Siskin v. Koral
Filed 10/2/13 Siskin v. Koral CA2/4
PUBLISHED IN THE OFFICIAL REPORTS
California
Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or
relying on opinions not certified for publication or ordered published, except
as specified by rule 8.1115(b). This
opinion has not been certified for publication or ordered published for
purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FOUR
JANE
SISKIN,
Plaintiff and Appellant,
v.
PETER
KORAL et al.,
Defendants and Respondents.
B241715
(Los Angeles County
Super. Ct. No. BC462606)
APPEAL from a
judgment of the Superior Court of
County, Michelle R. Rosenblatt, Judge. Affirmed.
Brown George
Ross, Peter W. Ross, Sylvia P. Lardiere, and Lori Sambol Brody for Plaintiff
and Appellant.
Kelley Drye
& Warren, Andrew M. White, David E. Fink, and Eric W. May for Defendants
and Respondents.
__________________________________
Jane Siskin appeals from a
granting summary judgment in favor of respondents Peter Koral (Koral) and
L’Koral Incorporated (L’Koral).
Appellant contends the trial court erred in determining that her causes
of action were time-barred by the applicable statutes of limitations. Finding no
Appellant
began working for Koral in 1994. In
2005, she became a 9.91 percent shareholder of L’ Koral; Koral owned the
remaining 90.09 percent. At the
beginning of 2005, appellant was the president of sales for L’Koral, and Koral
was its chief executive officer. L’Koral
was in the business of designing, manufacturing, and distributing apparel
throughout the United States.
It had two divisions: one
division manufactured and sold expensive blue jeans and related apparel under
the trade name “Seven for All Mankind†(the Seven Division); the other
manufactured more moderately priced apparel (the Moderate Division). Later that same year, L’Koral spun off the
Seven Division to a subsidiary known as Seven for All Mankind, LLC (Seven,
LLC). Shortly thereafter, on March
1, 2005,
L’Koral sold 50 percent of Seven, LLC to Bear Stearns. Appellant received her pro rata share of the
sale proceeds.
Shortly after
the sale to Bear Stearns, appellant entered into negotiations to sell her
ownership interest back to L’Koral. On April
30, 2007,
appellant signed an agreement (the Redemption Agreement) to sell her 9.91
percent ownership interest in L’Koral for approximately $4.2 million and a 30
percent share of the Moderate Division, which was spun off into a separate
entity. As a result of the sale, Koral
became the sole owner of L’Koral. Four
months later, on August 31, 2007, L’Koral and Bear Stearns sold
Seven, LLC to VF Corp. (VFC) for approximately $773.1 million (the VF
Sale). Appellant remained a business
partner of Koral until October 2009, when she bought out Koral’s 70 percent
interest in the Moderate Division.
In 2010, the
Internal Revenue Service (IRS) conducted an audit of L’Koral’s tax accounting
of the 2007 Redemption Agreement.
Appellant was told that “the IRS found improbable L’Koral Inc.’s
assertion that my interest in L’Koral Inc. was purchased for only $4.2 million,
when the VF Sale took place just four months thereafter and, according to the
IRS, established that my interest was much more valuable.†In the course of the IRS audit, in February
2011, a representative of Koral admitted to appellant’s representative that the
negotiations between L’Koral, Bear Stearns, and VFC for the sale of Seven, LLC
began within days of appellant’s signing the Redemption Agreement.
On May
27, 2011,
appellant filed a complaint against respondents, alleging causes of action for
intentional misrepresentation, concealment, and negligent misrepresentation. Appellant alleged that she entered into
negotiations to sell her ownership interest in L’Koral based upon Koral’s
representations that L’Koral was unlikely to sell the balance of its interest
in Seven, LLC any time soon, and that any such sale would take place, if at
all, many years in the future. She
further alleged that in early 2007, Koral was “heavily†pressuring her to sell
her ownership interest, even “threaten[ing] that, unless she did so immediately,
he would simply shut down the Moderate Division.†Before finally agreeing to
sell her ownership interest in April 2007, appellant alleged that she sought
and obtained Koral’s assurances that “no plans were in the offing to sell the
balance of Seven, LLC; no discussions regarding such a sale were underway; and
any possibility of such a sale remained years distant.†Based upon these assurances, appellant sold
her ownership interest back to L’Koral.
