JLI Invest S.A. et al v. Computershare Trust Company, N.A. et al
Judge Allison D. Burroughs: Corrected MEMORANDUM AND ORDER entered. For the foregoing reason, Defendants' Motions to Dismiss on statute of limitations grounds [ECF Nos. 66, 70] are GRANTED IN PART AND DENIED IN PART with respect to the statute of limitations issues. Plaintiffs claims for negligence (Count I), conversion (Count III), breach of fiduciary duty (Count VI), violations of state securities laws (Count VIII), and violation of § 1983 (Count IX) are time-barred and therefore DISMISSED without prejudice. Plaintiffs may seek to amend the Complaint if discovery reveals alternative grounds for tolling the statute of limitations. Plaintiffs' claims for breach of contract (Count IV), breach of the implied covena nt of good faith and fair dealing (Count V), Chapter 93A (Count II), and negligent misrepresentation (Count X) are not dismissed at this stage, although Defendants may raise the defense again at a later stage once the facts have been sufficiently developed. The motions to dismiss [ECF Nos. 66, 70] with respect to the non-statute of limitations issues remain under advisement. (NEF Regenerated) (Main Document 94 replaced on 1/24/2017) (Montes, Mariliz). Modified on 1/24/2017 (Montes, Mariliz).
UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
JLI INVEST S.A., and LIN INVEST S.A.,
COMPUTERSHARE TRUST COMPANY,
N.A., et al.
Civil Action No. 15-cv-11474-ADB
MEMORANDUM AND ORDER
On March 30, 2015, Plaintiffs JLI Invest S.A. (“JLI”) and LIN Invest S.A. (“LIN”)
(together, “Plaintiffs”) filed a complaint against Computershare;1 Indenix Pharmaceuticals, Inc.
(“Idenix”), Merck & Co., Inc. and Imperial Blue Corporation (together, “Merck”) (collectively,
“Defendants”). Currently pending before the Court are (1) Idenix and Merck’s and (2)
Computershare’s Motions to Dismiss Plaintiffs’ claims on the statute of limitations grounds
[ECF Nos. 66, 70].2 For the reasons stated below, Defendants’ motions to dismiss [ECF Nos. 66,
The Court will refer to Computer Share Trust Company, N.A,; Computershare Inc.;
Computershare Investor Services, LLC as “Computershare” when discussing these three
With the Court’s permission, the parties have bifurcated briefing on the motions to dismiss,
addressing the statute of limitations issues first. Defendants have raised additional grounds to
dismiss the action not addressed in the instant Memorandum and Order. With respect to the
statute of limitations issues, Computershare adopts the entirety of Merck’s argument (Section I
of Merck’s Memorandum of Law in Support of Its Motion to Dismiss the First Amended
Complaint [ECF No. 67]. Accordingly, the Court will not distinguish between the arguments of
the two motions to dismiss presently pending. Furthermore, the Court recognizes that Plaintiffs’
Motion to Strike [ECF No. 82] the declaration and the accompanying exhibits [ECF No. 68]
bears on some factual questions in this case, including the precise relationships between the
various parties, however, the issues need not be resolved in discussing the statute of limitations
issues. Lastly, the Court notes that Computershare filed two nearly identical motions to dismiss
70] are GRANTED IN PART AND DENIED IN PART only with respect to the statute of
a. Factual Background
For the purposes of the instant Memorandum and Order, only the background relevant to
the statute of limitations issues is included. In deciding a motion to dismiss, the Court treats all
well-pleaded facts in the operative complaint as true and makes all reasonable inferences in favor
of the plaintiff. United States ex rel. Hutcheson v. Blackstone Med., Inc., 647 F.3d 377, 383 (1st
Cir. 2011). The following facts are taken from Plaintiffs’ First Amended Complaint [ECF No. 10
Idenix is a biopharmaceutical company engaged in the discovery and development of
drugs for treatment of human viral diseases. Based on the Amended Complaint, Idenix is
incorporated in Delaware with its principal place of business in Massachusetts. Merck is a
pharmaceutical company incorporated in New Jersey with its principal place of business in New
Jersey. In 2014, Merck acquired Idenix. Imperial Blue is a wholly owned subsidiary of Merck.
Computershare Investor Services, LLC is a Delaware limited liability company, and
Computershare Inc. is a Delaware corporation. Computershare Trust Company is a trust
company formed under United States law and is a citizen of Massachusetts. It acted as Idenix’s
transfer agent during the relevant time periods. The Computershare defendants each have their
principal place of business in Massachusetts.
Plaintiffs allege on information and belief that Equiserve acted as Idenix’s transfer agent
until 2005, at which point Equiserve was acquired by Computershare. After the 2005 acquisition,
[ECF Nos. 69, 70], the second one being a corrected version of the first. For the purposes of this
Memorandum and Order, the Court will refer to the second motion only [ECF No. 70].
Computershare acted as Idenix’s transfer agent, which included escheat services for Idenix’s
abandoned or unclaimed securities. The escheat services included finding lost shareholders,
communicating with shareholders to prevent escheatment, and determining whether Idenix
shares constituted unclaimed property. Plaintiffs were intended third-party beneficiaries of
Computershare’s contract with Idenix for these escheat services.
