Rader v. Greenberg Traurig, LLP

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE

ROBERT and KATALIN RADER, as individuals and as trustees for The
Rader Family Trust dated September 6, 2002; DELBERT and HEATHER
LEWIS, as individuals and as trustees for The Delbert R. Lewis Jr. Family
Trust U/T/A dated December 31, 1997; JANE BARTELME, as an
individual; KAREN E. LAMB, as an individual and a trustee for The
Karen E. Lamb Living Trust dated February 26,2007; MARK LOBERG, as
an individual; DAVID STANTON, as an individual and a trustee for The
David Brian Stanton Revocable Trust dated August 25, 2004; LOUIS and
THELMA VAZQUEZ, as individuals; WALTER J. CLARKE, as an
individual; DONALD FRUCHTMAN, as an individual; TOM and
NANCY LUTZ, as individuals; SUSAN THARP and MICHAEL
NORMAN, as individuals and as trustees for The Norman Tharp Family
Trust #3 dated July 19, 2002; JAN STERLING, as an individual and a
trustee for The Jan M. Sterling Living Trust dated January 4, 1995; DAVID
and HANNA FURST, as individuals and as trustees for the DHF
Corporation Retirement Trust and the Furst Family Trust,
Plaintiffs/Appellants,

v.

GREENBERG TRAURIG, LLP, a New York limited liability partnership,
Defendant/Appellee.

No. 1 CA-CV 14-0299
FILED 6-23-2015

Appeal from the Superior Court in Maricopa County
No. CV2012-013308
The Honorable Arthur T. Anderson, Judge

AFFIRMED
 COUNSEL

Johnson & Weaver, LLP, San Diego
By Brett M. Weaver, Frank J. Johnson
Co-Counsel for Plaintiffs/Appellants

Dessaules Law Group, Phoenix
By Jonathan A. Dessaules
Co-Counsel for Plaintiffs/Appellants

Williams & Connolly LLP, Washington DC
By Kevin M. Downey, Kenneth C. Smurzynski, Colette T. Connor
Co-Counsel for Defendant/Appellee

Galbut & Galbut, P.C., Phoenix
By Martin R. Galbut, Michaile J. Berg
Co-Counsel for Defendant/Appellee

OPINION

Presiding Judge Samuel A. Thumma delivered the opinion of the Court, in
which Judge Patricia A. Orozco and Judge Michael J. Brown joined.

T H U M M A, Judge:

¶1 Appellants challenge the superior court’s dismissal of their
claims against Greenberg Traurig, LLP as time-barred, asking this court to
adopt cross-jurisdictional tolling. Because Appellants have not shown the
superior court erred in granting Appellees’ motion to dismiss, the dismissal
is affirmed.

FACTS1 AND PROCEDURAL HISTORY

¶2 Mortgages Ltd., a now-bankrupt Arizona real estate
investment company, solicited investors using private offering
memoranda. In 2006, Mortgages Ltd. retained the law firm Greenberg

1 In reviewing the grant of a motion to dismiss for failure to state a claim,
this court assumes the truth of all well-pleaded facts alleged in the
complaint. Fidelity Sec. Life Ins. Co. v. State, 191 Ariz. 222, 224 ¶ 4, 954 P.2d
580, 582 (1998).

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Opinion of the Court

Traurig to review and draft offering memoranda. Appellants claim they
relied on these offering memoranda to invest in securities offered by
Mortgages Ltd. between March 2006 and June 2008.

¶3 Scott M. Coles managed Mortgages Ltd. from 1997 until his
suicide on June 2, 2008. Appellants allege that, “[b]y 2005, Mortgages Ltd.
stood at the brink of bankruptcy” and, after issuance of an audit report for
2007, “Mortgages Ltd. was forced into bankruptcy” on June 20, 2008. On
April 30, 2009, Appellants filed an action against the estate of Scott Coles in
Maricopa County Superior Court. In December 2009, most Appellants
entered into a written agreement with Greenberg Traurig tolling the
application of “any statutes of limitations and/or any statutes of repose”
against Greenberg Traurig from December 15, 2009 to December 15, 2010.
This tolling agreement was not extended.

