Wuliger v. Owens, No. 3:03 CV 732.

• Decision Date: 18 April 2005
• Docket Number: No. 3:03 CV 732.
• Citation: 365 F.Supp.2d 838
• Parties: William T. WULIGER, Receiver, Plaintiff, v. Ronald K. OWENS, Defendant.
• Court: U.S. District Court — Northern District of Ohio

365 F.Supp.2d 838

William T. WULIGER, Receiver, Plaintiff, v. Ronald K. OWENS, Defendant.

No. 3:03 CV 732.

United States District Court, N.D. Ohio, Western Division.

April 18, 2005.

COPYRIGHT MATERIAL OMITTED

Roger J. Katz, Victor M. Javitch, Javitch, Block, Eisen & Rathbone, Cleveland, OH, for Plaintiff.

Richard S. Mitchell, Roetzel & Andress, Cleveland, OH, for Defendant.

MEMORANDUM OPINION

KATZ, District Judge.

I. BACKGROUND

Plaintiff William T. Wuliger ("Wuliger") commenced this action against Defendant for recovery of commissions in connection with the sale of viatical investments. This case is an outgrowth of the Liberte v. Capwill¹ litigation which has spawned related litigation both in the state and federal courts. The essence of this action contends that Defendant Jay Ronald K. Owens ("Owens") entered into an agent sales agreement whereby he solicited individuals to invest in viatical settlements offered by Alpha Capital Group ("Alpha"). In return for making these sales, Owens is alleged to have received approximately $118,381.39 in commissions.

Wuliger was appointed Receiver of Alpha in the fall of 2001. Thereafter, he was authorized by the Court in the Liberte action, in part, to:

[U]se his best judgment to protect the rights of Alpha investors and to discharge his duties in a manner calculated to preserve the greatest monetary recovery for the maximum number of all Alpha investors.

(Liberte, Doc. No. 1290.) One year later those responsibilities included the right to pursue actions against Liberte and Alpha agents and brokers. (Liberte, Doc. No. 1758.) More recently, the Court clarified the expanded role of both the General and Alpha Receivers, stating that:

[I]n keeping with the ultimate goal of maximizing the estates for the benefit of the investors, [the Receivers] are empowered to represent and pursue the interests of the investors directly. The Receivers shall further continue to carry out their duties and obligations as set forth by previous and existing Order of the Court. Finally, the Receivers shall continue to coordinate their efforts with class counsel to recover, protect and preserve receivership assets.

(Doc. No. 1982.)

Wuliger initiated this suit in April 2003 against Owens alleging the following claims: (1) violations of the 1933 Securities Act, 15 U.S.C. § 77; (2) violations of the Securities Exchange Act of 1934, 15 U.S.C. § 78 j; (3) violations under the Racketeer Influenced and Corrupt Organizations Act ("RICO")², 18 U.S.C. §§ 1962 and 1964© (4) common law fraud; (5) fraud in the inducement; (6) breach of contract; (7) unjust enrichment; (8) conversion; (9) breach of fiduciary duty/breach of covenant to act in good faith and fair dealing; and (10) intentional or negligent misrepresentation. Owens moves for dismissal pursuant to Fed.R.Civ.P. 12(b)(6).

II. MOTION TO DISMISS STANDARD

In deciding a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the function of the Court is to test the legal sufficiency of the complaint. In scrutinizing the complaint, the Court is required to accept the allegations stated in the complaint as true, Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 2232, 81 L.Ed.2d 59 (1984), while viewing the complaint in a light most favorable to the plaintiffs, Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974); Westlake v. Lucas, 537 F.2d 857, 858 (6th Cir.1976). The Court is without authority to dismiss the claims unless it can be demonstrated beyond a doubt that the plaintiff can prove no set of facts that would entitle it to relief. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957); Westlake, supra, at 858. See generally 2 JAMES W. MOORE, MOORE'S FEDERAL PRACTICE, § 12.34[1] (3d ed.2004).

III. STATUTE OF LIMITATIONS

A. Statute of Limitations as to Counts One and Two

In this action, the Defendant argues the federal securities claims are barred by the applicable statute of limitations/repose. The Receiver, however, contends he does not seek to bring this cause of action on behalf of the Alpha, which is presently defunct, but for the benefit of the Receivership estate. The Plaintiff, therefore, disclaims the Defendant's "stands in the shoes" doctrine and disavows application of the statute of limitations/repose defenses which might be ascribed to Alpha itself.