Plaintiffs JLI and LIN are Belgian entities formed by Dr. Gilles Gosselin and Dr. Jean
Louis Imbach to hold their shares in Idenix. In 1997, Imbach and Gosselin were part of a
research team that synthesized a new drug found to be active against Hepatitis B. Idenix was
established in 1998 to help develop the drug. JLI owned 240,000 shares of Idenix and LIN
owned 320,000 shares of Idenix. The Amended Complaint alleges that Idenix was aware of the
relationship between Gosselin, Imbach, JLI, and LIN.
Under Delaware’s state escheat statute, holders of unclaimed or abandoned property
subject to Delaware’s jurisdiction are required to report and remit such property to the State of
Delaware. See Del. Code tit. 12, §§ 1199, 1201. In November 2008, Computershare, acting as
agent of Idenix, reported to the state of Delaware that the 560,000 shares of Idenix owned by
Plaintiffs has been abandoned and constituted unclaimed property. On January 2, 2009, JLI’s and
LIN’s shares in Idenix were escheated to the state of Delaware. The Amended Complaint alleges
that “the escheat of such shares was not required or permitted.” Compl. ¶ 37.
Through 2009, Plaintiffs allege that Computershare and Idenix had Plaintiffs’ proper
mailing addresses and actually sent correspondence to Plaintiffs regarding their shares, which
was never returned as undeliverable. Furthermore, Gosselin, on behalf of LIN, worked with
Idenix at least through 2011 and had regular contact with it as part of this relationship. Imbach,
on behalf of JLI, worked with Idenix at least through 2006 and had regular contact with it as part
of this relationship. Specifically, the Amended Complaint notes that LIN entered into a
consulting agreement with Idenix that explicitly acknowledged LIN’s shares in Idenix, was
executed on January 1, 2007, and was terminated in March 2011. Similarly, JLI entered into a
consulting agreement with Idenix that explicitly acknowledged JLI’s shares in Idenix, was
executed on January 1, 2003, and was terminated on December 31, 2006. Idenix made regular
payments to both JLI and LIN under these agreements that they received and cashed.
Furthermore, Plaintiffs received periodic account statements related to their shares that
specifically noted “[n]o action on your part is required.” Compl. ¶ 53.3 Plaintiffs state that they
were nonetheless never contacted about the possible escheatment of their shares, and that
Defendants failed to undertake the required due diligence prior to escheatment. In short,
Plaintiffs were completely blind-sided by the escheatment.
Sometime between March 23, 2009 and April 6, 2009, the state of Delaware liquidated
Plaintiffs’ shares for a total of $1,695,851.75. During that time, according to Plaintiffs, the
market for Idenix stock was fairly illiquid and comprised of approximately 50 shareholders.
Accordingly, they argue that the sale in 2009 did not represent the true value of their shares.
It was not until March 30, 2011, upon their own inquiry, that Plaintiffs were informed
that their shares had been escheated. At the time, however, Computershare informed them that
the shares has been escheated to the state of Massachusetts. On July 9, 2012, Computershare
informed Plaintiffs that their shares had actually been escheated to Delaware. In September
2012, Plaintiffs began to pursue a claim with the Delaware Office of Unclaimed Property to
recover their shares. Plaintiffs argue, however, that because of Computershare’s and Idenix’s
“lack of responsiveness and assistance,” they were not able to confirm that their shares had
It is unclear based on the Amended Complaint at which point these periodic account statements
stopped, if at all.
actually been escheated to Delaware until May 2014, and only learned of the liquidation in
October 2014. Compl. ¶ 62. In 2014, Merck acquired Idenix at $24.50 per share. Plaintiffs aver
that they would have participated in the tender offer had their shares not been escheated. Under
the Merck tender offer, Plaintiffs’ total shares would have been worth over $12 million. On June
8, 2015, Plaintiffs received a check from Delaware in the amount of $1,695,851.75, equal to the
amount their shares were sold for.
b. Procedural Background Relevant to Statute of Limitations Issues
Plaintiffs initiated this lawsuit on March 30, 2015. They filed an Amended Complaint on
July 23, 2015. [ECF No. 10]. The Amended Complaint alleges the following causes of action:
negligence (Count I); Massachusetts Chapter 93A violation (II); conversion (III); breach of
contract (IV); breach of covenant of good faith and fair dealing (V); breach of fiduciary duty
(VI); violations of Massachusetts and Delaware state securities law (VIII); § 1983 violation (IX);
and negligent misrepresentation (X).4 Throughout, for ease of reference, Counts I, III, VI, VIII
and X will be collectively referred to as the “tort-based claims” and Counts IV and V as the
Count I asserts a negligence claim against all Defendants, on the grounds that
Computershare and Idenix breached their duties of care to Plaintiff shareholders by, inter alia:
(1) wrongfully escheating Plaintiffs’ shares; (2) failing to conduct due diligence prior to the
escheat, in violation of state and federal law, including 17 C.F.R. § 240.17Ad-17; (3) failing to
contact Plaintiffs before escheating their shares, even though Defendants knew how to contact
Plaintiffs; (4) in Computershare’s case, failing to inquire with Idenix regarding Plaintiffs’ contact
information and their relationship with Idenix, and in Idenix’s case, failing to inform
Count VII (violation of federal securities law) was dismissed by agreement of the parties. See
[ECF No. 64].
