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July 7, 1986

DAVID B. RICHARDSON, et al., Plaintiffs,
U.S. NEWS & WORLD REPORT, INC., et al., Defendants

The opinion of the court was delivered by: PARKER


 On July 10, 1985, plaintiffs filed this action against their former employer, U.S. News & World Report, Inc. ("U.S. News" or "Company"), a weekly news magazine, as well as against eight of its former directors, the U.S. News Profit-Sharing Plan ("Plan"), and American Appraisal Associates, Inc. ("American Appraisal"), an independent appraisal firm. They charge that defendants collectively suppressed the value of the retirement benefits that they received upon separation from the Company through their participation in the Plan and through resale of shares of common stock issued them in connection with a stock bonus plan.

 Plaintiffs *fn1" are, with one exception, *fn2" former employee-shareholders of U.S. News, who retired from U.S. News in 1982. Employees who had separated from the Company between 1974 and 1981 instituted a class action suit against these same defendants in February 1984, Charles S. Foltz, et al. v. U.S. News & World Report, Inc., et al., C.A. No. 84-0447. The two cases were consolidated for pretrial and trial by Order of March 3, 1986.

 Currently before the Court are defendants' motions for summary judgment. For the reasons set forth below, the Court grants in part and denies in part those motions, as follows:

(1) the claims of plaintiffs Haller, LeCompte, Stifel, Strube, and Truitt for benefits due under the Employee Retirement Income Security Act of 1974 ("ERISA") § 502(a)(1)(B), for breach of the fiduciary duty of care under ERISA § 502(a)(3), and for negligence are time-barred;
(2) plaintiffs' claims for securities and common-law fraud are dismissed in part;
(3) plaintiffs' claims under ERISA § 502(a)(3) are dismissed in part; plaintiffs' claims under ERISA § 502(a)(1)(B) that are not time-barred may proceed to trial; and
(4) plaintiffs' common-law claims are dismissed in part.


 The facts leading up to the filing of Foltz, as well as the general background of this litigation, have been extensively treated elsewhere. *fn3" A few of those facts, however, need to be restated, if only in barest outline.

 Between the time of its reorganization in 1962 and its sale in 1984, U.S. News was an entirely employee-owned company. Pursuant to the Articles of Incorporation, employees were issued, under a stock bonus plan, shares of non-transferable common stock at regular intervals. In addition, employees received an undivided interest in the Profit-Sharing Plan, in accordance with a formula based upon salary and term of service. Upon separation, each employee was required to offer his bonus shares back to the Company for repurchase and was entitled to liquidate his Plan account. *fn4"

 The price that a retiring employee received per share of bonus stock was based upon annual valuations conducted by American Appraisal in accordance with Article Fifth (e) of the Articles of Incorporation. The per share value of the Company's stock also determined the value of each employee's interest in the Plan, whose major asset was a 50,000 share block of U.S. News stock. *fn5" In arriving at a value for the Company as a whole, American Appraisal gave some consideration to U.S. News' extensive real estate holdings in the West End of Washington, D.C.

 While the real estate did not always figure highly in the appraisal, by 1981 sufficient headway had been made in developing the U.S. News holdings that American Appraisal valued the real estate separately from the operating business of the magazine. In that year, a series of six joint venture agreements were entered into between U.S. News and Boston Properties, Inc., whereby U.S. News assigned its real estate holdings to Boston Properties, in exchange for a 50 percent equity interest in the joint ventures. As a result of the anticipated profitability of the joint ventures, the appraised value of the company's stock increased more than three-fold over its 1980 value of $152 per share.

 In 1984, U.S. News, including its interest in the joint ventures, was sold to Mortimer Zuckerman, a real estate and publishing entrepreneur and principal of Boston Properties. The sale price of $176 million meant that current employees of U.S. News would receive approximately $2,800 per share for their interest in the Company. Plaintiffs, who received only $470 per share based upon the 1981 year-end appraisal, believe that the value of the stock had been previously suppressed, principally by a conservative treatment of the real estate and by a refusal to value the 50,000 share block held by the Plan on a control-premium basis. In addition, plaintiffs allege that U.S. News fraudulently withheld information concerning its real estate development plans, including a "secret" intent to sell the Company, from its employees and from American Appraisal and that U.S. News conspired with American Appraisal to arrive at a "negotiated" value for its stock.

