USACM Liquitating Trust, et al v. Deloitte & Touche, LLP
FILED ORDER AND OPINION (J. CLIFFORD WALLACE, SANDRA S. IKUTA and MARVIN J. GARBIS) The mandate issued on May 15, 2013, is hereby recalled. Appellee Deloitte & Touche s request for publication is GRANTED, and the Memorandum Disposition filed on April 22, 2013, is withdrawn. The withdrawn memorandum disposition is replaced and superseded by the attached opinion. No petitions for rehearing and/or rehearing en banc will be entertained. (ECF Filing) AFFIRMED Judge: JCW , Judge: SSI , Judge: MJG Authoring. FILED AND ENTERED JUDGMENT. 
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
USACM LIQUIDATING TRUST,
USA CAPITAL DIVERSIFIED DEED
DELOITTE & TOUCHE,
Appeal from the United States District Court
for the District of Nevada
Philip M. Pro, Senior District Judge, Presiding
Argued and Submitted
March 15, 2013—San Francisco, California
Filed February 18, 2014
Before: J. Clifford Wallace and Sandra S. Ikuta, Circuit
Judges, and Marvin J. Garbis, Senior District Judge.*
Opinion by Judge Garbis
The Honorable Marvin J. Garbis, Senior District Judge for the U.S.
District Court for the District of Maryland, sitting by designation.
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2 USACM LIQUIDATING TRUST V. DELOITTE & TOUCHE
The panel filed an order recalling the mandate, granting
appellee’s request for publication, withdrawing a
memorandum disposition, and filing an opinion affirming the
district court’s summary judgment on claims brought by a
bankruptcy litigation trust under Nevada law.
The trust, created by a confirmed chapter 11 plan, sued
the debtor’s former outside auditor, alleging that the auditor
wrongfully issued unqualified audit opinions, concealing the
misappropriations of the debtor’s funds through two allegedly
fraudulent schemes perpetrated by the debtor’s owners and
controllers. The panel held that under Nevada’s “sole actor”
rule, the misconduct of the owners and controllers must be
imputed to the debtor. Accordingly, the district court
properly granted summary judgment to the defendant auditor
on its affirmative defense that the debtor’s claims had expired
under Nevada law prior to the bankruptcy petition date.
Allan B. Diamond (argued) and J. Maxwell Beatty (argued),
Diamond McCarthy LLP, Houston, Texas, for PlaintiffAppellant.
Steve Morris and Rosa Solis-Rainey, Morris Peterson, Las
Vegas, Nevada; Miles N. Ruthberg (argued), Robert W.
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
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USACM LIQUIDATING TRUST V. DELOITTE & TOUCHE 3
Perrin and Melanie M. Blunschi, Latham & Watkins LLP,
Los Angeles, California, for Defendant-Appellee.
The mandate issued on May 15, 2013, is hereby recalled.
Appellee Deloitte & Touche’s request for publication is
GRANTED, and the Memorandum Disposition filed on April
22, 2013, is withdrawn. The withdrawn memorandum
disposition is replaced and superseded by the attached
No petitions for rehearing and/or rehearing en banc will
GARBIS, Senior District Judge:
On April 13, 2006, USA Commercial Mortgage Company
(“USACM”) filed for bankruptcy in the United States
Bankruptcy Court for the District of Nevada. USACM’s
confirmed Chapter 11 plan created a bankruptcy litigation
trust, USACM Liquidating Trust (the “Trust”), for purposes
of pursuing USACM’s claims for the benefit of holders of
allowed unsecured claims in USACM’s bankruptcy. On
April 11, 2008, the Trust sued USACM’s former outside
auditor, Deloitte & Touche LLP, alleging that Deloitte
wrongfully issued unqualified audit opinions for fiscal years
2000 and 2001, concealing the misappropriations of
USACM’s funds through two allegedly fraudulent schemes
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4 USACM LIQUIDATING TRUST V. DELOITTE & TOUCHE
perpetrated by Thomas Hantges and Joseph Milanowski (the
owners and controllers of USACM).
misappropriations caused USACM to sustain millions of
dollars in losses and required its bankruptcy filing.
The Trust appeals from the district court’s summary
judgment in favor of Deloitte. We have jurisdiction under
28 U.S.C. § 1291, and we affirm.
The district court properly granted summary judgment to
Deloitte on the ground that the misconduct of Hantges and
Milanowski must be imputed to USACM under Nevada’s
“sole actor” rule.1 Under Nevada law, the sole actor rule
imputes an agent’s actions to the principal corporation “even
if the agent totally abandons the corporation’s interest” when
“the corporation and its agent are indistinguishable from each
other.”2 See Glenbrook Capital Ltd. P’ship v. Dodds (In re
Amerco Derivative Litig.), 252 P.3d 681, 695–96 (Nev.