Appellant also
alleged that “[i]mmediately after learning of the VF Sale, Siskin confronted
Koral and asked whether this deal had been under discussion or contemplated in
any way prior to the execution of the Redemption Agreement on April 30,
2007. Koral assured Siskin that it had
not. He told her the discussions between
L’Koral, Inc., Bear Stearns and VF had not commenced until some months after
the Redemption Agreement had closed.â€
Appellant sought to recover approximately $34 million from respondents,
the difference between what she had received for her shares and what she would
have received had she not sold her shares four months earlier.
Subsequently,
appellant served a document subpoena on VFC.
In response, VFC produced (1) a confidentiality agreement between VFC
and Seven, LLC on May 14, 2007, (2) a letter of intent for the VF Sale signed
June 15, 2007, and (3) a transcript of a deposition taken in June 2009 in an
unrelated action, in which Koral testified that his intention as of March 2005
was to sell Seven, LLC within three years.
Appellant also
served a document subpoena on Irving Place Capital Management, L.P. (IPC), the
successor to Bear Stearns. IPC informed
appellant that it could not locate any responsive records, as Bear Stearns had
been sold to JP Morgan Chase in May 2008.
“As a result . . . , IPC simply does not have, in
its possession, custody or control, all of [Bear Stearns’s] electronic
documents and communications.â€
On September
8, 2011,
appellant filed a first amended and supplemental complaint, which added
allegations related to the documents produced by VFC. Specifically, she alleged that in a June
2, 2009
deposition, Koral testified that, at the time of the sale of 50 percent of
Seven, LLC to Bear Stearns on March 1, 2005, he had “a plan to sell the rest of
Seven within three years.†As to the sale of Seven, LLC to VFC,
appellant alleged that “[a] Confidentiality Agreement was signed between VF and
Seven on May 14, 2007, just two weeks after Siskin signed
the Redemption Agreement. A Letter of
Intent for the VF Sale was signed one month later, on June
15, 2007.â€
After filing
an answer generally denying the allegations and raising the affirmative defense
of statute of limitations, respondents filed a motion for
of appellant’s claims were time-barred as a matter of law. Respondents asserted that in verified
discovery responses, appellant had stated that she first learned of the VF Sale
“just a few days before that transaction was reported by the press in late
August 2007.†Appellant also admitted
that she “confronted†Koral regarding the timing of the VF Sale within one week
of learning of it, and that she conducted no investigation other than that
inquiry. Thus, respondents asserted,
appellant was on inquiry notice in August 2007.
Unless the statute of limitations was tolled or Koral was estopped from
asserting it as a defense, appellant’s claims for intentional misrepresentation
and concealment expired in August 2010, and her claim for negligent
misrepresentation expired in August 2009.
Respondents
also contended that appellant could not show the applicable statutes of
limitations were tolled. They argued
that a reasonable and diligent investigation would have revealed information
indicating that Koral likely misled appellant in April 2007. They asserted that appellant could have
contacted VFC and Bear Stearns to inquire about the timing of the negotiations
for the VF Sale, as the contact information for the parties and their attorneys
was publicly available. They noted that
VFC produced the transactional documents and deposition transcript immediately
after appellant requested them from VFC.
Respondents also submitted a Form 8-K filed by VFC with the Securities
and Exchange Commission (SEC) on July 26, 2007.
In the publicly available Form 8-K, VFC included a July 26, 2007
“Agreement and Plan of Merger By and Among VF Corporation, Ring Company, Ring
Five LLC, Seven For All Mankind, LLC, and Certain Unitholders†(the Purchase
Agreement), and a press release announcing the purchase. The Purchase Agreement included the contact
information for VFC, Bear Stearns, L’Koral, and Koral, and for their respective
attorneys.
Appellant
opposed the motion for summary judgment, contending that the reasonableness of
her investigation was a question of fact that could not be decided on summary
judgment. She argued that her duty to
investigate Koral’s representations was relaxed because Koral was her fiduciary
and a long-time business partner. In a
declaration, appellant stated that after learning of the VF Sale, she asked
Koral whether the sale had been under discussion or contemplated prior to the
execution of the Redemption Agreement on April 30, 2007.
