10-1581-cv
     Int’l Strategies Grp., Ltd. v. Ness

 1                       UNITED STATES COURT OF APPEALS
 2
 3                           FOR THE SECOND CIRCUIT
 4
 5                              August Term, 2010
 6
 7
 8        (Argued: April 8, 2011           Decided: July 15, 2011)
 9
10                            Docket No. 10-1581-cv
11
12   - - - - - - - - - - - - - - - - - - - - -x
13
14   INTERNATIONAL STRATEGIES GROUP, LTD.,
15
16                     Plaintiff-Appellant,
17
18               - v.-
19
20   PETER S. NESS,
21
22                     Defendant-Appellee.
23
24   - - - - - - - - - - - - - - - - - - - -x
25
26         Before:           JACOBS, Chief Judge, CABRANES, Circuit
27                           Judge, KRAVITZ, District Judge.*
28
29         Plaintiff-Appellant International Strategies Group,

30   Ltd. appeals from a March 31, 2010 judgment of the United

31   States District Court for the District of Connecticut

32   (Chatigny, J.), granting Defendant-Appellee Peter Ness’s

33   motion to dismiss the complaint as untimely.         The claims,

34   alleging breach of fiduciary duty, intentional

           *
            The Honorable Mark R. Kravitz, of the United States
     District Court for the District of Connecticut, sitting by
     designation.
1    misrepresentation, negligent misrepresentation, and

2    conspiracy to commit those three offenses, arose from the

3    loss of a $4 million investment that the plaintiff made with

4    Ness’s employer.   We agree with the district court that the

5    claims are untimely and that tolling is unwarranted.

6    AFFIRMED.

 7                                 KATHLEEN C. STONE, Boston, MA, for
 8                                 Plaintiff-Appellant.
 9
10                                 ROBERT C. E. LANEY, (Claire E.
11                                 Ryan, on the brief), Ryan Ryan
12                                 Deluca LLP, Stamford, CT, for
13                                 Defendant-Appellee.
14
15   DENNIS JACOBS, Chief Judge:
16
17       Plaintiff International Strategies Group, Ltd. (“ISG”)

18   appeals from a March 31, 2010 judgment of the United States

19   District Court for the District of Connecticut (Chatigny,

20   J.), granting Defendant Peter Ness’s motion to dismiss as

21   untimely ISG’s complaint, which alleges breach of fiduciary

22   duty, intentional misrepresentation, negligent

23   misrepresentation, and conspiracy to commit those three

24   offenses.   ISG’s claims arose from the loss of a $4 million

25   investment it made with Ness’s employer, Corporation of the

26   BankHouse (“BankHouse”).   The district court ruled that

27   tolling of the untimely claims, on the basis of Ness’s



                                    2
1    continuing concealment, was unwarranted.   We affirm on the

2    ground that this lawsuit, commenced in April 2004, arises

3    from an injury suffered no later than June 2000, and is

4    therefore barred by the applicable statute of repose, Conn.

5    Gen. Stat. § 52-577.

6

7                               BACKGROUND

8        We recount only the facts that bear upon the issues

9    necessary to decide the appeal, and assume (as we must) that

10   all plausible allegations in ISG’s first amended complaint

11   are true.   Where appropriate, we take judicial notice of

12   filings from ISG’s related lawsuits.    See Scherer v.

13   Equitable Life Assurance Soc’y of the U.S., 

,

14   402 (2d Cir. 2003).

15        The defendant, Peter S. Ness, was the Vice President

16   of Corporate Finance at BankHouse, as well as an in-house

17   counsel and the head of the Greenwich office.   Ness was one

18   of a core group of senior executives for entities controlled

19   by James F. Pomeroy, II.   BankHouse, and several other

20   Pomeroy-controlled entities, purported to offer a

21   sophisticated investment opportunity but was in essence a

22   Ponzi scheme.


                                    3
1        Around April 1998, Pomeroy enticed ISG to invest $4

2    million with BankHouse by promising guaranteed profits of $2

3    million every twelve days for three months,1 with an express

4    covenant that invested funds would not be depleted.

5    Although Pomeroy assured ISG that profits were accruing as

6    expected, ISG’s funds were soon depleted through various

7    unauthorized transfers.