Computershare of such contact information and relationships; (5) failing to provide sufficient
information to the State of Delaware to enable Delaware to return Plaintiffs’ shares to them; (6)
failing to notify Plaintiffs that their shares would be or had been escheated; (7) misrepresenting
to Plaintiffs that their shares had been escheated to Massachusetts, which caused a lengthy delay
in Plaintiffs’ efforts to recover their shares; and (8) failing to disclose to Plaintiffs in any written
document that their shares could be subject to escheat under certain circumstances, that the
relevant state law on such issues had changed, or that the changes to the law would result in the
automatic escheat of Plaintiffs’ shares unless immediate action was taken. Plaintiffs further
contend that Merck, as successor in interest to Idenix, is liable for Idenix’s negligent acts and
omissions. Plaintiffs allege that as a result of the Defendants’ negligence, Plaintiffs lost over $12
Count II alleges that Defendants violated Massachusetts General Laws Chapter 93A, § 2
by willingly, knowingly, and recklessly engaging in unfair and/or deceptive acts or practices.
The factual allegations supporting the Chapter 93A claim in Count II are similar to those alleged
in Count I.
Count III alleges that all Defendants are liable for conversion. In Count IV, Plaintiffs
assert a claim for breach of contract, on the grounds that they were the third-party beneficiaries
of the contract between Computershare and Idenix, including any indemnity provisions therein.
Plaintiffs contend that both parties breached their respective obligations under the contract, and
that Plaintiffs were damaged as a result. Similarly, Count V alleges that the Defendants breached
the implied covenant of good faith and fair dealing associated with that contract, in an effort to
deprive Plaintiffs of the benefit of the contract.
Count VI alleges that Idenix and Merck breached their fiduciary duties to the Plaintiffs,
to safeguard and protect their shares, to maintain accurate books and records, to avoid making
untrue statements of material fact or material omissions, and to refrain from engaging in any
practice or course of business that would operate as a deceit. Plaintiffs contend that Idenix knew
or should have known that Plaintiffs had not, in fact, abandoned their shares, based on its regular
contacts with the Plaintiffs. They also contend that Idenix and its officers failed to inform
Plaintiffs of material, non-public information, namely that the company was on the brink of an
acquisition, and unfairly profited from the sale and liquidation of Plaintiffs’ shares prior to the
Merck tender offer.
In Count VIII, Plaintiffs allege that the Defendants violated their statutory duties under
Massachusetts and Delaware state securities laws, to ensure that securities were not wrongly
transferred from one person to another. See Mass. Gen. Laws ch. 106, §§ 8-404, 8-405; Del.
Code tit. 6, §§ 8-404, 8-405.
Count IX alleges that all Defendants violated 42 U.S.C. § 1983, insofar as Computershare
and Idenix “had a symbiotic and intertwined relationship with Delaware,” such that Delaware,
Computershare, and Idenix “jointly participated in the escheat” of Plaintiffs’ shares. See Compl.
¶¶ 144–59. Accordingly, Plaintiffs contend that Defendants’ wrongful acts were taken under
“color of state law,” subjecting them to liability under 42 U.S.C. § 1983.
Finally, Count X alleges that Defendants are liable for negligent misrepresentation, based
on Computershare’s erroneous statement that Plaintiffs’ shares had been escheated to
Massachusetts. Plaintiffs also allege that Computershare negligently and recklessly concealed
material facts which they were under a legal duty to communicate. Plaintiffs contend that they
relied on these misstatements and omissions to their detriment, and that Defendants are liable for
the resulting $12 million in damages.
As relief, Plaintiffs request compensatory, multiple, and punitive damages, attorneys’
fees, costs, and pre and post-judgment interest.
On September 29, 2016, Idenix and Merck filed a Motion to Dismiss for Failure to State
a Claim [ECF No. 66], and an accompanying Memorandum of Law in Support [ECF No. 67] and
Declaration [ECF No. 68].5 On September 29, 2016, Computershare also filed a Motion to
Dismiss [ECF No. 70]. On October 31, 2016, Plaintiffs opposed the motions with respect to the
statute of limitations issues [ECF No. 72]. On November 7, 2016, each set of Defendants,
Idenix/Merck and Computershare, replied. [ECF Nos. 78, 79]. Plaintiffs filed a surreply with the
Court’s permission [ECF No. 84].
