Title: Wal-Mart Stores, Inc. v. AIG Life Insurance Co.

State: delaware

Issuer: Delaware Supreme Court

Document:

IN THE SUPREME COURT OF THE STATE OF DELAWARE 
 
WAL-MART STORES, INC., a Delaware § 
Corporation, and WACHOVIA BANK OF § 
GEORGIA, N.A., in its capacity as 
 
§ 
Trustee of the WAL-MART STORES, INC. § 
CORPORATION GRANTOR TRUST, 
§ 
 
 
 
§ 
No. 126, 2004      
 
Plaintiffs Below, 
 
§ 
 
Appellants, 
 
§ 
Court Below: Court of Chancery   
 
 
 
§ 
of the State of Delaware in and  
                        vs. 
 
§ 
for New Castle County 
 
 
 
§ 
AIG LIFE INSURANCE COMPANY, a 
§ 
C.A. No. 19875 
Delaware Corporation; HARTFORD LIFE § 
INSURANCE COMPANY, a Connecticut § 
Corporation; WESTPORT MANAGEMENT§ 
SERVICES, INC., a Delaware Corporation; § 
INTERNATIONAL CORPORATE   
§ 
MARKETING GROUP, LLC, a Delaware § 
limited liability company; NATIONAL 
§ 
BENEFITS GROUP, INC., dba MARSH 
§ 
FINANCIAL SERVICES, a Minnesota 
§ 
Corporation; SEABURY & SMITH, INC., § 
a Delaware Corporation; MARSH &  
§ 
McLENNAN NATIONAL MARKETING § 
CORPORATION, now known as J&H 
§ 
MARSH & McLENNAN PRIVATE   
§ 
CLIENT SERVICES, INC., a Delaware 
§ 
Corporation, 
 
 
§ 
  
 
 
 
§ 
 
 
Defendants Below,  
§ 
 
 
Appellees. 
 
§ 
 
 
 
Submitted: August 18, 2004 
 
 
Decided: 
November 4, 2004 
 
Before HOLLAND, BERGER and JACOBS, Justices. 
 
Upon Appeal from the Court of Chancery.  REVERSED AND REMANDED. 
 
 
 
 
Robert K. Payson and Gregory A. Inskip, Esquires, of Potter Anderson & 
Corroon LLP, Wilmington, Delaware; Of Counsel:  Michael Y. Horton (argued) 
and David S. Cox, Esquires, of Morgan, Lewis & Bockius LLP, Los Angeles, 
California; Paul A. Zevnik, Esquire, of Morgan, Lewis & Bockius LLP, 
Washington, DC; for Appellants. 
 
 
Richard D. Heins and Carolyn S. Hake, Esquires, of Ashby & Geddes, 
Wilmington, Delaware; Of Counsel:  James F. Jorden and Paul A. Fischer, 
Esquires, of Jorden Burt LLP, Washington, DC; for Appellee AIG Life Insurance 
Company. 
Elizabeth A. Wilburn, Esquire, of Blank Rome LLP, Wilmington, Delaware; 
Of Counsel:  Ian M. Comisky and Roger F. Cox, Esquires, of Blank Rome LLP, 
Philadelphia, Pennsylvania; for Appellee National Benefits Group, Inc. 
 
 
Edward P. Welch, Julie T. Saunders and Edward B. Micheletti, Esquires, of 
Skadden, Arps, Slate, Meagher & Flom LLP, Wilmington, Delaware; Of Counsel:  
Marco E. Schnabl and Michael S. Davi, Esquires, of Skadden, Arps, Slate, 
Meagher & Flom LLP, New York, New York; for Appellees Marsh Financial 
Services, Seabury & Smith, Inc., Marsh, Inc., and Marsh & McLennan National 
Marketing Corporation, now known as J&H Marsh & McLennan Private Client 
Services.
 
