Jeffrey Norman v. David Elkin

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________
Nos. 19-2294 and 19-2410
_____________
JEFFREY M. NORMAN,
Appellant in 19-2410
v.
DAVID W. ELKIN; RICHARD M. SHORIN;
ELKIN GROUP INC.; U.S. MOBILCOM, INC.
David W. Elkin
Appellant in 19-2294
_______________
On Appeal from the United States District Court
for the District of Delaware
(D.C. No. 1-06-cv-0005)
District Judge: Hon. Leonard P. Stark
_______________
Submitted Under Third Circuit LAR 34.1(a)
March 23, 2020
Before: JORDAN, RESTREPO, and GREENBERG, Circuit
Judges
(Opinion Filed: May 29, 2020)
_______________
David A. Felice
Bailey & Glasser
2961 Centerville Road – Ste. 302
Wilmington, DE 19808
Counsel for Jeffrey M. Norman
David W. Elkin
805 Bryn Mawr Avenue
Newtown Square, PA 19073
Pro Se
_______________
OPINION OF THE COURT
_______________
JORDAN, Circuit Judge.
This appeal, the second we have been asked to decide in
this case, marks what is, one hopes, effectively the final chapter
of a bitter dispute spanning more than 14 years and involving
state and federal courts, two different district court judges, two
jury trials, and seemingly innumerable procedural and
dispositive motions, both pre- and post-trial. Pursuant to our
mandate in the parties’ prior appeal, Norman v. Elkin, 860 F.3d
111 (3d Cir. 2017) (“Norman V”), the District Court decided
that the statute of limitations for all of plaintiff Jeffrey M.
Norman’s claims, which include both contract and non-
contract causes of action, were tolled during the pendency of a
books and records request he initiated in the Delaware Court
of Chancery in November 2004 pursuant to § 220 of Title 8 of
2
the Delaware Code (the “§220 Action”). Notwithstanding
Norman’s entitlement to §220-based tolling, however, the
Court also concluded that all but a subset of his breach of
contract claim was time-barred because he knew or should
have known the facts giving rise to those claims for longer than
the applicable limitations period before filing the §220 Action.
Both Norman and defendants David W. Elkin, The Elkin
Group, Inc. (“TEG”), U.S. Mobilcomm, Inc. (“USM”), and
Richard Shorin (collectively, the “Elkin Defendants”) now
challenge multiple aspects of the District Court’s ruling.
With one exception, we hold that the parties’ assertions
of error by the District Court lack merit. The single exception
deals with Norman’s breach of contract claim based on events
that occurred in May, July, and August of 2001. We agree with
Norman that the District Court incorrectly determined that
those claims were untimely. Accordingly, we will reverse that
aspect of the District Court’s final judgment, affirm all others,
and remand to the District Court for the limited purpose of
entering a revised final judgment consistent with this decision.
I. BACKGROUND1
A. Factual Background
Norman and Elkin founded USM in the early 1990s for
the purpose of aggregating “Phase 1” 200 MHZ licenses issued
1
We focus our statement of the factual and procedural
background on those matters most pertinent to the parties’
present appeals. Additional information can be found in
Norman V, and the District Court’s numerous opinions
throughout this case’s extensive history. See Norman v. Elkin,
3
by the Federal Communications Commission (“FCC”).2 They
orally agreed that Elkin would hold 75% of USM’s equity and
Norman the other 25%. Consistent with that ownership
structure, they also agreed that, of the $1 million required to
capitalize USM, Elkin would contribute $750,000 and Norman
would contribute $250,000. Norman’s role in USM was to
acquire the initial licenses. After he successfully did so,
“Norman’s day-to-day involvement in USM ended[,]” and
“Elkin continued to manage USM’s affairs.” Norman VI, 338
F. Supp. 3d at 369.
In 1998, the FCC announced it would auction “Phase
II” licenses. Elkin registered USM as a bidder in one such
auction in which “USM won the rights to several Phase II
licenses[.]” Id. Elkin subsequently transferred USM’s rights
in the Phase II licenses to another company that he owned,
TEG. TEG’s involvement purportedly was necessary because
USM did not have sufficient funds on its own to participate in
No. CIV.A. 06-005-JJF, 2007 WL 2822798 (D. Del. Sept. 26,
2007) (“Norman I”); Norman v. Elkin, 726 F. Supp. 2d 464 (D.
Del. 2010) (“Norman II”); Norman v. Elkin, 849 F. Supp. 2d
418 (D. Del. 2012); Norman v. Elkin, No. CV 06-005-LPS,
2015 WL 4886049 (D. Del. Aug. 14, 2015); and Norman v.
Elkin, 338 F. Supp. 3d 361 (D. Del. 2018) (“Norman VI”).
2
“Phase I” licenses, which were distributed by lottery,
were the “first wave” of licenses that covered particular radio
frequencies in specified geographic areas. Norman V, 860 F.3d
at 116. The FCC subsequently issued “Phase II” licenses
“through a competitive auction.” Id. Some Phase II licenses
overlapped, but were not coterminous, with previously issued
Phase I licenses.
4
the auction and it was important to ensure that “a friendly
corporation acquired the licenses that overlapped with those
already owned by USM.” Norman V, 860 F.3d at 116. Norman
closely monitored the auction and emailed Elkin requesting
information on its outcome. Elkin did not respond. Id. Some
FCC notices relating to the auction listed USM as the winning
bidder of Phase II licenses, while others referred to TEG as the
owner of those same licenses. Id.
At some unknown time between 1995 and 2002, Elkin
caused USM to enter into a Shareholder Loan Agreement
(“SLA”) with him. Under the SLA, “USM agreed to treat any
amount Elkin contributed above his capital requirement as a
loan.” Norman VI, 338 F. Supp. 3d at 369. Elkin neither
informed Norman about the SLA nor sought his approval for
it, and purportedly lent USM in excess of $600,000 pursuant
thereto.
