IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

WILLIAM E. HUGHES III, et al., :

Plaintiffs, : CIVIL ACTION

:

:

v. :

:

GEORGE P. BROWN INVESTMENT :

ADVISORS, INC., et al., : No. 03-4668

Defendants. :

MEMORANDUM

Schiller, J. November 24, 2010

In this diversity action, Plaintiffs William E. Hughes III and Patricia E. Hughes, husband

and wife (collectively, “the Hugheses”), allege that their former investment advisor, George P.

Brown Investment Advisors, and its employee, George P. Brown, provided deficient financial

advice that ultimately resulted in them losing approximately $1 million. Through an “Asset

Protection Trust” arrangement facilitated by Defendants, Plaintiffs’ $1 million investment ended

up in the Evergreen Fund, which declared bankruptcy in Florida in 2001. Currently before the

Court is Defendants’ motion for summary judgment, which was renewed following a six-year

period during which this matter was placed in suspense. The motion is granted for the reasons

that follow. 

I. BACKGROUND

William E. Hughes III is a retired general contractor who lives in New Jersey. (Defs.’

Mot. for Summ. J. Ex. I [William Hughes Dep. 237-39].) Patricia Hugues is a former nurse and

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real estate agent. (Id. Ex. J [Patricia Hughes Dep. 68-69].) George P. Brown Investment

Advisors, Inc. (“BIA”) is a Pennsylvania corporation founded in 1985. (Id. Ex. G [George

Brown Dep. at 6, 17].) George P. Brown is the founder and part-owner of BIA. (Id. at 18.) BIA

provides asset planning and investment advisory services. (Id. at 23-24.) 

On March 28, 1997, George Brown met with the Hugheses to discuss devising an estate

plan for them. (Pls.’ Opp’n to Defs.’ Mot. for Summ. J. Ex. A [Letter from George Brown to the

Hugheses dated Apr. 1, 1997].) The estate plan included an “Asset Protection Trust” that was

designed to protect the Hugheses’ liquid assets. (Id.) At this meeting, George Brown provided

information that Surety Bank and Trust (“Surety”), an entity located in the Bahamas, would serve

as trustee for the asset protection trust. (Id.) George Brown also provided information about

another offshore entity, the “Honor Fund,” as a possible investment, which Brown represented as

a “U.S. Government Mortgage-backed securities portfolio.” Id. The Hugheses moved forward

with the plan and proceeded to establish the asset protection trust with Surety. (William Hughes

Dep. 71, 183; George Brown Dep. 74.) William Hughes settled the asset protection trust on or

about May 30, 1997 by wiring the sum of $1,000,800 to Surety. (Pls.’ Opp’n to Defs.’ Mot. for

Summ. J. Ex. N [fax from Surety to William Hughes dated June 3, 1997].) Of that sum, $1

million—the entirety of the Hugheses’ trust investment—was invested in Honor Fund at the

Hugheses’ direction. (Id. Ex. 13 [certificate of units purchased issued by Honor, F.A.].) 

Defendants received referral fees from Surety for directing the Hugheses to the Honor Fund.

(George Brown Dep. 37-38.) The Honor Fund was the only investment option offered for the

asset protection trust. (Id. at 41-42.) The Hugheses received regular interest payments from

Surety from 1997 to September 2000 based on Surety’s investment in the Honor Fund. (Defs.’

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Mot. for Summ. J. Ex. T [Client Statement from Surety].) 

In October of 2000, the Hugheses received a check for the first time from an “Evergreen

Fund” instead of their usual payor, Surety. (Pls.’ Opp’n to Defs.’ Mot. for Summ. J. 10.) After

asking a BIA employee about this, the Hugheses were told that Surety was going out of business,

and that a new trustee would have to be appointed for the asset protection trust. (Id.) The

Hugheses therefore executed documents appointing a new trustee, the Grenadines Trust and

Management Company. (Id.) In December of 2000, George Brown informed the Hugheses that

the Honor Fund was merging with the Evergreen Fund, and that this meant that their investment

would thereafter generate a variable return rather than a stable return. (George Brown Dep. 65-

66; 78; 115-16; 155-156.) George Brown informed the Hugheses that the Evergreen Fund was

allowing its investors an ability to “cash out” without incurring an early withdrawl penalty if

investors were not interested in continuing with the Evergreen Fund. (Id. at 61, 114.) With the

assistance of BIA, the Hugheses attempted to liquidate their investment in the Honor

Fund/Evergreen Fund prior to December 31, 2000. The Hugheses never received their money. 