 Corresponding to these sets of facts, plaintiffs bring claims *fn6" against U.S. News, the directors, and American Appraisal for securities fraud in violation of section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and Rule 10b-5 of the Securities and Exchange Commission, 17 C.F.R. § 240.10b-5, breach of fiduciary duty in violation of section 404(a) of ERISA, 29 U.S.C. § 1104(a), *fn7" and for common-law fraud. Plaintiffs also bring against only U.S. News and its directors claims for common-law breach of fiduciary duty, unjust enrichment, and negligence. Against the Plan plaintiffs' claim is limited, as it must be, to an action for benefits due under section 502(a)(1)(B) of ERISA, 29 U.S.C. § 1132(a)(1)(B).


 Defendants move for summary judgment on several grounds. All defendants charge that a number of the claims asserted are time-barred. U.S. News, the directors, and American Appraisal also urge the Court to hold that there is insufficient record evidence to support a rational inference of fraudulent conduct on which to premise a claim for securities or common-law fraud. Those defendants further argue that plaintiffs' ERISA claims against them will not withstand scrutiny, whether they are based upon intentional or negligent conduct. Finally, U.S. News and the directors contend that the claims for common-law breach of fiduciary duty and unjust enrichment, premised as they are upon defendants' alleged intentional conduct, must fail for the same reasons as the fraud claims, and that plaintiffs' negligence claim similarly is as factually barren as their ERISA claim.

 In brief, plaintiffs' claims can be grouped together into two categories. The first category encompasses those claims premised upon negligent, imprudent, or arbitrary conduct: plaintiffs' claims under ERISA § 502(a)(1)(B) and, possibly *fn8" § 502(a)(3), as well as their negligence claim. The second category includes those claims grounded in fraudulent or willful conduct: plaintiffs' claims for securities and common-law fraud, intentional breach of fiduciary under ERISA § 502(a)(3), common-law breach of fiduciary duty, and unjust enrichment.

 The facts underlying claims in the first category speak to whether U.S. News and its directors provided American Appraisal with adequate information, whether American Appraisal properly conducted the appraisal, and whether American Appraisal's work was properly scrutinized by U.S. News. Facts suggested to support claims in the second category surround U.S. News' alleged withholding of information from its employees and from American Appraisal, particularly a "secret" intent to sell the company, and an alleged conspiracy between U.S. News and American Appraisal to arrive at a "negotiated" value for the magazine's stock. Keeping separate these two sets of facts, together with the corresponding categories of claims, aids greatly in an analysis of defendants' motions and of the record.



 1. Do plaintiffs have one or two causes of action?

 From the foregoing discussion, it appears that plaintiffs may actually have two causes of action, one for improperly calculated benefits, and one for wrongfully and willfully withheld benefits. The question rises to crucial importance in analyzing whether any of plaintiffs' claims are time-barred, or whether the statute of limitations must be tolled under the doctrine of fraudulent concealment as to some or all of them.

 It is undisputed that the claims of some of the plaintiffs, as well as the securities claims of all of them, are outside the relevant limitations periods. *fn9" To come, then, within the ambit of tolling doctrine, plaintiffs must demonstrate that (1) defendants engaged in some fraudulent or deceptive course of conduct that successfully concealed facts underlying their cause of action, and that (2) they were not on notice of those facts, despite (3) 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).

 The question that then arises is what constitutes plaintiffs' "cause of action." To impute notice to a plaintiff such as to start the statute running, it must be that the plaintiff was aware of "facts giving notice of the particular cause of action at issue, not of just any cause of action." Hobson, 737 F.2d at 35. In this connection, counsel for the Plan reluctantly raises the possibility that plaintiffs' cause of action indeed may be two-fold, with the result that notice of facts underlying one will not impute notice of the existence of the other. In other words, merely because plaintiffs may have been aware that the real estate may not have been properly accounted for in the appraisals would not start the clock running on a claim that defendants "negotiated" a per share value for the Company's stock. The most that could be said, then, is that a claim for improperly, as opposed to wrongfully, determined benefits would be time-barred. *fn10"

 As the Plan's counsel suggests, a look at Richards v. Mileski, 213 U.S. App. D.C. 220, 662 F.2d 65 (D.C. Cir. 1981), may prove instructive. In Richards, the plaintiff was coerced into resigning his government position by what his superiors held out to be reports of his homosexual activity. Although Richards of course knew at the time of his resignation that the reports were false, he did not know of facts -- learned some twenty years later -- suggesting that his superiors had fabricated or at least had maliciously utilized the false reports to secure his resignation. Finding that a claim for intentional wrongdoing, based upon the subsequently learned facts, had been fraudulently concealed by the defendants, the court held that awareness at the time of his resignation of the alleged reports' falsity was insufficient to put Richards on notice of a claim premised upon malicious conduct. 662 F.2d at 69. Within the limitations period running from the time of his resignation, Richards could have only brought a claim for wrongful discharge, an entirely different claim from the one actually brought much later. Id.

