

Id. Thus, American Pipe found “the rule most consistent with federal class action procedure must be that the commencement of a class action suspends the applicable statute of limitations as to all asserted members of the class who would have been parties had the suit been permitted to continue as a class action.” Id. at 554, 94 S.Ct. 756. American Pipe also noted that tolling was “in no way inconsistent with the functional operation of a statute of limitations” because the putative class action would put a defendant on notice even if class certification ultimately was denied. Id. at 554–55, 94 S.Ct. 756.

¶ 10 The United States Supreme Court later held that American Pipe tolling also applied to putative class members who, after the denial of class certification, timely filed a separate suit in the same court where the putative class action had been pending (sometimes called intra-jurisdictional tolling). See Crown, Cork & Seal Co. v. Parker, 462 U.S. 345, 353–54, 103 S.Ct. 2392...