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James F. Koester Robert Rives Harry J. Nichols Janice Spengel Alexander Loeb Thomas Zensen Frank B. Green Dr. Gerald Newport Lawrence J. Siefel Robert E. Perkinson Dr. James R. Criscione Dr. A. Sciortino Eugene Fahrenkrog Eugene Fahrenkrog, Jr. Scott Kell William Londoff John Larsen Spero Bourdoures Fox, Goldblatt & Singer, P.C. Noah Susman Steve Gilmore Robert Evans Dr. Jacques Paul Schaerer William Curren Virginia Curren Patricia Baxter Lester A. Schamel Dr. Alan Pierce Bernie Plouch Jerry Kopp Donna J. Hill Phillip Sweeney Dr. Ronald Hertel Joseph Straub Dr. John Keethler v. American Republic Investments, Inc. American Resource Corporation, Inc. Ronald Ruis Tatco Investment Co., G. Charles Cole Sherman Mazur, Also Known as Masur

Citation: 11 F.3d 818Docket: 92-3370

Court: Court of Appeals for the Eighth Circuit; January 20, 1994; Federal Appellate Court

Narrative Opinion Summary

In this diversity action, investors who suffered losses from real estate limited partnerships sued the general partners, alleging breach of fiduciary duties. The jury awarded the plaintiffs $6.4 million in compensatory damages and $4.8 million in punitive damages. The court reversed the judgments against defendant G. Charles Cole, finding the claims time-barred under Missouri's five-year statute of limitations for breach of fiduciary duty. The court held that the claims accrued when the plaintiffs were aware of Cole's management withdrawal by the end of 1981. Conversely, the compensatory damages against defendant Sherman Mazur were upheld, as he was found to have breached fiduciary duties by failing to account for property sale proceeds and not notifying partners of a foreclosure. However, punitive damages against Mazur were reversed due to insufficient evidence of willful or malicious conduct required under Missouri law. The court rejected Mazur's appeal regarding jury instructions and the denial of a trial stay due to his criminal indictment. The court remanded the case to dismiss claims against Cole and eliminate punitive damages against Mazur, emphasizing the plaintiffs' failure to meet the burden of proving tolling of the statute of limitations.

Legal Issues Addressed

Adverse Inference from Invocation of the Fifth Amendment

Application: The court noted that while an adverse inference could be drawn from Mazur's invocation of the Fifth Amendment, it was insufficient to justify punitive damages without further evidence of malice.

Reasoning: Although an adverse inference could be drawn from his refusal to testify, this alone does not justify punitive damages without further evidence of malice.

Fraud Discovery Rule

Application: The court expressed doubt that the Missouri Supreme Court would apply the discovery rule to breach of fiduciary duty claims, emphasizing that the plaintiffs' claims were time-barred even under the fraud discovery standard.

Reasoning: Under Missouri law, the statute of limitations for breach of fiduciary duty is five years, and claims generally accrue when damages are ascertainable. However, fraud claims accrue when the fraudulent facts are discovered.

Punitive Damages under Missouri Law

Application: The court overturned the punitive damages against Mazur, concluding that his actions did not meet the required standard of willful, wanton, or malicious conduct under Missouri law.

Reasoning: Under Missouri law, punitive damages require evidence of willful, wanton, or malicious conduct, and the court concludes that Mazur's actions did not meet this standard.

Statute of Limitations for Breach of Fiduciary Duty

Application: The court found the plaintiffs' claims against Cole time-barred under the five-year statute of limitations for breach of fiduciary duty, as the plaintiffs were aware of Cole's withdrawal from management by the end of 1981.

Reasoning: The court reversed the judgments against Cole, finding the plaintiffs' claims against him were time-barred.