R. Franklin Balotti, Lisa A. Schmidt and Michael R. Robinson, Esquires, of 
Richards, Layton & Finger, P.A., Wilmington, Delaware; Of Counsel:  Barry A. 
Chasnoff (argued), and David R. Nelson, Esquires, of Akin Gump Strauss Hauer & 
Feld LLP, San Antonio, Texas; Michael Quigley and Jeffrey P. Kehne, Esquires, of 
Akin Gump Strauss Hauer & Feld LLP, Washington, D.C.; Michael Small, 
Esquire, of Akin Gump Strauss Hauer & Feld LLP, Los Angeles, California; for 
Appellees Hartford Life Insurance Company and International Corporate 
Marketing Group. 
 
 
Per Curiam:
         On September 3, 2002, the plaintiff below-appellant, Wal-Mart Corporation 
(“Wal-Mart”), brought an action in the Court of Chancery.  In its amended 
complaint Wal-Mart asserted legal and equitable claims arising out of insurance 
policies that Wal-Mart had purchased between 1993 and 1995 from the defendants, 
who are certain insurance brokers and insurance providers.  The Court of Chancery 
granted the defendants’ motion to dismiss the amended complaint, determining as 
a matter of law that all of Wal-Mart’s claims had accrued between 1993 and 1995, 
the period during which the policies were purchased.  The Court further concluded 
that there was no basis to toll the running of the three-year statute of limitations.  
Because Wal-Mart’s claims were found to be time-barred, the Court of Chancery 
granted the motion to dismiss. 
Wal-Mart appealed to this Court, contending that: (1) none of its claims 
accrued before October 19, 1999, a date less than three years before this Chancery 
action was filed; (2) even if Wal-Mart's claims did accrue before October 19, 1999, 
the statute of limitations was tolled at least until then; and (3) in any event, the 
motion to dismiss should have been denied because the issues of when the causes 
of action accrued and whether the statute of limitations was tolled were fact-
intensive and could not be decided on the face of the complaint.  
 We agree that the limitations defense poses issues that require a more 
developed record, for which reason this matter was improperly disposed of on a 
 
2
motion to dismiss.  Accordingly, we reverse the judgment of the Court of Chancery 
and remand the case for further proceedings. 
FACTS 
The Parties 
The pertinent facts, which for present purposes are assumed to be true, 
appear from the well-pleaded allegations of the complaint.1  Wal-Mart is a national 
retailer that is incorporated in Delaware and whose principal place of business is in 
Bentonville, Arkansas.2  The defendants are insurance providers and insurance 
                                                 
1 DEL. CH. R. 56; Grobow v. Perot, 539 A.2d 180, 187 (Del. 1988).  All references in this 
Opinion to the "complaint" are to the amended complaint. 
 
2 The co-plaintiff, Wachovia Bank of Georgia, is the trustee of the Wal-Mart Corporation 
Grantor Trust, which was established in December 1993 to purchase the insurance policies at 
issue in this case.  In this Opinion, both plaintiffs are referred to collectively as “Wal-Mart.”  
Wal-Mart v. AIG Insurance, C.A. No. 19875, 2004 WL 405913 (Del. Ch. Mar. 8, 2004) 
(hereinafter “Op.”) 
 
 
3
brokers from or through whom Wal-Mart purchased policies of insurance between 
1993 and 1995.3   
Facts Relating to the Dismissal Motion 
 
Wal-Mart’s claims arise out of its purchase from the insurer-defendants of 
some 350,000 corporate-owned life insurance (“COLI”) policies, under which 
Wal-Mart was named as the beneficiary.  Those COLI policies, which insured the 
lives of Wal-Mart’s employees, were purchased as part of a plan whereby the 
insurers granted Wal-Mart loans that were used to pay the premiums on the 
policies.  Wal-Mart would then deduct the interest payments on those loans from 
its income for purposes of reducing its federal income taxes.4  During the 1980s 
and early 1990s, many large corporate employers besides Wal-Mart had purchased 
COLI policies under similar tax-reducing COLI plans.   
                                                 