(Patricia Hughes Dep. 56; William Hughes Dep. 170-72; George Brown Dep. 118.) On January

23, 2001, the Evergreen Fund filed for bankruptcy protection in the United States Bankruptcy

Court for the Middle District of Florida, allegedly due to fraud perpetrated by its managers. 

(Defs.’ Mot. for Summ. J. Ex. Y [Notice of Evergreen Fund bankruptcy dated Jan. 24, 2001]; Ex.

Z [Orlando Sentinel article dated Feb. 24, 2001].) As a result of the bankruptcy, a large portion

of the Hugheses’ investment has been lost. (Compl. 14) 

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II. STANDARD OF REVIEW

Summary judgment is appropriate when the admissible evidence fails to demonstrate a

dispute of material fact and the moving party is entitled to judgment as a matter of law. Fed. R.

Civ. P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). When the moving

party does not bear the burden of persuasion at trial, it may meet its burden on summary

judgment by showing that the nonmoving party’s evidence is insufficient to carry its burden of

persuasion. Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986). Thereafter, the nonmoving

party demonstrates a genuine issue of material fact if sufficient evidence is provided to allow a

reasonable finder of fact to find for the nonmoving party at trial. Anderson, 477 U.S. at 248. In

reviewing the record, “a court must view the facts in the light most favorable to the nonmoving

party and draw all inferences in that party’s favor.” Armbruster v. Unisys Corp., 32 F.3d 768,

777 (3d Cir. 1994). A court may not make credibility determinations or weigh the evidence in

making its determination. See Reeves v. Sanderson Plumbing Prods., 530 U.S. 133, 150 (2000);

see also Goodman v. Pa. Tpk. Comm’n, 293 F.3d 655, 665 (3d Cir. 2002).

III. DISCUSSION

The Hugheses articulate four causes of action. Counts I and II of the Complaint charge

Defendants with negligent misrepresentation and negligence, alleging that in the course of their

recommendations, George Brown and BIA should have known that the assets of the Honor Fund

were not invested in U.S. Government mortgage-backed securities, and that the assets of the

Honor fund would never be sufficient to pay the Hugheses back their original investment. 

Counts III and IV allege breach of contract and breach of the covenant of good faith and fair

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dealing arising out of the Hughes-BIA investment advice relationship. Defendants argue, inter

alia, that both Plaintiffs’ tort and contract claims are barred by the applicable statutes of

limitations. 

A. The Hugheses’ Negligent Misrepresentation and Negligence Claims are

Time-Barred

The parties agree that the Hugheses’ negligent misrepresentation and negligence claims

are subject to a two-year statute of limitations. 42 Pa. Cons. Stat. §§ 5524 (2) & (7). This action

was filed in the Montgomery County Court of Common Pleas on June 10, 2003 before being

removed to this Court. The Hugheses’ tort claims are thus timely only if the causes of action

accrued no earlier than June 10, 2001. Defendants contend that the Hugheses were on notice of

potential claims against them well before June of 2001. The Hugheses dispute this contention,

and also argue that Defendants should be estopped from invoking the statute of limitations.

1. The Discovery Rule Does Not Toll the Statute of Limitations

Under Pennsylvania law, the statute of limitations “begins to run as soon as the right to

institute and maintain suit arises,” which is ordinarily when the injury occurs. Lazarski v.

Archdiocese of Phila., 926 A.2d 459, 461 (Pa. Super. Ct. 2007); Drelles v. Mfr. Life Ins. Co., 881

A.2d 822, 831 (Pa. Super. Ct. 2005). Mere “mistake, misunderstanding, or lack of knowledge in

themselves do not toll the running of the statute,” but the discovery rule may toll the statute if,

despite the exercise of reasonable diligence, “the injury or its cause was neither known nor

reasonably knowable.” Drelles, 881 A.2d at 831. Reasonable diligence means “a reasonable

effort to discover the cause of an injury under the facts and circumstances present in the case.”

