Summary
The Supreme Court of Alabama affirmed summary judgment for Kassouf & Company and related defendants in the doctors’ fraud and suppression action arising from investments allegedly misappropriated by the firm’s former employee. The court held that the claims were barred by Alabama’s two-year statute of limitations because the doctors had discovered, or should have discovered, the alleged fraud more than two years before adding Kassouf as a defendant. A dissent would have held that the limitations issue presented a jury question, and the court later overruled rehearing without opinion.
Topics
Practice areas
Questions Presented
- Whether the doctors' fraud and suppression claims against Kassouf were barred by Alabama's statute of limitations.
- Whether summary judgment for Kassouf was proper where the doctors had discovered, or were charged as a matter of law with discovering, the facts constituting the alleged fraud more than two years before adding Kassouf as a defendant.
Holdings
- The doctors' fraud and suppression claims against Kassouf were barred by the statute of limitations because they had discovered, or were charged as a matter of law with discovering, the facts constituting the alleged fraud more than two years before asserting claims against Kassouf.
- Kassouf was entitled to judgment as a matter of law because the doctors' fraud and suppression claims were time-barred.
Key quotations
“"However, a party will be deemed to have `discovered' a fraud as a matter of law upon the first of either the actual discovery of the fraud or when the party becomes privy to facts that would provoke inquiry in a reasonable person that, if followed up, would lead to the discovery of the fraud."” (140)
“When examined under these "objective standards," Abston, 822 So.2d at 1195, the doctors' fraud claims against Kassouf are time-barred.” (140)
Factual background
The doctors were clients of Kassouf & Company and dealt primarily with Vernon Kreider, an accountant in Kassouf's Professional Services Group. Between 1988 and 1997, Kreider solicited investments from the doctors in Mortgage Partners and Oversize Outfitters, Inc., representing that their funds would be used for those entities; Kreider later misappropriated the funds and the investments or related loans defaulted. The doctors knew before suing Kreider in April 2000 that he had defrauded them, but they did not add Kassouf as a defendant until June 2003.
Procedural history
The doctors initially sued Vernon Kreider, Mortgage Partners, and Oversize Outfitters, Inc., in the Jefferson Circuit Court on April 11, 2000. After learning of Kreider's federal criminal proceedings, they obtained leave to amend and added Kassouf and certain employees as defendants on June 6, 2003, asserting fraud and suppression claims. Kassouf's motion to dismiss was converted into a summary-judgment motion under Ala. R. Civ. P. 12(c). The trial court granted summary judgment on November 15, 2004, made the judgment final under Rule 54(b) on April 1, 2005, and the doctors appealed.