benefits due, it could not have intended that a court should borrow, as the occasion arose, from one of the most anachronistic provisions of state law. Plaintiff's theory, if accepted, would frustrate the intent of Congress to create uniformity in the enforcement of rights under employee benefit plans.
Accordingly, and consistent with its earlier opinion, the Court rejects plaintiff's argument and rules that the applicable limitations period for a claim under ERISA § 502(a)(1)(B) is three years, as provided for by D.C. Code Ann. § 12-301(7).
3. ERISA Claim for Breach of Fiduciary Duty -- § 502(a)(3)
For a claim for breach of fiduciary duty, ERISA provides a six year limitations period, which will be reduced to three years if the plaintiff had actual notice of facts underlying the wrongs alleged. 29 U.S.C. § 1113. Because the Court holds below that Grant was on actual notice of the facts underlying plaintiff's suit, a three year limitations period applies to its claims under section 502(a)(3).
4. Common-Law Claims
The limitations period applicable to plaintiff's common-law claims is three years. D.C. Code Ann. § 12-301(8).
In sum, the longest limitations period applicable to any of plaintiff's claims is three years, considerably less time than the 10 or so years that have elapsed since Mr. Grant's retirement from U.S. News.
Doctrine of Fraudulent Concealment
The legal elements of a claim that a cause of action has been fraudulently concealed are well established in this Circuit. To prevail on such a claim, a plaintiff must demonstrate that (1) the defendant engaged in some fraudulent or deceptive course of conduct that successfully concealed facts underlying his cause of action, (2) he was not on notice of those facts, (3) despite the exercise of due diligence. Hobson v. Wilson, 237 U.S. App. D.C. 219, 737 F.2d 1, 33-36 (D.C. Cir. 1984), cert. denied sub nom. Brennan v. Hobson, 470 U.S. 1084, 105 S. Ct. 1843, 85 L. Ed. 2d 142 (1985). In its most recent pronouncement concerning the doctrine of fraudulent concealment, the D.C. Circuit reaffirmed the vitality of the due diligence requirement. Hohri v. United States, 251 U.S. App. D.C. 145, 782 F.2d 227, 246-50 (D.C. Cir. 1986). In Hohri, the Court stressed that, once a potential plaintiff is put on notice of facts indicating that "further inquiries might be appropriate[,]" he comes under a duty "to discover that which was concealed. . . ." Id. at 250. In other words, a potential plaintiff "is held to be on notice of all facts he could have learned through reasonably diligent inquiry." Hobson, 737 F.2d at 35 n. 107, cited in Hohri, 782 F.2d at 250. In short, the absence of actual notice is not sufficient to prevail on a claim for fraudulent concealment; such a claim will be defeated if a plaintiff should have known of facts underlying his cause of action.
Application of the Doctrine to the Facts of Record
In an attempt to come within the parameters of the fraudulent concealment doctrine, plaintiff essentially focuses not upon whether Mr. Grant had constructive knowledge of facts relating to the wrongs alleged, but whether he actually knew of those facts. In this way, plaintiff misconstrues and misapplies the tolling doctrine. Moreover, even if the standard were one of actual notice, the undisputed facts of record indicate quite clearly that Mr. Grant actually knew of those facts alleged in plaintiff's complaint to have constituted the wrongdoing complained of.
1. Constructive Notice
Apparently aware that Mr. Grant's former position as a Director and Executive Vice President of U.S. News would ordinarily be such as to impute notice to him, plaintiff seeks to avoid that obstacle to its tolling claim by asserting that the U.S. News Board was bifurcated into a "news" and a "business" side. Although plaintiff concedes, as it must, that Mr. Grant moved from the "news" side to the "business" side, plaintiff attempts to minimize his participation in the business affairs of the company by claiming that he really was not on the business side at all. Accordingly, plaintiff adduces the testimony of Mr. John Adams, a colleague of Mr. Grant on the Board, who states that "Ben Grant . . . was kind of a bridge man, outside speaker man who had come over from the news department and was given a fancy title."
Deposition of John H. Adams (Apr. 22, 1985) at 9. Mr. Adams goes on to say that "mainly Ben went around the country and made speeches on behalf of the magazine. . . ." Id. at 10. That characterization of Mr. Grant's activities is repeated by another fellow Board member, Affidavit of John Kirby para. 5, Pls.App. at 7,
and by Mrs. Grant, who states that her husband was a "goodwill ambassador," Affidavit of Elizabeth B. Grant para. 9, Pls.App. at 3, and a "public relations representative." Id. para. 10. Both Mr. Kirby and Mrs. Grant state, in the same terms, that Mr. Grant was not a "sophisticated businessman." Kirby Affidavit para. 6; Grant Affidavit para. 19. In short, plaintiff relies exclusively on flat, generalized assertions that Mr. Grant had no dealings with the "business" side of the company and upon opinion testimony that Mr. Grant was not generally knowledgeable about business affairs.