8        BankHouse prolonged the scheme by tantalizing ISG with

9    some or all of its notional profits--in the form of a $9

10   million promissory note.   Around October 1998, Ness and

11   Pomeroy proposed that ISG forgo the payment by note and

12   instead participate in another investment opportunity.     ISG

13   knew nothing about this proposed investment,2 but agreed

          1
            See App. at 68 (Funds Management Agreement).
     Although ISG did not attach the Funds Management Agreement
     to its complaint or its opposition to Ness’s motion to
     dismiss, it “reli[ed] on the terms and effect of [the
     agreement] in drafting the complaint” by alleging that the
     investment created fiduciary duties, see Chambers v. Time
     Warner, Inc., 

, 153 (2d Cir. 2002); it also
     filed the agreement in its suit against BankHouse, see
     Barber Aff. Ex. A, Int’l Strategies Grp., Ltd. v. Corp. of
     the BankHouse, Inc., No. 02-cv-10532 (D. Mass. May 15,
     2002). The agreement may therefore be considered in this
     appeal.
          2
            ISG’s pleadings are inconsistent as to whether it
     knew that funds would be transferred to another entity.
     Compare First Am. Compl. ¶ 25 (“[ISG] agreed to allow what
     it believed to be an augmented investment amount to be
     transferred to another entity, Swan Trust, for further
                                   4
1    nevertheless.   BankHouse then transferred $19 million of its

2    clients’ money to a foreign entity, Swan Trust, which

3    included any remnant of ISG’s investment.

4        The funds that BankHouse transferred to Swan Trust were

5    swiftly distributed (unlawfully) to third-party bank

6    accounts.   BankHouse concealed the depletion from ISG for a

7    time: In January 1999, Ness sent a memorandum informing

8    Chris Barber, a Managing Director of ISG, that funds

9    invested with Swan Trust were expected to yield profits of

10   200% to 300%, which would be disbursed to BankHouse by the

11   end of the month.3   At some point prior to June 2000,

12   however, ISG learned that Swan Trust had dissipated the

13   funds.   (ISG’s filings reflect an unimportant inconsistency

14   on the timing.4)


     investment.”), with Pl.’s Opp. to Def.’s Mot. to Dis. at 6
     (“At the time, ISG had no knowledge of Swan Trust . . . .”).
          3
            This and subsequent communications from Ness are
     properly considered because they were referenced (either
     specifically or as a course of conduct) in the complaint and
     were attached by ISG to its opposition to Ness’s motion to
     dismiss. First Am. Compl. ¶ 29; Pl.’s Opp. to Def.’s Mot.
     to Dis. Ex. E; cf. 

.
          4
            ISG’s complaint concedes knowledge of the dissipation
     only as of June 2000. First Am. Compl. ¶ 36. Its
     opposition to Ness’s motion to dismiss, however, admits
     knowledge since August 1999. Pl.’s Opp. to Def.’s Mot. to
     Dis. at 10; see also Complaint ¶ 90, Int’l Strategies Grp.,
     Ltd. v. Corp. of the BankHouse, Inc., No. 02-cv-10532 (D.
                                   5
1        The complaint alleges that BankHouse undertook (or

2    pretended to undertake) efforts to recover the funds from

3    Swan Trust, as a ploy to dissuade ISG from bringing a claim.

4    As part of the deception, ISG cites two memoranda that Ness

5    co-wrote to it in October 1999 (“the October 1999

6    Memoranda”), which optimistically described the recovery

7    efforts conducted by BankHouse’s attorneys and its “recovery

8    specialists,” but stressed the need for confidentiality.

9    See Pl.’s Opp. to Def.’s Mot. to Dis. Exs. F, G.    ISG was

10   lulled: Although the memoranda suggested an imminent

11   recovery, ISG waited for months while the recovery efforts

12   unfolded.

13       Approximately nine months later, ISG (and other

14   investors) accepted BankHouse’s suggestion to grant a power

15   of attorney to BankHouse’s outside counsel, A. John

16   Pappalardo, to act on its behalf in the recovery efforts.

17   Efforts by Pappalardo continued from mid-2000 through the

18   fall of 2001, during which time (as ISG alleges generally)

19   BankHouse and “its employees and agents” deceived ISG by

20   insisting “that they were doing everything feasible to


     Mass. Mar. 22, 2002).

