Federal Circuit Court of Appeals Dismisses as Untimely Breach of Fiduciary Duty Suit Involving Alleged Ponzi Scheme

By Lewis Tesser, Partner, and Timothy Nolen, Associate

A recent case out of the Second Circuit Court of Appeals highlights the importance of the statute of limitations in litigated controversies. The litigation also involved issues of business law, corporate law, tort law, equity and civil practice.

The case, International Strategies Group, Ltd. v. Ness, 2011 U.S. App. LEXIS 14499 (2d Cir. July 15, 2011), concerned claims for breach of fiduciary duty, intentional misrepresentation, negligent misrepresentation and conspiracy based upon the defendant’s involvement in his employer’s Ponzi scheme. The plaintiff first learned of the unlawful transfer of their funds in June of 2000. The plaintiff then waited almost four years to file suit against the defendant, who was the employer’s in-house counsel and vice president. The Plaintiff argued that the three-year statute of limitations should be tolled (i.e. extended) since there was a special relationship between the parties. Chief Judge Jacobs, however, rejected this argument, noting that the claims were against the defendant in his personal capacity and not against the defendant’s employer. Because the plaintiff failed to establish that the defendant was personally involved in the transaction, the plaintiff was held to the three-year filing requirement.

At Tesser, Ryan & Rochman, LLP, our litigation experience allows us to anticipate issues regarding the timing of lawsuits. Whether a plaintiff is worried about filing suit in a timely fashion or a defendant would like to challenge a suit as untimely, our attorneys can prepare litigants to address one critical aspect of any suit: timeliness.