Toy v. Metro. Life Ins. Co., 863 A.2d 1, 7 (Pa. Super. Ct. 2004). The party who invokes the

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discovery rule has the burden of proving its applicability by establishing he acted with reasonable

diligence in determining the fact and cause of his injury yet was unable to ascertain it. Weik v.

Estate of Brown, 794 A.2d 907, 909 (Pa. Super. Ct. 2002). The application of the discovery rule

is ordinarily a factual issue for a jury. Id. However, where “reasonable minds would not differ in

finding that a party knew or should have known on the exercise of reasonable diligence of his

injury and its cause,” a court may determine that the discovery rule does not apply as a matter of

law. Fine v. Checcio, 870 A.2d 850, 858-59 (Pa. 2005).

Here, there can be no debate that Plaintiffs knew they had suffered injury well before

June of 2001, having been aware of the Evergreen Fund bankruptcy in January of 2001. (William

Hughes Dep. 205-06.) Therefore, the only remaining inquiry is when the Hugheses were able, or

should have been able “in the exercise of reasonable diligence” to ascertain the factual bases of

their claims that their losses were caused by Defendants’ allegedly negligent conduct. 

 With regard to the negligent misrepresentation count, the Hugheses allege that

Defendants had reason to know and knew that: (1) “the assets of the Honor Fund, now the

Evergreen Fund, were not invested in guaranteed U.S. Government Mortgage-backed Securities

Funds” and (2) the assets of the fund “would never be sufficient to pay over to . . . the Hugheses .

. . their initial principal investment in the ‘Asset Protection Trust’ upon maturity of their share in

the Honor Fund in 2002, or at any time that withdrawal of funds would have been requested prior

to the maturity date.” (Compl. ¶¶ 45-46.) The negligence count contains allegations that

Defendants failed to exercise reasonable care in giving the Hugheses investment advice. (Id. ¶¶

52-55.) 

The Hugheses appear to contend that they only “discovered” they might have claims

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against Defendants as late as December 2003. However, the evidence establishes that the 1

Hugheses were fully aware, or, at a minimum, should have been aware, that they had potential

claims arising from the above allegations against Defendants well before June of 2001. Mr.

Hughes recalled multiple conversations with George Brown wherein Mr. Hughes explained that

he would “have to sue” Brown if he did not “get [his] money back.” (William Hughes Dep.

199). Mr. Hughes testified that he had these conversations “from the time [the Hugheses] found

out that they [the Evergreen Fund] were bankrupt.” Id. at 203-04. This admission belies the

Hugheses’ contention that they were not aware of a potential cause of action until much later.

Also, the Hugheses learned about the Evergreen bankruptcy in January or February of

2001. (William Hughes Dep. 205-06.) This information should have put the Hugheses on

notice that the assets they invested may have been substantially lost. Indeed, from February to

May 2001, there were multiple reports in the press indicating that the Evergreen Fund’s assets

might be lost to investors and that the fund’s assets may have been misappropriated. (Defs.’ Mot.

for Summ. J. Ex. Z [Orlando Sentinel Article dated Feb. 24, 2001]; Ex. CC [Orlando Sentinel

article dated May 24, 2001].) Mr. Hughes received these articles. (William Hughes Dep. 210;

Defs.’ Mot. for Summ. J. Ex. DD [Letter from Michael Tessitore, Esq. to the Hugheses dated

May 30, 2001 enclosing Orlando Sentinel article dated May 24, 2001].) The record supports the

conclusion that a reasonable investigation could have readily uncovered the facts underlying the

Hugheses’ negligent misrepresentation and negligence claims. 