1. Receiver's Role Impacting on Statute of Limitations

Federal equity receivers are appointed to take control, custody, and/or management of property involved in litigation. It is generally recognized that a receiver may bring suit to "accomplish the objective of the suit for which he or her appointment was made, or under the specific directions of the appointing court, or pursuant to his general duties to receive, control, and manage the receivership property." 12 Charles Alan Wright, Arthur R. Miller & Richard L. Marcus, Federal Practice & Procedure § 2984 (2d ed.1997). See also, Javitch v. First Union Securities, Inc., 315 F.3d 619, 626 (6th Cir.2003) ("question depends on the authority granted by the appointing court and actually exercised by the receiver"); 65 Am.Jur.2d Receivers § 129 (2d ed) (powers of a receiver flow from statute, court rules, orders of appointment and subsequent orders of appointing court). By the same token "[a] receiver stands in the shoes of the person for whom he has been appointed and can assert only those claims which that person could have asserted." Armstrong v. McAlpin, 699 F.2d 79, 89 (2d Cir.1983).

The Receiver is correct that at the time he was appointed he did not stand in the shoes the Alpha investors. In fact, it was not until October 2002 that the Court authorized the Receiver as follows:

[A]ll claims against former agents and/or brokers of Alpha and Liberte for damages in contract or tort actions arising out of claims by investors are deemed to be assets of the receivership estates and must be filed by the Receivers, if at all.

Liberte, Doc. No. 1758. Therefore, until this authorization was in place, the Receiver properly contends that he was prohibited from asserting these securities violation claims. Stated differently, until the grant of express authorization of the Court, the securities violations alleged herein could only have been asserted by the investors themselves.

There is no basis in law which allows circumvention of the applicable statute of limitations in situations where a non-governmental receiver is appointed by the court. See 1 CLARK ON RECEIVERS § 268.1 (3d ed.1959) (generally the "mere appointment of a receiver does not in any way affect the running of the statute of limitations"). Arguments of a similar nature were rejected by the district court in Friedlob v. Trustees of the Alpine Mut. Fund Trust, 905 F.Supp. 843 (D.Colo.1995). There a receiver of an investment trust brought suit against former administrators, contending securities violations under both the 1933 and 1934 Acts. In opposing summary judgment, the receiver opposed application of the one year statute of limitations and three year statute of repose under §§ 77m and 78j(e). After finding tolling principles inapplicable, the court rejected the receiver's attempt to characterize his status as on par with that of the SEC in an enforcement action. Id. at 852³. The district court determined that the one year statute of limitations and three year statute of repose were applicable to the court appointed receiver. Id. at 853.

Absent any authority which allows circumvention of the applicable statute of limitations, the Receiver's arguments advocating their commencement contemporaneous with his appointment are without merit. The Court next turns to whether commencement of this action was outside the statute of limitations and/or statute of repose.

2. Statutes of Limitations Relative to Securities Claims (Counts 1 and 2)

The starting point for this analysis begins with the relevant statute. Regarding statutory construction, the Sixth Circuit has set forth the following guidelines:

"In all cases of statutory construction, the starting point is the language employed by Congress." Appleton v. First Nat'l Bank of Ohio, 62 F.3d 791, 801 (6th Cir.1995). Moreover, where "the statute's language is plain, the sole function of the courts is to enforce it according to its terms." United States v. Ron Pair Enterprises, Inc., 489 U.S. 235, 241, 109 S.Ct. 1026, 103 L.Ed.2d 290 (1989) (citation and internal punctuation omitted).

Chapman v. Higbee Co., 319 F.3d 825, 829 (6th Cir.2003), cert. denied, ___ U.S. ___, 124 S.Ct. 2902, 159 L.Ed.2d 827 (2004). It is only when "a literal interpretation would lead to internal inconsistencies, an absurd result, or an interpretation inconsistent with the intent of Congress" that a court may "look beyond the language of the statute." Dorris v. Absher, 179 F.3d 420, 429 (6th Cir.1999), citing United States v. Turkette, 452 U.S. 576, 580, 101 S.Ct. 2524, 69 L.Ed.2d 246 (1981).

The statute of limitations applicable to the claim under the 1933 Act is set forth at 15 U.S.C. § 77m, which states as follows:

No action shall be maintained to enforce any liability created under section 77k or 77 l (a)(2) of this title unless brought within one year after the discovery of the untrue statement or the omission, or after such discovery should have been made by the exercise of reasonable diligence, or, if the action is to enforce a liability created under section 77 l (a)(1) of this title, unless brought within one year after the violation upon which it is based. In no event shall any such action be brought to enforce a liability created under section 77k or 77l(a)(1) of this title more than three years after the security was bona fide offered to the public, or under section 77l(a)(2) of this title more than three years after the sale.

(Emphasis added.) In Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, 501 U.S. 350, 111 S.Ct. 2773, 115 L.Ed.2d 321 (1991), the...