¶4 On May 11, 2010, Mortgages Ltd. investors filed a putative
class action against Greenberg Traurig and others in the United States
District Court for the District of Arizona, captioned Facciola v. Greenberg
Traurig LLP, No. 10-CV-1025 (the Facciola Action). In March 2012, the
putative class in the Facciola Action was certified and Appellants were class
members. After discovery and motion practice, the court in the Facciola
Action preliminarily approved a settlement reached with Greenberg
Traurig. Appellants later filed a notice of intent to opt out of that settlement.
On August 31, 2012, the same day the court in the Facciola Action
“confirmed that [Appellants] had properly excluded themselves from” the
class and the settlement with Greenberg Traurig, Appellants filed this
action.

¶5 Appellants’ complaint in this action asserted five claims
against Greenberg Traurig: (1) primary statutory liability under Arizona
Revised Statutes (A.R.S.) section 44-2003(A) (2015);2 (2) aiding and abetting
“common law securities fraud;” (3) aiding and abetting breach of fiduciary
duty; (4) intentional misrepresentation and (5) negligent misrepresentation
and nondisclosure. Greenberg Traurig moved to dismiss, arguing
Appellants’ claims: (1) generally were subject to a two-year limitations
period (with the intentional misrepresentation claim subject to a three-year
limitations period); (2) accrued on Mortgage Ltd.’s June 20, 2008
bankruptcy; and (3) were time-barred, given this case was not filed until
August 31, 2012. Appellants argued the limitations period was “tolled

2Absent material revisions after the relevant dates, statutes and rules cited
refer to the current version unless otherwise indicated.

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Opinion of the Court

during the entire time that they were members of the Facciola” Action (from
May 11, 2010 until August 31, 2012), making their claims timely. After
briefing and oral argument, the superior court rejected Appellants’ tolling
arguments and granted Greenberg Traurig’s motion to dismiss, finding
Appellants’ claims were time-barred.

¶6 This court has jurisdiction over Appellants’ timely appeal
from the resulting judgment pursuant to the Arizona Constitution, Article
6, Section 9, and A.R.S. §§ 12-2101(A)(1) and -120.21(A)(1).

DISCUSSION

¶7 The sole issue on appeal is whether Arizona should adopt
cross-jurisdictional tolling, whereby the filing of a class action in one
jurisdiction tolls the limitations period for claims by class members in a
different jurisdiction during the pendency of the class action. If cross-
jurisdictional tolling does not apply, Appellants do not dispute that their
claims are time-barred. Because this involves a purely legal issue, this
court’s review is de novo. US W. Commc’ns, Inc. v. Ariz. Corp. Comm’n, 201
Ariz. 242, 244 ¶ 7, 34 P.3d 351, 353 (2001); see also Andrews ex rel. Woodard v.
Eddie’s Place, Inc., 199 Ariz. 240, 241 ¶ 1, 16 P.3d 801, 802 (App. 2000)
(applying de novo review to grant of motion to dismiss claims as time-
barred). To claim the benefit of tolling of a limitations period, “the burden
is on the plaintiff to show the statute should be tolled.” Ulibarri v.
Gerstenberger, 178 Ariz. 151, 155, 871 P.2d 698, 702 (App. 1993) (citation
omitted).

I. Intra-Jurisdictional And Cross-Jurisdictional Tolling.

¶8 Intra-jurisdictional tolling, whereby the filing of a class action
may toll the limitations period for claims by class members in the same
jurisdiction during the pendency of the class action, was first recognized in
American Pipe & Constr. Co. v. Utah, 414 U.S. 538 (1974). See generally David
Bober, Comment, Cross-Jurisdictional Tolling: When and Whether a State Court
Should Toll Its Statute of Limitations Based on the Filing of a Class Action in
Another Jurisdiction, 32 Seton Hall L. Rev. 617 (2002). In American Pipe, the
State of Utah filed a timely putative class action alleging civil antitrust
violations. 414 U.S. at 541–42. Several months later, the district court ruled
the case could not proceed as a class action under Federal Rule of Civil
Procedure 23 because the putative class was not “‘so numerous that joinder
of all members was impracticable.’” Id. at 543 (citation omitted). Days later,
purported members of the putative class moved to intervene as plaintiffs.