“Affirmative defenses, such as the statute of limitations, may be raised in a motion to
dismiss under Federal Rule of Civil Procedure 12(b)(6), provided that the facts establishing the
defense [are] clear ‘on the face of the plaintiff’s pleadings.’” Santana-Castro v. Toledo-Dávila,
579 F.3d 109, 113–14 (1st Cir. 2009) (alteration in original) (quoting Trans-Spec Truck Serv.,
Inc. v. Caterpillar, Inc., 524 F.3d 315, 320 (1st Cir.2008)) (internal quotation marks omitted). On
a motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6) of the Federal Rules of
Civil Procedure (“Rule 12(b)(6)”), the Court accepts as true all well-pleaded facts and draws all
reasonable inferences from those facts in favor of the plaintiff. Hutcheson, 647 F.3d at 383. A
dismissal for timeliness is warranted under Rule 12(b)(6) when “the pleader’s allegations leave
On November 14, 2016, Plaintiffs moved to strike the declaration [ECF No. 82] on the grounds
that the documents are unauthenticated and cannot be properly considered at the motion to
dismiss stage. Idenix opposes the motion [ECF No. 86]. In this Memorandum and Order, the
Court does not decide Plaintiffs’ Motion to Strike and does not rely on the declaration.
no doubt that an asserted claim is time-barred.” LaChapelle v. Berkshire Life Ins. Co., 142 F.3d
507, 509 (1st Cir. 1998) (citations omitted).
In short, Defendants argue that all of Plaintiffs’ causes of action, except negligent
misrepresentation,6 accrued on January 2, 2009 (the date of the escheatment) are not subject to
tolling under the discovery rule, and are therefore time-barred. Plaintiffs, on the other hand,
argue that the statute of limitations was not triggered until they learned in October 2014 that their
shares had been liquidated, which is when they discovered that they had been harmed by the
Defendants’ wrongful conduct.
a. Choice of law analysis for Plaintiffs’ contract-based and tort-based claims.
The Court must first determine whether the laws of Massachusetts or Delaware provide
the statute of limitations for each state law cause of action. In making this determination, the
Court applies the choice of law rules of the forum state, in this case, Massachusetts. See, e.g.,
Millipore Corp. v. Travelers Indemnity Co., 115 F.3d 21, 29 (1st Cir. 1997). “Massachusetts
state courts apply ‘a functional choice of law approach that responds to the interests of the
parties, the States involved, and the interstate system as a whole.’” Reicher v. Berkshire Life Ins.
Co. of Am., 360 F.3d 1, 5 (1st Cir. 2004) (quoting Bushkin Assocs., Inc. v. Raytheon Co., 473
N.E.2d 662, 668 (Mass. 1985)). Courts consider the following factors in applying this approach:
(a) the needs of the interstate and international systems, (b) the
relevant policies of the forum, (c) the relevant policies of other
interested states and the relative interests of those states in the
determination of the particular issue, (d) the protection of justified
expectations, (e) the basic policies underlying the particular field of
The Court notes that the negligent misrepresentation claim accrued on or after March 30, 2011,
the date the representation was made. Although the Court is referring to the “tort-based claims”
collectively, it will note when the negligent misrepresentation claim requires a separate
law, (f) certainty, predictability, and uniformity of result, and (g)
ease in the determination and application of the law to be applied.
Id. (quoting Bushkin Assocs., Inc., 473 N.E.2d at 669). “Under this functional approach, a
Massachusetts court ‘generally will apply its own statute of limitations to permit a claim unless:
(a) maintenance of the claim would serve no substantial interest of the forum; and (b) the claim
would be barred under the statute of limitations of a state having a more significant relationship
to the parties and the occurrence.’” In re Fresenius Granuflo/NaturaLyte Dialysate Prod. Liab.
Litig., 76 F. Supp. 3d 294, 305 (D. Mass. 2015) (quoting Nierman v. Hyatt Corp., 808 N.E.2d
290, 292 & n.7 (Mass. 2004)).
Massachusetts law applies to Plaintiffs’ contract-based claims and
Parties agree that Massachusetts law applies to Plaintiffs’ contract-based claims, breach
of contract (Count IV) and breach of implied covenant of good faith and fair dealing (Count V).
Under Massachusetts law, the statute of limitations for contract claims is six years. See Mass.
Gen. Law. Ch. 260, § 2. With respect to Plaintiffs’ 93A claim, the parties agree that
Massachusetts law would provide the statute of limitations period.
The Court applies Delaware law applies to Plaintiffs’ tort-based
Plaintiffs argue that Massachusetts law provides the applicable statute of limitations
period for the tort-based claims because the majority of factors weigh in its favor. Namely, two
of the Defendants are residents of Massachusetts and the wrongful conduct in this case occurred
in Massachusetts. Defendants, on the other hand, argue that Delaware law applies to the tortbased claims (Counts I, III, VI, VIII, and X) because the causes of action involve Delaware
companies and an alleged wrongful escheatment under Delaware law.
In this case, many of the acts on which the claims are based took place in Massachusetts
and were undertaken by Massachusetts residents, which implicate strong local interests. The tortbased claims, however, with the exception of negligent misrepresentation, are based on the
allegedly wrongful escheatment of Plaintiffs’ shares under Delaware Escheats Law. Thus, this
case is distinguishable from many other cases involving tort-based claims because the tortious
actions alleged in this case are inextricably tied to a particular state’s law in that it is the
Defendants’ supposed compliance with the Delaware Escheats Law that gave rise to all of the
causes of action in this case. Moreover, the shares were escheated to the state of Delaware,
which has already given Plaintiffs some payment in connection with the escheatment, and
ultimately liquidated in the state of Delaware, all of which gives Delaware a very significant
interest in the resolution of relevant issues, including what qualifies as a proper escheatment
under the Delaware Escheats law and whether that is constitutional. Moreover, Idenix is formed
under the laws of Delaware. To the extent that the tort-based claims, like breach of fiduciary duty
and conversion, involve the internal affairs of a corporation, “the law of the State of
incorporation governs claims concerning the internal affairs of a corporation.” Harrison v.