Koral assured her that it had not; rather, he represented, the
discussion between L’Koral, Bear Stearns and VFC had commenced months
later. Appellant asserted that: “I trusted Koral and accepted his word on the
matter. I had no reason to disbelieve
him. He had been my business partner for
thirteen years. He remained my business
partner until two years later (October 2009), when my current partner and I
bought defendants’ controlling interest in the Moderate Division. Further, I was not aware of any means
available to me to investigate or challenge his assurances. I had no information available to me that
would have established that Koral was lying.â€
Appellant further contended that
neither VFC nor Bear Stearns would have provided information voluntarily to
her; VFC had produced the documents during the discovery process. Appellant also filed evidentiary objections
to respondents’ assertion that “[c]opious information about the VF Sale,
including numerous documents and contact information for multiple parties
involved in the VF Sale and their attorneys has been available to the public
since July 26, 2007.â€
Respondents filed a reply, contending
that appellant’s investigation was not diligent or reasonable as a matter of
law, because she did nothing to investigate whether Koral had misled her, other
than confronting him. They also filed
evidentiary objections to two assertions in appellant’s declaration -- that she
was not aware of any means available to her to investigate Koral’s
representations when she confronted him after the VF Sale, and that she had no
information available to determine whether Koral was then lying to her.
On April 26,
2012, the trial court granted respondents’ motion for summary judgment,
overruled appellant’s evidentiary objections, and sustained respondents’
evidentiary objections. The court held
that appellant was on inquiry notice of her claims in late August 2007, as by
that time, appellant had a suspicion of wrongdoing. As the court characterized it, “what the
complaint and Siskin describe in late August 2007 can be boiled down to her
inquiring as to whether or not Defendant Koral had lied to her [in
April].†The court determined that
appellant could not avail herself of the delayed discovery rule because “she
did not actually conduct an investigation of whether or not Koral was lying to
her beyond taking Koral’s word that he did not lie to her.†For the same reason, appellant was not
entitled to the tolling of the applicable statutes of limitations under the
fraudulent concealment doctrine. In
addition, the court found appellant’s assertion that VFC and Bear Stearns would
not have cooperated with her requests for documents in August 2007 was
speculative and unsupported by evidence.
A judgment of
dismissal of appellant’s amended and supplemental complaint was entered May 17,
2012. Appellant timely appealed.
DISCUSSION
Appellant contends the
trial court erred in determining that she was on inquiry notice of her claims
in August 2007. She disputes the court’s
determination that she was not entitled to tolling of the applicable
limitations period under the fraudulent concealment doctrine. Finally, she challenges the trial court’s
evidentiary ruling that struck two assertions in her declaration -- that she
was not aware of any means to investigate Koral’s representations in
August/September 2007, and that she had no information available to determine
whether he was then lying to her.
A. Standard
of Review
“A defendant is entitled to summary
judgment if the record establishes as a matter of law that none of the plaintiff’s
asserted causes of action can prevail.
[Citation.]†(
Cal.3d 1092, 1107.) Generally, “the
party moving for summary judgment bears an initial burden of production to make
a prima facie showing of the nonexistence of any triable issue of material
fact; if he carries his burden of production, he causes a shift, and the
opposing party is then subjected to a burden of production of his own to make a
prima facie showing of the existence of a triable issue of material fact.†(Aguilar
v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850.) In moving for summary judgment, “all that the
defendant need do is to show that the plaintiff cannot establish at least one
element of the cause of action -- for example, that the plaintiff cannot prove
element X.†(Id.
at p. 853.)
“‘Review of a
summary judgment motion by an appellate court involves application of the same
three-step process required of the trial court.
[Citation.]’†(
(1995) 35 Cal.App.4th 1654, 1662.) The
three steps are (1) identifying the issues framed by the complaint, (2)
determining whether the moving party has made an adequate showing that negates
the opponent’s claim, and (3) determining whether the opposing party has raised
a triable issue of fact. (
“Although we
independently review the grant of summary judgment [citation], our inquiry is
subject to two constraints. First, we
assess the propriety of summary judgment in light of the contentions raised in
[appellant’s] opening brief.
