MAINE SUPREME JUDICIAL COURT Reporter of Decisions
Decision: 2017 ME 155
Docket: BCD-16-419
Argued: April 11, 2017
Decided: July 13, 2017
Panel: SAUFLEY, C.J., and ALEXANDER, MEAD, GORMAN, JABAR, HJELM, and HUMPHREY, JJ.
ALAN MILLER
v.
STEVE N. MILLER et al.
HUMPHREY, J.
[¶1] Alan Miller appeals from summary judgments entered in the
Business and Consumer Docket (Horton, J.) in favor of Miller’s Lobster
Company Inc. (MLC), Steve N. Miller, and Mark K. Miller (collectively, the
Millers); and in favor of SAM Miller, Inc. (SMI). After Alan sought injunctive
relief and damages arising out of the lease of wharf property in St. George by
SMI to MLC, the court granted the Millers’ and SMI’s motions for summary
judgment, concluding that Alan’s claims are barred by the applicable statute of
limitations. We affirm the judgments.
I. BACKGROUND
[¶2] On August 8, 2014, Alan, acting “individually and in the right of and
for the [b]enefit of” SMI, filed the operative second amended complaint
2
against the Millers.1 Alan alleged that he, Steve, and Mark are the sole
shareholders of SMI; that Steve and Mark are the sole shareholders of MLC;
and that SMI leased wharf property in St. George to MLC without conducting a
lawful corporate meeting and without charging MLC rent, to the detriment of
Alan and SMI.
[¶3] Alan asserted eight causes of action in connection with the lease
agreement: a shareholder derivative action challenging Steve and Mark’s
failure to prevent SMI from entering into the lease (Count 1); breach of
fiduciary duty (Count 2); gross mismanagement (Count 3); waste of corporate
assets (Count 4); unjust enrichment (Count 5); punitive damages (Count 6);
breach of the duty of good faith and fair dealing (Count 7); and interference
with advantageous relationships (Count 8).2 The Millers moved for a
summary judgment, arguing that each of Alan’s claims against them was
barred by the statute of limitations. Alan opposed the motion and filed
additional statements of material facts, to which the Millers replied.3
1 Alan filed his initial complaint on February 19, 2014, in the District Court (Rockland). The case
was transferred to the Business and Consumer Docket in June 2014.
2 Alan named SMI as a “Nominal Defendant” and sought relief “Against All Defendants” in five of
the causes of action. SMI, represented by separate counsel, filed an answer and asserted that Alan’s
claims were barred by the statute of limitations.
3 SMI did not separately move for a summary judgment or join the Millers’ motion.
3
[¶4] Viewed in the light most favorable to Alan, the nonprevailing
party, the summary judgment record reveals the following facts.
See Pawlendzio v. Haddow, 2016 ME 144, ¶ 9, 148 A.3d 713. Alan, Steve, and
Mark are brothers. Their father, Luther Miller, purchased the wharf at issue in
the 1960s. MLC, which conducts a restaurant business, was formed in 1978
and has operated from Luther’s wharf since its inception. Since 1992, Steve
and Mark have been the sole shareholders of MLC. Between 1992 and 1997,
MLC continued to operate on the wharf while paying the wharf’s real estate
taxes, insurance, and maintenance costs.
[¶5] In 1997, Luther transferred ownership of the wharf to SMI, a new
corporation formed by Alan, Steve, and Mark. The three brothers are the sole
shareholders of SMI, each owning a one-third interest in the corporation. On
September 2, 1997, SMI executed a lease allowing MLC to continue operating
from the wharf without paying rent in exchange for paying the wharf’s taxes,
insurance, and maintenance costs. That lease was renewed in 2001 and again
on May 1, 2004. Alan alleges that both lease renewals occurred without his
knowledge or consent and without a meeting of all of the SMI shareholders. It
is undisputed, however, that MLC has operated in some capacity from the
wharf continuously since it was formed in 1978 and that since 1997 it has
4
“been using the [w]harf exclusively” and paying for the wharf’s real estate
taxes, insurance, and maintenance costs.4
[¶6] On August 16, 2013, Alan demanded, pursuant to 13-C M.R.S. § 753
(2016), that SMI file an action against the Millers for damages caused by
MLC’s lease of the wharf for no or insufficient rent and for other fiduciary
breaches. SMI has not instituted such an action.