3 Defendant AIG Life Insurance Company (“AIG”) is a Delaware corporation with its principal 
place of business in Wilmington, Delaware.  Defendant Westport Management Services, Inc. 
(“Westport”) is a Delaware corporation with its principal place of business in Trumbull, 
Connecticut.  Westport served as AIG’s representative in connection with the policies at issue in 
this case.  Defendant Hartford Life Insurance Company (“Hartford”) is a Connecticut 
corporation with its principal place of business in Hartford, Connecticut.  Defendant 
International Corporate Marketing Group, LLC (“ICMG”) is a Delaware limited liability 
company with its principal place of business in Florham, New Jersey.  ICMG served as 
Hartford’s representative in connection with the policies at issue in this case.  In this Opinion, 
AIG, Hartford, and their respective representatives are referred to collectively as “the insurer-
defendants.”  Defendants Seabury & Smith, Inc., Marsh Financial Services, Marsh, Inc. and 
Marsh & McLennan National Marketing Corporation (“the Marsh entities”), and National 
Benefits Group, Inc. (“NBG”) acted as insurance brokers for Wal-Mart in obtaining the 
insurance policies at issue in this case.  In this Opinion, the Marsh Entities and NBG are referred 
to collectively as “the broker-defendants.” 
 
4 Another favorable benefit of the COLI plan was that any policy benefits paid out thereunder 
would be tax exempt. 
 
4
In August 1993, Wal-Mart retained the broker-defendants to advise it about 
using COLI policies to obtain tax benefits.  After proposals from several insurance 
companies were received, the broker-defendants recommended that Wal-Mart 
purchase COLI policies from AIG and Hartford.  The broker-defendants also 
recommended that Wal-Mart create and use a Georgia “grantor trust” as the 
vehicle to purchase the policies, so that Georgia law would govern any “insurable 
interest” issues that might arise after the policies were purchased.  The broker-
defendants advised Wal-Mart that Georgia law would provide a favorable result if 
any employee(s) challenged whether Wal-Mart had a legally valid insurable 
interest in the lives of its workers. 
 
Between 1993 and 1995, Wal-Mart purchased approximately 350,000 COLI 
policies from the insurer-defendants, and retained Marsh, Inc. to administer and 
service those policies.  Wal-Mart sought—and obtained—assurances from both the 
insurer defendants and the broker defendants that: (i) the policies complied with 
the Internal Revenue Code, (ii) future changes to the tax law were unlikely to 
impact the policies adversely, and  (iii) Wal-Mart had a valid insurable interest in 
the lives of its employees. 
 
Through 1995, Wal-Mart claimed the federal tax deductions as contemplated 
under the COLI plan.  In 1996, however, the legal landscape changed.  As part of 
the Health Insurance Portability and Accountability Act (“HIPAA”), Congress 
 
5
prospectively disallowed interest deductions for loans used to fund COLI plans.  
HIPAA also provided for “transitional relief” that allowed taxpayer companies to 
take deductions in 1997 and 1998 for up to a maximum of 20,000 COLI policies. 
HIPAA did not, however, disallow any deductions that were taken before January 
1, 1996.  In response to the HIPAA legislation, Wal-Mart immediately began 
“unwinding” its COLI policies, although it took whatever deductions for 1997 and 
1998 were allowed under HIPAA’s transitional relief provision.5 
 
Of importance to Wal-Mart's claims is that HIPAA eliminated the 
deductibility of interest payments for loans funding COLI policies prospectively, 
but did not disallow deductions taken before 1996; i.e., retrospectively.  In 1997, 
nonetheless, the United States Internal Revenue Service (“IRS”) brought several 
lawsuits in which it sought to disallow retrospectively COLI-related tax deductions 
that the defendants in those cases had taken before 1996.  In those lawsuits the IRS 
characterized the COLI programs as “sham transactions.”  Wal-Mart was not 
included among the companies that were named as defendants in the IRS lawsuits.  
The first of the IRS cases, Winn-Dixie Stores Inc. v. C.I.R.,6 was decided by 
the United States Tax Court on October 19, 1999.  In that case, the Tax Court 
disallowed deductions that were taken in 1993 for the interest that had accrued on 
                                                 
5 The unwinding process was completed in January 2000. 
 
6 113 T.C. 254 (1999), aff’d, 254 F.3d 1313 (11th Cir. 2001). 
 
