Algrant v. Evergreen Valley Nurseries Ltd. Partnership

Joyce offer to that he return to ed RJR’s his position.

old

IV. Conclusion jurisdiction district court had over this granting summary err in and did not

case Joyce’s claims under RJR erroneously con-

ERISA. district

cluded, however, preempted that ERISA

Joyce’s claim NJLAD RJR disability. his to accommodate

failed permit Joyce is therefore remanded to

case complaint making

to file amended

claim under the NJLAD. ALGRANT; Douglas R.

Roland F. Trust; Associates, Anchor Sales

Allison Avery;

Inc; Bagley; Daniel B. James Boron; Mary Boron; Pat

Thomas S. Jr.; Cater,

Franklin Edward Paul W.

Dlabal; Elefante; B. Michael Herbert

Fisher; Marilyn Haar; Susan E. C. Har- Horowitz;

lin; Steven Herbert G. J.

Hostetler; Rudolph Estate; Maurizi S. Reddy; Jagannadha

P.Dr. E.W. Richar-

don, Jr.; Ruppert; Sloan; Patrick Susan Sood; Sood; K. R.

Narendra Usha Yonano;

George Yonano, L. L. Lucretia

Appellants,

EVERGREEN VALLEY NURSERIES PARTNERSHIP;

LIMITED The Par- Trust; Wayne Pocius;

kinson Pension E. Dimmick; Pa; M.

Russell Van Pines of Parkinson, Dr.; Unique

William L. Gar- Company.

den Center

No. 96-1994. Appeals,

United States Court of

Third Circuit.

Argued June 1997. Sept.

Decided Timothy D. (argued),

Alexander D. Bono Katsiff, Rome, Blank, Comisky McCauley, & PA, Philadelphia, Appellants. for (argued), Obermayer, Parry E. Warner Rebmann, Hippell, Philadelphia, Maxwell & PA, Parkinson Pension Appellees L. Parkinson. Trust and Dr. William Lavin, McGinley (argued), A. Cole- Joseph man, O’Neil, Ricci, Gray, & Phila- Finarelli Pocius, PA, Wayne E. delphia, Appellees Dimmiek, Pennsyl- approximately Wayne Pines of E. M. Van million. $3.6 Russell vania, Company. Unique general Center Pocius and Russell Dimmiek are the Garden partners of Pines Van and are the sole MANSMANN, NYGAARD Before: Unique shareholders Garden Center ROSENN, Judges. Circuit (“Unique”), general partner of Ever- purchased green. Tioga The Trust then the THE OF COURT OPINION nursery from Dim- Farm stock Pocius and $600,000. approximately mick for ROSENN, Judge. Circuit important appeal This raises two issues Following acquisition nursery the the relating in impression first this Trust, Evergreen pur- stock the then obligations promissory commercial and secu- chased an undivided 91.2% interest in the First, obligors on unma- rities. whether the nursery price Trust’s for stock the $10.4 promissory can obtain tured notes declarato- purchase million. Evergreen financed the ry against obligees of that The asserted the UTP/CPL. Appeals Tenth of have all held Circuit Courts expressed of the Trust’s intent to declaratory that an for be relief will 1996, July in Multiple v. Eastrich Investor Silverman, Silverman In plaintiff the no had Fund, (3d Cir.1995). L.P., F.3d 28 In 51 prior opportunity respond to to state the Silverman, plaintiff in federal the moved judgment, limiting court confession of thus injunctive court for relief to equitable her available claim remedies proclaim guaranty a void after the defen- pursued. she Id. The court noted that “[the judgment in dants confessed state court plaintiffs] ECOA claim was raised direct against guarantors, including the loan response to state Eastrich’s court confession plaintiff. at Id. 51 F.3d 30. The defendants judgment, pro require which did not dismissal, asserting moved that the claim Thus, answering pleading.... vide for an Equal Op- was under the time-barred Credit essence, plaintiffs alleged ECOA violation is (“ECOA”) portunity plain- on Act which the to asserted as a defense the state confession guarantor tiff relied. Id. 51 at 31. The judgment.” Accordingly, despite plain Id. granted ap- trial court the motion. Id. On case, tiffs’ assertions in the instant Silver- peal, we held that when the endeav- creditor does proposition man not stand for the guaranty to ors enforce the the claim could independent offensively an action for declara be asserted “as a to the state confes- defense tory potential liability relief from on a note judgment.” sion of Id. 51 32. F.3d at brought though be even had