          The discrepancy is unimportant because the result is
     the same even if the June 2000 date is used.
                                  6
1    recover the funds” and that independent action would

2    “interfere with [BankHouse’s] ability to recover on behalf

3    of the investors.”    First Am. Compl. ¶ 43.

4        On August 15, 2001, nearly two years after the October

5    1999 Memoranda he co-drafted, Ness faxed a single-page,

6    handwritten note (the “August 2001 Fax”) to Chris Barber of

7    ISG, in evident response to an inquiry by ISG:

 8            Chris--
 9
10                  •     Discussed your letter with Jim [Pomeroy]
11
12                  •     Will get letter to you ASAP from me (with
13                        John [Pappalardo] OK) or from John---
14
15                  •     We are proceeding with first steps of
16                        litigation ---
17
18                        Peter

19   Pl.’s Opp. to Def.’s Mot. to Dis. Ex. H.    ISG claims that it

20   first realized that the recovery efforts were futile (or

21   perhaps fictitious) after the promises in this fax went

22   unfulfilled.

23       After a few more months, ISG hired its own counsel to

24   recover its funds through litigation.    Several additional

25   months later, on March 22, 2002, ISG commenced a suit

26   against BankHouse, Pomeroy, and various other Pomeroy-




                                     7
1    controlled entities to recover its investment funds.5    Ness

2    was not named a defendant or mentioned in the complaint.

3    The defendants answered, but later ceased to defend.    After

4    more than two years of litigation, ISG won a default

5    judgment of over $10 million in damages and penalties.6

6        ISG’s inability to collect on its judgment triggered

7    additional lawsuits.   This suit was filed on April 27, 2004

8    in the United States District Court for the District of

9    Connecticut.   Three days later, a nearly identical suit was

10   filed in the United States District Court for the District

11   of Massachusetts against Stephen Heffernan, the Chief

12   Financial Officer of BankHouse, alleging (among other

13   claims) the same six causes of action as alleged in this

14   suit.7   Ness was not mentioned in the complaint.   The suit

15   against Heffernan was dismissed as untimely.8


          5
            See Complaint, Int’l Strategies Grp., Ltd. v. Corp.
     of the BankHouse, Inc., No. 02-cv-10532 (D. Mass. Mar. 22,
     2002).
          6
            See Amended Judgment, Int’l Strategies Grp., Ltd. v.
     Corp. of the BankHouse, Inc., No. 02-cv-10532 (D. Mass. June
     3, 2004).
          7
            See Complaint, Int’l Strategies Grp., Ltd. v.
     Heffernan, No. 04-10863 (D. Mass. Apr. 30, 2004).
          8
            See Memorandum of Decision, Int’l Strategies Grp.,
     Ltd. v. Heffernan, No. 04-10863 (D. Mass. July 30, 2004),
     ECF No. 11; App. at 60-63. The court ruled that the repose
                                   8
1        While this suit (against Ness) and the suit against

2    Heffernan were pending, ISG began suing third parties

3    involved in the transactions.       In May and June 2004, ISG

4    sued two banks involved in the transfers.9      In September

5    2004, ISG sued Pappalardo and his current and prior law

6    firms, claiming malpractice in connection with the power of

7    attorney it granted him.10   Pappalardo and the firms

8    prevailed on summary judgment: Each claim was held either

9    meritless (because no attorney-client relationship was

10   formed) or untimely.11


     period began in 1999, when ISG knew all the facts giving
     rise to its claim (after BankHouse and its CEO represented
     to ISG that its funds were about to be returned); under
     Massachusetts law, ISG’s knowledge that its funds were
     dissipated precluded tolling.
          9
            See Complaint, Int’l Strategies Grp., Ltd. v. ABN
     AMRO Bank N.V., No. 04-601604 (Sup. Ct. N.Y. County May 27,
     2004); Complaint, Int’l Strategies Grp., Ltd v. ABN AMRO
     Bank N.V., No. 04-601731 (Sup. Ct. N.Y. County June 7,
     2004). Ness is mentioned in only one paragraph in each
     complaint (concerning the $9 million promissory note). The
     cases, which were consolidated, have apparently been
     dismissed pursuant to a stipulated order.
          10
            See Complaint, Int’l Strategies Grp., Ltd. v.
     Greenberg Traurig, LLP, No. 04-cv-12000 (D. Mass. Sept. 16,
     2004). Ness was mentioned once in the complaint, in
     connection with the August 2001 Fax.
          11
            See Int’l Strategies Grp., Ltd. v. Greenberg
     Traurig, LLP, 