[Citation.] Second, to determine
whether there is a triable issue, we review the evidence submitted in
connection with summary judgment, with the exception of evidence to which
objections have been appropriately sustained.
[Citations.]†(
USA, Inc. (2012) 209 Cal.App.4th 1118, 1124.)
B. Accrual of Causes of Action
Appellant
alleged three causes of action in her complaint: intentional
misrepresentation, concealment, and negligent misrepresentation. The first two causes of action are governed by
the three-year limitations period set forth in California Code of Civil
Procedure section 338, subdivision (d).
(§ 338, subd. (d) [fraud claims]; Alfaro
v. Community Housing Improvement System & Planning Assn., Inc. (2009)
171 Cal.App.4th 1356, 1391.) The cause
of action for negligent misrepresentation is governed by the two-year
limitations period set forth in section 339.
(§ 339 [claims upon an obligation or liability not based on a writing];
(2007) 153 Cal.App.4th 1308, 1316.)
Generally, the
limitations period starts running when the last element of a cause of action is
complete. (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 806 (
As used in this context, the “‘elements’†of a cause of action are the
“‘generic’†elements of wrongdoing, causation, and injury. (Id.
at p. 807.) Here, the wrongdoing that
formed the basis for appellant’s causes of action were Koral’s alleged
misrepresentations in April 2007.
According to the complaint, Koral made three misrepresentations: (1) that “no plans, were in the offing to
sell the balance of Seven[, LLC]â€; (2) that “no discussions regarding such a
sale were underwayâ€; and (3) that “any possibility of such a sale remained
years distant.†Appellant contended
these misrepresentations caused her injury, as she would not have sold her 9.91
percent ownership interest in L’Koral had she known the representations were
false. Finally, appellant alleged she
suffered an economic injury as a result of the alleged misrepresentations when
Seven, LLC was sold in August 2007; she contends she would have made over $38 million
from the VF Sale had she kept her ownership interest.
In their
motion for summary judgment, respondents made an adequate showing that
appellant’s causes of action were time-barred as a matter of law. On the face of her complaint, appellant’s
causes of action accrued in August 2007, when the last element of her causes of
action was completed. However, the
applicable statutes of limitations here codified the “‘discovery rule,’ which
postpones accrual of a cause of action until the plaintiff discovers, or has
reason to discover, the cause of action.â€
(Fox, supra, 35 Cal.4th at p. 807 [“The discovery rule only delays
accrual until the plaintiff has, or should have, inquiry notice of the cause of
action.â€].) For example, section 339
provides that a negligent misrepresentation cause of action “shall not be
deemed to have accrued until the discovery of the loss or damage suffered by
the aggrieved party thereunder.â€
Similarly, section 338, subdivision (d) provides that a cause of action
on a fraud claim “is not deemed to have accrued until the discovery, by the
aggrieved party, of the facts constituting the fraud.†As our Supreme Court has explained, “[t]he
Legislature, in codifying the discovery rule,
has . . . required plaintiffs to pursue their claims
diligently by making accrual of a cause of action contingent on when a party
discovered or should have discovered
that his or her injury had a wrongful cause.â€
(Fox, supra, 35 Cal.4th at p. 808; see also Dias v. Nationwide Life Ins. Co. (E.D. Cal. 2010) 700 F.Supp.2d
1204, 1222 (Dias) [“The limitations
period for fraud . . . incorporates the ‘delayed discovery
rule.’â€]; Doe v. Roman Catholic Bishop of
Sacramento (2010) 189 Cal.App.4th 1423, 1430-1431 [concealment claim
accrues on inquiry notice].)
name="_ftnref2" title="">[2]
“[T]he statute of limitations begins
to run when the plaintiff suspects or should suspect that her injury was caused
by wrongdoing, that someone has done something wrong to her.†(Jolly
v. Eli Lilly & Co. (1988) 44 Cal.3d 1103, 1110 (Jolly).) The plaintiff has
reason to suspect when she has notice or information of circumstances to put a
reasonable person on inquiry. The
plaintiff need not know the specific facts necessary to establish the cause of
action. Rather, the plaintiff must seek
to learn the facts necessary to bring the cause of action in the first place;
she cannot “‘sit’†on her rights. (
383, 398 (Norgart); see also
1369, 1374 [“[D]iscovery†in the context of the accrual of a fraud claim occurs
“when the plaintiff suspected or should have suspected that an injury was
caused by wrongdoingâ€].) “In other
words, plaintiffs are required to conduct a reasonable investigation after
becoming aware of an injury, and are charged with knowledge of the information
that would have been revealed by such an investigation.†(Fox,
supra, 35 Cal.4th at pp.