Silverman, only the defendants had not ob- legal remedy before the statute of limita judgment, tained in contrast to this case on legal concurrent had notes, yet begun where no action on has contrary, only run. On the Silverman holds judgment but enforcement of the immi- confessed, judgment that where has been plaintiffs’ challenge nent. there to purported obligor may assert to as a defense the confession of was defensive. statutory its enforcement a violation which Although have Silverman did allow the asser- would been time-barred if of asserted fensively tion of a claim independent defensive after the statute of action.1 In this case, underlying however, limitations on the violation had instant tak- creditors have Freeman, by plaintiffs Bank/Pittsburgh other cited F.Supp. cases 326 839 equally distinguishable grounds. (E.D.Pa.1993) on the same (party could assert time-barred Putnam, Sony F.Supp. See Electronics v. by way recoupment by claim in action lender (D.N.J.1995) (party bring could time-barred Bank, guaranty); collect on Mellon N.A. v. claim guaranty action to defense to collect on (W.D.Pa. F.Supp. Pasqualis-Politi, but could not claim as assert counterclaim seek 1992) (party could assert defense which could Medmark, Inc., ing monetary damages); FDIC v. affirmatively be asserted of bar (D.Kan.1995) (party could as statute limitations when lender action defensively sert time-barred claim notes). mortgage to collect on Integra guaranty); lender collect challenging a tax defense” when assessment. on the Investors action to collect no en Therefore, Notes, judgment, voidable at 55 S.Ct. at 699-700. have no Id. only us. recoupment is not now before was entitled to raise the claim estate paying after tax on as a defense income forth in Bull Supreme Court set profits. the same States, 55 S.Ct. 295 U.S. United (1935), a rationale similar Sil- deficiency L.Ed. If claim for tax had income Bull, partner ship-brokering in a suit, verman. subject of a counter been the business, February his estate died recoupment overpay- demand for profits part- of his to receive continued ment of estate tax could have been assert- at year after his death. Id. nership for one way ed of defense and credit obtained His estate valued the at 696. 55 S.Ct. notwithstanding the statute of profits up received only partnership independent against barred an suit States, however, Bull’s death. United therefor. This is because re- Government profits received the estate all declared coupment is in the nature of a defense estate tax and taxed corpus under the arising out of some feature of the transac- The estate did not property accordingly. tion which the action is at the time. Id. at challenge the assessment grounded. is never barred Such defense later, 251-52, years Four at 696-97. 55 S.Ct. long statute of limitations so as the notified the estate the United States timely. main action itself is was income and taxable as property same Bull, 55 S.Ct. at 700-01. U.S. at 696-97. The 55 S.Ct. such. Id. The Court then determined that Gov- “[the reme- pursued then the administrative estate given has ernment] [the estate] taxation of the challenge the double dies to refund, though he credit or could final administra- property. When the same brought by in an him in assert it rejected, the estate appeal been tive had him since it had accrued and was available to Claims, in the brought an action Court 1925, not when was actionable and barred paid as in- of the amount seeking refund proceeded against him for the Government alternative, or, a refund for tax in the come pleading tax. The the collection of income property same when the paid tax on the the put right in issue the to sufficient to was 253, 55 paid. was Id. S.Ct. estate tax 263, 701. recoupment.” Id. at 55 S.Ct. at the of Claims found 697. The Court by Thus-, not barred the estate’s claim was limitations barred the second statute of limitations. Id. the statute of relief, seeking correction of the ground for 254, at 697. tax. Id. at 55 S.Ct. estate Silverman, Bull, recognizes that a like defensively even if it can be raised claim The Bull first determined Court independently. if would be barred portion profits paid the the estate the Silverman, no the in Bull had Like income, wrongly corpus, and thus sub- not present to the claim as a defense opportunity 257, as such. Id. at jected to the estate tax assessment, having been summari- to the tax then held that at 698-99. Court S.Ct. compelled ly with the tax and later assessed tax was not for refund of the estate the claim before pursue administrative remedies statute of limitations. The barred the right seeking legal adjudication of the that, prior to the institution Court noted Therefore, pos- despite the unusual refund. income tax on the proceedings to collect case, not time- the the claim was ture of grounds property, the estate had no same it as a because the Court considered money product as a a refund of the seek against the obtained Additionally, not- defense the Court double taxation. the law, administratively.2 The crux of that, precedes “[pjayment estate under the ed Dalm, 596, 608, may, proceeding, timely proceeding in that seek 494 U.S. In United States v. inconsistent, 1361, 1368, (1990), related, recoupment but 108 L.Ed.2d 548 of a and 110 S.Ct. Supreme decisions in Court stated that "our relating the same now time-barred tax claim 532, White, Therefore, 57 S.Ct. and v. 301 U.S. [Stone Bull Supreme has Court transaction.” 851, (1937)] only stand Bull, 81 L.Ed. holding very specifically limited party litigating proposition a tax claim in a that a against entirety existence of a claim and unenforceable in decision was the their because matter, present plain- they In the the estate. induced fraud” and were made tiffs asserted their claims inde- could have in violation of the federal Securities Ex- pendently by to rescind other an Pennsylvania Act of change Securi- legal options the time allowed within Act, Pennsylvania ties common law. They chose not to do statute of limitations. potential collection on notes is at this Therefore, is to wait so. their now only an possibility, time action in court. until to collect on the notes the Trust seeks However, the door has been closed to defensively. the claims and then assert notes, to rescind other However, absence of action taken options for relief federal and state debt, against collect the are them to statutes, Pennsylvania common law bring independent entitled to open which the now cannot at this seeking essentially posturing recision it independent late date an offensive action. as defensive. Court Appeals As the for the Second stated, Circuit “a claim Moreover, plaintiffs’ action be relief could have through been resolved an- by the fore us is not saved doctrine re form specific other of action which has a law, coupment. “the de Under period, specific period of time by way recoupment fense asserted must Gorsuch, govern.” Orangetown will v. be related to the nature of demand (2d Cir.1984). Bank, plaintiff.” brought by the Mellon Pasqualis-Politi, N.A. v. case, theory and with (W.D.Pa.1992) (citing Porter Lever which the agrees, they dissent is that (1938)). ing, 330 Pa. 199 A. As entitled to relief now and need Supreme noted in Court not wait until action is taken collect on the Vespa Discount Household Consumer Co. notes, would raise the fraud ziani, (1980), 415 A.2d defense such an event. The court in Gil- recoupment a set-off is not “because is not responded bert argument to a similar demand, cross the nature of a but rather it these words: any recovery by plain lessens or defeats idea, precocious, We find this albeit to be then, Recoupment, tiff.” is a defensive claim equally unavailing. temporal bar can- only response which can asserted in to an merely be sidestepped by asserting not independent by par action instituted another appellants’ declaratory judgment ty; permit recoupment party does not was brought suit to establish defenses asserting present it to otherwise time-barred against rainy future, day, when simply by pleading claims creative in an inde might against the Ordinance enforced pendent proceeding brought by it. ap- them.... Such a smoke-and-mirrors dissent, concluding that this declar- proach place would too priority far much atory action judgment be maintained possibilities on theoretical expense despite lapse long of time the al- since actualities, practical us, requiring in the committed, leged frauds were focuses analysis, aggressor last to treat as defend- expected “defendants’ enforcement a fu- er, petitioner effect, respondent. as it obligation,” op. ture dis. rather than on justiciable would serve to make claims plain- which acts of fraud is the basis simultaneously (i.e., were stale time- present tiffs’ claims. The dissent asserts denial) permit barred as to the actual Algrant claim “substantive seeks to unripe (i.e., yet any mature as to po- through in pursuing vindicate Counts I III is action). tential enforcement The decided Algrant the claim that is not liable for future contrary. are to cases obligations under the Investors Notes.” Dis. at 58. op. however, plaintiffs, allege at 21. The therefore, We, plaintiffs’ Investor Notes were obtained fraud hold that when specific intent deceive “are void claims barred a statute of limitations holding applicable judice. is not to the situation sub section) far to that legal remedy, then so as relates applicable to a concurrent declaratory expiration unless before the will withhold a court essentially pred- years suit four after the act or transaction con- independent in an relief expiration stituting Other- the violation or the upon the same cause of action. icated wise, year limitations can be circum- actual statute of one after the receives by “[djraping their claim merely notice or the exercise of reasonable vented Declaratory Judgment diligence of the the raiment should have known of the facts Accordingly, violation, turn to at 58. we constituting Act.” Id. whichever shall plaintiffs’ expire. claims determine each of first the claim would be whether § 70 Pa. Cons.Stat. 1-504. Plaintiffs chal- applicable statute of limitations. lenge application of this statute of limitations claim, asserting to their that the statute of A. expressly § limitations set forth in does apply brought pursuant Count I to claims The district court dismissed § declaratory 508. sought time-barred. Count as 29(b) that, § of the pursuant to Securi relief provides of the Section 508 PSA 1934, 15 U.S.C. Exchange Act of ties that: 78cc(b), promissory investor notes § person may any any suit on con- No base void and unenforceable any act or rule or tract violation in violation of federal by fraud were obtained if he has made or en- order hereunder the statute of limita laws. Under securities gaged performance of such contract 29(b) § actually forth in an action set any purported right acquired or has year one pursuant to that section is barred knowledge of the such contract with discovery time of of the violation from the making or facts reason of which its years three securities laws and the federal performance was in violation. the time the violation occurred. Gatto from § 70 Pa. 1-508. The Cons.Stat. Assocs., Inc., F.2d at Meridian Med. premised claim for have their claim, that this The district court held This relief under this section PSA. years than two after the dis brought more however, section, not create an affirma- does years covery the fraud and almost nine tive cause of action on which the transaction, was barred the stat after the can seek relief. 29(b). Applying limitations under ute of corollary puts limitations on limitations from the clear