NetCentric Corp., 744 N.E.2d 622, 628–29 (Mass. 2001); see also Natale v. Espy Corp., 2 F.
Supp. 3d 93, 102 (D. Mass. 2014) (“The general choice-of-law rules in Massachusetts may be
supplanted, however, by the ‘internal affairs doctrine.’”). The Court notes, however, that
Massachusetts law does not provide a longer statute of limitations for tort claims than Delaware
law. In fact, the Court observes that the outcome of the statute of limitations inquiry for
Plaintiffs’ tort-based claims would likely be the same regardless of whether Delaware or
Massachusetts law applied. Kaufman v. Richmond, 811 N.E.2d 987, 989 (Mass. 2004) (“Only
actual conflicts between the laws of different jurisdictions must be resolved” and the “analysis is
unnecessary when that choice will not affect the outcome of the case.”). Accordingly, the Court
applies Delaware law to Plaintiffs’ tort-based claims for the purpose of this Memorandum and
b. The applicable statute of limitations for each state law cause of action
Under Delaware (and Massachusetts) law, tort actions, including the state securities law
claims, have a three-year limitations period. Del. Code tit. 10, § 8106(a); Mass. Gen. Laws ch.
260, § 2A. With respect to the securities law claims, Massachusetts General Laws Chapter 260, §
2A provides the statute of limitation for statutory violations based in tort. See Prescott v. Morton
Int’l, Inc., 769 F. Supp. 404, 406 (D. Mass. 1990). Delaware securities law does not provide a
statute of limitations for claims under its state securities law, §§ 8-804 and 8-805, but both
parties seem to agree that the state securities law violations arise out of tort, and thus the Court
applies Delaware’s statute of limitations for tort claims to Plaintiffs’ claim under Delaware
securities law. See Mastellone v. Argo Oil Corp., 82 A.2d 379, 384 (Del. 1951) (applying threeyear statute of limitations to securities conversion claim).
If the Chapter 93A claim is viable, which is not addressed in this Memorandum, it has a
limitations period of four years. See Mass. Gen. Laws Ch. 260, § 5A. The parties do not dispute
that Massachusetts law provides the statute of limitations for the contract-based claims, which is
six years. See Mass. Gen. Laws ch. 260, § 2.
c. Under the general rules of accrual in Massachusetts and Delaware, the
escheatment, rather than liquidation, is the injury for statute of limitations
The Court must next determine when the causes of action accrued, or in other words,
whether the injury underlying Plaintiffs’ causes of action was the escheatment or the liquidation
This section applies to all claims, except the § 1983 claim, which will be discussed in a later
of Plaintiffs’ shares. Plaintiffs argue that the causes of action did not accrue until they learned of
the appreciable harm (the liquidation of their shares) that resulted from Defendants’ wrongful
conduct (the escheatment). Defendants argue that Plaintiffs’ conception of harm confuses injury
and damages and that because the injury was the escheatment as alleged in the Amended
Complaint, the subsequent liquidation of the shares may be relevant to assessing damages but not
to the accrual date for statute of limitations purposes.
Under Massachusetts law, “[c]auses of action in contract and tort generally accrue at the
time of breach or injury.” Arcieri v. N.Y. Life Ins. Co., 63 F. Supp. 3d 159, 164 (D. Mass. 2014)
(citing Int’l Mobiles Corp. v. Corroon & Black/Fairfield & Ellis, Inc., 560 N.E.2d 122 (Mass.
App. Ct. 1990)). Under Delaware law, “[f]or tort claims, a cause of action accrues at the time of
the injury.” Krahmer v. Christie’s Inc., 903 A.2d 773, 778 (Del. Ch. 2006); see also Niehoff v.
Maynard, 299 F.3d 41, 48 (1st Cir. 2002) (Under Delaware law, “[a]bsent concealment or fraud,
a cause of action [for breach of fiduciary duty and breach of contract] accrues at the moment of
the wrongful act, even if the plaintiffs are ignorant of the wrong.”). Despite this general rule, as
will be discussed below, under both Massachusetts and Delaware law, the date of accrual can be
extended by the “discovery rule.”
In this case, the injury and breach that triggered the statute of limitations under both
Massachusetts and Delaware law was the Defendants’ allegedly wrongful escheatment of
Plaintiffs’ shares on January 2, 2009. A wrongful escheatment gives rise to causes of action
against private parties. See A.W. Fin. Servs., S.A. v. Empire Res., Inc., 981 A.2d 1114, 1120
(Del. 2009) (Under Delaware law, “[c]laims for wrongful escheatment brought by a property
owner against the State of Delaware based on common law causes of action are superseded by
the Escheat Statute and, therefore, are not available. Not superseded, however, are common law
or statutory causes of action brought against parties, other than the State, that are involved in an
escheat transaction.”); see also Sotos v. Computershare Trust Co., N.A., No. 15-818, 2016 WL
447425, at *4 (D. Conn. Feb. 3, 2016) (causes of action based on wrongful escheatment under
Connecticut law); Azure Ltd. v. I-Flow Corp., 210 P.3d 1110, 1111 (Cal. 2009) (causes of action
for wrongful escheatment under California law). The Amended Complaint itself makes it clear
that the injury complained of in this case is the wrongful escheatment which resulted in a breach
that gave rise to the contract-based claims. For example, Plaintiffs allege that “[b]y wrongfully
escheating Plaintiffs’ shares . . . Computershare and Idenix breached the implied covenant of
good faith and fair dealing, resulting in harm to Plaintiffs.” Compl. ¶ 116. Plaintiffs also state
that “[b]y Computershare’s acts and omissions set forth herein, including but not limited to its
wrongful escheatment . . . Computershare breached its duties under the contract with Idenix.” Id.