6
Winn-Dixie’s COLI policies.  After the Winn-Dixie decision, two other federal 
courts retrospectively disallowed COLI tax deductions that had been taken before 
1996.7   After those adverse decisions were handed down, Wal-Mart negotiated a 
settlement with the IRS.  In that settlement, which was concluded in 2002, most of 
the COLI-related tax deductions that Wal-Mart had claimed before 1996 were 
retrospectively disallowed.8   
Separate and apart from the tax deductibility issue, beginning in 2001 Wal-
Mart found itself confronted with lawsuits brought by the estates of deceased 
employees, wherein the estates claimed that Wal-Mart had no legally valid 
insurable interest in its employees’ lives.  In August 2002, in one of these lawsuits, 
Mayo v. Hartford Life Ins. Co., the Court held that Texas law, rather than Georgia 
law, governed the insurable interest question, and that under Texas law Wal-Mart 
                                                 
7 American Elec. Power, Inc. v. U.S., 136 F.Supp.2d 762 (S.D. Ohio 2001), aff’d, 326 F.3d 737 
(6th Cir. 2003) (upholding IRS disallowance of deductions of interest paid on loans funding 
COLI plans); IRS v. CM Holdings, Inc., 254 B.R. 578 (Bankr. D. Del. 2000), aff’d, 301 F.3d 96 
(3d Cir. 2002) (upholding IRS claim for unpaid taxes after deductions taken for COLI policies). 
 
8 In its complaint, Wal-Mart alleges that the IRS was threatening litigation against it, and that in 
the face of the decisions in Winn-Dixie, In re CM Holding, and American Electric Power, Inc. 
Wal-Mart had little choice but to settle.  In their answering brief the defendants argue that Wal-
Mart “voluntarily” settled with the IRS, and point to cases decided after that settlement which 
found that the deductions were not sham transactions.  See, Dow Chem. Co. and Subsidiaries v. 
U.S., 250 F.Supp.2d 748 (E.D. Mich. 2003) appeal pending, No. 00-10331-BC (6th Cir.) (filed 
Oct. 10, 2003).  For purposes of a motion to dismiss, however, we accept as true all of the 
plaintiff’s well-pleaded facts.  It is for the trial court ultimately to resolve whether Wal-Mart 
should have settled with the IRS. 
 
 
7
had no valid insurable interest in the lives of its Texas employees.9  Similar 
lawsuits challenging Wal-Mart’s insurable interest in the employees' lives were 
pending in other jurisdictions at the time Wal-Mart filed its Court of Chancery 
action on September 3, 2002.10 
Procedural History 
Wal-Mart’s Chancery complaint alleges several claims arising out of both 
the retrospective disallowance of the COLI-related tax deductions and the adverse 
“insurable interest” litigation.  Specifically, Wal-Mart’s complaint asserts claims 
against all defendants for: (i) unjust enrichment and restitution, (ii) breach of 
fiduciary duty, (iii) equitable fraud, (iv) breach of contract, (v) violation of the 
Delaware Consumer Fraud Act, and (vi) declaratory relief.  Wal-Mart also asserts a 
separate claim against the broker defendants for negligence. 
With one possible exception, the gravamen of those claims is that the 
defendants failed to disclose material facts and risks of the COLI plan at the time 
that Wal-Mart, in reliance upon the defendants’ advice, purchased the COLI 
policies.  Wal-Mart contends, however, that one of its claims—unjust 
                                                 
9 220 F.Supp.2d 714 (S.D.Tex. 2002), aff’d, 354 F.3d 400 (5th Cir. 2004). The Mayo Court 
imposed a constructive trust in favor of the insured employees’ estates upon the policy benefits 
that had been paid to Wal-Mart under the COLI policies.   
 