(1st Cir. 2007), aff’g on other
     grounds No. 04-cv-12000, 

(D.
     Mass. Jan. 30, 2006).
                                     9
1        After the other suits had concluded, the district court

2    in this case granted Ness’s motion to dismiss the action as

3    untimely, ruling that the limitations period began to run by

4    June 2000 and that tolling was unwarranted.

5

6                               DISCUSSION

7        We review de novo a district court’s dismissal of an

8    action under Fed. R. Civ. P. 12(b)(6) for failure to state a

9    claim.    Selevan v. N.Y. Thruway Auth., 

, 88 (2d

10   Cir. 2009).   To avoid dismissal, ISG’s allegations “must be

11   enough to raise a right to relief above the speculative

12   level.”   Bell Atl. Corp. v. Twombly, 

, 555

13   (2007).   Assuming all “well-pleaded factual allegations” to

14   be true and drawing all reasonable inferences in ISG’s

15   favor, we “determine whether [the allegations] plausibly

16   give rise to an entitlement to relief.”   Ashcroft v. Iqbal,

17   

, 1950 (2009).

18

19                                   I

20       Tort actions under Connecticut law are (with exceptions

21   not relevant here) subject to the three-year statute of

22   repose that “begins with the date of the act or omission


                                     10
1    complained of, not the date when the plaintiff first

2    discovers an injury.”   Piteo v. Gottier, 

,

3    445 (App. Ct. 2009) (internal quotation marks omitted); see

4    Conn. Gen. Stat. § 52-577; Barrett v. Montesano, 

   787, 794 (2004) (noting that Conn. Gen. Stat. § 52-577 is

6    among the statutes that the Connecticut Supreme Court has

7    referred to as “statutes of limitations” even though they

8    “technically function more like statutes of repose”).

9        ISG’s funds were unlawfully dissipated by June 2000,

10   the point by which ISG concedes knowledge of the dissipation

11   in the present complaint.   See First Am. Compl. ¶ 36.     The

12   present suit was filed on April 27, 2004, nearly four years

13   later.    ISG argues that its claims are nevertheless timely,

14   because Ness’s actions amounted to a “continuing course of

15   conduct” through August 2001, thereby “allowing [it] to

16   commence [its] lawsuit at a later date.”12   Sherwood v.

17   Danbury Hosp., 

, 203 (2000) (internal quotation


          12
            To the extent that ISG argues that Ness’s actions
     from 1999 to 2001 give rise to separate causes of action for
     misrepresentation and breach of fiduciary duty, it is
     duplicative of the “continuing course of conduct” argument.
     In any event, ISG did not raise this argument before the
     district court, and “[i]n general, a federal appellate court
     does not consider an issue not passed upon below.” See
     Booking v. Gen. Star Mgmt. Co., 

, 418 (2d Cir.
     2001) (internal quotation marks omitted).
                                    11
1    marks omitted).

2        At the threshold, Ness argues that a course of conduct

3    cannot toll the repose period beyond the plaintiff’s

4    discovery of the injury.   See, e.g., Rosato v. Mascardo, 82

, 405 (App. Ct. 2004).   The cases he cites

6    interpret a different statute of limitations (Conn. Gen.

7    Stat. § 52-584), one that contains a separate two-year

8    limitation triggered when an injury is “first sustained or

9    discovered.”   However, at least one Connecticut trial court

10   has indicated that this proposition from Rosato is

11   nevertheless equally applicable to § 52-577, and the

12   knowledge of the injury may well deny a plaintiff (with a

13   claim subject to that provision) the benefit of the

14   continuous course of conduct doctrine.   See Coss v. Stewart,

15   Civ. No. 08-5007541-S, 

, at *6 n.1 (Conn.