the statute of Section party’s ability to assert a claim for relief, According provision: to that no error in the district court’s under the PSA. we see the claim as time-barred. dismissal of act, Except explicitly provided in this no party liability any private civil in favor of

B. any person by implica- against arise shall of the violation of tion from or as result The district court also dismissed any any provision act or rule or of this sought II II as time-barred. Count Count Nothing in this act shall order hereunder. that, pursuant to sec by virtue any liability limit which exist Pennsylvania Securities Act tion 508 of the common law any other statute or under of 1-508, (“PSA”), § in 70 Pa. Cons.Stat. if this act were not in effect. vestor notes were void and unenforceable by in viola they were induced fraud § 1-506. Section 508 does 70 Pa. Cons.Stat. Pennsylvania law. The securities tion liability; provide civil rath- explicitly for applicable concluded that district court er, any suit simply creates defense year limitations was the statute of one/four that violates the PSA. brought on a contract limitations, pursuant to 70 Pa. statute only brought plaintiffs could have 504(a) § states: 1-504. Section Cons.Stat. expressly § is which their action under subject year/four year statute to the one maintained to enforce No action shall be Therefore, (or plaintiffs’ §of limitations any liability under section 501 section for relief two court action The trial stated that order to “[i]n they years 201-9.2, violation bring private after learned of the action under Section years allegedly plaintiffs nine after the they purchased over fraudulent must show that or transaction, by of limi- goods plaintiffs’ the statute or leased services. Because applicable corollary legal claim. purchase tations Evergreen units does not therefore, Huyett, err in Judge did not dis- provision service, plaintiffs involve the of a Count II missing as time-barred.3 may bring an action under Section 201-9.2 if “goods” are meaning the units within the

C. Algrant Valley the act.” v. Evergreen Nurs- Partnership, eries Ltd. The district court dismissed Count (E.D.Pa.1996). The court then that in- held sought III as time-barred. Count III a de goods vestment securities were neither nor claratory that, pursuant to Penn Pennsylva- services under its construction of law, sylvania common any ... suffers ascertainable loss as a legislatures noted that the state had enacted by employment any the use or result laws regulating extensive the sale of the se method, person of a practice act or de- Giving plaintiffs curities. under by unlawful protection clared section 3 this act. both consumer laws and securities relief, by equity governed An action in the corollary table or if the to their action Todd, doctrine laches. See Russell 309 v. U.S. suit an is viewed as 287, 280, 527, 530-31, 60 S.Ct. equity, L.Ed. by 84 754 in the claim would still be the (1940). Therefore, plaintiffs sought equi- had the doctrine of laches.

