In Rite Aid Corporation v. Alex Grass , Rite Aid accused Grass (and others) of "fraud" with respect to the acquisition of stock in certain Rite Aid subsidiaries.
Rite Aid alleged that interests in Sera-Tec Biologicals, and two other companies, Immucor and Isolyser, had been acquired without the Board of Directors' knowledge or consent.
Grass asserted that Rite Aid had been afforded notice of the purchase by way of financial records and internal communications which should have prompted the Board to investigate. He further argued that because Rite Aid had possession of that information, the lawsuit was barred by the statute of limitations -- a law which forecloses suits brought after a certain period of time has elapsed. The New York Supreme Court agreed and granted Grass's motion to dismiss the case on those grounds.
On appeal, the Appellate Division, First Department, reiterated that a fraud claim must be filed within two years of the date the fraud was discovered, or could have been discovered with reasonable diligence. The amount of time in which a "reasonably diligent plaintiff" could have discovered a fraud "turns upon whether a person of ordinary intelligence possessed knowledge of facts from which the fraud could be reasonably inferred."
Since Rite Aid already had relevant correspondence dating back to 1994, the company was on notice of the conduct and could not explain-away its failure to and file a fraud claim within the requisite time frame.
Although the company argued dismissal was premature absent completion of discovery, the AD1 was of the opinion that process would neither have been "productive" nor "helpful." Moreover, the company's claim of "equitable estoppel" was rejected, as that doctrine does not toll the statute of limitations when a plaintiff had knowledge of information which warranted an investigation before the statute of limitations expired.
Undeniably, the AD1 wasn't about to come to Rite Aid 's aid.
To download a copy of the Appellate Division's decision, please use this link: Rite Aid Corporation v. Alex Grass