807-808.)
“While
resolution of the statute of limitations issue is normally a question of fact,
where the uncontradicted facts established through discovery are susceptible of
only one legitimate inference, summary judgment is proper.†(Jolly,
also Norgart, supra, 21 Cal.4th at p. 405 [affirming summary judgment on statute
of limitations ground]; Gutierrez v.
Mofid (1985) 39 Cal.3d 892, 902-903 [same]; Sanchez v. South Hoover Hospital (1976) 18 Cal.3d 93, 103
[same].)
C. Inquiry Notice
As our Supreme Court has held, “the
statute of limitations begins to run when the plaintiff suspects or should
suspect that her injury was caused by wrongdoing, that someone has done
something wrong to her.†(Jolly,
undisputed facts is that appellant actually suspected Koral had done something
wrong in August 2007. Appellant alleged
that Koral pressured her heavily to sell her shares in early 2007, even
threatening to shut down the Moderate Division if she did not sell
immediately. Before agreeing to sell in
April 2007, she sought and obtained Koral’s assurances that [1] “no plans were
in the offing to sell the balance of Seven[, LLC];
[2] . . . no discussions regarding such a sale were
underway; and [3] . . . any possibility of such a sale
remained years distant.†It is
undisputed that a mere four months later, Koral and Bear Stearns sold Seven,
LLC to VFC for nine times the value appellant had received from L’Koral. Immediately after learning of the sale,
appellant -- in the words of her complaint -- “confronted Koral†and asked him
whether discussions regarding the sale had been underway or contemplated prior
to April 30, 2007. The only legitimate
inference from these undisputed facts is that in August 2007, appellant
suspected that Koral had lied to her in April 2007 and caused her to suffer an
economic loss.
Appellant contends that it is
reasonable to infer that in August 2007, she had no suspicion that Koral had
lied to her, because (1) she believed in and trusted him, based upon their
lengthy business partnership; (2) the timing of the VF Sale did not
conclusively establish that Koral had lied to her in April 2007, as the VF
opportunity might have arisen after April 30, 2007; and (3) Koral owed a
fiduciary duty to appellant to disclose his intent to sell Seven, LLC. Appellant’s contentions do not obviate the
fact that she confronted Koral to inquire whether the negotiations to sell
Seven, LLC to VFC had been underway or contemplated before April 30, 2007 --
conduct irreconcilable with her current claim that she trusted him, believed
that the timing of the VF Sale was not inherently suspicious, and relied on the
fiduciary relationship between them.
Rather, the only legitimate inference is that despite her later
assertions, appellant was suspicious of Koral’s wrongdoing in August 2007, and
acted upon her suspicions by asking him about the timing of the negotiations to
sell Seven, LLC. As the trial court
aptly observed, appellant’s conduct amounted to “inquiring as to whether or not
Defendant Koral had lied to her.†Her
inquiry evinced an understandable suspicion as to the truth of Koral’s April
representations. In short, the evidence
establishes that upon learning of the VF Sale in August 2007, appellant
suspected that Koral had wronged her in August 2007; her causes of actions
accrued at that time.
Even were we to find a triable issue
of fact existed as to her actual suspicion, we would conclude that a reasonable
person in appellant’s position “should have suspected that an injury was caused
by wrongdoing.†(Kline v. Turner, supra,
87 Cal.App.4th at p. 1374.) No
reasonable person would have placed much trust in Koral based upon, in
appellant’s words, “the fact that he had treated her fairly in the past.†Months before the sale, Koral had heavily
pressured appellant to sell her shares, including using economic threats. In addition, although appellant now argues
she received what seemed like a fair price for her ownership interest in April
2007, it could not have appeared nearly so fair in August after the VF sale,
when what had been her minority interest sold for nine times the price she had
received only four months earlier.