187 A analysis upon with coherent closer of the cases relied would be “inconsistent laws plaintiffs by the that show Corp., distin- Spinner legislative intent.” guishable; most of the cases involved situa- extensively regu- Pennsylvania at 391. alleged tions which the violation the pursuant to the lates transactions securities committed a brokerage was UTP/CPL 1972, Act of 70 P.S. Securities selling customarily house the securities of (1994 Supp.1997), § § and 1-101 to 1-704 case, parties. plaintiffs third In this the have that provides remedies under Act. We and alleged that the fraud was in the valuation allowing plaintiffs to obtain also believe that fixed the of the investment issuer securi- remedies under both the and UTP/CPL misrepresentations ties themselves and not consistent with coher- Securities Act is concerning made issuer these securities. legislative ent intent. any Plaintiffs alleged have not fraudulent conduct actual sale of the securities. question to the whether We turn Denison, 199, F.Supp. only at 759 case security “good” an investment is a under the providing analysis reasoning for its Although acknowledged Denison UTP/CPL. conclusion that the sale covers the UTP/CPL for aid in that reference to the FTCA inter securities, factually investment addressed guidance only preting is for the UTP/CPL There, alleged different scenario. the fraud 205, controlling, F.Supp. not and is 759 the was in the actual securities sale from a exclusion of securities from definition of brokerage plaintiffs. house to the Deni- goods the FTCA is with consistent son, plaintiffs alleged that the defendants statutory Pennsylvania’s rules of construc pur- “had churned their account had predict, tion. as did Thus we the district inappropriate chased investments court, Pennsylvania Supreme Court long growth term stated desire would hold that investment securities are not appreciation.” F.Supp. at 200. goods under the and therefore the Therefore, UTP/CPL alleged fraudulent conduct provide not a cause of action does provided by in the UTP/CPL “services” broker- house, party alleging age for a fraud securities which is covered UTP/ plaintiffs allege Accordingly, we CPL. did fraud themselves. conclude that related to the themselves. securities dismissing err in the district court did not complaint Count TV the for fail holding The other eases that the UTP/CPL ure to state a cause of purchase covers of securities also deal granted. relief could be transaction, specifically with the not with the securities themselves. See S. Kane & law We find no case address- (claim Son, 200603, 1996WL at *3 that seller ing plaintiffs argue this that issue. money regular opera- of investment used those federal courts that have confronted this prom- rather than in escrow account split have issue on whether UTP/CPL bankrupt); subsequently ised and went Ad- securities, covers the sales of investment (actionable Inc., 18592, at *2 vest 1994 WL majority holding while the that the UTP/ conduct was broker’s fraudulent assurance Only CPL does cover these transactions.4 profit); that shares be sold at could McCul- court, one trial addition the district (claims 23008, lough, allege at *4 WL case, has not. held does purchaser providing that broker misled Opp, F.Supp. Klein See v. regarding inaccurate information and advice (E.D.Pa.1996). securities).5 pro- involve These cases all Sharing 4. See S. Kane & Son v. Ma- 5. Two of cases cited for the Trust Profit Bank, 95-7058, proposition WL covers rine Midland Civ. No. securities UTP/CPL 25, 1996); (E.D.Pa. purposes Apr. at *3 transactions this for reach Lebovic assumed 96-319, Nigro, ing directly WL *2 other Civ. No. issues and did reach (E.D.Pa. 15, 1996); Kirschner, Apr. Boyd, F.Supp. Inc. v. See Advest matter. Klein v. 92-6656, (E.D.Pa. (E.D.Pa. 1996) (assuming Civ. No. WL at *2 covers sale UTP/CPL issue); 1994); Kelly, privity Jan. Denison v. Rosen v. Fidel securities decide Trust, (E.D.Pa. (M.D.Pa.1991); McCullough ity Fixed 169 F.R.D. 295 Income Inc., 1995) (assuming Shearson 1988 WL *4 covers sale securi Lehman Bros. UTP/CPL issue). Thus, (W.D.Pa. 18, 1988). to Feb. ties determine class certification defining goods” Pennsylvania’s thus with- in squarely vision services and are “consumer of the protections in Compare Commercial Uniform Code. 13 Pa. UTP/CPL. (“Goods (1) § are: Cons.Stat. ‘Consum- readily so only cannot be case they goods’ bought er are for use used Nigro, Lebovic v. 1996 WL distinguished is family primarily personal, for or household 1996). (E.D.Pa. Apr. In *2 Lebo- § purposes.”) with 73 Pa. Cons.Stat. 201-9.2 vic, orally agreed to form new (providing right person for buying bought corporation with defendant and leasing “goods primarily corporation. new The defen- or services “shares” in this part performed personal, family purposes”). never his allegedly dant or household money bargain provision dealing sales, the oral converted the the UCC with Under plaintiff paid for these in the new shares “goods” things (including is defined as “all corporation personal his own use. 1996 to specially goods) manufactured which are court, analy- *1. The WL 179982 at without at the time of movable identification sis, applied to the held that the UTP/CPL contract for sale ... other than investment securities, purchase simply citing S. Kane 2105(a). § securities.” 13 Pa.Cons.Stat. In Denison, Son, McCullough. & & Id. at *2. fact, sepa- UCC contains a claim, however, The court then dismissed the provision dealing solely with rate investment plaintiff, holding purchased who that the had § See securities. 13 Pa. Cons.Stat. et agreement, of an part ownership the stock as Thus, by seq. comparing this statute to the contemplation was not a consumer within the UCC, district court determined that the of the Id. at *3. this case UTP/CPL. goods definition of under the does UTP/CPL support proposition offers little not include investment securities. covers investment securities UTP/CPL fact, § “goods” as 9.2. it under could IV. ruling pur- contemplate plaintiffs, in partnership, chasers of a limited interests Accordingly, the court district committed protected are not “consumers” under the dismissing plaintiffs’ no error order UTP/CPL. complaint. action, dismissal of how- ever, difficulty prejudice arises the term is without “goods” expressly is not defined in the invoke the claims have raised UTP/ law, however, CPL. has estab- proceeding as defenses suit statutory lished rules of construction to be collect Trust employed defining a when term not defined notes referred to in this action. itself. There are number statute Each side to bear its own costs. approved ways construing that are terms otherwise defined the statute. Gener- MANSMANN, Judge, dissenting. Circuit ally, phrases shall construed “[w]ords according party may bring common I that a approved to their us- believe a defen- 1903(a). age.” According Cons.Stat. sive action to assert his dictionary, “goods” generally the term non-liability obligations for future under a does not securities. Webster’s include See jurisdic- long written instrument so as the Collegiate Dictionary Seventh New requirements Declaratory tional Judg- of the (1969). Additionally, words can be construed satisfied, Act are party’s ment when the even to other statutes. 1 Pa. reference Cons. unpursued cause of action for based 1921(c), §§ Stat. The district court did on the same instrument timebarred. I that, just comparing the term “goods” under purchasers believe investment “goods” the term with UTP/CPL protection securities seek the Uniform Commercial Code. Pennsylvania Unfair Trade Practices and noted, so Pennsylva- long

