Saunders v. Lightwave Logistics, Inc.

SUPERIOR COURT
OF THE
STATE OF DELAWARE
PAUL R. WALLACE LEONARD L. WILLIAMS JUSTICE CENTER
JUDGE 500 N. KING STREET, SUITE 10400
WILMINGTON, DELAWARE 19801
(302) 255-0660
Submitted: July 26, 2023
Decided: July 28, 2023
Joseph C. Schoell, Esquire Albert H. Manwaring, IV, Esquire
FAEGRE DRINKER BIDDLE & REATH LLP Barnaby Grzaslewicz, Esquire
222 Delaware Avenue, Suite 1410 Kirsten Zeberkiewicz, Esquire
Wilmington, Delaware 19801 MORRIS JAMES LLP
500 Delaware Avenue, Suite 1500
Steven L. Caponi, Esquire P. O. Box 2306
Matthew B. Goeller, Esquire Wilmington, Delaware 19801
Megan E. O’Connor, Esquire
K&L GATES LLP
600 N. King Street, Suite 901
Wilmington, Delaware 19801
RE: Jonathan Saunders v. Lightwave Logistics, Inc. et al.
C.A. No. N23C-05-120 PRW CCLD
Defendants’ Motion to Dismiss
Dear Counsel,
The Court provides this Letter Opinion and Order in lieu of a more formal
writing to resolve Defendants’ Motion to Dismiss. For the reasons explained
below, the motion to dismiss is DENIED.
I. FACTUAL AND PROCEDURAL BACKGROUND
On July 8, 2013, Dr. Jonathan Saunders acquired 55,000 shares of
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Lightwave Logistics, Inc.1 Lightwave, at that time, was traded on the over-the-
counter market as opposed to an exchange market.2 Lightwave used Defendant
Broadridge Financial Solutions, Inc. as its transfer agent.3
On January 26, 2017, Dr. Saunders’ shares in Lightwave were “cancelled
and escheated to the State of Delaware.”4 Dr. Saunders says that Lightwave and
Broadridge caused his shares to be escheated and neither Lightwave nor
Broadridge made any attempt to locate or contact him.5 Additionally, Dr. Saunders
says Lightwave and Broadridge failed to send him a required “due diligence
mailing.”6
Accordingly, Dr. Saunders says he didn’t know his Lightwave stock had
been escheated until July 20, 2021, which was when he attempted to open a
brokerage account to hold that stock.7
Dr. Saunders originally brought this action in the Court of Chancery. That
1
Compl. ¶ 12 (D.I. 1).
2
Id.
3
Id. ¶ 13.
4
Id. ¶ 30.
5
Id. ¶¶ 29-30.
6
Id. ¶ 29.
7
Id. ¶¶ 36-40.
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Court questioned the parties as to whether it had subject matter jurisdiction.8 The
parties subsequently stipulated to dismiss the breach-of-fiduciary-duty claim and
transfer the action here.9
In this Court, Dr. Saunders has asserted two counts against Defendants—
first, a claim for negligence (jointly and severally) and second, a claim for
conversion (jointly and severally).10
Defendants have moved to dismiss the Complaint arguing that Dr. Saunders’
claims are barred by a three-year statute of limitations.11 In opposition,
Dr. Saunders says the statute of limitations should be tolled because his injury—
the loss of his stock—was inherently unknowable.12
II. STANDARD OF REVIEW
“Under Superior Court Civil Rule 12(b)(6), the legal issue to be decided is,
whether a plaintiff may recover under any reasonably conceivable set of
8
Jonathan Saunders v. Lightwave Logic, Inc., et al., C.A. 2022-0882-MTZ (Del. Ch.) D.I. 21
(letter to counsel).
9
See D.I. 1, Ex. 1 (stipulation and order of 10 Del. C. § 1902 transfer).
10
Compl. ¶¶ 45-61.
11
Mot. to Dismiss at 15-19 (D.I. 6).
12
Answering Br. at 13-22 (D.I. 8).
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circumstances susceptible of proof under the complaint.”13 Under that Rule, the
Court will:
(1) accept all well pleaded factual allegations as true, (2) accept even
vague allegations as “well pleaded” if they give the opposing party
notice of the claim, (3) draw all reasonable inferences in favor of the
non-moving party, and (4) not dismiss the claims unless the plaintiff
would not be entitled to recover under any reasonably conceivable set
of circumstances.14
“If any reasonable conception can be formulated to allow Plaintiffs’ recovery, the
motion must be denied.”15
Indeed, “[d]ismissal is warranted [only] where the plaintiff has failed to
plead facts supporting an element of the claim, or that under no reasonable
interpretation of the facts alleged could the complaint state a claim for which relief
might be granted.”16 As a corollary to that principle, a time-limitations defense
may be decided at the Rule 12(b)(6) stage.17
13
Vinton v. Grayson, 189 A.3d 695, 700 (Del. Super. Ct. 2018) (quoting Super. Ct. Civ. R.