In 2000 and 2001, USM started selling off its licenses.
“Norman received federal income tax K-1 forms from USM
for the tax years 2000 and 2001 that declared USM had realized
a capital gain.” Id. at 370. “Those K-1 forms did not state what
had been sold, and they did not list any shareholder loans or
distributions. However, in a deposition, Norman admitted that
a capital gain, by definition ... has to be sale of a license[.]”
Norman V, 860 F.3d at 117 (quotations omitted and alterations
in original). In a series of distributions effectuated by Elkin
from 2000 to 2002, USM paid Elkin $615,026 from the
proceeds of the license sales. Norman received nothing.
5
After not hearing from Elkin “in ages,” (JA at 860,)3
Norman called him in the summer of 2002 (the “Summer 2002
Call”). Norman testified that Elkin was “a little bit evasive”
on the call, but admitted that licenses had been sold and that he
(Elkin) had taken a distribution. Norman V, 860 F.3d at 117.
When Norman inquired why he (Norman) had not received any
distributions, Elkin responded, “it wasn’t your turn.” Id.
Norman requested additional information, which Elkin never
provided.
Perhaps spurred by Elkin’s lack of cooperation, Norman
had his attorney send Elkin a letter in October 2002 (the
“October 2002 Letter”) requesting information regarding “the
sale or other disposition of any assets or stock of [USM] over
the past three (3) years, and the distribution or use of any
proceeds of any such sales or dispositions.” Id. (alteration in
original). Elkin responded by letter approximately two months
later on December 3, 2002 (the “December 2002 Letter”),
acknowledging that USM had sold the licenses “it owned,” but
the letter included agreements revealing TEG had sold certain
Phase II licenses. Id. “The letter also included a breakdown
of the uses of the proceeds, including repayment of what were
characterized as shareholder loans[.]” Id. In October 2003,
USM responded to requests for further information by
Norman’s attorney by sending him a letter (the “October 2003
Letter”) that included a copy of the SLA. Id.
3
As used herein, references to “JA” are to the parties
Joint Appendix filed in Norman V (case numbers 16-1924 and
16-2164), which, by Order dated February 28, 2020, we
permitted the parties to utilize in the present appeals.
6
B. Procedural Background
Based on the information he had obtained over the prior
two years, Norman filed the §220 Action on November 16,
2004, which was resolved in Norman’s favor on October 2,
2005. Approximately two months later, Norman filed this
lawsuit in the Delaware Court of Chancery, which the Elkin
Defendants removed to the District Court. In his complaint,
“Norman raised a wide variety of tort and contract claims
against [Defendants] including breach of contract, usurpation
of corporate opportunities, conversion, fraud, breach of
fiduciary duties, and unjust enrichment.” Norman V, 860 F.3d
at 118.
In May 2009, three of Norman’s claims – breach of
contract, fraud, and conversion – were tried to a jury. The jury
returned a verdict for him on all counts. Elkin moved for
judgment as a matter of law on the ground that Norman’s
claims were time-barred. The District Court largely agreed,
and held Norman’s claims were untimely except those based
on two breach-of-contract theories: that Elkin breached his oral
agreement with Norman regarding USM’s capitalization by
executing the SLA and by failing to make pro rata
distributions of the license sale proceeds.
After further motions by both Norman and Elkin, the
District Court held a second jury trial on Norman’s two
remaining claims. “The jury again found in Norman’s favor
and awarded him $1 in nominal damages based on Elkin’s
execution of the SLA and $73,180.17 in compensatory
damages for Elkin’s failure to make pro rata distributions.”
Norman VI, 338 F. Supp. 3d at 368. The amount of damages
awarded indicates that the jury considered a substantial portion
7
of the funds Elkin directed to himself between 2000 and 2002
to be repayments of loans he made to USM, rather than
distributions. Elkin again moved for judgment as a matter of
law, and again the District Court agreed. Most significantly,
the District Court held that the §220 Action did not toll the
statute of limitations for any of Norman’s claims, rendering all
of his claims untimely. The Court vacated the jury’s verdict
and entered final judgement in Elkin’s favor.
Both Norman and Elkin appealed. Ultimately, we
vacated the entry of judgment in Elkin’s favor, excepting the
fraud claim. We remanded the case to the District Court for
two purposes: “(1) for the Court to reinstate the jury verdict
and award of nominal damages for Norman’s SLA-based
breach of contract claim and (2) for the Court to determine
whether §220 tolling should apply to Norman’s claims, and, if
so, whether Norman’s remaining claims are timely.” 4 Id.
4
Surprisingly, Elkin asks us to overrule part of our
earlier mandate based on the District Court’s conclusion on
remand that Norman’s SLA-based breach of fiduciary claim,
premised on the same facts as his SLA-based breach of contract
claim, was time-barred. In making such a request, Elkin
ignores that he had a full and fair opportunity during the first
appeal to challenge the SLA-based breach of contract claim as
untimely, just as he did with the SLA-based breach of fiduciary
duty claim, but failed to do so. As we specifically noted in
Norman V, that failure created a “confounding” situation in
which “the statute of limitations might stand as a bar to the
[breach of fiduciary duty claim] but not the [breach of contract
claim].” Norman V, 860 F.3d at 128. The fact that the entirely
foreseeable disparity we identified in Norman V came to
fruition, a disparity that Elkin bears sole responsibility for,
8
On remand, the District Court, applying our guidance
from Norman V, concluded that the statute of limitations for
each of Norman’s claims was tolled during the pendency of the
§220 Action. The Court then proceeded to examine whether
Norman’s claims nevertheless were untimely by assessing
whether he had actual or inquiry notice of his claims within the
applicable limitations period – three years for his contract
claim and two years for his non-contract claims – before
initiating the §220 Action. Because two of the distributions
that Elkin made to himself occurred in 2002, the Court held
Norman’s breach of contract claim based on those distributions
was timely, as it was made within three years of Norman
bringing the §220 Action. For each of Norman’s other claims,
including breach of contract based on distributions that Elkin
made to himself in May, July, and August of 2001, the Court
held that Norman had at least inquiry notice of those claims
beyond the applicable limitations period, and thus dismissed
them as untimely. Accordingly, the District Court entered
judgment in Norman’s favor on his breach of contract claim
premised on distributions made in 2002 and, per our mandate,
his breach of contract claim based on the execution of the SLA,
but in Elkin’s favor on all other claims.
