998 F.3d 768
7th Cir.2021Background
- Hy-Pro Corporation founded in 1986; Richard Deibel received 2,500 shares (12.5%) and guaranteed a $100,000 bank debt; he left management but retained his stock.
- A state-court dispute was settled in 1992, but parties dispute whether Deibel surrendered his shares as part of the settlement; settlement terms were not reduced to a definitive record.
- Hy-Pro removed Deibel from its shareholder list in 1992; correspondence in 1993–1998 (including an IRS notice and absence of S‑corp K‑1s) confirmed Hy‑Pro did not treat him as a shareholder and Deibel ceased reporting Hy‑Pro income after 1998.
- Hy‑Pro was sold for over $20 million in 2017, giving Deibel a potential multi‑million claim if he still owned 12.5% of the stock.
- Deibel filed federal suit nearly 30 years after the 1992 events claiming he remains a shareholder; the district court dismissed under Indiana’s two‑year statute of limitations.
- The Seventh Circuit affirmed: Deibel’s claim accrued at the time Hy‑Pro canceled/ceased to recognize his shares (a discrete act), so his suit—filed decades later—was time‑barred.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Accrual / timeliness | Deibel: he remained an investor (or accrual at later sale), so claim is timely | Defendants: accrual occurred when shares were canceled/recognition ceased in 1992–1998; limitations expired | Court: accrual at cancellation (discrete wrong); suit time‑barred |
| Continuing‑wrong doctrine | Deibel: refusal to recognize him is a continuing wrong that tolls limitations | Defendants: cancellation is a discrete act; ongoing effects are not separate wrongs | Court: rejects continuing‑wrong; discrete‑act rule controls |
| Ultra vires cancellation | Deibel: corporation lacked authority to cancel unrelinquished shares, so cancellation invalid | Defendants: even if wrongful, the act occurred and gives rise to a claim—legal error does not prevent accrual | Court: legal error does not mean the event didn’t happen; accrual unaffected |
| Predicting Indiana law on freezeouts | Deibel: (implied) Indiana might treat exclusion as continuing | Defendants: states following Model Business Corp. Act treat freezeouts as accruing when exclusion occurs | Court: predicts Indiana will not treat a simple freezeout as a continuing wrong; accrual at exclusion |
Key Cases Cited
- United States v. Kubrick, 444 U.S. 111 (1979) (statute of limitations accrues when discrete injury occurs)
- National Railroad Passenger Corp. v. Morgan, 536 U.S. 101 (2002) (distinguishes discrete acts from continuing violations for accrual)
- PiBs v. Kankakee, 267 F.3d 592 (7th Cir. 2001) (continuing injury does not delay accrual of claim)
- Thorndike v. Thorndike, 154 N.H. 443 (2006) (freezeout claim accrues when plaintiff is notified/excluded; not a continuing wrong)
- Houle v. Low, 556 N.E.2d 51 (Mass. 1990) (similar rule: accrual at the time of exclusion)
- StraBon v. Royal Bank of Canada, 211 N.C. App. 78 (2011) (continued effects of conversion are not continual violations)
- Baur v. Baur Farms, Inc., 780 N.W.2d 249 (Iowa Ct. App. 2010) (distinguishable where a course of oppressive conduct creates cumulative violation)