A class action against an accounting firm whose former employee is alleged to have distributed nearly $6 million worth of fraudulent claims from a multidistrict litigation settlement can survive despite technically being filed outside the statute of limitations, a federal judge has ruled.
U.S. District Judge Jan DuBois of the Eastern District of Pennsylvania on Aug. 11 gave a green light to the lawsuit against Heffler, Radetich & Saitta to survive a statute of limitations challenge. The claims stem from a $490 million settlement involving a securities litigation that arose from the merger between BankAmerica Corp. and NationsBank.
Although plaintiff James Oetting lodged his proposed class lawsuit more than two years after a former employee of the accounting firm pleaded guilty to fraud in connection with settlement funds the firm managed, DuBois determined the defendants had been aware of the claims through a supplemental complaint Oetting filed with the MDL two years before the lawsuit was properly filed in Missouri federal court.
“There is no evidence that [the proposed class's] filings were anything other than a good-faith effort to commence an action against Heffler,” DuBois said. “Heffler has no reasonable argument that it was ‘surprised’ or not ‘on notice’ of the claims against it within the statutory period.”
Oetting’s attorney, Frank Tomlinson of Tomlinson Law in Birmingham, Alabama, did not return a phone call.
Buchanan Ingersoll & Rooney attorney Howard Scher, who is representing Heffler, Radetich & Saitta, also did not return a call for comment.
According to DuBois, Christian Penta, who had worked at the accounting firm in 2004 when the settlement began to be distributed, was indicted in October 2008, and pleaded guilty to mail fraud, wire fraud and filing a false tax return. He was also sentenced to 60 months in prison, and ordered to pay $19.5 million in restitution.
DuBois said the first distribution payment from the underlying MDL settlement included payments of more than $5.87 million based on fraudulent claims submitted by Penta and his co-conspirators.
The law firm of Green Jacobson, which had been class counsel in the underlying MDL, filed a supplemental complaint with the MDL court in October 2009, asserting breach of fiduciary duty, negligent misrepresentation and accountant malpractice, among other claims. The MDL court, however, dismissed the claims in November 2010, finding that, while the allegations were connected to the underlying MDL, they were not similar enough to justify supplemental pleadings.
Oetting eventually filed his suit in February 2011.
DuBois said the suit was clearly filed outside of Pennsylvania’s two-year statute of limitations, but he determined that Missouri’s saving statute, which gives a plaintiff a one-year extension to refile claims that were timely commenced and subsequently dismissed, applied to the case.
Specifically, DuBois said the 2009 supplemental complaint was served on all counsel, and that Heffler did not file its motion to strike the complaint until May 2010.
“That delay indicates that none of the parties involved—not the NationsBank class, not Heffler, and not even the MDL court—recognized plaintiff’s procedural error,” DuBois said. “Therefore, notwithstanding the NationsBank class’s procedural error, the court construes the supplemental complaint as having been filed on Oct. 29, 2009, effectively ‘commencing’ an action for purpose of applying the Missouri savings statute.”