Even if it were true that the operations were crisply divided into a news and business side, such a division, without more, would not exempt Grant from the general duty incumbent upon a director to keep himself at least minimally aware of corporate affairs. A director cannot claim ignorance of "matters fairly disclosed by the directors' meetings and those corporate records to which the directors had access." Federal Deposit Ins. Co. v. Lauterbach, 626 F.2d 1327, 1334 (7th Cir. 1980); accord Myzel v. Fields, 386 F.2d 718, 736 (8th Cir. 1967), cert. denied, 390 U.S. 951, 19 L. Ed. 2d 1143, 88 S. Ct. 1043 (1968). While it is true that notice will not be imputed to a director simply by virtue of his position if his fellow board members actively concealed information from him, Janigan v. Taylor, 344 F.2d 781, 786 (1st Cir. 1965), there is nothing in this record to suggest nor is there any claim that Mr. Grant's colleagues on the Board deliberately withheld any material facts from him. On the contrary, as will be discussed below, Mr. Grant had actual notice of facts relevant to the claims asserted in this complaint. To that extent, even if his fellow directors had sought to withhold information from him, they could not have been successful.
2. Actual Notice
While plaintiff has attempted to shield Mr. Grant from the general duties incumbent upon corporate directors by claiming that the company was divided into news and business departments, it is clear from the record that neither did such a rigid division exist in theory, nor did it preclude Mr. Grant from notice in practice.
First, it is simply not true that directors on the "news" side had no dealings with general corporate affairs. Mr. Adams, for instance, who had served as Managing Editor, Deposition at 6, was also a member of the Profit-Sharing Committee, id. at 25, which administered the Plan. Similarly, Mr. Grant, while perhaps a "public relations representative" or "goodwill ambassador," actively engaged in affairs on the business side of the Company. He voted on the payment of stock dividends and contributions to the pension and Profit-Sharing plans, on whether the Company should continue the stock bonus plan, and on the award of deferred compensation rights to fellow directors. Defts. App. at 21-36, 41-42, 44-53. Of even greater significance, as a member of the Madana Board, Mr. Grant played a more or less active part in the discussion of plans for the future development of the Company's real estate holdings. He attended meetings of the Boards of U.S. News and Madana, at which various plans for development were considered. At one such meeting, Oliver T. Carr of the Oliver T. Carr Company, a prominent Washington construction and development firm, made a presentation concerning such development. See Defts. App. at 190-213. At that time also, U.S. News joined with a consortium of owners of substantial properties in the West End, known as West End Planning, Inc., in creating a commercially attractive plan for development in the area, to be submitted to the District of Columbia government for consideration. Indeed, it was Mr. Grant who placed before the Madana Board the motion to adopt a resolution supporting the West End Planning proposal. Defts. App. at 213. The assertion, then, that Mr. Grant was not involved with the business activities of the company is simply untenable.
Not only does the record reveal that the wall allegedly separating Mr. Grant and the "news" side of the magazine from the business affairs of the company was at least permeable, but it also indicates that Grant had knowledge of facts underlying the present suit. Through his participation on the Madana Board, Mr. Grant certainly knew that the company's real estate was of great potential value. Through his attendance at the 1974 Annual Shareholder Luncheon, Defts. App. at 136, Mr. Grant heard -- if he was not already aware -- that the real estate was carried on the books at only one-third of current value, id. at 137, and that American Appraisal determined the value of the Company's stock in part by comparing it to the earnings capacities of the publicly traded stock of comparable businesses. Id. at 141. Those two items of information, combined with his knowledge of the status of the real estate development plans, should have been enough to put Mr. Grant on notice that (1) the real estate was being conservatively appraised, and (2) that no "control premium" was being attributed to the fact that the Plan owned a controlling block of the company's stock,
the two aspects of the year-end 1974 appraisal that plaintiff contends were most wrongful. Moreover, the annual appraisals were a topic of discussion at meetings of the U.S. News Board. Deposition of John H. Adams at 10. While plaintiff attempts to make much of the fact that no formal appraisal reports were prepared for the years 1971 through 1973, whatever information that they might have contained was simply not necessary to put Mr. Grant on notice of the fact that the Company's real estate holdings did not figure highly in American Appraisal's valuation of the U.S. News stock. Moreover, even if such information might have been helpful, absent fraudulent concealment of facts such as would have put Mr. Grant on notice of a potential claim, the statute will not be tolled.