12(b)(6)).
14
Id. (quoting Cent. Mortg. Co. v. Morgan Stanley Mortg. Cap. Hldgs. LLC, 27 A.3d 531, 535
(Del. 2011)).
15
Id. (citing Cent. Mortg. Co., 27 A.3d at 535).
16
Hedenberg v. Raber, 2004 WL 2191164, at *1 (Del. Super. Ct. Aug. 20, 2004).
17
Gadow v. Parker, 865 A.2d 515, 519 (Del. 2005) (“The Superior Court Civil Rules expressly
permit a defendant to raise the defense of limitations in a motion to dismiss or in a first
responsive pleading to the complaint.” (citations omitted)).
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III. DISCUSSION
IT IS PREMATURE ON THE CURRENT RECORD
TO CONCLUDE THAT DR. SAUNDERS’ CLAIMS ARE TIME-BARRED.
Dr. Saunders first says that Defendants were negligent in allowing his
Lightwave stock to be escheated.18 Second, Dr. Saunders says that Defendants
converted his shares by allowing them to be wrongfully escheated.19
Lightwave and Broadridge contend that both claims are barred by a three-
year statute of limitations.20
The escheatment took place on January 26, 2017, so under 10 Del. C.
§ 8106, Dr. Saunders had three years to bring his negligence and conversion
claims.21 When Dr. Saunders first filed suit in the Court of Chancery on
September 30, 2022, he was well past the three-year mark. This means that unless
the statute of limitations is tolled, his claims are untimely.22
18
Compl. ¶¶ 45-55; see, e.g., id. ¶ 53 (“Each of Lightwave and Broadridge were negligent and
breached their respective duties by wrongfully reporting and delivering the shares to the State of
Delaware as unclaimed property before the expiration of the period of dormancy required by
Delaware law.”).
19
Id. ¶¶ 56-61; id. ¶ 60 (“Lightwave and Broadridge took actions leading to the wrongful
escheatment of Dr. Saunders’ shares.”).
20
Mot. to Dismiss at 15-19.
21
DEL. CODE. ANN. tit. 10, § 8106 (2016); see also Kim v. Coupang, LLC, 2021 WL 3671136,
at *3 (Del. Ch. Aug. 19, 2021); S&R Assocs., L.P. v. Shell Oil Co., 725 A.2d 431, 439 (Del.
Super. Ct. 1998).
22
Wal-Mart Stores, Inc. v. AIG Life Ins. Co., 860 A.2d 312, 319-20 (Del. 2004).
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Dr. Saunders says he “was ‘blamelessly ignorant’ of an ‘inherently
unknowable’ injury -- thereby tolling the statute of limitations.”23
“[T]he doctrine of inherently unknowable injuries will toll the statute of
limitations ‘while the discovery of the existence of a cause of action is a practical
impossibility.’”24 Tolling doesn’t happen when “facts exist sufficient to put a
person of ordinary intelligence and prudence on inquiry which, if pursued, would
lead to the discovery of such facts.”25
Dr. Saunders insists it was practically impossible for him to discover the
escheatment because Lightwave and Broadridge had duties to keep him informed
and to send him a due diligence mailing, neither of which occurred.26 And that he
was blamelessly ignorant because he had no reason to believe his stock would be
escheated without that notice from Defendants.27
According to Defendants, (1) the escheatment was not inherently
unknowable, and (2) Dr. Saunders is not blamelessly ignorant.
23
Answering Br. at 14.
24
Ocimum Biosolutions (India) Ltd. v. AstraZeneca UK Ltd., 2019 WL 6726836, at *8 (Del.
Super. Ct. Dec. 4, 2019) (quoting In re Dean Witter P’ship Litig., 1998 WL 442456, at *5 (Del.
Ch. July 17, 1998), aff’d, 1999 WL 87385 (Del. Jan. 6, 1999)).
25
Wal-Mart Stores, Inc., 860 A.2d at 319 (cleaned up).
26
Compl. ¶¶ 29, 46-48.