As the Consumer Protection Law as the district legislature language purchased per- nia used the are primarily same securities section 201-9.2 of the purposes. respectfully did sonal dissent. UTP/CPL persuasive

these cases critical on the issue us. before

189 (“Limitations bach, 312 at 548 I. F.2d statutes apply declaratory judgments do not Declaratory purpose of the primary pro- such.... There are no statutes which Act is “to avoid accrual avoid Judgment declaratory that relief will be vide rights of his damages to one not certain able time.”). Rather, period a certain after early adjudication him an with and to afford “[declaratory proce- relief a since is mere adversary fit waiting until his should see out types dural device which various of sub- suit, damage after had accrued.” begin vindicated,” stantive claims it is the Davis, 536, v. 490 F.2d 543 Travelers Ins. Co. on, substance of the sued not the and (3d Cir.1974) (quoting E. Edelmann & v.Co. invoked, governs applicable that (7th Co., 852, Specialty 88 F.2d Triple-A period. limitations Id. 312 F.2d at 548 & n. Bros., Cir.1937)); Cunningham Inc. accord observed, 2. As the district court “the declar- (7th 1165, Bail, Cir. v. 407 F.2d atory judgment action must be with- States, 1969); v. Luckenbach S.S. Co. United period applicable to the Cir.1963). (2d 545, 548 The Act 312 F.2d underlying request substantive claim “prospective defendants to sue to es allows declaratory Algrant Evergreen relief.” Theatres, nonliability.” Beacon tablish their Valley Partnership, Nurseries Ltd. 504, Westover, 500, Inc. v. 359 U.S. S.Ct. (E.D.Pa.1996). 495, (1959). 3 L.Ed.2d 988 Algrant claim The substantive seeks character Bearing in mind the remedial pursuing through III is vindicate Counts Declaratory legislative purpose of the and Algrant the claim that is not liable for future Act, repeatedly empha Judgment we have Al- obligations under the Investor Notes. have a liberal inter that the Act should sized grant invokes section 29 of the Securities and Corp. v. Federal Trade pretation. Exxon Exchange Act of section 508 (3d Cir.1978); Comm’n, 588 F.2d Act, common Securities Stop v. Elastic Nut Simmonds Aerocessories pur- for the sole law fraudulent inducement (3d Am., Cir.1958); Corp. F.2d pose establishing non-liability his Aralac, Am., Corp. Hat 166 F.2d Inc. v. Algrant the Notes. does not seek Cir.1948). (3d Indeed, federal laws; rather, pursuant Algrant to these re- declaratory judg jurisdiction over courts’ a lies on these laws to establish defense just primary limited two ment actions are anticipated claims to enforce the defendants’ present action must a considerations: the Notes. controversy ripe and it must be case or Obusek, disposition. Travelers Ins. Co. underlying claim Since the substantive (3d Cir.1995).1 1148, 1153-54 declaratory judgment Algrant’s action is de- majority potential do not claim un- The district court and to the defendants’ fense Notes, satisfy declaratory judgment ac- Algrant that failed to contend der “ripeness” controversy” require- or not time-barred until the defendants’ “case tion is Rather, majority Ap- the Act. As the Court of ments under claim is time-barred. Algrant’s agrees peals with the district court that for the Circuit held Lucken- Second first causes of action are barred three bach: limitations.