16   Super. Ct. Feb. 11, 2010), aff’d, 

(App.

17   Ct. 2011).   It is possible that the wording in Rosato may

18   signify only that the separate two-year limitation will

19   already have begun running at that point.   But we need not

20   resolve the issue, because even if the continuous course of

21   conduct doctrine were available for the period following the

22   discovery of the actionable harm, ISG has not plausibly


                                   12
1    alleged facts warranting its application.

2        “To support a finding of a ‘continuing course of

3    conduct’ . . . there must be evidence of the breach of a

4    duty that remained in existence after commission of the

5    original wrong related thereto.”    Fichera v. Mine Hill

6    Corp., 

, 209 (1988).    A plaintiff can show a

7    “duty that remained in existence” by establishing: (A) “a

8    special relationship between the parties giving rise to such

9    a continuing duty,” or (B) “some later wrongful conduct of a

10   defendant related to the prior act.”   

11

12                                  A

13       ISG’s conclusory claim that BankHouse’s “superior

14   knowledge, skill and expertise” and acceptance of ISG’s

15   funds created a fiduciary bond with Ness is not a plausible

16   allegation of a “special relationship between the parties”

17   giving rise to a continuing duty.   

see First Am.

18   Compl. ¶ 14.   The Connecticut Supreme Court recognizes that

19   “not all business relationships implicate the duty of a

20   fiduciary,” and that “certain relationships, as a matter of

21   law, do not impose upon either party the duty of a

22   fiduciary.”    Hi-Ho Tower, Inc. v. Com-Tronics, Inc., 255


                                    13


, 38 (2000).   Because the present suit is against

2    Ness in his personal capacity, the inquiry must focus on

3    ISG’s dealings with Ness rather than its dealings with other

4    BankHouse agents, or with the firm itself.

5        ISG does not allege that Ness had any role in the

6    solicitation of ISG’s investment, First Am. Compl. ¶ 13, or

7    that he presented himself as an investment manager.    ISG

8    merely claims that “from time to time” Ness “held himself

9    out as having experience and expertise in financial and

10   investment matters.”   First Am. Compl. ¶ 4.   Nor does ISG

11   claim that Ness offered to perform a key role in its

12   investing relationship with BankHouse or that he purported

13   to have superior knowledge about investments made by

14   BankHouse or ISG.   See Beverly Hills Concepts, Inc. v.

15   Schatz & Schatz, Ribicoff & Kotkin, 

, 57 (1998).

16   Absent a representation that Ness had “superior knowledge,

17   skill or expertise” or that he “sought the plaintiff’s

18   special trust,” there can be no breach of fiduciary duty

19   under Connecticut law.   

not BankHouse owed a

20   fiduciary duty to ISG, Ness’s fiduciary duties--if any--ran

21   to BankHouse by virtue of his officership.     See First Am.

22   Compl. ¶ 11.



                                    14
1

2                                   B

3           ISG has also not plausibly alleged that tolling is

4    warranted on account of “some later wrongful conduct . . .

5    related to the prior act” by Ness.    

   210.    Conclusory allegations are made about BankHouse and

7    its “employees and agents,” but the only alleged

8    misrepresentations attributed to Ness after 1999 are stray

9    remarks from the August 2001 Fax, most notably that “We are

10   proceeding with first steps of litigation.”    (Ness’s failure

11   to inform ISG of the repose period cannot establish a course

12   of conduct because, as discussed above, Ness had no special

13   relationship with ISG.)

14          A single-page, handwritten fax sent twenty months after

15   any other alleged misrepresentation by Ness does not

16   plausibly link up to form a continuous course of conduct.

17   If a plaintiff’s miscellaneous, discontinuous interactions

18   with a defendant over an extended period of time alone

19   justified tolling, it “would render the repose part of [a]

20   statute of limitations a nullity,” Nieves v. Cirmo, 

  App. 576, 587 (App. Ct. 2002), and “would, in effect, allow

22   the plaintiff to acquiesce in the defendant’s conduct for as


                                    15
1    long as convenient to the plaintiff, contrary to one of the

2    purposes of statutes of limitations, which is to prevent the

3    unexpected enforcement of stale claims concerning which the

4    persons interested have been thrown off their guard by want

5    of prosecution,” 

(internal

6    quotation marks omitted).

