Partington v. Garner , 352 F.3d 884 ( 2003 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
ALLEN E. SMITH; ELVIS H. HESTER, 
JR.; LARRY R. WIGAL; FRANCIS
LENTZ; LESLIE S. HOLLOWELL;
THOMAS H. ADAMS; SHERMAN H.
BLANKENSHIP; ALICE S. CARR; DAVID
L. ARMBRISTER; JACQUELINE M.
ARMBRISTER; DRAPER VALLEY
BAPTIST CHURCH; WESTMINSTER
PRESBYTERIAN CHURCH
CORPORATION OF GREENSBORO, NORTH
CAROLINA; LARRY W. ARMBRISTER;
CAROLYN Q. ARMBRISTER,
individually and on behalf of all
others similarly situated,
Appellants,
DAVID PARTINGTON, Reverend,  No. 02-1535
individually and for the benefit of
the David Partington Rabbi Trust of
which he is beneficiary, and on
behalf of all others similarly
situated,
Plaintiff-Appellant,
v.
JOHN R. PENNINGTON; JAMES H.
PERRY; PATRICIA B. LANE; DAVID R.
TANNER; BRIAN KRAIDER; TOM
MASCHEL; DONALD G. LONG; JEFFREY
PAINE,
Defendants-Appellees,
and

2 PARTINGTON v. PENNINGTON
ROBERT H. GARNER; KEN JOHNSON; 
U.S. CAPITAL FUNDING,
INCORPORATED; FIRST CAPITAL
SERVICES, INCORPORATED; FIRST
CAPITAL CORPORATION; THE
CHARTERHOUSE GROUP, LTD.,

Defendants.
CARL F. SCHOEPPL,
Party in Interest.

Appeal from the United States District Court
for the Western District of Virginia, at Roanoke.
James C. Turk, Senior District Judge.
(CA-00-100)
Argued: October 31, 2003
Decided: December 18, 2003
Before LUTTIG and SHEDD, Circuit Judges, and
James H. MICHAEL, JR., Senior United States District Judge
for the Western District of Virginia, sitting by designation.
Affirmed by published opinion. Judge Luttig wrote the opinion, in
which Judge Shedd and Senior Judge Michael joined.
COUNSEL
ARGUED: John Francis Bloss, Sr., CLARK, BLOSS & WALL,
P.L.L.C., Greensboro, North Carolina, for Appellants. Gary Michael
Bowman, Roanoke, Virginia, for Appellees. ON BRIEF: David M.
Clark, CLARK, BLOSS & WALL, P.L.L.C., Greensboro, North Car-
olina, for Appellants.
PARTINGTON v. PENNINGTON 3
OPINION
LUTTIG, Circuit Judge:
Plaintiff-appellant, the Reverend David Partington, sued defen-
dants, including The Charterhouse Group, Ltd. ("Charterhouse"), and
defendants-appellees ("appellees") for selling unregistered securities
in violation of section 12(1) of the Securities Act of 1933, codified
at 15 U.S.C. § 77l (2000). Partington sued individually and for the
benefit of the Reverend David Partington Rabbi Trust (the "Partington
Trust"), and also sought to represent a class of similarly situated indi-
viduals. After almost two years of litigation, the district court granted
summary judgment against Partington because he lacked standing
under section 77l, and also denied class certification. Appellants, who
include other ministers, lay persons, and churches, moved for permis-
sive intervention, filing in several groups both before and after the
dismissal of Partington’s claims. The district court denied appellants’
motions, concluding that the statute of limitations had run on their
claims. For the reasons stated below, we affirm the judgment of the
district court in all respects.
I.
Partington, a Presbyterian minister, wished to save for his retire-
ment. Consequently, he entered into a deferred compensation plan
with his church, Shallowford Presbyterian Church ("Shallowford"),
pursuant to which, as a general matter, Shallowford agreed to fund a
rabbi trust1 for Partington by diverting a portion of his salary into the
trust, and to direct the trust to pay benefits to Partington or his benefi-
ciaries upon his retirement or death. Shallowford, in turn, entered into
a grantor trust agreement (the Partington Trust) with Charterhouse,
which provided trustee services for rabbi trusts. In this agreement,
1
Rabbi trusts are arrangements "approved by the I.R.S. in 1980 to
allow employers to create trusts that would fund retirement plans for
their employees without the funds in the trust being taxable to those
employees in the years in which the contributors made those contribu-
tions. . . . These trusts were set up so that the employee had no economic
benefit from the funds and was not in constructive receipt of the funds."