 The Court finds the rationale of Richards to be persuasive. As outlined above, the facts underlying plaintiffs' claims for intentional and fraudulent conduct are distinct from those supporting their claims premised upon lesser degrees of fault. To impute notice to them of the former claims, based upon knowledge of facts underlying the later, would would be to attribute to them a prescience beyond that which the Richards court deemed appropriate. *fn11"

 Accordingly, the Court holds that, for statute of limitations purposes, plaintiffs have two causes of action, as outlined above.

 2. Claims that would otherwise be time-barred

 Plaintiffs LeCompte, Strube, and Truitt, liquidated their Plan accounts and resold their bonus shares prior to July 10, 1982, or more than three years before filing suit. Ellis M. Haller, the decedent of plaintiff Dorothy G. Haller, had his bonus shares repurchased upon his death in 1981; his Plan account was settled in May 1982. *fn12" Plaintiff Stifel resold his bonus shares in April 1982, but continues as a participant in the Plan to this date. Because the claims of these plaintiffs accrued more than three years before the instant suit was filed, any cause of action for violation of ERISA and any common-law claims would be time-barred absent tolling of the statute. 29 U.S.C. § 1113; D.C. Code Ann. § 12-301(7), (8) (Michie 1981). *fn13" In addition, because the limitations period in the District of Columbia for a claim for securities fraud is two years, Wachovia Bank & Trust Co. v. Nat'l Student Marketing Corp., 209 U.S. App. D.C. 9, 650 F.2d 342, 346-48 (D.C. Cir. 1980), cert. denied, 452 U.S. 954, 101 S. Ct. 3098, 69 L. Ed. 2d 965 (1981), the securities claims of the remaining plaintiffs would be otherwise untimely.

 3. Tolling as to claims involving elements of intent or fraud

 As outlined above, one category of claims brought by plaintiffs -- those for securities and common-law fraud, breach of fiduciary duty under ERISA and the common law, and unjust enrichment -- derive support from defendants' allegedly intentional or fraudulent conduct. That conduct is said to involve (1) the failure of U.S. News and its directors to provide American Appraisal with all information relevant to the magazine's real estate development plans; (2) those defendants' failure to provide that information to the employees; (3) those defendants' failure to disclose their "secret" intent to sell the company, and (4) the conspiracy entered into by those defendants and American Appraisal to arrive at a "negotiated" value for the magazine's stock.

 Item (1) above will be discussed later in the context of defendants' motion for summary judgment on the merits of plaintiffs' securities and fraud claims. Suffice it to say now that, because the record reveals no support for the proposition that any relevant information was withheld from American Appraisal, the Court need not reach the question of whether a claim premised upon such an allegation is time-barred. Item (2) is discussed in connection with whether plaintiffs' claims for other than fraudulent or intentional conduct are time-barred.

 Turning to items (3) and (4), the Court notes that, if there is any substance to plaintiffs' allegations, they certainly could not have been on notice of the facts in question. *fn14" It is not argued by defendants that plaintiffs knew of the key fact that plaintiffs say supports an inference of an intent to sell the company -- the acceleration of certain deferred compensation rights or "phantom stock" in March of 1982, supposedly in anticipation of an imminent sale. Nor do defendants suggest that plaintiffs were privy to the communications that took place between representatives of U.S. News and American Appraisal in connection with the conduct of the 1981 year-end appraisal, from which plaintiffs infer a "negotiated" valuation.

 If plaintiffs cannot be held to have been on notice of those facts outlined above, the issue is whether there was any fraudulent concealment of those facts. Moreover, because any concealment was effected by the nature of the alleged wrongs themselves -- in other words, because of the element of secrecy alleged -- the issue becomes simply one of whether the conduct charged was fraudulent or not. *fn15" The relevant inquiry thus merges with a discussion of the merits of plaintiffs' claims and will be deferred accordingly.

 Accordingly, the Court holds that none of plaintiffs' claims for securities or common-law fraud, intentional breach of fiduciary duty under ERISA § 502(a)(3), common-law breach of ...

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