[¶7] By order dated August 7, 2015, the court concluded that Alan’s
claims were untimely according to the applicable six-year limitations period,
see 14 M.R.S. § 752 (2016),5 and granted the Millers’ motion for summary
judgment as to “all of [Alan’s] claims.” Alan appealed from the judgment and
we dismissed his appeal as interlocutory because to the extent that he had
asserted claims against SMI as a “nominal defendant,” the judgment did not
dispose of those claims.
4 The parties’ statements of material facts generate several disputes regarding Alan’s notice of
and participation in SMI’s decisions, details of the executions of the leases, Alan’s level of
knowledge of or agreement to the leases and the timing of that knowledge, SMI’s failure to charge
MLC rent, and the extent of MLC’s growth (and resulting increase in its use of the wharf) over the
years. These disputes are not material to the statute-of-limitations issue, which is the sole issue in
this appeal.
5 According to 14 M.R.S. § 752 (2016), “All civil actions shall be commenced within 6 years after
the cause of action accrues and not afterwards, except actions on a judgment or decree of any court
of record of the United States, or of any state, or of a justice of the peace in this State, and except as
otherwise specially provided.”
5
[¶8] In June 2016, SMI moved for a summary judgment, arguing that
Alan’s claims against it were barred by the statute of limitations. The court
granted SMI’s motion, determining that to the extent Alan asserted claims
against SMI, those claims were “barred by the statute of limitations to the
same extent and for the same reasons as his claims against” the Millers. Alan
now timely appeals from the summary judgments in favor of the Millers and
SMI.
II. DISCUSSION
[¶9] Alan argues that the court erred by concluding that his claims
against the Millers and SMI are barred by the applicable statute of limitations.
We review the summary judgment record in the light most favorable to Alan,
the nonprevailing party, to determine de novo whether the parties’
statements of material facts and the evidence cited therein establish that no
genuine dispute of material fact exists and that the Millers and SMI are
entitled to judgments as a matter of law. See M.R. Civ. P. 56(c); Angell v. Hallee,
2014 ME 72, ¶ 16, 92 A.3d 1154; Pawlendzio, 2016 ME 144, ¶ 9, 148 A.3d 713.
“A fact is material if it has the potential to affect the outcome of the suit, and a
genuine issue of material fact exists when a fact-finder must choose between
competing versions of the truth, even if one party’s version appears more
6
credible or persuasive.” Angell, 2014 ME 72, ¶ 17, 92 A.3d 1154 (quotation
marks omitted).
[¶10] The Millers and SMI, who raised the affirmative defense of the
statute of limitations, first had the burden to establish that there is no genuine
dispute that Alan’s suit was commenced after the limitations period elapsed.
See M.R. Civ. P. 8(c); Angell, 2014 ME 72, ¶¶ 18, 20, 92 A.3d 1154; Nuccio v.
Nuccio, 673 A.2d 1331, 1333 (Me. 1996). If they met that burden, it was then
Alan’s burden to demonstrate that a dispute of material fact exists as to
whether the statute of limitations was nonetheless tolled or otherwise
inapplicable. See Nuccio, 673 A.2d at 1334. Alan contends that the Millers and
SMI did not meet their burden and that even if they did, he met his burden to
establish that tolling of the limitations period renders his complaint timely.
A. Accrual
[¶11] Alan first contends that the Millers and SMI did not meet their
burden to establish, as a matter of law, that his action was commenced after
the limitations period for each claim had elapsed. The parties agree that the
six-year limitations period provided by 14 M.R.S. § 752 applies to all of Alan’s
claims; therefore, to survive the defendants’ statute-of-limitations defense, his
action must have been commenced within six years after his causes of action
7
accrued. There is no dispute that Alan commenced his action on February 19,
2014.