Both Norman and Elkin moved for reargument. At the
hearing on the motion, Elkin argued for the first time that
Norman was not entitled to tolling relating to the §220 Action
because he brought that action in bad faith. Elkin attempted to
introduce purported “evidence” of that bad faith, but the
District Court refused to consider that new evidence and denied
does not entitle him to any relief. We reject Elkin’s request to
revisit that, or any other, aspect of Norman V.
9
all motions for reargument. Both Norman and Elkin timely
appealed the final judgment.
II. DISCUSSION5
A. Elkin’s Appeal
1. Tolling based on the §220 Action
Elkin’s primary contention on appeal is that the District
Court erred in concluding that the §220 Action tolled the
5
This case was removed from the Delaware Court of
Chancery to the District Court under 28 U.S.C. § 1441, on the
basis of diversity jurisdiction, 28 U.S.C. § 1332(a). We have
jurisdiction pursuant to 28 U.S.C. § 1291. “We exercise
plenary review of an order granting or denying a motion for
judgment as a matter of law and apply the same standard as the
district court.” Lightning Lube, Inc. v. Witco Corp., 4 F.3d
1153,1166 (3d Cir. 1993) (citation omitted); cf. Lake v.
Arnold, 232 F.3d 360, 365 (3d Cir. 2000) (“[P]lenary review
extends to the District Court’s choice and interpretation of
applicable tolling principles and its conclusion that the facts
prevented a tolling of the statute of limitations.”). “[A]lthough
the court draws all reasonable and logical inferences in the
nonmovant’s favor, we must affirm an order granting judgment
as a matter of law if, upon review of the record, it is apparent
that the verdict is not supported by legally sufficient
evidence.” Lightning Lube, Inc., 4 F.3d at 1166. As to Elkin’s
sufficiency of the evidence arguments, we likewise “view[ ]
the evidence in the light most favorable to [Norman]” and will
affirm the District Court only if there “is insufficient evidence
from which a jury reasonably could find liability [against
10
statute of limitations for Norman’s claims. In support of that
position, he advances several arguments, each of which fails.
First, he makes an “order of operations” argument – that the
District Court improperly decided the issue of §220-based
tolling before determining if, and when, Norman had inquiry
notice of each of his claims. But the order in which the District
Court chose to address those discrete issues is irrelevant.6 It is
neither incorrect nor inherently inconsistent for a court to first
determine that the statute of limitations for a claim should be
tolled based on a successful §220 action but that the claim
nevertheless is untimely because the plaintiff had actual or
inquiry notice of his injury sufficiently in advance of that §220
action. To the extent the District Court utilized that approach
on remand, it did not err in doing so, even if it took what might
be a more circuitous route to resolution.
Second, Elkin says that Norman is not entitled to §220-
based tolling because of Norman’s “complete lack of inquiry”
Elkin].” Id. Finally, “[w]e review admissibility
determinations, and exclusion of evidence for an abuse of
discretion.” Quinn v. Consol. Freightways Corp. of Del., 283
F.3d 572, 576 (3d Cir. 2002).
6
In that regard, Elkin appears to have misunderstood
our instruction in Norman V for the District Court to determine
“in the first instance” when Norman had inquiry notice of his
claims. Norman V, 860 F.3d 127. The purpose of that
instruction was not to dictate the structure of the District
Court’s opinion on remand, but rather, as the Court properly
recognized, was to ensure that the District Court would be the
first tribunal to decide that fact-intensive issue.
11
into his potential claims before initiating the §220 Action.
(Elkin Opening Br. at 27.) Not only is this argument flatly
inconsistent with the record, including evidence of Norman’s
efforts to obtain information from Elkin following the Summer
2002 Call, but it is legally meritless. Elkin fails to cite a single
case, and we are aware of none, involving a successful §220
action in which a Delaware court has declined to grant tolling
because of a “lack of inquiry.” Nor are we aware of a case in
which a Delaware court has even so much as suggested that
such a concern is a relevant consideration in the §220-based
tolling analysis.7 That is hardly surprising, given that “pursuit
of an action under § 220 is regarded as strong evidence that [a]
plaintiff was aggressively asserting its claims at that time[.]”
Norman V, 860 F.3d at 124 (quotations omitted and first
alteration in original). The proper focus of a §220-based
tolling analysis is the nature of the underlying §220 action and
the results of it. While a plaintiff’s conduct before filing a §220
action may be significant for other purposes, such as
determining inquiry notice or laches, there is no support for
7
To the contrary, all of the cases to which Elkin directs
us discuss a plaintiff’s level of inquiry in distinct contexts, such
as determining whether they had inquiry notice of their claims
or if their claims were barred by laches. See, e.g., Technicorp
Int’l II, Inc. v. Johnston, No. CIV.A. 15084, 2000 WL 713750,
at *7 (Del. Ch. May 31, 2000) (holding plaintiff was not on
inquiry notice of claims because it was unable to discover
wrongdoing despite diligent investigation); Fike v. Ruger, 754
A.2d 254, 262 (Del. Ch. 1999), aff’d, 752 A.2d 112 (Del. 2000)
(claims barred by laches because plaintiff’s “lack of
knowledge was due to his failure to exercise his right to obtain
information,” including his right to inspect the company’s
books and records).