J.A. 498 n.1.
4 PARTINGTON v. PENNINGTON
Charterhouse agreed to act as trustee over the funds that Shallowford
contributed to the trust, in order to provide Shallowford "with a
source of funds to assist it in the meeting of its liabilities" to Parting-
ton. J.A. 499.
Partington claims that, in 1999, one R. Ray Levy approached
Charterhouse and induced it to purchase viatical insurance contracts2
as investments for the trusts Charterhouse administered, promising
above-market returns. Clients of Charterhouse apparently invested
more than one million dollars in these viatical contracts; it invested
more than $34,000 in funds from the Partington trust. The viatical
contracts were purchased from Financial Federated Title & Trust
("FinFed") using a broker controlled by Levy. In late 1999, Partington
received notice that the entire investment from his trust in the viatical
contracts was lost. All in all, of the 115 million dollars nationwide
that was given to FinFed for the purpose of purchasing viaticals, only
about six million dollars was actually so used.
Allegedly, Levy also persuaded Charterhouse to advise its clients
to purchase senior notes from defendant U.S. Capital Funding, Inc.
("U.S. Capital"), a company Levy controlled, which notes purported
to fund U.S. Capital’s loans to well-known companies. Partington
claims that Charterhouse used over $52,000 in funds from the Part-
ington trust to purchase such a note from U.S. Capital, and that
Charterhouse defendants persuaded numerous other ministers to
invest in these notes. He asserts that members of his proposed class
purchased over seven million dollars of these notes. U.S. Capital is
now in bankruptcy, and has refused Partington’s requests for payment
on the note. Partington claims the investments made for the benefit
of the Partington Trust all were made after consultation with and
direction from him, without any input from his church.
Subsequently, Partington moved his ministry to Westminster Pres-
byterian Church ("Westminster"). Shallowford assigned its rights in
the trust to Westminster; as part of that agreement, Westminster,
unsurprisingly, replaced Charterhouse with Centura Bank as Trustee.
2
"Viatical insurance contracts are made when a terminally ill person
(the "viator") agrees to assign irrevocably the benefits of his life insur-
ance policy to a third party" for a discounted amount. J.A. 499.
PARTINGTON v. PENNINGTON 5
3
On February 20, 2000, Partington filed suit against defendants and
appellees, which included Charterhouse, U.S. Capital, and other enti-
ties, as well as several individuals Partington labels "Charterhouse
agents."4 After an extensive procedural history, the district court
finally granted summary judgment against Partington on February 15,
2002, renewing, on its own motion, earlier-filed motions to dismiss,
and reinterpreting them as motions for summary judgment. The court
concluded that Partington was not the legal beneficiary of the Parting-
ton Trust, and thus could not be considered the "person purchasing"
the alleged securities, as is required to maintain his federal securities
claim. The court also denied class certification, primarily because
Partington’s failure to state a claim meant he could not adequately
represent anyone who did. Given its conclusion as to the only federal
claim in the case, the court dismissed Partington’s state law claims for
lack of jurisdiction. Partington moved for reconsideration of this order
on March 18, 2002, but that motion was denied.
Additional parties moved for permissive intervention on four dif-
ferent occasions over the course of the litigation, in each case seeking
to intervene individually and on behalf of all others similarly situated.
Two groups of persons sought intervention prior to dismissal of the
case, but the court did not act on their motions before dismissal. After
the case was dismissed and reconsideration denied, two other groups
of persons and churches filed motions for permissive intervention.
The district court held a hearing and, on May 14, 2002, denied all
motions for intervention. The court reasoned that appellants’ claims
were not entitled to equitable tolling because appellants were not
within the class Partington was seeking to have certified over the
course of the litigation, and thus the one-year statute of limitations
had run on all of appellants’ claims. Along with appellants, Partington
appeals from the district court’s orders granting summary judgment
and denying class certification, denying reconsideration, and denying
the motions for intervention.
3
Over the course of the litigation, default judgment was entered against
several defendants, including Charterhouse. In addition, other defendants
have been dismissed from the case during the course of this appeal.
4
As explained by the district court, Levy was, "in typical law school
fashion[,] . . . the obvious but judgment-proof and absent defendant."
J.A. 499.
6 PARTINGTON v. PENNINGTON
II.
Partington first claims that the district court erred in granting sum-
mary judgment against him on the basis that he lacked standing to sue
for the alleged sales of unregistered securities. Reviewing this deter-
mination de novo and construing the evidence in the light most favor-
able to Partington, see Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
255 (1986), we conclude that the district court’s decision was correct.
