Plaintiff International Strategies Group, Ltd. ("ISG") appeals from a March 31, 2010 judgment of the United States District Court for the District of Connecticut (Chatigny, J.), granting Defendant Peter Ness's motion to dismiss as untimely ISG's complaint, which alleges breach of fiduciary duty, intentional misrepresentation, negligent misrepresentation, and conspiracy to commit those three offenses. ISG's claims arose from the loss of a $4 million investment it made with Ness's employer, Corporation of the BankHouse ("Bank-House"). The district court ruled that tolling of the untimely claims, on the basis of Ness's continuing concealment, was unwarranted. We affirm on the ground that this lawsuit, commenced in April 2004, arises from an injury suffered no later than June 2000, and is therefore barred by the applicable statute of repose, Conn. Gen.Stat. § 52-577.
We recount only the facts that bear upon the issues necessary to decide the appeal, and assume (as we must) that all plausible allegations in ISG's first amended complaint are true. Where appropriate, we take judicial notice of filings from ISG's related lawsuits. See Scherer v. Equitable Life Assurance Soc'y of the U.S., 347 F.3d 394, 402 (2d Cir.2003).
The defendant, Peter S. Ness, was the Vice President of Corporate Finance at BankHouse, as well as an in-house counsel and the head of the Greenwich office. Ness was one of a core group of senior executives for entities controlled by James F. Pomeroy, II. BankHouse, and several other Pomeroy-controlled entities, purported to offer a sophisticated investment opportunity but was in essence a Ponzi scheme.
Around April 1998, Pomeroy enticed ISG to invest $4 million with BankHouse by promising guaranteed profits of $2 million every twelve days for three months,
BankHouse prolonged the scheme by tantalizing ISG with some or all of its notional profits—in the form of a $9 million promissory note. Around October 1998, Ness and Pomeroy proposed that ISG forgo the payment by note and instead participate in another investment opportunity. ISG knew nothing about this proposed investment,
The funds that BankHouse transferred to Swan Trust were swiftly distributed (unlawfully) to third-party bank accounts. BankHouse concealed the depletion from ISG for a time: In January 1999, Ness sent a memorandum informing Chris Barber, a Managing Director of ISG, that funds invested with Swan Trust were expected to yield profits of 200% to 300%, which would be disbursed to BankHouse by the end of the month.
The complaint alleges that BankHouse undertook (or pretended to undertake) efforts to recover the funds from Swan Trust, as a ploy to dissuade ISG from bringing a claim. As part of the deception, ISG cites two memoranda that Ness co-wrote to it in October 1999 ("the October 1999 Memoranda"), which optimistically described the recovery efforts conducted by BankHouse's attorneys and its "recovery specialists," but stressed the need for confidentiality. See Pl.'s Opp. to Def.'s Mot. to Dis. Exs. F, G. ISG was lulled: Although the memoranda suggested an imminent recovery, ISG waited for months while the recovery efforts unfolded.
Approximately nine months later, ISG (and other investors) accepted Bank-House's suggestion to grant a power of attorney to BankHouse's outside counsel, A. John Pappalardo, to act on its behalf in the recovery efforts. Efforts by Pappalardo continued from mid-2000 through the fall of 2001, during which time (as ISG alleges generally) BankHouse and "its employees and agents" deceived ISG by insisting "that they were doing everything feasible to recover the funds" and that independent action would "interfere with [BankHouse's] ability to recover on behalf of the investors." First Am. Compl. ¶ 43.
On August 15, 2001, nearly two years after the October 1999 Memoranda he co-drafted, Ness faxed a single-page, handwritten note (the "August 2001 Fax") to Chris Barber of ISG, in evident response to an inquiry by ISG:
Pl.'s Opp. to Def.'s Mot. to Dis. Ex. H. ISG claims that it first realized that the recovery efforts were futile (or perhaps fictitious) after the promises in this fax went unfulfilled.
After a few more months, ISG hired its own counsel to recover its funds through
ISG's inability to collect on its judgment triggered additional lawsuits. This suit was filed on April 27, 2004 in the United States District Court for the District of Connecticut. Three days later, a nearly identical suit was filed in the United States District Court for the District of Massachusetts against Stephen Heffernan, the Chief Financial Officer of BankHouse, alleging (among other claims) the same six causes of action as alleged in this suit.
