United States District Court, E.D. Pennsylvania
JAMES OETTING, Individually and on behalf of all others similarly situated, Plaintiff,
HEFFLER, RADETICH & SAITTA, LLP, EDWARD J. SINCAVAGE, EDWARD J. RADETICH, JR., and MICHAEL T. BANCROFT, Defendants.
case involves claims asserted by plaintiff James Oetting on
behalf of himself and a certified class of similarly situated
individuals who received payments from a settlement fund in a
long-running multidistrict litigation in the United States
District Court for the Eastern District of Missouri. This
case was originally filed as a separate action in that
district but was transferred to this Court pursuant to 28
U.S.C. § 1404(a) by Order dated July 25, 2011. Plaintiff
seeks damages from defendants for harm suffered by the class
due to fraudulent claims made on the settlement fund by a
former employee of defendant Heffler, Radetich & Saitta,
LLP (“Heffler”), that were authorized by
defendants. Plaintiff asserts claims for negligence,
accountant malpractice, breach of fiduciary duty, and fraud.
before the Court are the parties' memoranda and
supplemental memoranda on all choice of law issues. For the
reasons that follow, the Court concludes that
Pennsylvania's statute of limitations, the Missouri
savings statute, and Missouri substantive law are applicable
to this case.
relevant facts as outlined in plaintiff's Second Amended
Complaint, attached exhibits, and the underlying MDL docket
are as follows. This case arises out of securities litigation
following a merger between BankAmerica Corporation
(“BankAmerica”) and NationsBank. On October 16,
1998, the first of numerous class actions was initiated
against BankAmerica. Second Am. Compl. ¶ 1. The Judicial
Panel for Multi-District Litigation issued a Transfer Order
on February 12, 1999, consolidating all cases relating to the
merger for all pretrial purposes in the Eastern Division of
the Eastern District of Missouri. Second Am. Compl. ¶ 2.
Judge John F. Nangle was the appointed judge. Judge Carol E.
Jackson succeeded Judge Nangle upon his death. Id.
The multi-district litigation is identified as In re
BankAmerica Corp. Securities Litigation, 99-md-1264
(E.D. Mo.) (“the MDL”).
Order dated July 6, 1999, Judge Nangle certified four classes
in the MDL: (1) the NationsBank Holder Class, (2) the
NationsBank Purchaser Class, (3) the BankAmerica Holder
Class, and (4) the BankAmerica Purchaser Class. Second Am.
Compl. ¶ 3. Plaintiff James Oetting was a member of the
original NationsBank Holder Class. Judge Nangle approved a
settlement between the MDL defendants and all four of the MDL
classes by Order dated September 20, 2002. Second Am. Compl.
¶ 24. Under the terms of the settlement agreement, the
MDL defendants agreed to pay $490 million to the class
members, with $333.2 million allocated to a combined
NationsBank class and $156.8 million allocated to a combined
BankAmerica class. Id.
submission of a proposal to class counsel, Heffler was
appointed by the MDL Court as the Claims Administrator for
the settlement. Second Am. Compl. ¶¶ 4-9, 25-26. As
Claims Administrator, Heffler was responsible for publicizing
the settlement, receiving and reviewing submitted claims,
identifying valid and invalid claims, and distributing the
settlement proceeds to valid claimants. Second Am. Compl.
¶ 25-26. The individual defendants in this case, Edward
J. Sincavage, Edward J. Radetich, Jr., and Michael T.
Bancroft, were partners in Heffler during the time that the
firm oversaw distribution of the MDL settlement fund. Second
Am. Compl. ¶ 12.
13, 2004, lead counsel for the NationsBank class filed a
motion for partial distribution of the NationsBank settlement
fund. Second Am. Compl. ¶ 29; Pls' Joint Mot. for
Approval of Distribution of Class Settlement Fund, In re
BankAmerica Corp. Securities Litig., MDL No. 1264 (E.D.
Mo. May 13, 2004), Doc. No. 616. In support of that Motion,
counsel submitted an affidavit from defendant Sincavage
stating, inter alia, that Heffler had examined and
calculated all claims forms to determine that they were
properly completed, signed, and documented. Second Am. Compl.