Accordingly, we hold that Partington lacks standing under section
77l, both in his individual capacity and for the benefit of the Parting-
ton Trust, to recover against appellees.
A.
Section 77l provides, in relevant part, that "[a]ny person who . . .
offers or sells a security in violation of section 77e of this title . . .
shall be liable . . . to the person purchasing such security from him
. . . ." (emphasis added). As did the district court, we will assume,
without deciding, that the notes and viaticals were securities for the
purpose of section 77l. Appellees do not contest that these securities
were sold without the registration required by section 77e. Neverthe-
less, under the plain language of section 77l, Partington cannot
recover unless he is a "person purchasing such securit[ies]" as defined
in this provision.
There is no allegation that Partington himself actually purchased
these securities. To the contrary, Charterhouse, as trustee, purchased
the viatical contracts and the note for the benefit of the Partington
Trust. Instead, Partington’s theory below was that he was the benefi-
ciary of the Partington Trust, and since funds from that trust were
used to purchase the securities for the benefit of that trust, he should
be considered a "person purchasing" those securities. The district
court, however, concluded that, even assuming that an equitable bene-
ficiary can be a purchaser for the purpose of section 77l, Partington
was not the trust beneficiary "in a legal sense," J.A. 502 — a conclu-
sion Partington deems "hypertechnical." Opening Br. of Appellant at
20.
We recognize that other courts have, with respect to section 10(b)
of the Securities Exchange Act of 1934 and S.E.C. Rule 10b-5,
PARTINGTON v. PENNINGTON 7
accorded a flexible construction to the determination of who is a pur-
chaser or seller to avoid "taking a technical, unrealistic view of what
happened in a case." Grubb v. Federal Deposit Ins. Corp., 868 F.2d
1151, 1162 (10th Cir. 1989); see also Norris v. Wirtz, 719 F.2d 256,
261 (7th Cir. 1983) (holding that beneficiary of trust from which
executors sold securities had standing under section 10(b) and rule
10b-5).5 We need not decide, however, whether trust beneficiaries can
be "person[s] purchasing" under section 77l, because the district court
correctly concluded that, even if this were true, Partington was not a
beneficiary of the Partington trust.
In reaching this conclusion, we look to the terms of the original
trust agreement, which is the version in place at the time of the rele-
vant purchases. The trust agreement is "by and between" Shallowford
and Charterhouse alone, and its stated purpose is to provide Shallow-
ford with "a source of funds to assist it in meeting its obligations" to
Partington. J.A. 428. And most importantly, the trust agreement
5
The precise relevance of this and other rule 10b-5 cases cited by Part-
ington in arguing for a flexible definition of "person purchasing" in sec-
tion 77l is unclear. The statutory language for rule 10b-5 is relatively
broad — "prohibiting fraudulent or manipulative conduct ‘in connection
with the purchase or sale of any security,’" 17 C.F.R. § 240.10b-5 (2003)
(emphasis added) — and a purchaser/seller requirement has been judi-
cially imposed. See Blue Chip Stamps v. Manor Drug Stores, 421 U.S.
723 (1975) (adopting the rule of Birnbaum v. Newport Steel Corp., 193
F.2d 461 (2d Cir. 1952), and holding that private damages actions under
rule 10b-5 are confined to actual purchasers or sellers of securities).
Given this, it is understandable why courts dealing with rule 10b-5 cases
might occasionally employ a definition of purchaser which is broader
than its plain meaning to maintain consistency with the broader statutory
terminology. As to section 77l, however, the requirement that a plaintiff
be a "person purchasing" the security is itself imposed by statute, and we
have significantly less reason to go beyond the plain meaning of that
phrase. In this respect, we take instruction from Pinter v. Dahl, 486 U.S.
622 (1988), in which the Supreme Court stated that "[t]he broad remedial
goals of the Securities Act are insufficient justification for interpreting a
specific provision more broadly than its language and the statutory
scheme reasonably permit. We must assume that Congress meant what
it said." Id. at 653 (rejecting an overly-broad definition of "seller" in sec-
tion 77l) (internal quotation marks and citations omitted).
8 PARTINGTON v. PENNINGTON
explicitly disavows any beneficial interest in the trust by Partington.