Likewise, no reasonable person would
have found the timing of the VF Sale innocuous.
The sale of Seven, LLC in August 2007 established that Koral’s third
April representation -- that any sale would occur years in the future -- was
wrong, and cast doubt on the truthfulness of the other two
representations. Koral had represented
that he did not intend to sell Seven, LLC in the near future; yet a mere four
months later, he had secured a buyer, negotiated a deal satisfactory to the
company’s other shareholder, and closed a sale involving three-quarters of a
billion dollars.
Finally, a reasonable person would
have been suspicious in August 2007, despite the fiduciary relationship that
existed when Koral made his three representations in April 2007. As stated in Hobbs v. Bateman Eichler, Hill Richards, Inc. (1985) 164 Cal.App.3d
174, 201-202 (Hobbs), “[w]here a
fiduciary relationship exists, facts which ordinarily require investigation may
not incite suspicion [citation] and do not give rise to a duty of inquiry
[citation].†However, “once a plaintiff
becomes aware of facts which would make a reasonably prudent person suspicious,
the duty to investigate arises and the plaintiff may then be charged with knowledge
of the facts which would have been discovered by such an investigation.†(Id.
at p. 202, italics omitted; Lee v. Escrow
Consultants, Inc. (1989) 210 Cal.App.3d 915, 921 (Lee) [same].) While
appellant may have been entitled to rely on Koral’s representations in April
regarding his present and future plans for L’Koral, the VF Sale necessarily
cast them in a different light. As
explained above, the facts known to appellant following the VF Sale would have
caused any reasonable person to question the veracity of Koral’s
representations in April that he had no plans to sell the company and did not
contemplate doing so for years.
On this point, Miller v. Bechtel Corp. (1983) 33 Cal.3d 868 (Miller) is particularly instructive. There, the plaintiff wife sued her husband
for misrepresenting the value of a marital asset (stock in Bechtel) and
fraudulently inducing her to relinquish her interest in the stock during the
dissolution proceedings. (
judgment in favor of the husband. The
court held that notwithstanding the fiduciary relationship between the parties,
the wife was aware of facts that imposed upon her a duty to investigate her
husband’s representations. Specifically,
her attorneys had expressed suspicions about the stated value of the stock, and
had written the husband’s attorney seeking more information about the
valuation. (Id. at pp. 874-875.) Because
the wife had failed to make further inquiry, such as asking Bechtel or examining
public records, the court found she could be charged with the knowledge
acquired from such inquiry, which would “at the very least have reinforced
plaintiff’s doubts whether the ‘true value’ of the stock was as represented in
the property settlement agreement.†(
Here, from April to August 2007,
appellant had no duty to investigate Koral’s April representations because a
reasonably prudent person would have had no reason to become suspicious of the
representations. However, in late August
2007, appellant learned that Koral had sold Seven, LLC for multiples of the
price she had received from L’Koral, just four months after assuring her that
it would be years before Seven, LLC would be sold. When viewed in conjunction with the fact that
Koral had pressured appellant heavily to sell her shares just months earlier, a
reasonable person in appellant’s situation would have been suspicious of
Koral’s April representations. Thus, a
duty to investigate arose. Appellant
confronted Koral and inquired about the timing of the negotiations to sell
Seven, LLC, but failed to conduct a further inquiry that would “at the very
least have reinforced plaintiff’s doubts.â€
(Miller, supra, 33 Cal.3d at p. 875.)
In short, appellant had inquiry notice in August 2007.
D. Fraudulent
Concealment Doctrine
Appellant contends the applicable
limitations periods were tolled under the fraudulent concealment doctrine. “‘It has long been established that the
defendant’s fraud in concealing a cause of action against him tolls the
applicable statute of limitations, but only for that period during which the
claim is undiscovered by plaintiff or until such time as plaintiff, by the
exercise of reasonable diligence, should have discovered it.’†(Bernson
v. Browning-Ferris Industries (1994) 7 Cal.4th 926, 931.) Stated differently, the fraudulent
concealment doctrine tolls the limitations period only as long as a plaintiff’s
reliance on the defendant’s misrepresentations is reasonable. (Grisham
v. Phillip Morris U.S.A., Inc. (2007) 40 Cal.4th 623, 637.) “‘[W]hether reliance was reasonable is a
question of fact for the jury, and
may be decided as a matter of law only if the facts permit reasonable minds to
come to just one conclusion.’†(
Cal.App.4th 1640, 1666, italics omitted.)