statute of Non-liability negative is the of the claim respect which the of action with relief do not have cause Actions for sought. purposes of the is For own statute of limitations. See Lucken- declaration their “ripeness” requirement, plain- controversy" require satisfy a satisfy To 1. To the "case or ment, declaratory judgment must dem- pres action must tiff in (1) (1) probability controversy of future harm legal that is real and not onstrate ent substantial, immediacy (2) of sufficient hypothetical, real and that affects an individual in reality provide to warrant the issuance of so as to the factual concrete manner (2) (3) parties adjudication, judgment, status of the predicate that for reasoned declaration, (3) changed sharpens judicial resolution. Obu will be the issues (i.e., utility sek, Armstrong declaratory judgment will have (citing 72 F.3d at 1154 World Indus., Adams, (3d help practical it will be of some Inc. v. 1992)). parties). Id. at 1154-55. Cir. non-liability seeking early adjudica- is inex- fendant to obtain an statute controversy tion of an actual so as to avoid with that cause of action. tricably linked made, damages, Algrant the accrual of avoidable long as the claim can be So exactly type Declaratory person asserted. the claim negative can be When Judgment Act barred, was intended to assist. a declaration of itself has been non-liability is also barred.... majority improperly The links the timeli- Luckenbach, 549; declaratory judgment see ness of ac- also Unit defensive Co., with ed v. Western Pac. R.R. 352 U.S. the timeliness of other remedies States (1956) 161, 169, might Algrant that have been available had S.Ct. L.Ed.2d limitations, (statutes pursue Declaratory apply chosen to them. The do not to de fenses). Judgment provides “may Act that courts de- rights clare the other relations majority perceives through I Counts party seeking interested such declara- quite differently. majority The" focuses III tion, whether or not is or could further relief periods governing on the limitations offensive 2201(a) sought.” (emphasis 28 U.S.C. damages brought laws actions for under the Indeed, supplied). when coercive relief is Algrant which cites to establish a defense. unavailable, may, deemed the court “if it that, majority indepen- reasons since an purpose, a grant serves useful instead a dec- damages dent cause of action for under these rights.” advisory laration of Fed.R.Civ.P. 57 barred, laws would have been so too must a availability committee’s note. of a declaratory judgment action which defensive declaratory judgment remedy depen- is not invokes these laws be barred. I believe that dent on the existence or timeliness of an majority misconstrues the nature of Al- alternative, remedy. coercive grant’s claim. substantive claim under- lying Algrant’s request “may relief Written instruments be construed damages Algrant is not the claim for elected petition before after breach at the of a pursue; Algrant not to does not a coer- properly party.” seek interested Id. Under the Rather, judgment. cive majority’s however, the substantive reasoning, written in (1) potential claim is the defendants’ may only struments be construed after against Algrant breach, to enforce the Notes. litigation action on that (2) through Counts I III do not exist for the sufficiently breach before breach so as purpose establishing timely the defendants to coincide with a cause of action for fraud; rather, they committed exist to estab- damages which based conduct Algrant lish that is not liable under the render the written instrument unenforceable. Luckenbach, Notes. periods, 548 During declaratory judg these Cf. (declaratory judgment may proceed plaintiff ordinarily options ment has other “only when defense, seeks declaration of (e.g., asserting bringing a claim non-liability” and not time-barred “coercive damages), and the judgment”). major action often becomes redundant. The ity prevents seeking an individual from majority Algrant may concludes that declaratory judgment when it would be most not assert the defenses articulated Counts during controversy, an actual when useful — through III until the defendants seek en- party liability threatened with desires an majori- forcement of the Notes. Under early adjudication unnecessary to avoid the ty’s reasoning, Algrant’s claims are both damages waiting accrual of without until his unripe; they stale and both too adversary begin should see fit to an action jurisdic- late and too soon. Given that the damage after the has accrued. See Saum v. requirements Declaratory Judg- tional (D.Colo. Widnall, now, ment Act are satisfied it makes little 1996). (while Algrant poten- sense to force to wait looms) liability Multiple tial until the defendants seek v. Eastrich Inves- Silverman (3d Fund, L.P., Cir.1995), judicial enforcement of the Notes before as- tor 51 F.3d 28 very properly plaintiff brought seeking an action serting defenses he declara- prospective requirement guarantee she asserts this action. As a de- tion spouse (plaintiffs claim for relief was of her for the benefit a loan Opportunity Equal Credit tied to time-barred substantive claims for violation of “right that even the damages arising prior Act. We held from of collec- breach based to initiate an action bargaining agreement; court was not tive is barred the stat- alleged violations such controversy anticipat- actual about faced with limitations, bar exists to as- no such ute of breach); Oklahoma, ed future Clulow v. violation as a defense to serting such (10th Cir.1983) 1291, 1293-95, 1302-03 efforts Id. 51 F.3d at guaranty.” collect on said to (declaratory judgment plaintiff could not vin- supplied). permitted the (emphasis We past alleged wrongs dicate in claims that declaratory judgment go action to plaintiffs inextricably to linked time-barred in nature. it was defensive forward because contrast, damages). causes of action for In narrowly, majority con- reads Silverman Algrant prior not seek to vindicate does judg- cluding that the wrongs indistinguishable in an a action from only permitted because the action was ment damages. action for time-barred offensive response to the defen- brought was Algrant merely seeks a declaration about a judgment. state court confession dant’s obligation. future broadly, interpret more Silverman City Cambridge, In v. 932 F.2d Gilbert party bring a defensive declarato- permit a (1st Cir.1991), majority, also cited (i.e., to thwart “efforts” ry judgment action plaintiffs’ “as-applied” challenge to an instrument), even when to enforce a written of limi- ordinance was barred the statute time- action raises issues that would be injury was inflicted at the tations because (i.e., offensively to obtain applied; was the sub- time the ordinance 51 F.3d at 32. The Declara- damages). Id. from the stance of the claim was no different Judgment permits parties bring tory Act damages. time-barred claim for Id. 932 F.2d before a an action to establish a defense even Importantly, court also at 57-58. noted controversy stage at which has reached the declaratory judgment action was not may sue defendant yet any potential as to enforcement “mature By forcing Algrant for coercive relief. (emphasis sup- action.” Id. 932 F.2d at 58 bring until suit on the wait the defendants plied). “potential” The fact that enforcement Notes, pri- majority has undermined the possibili- actions remained mere “theoretical mary purpose of the Act. plaintiffs’ declaratory ties” rendered appeals courts of The eases from our sister contrast, unripe. Id. In judgment action majority distinguishable. In cited ripe; Algrant’s declaratory judgment action is Desert, Levald, City Inc. v. Palm 998 F.2d controversy present is a about the de- there (9th Cir.1993), example, a future expected fendants’ enforcement of challenge to an ordinance was time-barred obligation.2 harm, single suffered a compensable when the measurable and ordi- II. passed years before. Id. 998 F.2d nance was Pennsylvania Unfair Trade Practices declaratory judgment (“UTP/CPL”), Protection Law Consumer from the time- no different substance seq., pro- § Pa. Ann. tit. 201-1 et past inju- Stat. damages barred action for any person purchases “goods vides that who ry. International Ass’n Machin- See also family primarily personal, Aerospace v. or services ists & Workers Tennessee Val- (6th Cir.1997) Auth., thereby purposes and suffers ley 667-68 household Orangetown Pennsylvania, four-year majority In "catch all” statute 2. The also cites Town Gorsuch, (2d Cir.1983), declaratory judg- applies 718 F.2d 29 but that case to certain of limitations actions, decided under New York law. Id. 718 F.2d was at 41-42. Under 42 Pa. Cons.Stat. Ann. ment see law, party may 5525(8), begin § run but the statute does not " pursue action to ascer- controversy' 'actual indi- until there exists an obligations parties of the to a contract tain future cating litigation, and inevitable immediate though even claim for breach of con- direct, Wag- present interest." substantial and Co., Wagner Apollo Gas tract is time-barred. ner, A.2d at 366. (1990). Pa.Super. A.2d money property” may “goods” from the loss of cluded definition ascertainable damages. private action for Id. bring a Uniform Commercial Code 201-9.2(a). (“UCC”) legislative intent in enact provision dealing § with sales. 13 2105(a). pro was “to enhance the ing doing, Ann. Cons.Stat. so UTP/CPL deceptive public from unfair or majority exception tection into the reads UTP/ underly The central practices.... Indeed, present. business CPL that is not while the prevention, and the act ing was fraud intent scope expressly UCC limit its exclud- liberally construed to effectuate that must be ing investment securities from its definition Valley Forge Towers remedial intent.” S. “goods,” telling I find it that the UTP/CPL Insulators, v. Ron-Ike Foam Condominium does not contain such an exclusion. Mon- Cf. Inc., Pa.Super. 574 A.2d (caution- Properties, umental 329 A.2d at 824 (1990), (1992); aff'd, 605 A.2d 798 “woodenly apply” ing courts not to definition Prop v. Monumental accord Commonwealth UCC, objec- which furthers commercial erties, Inc., 459 Pa. 329 A.2d 815-17 tives, Law, Consumer Protection (1974) (Consumer Protection Law is to be objectives; which furthers consumer to do so liberally object pre to effect construed might “defeat the Law’s remedi- [Consumer] deceptive practices). venting unfair or objects”). al determining scope of When the UTP/ Properties, Monumental the court em- CPL, I that the Act is not note concerned phasized interpret its intention to the Con- instead, type product purchased; with the broadly: sumer Protection Law purpose pur with the is concerned There is no indication of an intent to ex- purchase, purpose chase. “The of the clude a class or classes of transactions type product purchased, not the controls.” from the ambit of the Consumer Protection Valley Forge, (emphasis 574 A.2d at 648 Legislature Law. When the deemed it nec- (whatever long product original). So as the essary exception to make an from the type) purchased “primarily person is scope, language. Law’s it did so clear al, family purposes,” pur or household protected by chase is the Act. in decid 329 A.2d at 815 n. 5. The contains UTP/CPL ing Evergreen purchased whether the units language” excluding purchase no “clear by Algrant protection come within the personal investment securities from the UTP/CPL, purpose we should focus on the of protection legislature of the law. The could purchase. easily language, include such as it did for Algrant pur There is no indication that broadcasters, printers publishers. Pa. Evergreen part units as a chased limited 73, § Ann. legisla- Stat. tit. 201-3. Until the Rather, purpose. ner for a business excep- ture chooses to create a “securities purchased personal securities were invest UTP/CPL, tion” to the the courts should not passive ments. Due to the nature of the recognize one. typical partnership arrangement, limited reasons, foregoing respectfully For the partner invests in a individual who limited dissent. ship engaging is not characterized as in busi activity. ness See Freedman v. Tax Review City of Phila., Pa.Super.