The trust agreement specifies that "Plan participants [i.e., Partington]
and their beneficiaries shall have no preferred claim on, or any benefi-
cial ownership interest in, any assets of the Trust." J.A. 428 ¶ 1(d)
(emphasis added).6 If that were not clear enough, the agreement goes
on to define the rights Partington retains under both the trust agree-
ment and the deferred compensation plan as follows: "Any rights cre-
ated under the Plan(s) and this Trust Agreement shall be mere
unsecured contractual rights of Plan participants [i.e., Partington]
against the Congregation [i.e., Shallowford]." Id. (emphasis added).
That the trust proceeds were to be paid directly to Partington rather
than to Shallowford appears to be, in light of the above, no more than
a matter of expediency, and does not enlarge Partington’s rights
beyond these limitations.
B.
Partington dismisses these trust provisions as mere "legal disclaim-
ers," Opening Br. of Appellant at 25, without appreciating that they
disclaim his status as a beneficiary of this trust. That said, it is unsur-
prising that Partington has apparently retreated from the position he
took below, contending at oral argument, for example, that while
Westminster (as successor to Shallowford) was the "de jure benefi-
ciary" of the Partington Trust, he was the trust’s "de facto benefi-
ciary," and thus he should still be considered a "person purchasing."
To justify this label, he contends that it was his funds that were used
to purchase the investments, it was he who made the decisions to
invest in the viaticals and note, and it is he alone that feels the loss
of assets in the Partington Trust.
Even when viewed through this lens, however, Partington is not a
"person purchasing." We first note that at the time of the purchases,
6
Whether by mistake or otherwise, Partington erroneously claims that
the district court in fact relied on the revised rabbi trust agreement, which
also contains this language, rather than the language of the original
agreement, which he claims does not. But in this respect, the two agree-
ments are identical in terms, if not in structure, and the paragraph cited
by the district court (¶ 1(d)) only contains this language in the original
agreement (the disclaimer is in ¶ 1(e) of the revised version).
PARTINGTON v. PENNINGTON 9
the money used to make these investments was not Partington’s, but
instead belonged to the trust and was subject in its entirety to the
claims of Shallowford’s creditors. But to the extent the factors Part-
ington mentions are relevant at all to whether he is a "person purchas-
ing," the dominant one must be the second — Partington’s assertion
that he made the relevant investment decisions.
We conclude that Partington did not, however, actually make these
decisions because he had no control over trust investments. The trust
agreement specifies, under the heading "Investment Authority," that
"[a]ll rights associated with assets of the Trust shall be exercised by
Trustee or the person designated by Trustee, and shall in no event be
exercisable by or rest with Plan participants." J.A. 430 ¶ 5. Parting-
ton’s lack of legal authority in this regard is important because,
whether we label him a de facto beneficiary (his terms) or simply a
plan participant (the trust agreement’s terms), Partington still must be
a "person purchasing" under section 77l in order to prevail. Although
the lack of investment authority may not be dispositive in the determi-
nation of who is a "person purchasing," we must conclude that Part-
ington, a person who did not actually make the relevant purchases,
who did not own the funds used for the purchases, who was not a ben-
eficiary of the trust for which the purchases were made, and who
lacked any authority to control the purchasing decisions, is not a "per-
son purchasing" under section 77l. That in this case Charterhouse
chose, in the exercise of its investment authority, to consult Partington
on these decisions and follow his direction, does not alter our conclu-
sion. Rather, and as the district court concluded, the actual "person
purchasing" for the transactions from which Partington alleges injury
is likely Centura Bank (as successor trustee to Charterhouse) or West-
minster (as successor beneficiary to Shallowford).
As might be expected, the cases cited by Partington lend no support
to his position, and at least one case militates directly against it. For
example, Partington relies on the Seventh Circuit’s decision in Norris,
a section 10(b) and rule 10b-5 case which involved a plaintiff who
was beneficiary of a testamentary residuary trust to be funded by the
assets remaining after the closing of her father’s estate. 719 F.2d at
257. Allegedly, the trustees had fraudulently induced the plaintiff to
authorize a particular securities transaction involving the sale of estate
assets to companies controlled by the trustees. Id. In holding that the
10 PARTINGTON v. PENNINGTON
plaintiff stated a cause of action under section 10(b) and rule 10b-5,
the court reasoned that "[b]ecause we believe plaintiff’s approval was
required under the will, plaintiff fits within the contours of the Birn-
baum rule" requiring a plaintiff bringing an action for securities fraud
under those provisions to be an actual purchaser or seller. Id. at 259.
(emphasis added). Thus, Norris turned on the very investment author-
ity that Partington lacks, and suggests only why Partington is not, in
his individual capacity, a "person purchasing."
C.