While this suit (against Ness) and the suit against Heffernan were pending, ISG began suing third parties involved in the transactions. In May and June 2004, ISG sued two banks involved in the transfers.
After the other suits had concluded, the district court in this case granted Ness's motion to dismiss the action as untimely, ruling that the limitations period began to run by June 2000 and that tolling was unwarranted.
We review de novo a district court's dismissal of an action under Fed.R.Civ.P. 12(b)(6) for failure to state a claim. Selevan v. N.Y. Thruway Auth., 584 F.3d 82, 88 (2d Cir.2009). To avoid dismissal, ISG's allegations "must be enough to raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544,
Tort actions under Connecticut law are (with exceptions not relevant here) subject to the three-year statute of repose that "begins with the date of the act or omission complained of, not the date when the plaintiff first discovers an injury." Piteo v. Gottier, 112 Conn.App. 441, 445, 963 A.2d 83 (App.Ct.2009) (internal quotation marks omitted); see Conn. Gen.Stat. § 52-577; Barrett v. Montesano, 269 Conn. 787, 794, 849 A.2d 839 (2004) (noting that Conn. Gen.Stat. § 52-577 is among the statutes that the Connecticut Supreme Court has referred to as "statutes of limitations" even though they "technically function more like statutes of repose").
ISG's funds were unlawfully dissipated by June 2000, the point by which ISG concedes knowledge of the dissipation in the present complaint. See First Am. Compl. ¶ 36. The present suit was filed on April 27, 2004, nearly four years later. ISG argues that its claims are nevertheless timely, because Ness's actions amounted to a "continuing course of conduct" through August 2001, thereby "allowing [it] to commence [its] lawsuit at a later date."
At the threshold, Ness argues that a course of conduct cannot toll the repose period beyond the plaintiff's discovery of the injury. See, e.g., Rosato v. Mascardo, 82 Conn.App. 396, 405, 844 A.2d 893 (App. Ct.2004). The cases he cites interpret a different statute of limitations (Conn. Gen. Stat. § 52-584), one that contains a separate two-year limitation triggered when an injury is "first sustained or discovered." However, at least one Connecticut trial court has indicated that this proposition from Rosato is nevertheless equally applicable to § 52-577, and the knowledge of the injury may well deny a plaintiff (with a claim subject to that provision) the benefit of the continuous course of conduct doctrine. See Coss v. Stewart, Civ. No. 08-5007541-S, 2010 WL 1050534, at *6 n. 1 (Conn.Super.Ct. Feb. 11, 2010), aff'd, 126 Conn.App. 30, 10 A.3d 539 (App.Ct.2011). It is possible that the wording in Rosato may signify only that the separate two-year limitation will already have begun running at that point. But we need not resolve the issue, because even if the continuous course of conduct doctrine were available for the period following the discovery of the actionable harm, ISG has not plausibly alleged facts warranting its application.
"To support a finding of a `continuing course of conduct' . . . there must be evidence of the breach of a duty that remained in existence after commission of the original wrong related thereto." Fichera v. Mine Hill Corp., 207 Conn. 204, 209, 541 A.2d 472 (1988). A plaintiff can show a "duty that remained in existence" by establishing: (A) "a special relationship
ISG's conclusory claim that Bank-House's "superior knowledge, skill and expertise" and acceptance of ISG's funds created a fiduciary bond with Ness is not a plausible allegation of a "special relationship between the parties" giving rise to a continuing duty. Id. at 210, 541 A.2d 472; see First Am. Compl. ¶ 14. The Connecticut Supreme Court recognizes that "not all business relationships implicate the duty of a fiduciary," and that "certain relationships, as a matter of law, do not impose upon either party the duty of a fiduciary." Hi-Ho Tower, Inc. v. Com-Tronics, Inc., 255 Conn. 20, 38, 761 A.2d 1268 (2000). Because the present suit is against Ness in his personal capacity, the inquiry must focus on ISG's dealings with Ness rather than its dealings with other BankHouse agents, or with the firm itself.