10 See, Rice v. Wal-Mart Stores, Inc., C.A. No. 02-390-B (D.N.H., filed July 23, 2002); Waller v. 
AIG Life Ins. Co., C.A. No. 4:02-CV-120-Y (N.D. Tex., filed July 3, 2001); Miller v. Wal-Mart 
Stores, Inc., C.A. No. 02-4015 (S.D. Tex., filed Oct. 22, 2002); Lewis v. Wal-Mart Stores, Inc., 
C.A. No. 02-CV-944-EA(M) (N.D. Okla., filed Dec. 18, 2002). 
 
8
enrichment—rests upon a different (non-disclosure) basis, viz, frustration of 
commercial purposes, a ground that is not attributable to any wrongful conduct of 
the defendants.   
The relief that Wal-Mart seeks is an award of money damages equal to the 
“hard dollar losses” that Wal-Mart incurred by reason of the failure of the 
contemplated benefits of the COLI policies. Wal-Mart also seeks to recover all 
profits the defendants made in connection with the COLI transactions.  In addition 
to and apart from damages, Wal-Mart seeks a declaratory judgment that the 
defendants are liable for any future losses Wal-Mart may incur that are associated 
with the failed policies, including the costs of future “insurable interest” litigation 
to which Wal-Mart may be subjected.  Importantly, however, Wal-Mart does not 
seek to recover any COLI-related deductions that were prospectively disallowed 
under HIPAA.  Rather, Wal-Mart seeks to recover only those tax benefits that were 
disallowed retrospectively as a result of the adverse federal court rulings, plus the 
costs it incurred as a result of the insurable interest litigation.  
In December 2002, the defendants moved to dismiss Wal-Mart’s complaint 
on the ground that all Wal-Mart’s claims were time barred and (alternatively) that 
Wal-Mart’s complaint failed to state a claim upon which relief could be granted.  
The Court of Chancery granted the motion on the first ground, concluding as a 
 
9
matter of law that all of Wal-Mart’s claims were barred by 10 Del. C. § 8106, the 
applicable statute of limitations. 11 
The Decision of the Court of Chancery 
 
In reaching that result, the Court of Chancery determined that Wal-Mart’s 
claims had accrued between 1993 and 1995, and that accordingly, the action was 
commenced after the three-year limitations period had expired.  The Court also 
concluded that the running of the limitations period was not tolled because Wal-
Mart had been on inquiry notice of its claims more than three years before its 
lawsuit was commenced.   
 
In concluding that all of Wal-Mart’s claims had accrued at the time Wal-
Mart purchased the COLI policies—between 1993 and 199512—the Court 
identified as the common premise of all the claims (including the claim for unjust 
enrichment) Wal-Mart's contention that the defendants had failed to disclose the 
                                                 
11 Op. at 12, 14.  Having determined that the claims were time barred, the Court did not reach the 
defendants’ alternative ground for dismissal. 
 
12 Id. at 13. 
 
 
10
risks inherent in the COLI policies at the time those policies were purchased.13  
Because the claims had accrued by 1995, the Court held that Wal-Mart’s 
September 3, 2002 lawsuit was barred by the three-year statute of limitations. 
 
The Court of Chancery also determined as a matter of law that the statute of 
limitations had not been tolled because Wal-Mart’s claims were not inherently 
unknowable.14  The Court grounded that conclusion upon various news articles, all 
published between 1992 and 1995, that discussed certain risks related to COLI 
policies.  The Court also considered two technical advisory memoranda (“TAM”) 
that the IRS had issued to companies other than Wal-Mart.  Those TAMs 
expressed the IRS’s legal position that COLI interest deductions should be 
disallowed because they were “sham” transactions.15  Although these materials 
were extrinsic to Wal-Mart’s complaint, the Court did not treat those articles and 
TAMs as having converted the Rule 12(b)(6) motion into a motion for summary 
                                                 
13 Id. at 13-14.  The Court did not expressly determine whether Wal-Mart’s unjust enrichment 
claim was fault-based (in which case it would also be predicated upon the defendant’s alleged 
failure to disclose), or whether it was no-fault based (in which case the claim would be grounded 
upon Wal-Mart’s frustration of commercial purpose).  In a footnote, the trial court suggested, 
without deciding, that even if Wal-Mart had stated a claim for unjust enrichment predicated upon 
the doctrine of commercial frustration (in which case the claim would not accrue until Wal-
Mart’s commercial purposes had been frustrated) it could not recover under that theory because 
Wal-Mart had notice of the risks at the time of purchase, with the result that all risks had been 
contractually allocated to Wal-Mart.  Op. at 17, n 53. 
 