[¶12] Absent express direction from the Legislature stating otherwise,
a cause of action accrues when “the plaintiff sustains a judicially cognizable
injury.” Nevin v. Union Tr. Co., 1999 ME 47, ¶ 24, 726 A.2d 694 (quotation
marks omitted). Generally, tort actions accrue “when the plaintiff sustains
harm to a protected interest,” i.e., when a plaintiff is “entitled to seek judicial
vindication.” McLaughlin v. Superintending Sch. Comm., 2003 ME 114, ¶ 22,
832 A.2d 782 (quotation marks omitted). The same is true for a claim for a
declaratory judgment. See Bog Lake Co. v. Town of Northfield, 2008 ME 37,
¶¶ 1, 8-9, 942 A.2d 700.
[¶13] Here, for each of his eight causes of action, Alan identified the
operative wrong as the execution of the lease agreement between SMI and
MLC and the renewals of that agreement. Although in his summary judgment
filings he disputed whether he was aware of the lease renewals, he conceded
that the original lease agreement was executed in 1997 and that he has been
aware since then that MLC has been using the wharf exclusively and paying
tax, insurance, and maintenance costs—but not rent—to SMI continuously.
Alan therefore could not have sustained the injury of which he now complains
8
any later than May 1, 2004, and the summary judgment record reveals no
genuine dispute of material fact that his action, commenced in February 2014,
was initiated more than six years after the date that his claims accrued.6
B. Tolling
[¶14] We now turn to the issue of whether Alan met his burden to
demonstrate a genuine issue of material fact as to whether the limitations
period was nevertheless tolled or otherwise inapplicable. See Nuccio,
673 A.2d at 1334. Alan contends that the limitations period was tolled based
on the doctrine of adverse domination.7
[¶15] According to the equitable doctrine of adverse domination, the
statute of limitations applicable to a corporation’s cause of action against
controlling directors who are culpable of wrongdoing may be tolled in some
circumstances where the culpable officers would have a duty to institute the
action on behalf of the corporation against themselves. See Bates St. Shirt Co.
6 We need not discuss whether Alan’s claims accrued in 1997, when the original lease was
executed, or in 2004, when it was most recently renewed, because there is no dispute that his
action was filed more than six years after either date. To the extent that Alan preserved for
appellate review—as to either the Millers or SMI—any argument that the summary judgment
record contains a genuine dispute of material fact as to whether his claims accrued after May 1,
2004, we are not persuaded by those arguments. See 13-C M.R.S. §§ 751-758 (2016); Bog Lake Co.
v. Town of Northfield, 2008 ME 37, ¶¶ 8-9, 942 A.2d 700; McLaughlin v. Superintending Sch. Comm.,
2003 ME 114, ¶ 23 n.6, 832 A.2d 782.
7 In the trial court, Alan advanced two other theories as to why the limitations period was tolled
notwithstanding the accrual date—fraud and equitable estoppel. He has not raised those theories
on appeal.
9
v. Waite, 130 Me. 352, 356-57, 156 A. 293 (1931). The doctrine provides for
equitable tolling in situations where controlling officers conceal their culpable
conduct from those who would otherwise bring an action on the corporation’s
behalf, or where they control the corporation to the extent that they could
refuse to allow it to act in its best interest. See Aiello v. Aiello, 852 N.E.2d 68,
79-80 (Mass. 2006); see also Wilson v. Paine, 288 S.W.3d 284, 288 (Ky. 2009)
(stating that the doctrine “prevents the culpable directors from benefiting
from their lack of action on behalf of the corporation” because “in most cases,
defendants’ control of the corporation will make it impossible for the
corporate plaintiff independently to acquire the knowledge and resources
necessary to bring suit” (quotation marks omitted)).
