Court of Chancery Holds Limitation Statutes Run From Notice Of Wrongful Act
Jacques Pomeranz, et al. v. Museum Partners, L.P., C.A. No. 20211, 2005 WL 217039 (Del. Ch. Jan. 24, 2005).
In this motion to dismiss opinion, the court examines whether the claims were tolled or untimely and held against the plaintiff. The plaintiff had instituted contract claims, fiduciary duty violation claims and a breach of the limited partnership agreement claim against the defendant-partners.
Plaintiffs brought several claims against defendant-partners including a breach of the limited partnership agreement by the purported withdrawal of partners and a claim for violation of fiduciary duties. The court analyzed whether a limitations defense could bar the claims as untimely or whether they were successfully tolled.
Holding that a limitations defense could be successfully raised on a motion to dismiss, the court observed that such a defense required an analysis of when the wrongful act accrued and the likely receipt of inquiry notice of it by the plaintiff. Holding that a claim accrues at the time of a wrongful act, the court further observed that the time for filing does not begin running until the plaintiff is on inquiry notice of that act. The court pointed out that the party asserting tolling bears the burden to demonstrate it, a burden that the plaintiffs failed to discharge.
In arriving at this holding, the court found that the plaintiffs had been put on that notice through a June 2000 partnership-renewal letter intending to extend the partnership and notice of its bleak financial status in October 2000.
The court emphasized that a plaintiff is not required to await receipt of all material facts before filing but is required by law to diligently inquire once wrongdoing is suspected. Accordingly, the court dismissed the delayed claims against two partner-defendants, but permitted claims against the other defendants to survive dismissal.