14 Id. at 18-19. 
 
15 Id. at 6-8, 18-19. 
 
 
11
judgment.  Instead, the Court took judicial notice of the articles and the TAMs, and 
proceeded to decide the motion under Rule 12(b)(6). 
Standard of Review 
 
This Court reviews de novo, for errors of law, the dismissal of a complaint 
under Court of Chancery Rule 12(b)(6).16  Under Rule 12(b)(6), the facts alleged in 
the complaint are taken as true and all inferences are viewed in the light most 
favorable to the non-moving party (here, Wal-Mart).17  A dismissal of the claims 
will be upheld only if it appears from the well-pleaded allegations of the complaint 
that the plaintiffs would not be entitled to relief under any set of facts that could be 
proven to support the claims asserted.18  We find, for the reasons discussed below, 
that the Court of Chancery erroneously dismissed Wal-Mart’s complaint. 
Accrual of Wal-Mart’s Claims 
A critical basis for the Court of Chancery’s conclusion that Wal-Mart’s 
claims were time-barred was its determination as a matter of law that all of Wal-
Mart’s claims had accrued at the time the COLI policies were purchased, i.e., 
between 1993 and 1995.  The Court found that the gist of Wal-Mart’s claims was 
the defendants’ alleged failure to disclose to Wal-Mart, at the time the policies 
                                                 
16 VLIW Tech., LLC. v. Hewlett-Packard Co., 840 A.2d 606, 610 (Del. 2003). 
 
17 See, Id. at 611. 
 
18 Id. at 610-11. 
 
12
were purchased, the material risks associated with the COLI policies, including the 
tax deductibility and the insurable interest risks.   
 
The starting point of the Court of Chancery's analysis (with which all parties 
agree) is that the applicable statute of limitations is 10 Del. C. § 8106, which 
imposes a three-year period of limitations on Wal-Mart’s tort, contract, and 
fiduciary duty claims; and that that three-year period applies by analogy to 
proceedings in equity.19  The Court further found that Wal-Mart's claim for unjust 
enrichment was also controlled by the three-year statute of limitations.20  
Accordingly, the Court concluded, for Wal-Mart’s lawsuit to have been timely 
filed, the claims must have accrued no earlier than September 3, 1999 (three years 
before Wal-Mart filed its action), because under Section 8106, the three-year 
period of limitations begins to run when the cause of action “accrues.” 21 
This Court has repeatedly held that a cause of action “accrues” under 
Section 8106 at the time of the wrongful act, even if the plaintiff is ignorant of the 
cause of action.22  As noted, the Court of Chancery found as a matter of law, that 
                                                 
19 Op. at 12 (citing 10 Del. C. § 8016 and Fike v. Ruger, 754 A.2d 254, 260 (Del. Ch. 1999), 
aff’d 752 A.2d 112 (Del. 2000)). 
 
20 Op. at 12 (citing Merck v. SmithKline Beecham Pharms. Co., C.A. No. 15443-NC, 1999 WL 
669354 at *42 (Del. Ch. Aug. 5, 1999), aff’d, 766 A.2d 442 (Del. 2000)). 
 
21 Op. at 13. 
 
22 SmithKline Beecham Pharms. Co. v. Merck & Co., 766 A.3d 442, 450 (Del. 2000); Issacson, 
Stolper & Co. v. Artisan’s Savings Bank, 330 A.2d 130, 132 (Del. 1974). 
 