¶ 29. By Order dated June 14, 2004, Judge Nangle granted
the Motion and approved a partial distribution of the
settlement funds in accordance with the motion and the
attached affidavit from Sincavage. Id.; Order,
In re BankAmerica Corp. Securities Litig., MDL No.
1264 (E.D. Mo. June 14, 2004), Doc. No. 630.
Heffler's administration of the settlement, but prior to
the first distribution of settlement funds authorized by the
MDL Court by Order dated June 14, 2004, a then-employee of
Heffler, Christian Penta, submitted false claims for payment
from the NationsBank class settlement fund. Second Am. Compl.
¶ 28. Thus, the first distribution included
“payment(s) of over $5.87 million based on false claims
submitted by Penta and his co-conspirators.” Second Am.
Compl. ¶ 30. The fraud was not immediately discovered.
jury in Philadelphia, Pennsylvania ultimately returned an
indictment against Penta and four co-conspirators on charges
including mail fraud, wire fraud, and tax evasion relating to
three separate class action settlement funds managed by
Heffler, including the In re BankAmerica fund.
Indictment, United States v. Penta et al., Criminal
Action No. 08-550 (E.D. Pa. Sept. 11, 2008) (Savage,
The Penta indictment was publicly announced on November 20,
2008, in a press release issued by the United States Attorney
for the Eastern District of Pennsylvania. Defs' Mem. on
Choice of Law Issues (“Defs' Mem.”), Ex. G,
Press Release, “Six Charged in $40 Million Class Action
Fraud, ” Issued by the United States Attorney for the
Eastern District of Pennsylvania, Nov. 20, 2008 (“Press
October 29, 2009, the law firm of Green Jacobsen, former
class counsel, filed a Supplemental Complaint with the MDL
Court on behalf of the NationsBank class. Supp. Compl.,
In re BankAmerica Corp. Securities Litig., MDL No.
1264 (E.D. Mo. Oct. 29, 2009), Doc. No. 723. The Supplemental
Complaint asserted against Heffler claims of breach of
fiduciary duty, negligent misrepresentation, accountant
malpractice, conversion, and money had and received.
Id. On May 3, 2010, more than six months after the
filing of the Supplemental Complaint, Heffler moved to
dismiss or strike the Supplemental Complaint because,
inter alia, the NationsBank class did not first
obtain leave of court as required by Federal Rule of Civil
Procedure 15(d). [Heffler's] Mot. to Strike the Supp.
Compl., or in the Alternative, to Dismiss the Supp. Compl.,
In re BankAmerica Corp. Securities Litig., MDL No.
1264 (E.D. Mo. May 3, 2010), Doc. No. 745. In response, on
May 13, 2010, Green Jacobsen moved for leave to file the
Supplemental Complaint. Mot. for Leave to File Supp. Compl.,
In re BankAmerica Corp. Securities Litig., MDL No.
1264 (E.D. Mo. May 13, 2010), Doc. No. 749 & 750. The MDL
Court ultimately granted Heffler's Motion to Dismiss and
denied Green Jacobsen's Motion for leave to file the
Supplemental Complaint by Order dated November 5, 2010, and
dismissed the Supplemental Complaint, concluding that
although the allegations in the Supplemental Complaint were
“connected to” the underlying MDL, the asserted
claims were “not similar enough in substance to the
claims in the underlying action to justify supplemental
pleading.” Mem. and Order, In re BankAmerica Corp.
Securities Litig., MDL No. 1264 (E.D. Mo. Nov. 5, 2010),
Doc. No. 763.
February 8, 2011, former plaintiff David Oetting filed this
lawsuit in the Eastern District of Missouri on behalf of a
putative class of NationsBank settlement claimants.
Complaint, Oetting v. Heffler, Radetich, & Saitta,
LLP, Civil Action No. 11-253 (E.D. Mo. Feb. 8, 2011).
The Complaint named Heffler as the sole defendant, and
included claims for breach of fiduciary duty, accountant
malpractice, and respondeat superior liability based
on the conduct of its former employee, Penta. Id. By
Order dated July 25, 2011, Judge Jackson dismissed the
respondeat superior claim on the ground that it
failed as a matter of Missouri tort law because Penta acted
outside of the scope of his employment. Memorandum and Order,
Oetting v. Heffler, Radetich, & Saitta, LLP,
Civil Action No. 11-253 (E.D. Mo. July 25, 2011), Doc. Nos.