ISG does not allege that Ness had any role in the solicitation of ISG's investment, First Am. Compl. ¶ 13, or that he presented himself as an investment manager. ISG merely claims that "from time to time" Ness "held himself out as having experience and expertise in financial and investment matters." First Am. Compl. ¶ 4. Nor does ISG claim that Ness offered to perform a key role in its investing relationship with BankHouse or that he purported to have superior knowledge about investments made by BankHouse or ISG. See Beverly Hills Concepts, Inc. v. Schatz & Schatz, Ribicoff & Kotkin, 247 Conn. 48, 57, 717 A.2d 724 (1998). Absent a representation that Ness had "superior knowledge, skill or expertise" or that he "sought the plaintiff's special trust," there can be no breach of fiduciary duty under Connecticut law. Id. Whether or not BankHouse owed a fiduciary duty to ISG, Ness's fiduciary duties—if any—ran to BankHouse by virtue of his officership. See First Am. Compl. ¶ 11.
ISG has also not plausibly alleged that tolling is warranted on account of "some later wrongful conduct . . . related to the prior act" by Ness. Fichera, 207 Conn. at 210, 541 A.2d 472. Conclusory allegations are made about BankHouse and its "employees and agents," but the only alleged misrepresentations attributed to Ness after 1999 are stray remarks from the August 2001 Fax, most notably that "We are proceeding with first steps of litigation." (Ness's failure to inform ISG of the repose period cannot establish a course of conduct because, as discussed above, Ness had no special relationship with ISG.)
A single-page, handwritten fax sent twenty months after any other alleged misrepresentation by Ness does not plausibly link up to form a continuous course of conduct. If a plaintiff's miscellaneous, discontinuous interactions with a defendant over an extended period of time alone justified tolling, it "would render the repose part of [a] statute of limitations a nullity," Nieves v. Cirmo, 67 Conn.App. 576, 587, 787 A.2d 650 (App.Ct.2002), and "would, in effect, allow the plaintiff to acquiesce in the defendant's conduct for as long as convenient to the plaintiff, contrary to one of the purposes of statutes of limitations, which is to prevent the unexpected enforcement of stale claims concerning which the persons interested have been thrown off their guard by want of prosecution," Rivera v. Fairbank Management Properties, Inc., 45 Conn.Sup. 154, 160, 703 A.2d 808 (1997) (internal quotation marks omitted).
ISG argues that even if its claims were untimely, Ness should be equitably estopped from asserting a repose defense because he discouraged ISG from pursuing its remedies. Ness cites our dicta concerning the unavailability of equitable tolling under Conn. Gen.Stat. § 52-577 as establishing a "well-settled" principle that equitable estoppel is inapplicable as well. Ness Br. at 11; Gerena v. Korb, 617 F.3d 197, 206 (2d Cir.2010). But that argument ignores the differences between equitable tolling and equitable estoppel. See Bennett v. United States Lines, 64 F.3d 62, 65-66 (2d Cir.1995). In any event, a recent Connecticut Appellate Court case indicates that equitable estoppel may be available under § 52-577. See Coss v. Steward, 126 Conn.App. 30, 41-45, 10 A.3d 539 (App.Ct.2011).
Equitable estoppel in Connecticut has two elements: (1) "the party against whom estoppel is claimed must do or say something calculated or intended to induce another party to believe that certain facts exist and to act on that belief"; and (2) "the other party must change its position in reliance on those facts, thereby incurring some injury." Connecticut Nat'l Bank v. Voog, 233 Conn. 352, 366, 659 A.2d 172 (1995) (internal quotation marks omitted). "[A] person who claims an estoppel must show that he has exercised due diligence to know the truth, and that he not only did not know the true state of things but also lacked any reasonably available means of acquiring knowledge." Id. at 367, 659 A.2d 172 (internal quotation marks omitted).
ISG has not plausibly alleged that it exercised due diligence or changed its position based on Ness's representations. The August 2001 Fax was vague, cursory, informal, and otherwise without indicia of reliability. A diligent party would not have depended on it, at least not without demanding reliable confirmation. Moreover, the (at least) twenty-month gap between the fax and Ness's previous alleged misrepresentations defeat any claim that ISG relied upon Ness for periodic status updates to assess whether to forbear bringing suit. (To the contrary, ISG was relying on Pappalardo to execute its recovery efforts through the power of attorney it granted him.)
Under Connecticut law, ISG's knowledge by June 2000 that its funds were dissipated necessarily informed it that Ness's earlier representations were untrue. First Am. Compl. ¶¶ 29, 32, 36. ISG's credulous faith in Ness's subsequent assurances fell well short of diligence;
For the foregoing reasons, the judgment of the district court is affirmed.
The discrepancy is unimportant because the result is the same even if the June 2000 date is used.