13
the wrongful acts charged in the complaint occurred at the time Wal-Mart 
purchased the COLI policies.  Although Wal-Mart contends that that conclusion 
was improperly reached in the context of a Rule 12(b)(6) dismissal motion, we 
need not decide that question.  Even if it is assumed that Wal-Mart’s cause of 
action accrued by 1995 at the latest, the pleaded facts permit a reasonable inference 
that the statute of limitations was tolled, i.e., did not begin to run, until October 19, 
1999—less than three years before this lawsuit was filed.    
Tolling of the Statute of Limitations 
 
The trial court held as a matter of law that the statute of limitations period 
was not tolled as to Wal-Mart’s claims.  Even after a cause of action accrues, the 
“running” of the limitations period can be “tolled” in certain limited 
circumstances.23  Under the “discovery rule” the statute is tolled where the injury is 
“inherently unknowable and the claimant is blamelessly ignorant of the wrongful 
act and the injury complained of.”24  In such a case, the statute will begin to run 
only “upon the discovery of facts ‘constituting the basis of the cause of action or 
the existence of facts sufficient to put a person of ordinary intelligence and 
                                                 
23 Coleman v. PriceWaterhouseCoopers, LLC, 854 A.2d 838, 842-43 (Del. 2004) (discovery rule 
applied to malpractice action against accounting firm, because a layperson is unable to detect 
negligence in accounting practices); Layton v. Allen, 246 A.2d 794 (Del. 1968) (statute of 
limitations was tolled when both patient and doctor were unaware that a foreign object was left 
in the patient; the injury was inherently unknowable until the patient first experienced pain as a 
result of the object). 
 
24 Coleman, 854 A.2d at 842. 
   
 
14
prudence on inquiry which, if pursued, would lead to the discovery’ of such 
facts.”25 
The Court of Chancery held as a matter of law that Wal-Mart was on inquiry 
notice of its claims more than three years before it filed its Chancery action.  
Rejecting Wal-Mart’s contention that its claims were “inherently unknowable” 
before September 3, 1999, the Court cited a “barrage of relevant information” that 
(it held) was available to Wal-Mart and put Wal-Mart on inquiry notice of its 
claims.  The cited information included the TAMs issued by the IRS, as well as 
several newspaper articles that had been published during the mid 1990s. 
That conclusion was erroneous for three separate reasons.  First, the trial 
court was not free to consider the TAMs and newspaper articles on this Rule 
12(b)(6) motion, because these materials were neither attached to, nor incorporated 
by reference into, the complaint.  Matters extrinsic to a complaint generally may 
not be considered in a ruling on a motion to dismiss.26  Court of Chancery Rule 
12(b) provides that if the court considers matters outside the pleadings, the motion 
shall be “treated as one for summary judgment” and the parties must be given an 
opportunity to take discovery.  On a motion to dismiss, the Court may consider 
documents that are “integral” to the complaint, but documents outside the 
                                                 
25 Id. (quoting Becker v. Hamada, Inc., 455 A.2d 353, 356 (Del. 1982) (emphasis in original)). 
 
26 In re Santa Fe Pacific Corp. S’holder Litig., 669 A.2d 59, 68 (Del. 1995). 
 
 
15
pleadings may be considered only in “particular instances and for carefully limited 
purposes.”27  Here, Wal-Mart’s complaint did not refer to any newspaper articles or 
TAMs, and the record does not otherwise establish that these documents were 
publicly filed.28  Accordingly, the Court could not properly consider those 
materials, under judicial notice principles, to resolve conflicting factual inferences 
on a Rule 12(b)(6) motion to dismiss. 
 