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Opinion of the Court

Id. at 543–44. The district court, however, denied intervention, finding any
claims by the putative interveners were time-barred. Id. at 544.

¶9 On those facts, the United States Supreme Court recognized
what has become known as intra-jurisdictional tolling.

We hold that in this posture, at least where class
action status has been denied solely because of
failure to demonstrate that “the class is so
numerous that joinder of all members is
impracticable,” the commencement of the
original class suit tolls the running of the statute
for all purported members of the class who
make timely motions to intervene after the court
has found the suit inappropriate for class action
status.

Id. at 552–53. American Pipe added that failing to recognize this type of
tolling during the pendency of a putative class action where class
certification was denied based on a lack of numerosity would create
mischief and unnecessary litigation and “deprive Rule 23 class actions of
the efficiency and economy of litigation which is a principal purpose of the
procedure.” Id. at 553–54.

Potential class members would be induced to
file protective motions to intervene or to join in
the event that a class was later found unsuitable.
In cases such as this one, where the
determination to disallow the class action was
made upon considerations that may vary with
such subtle factors as experience with prior
similar litigation or the current status of a
court’s docket, a rule requiring successful
anticipation of the determination of the viability
of the class would breed needless duplication of
motions.

Id. Thus, American Pipe found “the rule most consistent with federal class
action procedure must be that the commencement of a class action
suspends the applicable statute of limitations as to all asserted members of
the class who would have been parties had the suit been permitted to
continue as a class action.” Id. at 554. American Pipe also noted that tolling
was “in no way inconsistent with the functional operation of a statute of

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Opinion of the Court

limitations” because the putative class action would put a defendant on
notice even if class certification ultimately was denied. Id. at 554–55.

¶10 The United States Supreme Court later held that American Pipe
tolling also applied to putative class members who, after the denial of class
certification, timely filed a separate suit in the same court where the
putative class action had been pending (sometimes called intra-
jurisdictional tolling). See Crown, Cork & Seal Co. v. Parker, 462 U.S. 345, 353–
54 (1983). “Once the statute of limitations has been tolled, it remains tolled
for all members of the putative class until class certification is denied. At
that point, class members may choose to file their own suits or to intervene
as plaintiffs in the pending action.” Id. at 354.

¶11 Although binding precedent in federal court, state courts
have taken different positions when addressing American Pipe tolling, with
the following results:

If the applicable tolling rule is that the
jurisdiction does not recognize American Pipe
tolling, the individual will not be able to take
advantage of tolling and will be bound by the
statute of limitations clock itself. If the
applicable rule permits only intra-jurisdictional
American Pipe tolling, the individual will be able
to take advantage of tolling law if her new case
is lodged in the same jurisdiction as that in
which the class suit was filed. If the applicable
rule encompasses cross-jurisdictional American
Pipe tolling, the individual will be able to take
advantage of tolling law no matter where the
initial class suit was filed.

William B. Rubenstein, Newberg on Class Actions § 9:67 (5th ed. 2014).
Appellants ask this court to adopt cross-jurisdictional tolling, which they
concede Arizona has never done.

II. Arizona Case Law Discussing American Pipe Tolling.

¶12 Three Arizona appellate court decisions have considered
American Pipe tolling. Hall v. Romero did not adopt American Pipe tolling
because the defendant in the putative class action was not the same
defendant as was named in the individual class members’ suits. 141 Ariz.
120, 126, 685 P.2d 757, 763 (App. 1984).