[¶16] The record supports Alan’s contentions that Steve and Mark,
together, hold a controlling interest in SMI and, as functioning directors,
see 13-C M.R.S. § 743(8)(A), (B) (2016), stood as fiduciaries of the corporation,
see 13-C M.R.S. § 831(1), (2) (2016). Alan takes issue with the trial court’s
determination that the doctrine of adverse domination does not apply to toll
the statute of limitations in this case because “the tolling of the limitations
period should not necessarily apply when a [non-controlling] shareholder has
the requisite information and ability to assert derivative claims.”
10
[¶17] The court’s logic is sound. As the Massachusetts Supreme Judicial
Court has explained,
The mere existence of a majority of culpable directors should not
lead to a presumption that a corporate plaintiff is unable to
discover or redress the wrongs perpetrated by such directors,
thereby tolling a statute of limitations established by the
Legislature to provide the temporal finality necessary for the
orderly conduct of human affairs. . . . The concerns justifying the
application of the adverse domination doctrine are substantially
mitigated where an informed, disinterested director is also a
shareholder in the corporation. Where such a person could have
induced the corporation to sue, it cannot be said that the
corporation is barred from seeking redress of the injury to it, and
there is no longer a good reason to refuse to impute that person’s
knowledge of the wrongdoing to the corporation itself.
Aiello, 852 N.E.2d at 80-81 (citation omitted) (quotation marks omitted). The
United States Court of Appeals for the Second Circuit has held, similarly, that
a plaintiff who seeks to toll the statute [of limitations] on the basis
of domination of a corporation has the burden of showing a full,
complete and exclusive control in the directors or officers
charged. . . . This principle must mean at least that once the facts
giving rise to possible liability are known, the plaintiff must
effectively negate the possibility that an informed stockholder or
director could have induced the corporation to sue.
Int’l Rys. of Cent. Am. v. United Fruit Co., 373 F.2d 408, 414 (2d Cir. 1967)
(quotation marks omitted).
[¶18] We agree with the analysis of these courts. There is no reason
that the limitations period should be stalled where a disinterested
11
shareholder is both aware of the alleged wrongdoing and able to initiate an
action on the corporation’s behalf against the allegedly culpable directors. In
those circumstances, the justifications for tolling based on adverse
domination are absent because the corporation’s interests can be protected
through a derivative action by the non-controlling shareholder. Cf., e.g.,
FDIC v. Dawson, 4 F.3d 1303, 1310 (5th Cir. 1993) (citing “the possibility of
concealment” as a “strong[] argument” for an approach under which the
plaintiff would need to “show only that a majority of the board members were
wrongdoers during period the plaintiff seeks to toll the statute”).
[¶19] Here, the summary judgment record establishes that Steve and
Mark did not have total control of SMI—they did not prevent a shareholder
derivative action by Alan, the owner of a one-third interest in SMI. Moreover,
Alan does not dispute that he has been aware, since at least May 1, 2004, of
the alleged wrongdoing that forms the basis of his shareholder derivative
action on behalf of SMI against its directors. As the trial court concluded,
therefore, Alan had the knowledge and ability to assert a shareholder
derivative action on SMI’s behalf against Steve and Mark in their capacities as
SMI directors, see 13-C M.R.S. §§ 751-758 (2016), but he did not do so within
the six-year limitations period. In these circumstances, the doctrine of
12
adverse domination does not apply to toll the statute of limitations. Because
no genuine dispute of material fact exists as to whether the statute of
limitations was tolled, the court did not err when it granted the Millers’ and
SMI’s motions for summary judgment.
The entry is:
Judgments affirmed.
William H. Welte, Esq. (orally), Welte & Welte, P.A., Camden, for appellant Alan
Miller
Christopher K. MacLean, Esq. (orally), Elliott MacLean Gilbert & Coursey,
Camden, for appellees Steve N. Miller, Mark K. Miller, and Miller’s Lobster
Company, Inc.
Business and Consumer Docket docket number CV-2014-36
FOR CLERK REFERENCE ONLY