Bd. (1968), aff'd, A.2d 434 Pa. (1969). Algrant passive

258 A.2d 323 was a partner participate

limited who did not any way. Algrant pur

business Since Evergreen personal

chased the units for a

purpose, engaged he was not in a business

activity purchase protected by and the

UTP/CPL. majority “goods” focuses on the term

and notes that investment securities are ex- notes relief the those nursery by a offering the stock million $13.5 the and unen- and have notes declared void units, Evergreen partnership pur- limited forceable, when the concurrent private placement to a suant memorandum declaratory for underlying request (“PPM”). the relief A number of substantial these barred the statute of limita- would be purchased by plaintiffs gen- units the are the Second, transactions involv- tions. whether $150,000 They paid of this esis lawsuit. for ing investment securities are covered under PPM; each unit under the terms of the the 9.2(a) section of the Unfair $70,000 purchase price consisted of a cash Practices Consumer Trade Protection $9,500 payment, a subscription note due on (“UTP/CPL”), private Law which creates a January $70,500 promissory and a injured (“investor note”) in of action for consumers the Trust, payable note to the purchase goods The lease of services. payable July which became due and Eastern United States District Court the Pennsylvania held District of that the PPM Evergreen issued did not declaratory relief was time-barred be- Evergreen pay disclose was to the Trust corollary legal cause the actions were based approximately million for 91.2% of the $10.4 on conduct for which the statute of limita- nursery purchased stock which the had Trust run. had The court held Evergreen for from about $4.2 million. “goods” investment securities purchase it failed to disclose that the timely appeal- plaintiffs UTP/CPL. price for the in interest land had more than ed. We affirm. doubled two months. The PPM did not the intricate entanglement mention of the I. parties underlying involved in the transac- Taking light facts most favorable self-dealing purchase tions or the court, plaintiffs, as did district nursery stock. appears orga- 1986 the defendants In Internal Revenue Service Evergreen nized Valley Nurseries Limited (“IRS”) report concluding issued a Partnership grow (“Evergreen”) acquire, price nursery signifi- stock been had nursery nursery sell stock. The stock cantly Although Evergreen overvalued. ini- 950,000 approximately evergreen consisted of tially report, contested the IRS in 1993 Ever- stock”) (“nursery trees proper- on two leased green closing and the IRS entered into a Pennsylvania, County ties in in Lehigh one agreement Evergreen admitted that (called Valley”) Tioga “Raven and one in nursery had stock been over-valued (called Farm”). County Tioga July “the 11, 1993, On $3.2 least million. October (“Trust”), the Parkinson Pension Trust copy closing obtained of the Parkinson, at the direction of Dr. L. William agreement Evergreen. between IRS and trustee, purchased Valley its sole the Raven nursery Pennsylva- stock from Pines of complaint Van filed their (“Van Pines”) nia 16, 1995, general partners raising district court on November case, regardless posture sought three claims same of the first four claims. Accordingly, whether offensive or defensive. that certain Investor time-barred, underlying action is so is void and unenforceable because Notes were (I) Huy- the action procured through Judge relief. been fraud: had 29(b) ett, judge, perceptively then trial deter- declaratory relief under Section I, II, mined that and III all Counts Exchange Act of U.S.C. Securities 78cc(b) (II) applicable (Supp.1997); statutes of limita- § relief tions. 508 of the Secu- under Section (1994); Act, rities Cons.Stat. appeals Although yet court of has (III) declaratory relief based on common issue, spoken on number of other alleged a fraud. Count IV violation law First, Sixth, courts have. The Ninth and

