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Fike v. Ruger
Citations: 752 A.2d 112; 2000 Del. LEXIS 181; 2000 WL 567217Docket: 604, 1999
Court: Supreme Court of Delaware; May 4, 2000; Delaware; State Supreme Court
The Supreme Court of Delaware affirmed the Court of Chancery's summary judgment favoring the defendants in an accounting action related to a financially unsuccessful joint venture, Del-Chapel Associates, formed in 1979. Plaintiffs Vivian H. Fike and Robert Wilson, minority members of the joint venture, sought an accounting and relief concerning several loan agreements from 1981 and 1992 after the joint venture agreed to sell its property in 1998. The Court of Chancery ruled that the plaintiffs' claims were barred by the equitable doctrine of laches and the three-year statute of limitations, determining that the claims regarding the loans arose at the time of the loans and were not timely brought. Although the plaintiffs retained the right to an accounting related to the joint venture’s dissolution, they could not contest the validity of the loan agreements in that context. The court noted that the plaintiffs had conceded there were no remaining funds subject to an accounting, leading to judgment for the defendants. In reviewing the case, the Supreme Court applied a de novo standard, considering undisputed material facts and emphasizing that laches requires both knowledge of the claim by the plaintiffs and prejudice to the defendants due to the plaintiffs' unreasonable delay in asserting their claims. The record indicated that the plaintiffs were aware of the joint venture's financial difficulties as early as the mid- to late-1980s. In 1985, Fike obtained the joint venture's tax returns for 1979-1984, financial statements for 1979-1983, and an unaudited profit/loss statement and balance sheet for 1984. In 1987, defendants Ruger and Scott informed Fike via letter that interest payments to Descomp, Inc. and Data Controls North, Inc. from capital contributions could erode Fike's equity in the venture. By the late 1980s, the property faced declining tenant occupancy, deteriorating conditions, and partial sales of the property, which Fike and another plaintiff observed daily. A September 1987 newspaper article reported significant unpaid real estate taxes, further indicating the venture's financial issues. Fike was aware of the claims over three years before filing suit in June 1994 against Ruger, Scott, Descomp, and Data Controls for federal RICO violations and state law breach of fiduciary duty claims. One claim alleged a conspiracy to misrepresent corporate contributions as loans. Although RICO claims were dismissed, the court allowed for re-filing state claims, but Fike did not act until November 19, 1998, exceeding the three-year mark. The court applied the doctrine of laches, stating that the plaintiffs were on inquiry notice due to known facts and the deteriorating property condition, as well as the newspaper article, indicating they had actual knowledge of their claims since the mid- to late-1980s. The defendants would suffer prejudice from the delay, notably the deaths of key witnesses Whittaker and Scott in 1996 and 1997, respectively, and the potential for defendants to mitigate losses had the suit been filed earlier. Consequently, the Court of Chancery granted summary judgment for the defendants based on laches, affirming the decision without addressing the statute of limitations or the defendants' acquiescence argument raised on appeal.