In the

United States Court of Appeals

For the Seventh Circuit

No. 09-1663

PRIME EAGLE GROUP LIMITED, as assignee of

the claims of Nakornthai Strip Mill Public

Company Limited,

Plaintiff-Appellant,

v.

STEEL DYNAMICS, INC.,

Defendant-Appellee.

Appeal from the United States District Court

for the Northern District of Indiana, Fort Wayne Division.

No. 1:08 CV 35—James T. Moody, Judge.

ARGUED OCTOBER 8, 2009—DECIDED JULY 27, 2010

Before EASTERBROOK, Chief Judge, and MANION and

TINDER, Circuit Judges.

EASTERBROOK, Chief Judge. Nakornthai Strip Mill Public

Company Limited began building a new steel mini-mill

in Thailand during the 1990s. When the project ran

into technical and financial difficulties, it asked Steel

Dynamics, a firm with expertise in developing and
2 No. 09-1663

running steel mini-mills, to lend assistance. Steel

Dynamics did so, and it also helped Nakornthai raise

capital. The mill was started and seemingly ran productively. But in late 1998 steel prices were down, the

economy of Southeast Asia was in recession, and Steel

Dynamics concluded that the venture was going to lose

money. It decided to withdraw, lest it become liable for

some of these losses. (Steel Dynamics had dispatched a

management team that had operational control of the

mill.) Prime Eagle Group, which sues as Nakornthai’s

assignee, contends in this litigation under the international-diversity jurisdiction, see 28 U.S.C. §1332(a)(2),

that Steel Dynamics chose fraud as its means of exit and

must pay damages in tort. The parties agree that Indiana

law supplies the rule of decision.

According to Prime Eagle, the fraud was telling

Nakornthai’s board of directors and principal investors

that the mini-mill had design flaws that would cost

about $100 million to fix. When the management team

under Steel Dynamics’ control began preparations for

these changes, major investors pulled the plug. The mill

was idle from December 1998 (when it was put out of

service by lightning) until it restarted in December 2003.

Meanwhile, Nakornthai was reorganized under Thai

insolvency law. In June 2002 it commissioned an engineering study, which two months later concluded that

the mill’s design and construction were sound. The mill

has operated successfully since its restart, without the

costly changes that Steel Dynamics had said were essential. Prime Eagle believes that Steel Dynamics must pay

$1 billion for losses suffered while the mill was idle or
No. 09-1663 3

operated at less than capacity, plus the costs of conducting the Thai reorganization proceeding.

Prime Eagle filed this suit in 2008, a decade after the

supposed fraud. (We have recited the complaint’s allegations, which may or may not be true.) The statute of

limitations in Indiana is six years. Ind. Code §34-11-2-7(4).

A claim accrues, and the statute of limitations begins to

run, “when a claimant knows or in the exercise of ordinary

diligence should have known of the injury.” Cooper Industries, LLC v. South Bend, 899 N.E.2d 1274, 1280 (Ind. 2009).

Steel Dynamics observes that Nakornthai knew of the

injury when the mill was closed; Prime Eagle replies that

Nakornthai did not know that it had been played false

until the consultant’s report in 2002. Cf. Merck & Co. v.

Reynolds, 130 S. Ct. 1784 (2010) (discussing the discovery doctrine for federal securities claims). Normally

knowledge of who injured you is essential, in addition

to knowledge of the injury’s existence. See Jay E.

Hayden Foundation v. First Neighbor Bank, N.A., No. 09-2781

(7th Cir. June 22, 2010), slip op. 8–9. Nakornthai knew

the “who” no later than it knew the existence of its injury.

Prime Eagle asks us to treat knowledge of a given person’s culpability, as well as that person’s causal role, as an

additional element of a claim’s accrual. That’s a less

common element. See United States v. Kubrick, 444 U.S. 111,

119–25 (1979). The district judge did not decide whether

a claim’s accrual is postponed until the victim knows

about the defendant’s fault, because Nakornthai had

actual knowledge on that front no later than September

1998, when its own president wrote the board of di-
4 No. 09-1663

rectors a detailed letter disagreeing with Steel Dynamics

and concluding that the mill should be restarted as is.

The board chose to fire its president instead and cannot

maintain that it was ignorant. The court found the suit

untimely and entered judgment for Steel Dynamics. 2009

U.S. Dist. LEXIS 13943 (N.D. Ind. Feb. 23, 2009).

Although the parties have filed lengthy briefs covering

many subjects, the only one that we need to discuss is

whether the president’s knowledge is imputed to

Nakornthai. If it is, then Nakornthai knew in fall 1998

that Steel Dynamics’ assertions were false, or at least

questionable enough to justify an investigation. The

report commissioned in 2002 could have been commissioned in 1998. (We put to one side the question why

Prime Eagle waited 51⁄2 years after Nakornthai received

the consultant’s report. Legal counsel had to have appreciated that a court might deem the claim to have accrued

earlier. Waiting until what is by one’s own calculation

the tail end of a period of limitations is a formula for

disaster.)

