Opinion ID: 2489851
Heading Depth: 2
Heading Rank: 2

Heading: Defenses of Statute of Limitations and Res Judicata

Text: Scrushy contends that all the claims against him are barred by the three-year statute of limitations applicable in Delaware to claims of fraud and breach of fiduciary duty or, in the alternative, by the doctrine of res judicata. Regarding the statute-of-limitations defense, he insists that various public documents released by HealthSouth from 1996 to 1998 should have afforded HealthSouth's shareholders notice of certain transactions and conduct that form the basis of some of the claims in this action. Specifically, he states that forms filed publicly with the Securities and Exchange Commission disclosed the compensation and bonuses paid to Scrushy as well as loans made to [him] with an interest rate less than prime rate. Scrushy's brief, at 52. Additionally, he insists, the forms revealed the existence of an earlier derivative action on behalf of HealthSouthcommenced in 1998alleging that certain officers and directors had misrepresented or failed to disclose certain material facts concerning [HealthSouth's] business and financial condition. Scrushy's brief, at 53. According to Scrushy, this information should have placed Tucker on notice of any fraud and breach-of-fiduciary-duty claims he might have had no later than November 16, 1998, thus barring such claims asserted on August 28, 2002. Scrushy alternatively insists that Tucker's claims are barred by the doctrine of res judicata in that his claims and/or causes of action were brought, and some causes of action[, i.e., the `Buyback' claims,] were actually litigated to a final judgment, in [ In re HealthSouth Shareholders Litig., 845 A.2d 1096 (Del.Ch. 2003), aff'd, 847 A.2d 1121 (Del.2004) (table)]. Scrushy's brief, at 59 (emphasis added). Tucker and Cook contend that consideration of both these defenses is precluded by the doctrine of the law of the case. That is so, because, they say, Scrushy failed to assert them when this Court resolved the bonuses issue presented in Tucker, supra, where, in affirming the partial summary judgment against Scrushy for restitution of the amount paid to him in bonuses, [w]e conclude[d] that, under the law of either Delaware or Alabama, Scrushy was unjustly enriched by the payment of the bonuses, which were the result of the vast accounting fraud perpetrated upon HealthSouth and its shareholders. 955 So.2d at 1012. Tucker and Cook contend that both defenses should have been asserted in that first appeal of this case. According to Scrushy, the doctrine of the law of the case turns on whether the Court addressed the issue between the parties and does not apply because the defenses were not asserted in the first appeal. Reply brief, at 19-20. Scrushy's understanding of the law-of-the-case doctrine is inaccurate: it is not essential to the application of the doctrine that the issue be asserted in the first appeal. It is enough that the issue should have been raised in the first appeal. Under the law of the case doctrine, `[a] party cannot on a second appeal relitigate issues which were resolved by the Court in the first appeal or which would have been resolved had they been properly presented in the first appeal. ' Kortum v. Johnson, 786 N.W.2d 702, 705 (N.D.2010)(quoting State ex rel. North Dakota Dep't of Labor v. Riemers, 779 N.W.2d 649 (N.D.2010) (emphasis added)); see also Judy v. Martin, 381 S.C. 455, 458, 674 S.E.2d 151, 153 (2009) (Under the law-of-the-case doctrine, a party is precluded from relitigating, after an appeal, matters that were either not raised on appeal, but should have been, or raised on appeal, but expressly rejected by the appellate court. C.J.S. Appeal & Error § 991 (2008)....). The doctrine is the same in Alabama. [I]n a second appeal, ... a matter that had occurred before the first appeal, but that was not raised in the first appeal, [is] the law of the case. Life Ins. Co. of Georgia v. Smith, 719 So.2d 797, 801 (Ala. 1998) (summarizing the holding in Sellers v. Dickert, 194 Ala. 661, 69 So. 604 (1915)). [3] The doctrine in this form was applied in Bankruptcy Authorities, Inc. v. State, 620 So.2d 626 (Ala.1993), which was the second of two appeals in that case. There, this Court held that the failure of the appellant to raise an issue in its first appeal regarding the sufficiency of the evidence to support the judgment precluded review of that issue in the second appeal. [4] Procedurally, Scrushy had ample opportunity to assert the statute of limitations and the doctrine of res judicata as defenses to the partial summary judgment in the bonus case. The judgment in In re HealthSouth Shareholders Litigation, on which Scrushy relies for his res judicata defense, was affirmed by the Delaware Supreme Court on April 14, 2004. Scrushy did not file his cross-motion for a partial summary judgment in the bonus case until September 21, 2005, and the partial summary judgment was entered on January 3, 2006. Indeed, on May 27, 2004, Scrushy actually raised in the trial court the statute-of-limitations defense in his motion to dismiss the third and fourth amended complaints. In particular, he argued that any claim for unjust enrichment or innocent misrepresentation that seeks the return of [salary, bonuses, options and incentive compensation] paid to Mr. Scrushy more than two years prior to [August 28, 2002,] [was] barred by [the statute of limitations]. (Emphasis added.) However, he did not raise that defense again until after this Court had affirmed the partial summary judgment in the bonus case. Thus, because these defenses were not presented to this Court in the bonus case, we will not consider them here.