¶ 109. The Amended Complaint makes similar allegations, relying on the wrongful escheatment,
for the remaining claims. For example, with respect to the negligence claim, “Computershare’s
and Idenix’s actions in escheating Plaintiffs’ shares to Delaware did not meet reasonable
commercial standards of practice in the securities industry.” Id. ¶ 88. Also, with respect to the
conversion claim, Plaintiffs allege that “[i]n wrongfully escheating the shares, Computershare
and Idenix exercised ownership, control, and/or dominion over Plaintiffs’ property, to which
they had no right of possession, thereby depriving Plaintiffs of their valuable property.” Id.
¶ 102; see also Leal v. Computershare, No. 10-00033, 2010 WL 4038609, at *6 n.3 (D. Nev.
Sept. 28, 2010) (“Leal’s alleged injury, however, was not California’s liquidation of her shares,
but Colgate-Palmolive’s escheatment of those shares to California. While California’s
liquidation may be relevant to the damages she may recover for her injury, her alleged injury
remains the escheatment of her shares.”).
Plaintiffs argue that “Massachusetts courts are unequivocal: the event that triggers the
statute of limitations is the discovery by a plaintiff that it has sustained ‘appreciable harm,’ not
the mere discovery of a defendant’s wrongful conduct.” This argument, however, conflates the
date of the injury with the discovery rule, which can delay the accrual date for statute of
limitations purposes under certain circumstances, but does not determine when an injury
occurred. Further, crediting Plaintiffs’ analysis would require this Court to conclude that
wrongful escheatment itself is not an injury or a harm. Regardless of whether a wrongful
escheatment inevitably constitutes a harm, Plaintiffs’ Amended Complaint makes clear that the
injury they allegedly suffered was the wrongful escheatment, which ultimately led to the
wrongful liquidation of their shares at an undervalued price. Even a case cited by Plaintiffs notes
that “appreciable harm” occurs even if “the full extent and nature of that harm has not been and
cannot be established immediately.” Massachusetts Elec. Co. v. Fletcher, Tilton & Whipple,
P.C., 475 N.E.2d 390, 392 (1985). Harm or injury for statute of limitations purposes is distinct
from damages for relief purposes. Therefore, it is the escheatment itself that sets the date that the
harm occurred and generally establishes when the cause of action accrued.
In this case, the wrongful escheatment that triggered the statute of limitations for most of
the claims under both Delaware and Massachusetts law happened on January 2, 2009. The one
exception is Plaintiffs’ claim for negligent representation which is based on representations about
the escheatment made on March 30, 2011. Thus, the negligent misrepresentation claim did not
accrue until March 30, 2011 at the earliest.
Accordingly, unless the discovery rule applies (discussed below), all of Plaintiffs’ state
law claims are time-barred. The complaint was filed on March 30, 2015. To be timely, the tortbased claims, except negligent misrepresentation, would have had to be filed by January 2012;
the negligent misrepresentation claim by March 2014; the contract-based claims by January
2015; and the 93A claim by January 2013. Even if liquidation provided the date of accrual, all
claims, except the contract-based ones, would still be time-barred.
d. The Court cannot determine at this stage whether the discovery rule under
Massachusetts law applies to the contract-based claims and 93A claim.
As the parties acknowledge, Massachusetts law provides the statute of limitations for the
contract-based claims and the 93A claim. Massachusetts has a discovery rule that tolls the statute
of limitations under certain circumstances. The discovery rule applies only when the injury was
inherently unknowable. See Power Control Devices, Inc. v. Orchid Techs. Eng’g & Consulting,
Inc., 968 F. Supp. 2d 435, 442 (D. Mass. 2013) (Under Massachusetts law, “[i]n order for the
statute of limitations to be tolled under the discovery rule, the basis for the action must have been
‘inherently unknowable’ to the plaintiff at the time of the injury.”). “The factual basis for a cause
of action is inherently unknowable if it is incapable of detection by the wronged party through
the exercise of reasonable diligence.” Gonzalez v. United States, 284 F.3d 281, 288–89 (1st Cir.
2002). The standard is an objective one. Id. at 288–89. “Under the Massachusetts discovery rule,
an ‘inherently unknowable’ cause of action accrues only when the injured party knew or should
have known of the facts underlying the claim.” Shane v. Shane, 891 F.2d 976, 986 (1st Cir.
1989) (quoting Maggio v. Gerard Freezer & Ice Co., 824 F.2d 123, 130 (1st Cir. 1987)).