12
Elkin’s assertion that it has any direct bearing on a §220-based
tolling analysis itself.
Elkin’s third contention is that the District Court erred
by failing to determine on a claim-by-claim basis whether
§220-based tolling should apply. Although the District Court
did not specifically discuss each of Norman’s claims
individually, for all intents and purposes its analysis achieved
the same purpose. The Court correctly recognized that there
was a clear nexus between the §220 Action and each of
Norman’s claims in this case, which Elkin does not, and
cannot, credibly refute. The Court similarly was right to note
that Norman succeeded in the §220 Action. According to the
Stipulated Order and Final Judgment that resolved the §220
Action, Norman secured, inter alia, access to 14 distinct
categories of documents, each of which directly relates to at
least one of his claims in this case. Moreover, we have already
recognized that what Norman obtained in the §220 Action was
“valuable information” with respect to this litigation. Norman
V, 860 F.3d at 126. Thus, given Norman’s broad success in the
§220 Action and the obvious relationship between the §220
Action and all of the claims asserted here, there was no need
for the District Court to specifically address the factors
favoring tolling on a claim-by-claim basis. The same is true
regarding any discussion of the factors weighing against
tolling, such as whether the §220 Action was prosecuted in bad
faith or for some other improper purpose, such as stalling to
lengthen the limitations period. Those inquiries, which look at
the underlying §220 action as a whole, did not warrant a claim-
13
by-claim analysis. We therefore discern no error in the District
Court’s approach.8
Fourth, Elkin contends that §220-based tolling was
inappropriate for Norman’s claims because, several years
before Norman initiated the §220 Action, there had been
widely available public information regarding the license
transfers around which his claims revolve. To the extent that
Elkin is arguing that inquiry notice forecloses §220-based
tolling, we already rejected that argument in Norman V. As we
explained, the relevant issue is not whether Norman was on
inquiry notice at all, but whether, if he was on such notice, that
notice preceded his commencement of the §220 Action by
more than the applicable limitations period. To the extent that
Elkin is arguing that Norman was not entitled to §220-based
tolling because the §220 Action was not strictly necessary to
bring his claims in light of the public information available to
8
Elkin’s reliance on Orloff v. Shulman, No. CIV.A.
852-N, 2005 WL 3272355, at *10 (Del. Ch. Nov. 23, 2005) is
unavailing. In Orloff, the court declined to toll the limitations
period for certain claims, despite the fact that the plaintiffs had
partially succeeded in a related §220 action, because the
plaintiffs had at least inquiry notice of those claims for
approximately 20 years before initiating their §220 action. Far
from holding that a successful §220 action does not support
tolling the limitations period for all related claims, Orloff
merely stands for the proposition that §220-based tolling
cannot revive claims that already were untimely when the
underlying §220 action was commenced. That is in accord
with, and in no way contrary to, our holding in Norman V and
the District Court’s analysis on remand.
14
him, we largely rejected that argument too in Norman V. Not
only did we recognize that the inability to file suit without the
benefit of a §220 action is not a “prerequisite[]” to §220-based
tolling, we also noted that the §220 Action, at a minimum,
actually enhanced Norman’s claims through the “valuable
information” he secured. Norman V, 860 F.3d at 125–26. The
District Court properly followed our guidance in Norman V by
not treating Norman’s ability to bring suit absent the §220
Action as a condition precedent to §220-based tolling and
instead treating it as a factor to be balanced against other
relevant considerations.9 See id. (“Delaware law preserves a
court’s discretion to toll or not toll the limitations period on
claims that may be informed by the results of a § 220 action….
Courts in our Circuit should proceed with due regard for the
positive role that § 220 actions are meant to play under
Delaware law. That is especially true when, as in this case, a
Delaware court has exercised its judgment and concluded that
a § 220 action has merit.”).
We are also unpersuaded by Elkin’s final argument on
this issue, that both we, in Norman V, and the District Court, in
Norman VI, based our respective §220-based tolling
9
For the same reasons, we reject Elkin’s argument that
the District Court erred by not denying §220-based tolling
given the absence of bad faith conduct or fraudulent
concealment on his part. Again, while such considerations
may be relevant to the analysis, they are not prerequisites to
§220-based tolling. The District Court gave appropriate
weight to the absence of bad faith by Elkin and acted well
within its discretion in concluding that this absence did not
outweigh the considerations strongly supporting §220-based
tolling.
15
discussions on a misapprehension of the extent to which
Norman succeeded in the §220 Action. More specifically,
Elkin argues that (1) our statements that the Court of Chancery
“granted” Norman broad relief are not accurate, (2) that our
reliance on the Vice Chancellor’s comments made at the end
of the §220 Action were misplaced because they do not reflect
his more recent view on the merits of that proceeding, and (3)
that our decisions overstated the connection between the §220
Action and this litigation.
Elkin’s first contention in this regard rests on hyper-
technical and ultimately incorrect semantics. At the end of the
§220 Action, the Vice Chancellor stated that he was “inclined
to … grant[] the 220 relief in pretty broad form[,]” Norman v.
US MobilComm, Inc., No. CIV.A. 849-N, 2006 WL 1229115,
at *2 (Del. Ch. Apr. 28, 2006) (“US MobilComm”), but he gave
the parties the opportunity to reach their own agreement based
on that guidance before formally ruling on the matter. The
parties did reach such an agreement, in the form of a Stipulated
Order and Final Judgment, which provided Norman with broad
relief. More significantly, the Stipulated Order and Final
Judgment, as the name suggests, was the Court of Chancery’s
judgment resolving the §220 Action and was formally
approved and entered by the Vice Chancellor. Accordingly,
and contrary to Elkin’s assertion otherwise, it is evident that
the Court of Chancery did, in fact, “grant” Norman broad relief
in connection with the §220 Action. It is of no moment that
what Norman received in the §220 Action was negotiated by
the parties based on the Vice Chancellor’s clear guidance that
Norman should obtain broad relief and was not unilaterally
imposed by the Vice Chancellor.