Additionally, the Hugheses were informed by George Brown in December of 2000 that

the Honor Fund was going to be combined and/or merged with the Evergreen Fund and that the

1. This is inexplicable given that this lawsuit was filed in June of 2003.

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Evergreen Fund would yield a variable instead of a stable return. (Pls.’ Opp’n to Defs.’ Mot. For

Summ. J. 10; Brown Dep. 115-16.) At this point, through reasonable diligence, the Hugheses

could have taken steps—certainly prior to June of 2001—to inform themselves that their money

was no longer invested in U.S. government-backed securities, which had been represented as a

key feature of the Honor Fund. (Letter from George Brown to the Hugheses dated April 1,

1997.) 

The Court thus concludes that reasonable minds could not differ in finding that the

Hugheses “knew or should have known on the exercise of reasonable diligence of [their] injury

and its cause,” and that they are not entitled to benefit from the discovery rule as a matter of law. 

See Weik, 794 A.2d at 909. 

2. The Doctrine of Fraudulent Concealment Does Not Toll the Statute of

Limitations

The Hugheses next argue that Defendants are estopped from asserting the statute of

limitations under the doctrine of fraudulent concealment. (Pls.’ Opp’n to Defs.’ Mot. for Summ.

J. 18.) “[I]n order for fraudulent concealment to toll the statute of limitations, the defendant must

have committed some affirmative independent act of concealment upon which the plaintiff[s]

justifiably relied.” Kingston Coal Co. v. Felton Min. Co., 690 A.2d 284, 291 (Pa. Super. Ct.

1997). The plaintiff bears the burden of proving fraudulent concealment by clear and convincing

evidence, and must “show that he exercised reasonable diligence in attempting to uncover the

relevant facts.” Forbes v. Eagleson, 228 F.3d 471, 487 (3d Cir.2000); Fine, 870 A.2d at 860. As

with the discovery rule, “the fraudulent concealment doctrine does not toll the statute of

limitations where the plaintiff knew or should have known of his claim despite the defendant's

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misrepresentation or omission.” Mest v. Cabot Corp., 449 F.3d 502, 516 (3d Cir. 2006).

Plaintiffs’ fraudulent concealment argument fails because there is no evidence that

Defendants committed any “affirmative independent act of concealment.” See Kingston Coal,

609 A.2d at 284. 

After the bankruptcy filing, from 2001 to 2003, the Brown Defendants engaged in various

activities that the Hugheses contend were intended to induce them to “forebear from instituting

suit” against Defendants. (Pls’ Opp’n to Defs. Mot. for Summ. J. 21.) For example, BIA

arranged and paid for legal counsel to represent the Hugheses’ interest in the Evergreen Fund

bankruptcy. (Letter from Michael Tessitore, Esq. to the Hugheses dated May 11, 2001.) 

Additionally, George Brown made arrangements to have both William and Patricia Hughes

placed on the payroll of different foundations with which he was involved. (Pls’ Opp’n to Defs.

Mot. for Summ. J. Ex. 9 [Letter from George Brown to the Hugheses dated Jan. 24, 2002].) BIA

also made payments directly to the Hugheses from its operating account. (Id. Ex. 11 [copy of

check from BIA to William Hughes dated December 2, 2002]; Ex. 12 [fax transmittal with Form

1099 from BIA to William Hughes reflecting payment to William Hughes during 2003].)

While the Hugheses may have hoped that these efforts would help them recover some

money from Defendants, thus avoiding a costly lawsuit, none of these activities constitutes

“fraud, deception or concealment of facts” sufficient to invoke the fraudulent concealment

doctrine. See Baselice v. Franciscan Friars Assumption BVM Province, Inc., 879 A.2d 270, 278

(Pa. Super. Ct. 2005). Indeed, Plaintiffs fail to identify a single act of concealment committed by

Defendants. See D.D. v. Idant Labs., 374 F. App’x 319, 323 (3d Cir. 2010) (holding that

fraudulent concealment doctrine did not apply when the plaintiff did “not identify the affirmative

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independent act of concealment on which she relied,” or what it was in the defendant’s

communications that was fraudulent).

Finally, Defendants’ payments and offers to pay the Hugheses are insufficient to invoke

the doctrine of fraudulent concealment. See Belfi Bros. & Co. v. Safeco Ins. Co. of Am., Civ. A.