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Opinion of the Court

¶13 In Hosogai v. Kadota, the Arizona Supreme Court found
equitable tolling was appropriate during the pendency of a wrongful death
suit resulting in a jury verdict that was vacated on appeal for lack of proper
service of process and then refiled in the same court. 145 Ariz. 227, 229, 700
P.2d 1327, 1329 (1985). In that context, and recognizing that the court was
construing a statutory limitations period adopted by the Legislature,
Hosogai noted that “Arizona does not have a general savings statute for civil
actions.” Id. at 230, 700 P.2d at 1330. Hosogai then rejected a “presumption
that mere silence on a particular subject necessarily indicates legislative
disapproval in all cases,” adding that it found no bill had been presented to
the Legislature “for a general civil savings statute” or any legislative
“disapproval of savings statutes generally or the equitable tolling doctrine
in particular.” Id. at 230–31, 700 P.2d at 1330–31. Hosogai added that “[a]
court has a legitimate interest in the procedural rules that govern lawsuits,
especially to prevent such rules from becoming a shield for serious
inequity. Accordingly, a court may under certain circumstances make
narrow equitable exceptions to statutes of limitations.” Id. at 231, 700 P.2d
at 1331 (citations omitted).

¶14 In concluding such a narrow equitable exception was
appropriate in that context, Hosogai cited American Pipe for the proposition
that courts have “applied the doctrine of equitable tolling to successive
identical actions arising within the same court system,” noting “[t]here is
no general savings statute in federal civil actions.” Id. at 231, 233, 700 P.2d
at 1331, 1333. Hosogai, however, had no need to consider or adopt American
Pipe tolling. Hosogai did, however, evidence caution by the Arizona
Supreme Court against broadly adopting tolling concepts in construing
statutory limitations periods. Hosogai noted that the “narrow equitable
exception to the statute of limitations” on the distinguishable facts of that
case “is far from the equivalent of a savings statute.” Id. at 234, 700 P.2d at
1334. And recognizing that equitable tolling, in substance, involves
construing statutory limitations periods, Hosogai concluded that “[a]s
overseers of the judicial system in this state, we call upon the legislature to
pass a general savings statute in civil actions.” Id.

¶15 In response to the call in Hosogai, the Legislature enacted a
general civil savings statute in 1986, currently codified at A.R.S. § 12-504.
See Jepson v. New, 164 Ariz. 265, 271, 792 P.2d 728, 734 (1990). The key
provision of that statute currently provides:

If an action is commenced within the time
limited for the action, and the action is
terminated in any manner other than by

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Opinion of the Court

abatement, voluntary dismissal, dismissal for
lack of prosecution or a final judgment on the
merits, the plaintiff, or a successor or personal
representative, may commence a new action for
the same cause after the expiration of the time
so limited and within six months after such
termination. If an action timely commenced is
terminated by abatement, voluntary dismissal
by order of the court or dismissal for lack of
prosecution, the court in its discretion may
provide a period for commencement of a new
action for the same cause, although the time
otherwise limited for commencement has
expired. Such period shall not exceed six
months from the date of termination.

A.R.S. § 12-504(A). Appellants voluntarily sought exclusion from the class
in the Facciola Action and do not argue that A.R.S. § 12-504 would apply to
their claims.3 The enactment of A.R.S. § 12-504 supersedes at least some of
the force of Hosogai, although as discussed below, its reasoning is still
instructive. See Jepson, 164 Ariz. at 270–71, 792 P.2d at 733–34.

¶16 The third Arizona appellate court decision considering
American Pipe tolling is Albano v. Shea Homes Ltd. P’ship, 227 Ariz. 121, 254
P.3d 360 (2011). In Albano, the Arizona Supreme Court addressed certified
questions from the Ninth Circuit Court of Appeals, holding “that American
Pipe tolling does not apply to the statute of repose in [A.R.S.] § 12-552.” Id.
at 128 ¶ 34, 254 P.3d at 367. In doing so, Albano noted that the Arizona
Supreme Court “has never determined whether American Pipe and its
progeny apply to class actions” and stated that American Pipe “aptly stated
that its ‘judicial tolling of the statute of limitations’ was simply a matter of
‘recognizing judicial power’ to do so in federal courts.” Id. at 124 ¶ 11, 127 ¶
25, 254 P.3d at 363, 366 (citation omitted). To resolve the certified questions,
Albano “assume[d] without deciding that the filing of a class action in
Arizona tolls the applicable statute of limitations for non-named class
members until class certification is denied.” Id. at 124 ¶ 11, 125 ¶ 17, 254

3 At oral argument before this court, both Appellants and Greenberg
Traurig argued A.R.S. § 12-504(A) would not apply to Appellants’ claims,
an issue this court need not address. Similarly, there is no contention that
other statutory tolling provisions would apply to Appellants’ claims. See,
e.g., A.R.S. § 12-501 (tolling for absence from state); A.R.S. § 12-502 (tolling
for minority and insanity).