Partington has also failed to establish that he has standing to sue
for the benefit of the Partington Trust. The case cited by Partington
that is most favorable to him on this issue appears to be Brink v.
DaLesio, 667 F.2d 420 (4th Cir. 1981), which stated the "general
rule" that "a beneficiary or one suing on his behalf can maintain a suit
against the trustee to enforce the trust or to enjoin or obtain redress
for a breach of trust." Id. at 428. Even if a section 77l claim under
these circumstances can be construed as one to enforce the trust or
respecting a breach thereof, Brink would suggest that this claim
would lie, if at all, with Westminster, the equitable beneficiary, or one
suing on Westminster’s behalf. Partington has not demonstrated that
he has standing to assert such a claim absent the court’s acceptance
of Westminster’s ratification of his action. See infra at 27.
III.
We turn next to appellants’ argument that the district court erred
in denying their motions for permissive intervention because the court
concluded that appellants were not members of the class Partington
sought to certify, and thus their claims were not entitled to equitable
tolling. This assertion of error requires us to decide whether, and to
what extent, evidence outside of the complaint can be used to con-
strue a definition of a plaintiff’s asserted class that is more narrow
than what the complaint alone would dictate for the purposes of deter-
mining a party’s entitlement to tolling. We conclude that consider-
ation of such evidence is proper, and that under the facts here, the
district court did not err in adopting a more narrow definition of Part-
ington’s asserted class and, accordingly, denying the motions for
intervention.
PARTINGTON v. PENNINGTON 11
A.
In concluding that appellants were not members of the class Part-
ington sought to certify, the court first examined Partington’s com-
plaint, which defined a "class consist[ing] of persons "on behalf of
whom [Charterhouse] and/or its agents purchased viatical settlements
and/or [notes]." J.A. 25 ¶ 20, 630 (emphasis added). The court rea-
soned that the "on behalf of whom" language suggested "that the class
was to consist of trust beneficiaries, not direct purchasers." J.A. 630.
While conceding the uncertainty of this determination, the court
explained that its decision was clarified by the fact that "the Plaintiff’s
attorneys represented to the Court that the Plaintiff sought to represent
a class of ‘members of the clergy on behalf of whom Charterhouse
created and/or administered a so-called "rabbi trust."’" Id. (quoting
Plaintiff’s Memorandum in Support of Motion for Class Certifica-
tion). Thus, the court concluded, at least as of June of 2000 (the
month that motion was filed), "the [asserted] class consisted of
preachers whom the Plaintiff mistakenly thought were the legal bene-
ficiaries of the ‘rabbi trusts’ their churches had established." Id.
(emphasis added).
The court then added that "the parties proceed for two years on the
assumption that this was an action in which preachers" having a rela-
tionship to a rabbi trust "were the plaintiffs," not "churches and other
plaintiffs as well." J.A. 630. In light of these facts, the court con-
cluded that appellants were not members of the asserted class, and
thus their claims were not entitled to equitable tolling. Given that the
statute of limitations for appellants’ federal securities claims was one
year, the court concluded that those claims, even if once viable, were
now time-barred. While expressing "genuine sympathy" for the minis-
ters involved, the court denied permissive intervention.
B.
Typically, a decision to deny permissive intervention under Rule
24(b) "lies within the sound discretion of the trial court." Hill v. West-
ern Elec. Co., Inc., 672 F.2d 381, 386 (4th Cir. 1982). But the denial
of permissive intervention because a party’s claim was not entitled to
equitable tolling, and thus was barred by the statute of limitations, is
not necessarily the exercise of discretion. See American Pipe &
12 PARTINGTON v. PENNINGTON
Const. Co. v. Utah, 414 U.S. 538, 560 (1974) (holding that a district
court’s decision that attempted intervenors’ claims were not entitled
to tolling, and thus were absolutely barred by the statute of limita-
tions, was a conclusion of law). Instead, to the extent a challenge to
the denial of tolling "is not to the existence of certain facts, but
instead rests on whether those facts demonstrate a failure to bring a
timely claim, resolution [of this challenge] . . . turns on questions of
law which are reviewed de novo." Franks v. Ross, 313 F.3d 184, 192
(4th Cir. 2002) (internal quotation marks and alterations omitted).
Accordingly, even in the context of motions for permissive interven-
tion, "[w]e have plenary review of the district court’s choice and
interpretation of applicable tolling principles and its conclusion that
the facts [did not give] rise to a tolling of the statute of limitations."