16
Likewise meritless is Elkin’s assertion that the view the
Vice Chancellor expressed about the merits of Norman’s
claims at the conclusion of the trial in the §220 Action was later
undermined or superseded. In support of his position, Elkin
relies on cherry-picked statements from an April 2006 decision
by the Vice Chancellor addressing the entirely distinct question
of whether Norman was entitled to an award of attorneys’ fees
for successfully prosecuting the §220 Action. The answer to
that question turned on whether Norman had a “clear right” to
the documents he sought in the §220 Action or whether USM
had acted in bad faith in opposing Norman in that proceeding.
Id. at *2-5. Neither of those issues has anything to do with the
Vice Chancellor’s post-trial view that the §220 Action was
meritorious. Yet, insofar as the Vice Chancellor discussed that
view in the April 2006 opinion, he unambiguously reiterated it.
See id. at *1 (“At the end of a one-day trial, I stated that I was
inclined to rule in Norman’s favor and grant broad relief[.]”);
id. at *2 (“At the end of trial I did not issue a ruling, but advised
the parties that ‘I’m very much inclined to be granting the 220
relief in pretty broad form.’”); id. (“[T]he parties do not dispute
that Norman prevailed in the litigation[.]”); id. at *4
(“Although I ultimately concluded Norman had a proper
purpose, I did not reach a firm decision on that issue until after
I heard the evidence at trial.”).
Finally, the connection between the §220 Action and
this litigation has not been overstated. Elkin’s assertion that
there are “blatantly false allegations in the Amended 220
Complaint that bear no connection to the allegations in this
litigation” is both conclusory and irrelevant. (Elkin Opening
Br. at 45.) Even assuming that some allegations in the §220
Action do not bear a relationship to this litigation, it is beyond
dispute that a great many of them are directly related.
17
Moreover, the categories of information Norman secured
access to through the §220 Action have an obvious and strong
nexus to Norman’s claims here. Elkin has failed to argue or
explain how any, let alone a meaningful percentage, of the
relief that Norman obtained in the §220 Action is unrelated to
at least one of Norman’s various causes of action. In short,
Elkin’s various attempts to blunt the impact of the §220 Action
on the tolling analysis fail in their entirety.
2. Purported evidence of Norman’s bad
faith in the §220 Action
Similarly unavailing is Elkin’s assertion that, on remand
from Norman V, the District Court wrongfully refused to allow
him to present evidence that Norman pursued the §220 Action
in bad faith. That argument rests of the incorrect premise that
“[t]he issue of Norman’s bad faith in pursuing the 220 Action
was never an issue in this litigation until this Court made it part
of the tolling calculus in Norman V.” (Elkin Opening Br. at
47.) We did not create new law in Norman V merely by
acknowledging that Delaware courts have recognized that
“deceitful, bad faith conduct[]” is relevant to determining
whether fact-gathering litigation, such as the §220 Action, can
provide a basis for tolling. Norman V, 860 F.3d at 125 (quoting
Technicorp Int’l II, Inc. v. Johnston, No. CIV.A. 15084, 2000
WL 713750, at *7 (Del. Ch. May 31, 2000)).10 That long-
10
Although Technicorp discussed “bad faith” conduct
by the defendant corporation resisting a fact-gathering
proceeding, rather than by the stockholder plaintiff, nothing in
Technicorp suggests that bad faith conduct is significant only
when it proceeds from the defendant.
18
standing principle was available to Elkin throughout this
litigation, including when the District Court first addressed
Norman’s argument that the §220 Action tolled the statute of
limitations for his claims. See Norman II, 726 F. Supp. 2d at
472 (citing Technicorp). Elkin could have and should have
raised the issue long before we decided Norman V, if he
thought it had any merit. The District Court did not abuse its
discretion in refusing to allow Elkin to further prolong an
already protracted litigation by belatedly raising a new issue
and offering new evidence in support of it, despite having had
ample prior opportunity to do so.11 Elkin’s arguments on
appeal are all unpersuasive.
11
Assuming Norman V did create new law, which it did
not, the District Court still did not abuse its discretion in
excluding Elkin’s late-offered evidence. That is because Elkin
only presented that evidence to the Court for the first time at a
hearing on the parties’ motions for reargument. At a minimum,
if Elkin wished to pursue the argument that Norman undertook
the §220 Action in bad faith, it was incumbent on him to raise
that argument and provide supporting evidence from the outset
of the remand proceedings. Having made the strategic choice
only to raise the bad faith argument for the first time in
connection with a motion for reargument, Elkin cannot
complain that the District Court acted outside of its discretion
in refusing to allow him to surprise the Court (and Norman)
with new evidence produced at the last minute.
19
B. Norman’s Appeal
1. Contract-based claims
Norman first argues that the District Court erred in
concluding that the statute of limitations for his distribution-
based breach of contract claim began to run at the time of each
distribution and not in May 2002 when the distributions were
completed, because the distributions were severable, rather
than continuous violations. We disagree. Under Delaware
law, “[t]he continuing breach doctrine is ‘narrow’ and
‘typically is applied only in unusual situations.’” AM Gen.
Holdings LLC v. The Renco Grp., Inc., No. 7639-VCS, 2016
WL 4440476, at *11 (Del. Ch. Aug. 22, 2016) (quoting
Desimone v. Barrows, 924 A.2d 908, 924–25 (Del. Ch. 2007)).