2011). The record before the district court demonstrated that,
for all relevant purposes, Hantges and Milanowski utterly
controlled and dominated USACM: they were the majority
shareholders, owning collectively at least 83% of the stock at
any given time prior to bankruptcy; held top management
At the time of the district court’s opinion, the Nevada Supreme Court
had not yet issued its opinion in Glenbrook Capital Ltd. P’ship v. Dodds
(In re Amerco Derivative Litig.), 252 P.3d 681, 695–96 (Nev. 2011),
officially adopting the sole actor rule. However, the district court
accurately predicted that the Nevada Supreme Court would do so.
The sole actor rule is a limited exception to the adverse interest
exception, which precludes the general imputation of an agent’s acts to the
principal corporation under agency law when the agent’s actions are
“completely and totally adverse to the corporation.” Glenbrook, 252 P.3d
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USACM LIQUIDATING TRUST V. DELOITTE & TOUCHE 5
positions including CEO and President, respectively; were the
only two directors until 2001 when they appointed a nominal
third director, who admittedly had no active involvement in
the company; and were perceived by other actors within
USACM as the relevant decision-makers whose actions could
not be overridden. As the district court correctly held after its
thorough analysis, the Trust failed to present evidence of any
“innocent decision-makers” within USACM sufficient to
permit a reasonable fact finder to find that Hantges and
Milanowski were not USACM’s sole actors for purposes of
imputation. See id. at 696 (explaining “presence of innocent
decision-makers” is relevant to assessing whether agents are
a corporation’s sole actors).
Because the district court properly imputed Hantges’ and
Milanowski’s misconduct to USACM, the district court also
properly granted summary judgment to Deloitte on its
affirmative defense that USACM’s claims had expired under
Nevada law prior to April 13, 2006, the petition date, and
were thus ineligible for the two-year extension of applicable
limitations periods under 11 U.S.C. § 108(a) that would have
rendered its claims (filed on April 11, 2008) timely.3 Since
knowledge of Hantges’ and Milanowski’s fraudulent schemes
is imputed to USACM, the company would have discovered
that Deloitte failed to expose those schemes in its 2000 and
2001 fiscal year audits — in alleged contravention of its
contractual and professional obligations — no later than the
date Deloitte completed those audits on June 28, 2001 and
November 26, 2002. Hence, the two-year limitations period
11 U.S.C. § 108(a) extends applicable limitations periods in the
bankruptcy context up to an additional “two years after the order for
relief” provided that the limitations period has “not expired before the date
of the filing of the petition.”
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6 USACM LIQUIDATING TRUST V. DELOITTE & TOUCHE
for the Trust’s accounting malpractice and breach of contract
claims expired on June 28, 2003 and November 26, 2004,
respectively, which both preceded the petition date and were
therefore untimely. See 11 U.S.C. § 108(a); Nev. Rev. Stat.
Ann. § 11.2075(1)(a).4
With regard to the aiding and abetting breaches of
fiduciary duty claim, USACM would have discovered
Deloitte’s failure to report and/or affirmative cover-up of
Hantges’ and Milanowski’s fraudulent schemes no later than
when Deloitte terminated its services with USACM in
January 2003. Thus, the three-year limitations period
provided by Nev. Rev. Stat. Ann. § 11.190(3)(d)5 expired in
January 2006, which again preceded the petition date and
therefore could not be extended under 11 U.S.C. § 108(a) to
make USACM’s claim timely.
Nev. Rev. Stat. Ann. § 11.2075(1) requires that an action against an
accounting firm “to recover damages for malpractice must be commenced
within” the earlier of (a) two years after the date on which the actionable
conduct is discovered or should have been discovered, (b) four years after
“completion of performance of the service for which the action is
brought”, or (c) four years after the date of the “initial issuance of the
report prepared by the accountant . . . regarding the financial statements
or other information.”
Nev. Rev. Stat. Ann. § 11.190(3)(d), applied by the district court to the
breaches of fiduciary duty claim, provides limitations for an action
grounded on fraud. Under Nevada law, the “true nature” of a breach of
fiduciary claim determines the applicable limitations period. Stalk v.
Mushkin, 199 P.3d 838, 841–42 (Nev. 2009). As observed by the district
court, this claim is more akin to fraud than an auditor malpractice claim.
However, even if the accounting malpractice limitation rules were applied
the claim would be barred under the lesser two-year period under
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USACM LIQUIDATING TRUST V. DELOITTE & TOUCHE 7
The district court correctly decided that there should be
no concealment-based tolling of limitations because Deloitte
could not have concealed from USACM that which USACM
knew based upon the imputation of Hantges’ and
Milanowski’s knowledge to USACM.
The district court also properly declined to apply the
adverse domination doctrine, which tolls claims alleging
wrongdoing by those who control the corporation under
certain circumstances, see Fed. Deposit Ins. Corp. v. Jackson,
133 F.3d 694, 698 (9th Cir. 1998), because Nevada has not
adopted the doctrine. The applicable limitations statutes are
comprehensive and provide for tolling based on specified
circumstances not pertinent hereto.
Because the Trust’s claims are barred by the applicable
statute of limitations under Nevada law, we do not reach, and
do not address other issues presented by the parties, including
those related to Deloitte’s alternative in pari delicto defense.
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