19, 20. By separate Order dated July 25, 2011, Judge Jackson
transferred the case to this Court on Heffler's motion
pursuant to 28 U.S.C. § 1404(a) for the convenience of
the parties and witnesses. Order, Oetting v. Heffler,
Radetich, & Saitta, LLP, Civil Action No. 11-253
(E.D. Mo. July 25, 2011), Doc. Nos. 18, 21.
the transfer to this Court, on August 16, 2011, plaintiff
David Oetting filed the First Amended Complaint. Heffler
filed an Answer to the First Amended Complaint on September
13, 2011. By Order dated August 21, 2015, the Court granted
plaintiff leave to file and serve a Second Amended Complaint.
On September 3, 2015, David Oetting filed a Second Amended
and Restated Complaint, adding James Oetting as plaintiff.
The Second Amended Complaint includes five separate claims
for relief: a claim of breach of fiduciary duty against
Heffler (Count I), a claim of “accountant
malpractice” against Heffler (Count II), claims of
fraud against Bancroft and Sincavage (Count III), a claim of
negligence against Radetich (“Count VI” [sic]),
and claims of negligence against “all defendants”
(“Count VII” [sic]). The Second Amended Complaint
asserts these claims on behalf of individual plaintiffs David
Oetting and James Oetting, and on behalf of “a class of
all persons similarly situated, who are defined as all
members of the NationsBank classes (a) who were entitled to
receive a distribution from the [MDL] Action in 2004; (b) who
have received a distribution at any time from the [MDL]
Action and [sic] (c) who are yet to receive a distribution
from the [MDL] action.”
October 1, 2015, Heffler filed a Motion to Dismiss. The
individual defendants also filed a separate Motion to Dismiss
on that date. By Memorandum and Order dated December 15,
2015, the Court granted in part and denied in part
defendants' Motions to Dismiss. The Court concluded that
David Oetting lacked Article III standing to pursue claims in
this case because he did not cash the checks issued by the
MDL settlement fund, and the Court dismissed David Oetting
from the case with prejudice. However, the Court concluded
that James Oetting was properly added as a plaintiff by the
Second Amended Complaint and that James Oetting had Article
III standing. The Court denied the Motions to Dismiss in all
January 5, 2016, remaining plaintiff James Oetting filed a
Motion for Class Certification. Following limited discovery,
defendants filed a Response in Opposition to the Motion on
February 29, 2016. The Court ultimately certified the
All individuals and entities who are or were members of one
of the NationsBank classes in In re BankAmerica
Securities Litigation, Multidistrict Litigation Number
1264, in the United States District Court for the Eastern
District of Missouri, who (1) filed valid claims for
distribution(s) from the NationsBank settlement fund, (2)
received payment on their claims from the NationsBank
settlement fund, and (3) are eligible for any additional
distributions from the NationsBank settlement fund.
to the Third Amended Scheduling Order dated November 3, 2016,
motions for summary judgment and Daubert motions
were scheduled to be filed on or before January 13, 2017. On
December 2, 2016, counsel for defendants submitted to the
Court a letter to request a scheduling conference for the
purpose of addressing an “as-yet undetermined choice of
law issue.” See Doc. No. 104. The Court held a
scheduling conference on December 14, 2016, and, recognizing
that the parties had not previously raised choice of law
issues, ordered the parties to brief all such issues.
Following an initial round of briefing, on June 1, 2017, the
Court ordered the parties to file supplemental memoranda of
law addressing (1) the applicable statute of limitations, (2)
the applicability of equitable tolling, and (3) the
applicability of the Missouri and Pennsylvania savings
statutes, and the parties did so. In addition, the Court held
a telephone conference on August 4, 2017, at which counsel
for the parties agreed that all choice of law issues,
including the applicable statute of limitations, had been
fully briefed and were ripe for decision. For the reasons set
forth below, the Court concludes that the Pennsylvania
statute of limitations, the Missouri savings statute, and
Missouri substantive law are applicable to this case.