Here, appellant contends that her
suspicions about Koral’s representations in April 2007 were allayed and that
she was lulled into not filing her lawsuit within the applicable limitations
periods by Koral’s August misrepresentations about the timing of the
negotiations to sell Seven, LLC to VFC.
(See Mercer v. Elliott (1962)
208 Cal.App.2d 275, 281 [“One cannot justly or equitably lull his adversary
into a false sense of security and thereby cause him to subject his claim to
the bar of the statute of limitations . . . .â€].) On the record before us, however, appellant’s
asserted reliance was not reasonable as a matter of law. Koral was the one person who had heavily
pressured appellant to sell her ownership interest, who had falsely assured her
that “any possibility†of a sale remained “years distant,†who had then sold
Seven, LLC for nine times the price that appellant had received just four
months prior, and who had benefitted greatly from the transaction. (See Roland
v. Hubenka (1970) 12 Cal.App.3d 215, 225 [“Where a buyer learns one
representation by a seller is false, he may not assume other representations by
the seller were true.â€].)
Appellant contends she could reasonably
rely upon Koral’s August representations because he was still her fiduciary at
that time. Although Koral and appellant
were no longer partners in Seven, LLC in August 2007, appellant contends Koral
had a fiduciary duty to fully disclose the truth about the negotiations to sell
Seven, LLC. Assuming Koral owed
appellant a continuing fiduciary duty with respect to the sale of her interest
in L’Koral, by August 2007, appellant was aware of facts that should have raised
her suspicions regarding his April representations. (Hobbs,
supra, 164 Cal.App.3d at p.
202.) As the Alfaro court stated, “A person in a fiduciary relationship may
relax, but not fall asleep.†(
Here, appellant was aware that one of Koral’s April representations was
demonstrably false, which should have raised her suspicions about his remaining
representations. She was also aware that
her April sale resulted in Koral’s having reaped $34 million more from the VF
Sale than he would have earned had appellant not acceded to his pressure to
sell her shares. (See
Cal.2d 479, 486 [when plaintiff discovered that a representation “by one in
whom she had implicit trust and confidence†had been motivated by personal gain,
“[a]t this point inquiry became a duty and plaintiff was chargeable with what
she would discover if inquiry were made.â€].)
On these undisputed facts demonstrating that at least one of Koral’s
April representations was not true, that the timing of the sale cast doubt on
the remaining representations, and that the sale of appellant’s shares Koral
had pressured her to make redounded to his financial benefit and to her
detriment, no reasonable person in appellant’s position could blindly have
accepted his assurances that no sale had been planned and no negotiations
initiated until “months†after she relinquished her shares.
Appellant’s reliance on
cases involved facts that would not have made a reasonably prudent person suspicious
that the fiduciary had committed wrongdoing.
In Lee, the plaintiff was
aware that escrow had not closed, but had no notice that the escrow agent was
disbursing monies to other parties in violation of the escrow
instructions. (Lee, supra, 210 Cal.App.3d
at pp. 921-922.) In Dias, the plaintiffs received notices that insurance premiums were
owed, but the notices did not establish or suggest that their insurance agent
had lied when he previously told them that the premiums would vanish over
time. (Dias, supra, 700
F.Supp.2d at pp. 1208, 1224-1225.) In
contrast here, appellant had notice of facts establishing that Koral had lied
to her or suggesting that he had harmed her by depriving her of the significant
financial gain from a planned sale of Seven, LLC.
distinguishable because, in addition to the agent’s assurance that the premium
notices were a mistake, the company did not cancel the plaintiffs’ insurance,
despite their disregard of the premium notices.
(Dias, supra, 700 F.Supp.2d at pp. 1223-1224.) The conduct of the company thus supported the
plaintiffs’ reliance. Here, in contrast, appellant neither sought nor obtained
confirmation of Koral’s August representations.