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Opinion of the Court

P.3d at 363, 364. Accordingly, Albano did not address or resolve the issue
presented here.

III. Appellants Have Not Shown That Arizona Should Adopt Cross-
Jurisdictional Tolling.

¶17 Contrary to Appellants’ argument, Albano did not adopt intra-
jurisdictional tolling in Arizona. Indeed, Albano expressly stated that it
“need not answer” whether to do so because the certified questions
addressed a statute of repose, not a statute of limitations. Id. at 125 ¶ 17, 254
P.3d at 364. Moreover, even if Albano could be construed as adopting intra-
jurisdictional tolling, it would not apply to Appellants’ state court claims
here, given the Facciola Action is a federal case, which the court certified as a
class action. See Albano, 227 Ariz. at 123 ¶ 2, 254 P.3d at 362 (assuming,
without deciding, that limitations period was tolled “until an order denying
class certification is entered”) (emphasis added); id. at 125 ¶ 17, 254 P.3d at
364 (same); see also William B. Rubenstein, Newberg on Class Actions § 9:67
(5th ed. 2014) (discussing distinction between intra-jurisdictional and cross-
jurisdictional tolling).

¶18 As Albano noted, however, whether class certification is
granted may be an important consideration in addressing subsequent
tolling requests. Other courts have been reluctant to extend American Pipe
tolling where class certification was granted. See, e.g., Warren Consol. Sch. v.
W.R. Grace & Co., 518 N.W.2d 508, 511 (Mich. Ct. App. 1994) (“Plaintiff has
failed to persuade us that the American Pipe rule should be extended to the
situation where, as here, the class is certified and the plaintiff elects to
pursue its own case.”) (citations omitted). Tellingly, none of the state court
cases Appellants cite adopted cross-jurisdictional tolling when class
certification was granted and class members elected to opt out to press their
own individual claims. See Dow Chem. Corp. v. Blanco, 67 A.3d 392 (Del.
2013); Stevens v. Novartis Pharm. Corp., 247 P.3d 244 (Mont. 2010); Vaccariello
v. Smith & Nephew Richards, Inc., 763 N.E.2d 160 (Ohio 2002); Staub v.
Eastman Kodak Co., 726 A.2d 955 (N.J. Super. Ct. App. Div. 1999); Lee v. Grand
Rapids Bd. of Educ., 384 N.W.2d 165 (Mich. Ct. App. 1986). Here, Appellants
opted out of the Facciola Action after the case was certified as a class action
and, in fact, after the court preliminarily approved the class settlement after
a fairness hearing. The facts of this case are therefore distinguishable from
the state cases relied upon by Appellants.

¶19 Federal cases have, at times, refused to apply American Pipe
tolling where, as here, class certification was granted. Compare Wachovia
Bank & Trust Co., N.A. v. Nat’l Student Mktg. Corp., 650 F.2d 342, 346 n.7 (D.C.

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Cir. 1980) (holding appellants could not claim American Pipe tolling where
“certification of the class was granted, not denied”) with Tosti v. City of Los
Angeles, 754 F.2d 1485, 1488 (9th Cir. 1985) (applying American Pipe tolling
where class was certified). Recognizing the interests of class members are
protected by class certification, one commentator has noted such an
approach “will encourage class members to seek vindication through the
class action suit” and a contrary approach “would sanction duplicative
suits.” Note, Statutes of Limitations and Opting Out of Class Actions, 81 Mich.
L. Rev. 399, 429–30 (1982). Because the class in the Facciola Action was
certified, this approach would not toll the limitations period for Appellants’
claims here.