Generally speaking, if a “plaintiff could have alleged a prima
facie case for breach of contract ... after a single incident[,]”
then the “continuing breach doctrine does not apply even when
confronted with numerous repeated wrongs of similar, if not
same, character over an extended period.” Id. at *12 (internal
quotation marks and citations omitted).
Norman’s breach of contract claim does not present an
“unusual situation.” Each individual distribution Elkin made
to himself constituted, at least in theory, a discrete and readily
determinable violation of Norman’s rights as a 25% equity-
holder in USM. Nevertheless, Norman contends that he has
asserted an overarching and continuous breach because his
damages from each individual distribution were “inherent[ly]
contingen[t]” on the SLA being invalidated and could not be
calculated until that time. (Norman Answering Br. at 50-51.)
That argument, however, ignores that, as Norman himself
asserts in his Amended Complaint, the SLA’s validity and
20
Elkin’s purported failure to make proper distributions could be,
and were, adjudicated simultaneously. The lone authority
Norman now cites in support of his position, Branin v. Stein
Roe Investment Counsel, LLC, No. CV 8481-VCN, 2015 WL
4710321 (Del. Ch. July 31, 2015), is readily distinguishable.
In Branin, an employee sought to enforce a contractual right to
indemnification against his current employer for expenses he
incurred in defending against a lawsuit by his former employer.
Because the employee “could not have enforced his
indemnification right until the nature of his conduct underlying
the [former employer’s lawsuit] was established[,]” “the
statute of limitations on [the employee]’s indemnification
claim did not begin to run until the underlying litigation was
resolved[,]” because it would have been “inefficient” to require
the employee to sue continually before that resolution. Id. at
*4, 7. Here, there was no prior, independent litigation that
needed to be resolved before Norman could bring a breach of
contract claim. Nor are there comparable “efficiency”
considerations. The question of the SLA’s validity arose in
connection with Elkin’s defense to Norman’s breach of
contract claim, not as a condition precedent to the claim. We
reject Norman’s unsupported attempt to dramatically expand
the “narrow” continuous breach doctrine such that it reaches
defenses to claims rather than true contingencies.
We do, however, agree with Norman’s second assertion
regarding his breach of contract claim: events that occurred
prior to the May, July, and August 2001 distributions did not
provide him with inquiry notice of his claim pertaining to those
distributions. Even assuming the public records regarding the
license transfers and the 2000 Form K-1 that Norman received
should have prompted him to inquire further into what was
happening at USM, a reasonable inquiry would not have led
21
him to the discovery of his injury, i.e., distributions in breach
of his agreement with Elkin. Rather, based on the facts as
found by the jury, he would have learned that Elkin was
repaying himself the excess capital he had contributed, which
was not a violation of the agreement. Elkin cites nothing in the
record that transpired or could have come to light between such
an investigation and November 2001, the outside limitations
date for Norman’s breach of contract claim,12 that should have
prompted Norman to investigate further, and would have led to
the discovery of the violative distributions.
For that same reason, Elkin’s argument that it is not
appropriate to simply disregard what Norman knew or should
have known prior to the date of his injury for inquiry notice
purposes misses the mark. Assuming the correctness of
Elkin’s dubious premise that one can be on inquiry notice of
an injury that has not yet occurred, his argument nevertheless
does not hold water because it fails to account for the fact that,
at least in this case, reasonable inquiry into facts known to him
before his injury would have led to Norman discovering
conduct – the repayment of loans – that did not violate his right
12
Because the District Court concluded that the statute
of limitations for Norman’s claims was tolled from November
2004 (when Norman commenced the §220 Action) through his
filing of this lawsuit, and because Norman’s breach of contract
claim has a three-year limitations period, the District Court
viewed the operative question in determining whether
Norman’s breach of contract claim was time-barred as being
whether he had at least inquiry notice of that claim before
November 2001, i.e., three years before the start of the §220
Action. Norman VI, 338 F. Supp. 3d at 375. We agree with
that approach.
22
to a pro rata share of USM’s distributions. And that discovery
would have terminated Norman’s obligation to inquire further
on that issue absent new information. Accordingly, we will
reverse the District Court’s dismissal of Norman’s distribution-
based breach of contract claim based on the May, July, and
August 2001 distributions, and will remand for the Court to
restore in full the second jury’s $73,180.17 compensatory
damages award for Norman’s distribution-based breach of
contract claim.13
2. Non-contract claims
Norman contends that the District Court erred in
dismissing his conversion and breach of fiduciary duty claims
as untimely. Regarding his conversion claim, Norman argues
that the District Court erred in concluding that claim accrued
when Elkin registered TEG as the applicant or owner of the
Phase II licenses, and not in 2000 and 2001 when “USM was
damaged by the failure of Elkin to deposit the Phase II license
sale proceeds into USM,” because that was the point at which
TEG’s control over the licenses was “unauthorized.” (Norman
Answering Br. at 58-59; see also Norman VI, 338 F. Supp. 3d at
376.) Norman’s position before us, however, is irreconcilable
with the conversion claim he actually tried to the jury, which
was clearly based on the theory that TEG’s initial procurement
of the Phase II licenses was unauthorized. (See JA 725 (verdict
question for Norman’s “Conversion and Misappropriation
Claim” stating “Do you find … that … Elkin misappropriated
[USM]’s good will or status as a qualified bidder and
13
Per our conclusion herein, we leave to the District
Court any recalculation of interest included in the judgment, as
necessitated by that restoration.
