Voluntary Dismissal Did Not Toll the Statute of Limitations

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January 23, 2012 Voluntary dismissal did not toll the statute of limitations

By David E. Frank be ordered at masslawyer - included or excluded from [email protected] sweekly.com. the law, he noted. “When you don’t have A voluntary dismissal did not toll the Bad form the benefit of a decision or statute of limitations and did not give Dismissals based on lack stipulation or court ruling, plaintiffs a year to re-file their case un - of jurisdiction are consid - then plaintiffs can simply der the Massachusetts Savings Statute, a ered “matters of form” un - ascribe a voluntary dis - Superior Court judge has ruled in a case der the statute, said San - missal to any subjective of first impression. ford F. Remz of Boston, reason that would happen The statute, G.L.c. 260, §32, allows a who represented the de - to fall within the statute,” case to be re-filed within a year if it was fendants, but the Delaware REMZ he said. “That is where the dismissed for any “matter of form.” suit did not specifically Represented the court would run into trou - But a voluntary dismissal is not a cite any jurisdictional ble.” “matter of form,” Superior Court Judge grounds for the plaintiffs’ defendants Such an outcome, Remz Judith Fabricant ruled. request. added, would put a judge in the difficult “Plaintiffs have cited no case, and the The Yurko, Salvesen & Remz practi - position of having to conduct an indi - Court has found none, treating a volun - tioner said Fabricant’s ruling marked vidualized inquiry into the underlying tary dismissal as a matter of form for the first time a Massachusetts judge had reason for a dismissal. purposes of the statute,” she wrote. “The ever been asked to decide whether the “Judge Fabricant did not consider plaintiffs’ argument would make appli - Savings Statute applies to voluntary dis - what happened in Delaware to be a cation of the statute depend on deter - missals. court ruling, but rather a rubber stamp,” mination of the plaintiffs’ subjective “The takeaway from this case is that he said. “It was not clear how she would motive for their own voluntary ac - lawyers need to take precautions before have ruled had the reason for the dis - tion. That cannot be what the legislature dismissing a suit if they have the intent missal been stated on the record, be - intended.” to re-file and the statute of limitations is cause that’s not what we were dealing As a result, Fabricant dismissed a case lurking,” he said. “A lawyer, for instance, with here.” brought by hedge fund investors who can seek a stipulated dismissal on Allen N. David of Boston’s Peabody & voluntarily dismissed their suit in the grounds of jurisdiction and there will Arnold, who argued a 1st U.S. Circuit Delaware Court of Chancery and be a tolling of the statute, but the bot - Court of Appeals case cited by Fabri - sought to re-file it later in the Suffolk tom line is that [the plaintiffs] didn’t cant, said there is no doubt a dismissal Superior Court’s Business Litigation ask for that here.” for want of jurisdiction is a matter of Session. Virtually every state in the U.S. has a form under the statute. The 20-page decision is Cannonball savings statute, Remz said. David, who is not involved in Cannon - Fund, Ltd., et al. v. Dutchess Capital Man - But Massachusetts, unlike some other ball, said the lack of substantive involve - agement, LLC, et al., Lawyers Weekly No. jurisdictions, does not expressly indi - ment by a judge in Delaware distinguished 12-269-11. The full text of the ruling can cate whether voluntary dismissals are the case from the 1st Circuit matter. 2 • Massachusetts Lawyers Weekly January 23, 2012

“Where there is no judicial resolu - in a Feb. 27, 2008 letter that their re - motion for voluntary dismissal. tion of the actual reason for a dismissal, demption rights in the hedge fund had The judge in Delaware did not pro - it strikes me that the Savings Statute been frozen. vide any grounds for doing so, Fabri - would not apply,” he said. “That really When the plaintiffs filed suit in cant added. does change the analysis.” Delaware in April 2010, some of the de - “Such an action by a court is essential - George M. Linge of Reed Smith rep - fendants moved to dismiss on jurisdic - ly pro forma,” she said. “It does not con - resented the plaintiffs. The Pittsburgh tional grounds. stitute a ruling on personal jurisdiction litigator , who is admitted in Massachu - Following an October 2010 hearing or any other ‘matter of form.’” setts, acknowledged that his clients have on that question, the plaintiffs volun - Fabricant added that the plaintiffs filed a notice of appeal but otherwise tarily dismissed the case without preju - were on notice of the alleged miscon - declined to comment. dice. duct for more than three years before Same suit filing suit in Boston. Plaintiffs Cannonball Although the statute of Fund invested with defen - CASE: Cannonball Fund, Ltd., et al. v. Dutchess Capital limitations can be tolled dant Duchess Capital Management, LLC, et al., Lawyers Weekly No. 12-269-11 based on a defendant’s im - proper self-dealing, such a Management and several COURT: Superior Court of its subsidiaries. claim fails once a plaintiff is The plaintiffs alleged ISSUE: Is a voluntary dismissal a “matter of form” such that on “inquiry notice” of the plaintiffs have a year to re-file their case under the misconduct, she said. that the defendants mis - Massachusetts Savings Statute? represented their stated Fabricant wrote that in - objectives and breached DECISION: No quiry notice does not re - their fiduciary duties by quire actual discovery of a making a series of ques - defendant’s wrongdoing. In - tionable investments in stead, the statute of limita - They filed their 12-count complaint two companies. tions begins to run when the plaintiffs in the BLS in June 2011, asserting Beginning in 2003, they claimed, the should have discovered the fraudulent claims similar claims to those in the defendants invested approximately $30 scheme. Delaware action. million in two companies for the pur - “Here … the plaintiffs were on inquiry pose of enriching themselves through ‘Pro forma’ notice of the facts constituting the al - fees, stock grants and other compensa - In dismissing the case, Fabricant said leged breach by the time the [defen - tion. The companies eventually failed. the only action taken by the judge in dants] informed them of the freeze on The defendants notified the plaintiffs Delaware was to approve an unopposed February 29, 2008,” she said. MLW

Sanford F. Remz, Esq. YURKO, SALVESEN & REMZ, P.C. One Washington Mall, 11th Floor Boston, MA 02108 (617)723-6900 [email protected] http://www.bizlit.com/