814 F. Supp. 2d 272
S.D.N.Y.2011Background
- Becnel and Jardine Ventures, LLC and Soward sue Deutsche Bank AG and Deutsche Bank Securities, Inc. in diversity actions alleging state-law fraud, conspiracy, fraudulent concealment, aiding and abetting, breach of fiduciary duty, breach of contract, and implied covenant claims arising from the BLIPS tax shelter strategy conducted between Sept. 1999 and May 2000.
- Soward entered into a $10.4 million loan with Deutsche Bank, opened Voltaire (Soward's sole ownership) and assigned Voltaire's rights to the Alverstone Strategic Investment Fund; accounts were closed May 15, 2000, with Soward alleging the loan was sham and fees were charged on fraudulent representations.
- Becnel similarly entered into an $80 million loan, opened Jardine for Becnel, assigned Jardine's rights to Hubbard Strategic Investment Fund, and had Jardine/Hubbard accounts closed May 15, 2000; Becnel alleges the loan was not legitimate and fees were charged for a sham loan.
- Deutsche Bank admitted wrongdoing in a December 21, 2010 Non-Prosecution Agreement (NPA) related to BLIPS, stating the transactions were designed to create the impression of loans with unusual premium structures and profits from currency depreciation, with loans converted to variable-rate loans with no premium.
- The case history includes related class actions Becnel v. KPMG, LLP et al. (denied class certification), and Kottler v. Deutsche Bank AG (denied class certification); these proceedings influence tolling considerations in the NY borrowing statute analysis.
- The court grants Deutsche Bank’s motions to dismiss, applying New York’s borrowing statute, rejecting cross-jurisdictional tolling, and finding all claims time-barred under New York law (and by extension under the borrowing statute).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the borrowing statute bars the claims as untimely. | Soward/Becnel contend tolling from class actions extends limitations. | Deutsche Bank asserts no cross-jurisdictional tolling under NY law. | Yes; time-barred under New York law; no cross-jurisdictional tolling adopted. |
| Whether fraud and fiduciary-duty claims are timely under accrual or discovery prongs. | Soward/Becnel argue accrual/discovery delays tolling periods (continuous representation and discovery reports). | DB argues accrual occurred by 2000; no tolling without cross-jurisdictional tolling. | Untimely under both prongs; time-barred under NY law. |
| Whether breach-of-contract and implied covenant claims are timely. | Soward/Becnel rely on continuous representation; otherwise untimely. | Same accrual and tolling defects apply; time-barred. | Time-barred under New York statute and borrowing statute. |
| Whether leave to amend should be granted given futility. | Soward seeks second amend. to restore original BLIPS references. | Amendment would be futile as claims are time-barred. | Denied; amendment would be futile. |
Key Cases Cited
- American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974) (class-action tolling governs timing in federal claims; state law governs tolling here)
- Primavera Familienstiftung v. Askin, 130 F.Supp.2d 450 (S.D.N.Y. 2001) (foreign tolling question requires state-law analysis; no clear NY rule on cross-jurisdictional tolling)
- Kottler v. Deutsche Bank AG, 607 F.Supp.2d 447 (S.D.N.Y. 2009) (class-action context; not supportive of factual defenses on notice; fraud claims inadequately pled under Rule 9(b))
- In re Fosamax Prods. Liab. Litig., 694 F.Supp.2d 253 (S.D.N.Y. 2010) (federal tolling issues; court disinclined to import tolling where state law lacks clear guidance)
- Casey ex rel. Estate of Casey v. Merck & Co., Inc., 653 F.3d 95 (2d Cir. 2011) (tolling and discovery-related issues analyzed as state-law questions where applicable)
- In re Agent Orange Prod. Liab. Litig., 818 F.2d 210 (2d Cir. 1987) (Erie-state-law analysis governs tolling and accrual in complex actions)
- Gorlin v. Bond Richman & Co., 706 F.Supp.2d 236 (S.D.N.Y. 2010) (market-based tolling/limitations considerations in securities-related disputes)
- Cuccolo v. Lipsky, Goodkin & Co., 826 F.Supp. 763 (S.D.N.Y. 1993) (tolling/accrual principles in NY)