Thus, for purposes of this case, the discovery rule only tolls the statute of limitations until
a plaintiff is on inquiry notice. See Epstein v. C.R. Bard, Inc., 460 F.3d 183, 188 (1st Cir. 2006)
(“[t]he discovery rule does not require that a plaintiff know the specific details pertaining to an
alleged harm, but instead it imposes a ‘duty to investigate’ on a plaintiff who has cause for
concern.” (quoting Doucette v. Handy & Harmon, 625 N.E.2d 571, 573 (Mass. App. Ct. 1994))).
Here, if the discovery rule tolled the statute of limitations for the contract-based claims and the
93A claim until March 30, 2011, the date Plaintiffs admit they learned of the escheatment, the
claims might not be time-barred.
To make this determination, “Massachusetts discovery rules require an individualized
fact-intensive inquiry.” In re Fresenius Granuflo, 76 F. Supp. 3d at 309. “Application of the
discovery rule ordinarily involves questions of fact and therefore ‘in most instances will be
decided by the trier of fact.’” Genereux v. Am. Beryllia Corp., 577 F.3d 350, 360 (1st Cir. 2009)
(quoting In re Mass. Diet Drug Litig., 338 F. Supp. 2d 198, 204 (D. Mass. 2004) (further internal
quotation marks omitted)).
The Court finds that that it is premature at this stage to determine whether the discovery
rule applies without the benefit of relevant discovery. Here, Plaintiffs allege that they received
explicit instructions from Defendants that shareholders need not take any affirmative actions
regarding their shares. There are no additional facts about the circumstances of the holding of the
shares from which the Court can infer whether the escheatment was inherently knowable or
unknowable around January 2, 2009 or, if not knowable then, when it might have become
knowable. Defendants argue only that Plaintiffs could have inquired. But, given the facts
available, the Court could reasonably infer that there were no circumstances that would have
rationally caused Plaintiffs to think to inquire into the status of their shares. Cf. In re Dreliouch,
359 B.R. 9, 16 (Bankr. D. Mass. 2006) (holding that fraudulent creation of deed was inherently
unknowable because, after checking once, the plaintiff “had no further reason to continually be
running to the registry of deeds to check for the alleged fraud after that point”). Under
Massachusetts law, at this stage, the Court finds it inappropriate to hold that the escheatment was
inherently knowable where Plaintiffs may have had no other way of knowing besides starting an
inquiry that they might have had no reason to undertake. Accordingly, drawing reasonable
inferences in favor of the Plaintiffs, it is not possible for the Court to conclude that the
escheatment was inherently knowable to Plaintiffs under Massachusetts law on January 2, 2009.
On summary judgment, for the contract-based claims and the 93A claim, the parties may develop
the facts or provide case law concerning whether and under what circumstances the escheatment
of shares is inherently unknowable or not.
e. Plaintiffs’ tort-based claims are time-barred even if the Delaware discovery
Delaware law, which the Court applies to the tort-based claims, has a discovery rule that
can toll the statute of limitations if the injury was inherently unknowable and the plaintiff was
blamelessly ignorant of the injury. See TL of Florida, Inc. v. Terex Corp., 54 F. Supp. 3d 320,
328 (D. Del. 2014) (“Under the [Delaware] ‘discovery rule’ the statute of limitations is tolled
when the injury is ‘inherently unknowable and the claimant is blamelessly ignorant of the
wrongful act and the injury complained of.’” (quoting Wal-Mart Stores, Inc. v. AIG Life Ins.
Co., 860 A.2d 312, 319 (Del. 2004))). Even if the Delaware discovery rule applied, however, it
would only toll or delay the accrual date of the statute of limitations until Plaintiffs were put on
inquiry notice of the injury, here the escheatment, which occurred no later than March 30, 2011.
See Wal-Mart Stores, Inc., 860 A.2d at 319 (accrual under the Delaware discovery rule begins
when “‘the existence of facts sufficient to put a person of ordinary intelligence and prudence on
inquiry which, if pursued, would lead to the discovery’ of such facts.” (quoting Coleman v.
Pricewaterhousecoopers, LLC, 854 A.2d 838, 842 (Del. 2004))).
The fact that Plaintiffs believed that their shares were escheated to Massachusetts, rather
than Delaware, does not change the fact that they knew by March 30, 2011 that their shares had
The analysis in this section would be similar for a violation of the Massachusetts state securities
law, and thus the Court does not discuss is separately.
been escheated. It is possible, although the Court cannot conclude so on these facts, that
Plaintiffs were even on inquiry notice before March 30, 2011. Accordingly, making all
reasonable inferences in favor of Plaintiffs at this stage and based on the record currently before
the Court, the accrual of the statute of limitations for Plaintiffs’ tort-based claims could not be
delayed beyond March 30, 2011, the date Plaintiffs learned of the escheatment. Because tort
claims under Delaware law have a three-year statute of limitations, Plaintiffs’ tort-based claims
had to be filed by March 30, 2014 to be timely even if the discovery rule applied. Because the
action was not initiated until March 2015, Plaintiffs’ tort-based claims, with the exception of
negligent misrepresentation, are time-barred.