No. 94-0844, 1994 WL 591762, at *5 (E.D. Pa. Oct. 28, 1994) (“An openness to amicable

settlement, a failure to deny a claim without additional inducement to delay legal action, and an

admission of a partial balance without promise of payment do not individually or collectively rise

to a level of activity that can be termed fraudulent, deceptive or concealing.”). 

B. The Hugheses’ Contract and Breach of Duty of Good Faith Claims are TimeBarred

1. Breach of Contract

The Hugheses’ contract claims are governed by 42 Pa. Cons. Stat. § 5525(3) (claims on

an express contract not in writing). However, in Pennsylvania, an “important limitation on

pleading malpractice claims . . . under a contract theory . . . is that a malpractice plaintiff may not

sidestep the two-year limitation on tort actions by pleading tort claims as breaches of contract.”

Saferstein v. Paul, Mardinly, Durham, James, Flandreau & Rodger, P.C., Civ. A. No. 96-4488,

1997 WL 102521, at *5 (E.D. Pa. Feb. 28, 1997). Moreover, claims “do not fall within the

four-year contract limitation period merely because a contract may have existed between the

parties, or because a contract between a plaintiff and a professional obliged the professional to

exercise reasonable care.” Knopick v. Connelly, Civ. A. No. 09-1287, 2009 WL 5214975, at *5

(M.D. Pa. Dec. 29, 2009). If this were the case, “the two-year limitation period for professional

negligence claims would be a legal nullity.” Id.

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 Plaintiffs’ claims properly sound in tort, not contract. The Hugheses allege, inter alia,

that Defendants failed to “provide competent, reasoned, and researched investment advice, per its

agreement with Plaintiff[s],” and that Defendants “fail[ed] to devise an ‘Asset Protection Trust’ .

. . so that their liquid assets would be protected.” (Compl. ¶¶ 65-66.) As a result, the Hugheses

allege, “Plaintiff[s] have lost . . . One Million Dollars.” (Id. ¶ 65.) These allegations amount to a

classic recitation of the elements of negligence: a duty; a breach of that duty; causation; and

damages. See French v. Commonwealth Assocs., 980 A.2d 623, 631 (Pa. Super. Ct. 2009)

(applying elements to professional negligence claim). Simply put, the Hugheses contend that

they received bad investment advice, that Defendants breached a duty to provide good

investment advice, and that they have suffered damages as a result. Accordingly, the Hugheses’

claims are governed by a two-year statute of limitations, not a four-year limitations period. See

42 Pa. Cons. Stat. §§ 5524(2) & (4). For the reasons discussed above, any negligence claims are

time-barred.

2. Breach of the Covenant of Good Faith and Fair Dealing

The Hugheses’ claim for breach of the covenant of good faith and fair dealing must be

dismissed. To the extent Pennsylvania courts recognize an independent cause of action for

breach of a good-faith duty, “it arises under the law of contracts, not under the law of torts.”

Chrysler Credit Corp. v. B.J.M., Jr., Inc., 834 F. Supp. 813, 841-42 (E.D. Pa. 1993) (citing

Creeger Brick and Bldg. Supply Inc. v. Mid-State Bank and Trust Co., 560 A.2d 151, 153 (Pa.

1989)). A good-faith claim requires a viable breach of contract claim. See Marci’s Fun Food,

LLC v. Shearer’s Foods, Inc., Civ. A. No. 10-188, 2010 WL 3982290, at *8 (W.D. Pa. Oct. 8,

2010). Accordingly, because the Hugheses’ contract claim is properly characterized as a

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professional negligence claim, their claim for breach of the covenant of good faith and fair

dealing cannot stand. 

IV. CONCLUSION

“Under the law of Pennsylvania, it is the duty of the one asserting a cause of action to use

all reasonable diligence to inform himself or herself properly of the facts and circumstances upon

which the right of recovery is based and to institute suit within the prescribed statutory period.”

Ciccarelli v. Canadian Mines, Ltd. 757 F.2d 548, 556 (3d Cir. 1985). In light of this duty, the

Court concludes that as a matter of law that Plaintiffs failed to file their complaint within the

statutory limitations period and that there exists no basis for tolling the statute of limitations. An

appropriate Order will be docketed separately.

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