Second, even if the articles and TAMs were properly before the Court, they 
do not conclusively demonstrate that Wal-Mart was on inquiry notice of its claims 
before September 3, 1999.  The cited articles, all published between 1992 and 
1995, discussed the existence of the COLI tax loophole and their use by many 
companies.  The articles also discussed proposed legislation that could 
prospectively eliminate the loophole.  But, the articles did not discuss retrospective 
disallowance of the deductions, which is the gravamen of Wal-Mart’s tax-related 
claims.  Moreover, on this record it is far from clear that the TAMs were sufficient 
                                                 
27 Id. at 69. 
 
28 See, DiLorenzo v. Edgar, C.A. No. 03-841-SLR, 2004 WL 609374 at *2 (D. Del. Mar. 24, 
2004) (On a motion to dismiss, the court may take judicial notice of the contents of documents 
required by law to be filed, and actually filed, with federal or state officials) (emphasis added); 
Southmark Prime Plus, L.P. v. Falzone, 776 F. Supp. 888, 891-92 (D. Del. 1991) (court could 
judicially notice contents of court records from another jurisdiction and SEC filings, but not 
letters sent by defendants because the letters addressed disputed facts); Coca-Cola v. Whistle Co. 
of America, 20 F.2d 261, 262 (D. Del. 1927) (court may not take judicial notice of the patents of 
prior art cited in motion to dismiss); In re Wheelbrator Technologies, Inc. S’holders Litig., C.A. 
No. 11495, 1992 WL 212595 (Del. Ch. Sept. 1, 1992) (publicly filed documents, including 
certificate of incorporation, are judicially noticeable on a motion to dismiss). 
 
 
16
to put Wal-Mart on inquiry notice of its tax-related claims against these 
defendants.  TAMs are IRS rulings issued to private companies.  As such, those 
rulings have questionable value either as binding or persuasive authority as to non-
parties.29  The record does not disclose whether these TAMs were publicly 
available before 1999, an important consideration because under 26 USCA § 
6110(g)(5), the Secretary of the Treasury is not invariably required to make 
technical advice memoranda publicly available. 
Third, and finally, neither the newspaper articles nor the TAMs contain any 
facts that would alert Wal-Mart to its claims relating to the insurable interest 
question.  The newspaper articles and TAMs do not discuss the insurable interest-
related issue, nor did the Court of Chancery make any specific determination of 
how Wal-Mart was placed on inquiry notice of its insurable interest-related claims. 
What the complaint does allege is that Wal-Mart did not settle the 
retrospective tax deduction claims with the IRS until 2002, and that no court had 
retrospectively disallowed the pre-1996 tax deductions until the Tax Court’s Winn-
Dixie decision was handed down on October 19, 1999.  The first case that 
challenged whether Wal-Mart had a legally valid insurable interest in its 
employees was not filed until 2001.  Wal-Mart alleges that it relied on the advice 
                                                 
29 See, Amtel, Inc. v. U.S., 31 Fed Cl. 598 (Fed. Cl. 1994), aff’d 59 F.3d 181 (Fed. Cir. 1995); 
Teichgraeber v. Comm’r of Internal Revenue, 64 T.C. 453 (1975) (TAM was not subject to 
discovery and was exempted from disclosure under 5 USCA § 522(b), and private letter rulings 
that may have been issued by IRS to other taxpayers were not relevant to taxpayers case).  
 
17
of the broker-defendants in establishing the Georgia Grantor Trust, and that its 
injuries resulting from the insurable interest litigation were inherently unknowable 
until at least one court had determined that Georgia law did not govern the 
insurable interest issue.  Those pleaded facts create a reasonable inference that 
Wal-Mart’s tax-related injuries were inherently unknowable before October 1999, 
and that Wal-Mart’s insurable interest-related injuries were inherently unknowable 
before 2002.  Those same pleaded facts also create a reasonable inference that 
Wal-Mart was blamelessly ignorant of the “wrongful acts.”  To be sure, the 
pleaded facts also create reasonable inferences to the contrary.  A Rule 12(b)(6) 
motion, however, is not a proper procedural vehicle to resolve conflicting 
inferences of fact. 
 
Accordingly, the Court of Chancery legally erred in deciding, as a matter of 
law, that the statute of limitations was not tolled. 
CONCLUSION 
 
For the foregoing reasons, the judgment of the Chancery Court is reversed, 
and this case is remanded for further proceedings consistent with this Opinion.