Nelson v. County of Allegheny, 60 F.3d 1010, 1012 (3d Cir. 1995)
(internal quotation marks omitted). However, as to all circumstances
other than "where the relevant facts are undisputed and the district
court denied equitable tolling as a matter of law," we review the
denial of tolling below for abuse of discretion. Rouse v. Lee, 339 F.3d
238, 247 n.6, 248 (4th Cir. 2003) (en banc) (stating that abuse of dis-
cretion is our standard of review for tolling decisions "[i]n the non-
habeas context").
C.
In American Pipe, the Supreme Court held that, at least in certain
circumstances, "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 con-
tinue as a class action." 414 U.S. at 554 (emphasis added). Thus, even
though a plaintiff’s desired class has been denied certification, parties
who were putative members of that class may file timely motions for
intervention after that denial and be eligible to have the statute of lim-
itations tolled on their claims for the period between the initiation of
the original suit and the denial of class certification. See Crown, Cork
& Seal Co., Inc. v. Parker, 462 U.S. 345, 354 (1983). Although
American Pipe’s holding was limited to the denial of class certifica-
tion for failure to show "the class is so numerous that joinder of all
members is impracticable," 414 U.S. at 552-53, the Crown, Cork &
Seal court appears to have untethered this tolling rule from any neces-
sary connection to the reasons for denying certification. See 462 U.S.
PARTINGTON v. PENNINGTON 13
at 353-54 (applying American Pipe tolling rule without qualification
as to the grounds for denial of class certification). And of particular
relevance here, we have held that persons who were members of the
named plaintiff’s asserted class as to a certain type of claim were enti-
tled to tolling on claims of that type even when the named plaintiff
himself was not such a member. See Lilly v. Harris-Teeter Supermar-
ket, 720 F.2d 326, 334 & n.13 (4th Cir. 1983). We therefore see no
reason in this case to say that Partington’s lack of a viable federal
claim prevents those appellants who are members of his asserted
class, and who might have viable individual claims, from obtaining
the benefit of tolling. But those appellants first must have been mem-
bers of the class Partington sought to have certified. See In re Syntex
Corp. Securities Litigation, 95 F.3d 922, 936 (9th Cir. 1996) (denying
equitable tolling to the claims of plaintiffs who were not "asserted
class members," but instead "wanted to expand the class in order to
become class members").
Accordingly, the first question we must decide is whether the dis-
trict court correctly construed Partington’s asserted class to include
only ministers on behalf of whom Charterhouse created and/or admin-
istered rabbi trusts. As to this point, appellants argue that the district
court incorrectly defined the class more narrowly than the complaint
requires, implicitly assigning error to the district court’s use of the
narrow class definition asserted by Partington when moving for class
certification. Of course, we need not examine whether the district
court abused its discretion as to its factual conclusions about the argu-
ments made and positions taken by Partington after filing his com-
plaint until we decide whether we can look beyond the complaint at
all.
Admittedly, we usually look to the complaint to determine the
scope of a plaintiff’s asserted class for tolling purposes. See, e.g.,
Davis v. Bethlehem Steel Corp., 769 F.2d 210, 212 (4th Cir. 1985)
("It is, of course, in the Lane complaint where we search for notice
to Bethlehem and the Unions" sufficient to invoke American Pipe
tolling.). As for the complaint here, its class definition, which
included persons "on behalf of whom" Charterhouse and/or its agents
purchased the contracts or notes, would encompass those attempted
intervenors who were rabbi trust beneficiaries (e.g., churches like
Westminster who funded the trusts), and arguably those who were
14 PARTINGTON v. PENNINGTON
direct purchasers (e.g., ministers who purchased securities outside of
the rabbi trust context with the assistance or advice of Charterhouse
or its agents), depending perhaps on how the transactions were carried
out. Liberally construed, it might also include those who were rabbi
trust "plan participants" like Partington, and thus, at best, de facto
beneficiaries of any purchases by Charterhouse. So were we to rely
on the complaint alone, we would likely conclude that the district
court was at least partially in error in defining Partington’s asserted
class.
We are not, however, confined to examine only the complaint in
determining the scope of the class Partington sought to certify. The
scope of a plaintiff’s asserted class for tolling purposes is that class
for which there was "fair notice" as to both "the substantive claims"
and the "number and generic identities of the potential plaintiffs" that
might "participate in the judgment" if the plaintiff’s desired class was,
in fact, certified. Davis, 769 F.2d at 212. In performing this analysis,
we can consider evidence outside of the complaint that demonstrates
the extent of the class the plaintiff represented to the district court that
he desired to have certified — especially when the complaint itself is
unclear. See McCarthy v. Kleindienst, 562 F.2d 1269, 1274 (D.C. Cir.