23
incumbent license holder with the Federal Communications
Commission during the 220 MHz Auction Number 18?”); JA
719 (jury instructions for Norman’s conversion claim
explaining elements as “1. [USM] possessed the status as a
qualified bidder and incumbent license holder before the
Federal Communications Commission; 2. [Elkin] or [TEG]
exercised control over that status; 3. The exercise of the control
was unauthorized; 4. [USM] was harmed as a result of the
conduct.”)). We find no error in the District Court’s
determination that Norman had inquiry notice of TEG’s
“unauthorized” procurement of Phase II licenses before
November 2002, the outside limitations date for his non-
contract claims.14 That inquiry notice was a product of the
numerous public disclosures regarding TEG’s procurement of
Phase II licenses, Norman’s close monitoring of the Phase II
auction, his failure to follow up with Elkin after Elkin declined
to provide him requested information about the auction results,
and Elkin’s disclosure during the Summer 2002 Call that
licenses had been sold and distributions made. Any of those
events should have prompted Norman to inquire further, and
reasonable inquiry would have led to the discovery that TEG
had procured Phase II licenses at USM’s expense.
Accordingly, the District Court properly dismissed Norman’s
conversion claim as untimely.
14
The District Court’s analysis of the timeliness of
Norman’s non-contract claims was similar to its analysis of his
contract claim, except November 2002, two years before the
§220 Action was filed, was the key date because of the two-
year statute of limitations for those claims. Norman VI, 338 F.
Supp. 3d at 377-78. We again agree with the framework the
District Court utilized to decide the timeliness issue.
24
Importantly, even if Norman was correct that his
conversion claim did not accrue until 2000 or perhaps 2001,
that claim’s disposition would remain unchanged. The
evidence in this case shows that the Summer 2002 Call alone
placed Norman on inquiry notice. That call, during which
Elkin was “evasive” and made the clearly disturbing statement
that Norman did not receive any distribution from USM’s asset
divestitures because it was not “his turn,” correctly prompted
Norman to investigate further and seek additional
information.15 In the case of Norman’s conversion claim, we
need not even infer what discoveries a reasonable investigation
would have yielded. The record shows Norman’s straight-
forward request for more information in fact led to, among
other things, the December 2002 Letter, which identified TEG
as the holder of Phase II licenses that he believed belonged to
USM. Therefore, Norman had inquiry notice of his conversion
claim by November 2002 because evidence of TEG’s alleged
wrongdoing could have been discovered, and was in fact
discovered, through a reasonable investigation of the
suspicious distributions that he actually became aware of
during the Summer 2002 Call.16 See U.S. Cellular Inv. Co. of
Allentown v. Bell Atl. Mobile Sys., Inc., 677 A.2d 497, 503 n.7
15
Of course, Elkin’s initial failure to respond to this
request only heightened the need for investigation, as
demonstrated by the fact that the failure galvanized Norman to
seek the assistance of counsel.
16
To be clear, we are not holding that the source of
Norman’s inquiry notice was the December 2002 Letter.
Rather, we cite that communication as compelling evidence of
what discoveries a reasonable inquiry initiated in response to
the Summer 2002 Call would and did yield.
25
(Del. 1996) (“[T]he federal doctrine means limitation and
laches does not begin to run until evidence of [the alleged
wrong] is discovered or could have been discovered had
reasonable diligence been exercised, for whatever is notice
calling for inquiry is notice of everything to which such inquiry
might have led.”) (quoting Tobacco & Allied Stocks, Inc. v.
Transamerica Corp., 143 F. Supp. 323, 328–29 (D. Del.
1956)).
As to his breach of fiduciary duty claim based on the
execution of the SLA, Norman says the District Court was
wrong to conclude the claim was time-barred, given both our
holding in Norman V reinstating his SLA-based breach of
contract claim and the Court’s reliance on USM’s financial
information from 1998. First, as already noted, Elkin failed to
challenge the timeliness of Norman’s SLA-based breach of
contract claim. Thus, the fact that judgment was entered in
Norman’s favor on that claim says nothing about the timeliness
of his SLA-based breach of fiduciary duty claim. Second, even
if we agreed with Norman that our holding in Norman V
somehow forecloses the possibility that he had inquiry notice
of his SLA-related claims in 1998, it is evident that the Summer
2002 Call provided such notice. Elkin’s statement during the
call that it was not Norman’s “turn” to participate in the
Company’s distributions undoubtedly should have prompted
Norman, USM’s only other stockholder, to investigate the
Company’s capital structure and understand the basis for that
statement. And, in fact, he did. The October 2002 Letter
specifically sought information “about the sale or other
disposition” of any USM stock or assets over the prior three
years, and the uses of any proceeds from those sales, which led
to Norman receiving a copy of the SLA in October 2003 and
26
notice that stockholder loans were being repaid.17 Norman VI,
338 F. Supp. 3d at 370. Accordingly, and exactly as with his
conversion claim, Norman had inquiry notice of his SLA
breach of fiduciary duty claim by November 2002 because
Elkin’s alleged breach could have been discovered, and was in
fact discovered, through a reasonable investigation of the
troubling statements Elkin made during the Summer 2002
Call.18
17
Again, to be clear, we are not holding that the source
of Norman’s inquiry notice was the October 2003 Letter. We
rely on that letter only as evidence of what discoveries a
reasonable inquiry initiated in response to the Summer 2002
Call would have yielded.
18
Norman argues that we should essentially ignore the
Summer 2002 Call because certain statements made by Elkin
in his briefing “are an explicit withdraw [sic] or waiver of his
past arguments that the Summer 2002 Call could have provided
Norman with notice of certain claims.” (Norman Reply Br. at
5.) Read in their proper context, however, it is clear that
Elkin’s statements regarding his lack of reliance on the
Summer 2002 Call to demonstrate Norman’s inquiry notice
pertain only to Norman’s breach of contract claim. That is
unsurprising, given those claims have a three-year limitations
period and the Summer 2002 Call occurred less than three
years before Norman initiated the §220 Action. Elkin did not,
sua sponte, abandon the most compelling – and largely
dispositive – evidence in the record on the question of when
Norman had inquiry notice of his non-contract claims.
