Levey v. Brownstone Asset Management, LP
2013 Del. LEXIS 431
| Del. | 2013Background
- Levey, a former 5% non‑managing owner of two Delaware entities (BIP and BAM), left the Brownstone entities in January 2006 and asserted claims for return of capital and related payments.
- Defendants sued Levey in S.D.N.Y.; Levey asserted the same claims as a counterclaim there (Feb. 23, 2006) and later demanded arbitration after the district court compelled NASD/FINRA arbitration.
- FINRA concluded it lacked jurisdiction (June 24, 2008). Levey then waited until August 12, 2010 to sue in the Delaware Court of Chancery.
- The Court of Chancery granted defendants summary judgment, holding Levey’s claim was barred by laches measured by the analogous three‑year statute of limitations (10 Del. C. § 8106).
- On appeal the Delaware Supreme Court conducted an independent review, concluded the Court of Chancery erred by applying the analogous limitations period without considering (1) IAC/InterActiveCorp factors showing extraordinary circumstances and (2) equitable tolling based on earlier proceedings, and reversed and remanded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether plaintiff’s delay is barred by laches measured by the analogous statutory limitations period | Levey: delay excused by former counsel’s error and by reliance on fiduciary good faith | Defendants: delay after plaintiff knew of claim is unreasonable and prejudicial; analogous 3‑year limitations applies | Court: reversed Chancery — laches cannot be applied by straightforward analogy because extraordinary circumstances (IAC factors) and equitable tolling apply; remanded |
| Whether attorney error or reliance on fiduciary good faith tolls or excuses delay | Levey: former counsel’s conduct should excuse delay; alternatively, reliance on fiduciary competence should equitably toll | Defendants: client is bound by counsel’s acts; no evidence of reliance on defendants’ fiduciary honesty | Held: attorney error excuse fails; reliance argument not raised below and lacked factual support; but other equitable grounds rectify result |
| Whether prior litigation/arbitration activity constitutes an "unusual or extraordinary" circumstance under IAC | Levey: prior counterclaim and arbitration proceedings show active pursuit and reliance on other fora | Defendants: delay remains unreasonable despite prior proceedings | Held: IAC factors satisfied (4 of 5): prior litigation, court‑ordered arbitration and FINRA proceedings, defendant awareness, and bona fide dispute — weigh against applying the analogous limitations period |
| Whether equitable tolling applies to the analogous limitations period | Levey: prior filings in S.D.N.Y. and FINRA justify tolling | Defendants: statute should run; suit in Delaware was late | Held: equitable tolling applies for the periods during which the S.D.N.Y. considered arbitration and FINRA considered the demand, making the Delaware filing timely when tolled |
Key Cases Cited
- IAC/InterActiveCorp v. O’Brien, 26 A.3d 174 (Del. 2011) (identifies "unusual conditions or extraordinary circumstances" factors for not applying the analogous limitations period in laches analysis)
- Reid v. Spazio, 970 A.2d 176 (Del. 2009) (Delaware Savings Statute and principles supporting tolling where claim was pursued in another forum)
- U.S. Cellular Inv. Co. v. Bell Atlantic Mobile Sys., Inc., 677 A.2d 497 (Del. 1996) (summary of laches doctrine and use of analogous limitations period as a presumptive measure)
- Worrel v. Farmers Bank of State of Del., 430 A.2d 469 (Del. 1981) (standards for summary judgment)