Plaintiffs’ negligent misrepresentation claim (Count X) is based on the allegation that the
Defendants provided misinformation in March 2011 about the state to which their shares were
escheated. The accrual date is different, but the same analysis involving Delaware’s discovery
rule applies. At this stage and on these facts, however, the Court cannot determine whether
Delaware’s discovery rule might apply to save Plaintiffs’ negligent misrepresentation claim.
Therefore, the claim will not be dismissed at this time.
f. The § 1983 claim is time-barred.
The Court addresses the statute of limitations inquiry for the § 1983 claim (Count IX)
separately because its accrual is governed by federal, rather than state, law. See Corliss v. City of
Fall River, 397 F. Supp. 2d 260, 264 (D. Mass. 2005). Here, Plaintiffs allege that Defendants, to
the extent Delaware law required escheatment of Plaintiffs’ shares, acted under color of state law
and “effected a deprivation and taking” of Plaintiffs’ property without due process and also
violated the Friendship, Establishment and Navigation Treaty between the United States and
Belgium. Compl. ¶¶ 153–154. Generally, a § 1983 claim accrues “when the plaintiff knows or
has reason to know of the injury which is the basis of the action.” Corliss, 397 F. Supp. 2d at 264
(quoting Street v. Vose, 936 F.2d 38, 40 (1st Cir. 1991)). “A claimant is deemed to ‘know’ or
‘learn’ of a discriminatory act at the time of the act itself and not at the point that the harmful
consequences are felt.” Marrero-Gutierrez v. Molina, 491 F.3d 1, 5–6 (1st Cir. 2007). Thus, in
the takings context, the First Circuit “ha[s] long held that ‘[i]n a § 1983 case concerning the
unlawful taking of property, the statute of limitations begins to run on the date of the wrongful
appropriation,’” and not on the date that the plaintiff learned of the defendants’ wrongful
motivations. Vistamar, Inc. v. Fagundo-Fagundo, 430 F.3d 66, 70 (1st Cir. 2005) (quoting Altair
Corp. v. Pesquera de Busquets, 769 F.2d 30, 32 (1st Cir. 1985)).
In this case, the wrongful appropriation took place on the day that Defendants escheated
Plaintiffs’ shares, or January 2, 2009. Given that the nature of shares is inherently different from
the nature of real property, however, it is unclear on these facts whether Plaintiffs had reason to
know of the escheatment on January 2, 2009. It is clear, however, that Plaintiffs knew of the
injury (the escheatment) by March 30, 2011. This determination is not altered by the fact that
Plaintiffs did not know at that time whether the shares were escheated to Delaware or
Massachusetts. For accrual of a § 1983 claim to be triggered, “[t]he knowledge required is not
notice of every fact which must eventually be proved in support of a claim, but rather knowledge
that an injury has occurred.” Williams v. City of Brockton, 59 F. Supp. 3d 228, 240 (D. Mass.
2014) (quoting Tedeschi v. Reardon, 5 F. Supp. 2d 40, 44 (D. Mass. 1998)).
A § 1983 claim “borrows the appropriate state law governing limitations unless contrary
to federal law,” Poy v. Boutselis, 352 F.3d 479, 483 (1st Cir. 2003), from “the state where the
action was brought,” Greenwood ex rel. Estate of Greenwood v. N.H. Pub. Utils. Comm’n, 527
F.3d 8, 13 (1st Cir. 2008). Thus, the three-year Massachusetts statute of limitations for personal
injury claims applies. See McLaughlin v. Boston Ret. Bd., 146 F. Supp. 3d 283, 288 (D. Mass.
2015), aff’d sub nom. McLaughlin v. Boston Ret. Bd. et al., No. 15-2452 (1st Cir. Jul. 27, 2016)
(order granting summary disposition and affirming); see also Mass. Gen. Law. Ch. 260, § 2A.
Making all reasonable inferences in favor of the Plaintiffs at this stage, the § 1983 claim must
have been filed within three years of March 30, 2011, or March 30, 2014. Because the instant
action was initiated in March 2015, Plaintiffs’ § 1983 claim is time-barred.
For the foregoing reason, Defendants’ Motions to Dismiss on statute of limitations
grounds [ECF Nos. 66, 70] are GRANTED IN PART AND DENIED IN PART with respect to
the statute of limitations issues. Plaintiffs’ claims for negligence (Count I), conversion (Count
III), breach of fiduciary duty (Count VI), violations of state securities laws (Count VIII), and
violation of § 1983 (Count IX) are time-barred and therefore DISMISSED without prejudice.
Plaintiffs may seek to amend the Complaint if discovery reveals alternative grounds for tolling
the statute of limitations. Plaintiffs’ claims for breach of contract (Count IV), breach of the
implied covenant of good faith and fair dealing (Count V), Chapter 93A (Count II), and
negligent misrepresentation (Count X) are not dismissed at this stage, although Defendants may
raise the defense again at a later stage once the facts have been sufficiently developed. The
motions to dismiss [ECF Nos. 66, 70] with respect to the non-statute of limitations issues remain
Dated: January 23, 2017
/s/ Allison D. Burroughs
ALLISON D. BURROUGHS
U.S. DISTRICT JUDGE
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