¶20 Appellants cite federal cases applying American Pipe tolling
after a class action was certified. See, e.g., Realmonte v. Reeves, 169 F.3d 1280,
1284 (10th Cir. 1999); Adams Pub. Sch. Dist. v. Asbestos Corp., 7 F.3d 717, 718
n.1 (8th Cir. 1993); Tosti, 754 F.2d at 1488; Edwards v. Boeing Vertol Co., 717
F.2d 761, 766 (3d Cir. 1983), judgment vacated on other grounds and remanded,
468 U.S. 1201 (1984). Those cases, however, are distinguishable; unlike
Arizona after the enactment of A.R.S. § 12-504, “[t]here is no general savings
statute in federal civil actions.” Hosogai, 145 Ariz. at 231, 700 P.2d at 1331.
Even the diversity case Appellants cite that applied American Pipe tolling
after certification of a class action did so noting that, although current state
law did not provide for tolling, a new statute provided “clear evidence of
the North Dakota legislature’s intent” that plaintiff’s claims were not barred
by the statute of limitations. Asbestos Corp., 7 F.3d at 719.

¶21 Regardless of whether American Pipe tolling is limited to cases
filed following the denial of class certification, the lack of a general savings
statute in the federal system is important in deciding whether to adopt
cross-jurisdictional tolling by case law in Arizona. Because there is no
general federal savings statute, the legislative void resulting in American
Pipe remains in the federal system, while in Arizona, the Legislature filled
that void by enacting A.R.S. § 12-504. Appellants do not argue that the
Legislature failed to account for cross-jurisdictional tolling when enacting
A.R.S. § 12-504. Indeed, Arizona’s saving statute applies to an action timely
filed in another jurisdiction and later refiled in Arizona. See Templer v. Zele,
166 Ariz. 390, 391, 803 P.2d 111, 112 (App. 1990). Thus, by enacting this
general Arizona savings statute, the Legislature adopted a form of cross-
jurisdictional tolling, just not in the form Appellants claim should apply to
their claims here. Given this history leading up to the enactment of A.R.S. §
12-504, and the scope of that statute, Appellants have not shown that
Arizona nonetheless should adopt broader cross-jurisdictional tolling by
case law.

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Opinion of the Court

¶22 Appellants cite several legitimate reasons supporting intra-
jurisdictional and cross-jurisdictional tolling, including resolution of
disputes on the merits and a lack of prejudice to defendants. Had the
Legislature not enacted the general Arizona savings statute in A.R.S. § 12-
504 following the call by Hosogai, those arguments would have greater
weight. But the Legislature did enact A.R.S. § 12-504. As a result, Appellants
effectively are asking this court to adopt a doctrine broader than what the
Legislature adopted in a statute enacted in response to a call by the Arizona
Supreme Court. This court declines to do so. Cf. State ex rel. Morrison v.
Anway, 87 Ariz. 206, 209, 349 P.2d 774, 776 (1960) (“[C]ourts cannot read
into a statute something which is not within the manifest intention of the
legislature as gathered from the statute itself.”).

¶23 Although addressing a different type of tolling, Albano noted
that, pertinent to its analysis in “determining whether to apply class action
tolling, ‘[t]he proper test is . . . whether tolling the limitation in a given
context is consonant with the legislative scheme.’” 227 Ariz. at 127 ¶ 22, 254
P.3d at 366 (citation omitted). There is no suggestion here that recognizing
cross-jurisdictional tolling for claims that may not fall within the protection
of A.R.S. § 12-504 is consonant with Arizona’s legislative scheme. This is
particularly true given that the Legislature’s limitations periods and
savings statute involve “very delicate policy decisions that properly belong
to the legislative branch of government.” Florez v. Sargeant, 185 Ariz. 521,
528–29, 917 P.2d 250, 257–58 (1996); see also Albano, 227 Ariz. at 127–28 ¶ 29,
254 P.3d at 366–67 (declining tolling when it conflicts with statute of repose;
“[i]f the Legislature wishes to permit class action tolling under [A.R.S.] § 12-
552, it may of course amend the statute to so provide”). Given these
legislative balances, Appellants have not shown that Arizona should adopt
cross-jurisdictional tolling by case law. Accordingly, the superior court
properly dismissed Appellants’ claims as time-barred. See A.R.S. § 12-542;
A.R.S. §§ 44-2004(B), -3241(B).

CONCLUSION

¶24 The superior court’s judgment is affirmed.

:ama

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