Law of the Case
first argue that the “law of the case” doctrine
requires the Court to apply Missouri law to all aspects of
this case, because that state's law was used in a past
decision in this case. That doctrine “provides that a
previous holding in a case constitutes the law of the case
and precludes relitigation of the issue on remand and
subsequent appeal.” Walton v. City of
Berkeley, 223 S.W.3d 126, 128-29 (Mo. 2007) (citation
omitted). While this case was still in the Eastern District
of Missouri, in granting defendants' Motion to Dismiss
with respect to a respondeat superior claim, the
district court stated that “[t]he parties are in
agreement that Missouri law applies in this diversity
action.” Memorandum and Order, Oetting v. Heffler,
Radetich, & Saitta, LLP, Civil Action No. 11-253
(E.D. Mo. July 25, 2011), Doc. No. 18. Plaintiffs argue that
the court's statement is binding as the “law of the
Court rejects this argument. The doctrine of the law of the
case only applies to issues that were “actually decided
by the court.” Eckell v. Borbidge, 114 B.R.
63, 69 (E.D. Pa. 1990) (DuBois, J.) (citing Todd &
Co., Inc. v. SEC, 637 F.2d 154, 157 (3rd Cir. 1980)).
The Missouri district court did not actually decide that
Missouri law applied; it only stated that the parties were
“in agreement” on that issue. The Court therefore
declines to apply the law of the case doctrine.
Statute of Limitations
defendants have not formally challenged the timeliness of
plaintiff's claims, the parties seek a determination of
what state's statute of limitations applies to the claims
in this case. The Court concludes that under the Missouri
borrowing statute, the claims in this case accrued in
Pennsylvania, and therefore the Pennsylvania statute of
limitations applies to the case. The Court further concludes
that the Missouri savings statute is also applicable.
this case was filed in the Eastern District of Missouri and
transferred pursuant to 28 U.S.C. § 1404(a), this Court
must follow the law that would have been applied had it
remained in its original venue. Van Dusen v.
Barrack, 376 U.S. 612, 639 (1964). “A federal
court exercising diversity jurisdiction is required to apply
the law of the forum when ruling on statutes of
limitations.” Nettles v. Am. Tel. & Tel.
Co., 55 F.3d 1358, 1362 (8th Cir. 1995). Therefore,
acting as “a federal court sitting in diversity within
the State of Missouri, ” this Court is “required
to apply Missouri's statute of limitations to claims
brought before it.” Hopkins v. Kansas Teachers
Cmty. Credit Union, 265 F.R.D. 483, 489 (W.D. Mo. 2010)
(citing Rademeyer v. Farris, 284 F.3d 833, 836 (8th
statute of limitations framework includes a
“borrowing” statute, which requires that
“[w]henever a cause of action has been fully barred by
the laws of the state, territory or country in which it
originated, said bar shall be a complete defense to any
action thereon, brought in any of the courts of this
state.” Mo. Rev. Stat. § 516.190. “The term
‘originated, ' as used in the borrowing statute, is
equivalent to the term ‘accrued.'”
Ferrellgas, Inc. v. Edward A. Smith, P.C., 190
S.W.3d 615, 620 (Mo.Ct.App. W.D. 2006) (citing Thompson
by Thompson v. Crawford, 833 S.W.2d 868, 871 (Mo.
1992)). A cause of action accrues “where as well as
when the final significant event that is essential to a
suable claim occurs.” Penalosa Co-op. Exch. v. A.S.
Polonyi Co., 754 F.Supp. 722, 733 (W.D. Mo. 1991)
(citing Mack Trucks, Inc. v. Bendix-Westinghouse Auto.
Air Brake Co., 372 F.2d 18, 20 (3rd Cir. 1966)). For
most claims, a cause of action accrues when and “where
the fact of damage became ‘capable of
ascertainment.'” Ferrellgas, 190 S.W.3d at
621. “Damage is ascertainable when the fact of damage
can be discovered or made known, not when the plaintiff
actually discovers injury or wrongful conduct.”
Klemme v. Best, 941 S.W.2d 493, 497 (Mo. 1997).
Indeed, “[a] plaintiff's ignorance of his cause of
action will not prevent the statute from running.”
State ex rel. Gasconade Cty. v. Jost, 291 S.W.3d
800, 804 (Mo.Ct.App. 2009).
determination of where and when a cause of action accrues is
an objective test decided as a matter of law by the court.
