Saunders v. Lightwave Logistics, Inc.

• Court: Superior Court of Delaware
• Decided: July 28, 2023
• Docket: N23C-05-120 PRW CCLD
• Status: Published

Opinion

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 Jonathan Saunders v. Lightwave Logistics, Inc. et al. C.A. No. N23C-05-120 PRW CCLD July 28, 2023 Page 2 of 13

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. Jonathan Saunders v. Lightwave Logistics, Inc. et al. C.A. No. N23C-05-120 PRW CCLD July 28, 2023 Page 3 of 13

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). Jonathan Saunders v. Lightwave Logistics, Inc. et al. C.A. No. N23C-05-120 PRW CCLD July 28, 2023 Page 4 of 13

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)). Jonathan Saunders v. Lightwave Logistics, Inc. et al. C.A. No. N23C-05-120 PRW CCLD July 28, 2023 Page 5 of 13

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). Jonathan Saunders v. Lightwave Logistics, Inc. et al. C.A. No. N23C-05-120 PRW CCLD July 28, 2023 Page 6 of 13

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. Jonathan Saunders v. Lightwave Logistics, Inc. et al. C.A. No. N23C-05-120 PRW CCLD July 28, 2023 Page 7 of 13

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). Jonathan Saunders v. Lightwave Logistics, Inc. et al. C.A. No. N23C-05-120 PRW CCLD July 28, 2023 Page 8 of 13

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. Jonathan Saunders v. Lightwave Logistics, Inc. et al. C.A. No. N23C-05-120 PRW CCLD July 28, 2023 Page 9 of 13

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)). Jonathan Saunders v. Lightwave Logistics, Inc. et al. C.A. No. N23C-05-120 PRW CCLD July 28, 2023 Page 10 of 13

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.’”). Jonathan Saunders v. Lightwave Logistics, Inc. et al. C.A. No. N23C-05-120 PRW CCLD July 28, 2023 Page 11 of 13

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). Jonathan Saunders v. Lightwave Logistics, Inc. et al. C.A. No. N23C-05-120 PRW CCLD July 28, 2023 Page 12 of 13

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)). Jonathan Saunders v. Lightwave Logistics, Inc. et al. C.A. No. N23C-05-120 PRW CCLD July 28, 2023 Page 13 of 13

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