It is not disputed that Mr. Grant was disappointed with the value of $65 per share placed on his retirement benefits and that he complained to John Sweet of his dissatisfaction. Affidavit of Elizabeth B. Grant para. 17, Pls. App. at 4; Deposition of Howard W. Flieger (Mar. 28, 1985) at 12. Knowing that the company was valued on a minority basis, Mr. Grant could have easily determined the entire appraised value of U.S. News by multiplying $ 65 by the approximate number of outstanding shares. Then comparing this figure with what he knew or considered the real estate to have been worth, by virtue of his involvement with current development plans, Mr. Grant would have been able to form an opinion as to whether the appraisal adequately took into account the "true" value of the real estate. If he had any doubts after such a comparison, he need only have asked to see the 1974 appraisal report.
Any potential claim against U.S. News would have thus been apparent in 1975, or soon after Mr. Grant left the magazine.
Perhaps most indicative of Mr. Grant's lack of diligence in following up upon what should have constituted knowledge of a potential claim is his lack of response to a letter he received in August of 1981 from Owen Scott, a former director of the Company. In that letter, Mr. Scott describes the "vast development projects that [were] ahead for the U.S. [News] property." Defts. App. 174. Mr. Scott contrasted the future prospects for development with the modest beginnings made when Mr. Grant was with the Company, id. at 175-76, concluding with the observation that henceforth "the value of the stock at least [would] reflect the new valuation on the land. . . ." Id. at 177. It was precisely this contrast between past and current valuation of the Company's real estate that impelled the Foltz plaintiffs to file suit in February 1984, many months before the Company was actually sold. Grant, by contrast, despite his disappointment in the price he received per share, did nothing to investigate a potential claim after receiving news from Mr. Scott that current employees would be enjoying the fruits of development projects begun when Mr. Grant was still with the Company. It is such an absence of diligence that defeats plaintiff's claim that the statute should be tolled.
While "it is one thing to toll the statute of limitations until a reasonable plaintiff could undo the effects of concealment[,] it is quite another matter to discharge a plaintiff completely from his usual obligations to conduct reasonable inquiries into the grounds supporting his cause." Hohri, 782 F.2d at 248. The undisputed facts of record do not reveal that Mr. Grant was a passive member of the U.S. News and Madana boards of directors. As both a corporate director and officer, he was chargeable with notice of those facts which corporate records, financial and otherwise, would clearly disclose and in this connection reasonable due diligence is expected of a person in his position. He was chargeable with awareness of matters fairly ascertainable from the records and day-to-day activities of the Company. There may be exceptions, of course, upon a claim and a showing that relevant documents were wrongfully withheld but such has not been demonstrated here. It appears from the record in this proceeding that Mr. Grant was in a position to know the facts underlying what plaintiff now charges was wrongful conduct. If he had any doubts as to those facts, he was bound to exercise reasonable diligence in inquiring further into any matters of concern. The argument that he was somehow relieved of any duty to maintain an awareness of company affairs because he operated somewhere on the fringes of the organization is untenable both in theory and in practice. As a matter of law, Mr. Grant's position on the Board of Directors and as Executive Vice President was sufficient to impute notice to him, absent record evidence of any attempt by his fellow directors to dupe him. As a matter of practice, Mr. Grant actively engaged on a day-to-day basis in the corporate management department and on the business side of the Company. Any attempt on the part of his colleagues to deceive him could not have been successful, unless of course he had been neglectful of his duties as director and unreasonably inattentive as a potential plaintiff. Finally, the record reveals that Mr. Grant had actual notice of facts underlying plaintiff's suit such as to preclude tolling of the statute.
Accordingly, the Court grants defendants' motion for summary judgment on the grounds that plaintiff's claims are time-barred.
An appropriate Order will be entered.
(Granting Defendants' Motion for Summary Judgment)
June 12, 1986
In accordance with the Memorandum Opinion issued on this date, it is
That defendants' motion for summary judgment is granted and this proceeding is dismissed with prejudice.
(Granting Defendants' Motion for Summary Judgment)
July 2, 1986
In accordance with the Memorandum Opinion issued on June 12, 1986, it is
That the Court's Order of June 12, 1986 is vacated; and
That defendants' motion for summary judgment is granted and the claims asserted against them by the plaintiff are dismissed with prejudice.