Opinion ID: 391417
Heading Depth: 2
Heading Rank: 1

Heading: Judgment on the Merits/Parties in Privity/Issues Determined.

Text: 10 Nathan's first contention is that a dismissal based upon the statute of limitations is not a decision on the merits. We disagree. A summary judgment on the basis of the defense of the statute of limitations is a judgment on the merits. Summary dismissal on this basis requires that no genuine issue of material fact exists as to whether the suit was commenced in a timely fashion and whether the plaintiff knew or had reason to know of the facts giving rise to his cause of action. Sperry v. Barggren, 523 F.2d 708 (7th Cir. 1975); Godbold v. Federal Crop. Ins. Corp., 365 F.Supp. 836 (D.Miss.1973). 11 The district court's summary dismissal of Singer on statute of limitations grounds was a decision on the merits. In Singer, the facts were uncontradicted. The defendants were indicted and convicted. The indictments were disclosed in the 1970 Annual Report. Consequently, Singer had reason to know the facts underlying his complaint as of the dissemination date of the Annual Report. Therefore, there is no issue of material fact concerning the timeliness of Singer's action. 12 Furthermore, in shareholder derivative actions arising under Fed.R.Civ.P. 23.1, parties and their privies include the corporation and all nonparty shareholders. Dana v. Morgan, 232 F.2d 85, 89 (2d Cir. 1916); Stella v. Kaiser, 218 F.2d 64 (2d Cir. 1954); Ratner v. Paramount Pictures, Inc., 6 F.R.D. 618 (S.D.N.Y.1942). Though Nathan was not a party to the Singer action, nonparty shareholders are bound by judgments if their interests were adequately represented. 13 The district court necessarily determined all the relevant issues in Singer. The district court construed Singer's complaint to allege a cause of action under former Michigan Statutes Annotated § 21.47 (M.C.L.A. § 450.47). 4 This section permitted a shareholder, on behalf of the corporation, to sue a director or officer for breach of his fiduciary duties to the corporation when the corporation has been or will be injured or damaged as a result of the director's or officer's delinquency. The section provided a limitations period of six years from the occurrence of the breach or two years from its discovery by the plaintiff, whichever occurs sooner. Under Section 27A.5827 (M.C.L.A. § 600.5827) 5 the limitations period commences when the action accrues and the action accrues at the time the wrong upon which the claim is based was done regardless of the time when the damage results. 6 14 In Singer, the district court held that under Section 21.47 (M.C.L.A. § 450.47), the limitations period expired by late March or early April 1973 (two years from the mailing of the 1970 Annual Report to Fruehauf shareholders). In any event, the court concluded that any shareholder derivative action against defendants Rowan and Grace was barred in 1971 (six years after the occurrence of the misconduct) or in 1973 (two years after its discovery). Detroit Gray Iron & Steel Foundries, Inc. v. Martin, 362 Mich. 205, 106 N.W.2d 793 (1961). 7 Because the statute of limitations issue was actually and necessarily decided in Singer, Nathan may not relitigate it. 15