7        Moreover, Ness’s fax was not unprompted: It was

8    apparently in response to an inquiry by ISG.    App. at 164

9    (reflecting Ness’s assurance that he “[d]iscussed [ISG’s]

10   letter with Jim [Pomeroy]”).     A plaintiff does not have a

11   unilateral option to extend the repose period of its claims

12   merely by making an inquiry that can be expected to elicit a

13   reply.   Cf. Sanborn v. Greenwald, 

, 297

14   (App. Ct. 1995) (“A plaintiff should not be allowed to keep

15   a legal malpractice action alive after the lawyer-client

16   relationship has ended by telephoning the attorney every

17   three years to obtain verification that something the

18   attorney had drafted previously would not cause the

19   plaintiff harm.”).

20

21                               II

22       ISG argues that even if its claims were untimely, Ness


                                    16
1    should be equitably estopped from asserting a repose defense

2    because he discouraged ISG from pursuing its remedies.        Ness

3    cites our dicta concerning the unavailability of equitable

4    tolling under Conn. Gen. Stat. § 52-577 as establishing a

5    “well-settled” principle that equitable estoppel is

6    inapplicable as well.   Ness Br. at 11; Gerena v. Korb, 617

, 206 (2d Cir. 2010).        But that argument ignores the

8    differences between equitable tolling and equitable

9    estoppel.   See Bennett v. United States Lines, 

,

10   65-66 (2d Cir. 1995).   In any event, a recent Connecticut

11   Appellate Court case indicates that equitable estoppel may

12   be available under § 52-577.    See Coss v. Steward, 

  App. 30, 41-45 (App. Ct. 2011).

14       Equitable estoppel in Connecticut has two elements: (1)

15   “the party against whom estoppel is claimed must do or say

16   something calculated or intended to induce another party to

17   believe that certain facts exist and to act on that belief”;

18   and (2) “the other party must change its position in

19   reliance on those facts, thereby incurring some injury.”

20   Connecticut Nat’l Bank v. Voog, 

, 366 (1995)

21   (internal quotation marks omitted).       “[A] person who claims

22   an estoppel must show that he has exercised due diligence to


                                     17
1    know the truth, and that he not only did not know the true

2    state of things but also lacked any reasonably available

3    means of acquiring knowledge.”      

(internal

4    quotation marks omitted).

5        ISG has not plausibly alleged that it exercised due

6    diligence or changed its position based on Ness’s

7    representations.   The August 2001 Fax was vague, cursory,

8    informal, and otherwise without indicia of reliability.      A

9    diligent party would not have depended on it, at least not

10   without demanding reliable confirmation.     Moreover, the (at

11   least) twenty-month gap between the fax and Ness’s previous

12   alleged misrepresentations defeat any claim that ISG relied

13   upon Ness for periodic status updates to assess whether to

14   forbear bringing suit.    (To the contrary, ISG was relying on

15   Pappalardo to execute its recovery efforts through the power

16   of attorney it granted him.)

17       Under Connecticut law, ISG’s knowledge by June 2000

18   that its funds were dissipated necessarily informed it that

19   Ness’s earlier representations were untrue.     First Am.

20   Compl. ¶¶ 29, 32, 36.    ISG’s credulous faith in Ness’s

21   subsequent assurances fell well short of diligence;14 there

          14
            ISG argues that the district court improperly found
     facts concerning (inter alia) ISG’s sophistication, and
                                    18
1    is “no reason to encourage investors who suspect something

2    amiss to rely solely on their [advisor’s] advice and to

3    refrain from seeking outside advice.”   Piteo v. Gottier, 112

, 449 (App. Ct. 2009).    ISG “cannot seek the

5    safe harbor of equitable estoppel due to [its] own failure

6    to recognize that [it] w[as] required to pursue [its]

7    action.”   Celentano v. Oaks Condo. Ass’n, 

, 615

8    (2003).

9
10       For the foregoing reasons, the judgment of the district

11   court is affirmed .




     prematurely required it to prove due diligence. Since the
     record supports no plausible inference of due diligence
     (without regard to ISG’s level of sophistication), these
     arguments need not be reached.
                                   19