Anderson v. Griffin, Dysart, Taylor, Penner & Lay,
P.C., 684 S.W.2d 858, 861 (Mo.Ct.App. 1984).
only argument with respect to the Missouri borrowing
statute is that the injuries alleged in this case have not
yet accrued, because “no class member would have even
known of the damages the class sustained at the time of
discovery of the theft, or anytime thereafter. Even more so,
virtually all of the class members do not even know to this
day that the class was damaged.” Pl.'s Supp. Mem.
of Law (“Pl.'s Supp. Mem.”) at 6-7.
Plaintiff's argument ignores the relevant standard: a
cause of action accrues, under the borrowing statute,
“when the fact of damage can be discovered or made
known, not when the plaintiff actually discovers injury or
wrongful conduct, ” Klemme, 941 S.W.2d at 497,
and “plaintiff's ignorance of his cause of action
will not prevent the statute from running, ”
Jost, 291 S.W.3d at 804. The Court thus rejects
primarily argue that each class member's injuries
“accrued” in their individual home states and
countries. Defs' Mem. at 6. In interpreting Missouri law,
the United States Court of Appeals for the Eighth Circuit
held that “for cases involving a purely economic
injury, as opposed to a physical accident with economic
consequences, a cause of action originates where the
plaintiff is financially damaged.” Great Plains
Trust Co. v. Union Pac. R. Co., 492 F.3d 986, 993 (8th
Cir. 2007). Because the class members suffered a purely
economic injury, defendants argue, Great Plains
requires the application of the statute of limitation of each
class member's home state.
response, plaintiff argues that Great Plains is
“inapposite” because the harm in that case, the
defendant's failure to pay, is not at issue in this case.
Pl.'s Conflict of Laws Mem. (“Pl.'s
Mem.”) at 17. The Court agrees that Great
Plains is distinguishable. The defendant in Great
Plains was obligated to make certain interest payments
to plaintiff, and the injury giving rise to the lawsuit was
the defendant's failure to make one such payment. The
court reasoned that the corporate plaintiff “could only
have ascertained [the purely economic injury] at its place of
business, ” in its home state, because that is where it
“felt the cash flow crunch.” Great
Plains, 492 F.3d at 993 (internal quotations omitted).
In other words, since the plaintiff expected payments, the
injury was ascertainable as soon as the plaintiff discovered
that no payment had been made. In contrast, in this case, the
class members could not have ascertained their injuries when
they received distributions, because they had no reason to
suspect that their distributions were fraudulently reduced.
argue in the alternative that that Pennsylvania's statute
of limitations applies because the harm in this case was
first capable of ascertainment when and where the Penta
indictment was announced. That announcement was made by way
of a press release from the United States Attorney for the
Eastern District of Pennsylvania, based in Philadelphia, on
November 20, 2008. In support of this argument, defendants
rely upon Ferrellgas, in which a Missouri-based
company was involved in a lawsuit filed in California. 190
S.W.3d at 617. The company lost the lawsuit, and filed a
malpractice suit in Missouri state court against the law firm
that had represented it in the California litigation.
Id. On appeal, the Missouri appellate court,
applying the Missouri borrowing statute, concluded that
California's statute of limitations applied to the case.
Id. at 622. Specifically, the court held that the
California verdict, when it was announced, became “a
matter of public record, which is immediately ‘capable
of ascertainment.'” Id. Since that verdict
was announced in California, the court ruled that the injury
accrued in California. Id. The court explicitly
reasoned that it did not matter “where the plaintiffs
were physically located” when they discovered the
injury. Id. at 621.
the reasoning in Ferrellgas, this Court concludes
that the class members' injuries became capable of
ascertainment in Pennsylvania, where the Penta indictment was
publicly announced. The press release announcing the
indictment plainly stated that the indicted individuals had
“submitted numerous false and fraudulent claims in
three major class action lawsuits[, including] In Re:
BankAmerica Corporation Securities Litigation.” Penta
Indictment. By way of a simple internet search for the term
“BankAmerica, ” members of the NationsBank class
could have easily discovered the facts giving rise to their
injury. Therefore, at the time and place that the press
release was made public-November 20, 2008, in Philadelphia,
Pennsylvania-the injury became ascertainable, because
“the fact of damage [could have been]