27
See id.; Answering Br. at 14.
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A. ON THE CURRENT RECORD, THE COURT FINDS IT REASONABLY
CONCEIVABLE THAT DR. SAUNDERS COULD CARRY HIS BURDEN ON THE
TOLLING EXCEPTION.
First, Defendants suggest the escheatment was not inherently unknowable
because “[t]he State of Delaware broadly disseminates information to make owners
of escheated property aware of the property and to allow them to reclaim such
property.”28 In support, Defendants first point to the State Escheator website
where, Defendants say, Dr. Saunders’ escheatment information was publicly
available.29 But Defendants rely on information from the website retrieved on May
31, 2023; the relevant time period here is January 26, 2017, to January
26, 2020.30 Even if the Court could consider the availability of the website at this
stage,31 Defendants do not point to what information the website actually contained
during the relevant time period, only that it is on it now.32
Second, Defendants call out two cases—Jepsco Limited v. B.F. Rich & Co.,
28
Mot. to Dismiss at 17.
29
Id.; Reply Br. at 8-9 (D.I. 7).
30
Motion to Dismiss at 13 & n.5; Reply Br. at 8-9.
31
Reid v. Spazio, 970 A.2d 176, 183 (Del. 2009).
32
Defendants admit in their reply brief that the nine items listed on the State Escheator’s
website that they “associate with Dr. Saunders have appeared as unclaimed in the State’s escheat
database since November 28, 2022.” Reply. Br. at 9 n.4 (citing D.I. 6, Ex. A).
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Inc.33 & Marvel v. Clay34—for the proposition that a matter of public record cannot
be inherently unknowable.35 Beyond Defendants’ insistence that the Court take
judicial notice of a public record they themselves have not provided to the
Court,36 neither case is particularly helpful here.
In Jepsco, the Court of Chancery considered the fraudulent-inducement
tolling exception, not the inherently unknowable exception,37 and in Marvel, the
Superior Court decided the tolling question on a summary judgment record.38
Defendants imply that the occurrence-of-escheatment was not inherently
unknowable because Dr. Saunders could have just called Defendants.
Dr. Saunders’ stockholder status was limited due to the stock’s presence on the
over-the-counter market.39 Defendants had the cancellation and escheatment
information, Dr. Saunders did not. While one might infer that a phone call to
Defendants could have provided Dr. Saunders with the facts he now claims he
33
2013 WL 593664 (Del. Ch. Feb. 14, 2013).
34
1995 WL 465322 (Del. Super. Ct. June 15, 1995), aff’d 1996 WL 69744 (Del. Jan. 22, 1996).
35
Mot. to Dismiss at 17.
36
Even if the Court were to take judicial notice of the Escheatment list, Defendants have not
provided the relevant list. Defendants instead ask the Court to assume the list says something
that may or may not be there.
37
Jepsco Ltd., 2013 WL 593664, at *10-11.
38
Marvel, 1995 WL 465322, at *4.
39
See Compl. ¶¶ 12, 40.
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didn’t (and wouldn’t otherwise) know, at this stage the Court cannot speculate on
the contents of any call such that it could find it was not practically impossible for
Dr. Saunders to learn of his stock’s escheatment.
Accordingly, the Court must draw the reasonable inference—at this
pleadings stage and with the facts pled—that it was inherently unknowable to
Dr. Saunders that his stock in Lightwave had been cancelled and escheated.
B. ON THE CURRENT RECORD, THE COURT MUST INFER DR. SAUNDERS WAS
BLAMELESSLY IGNORANT OF THE ESCHEATMENT OF HIS STOCK.
Defendants insist Dr. Saunders is not blamelessly ignorant because a
reasonably diligent person would have checked on the status of his investment, and
because he failed to keep Lightwave informed of where he lived.40
First, Defendants say that Dr. Saunders didn’t act like a reasonably diligent
person because he didn’t check on the status of his investment. They rely on the
Eighth Circuit’s decision in Weinbach v. Boeing Co.41 But in Weinbach, the
Eighth Circuit considered a grant of summary judgment where the appellant
initially received an annual communication only to then have that communication
40
Reply Br. at 4-5.
41
Reply Br. at 5-6 (citing Weinbach, 6 F.4th 855 (8th Cir. 2021)).
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cease.42 This case is currently at the dismissal stage, not at the summary judgment
stage. But even if it was at the summary judgment stage, the complaint doesn’t
allege (nor is there other indication) that Dr. Saunders initially received annual
communication from Lightwave only to have that communication cease—thus
supporting some notion that he was to blame for not following up.