1977) ("In determining [for tolling purposes] whether the function of
the statute of limitations has been served, it may be necessary to go
beyond the facts of the complaint . . . .").
Indeed, the Tenth Circuit has held that where plaintiffs move for
class certification by unambiguously asserting a class definition more
narrow than that required by their complaint, their asserted class for
tolling purposes is that more narrow definition. See Sawtell v. E.I. du
Pont de Nemours and Co., Inc., 22 F.3d 248, 254 (10th Cir. 1994).
In Sawtell, plaintiffs in Minnesota filed three separate class actions
involving product liability claims against du Pont. Although the origi-
nal complaints did not limit the class to consumers from any particu-
lar state, "when the [Minnesota] plaintiffs moved for class
certification a month later," they asked for a class of "those who
received the Proplast/Teflon Interpositional Implant in Minnesota"; at
that point, "the narrowness of the class definitions was clear." Id. at
253 (emphasis added). The court reasoned that Sawtell, who both
resided and had her implants installed in New Mexico, was outside
of the class the Minnesota plaintiffs sought to certify, and thus would
PARTINGTON v. PENNINGTON 15
not have been a party to the Minnesota suits "had the suit been per-
mitted to continue as a class action." Id.We believe that the Sawtell court employed the correct rule, and
conclude that when a plaintiff moves for class certification by assert-
ing an unambiguous definition of his desired class that is more narrow
than is arguably dictated by his complaint, his asserted class for toll-
ing purposes may be limited to that more narrow definition. It then
follows that for parties outside that asserted class, tolling will be
unavailable at least until such time as the plaintiff repudiates that defi-
nition of the class he seeks to have certified in a manner that provides
adequate notice that his class definition has changed.
D.
Applying this rule to the instant case, if the district court did not
abuse its discretion as to its conclusions about the arguments Parting-
ton made during his motion for class certification and the positions he
took thereafter, we believe that the district court would have properly
construed the scope of Partington’s asserted class, as of June 2000
through the end of the litigation, as being limited to ministers on
behalf of whom Charterhouse created and/or administered rabbi
trusts. However, before making that conclusion final, we must first
address appellants’ apparent challenge to the factual conclusions on
which that construction was based,7 and decide if any of those conclu-
sions were an abuse of discretion. We conclude that, in all meaningful
respects, they were not.
While Partington’s memorandum in support of his motion for class
certification is not in our record, the district court was undoubtedly
correct in its conclusion that Partington, in that memorandum,
7
Appellants do not explicitly challenge the district court’s factual con-
clusions as to the scope of the class Partington asserted when moving for
class certification and maintained throughout litigation, but in light of
their argument that there "was no logical reason" why the district court
would have construed the asserted class more narrowly than in the com-
plaint, and given appellants’ contention at oral arguments that the class
Partington sought to certify was not just limited to clergy, we will
assume appellants assign error to these conclusions.
16 PARTINGTON v. PENNINGTON
unequivocally defined his class so as to include only ministers on
behalf of whom Charterhouse created and/or administered rabbi trusts.8
There is more doubt, however, as to whether the district court’s con-
clusion that Partington maintained this definition for almost two years
thereafter was an abuse of discretion. In particular, the filing of the
first motion to intervene on July 27, 2001 (which was signed by Part-
ington’s attorneys, though at the time not in their capacity as such)
arguably repudiated that narrow class definition, requesting, as it did,
intervention by persons who had no connection to rabbi trusts, both
in their individual capacities and as class representatives.
We need not answer the question as to whether the district court
was correct in its conclusion that Partington maintained the narrow
class definition for the entire time from the date the suit was filed
until the date the suit was dismissed, however, because even if the
district court were incorrect that Partington maintained the narrow
class definition for this entire two year period, it is clear that Parting-
ton did maintain this class for at least a period of one year before the
first motion to intervene was filed. Specifically, appellants have not
shown error in the district court’s implicit conclusion that Partington
maintained his narrow class definition at least from the time of his
memorandum in support of his motion for class certification filed in
June 2000, in which he limited the definition of his class to ministers
on behalf of whom Charterhouse created and/or administered rabbi
trusts, until at least the first motion for intervention was filed in July
2001, over one year later. Moreover, the transactions of which appel-
lants complain all occurred more than one year before the filing of the
first motion to intervene, a time longer than the statute of limitations
8
During the hearing on the motions for intervention, Mr. Macintyre,
counsel for one of defendants, stated that Partington’s memorandum in
support of his motion for class certification asserted that "each of the
class members is a member of the clergy on behalf of whom Charter-
house created and/or administered a so-called Rabbi Trust . . . ." J.A. 858
(emphasis added). Mr. Bloss, Partington’s counsel, initially argued that
this was language from a separate action, but after being shown the docu-
ment that Mr. Macintyre stated he had read from "verbatim," Mr. Bloss
said: "Thank you. I apologize, Your Honor. He’s correct. Way back
when, I think that’s what we thought was going on with everybody in the
class." J.A. 859 (emphasis added).
