Name of Assigned Judge Sitting Judge if Other or Magistrate Judge John A. Nordberg than Assigned Judge
Defendant's motion to dismiss  is granted.
O[ For further details see text below.] Docketing to mail notices.
Introduction. This case arises out of a 2002 divorce settlement between plaintiff Denise McCann and her then husband, Anthony McCann. (We use first names to distinguish the ex-spouses.) Denise alleges that Anthony and his employer, Hy-Vee, Inc., committed fraud in 2002 when Denise and Anthony were negotiating a settlement to their divorce proceeding. Anthony and Hy-Vee allegedly misrepresented to Denise that Anthony's company stock was non-transferable under the terms of his employment agreement and that Hy-Vee was not willing to make an exception to lift these restrictions. The representations were proven false, according to Denise, in 2007 when Anthony convinced Hy-Vee to lift the restrictions on transferability to allow a buy-back of Hy-Vee shares awarded to Denise under the 2002 divorce settlement. Under the terms of the settlement, the offer to buy back Denise's shares terminated Anthony's alimony obligation which would have continued for another five years, amounting to approximately $220,000 in lost alimony payments.
In this lawsuit, Denise is asserting a Rule 10b-5 securities fraud claim against Hy-Vee, alleging that Hy-Vee made a fraudulent statement in connection with Denise's purchase of Hy-Vee shares, the "purchase" being the awarding Hy-Vee shares to her under the 2002 divorce decree.
Hy-Vee now moves to dismiss the Rule 10b-5 claim based on three independent arguments. For the reasons explained below, we grant the motion based on Hy-Vee's third argument, specifically its argument that Denise's claim is barred by the five-year statute of repose.
Facts. The following facts are taken from the complaint and are assumed true for purposes of ruling on the present motion.
In the summer of 2002, Denise and Anthony were negotiating an end to what had been an acrimonious divorce proceeding. Mediation was tried but failed. Each spouse was represented by an attorney. Denise was a stay-at-home mom who had not attended college. Anthony was a high-level executive for Hy-Vee earning around $300,000 a year. The couple had four children, three still minors at this time.
Under Anthony's employment agreement with Hy-Vee, he was required to use at least 15% of his income to buy Hy-Vee stock. And over the years, he had acquired a number of Hy-Vee shares, which made up the bulk of the family's assets.
Denise was initially interested in receiving a lump-sum distribution. But a question existed as to whether this was possible given that the family assets were tied up in Hy-Vee stock. Anthony and his lawyer explained that the Hy-Vee shares were subject to transferability restrictions under Anthony's employment agreement and could only be sold if Anthony quit, was fired, or died. Denise's attorney asked Anthony if Hy-Vee would be willing to make an exception and allow the sale of some shares to facilitate the divorce. Anthony said no. Apparently suspicious of this answer, Denise's attorney talked to a Hy-Vee vice-president named John Briggs who allegedly said that Anthony was correct and that Hy-Vee did not purchase stock from its employees upon demand and that there were "no exceptions" to this company rule. (¶ 42.)
The "no exceptions" statement by Briggs is the central allegation in the complaint. Denise alleges it was false. She claims that Anthony and his employer knew that Anthony -- "at any time" (¶ 47) -- could simply ask the Hy-Vee Executive Committee to purchase the stock and Hy-Vee would do so. In short, the statement was part of a fraudulent scheme by Anthony and his employer to help Anthony get a better divorce settlement.
Denise alleges that she relied on the Briggs statement in two key respects. First, she dropped her demand for a lump-sum settlement and agreed to accept Hy-Vee stock. In fact, she says that during negotiations she became persuaded by Anthony's claim ...