27
Third, Norman asserts that the District Court applied the
wrong standard to assess inquiry notice, based on the Court’s
statement that Norman knew “enough to put him on notice of
the need to undertake further inquiry to determine if Elkin had
wronged him.” (Norman Answering Br. at 60 (quoting
Norman VI, 338 F. Supp. 3d at 375).) According to Norman,
the correct standard “is whether the allegedly notice-providing
evidence would objectively lead to the discovery of Norman’s
actual injury.” (Id. at 61.) But that argument ignores that the
standard the District Court actually applied throughout its
opinions is exactly the standard Norman advocates. A mere
one sentence later than the language Norman criticizes, the
Court held that “[i]f Norman had [undertaken further inquiry],
he would have discovered Elkin’s allegedly improper
distributions.” Norman VI, 338 F. Supp. 3d at 375. Thus, it is
clear that the District Court considered it significant that
Norman knew enough information to warrant further
investigation, not for its own sake, but because such further
investigation would have led to the discovery of Norman’s
actual injury. That analysis, which the Court utilized
throughout its opinion,19 applies the correct standard. See
Pomeranz v. Museum Partners, L.P., No. CIV. A. 20211, 2005
WL 217039, at *3 (Del. Ch. Jan. 24, 2005) (“Inquiry notice
does not require full knowledge of the material facts; rather,
plaintiffs are on inquiry notice when they have sufficient
knowledge to raise their suspicions to the point where persons
19
See, e.g., Norman VI, 338 F. Supp. 3d at 377
(conversion claim time-barred because reasonable
investigation would have led to discovery of the injury); id. at
379 (same regarding SLA-based breach of fiduciary duty
claim).
28
of ordinary intelligence and prudence would commence an
investigation that, if pursued would lead to the discovery of the
injury.”).20 Norman’s position to the contrary is meritless.
Finally, Norman says that the District Court did not
properly consider the so-called “smoking gun” standard
applicable to determining inquiry notice for claims involving
fiduciaries. That argument also is unpersuasive. We have
previously recognized that, under Pennsylvania law, “the
existence of a fiduciary relationship is relevant to a discovery
rule analysis precisely because it entails such a presumptive
level of trust in the fiduciary by the principal that it may take a
‘smoking gun’ to excite searching inquiry on the principal’s
part into its fiduciary's behavior.” In re Mushroom Transp.
Co., 382 F.3d 325, 343 (3d Cir. 2004). Assuming Elkin had
the burden of producing a “smoking gun” that should have
prompted Norman to inquire into potential wrongdoing, we are
satisfied he carried that burden here. By Norman’s own
account, Elkin was “evasive” during the Summer 2002 Call,
which itself should have greatly troubled him, especially since
the reason he reached out to Elkin in the first place was that he
had not heard from him “in ages.” (Norman Answering Br. at
13; JA 860.) The substance of the call, in which Elkin
20
The District Court determined long ago that
Norman’s non-contract claims were governed by Pennsylvania
law. Norman I, 2007 WL 2822798, at *4. But both the District
Court’s analysis and the parties’ briefing often rely on
Delaware case law. Given the absence of any argument from
the parties that Delaware and Pennsylvania law have
meaningfully different definitions of inquiry notice, we will
follow their lead and assume, without deciding, that the two
laws are comparable in that regard.
29
acknowledged that licenses had been sold and that he alone had
taken distributions, without any direct notice to Norman,
should have been at least equally alarming, particularly given
Norman’s own admission that Elkin had a “checkered” history
in dealing with him. (Norman Answering Br. at 61.) Indeed,
there was no readily apparent reason that Norman, who
understood himself to be one of only two stockholders holding
the same class of common stock as Elkin, would need to wait
for “his turn” to receive a distribution.21 And if that were not
enough, Norman simply ignores that he, in fact, was
sufficiently disturbed by the Summer 2002 Call that it
prompted him to investigate further.22 Therefore, at a
minimum, the conclusion that the Summer 2002 Call placed
Noman on inquiry notice is consistent with Pennsylvania’s
“smoking gun” standard. Because the Summer 2002 Call
placed Norman on inquiry notice of all of his non-contract
21
Norman makes much of the fact that any Form K-
1’s he received did not identify that USM had any stockholder
loans. However, the omission of any stockholder loans from
USM’s Form K-1’s, whether deliberate or inadvertent, should
only have served to heighten Norman’s suspicions as to why
he was not receiving any distributions given the apparent lack
of more senior securities in USM’s capital structure.
22
Elkin’s ignoring Norman’s well-founded requests
for additional information to the point that Norman felt it
necessary to enlist the assistance of counsel only underscores
how patently unreasonable it would have been for him to
continue to rely on the fiduciary nature of his relationship with
Elkin as a justification for not investigating Elkin’s potential
wrongdoing.
30
claims,23 the District Court properly dismissed them as barred
by the statute of limitations.
III. CONCLUSION
For the foregoing reasons, we will reverse the District
Court’s dismissal of Norman’s distribution-based breach of
contract claim for the distributions that occurred in May, July,
and August of 2001. In all other respects, we will affirm the
District Court’s final order. Accordingly, we will remand this
case to the District Court for the limited purpose of entering a
further revised final judgment, which revisions to the District
Court’s Revised Final Judgement in a Civil Case dated May 7,
2019 shall be: (i) recalculating the damages amounts specified
in the first paragraph and paragraph 1(b) to reflect Norman’s
prevailing on his breach of contract claim based on Elkin’s
failure to make pro rata distributions in May, July, and August
2001; (ii) otherwise revising paragraphs 1(b) and 2(a) to reflect
Norman’s prevailing on his breach of contract claim based on
Elkin’s failure to make pro rata distributions in May, July, and
August 2001; and (iii) identifying the proper rate of post-
judgment interest.
23
This includes Norman’s claims for usurpation of
corporate opportunities, breach of the duty of disclosure, unjust
enrichment, and declaratory judgment.
31