Nakornthai’s president during 1998 was John Schultes,

an engineer who had worked for USX (U.S. Steel) before

he joined Nakornthai as President and CEO in October

1995. That was well before Steel Dynamics became involved. No one contends that Schultes was beholden to

Steel Dynamics or under its influence. Schultes knew the

design of the plant and believed that Steel Dynamics

was wrong in asserting that major changes were required.

He told the board of directors this in a comprehensive

letter. He was fired for his troubles—but his view was
No. 09-1663 5

vindicated by the consultant’s report in 2002 and the

successful restart of the mill in 2003.

Corporations do not have brains, but they do have

employees. One fundamental rule of agency law is that

corporations “know” what their employees know—at

least, what employees know about subjects that are

within the scope of their duties. (What a mailroom employee knew, or thought he knew, about the plant’s

design would not be imputed to Nakornthai.) Schultes

knew in 1998 that Steel Dynamics was not giving

Nakornthai accurate information; therefore Nakornthai

itself knew this. See EEOC v. G-K-G, Inc., 39 F.3d 740, 748

(7th Cir. 1994); William Meade Fletcher, Cyclopedia of the

Law of Corporations §811 (2010 ed.) (“notice to and knowledge of the president of a corporation relating to its

affairs and business is notice to and knowledge of the

corporation”). And Nakornthai’s injury began (and the

claim thus accrued) no later than July 1999, when its

investors withdrew their support, left the plant idle,

and threw the firm into insolvency.

Prime Eagle says that this is not so, because Schultes

was “in an extremely diminished capacity.” Presumably

this does not mean that he was on the verge of insanity.

What Prime Eagle means is that he had lost the board’s

confidence and was on his way out. But the board has

itself to blame. You can’t stare the truth in the face, disbelieve it, and then claim to have been ignorant. See Acme

Propane, Inc. v. Tenexco, Inc., 844 F.2d 1317 (7th Cir. 1988)

(a truthful written disclosure prevents a claim of reliance

on oral deceit). Conflicting assertions (Schultes on one
6 No. 09-1663

side, Steel Dynamics on the other) may leave a person in

doubt, but there are means to resolve doubt, such as

the consultant’s report commissioned in 2002. When

“ordinary diligence” (see Cooper Industries) following a

notice would expose the untruth, the plaintiff has all

required knowledge.

The common law of agency recognizes only two exceptions to the proposition that an employee’s knowledge of a matter within the scope of his duties is imputed

to the employer: One is that the employee was acting

adversely to the principal’s interests, and the other is

that the employee was subject to a duty to a third

party not to disclose the information to the principal. See

Restatement (Third) of Agency §5.03 (T.D. 6, 2005). Neither

the American Law Institute nor any state’s judiciary

thinks that there is, or should be, a third exception, for

employees who have lost the board’s confidence and are

soon to be shown the door. If Prime Eagle wanted to

argue for the creation of such an exception, it should

have sued in state rather than federal court. We must

take state law as we find it.

Prime Eagle suggests that, when the reorganization

began, and a new set of investors took over (the old bondholders’ claims were converted to equity, and new debt

capital was raised), Nakornthai effectively “forgot” what

the board had been told in 1998. The board members

to whom Schultes passed the information were no longer

there; Schultes himself was gone. The common law of

agency does not provide for corporate forgetfulness,

however; information is a corporate asset that does not
No. 09-1663 7

vanish when investors elect a new board. A corporation

is a continuing entity as the board changes, just as

the United States of America is a continuing entity governed by legal texts adopted in 1788 and 1791, even

though George Washington is no longer the President

and James Madison no longer sits in the House of

Representatives. More: if Schultes’ report drops out of

the picture, then Steel Dynamics’ statements do too; it

is not possible to adopt a rule that turnover on the

board causes selective corporate amnesia.

Prime Eagle argued in the district court that Steel

Dynamics is equitably estopped to plead the statute of

limitations, but it has not contested on appeal the

judge’s adverse decision. It does argue for equitable

tolling during its insolvency, but it misunderstands the

doctrine. Equitable tolling does not restart the period of

limitations, as Steel Dynamics supposes. Instead it

permits deferral of suit until the tolling event ceases

and requires diligent action thereafter. See, e.g., Pace v.

DiGuglielmo, 544 U.S. 408, 418–19 (2005); Cada v. Baxter

Healthcare Corp., 920 F.2d 446 (7th Cir. 1990); Jay E.

Hayden Foundation, slip op. 10–11. Nakornthai was out

of bankruptcy, and had its mill running, with at least

eight months left in the period of limitations, even on the

earliest possible accrual date. (Steel Dynamics contends

that the first injury occurred in August 1998.) Nakornthai

waited more than four years after the success of its mill

put the lie to Steel Dynamics’ analysis, and 51⁄2 years

after the consultant reported that the mill would run

just fine as is. Prime Eagle has been anything but dili-
8 No. 09-1663

gent and cannot use equitable tolling to justify the

untimely filing.

AFFIRMED

7-27-10