Notes

on the notes collect investor applicable barred to extent the same the compelled bring to this action to statute of bars the limitations concurrent le the notes void and unenforceable. declare remedy. gal International Ass’n Machin of The defendants moved to dismiss the com- Aerospace ists & v. Workers Tennessee Val pursuant to Rule of Civil Pro- plaint Federal Auth., 658, (6th Cir.1997); ley 108 F.3d 668 12(b)(6) failing for to state claim Levald, cedure Desert, City Inc. v. Palm 998 F.2d of granted. upon which relief could be The 680, (9th Cir.1993); City 688-89 Gilbert v. I, II, III district court dismissed Counts 51, (1st Cambridge, Cir.1991); 57-58 932 F.2d as time-barred and dismissed Count IV for Oklahoma, 1291, v. 700 Clulow F.2d 1302 which relief failing (10th Cir.1983). to state claim on can be settled, therefore, “It is that plaintiffs appealed from the granted. coexist, legal equitable eq where claims all four claims. dismissal appli uitable will remedies be withheld cable limitations the concur statute of bars II. Gilbert, legal remedy.” rent F.2d at 57. reviewing Circuit, a motion to dis When the Appeals The Court of Second 12(b)(6) law, Rule on statute of limita miss under applying has also that when a state held grounds, plenary exercises the court “claim for relief have been could “whether ‘the time al review determine through resolved another form of action in a claim that leged the statement of shows specific period, which has limitations the brought not been period govern.” the cause action has specific will Town of time ” Gorsuch, 29, limitations.’ v. within the statute of Cito Orangetown 718 F.2d v. law). (2d Cir.1983) Bridgewater Township Dep’t, 892 Police F.2d As (applying New York (3d Cir.1989) (citations 23, emphasis case, in this the district court found see infra omitted). plenary 184-85, This court exercises re pp. could the claims dismissing timely view over a district court order legal have been available resolved 12(b)(6) complaint pursuant remedies, to Rule fail un including an to rescind a claim which relief be ure to state can Exchange Act of der federal Securities Tartler, Assocs., Moore v. granted. 1934. See v. Meridian Med. Gatto (3d Cir.1993). (3d Cir.1989). Inc., applied courts Because actions for relief aforementioned which limitations, Supreme analogous relied on not have their own statute of federal law do In precedent this plain court that Court to reach conclusion. the district concluded Todd, 280, 289, governed Russell v. 309 U.S. 60 S.Ct. tiffs’ causes of action are (1940), the Court period applicable sub 84 L.Ed. action, underlying citing recognized long-standing doctrine claims stantive Anderson, 461, 463-64, court is Cope jurisdiction 67 “when federal 331 U.S. law, (1947). 1340, 1341-42, suit is concurrent that at or the 91 L.Ed. 1602 with S.Ct. right, equity will legal in of a the district held that statute aid court right if the is withhold applied limitations to would be the its run, holding definitely statute of limitations.” the local moored Anderson, Cope U.S. position response defensive posi this the Court S.Ct. at reiterated judgment. the state confession of stated; tion, “equity stating that will withhold applicable a case where the relief such There are numerous circumstances concur limitations would bar the statute of guarantor may institute an action legal remedy.” We rent have followed guaranty to declare her his or void and proposition. Gruca v. States See United expira- seek or other relief. The (3d Corp., 495 F.2d Cir. Steel tion of the statute of limitations calculated 1974). However, Supreme neither the Court guaranty from execution said question addressed nor this court has independent bar institution of such ac- posture presented in which is exists, however, No tion. such bar instant case. grounds utilization such as a defense. plaintiffs argue the statute 51 F.3d at 32. “plaintiff The court noted that limitations does not bar an action declara- retained the to assert the violation tory purely on a claim relief based when were made collect and efforts enforce proposition, in nature. For this defensive added). Guaranty.” (emphasis Id. they rely heavily opinion this court’s

notes the investor persuaded nia law. court was also that they void and unenforceable as were ob practices the PSA covered conduct and relat- tained fraud violation of ing to securities transactions to the exclusion tort law. The statute of limitations Penn protection consumer years sylvania “[a]ny is two for other action laws, had to state a proceeding injury failed or recover action cause of for which person property or relief could be which is founded on intentional, granted. Accordingly, the negligent, district court then otherwise tortious Count sounding conduct other action in tres dismissed IV. including deceit pass, or fraud.” The district court examined the 5524(7). § Cons.Stat. concede in light the Federal Trade Com UTP/CPL knew of October fraud (“FCTA”), 41-47, § Act § mission 15 U.S.C. 1993; complaint was not filed until No involving as well as cases other state’s unfair vember, independent 1995. An clearly practices trade statutes with identical lan two-year would be barred statute of guage. Pennsylvania courts have looked to governing fraud actions. Accord guidance construing the FCTA ingly, action for declaratory relief here is See Commonwealth v. Monu UTP/CPL. applicable governed statute limita Properties, Inc., mental 459 Pa. remedy. We, tions on the concurrent (1974). 812, 818-20 A.2d The FCTA has not therefore, error see no the district court’s applied been to securities transactions. As III dismissal Count as time-barred. observed, court district courts constru ing law in light state of the FTCA have III. found, despite language broad district Count dismissed IV scope, remedial the FTCA and similar state claim sought which relief under protections consumer laws do not extend to UTP/CPL, § § 73 P.S. to 201-9.2. Spinner Corp. investment securities. See Specifically, plaintiffs sought relief under Corp., Dev. Princeville 849 F.2d 201-9.2, provides private (9th Cir.1988); Stephenson v. Paine Webber for: Curtis, Inc., Jackson & 839 F.2d (5th [A]ny person Cir.1988); purchases who or leases Hosiery Lindner v. Durham goods personal, Mills, Inc., (4th Cir.1985). or services primarily family purposes thereby or household cases, foregoing each of the the courts

Case Details

Case Name: Algrant v. Evergreen Valley Nurseries Ltd. Partnership

Court Name: Court of Appeals for the Third Circuit

Date Published: Sep 16, 1997

Citation: 126 F.3d 178

Docket Number: 96-1994

Court Abbreviation: 3rd Cir.