Given the level of suspicion a reasonable person would have possessed
(and appellant evidently did possess), it was unreasonable to rely on Koral’s
uncorroborated assurances about the timing of the VF Sale. As no reasonable person would have relied on
the assurances of the person most likely to have misled her, appellant may not
rely on the doctrine of fraudulent concealment to toll the running of the
statute of limitations. (See
husband and wife, wife’s claims for fraud were time-barred because she did not
investigate his representations despite her suspicions].)
E. Futility
of Investigation
Appellant
argues that assuming a duty to investigate arose, any investigation would have
been futile. In connection with this
argument, she contends the trial court improperly sustained objections to two
assertions in her declaration.
Appellant asserted that after speaking with Koral following the VF Sale,
(1) “I was not aware of any means available to me to investigate or challenge
his assurances,†and (2) “I had no information available to me that would have
established that Koral was lying.†As to
the latter, being on inquiry notice obligated appellant to seek out the
information necessary to bring her claims.
(See Norgart,
notice means that “within the applicable limitations period, [plaintiff] must
indeed seek to learn the facts necessary to bring the cause of action in the
first place -- he ‘cannot wait for’ them ‘to find’ him and ‘sit on’ his
‘rights’; he ‘must go find’ them himself if he canâ€]; cf. Miller, supra, 33 Cal.3d
at pp. 874-875 [where plaintiff did not actually make an inquiry, her assertion
that her inquiry to a third party would be unavailing is not a fact within her
personal knowledge].) Thus, the trial
court properly sustained the objection on relevance grounds.
As to
appellant’s first assertion -- that she was not aware of any means to find the
necessary information -- her actual knowledge is irrelevant. Appellant is charged with knowledge of all
available means to investigate, even if she was not actually aware of those
means. (See Fox, supra, 35 Cal.4th at
p. 808 [plaintiff deemed to have inquiry notice of defendant’s wrongdoing when
she discovers or should have discovered
facts]; Hobbs, supra, 164 Cal.App.3d at p. 202 [where plaintiff has duty to
investigate, she may be “charged with knowledge of the facts which would have
been discovered by such an investigation.â€].)
Regardless of appellant’s actual knowledge of the means to investigate
or challenge Koral’s August assertions, she should have been aware (1) that she
could contact VFC and Bear Stearns directly and ask for information that could
corroborate or contradict Koral’s assertions, and (2) that she could review
publicly available SEC filings of the various parties for such information.
Appellant contends that any
investigation would have been futile.
Specifically, she asserts that VFC and Bear Stearns were prohibited from
disclosing the timing of the negotiations under the May 14, 2007
confidentiality agreement, which applied to VFC, Seven, LLC, and their
affiliates, who appellant contends included Bear Stearns and Koral.
persuaded. Even assuming the
confidentiality agreement prohibited any disclosure, appellant could have
discovered information indicating that Koral had lied about the timing of the
negotiations. Specifically, VFC filed a
publicly available Form 8-K, which included a July 26, 2007 Purchase Agreement
and press release. In the Purchase
Agreement, VFC agreed to a plan to purchase Seven, LLC, as the boards of
directors for the respective companies had approved the transaction. The date of the Purchase Agreement and the
board approval process created a reasonable inference that the negotiations to
sell Seven, LLC did not commence months after appellant sold her ownership
interest. Thus, appellant cannot show
that any investigation would have been futile, as such investigation would, “at
the very least[,] have reinforced plaintiff’s doubts†as to the veracity of
Koral’s representations in August 2007.
at p. 875.)
Appellant’s causes of action accrued
in August 2007 because she was on inquiry notice following the VF Sale. As she was not entitled to tolling under the
fraudulent concealment doctrine, the applicable limitations periods expired by
August 2010. Because she first filed her
complaint in May 2011, her causes of action were time-barred. The trial court properly granted summary
judgment to respondents and dismissed appellant’s complaint.
The judgment of dismissal is
affirmed. Costs are awarded to
respondents.
NOT
TO BE PUBLISHED IN THE OFFICIAL REPORTS.
MANELLA,
J.
We concur:
EPSTEIN, P. J.
SUZUKAWA, J.
further statutory citations are to the Code of Civil Procedure.
discovery rule, as the cases make clear, the rule is incorporated into the
statutes of limitations applicable to appellant’s claims.