Here, the adverse inference that Defendants urge the Court to reach is just
too far a reach. Indeed, the more allowable inference at this point is that
Lightwave offered no communication in the first instance and Dr. Saunders would
not have expected Lightwave to thereafter unless circumstances of his
stockholding changed. Defendants cite no legal or factual support for their urging
that Dr. Saunders had an affirmative duty to regularly check in with them on his
stockholder status. Nor can the Court infer any such duty given the current record.
Defendants next say that Dr. Saunders was not blamelessly ignorant because
he failed to inform Lightwave of his address change.43 But Dr. Saunders says he
received no mail at all from Lightwave, which is an assertion the Court must
accept as true at this stage. So, it doesn’t matter whether Dr. Saunders’ address
42
Weinbach, 6 F.4th at 858.
43
Mot. to Dismiss at 18 (Defendants conclude: Dr. Saunders “careless attitude for ensuring that
he received important communications from Lightwave clearly cannot fairly be characterized as
‘blameless.’”).
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was correct given his assertion that no mail at all was ever sent or received from
Lightwave.
Defendants posit that Dr. Saunders must have received mail from the State
Escheator because 12 Del. C. §§ 1150(a)-(b) obligates the State Escheator to send
mailed notice before it escheats property.44 But that statute was amended after
Dr. Saunders’ stock was escheated—before that operable 2017 amendment, the
State Escheator was only required to provide notice via the newspaper.45 So the
State Escheator had no obligation to mail notice at the time Dr. Saunders’
Lightwave stock was escheated. And to the extent that the information was
available via newspaper notification, nowhere do Defendants point the Court to
any record that Dr. Saunders’ information was present there. Nor can the Court
make that inference for them such at this stage.
According to Dr. Saunders, he had no reason to suspect any issue with his
Lightwave stockholder status. The escheatment happened without his involvement
and without his knowledge. As such, the Court, at this stage, must find it
reasonably conceivable that Dr. Saunders was blamelessly ignorant of the
44
Reply Br. at 7.
45
DEL. CODE ANN. tit. 12, § 1150 (2017) (added by 81 Del. Laws 2017, ch. 1, § 2, eff. Feb. 2,
2017). Previously the statute provided notice via publication. DEL. CODE ANN. tit. 12, §§ 1130-
77 (2016).
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escheatment.
C. DR. SAUNDERS HAS MET HIS MINIMAL BURDEN TO SURVIVE DISMISSAL.
Our Supreme Court has set a “low threshold for the use of the doctrine of
inherently unknowable injury.”46 Just the same, there is a low threshold on what a
plaintiff must demonstrate to survive a motion to dismiss.47 Dr. Saunders has met
his low burden here in both respects. He has alleged facts sufficient to put the
Defendants on notice of his claim. And he has alleged enough facts that it is
reasonably conceivable he might well gain tolling of the statute of limitations he
faces.
IV. CONCLUSION
For the reasons stated above, Defendants’ Motion to Dismiss is DENIED.
As both parties agree, there is no doubt Dr. Saunders filed his suit well after
the statute of limitations had run. And as both acknowledged at argument, a fuller,
but targeted, record might well resolve certain key factual questions on the tolling-
46
Certainteed Corp. v. Celotex Corp., 2005 WL 217032, at *9 (Del. Ch. Jan. 24, 2005) (citing
Wal-Mart, 860 A.2d 312); see also Serviz, Inc. v. ServiceMaster Co., LLC, 2022 WL 1164859, at
*5 (Del. Super. Ct. Apr. 19, 2022).
47
Doe v. Cahill, 884 A.2d 451, 458 (Del. 2005) (“the threshold for the showing a plaintiff must
make to survive a motion to dismiss is low”); VLIW Tech., LLC v. Hewlett-Packard Co., 840
A.2d 606, 611 (Del. 2003) (“An allegation, though vague or lacking in detail, is nevertheless
‘well-pleaded’ if it puts the opposing party on notice of the claim being brought against it.”
(citations omitted)).
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exception issue. To that end, the parties shall meet-and-confer within two weeks
of this date for purpose of setting an expedited schedule to complete the limited
discovery necessary. After the taking of that discovery—given the record and
arguments addressed here—the parties may file abbreviated summary judgment
applications on the applicability of the inherently unknowable injury doctrine as a
tolling mechanism here.
IT IS SO ORDERED.
_______________________
Paul R. Wallace, Judge
cc: All Counsel via File and Serve