PARTINGTON v. PENNINGTON 17
for appellants’ section 77l claims. See 15 U.S.C. § 77m (2000)
(requiring an action "to enforce a liability created under section
77l(a)(1)" to be "brought within one year after the violation upon
which it is based"). Therefore, unless appellants were within Parting-
ton’s narrow class definition — a definition that Partington main-
tained between June 2000 and, at minimum, July 2001 — and thus
were entitled to equitable tolling of the statute of limitations on their
claims for at least that period, the statute of limitations governing
appellants’ section 77l causes of action against defendants and appel-
lees would have run.
We conclude that appellants were not within that narrow class defi-
nition. For one, appellants have not asserted that any of the natural
persons seeking intervention were members of the clergy having a
connection with a rabbi trust.9 As for the two churches that sought
intervention, Westminster and Draper Valley Baptist Church, we
merely note that churches are not "members of the clergy" despite the
close connection between the two, and conclude that there was not
adequate notice that these churches were within Partington’s asserted
class.10 As a result, any error by the district court as to the class defi-
nition maintained by Partington after that first motion for intervention
was harmless.
We therefore hold that because appellants were not members of the
class Partington sought to have certified for over a year prior to their
seeking intervention, their section 77l claims were not entitled to toll-
ing for that period and, consequently, were time-barred. Thus, the dis-
9
Allen E. Smith, who moved for intervention on July 27, 2001, would
appear to be one exception. He claimed to be the beneficiary of a rabbi
trust similar in all respects to Partington’s, and thus arguably was within
Partington’s asserted class. But appellants do not raise this issue, and if
Smith’s rabbi trust was structured the same way as Partington’s, Smith
also would have lacked standing.
10
This question is made slightly more complex as to Westminster by
appellees’ concession at oral argument that, "using our imaginations, we
could have" determined that churches, and in particular Westminster,
were the proper party plaintiffs. But simply because appellees could have
determined that Westminster may have had a viable claim against them
does not mean that Westminster was part of Partington’s asserted class.
18 PARTINGTON v. PENNINGTON
trict court’s denial of appellants’ motions for permissive intervention
was proper.
IV.
We have considered the other claims presented by Partington, and
have concluded that no extended discussion of them is necessary.
First, we hold that the district court did not abuse its discretion by
failing to accept ratification of Partington’s action by Westminster or
by failing to allow substitution by Westminster for Partington under
Federal Rule of Civil Procedure 17(a). Although on February 8, 2002,
Partington filed with the court a letter indicating that Westminster, the
putative real party in interest, had ratified his action, Partington has
not shown that he either formally or informally asked the court to
accept Westminster’s ratification of the action. Partington also never
filed a formal motion for substitution, although he did appear to infor-
mally request substitution during the May 13, 2002 hearing on the
motions to intervene. See J.A. 896-98. But even if he did sufficiently
request acceptance of ratification or substitution, given that these
requests were made (at the earliest) over sixteen months after an
objection that Charterhouse, not Partington, was the real party in
interest, see J.A. 647 (motion to dismiss hearing on September 19,
2000), and without any compelling reason why acceptance of ratifica-
tion or substitution was not requested earlier, we cannot say that the
district court abused its discretion in either regard.
Finally, because we agree with the district court that Partington
"d[id] not himself state a claim," we hold that the district did not
abuse its discretion in denying class certification on the grounds that
"[Partington’s] position would not then be typical of anyone (for
instance, direct purchasers) who did state a claim," J.A. 503, nor by
concluding that, even if the action were brought by the proper party
plaintiff, a class action would not be "superior to other available
methods for the fair and efficient adjudication of the controversy."
J.A. 504.
CONCLUSION
Although the predicaments alleged by Partington and appellants
are, if true, quite unfortunate, we must conclude that the district court
PARTINGTON v. PENNINGTON 19
did not commit reversible error. For the reasons stated herein, the
judgment of the district court is affirmed.
AFFIRMED