# Alan Schmidt v. John Skolas > Court of Appeals for the Third Circuit · October 17, 2014 · 770 F.3d 241 URL: https://www.frixlaw.com/law-library/cases/9804285 ## Case - **Full name:** Alan W. SCHMIDT, on Behalf of Himself and in a Representative Capacity on Behalf of All Others Similarly Situated and Derivatively on Behalf of Genaera Corporation, Appellant v. John A. SKOLAS; Leanne Kelly; John L. Armstrong, Jr.; Zola B. Horovitz, Ph. D.; Osagie O. Imasogie; Mitchell D. Kaye; Robert F. Shapiro; Paul K. Wotton; Robert Deluccia; David Luci; Steve Rouhandeh; Jeffrey Davis; Mark Alvino; Genaera Liquidating Trust; Biotechnology Value Fund, Inc.; Ligand Pharmaceuticals, Inc.; Xmark Capital Partners, LLC; Argyce LLC; Ohr Pharmaceuticals; John L. Higgins; Genaera Corporation; SCO Financial Group; Dipexium Pharmaceuticals, LLC; MacRochem Corporation; Access Pharmaceuticals, Inc.; Mark N. Lampert - **Court:** Court of Appeals for the Third Circuit - **Decided:** October 17, 2014 - **Citations:** 770 F.3d 241; 2014 U.S. App. LEXIS 19889; 2014 WL 5303002 - **Precedential status:** Published - **Opinion:** Dissent by Rendell - **Judges:** Rendell, Greenaway, Sloviter - **Cited by:** 1,178 later opinions in the Frix Law Library ## Citator (automated) - No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases. - Full citator and citing cases: https://www.frixlaw.com/law-library/cases/9804285 ## How later opinions describe it (automated extraction) - explaining that while generally a defendant pleads “an affirmative defense, like the statute of limitations defense, in the answer, not on a motion to dismiss[,]” a movant may raise a timeliness defense “by a Rule 12(b)(6) motion . . . if the time alleged in the statement of a… - holding that a district court erred in granting a motion to dismiss on statute of limitations grounds, despite the lower court’s finding that the plaintiff did not adequately allege that an exception to the statute of limitations applied, because “a plaintiff is not required t… - concluding that a district court erred in dismissing claims for failure to comply with the statute of limitations where the plaintiff could claim the benefit of the discovery rule because “nothing in [the] complaint clearly suggests that [the plaintiff] did in fact have knowle… - explaining that, in evaluating a motion under Fed. R. Civ. P. 12(b)(6), a court should consider “the allegations contained in the complaint, exhibits attached to the complaint and matters of public record,” as well as any “document integral to or explicitly relied upon in the … - explaining, in the context of a motion to dismiss, that “what is critical is whether the claims in the complaint are based on an extrinsic document and not merely whether the extrinsic document was explicitly cited” (citation and internal quotation marks omitted) ## Opinion text RENDELL, Circuit Judge, dissenting: I see no reason to remand this case to the District Court and would affirm. As the Majority notes: “Schmidt did not dispute the applicability of the two-year statute of limitations and acknowledged that he filed suit more than two years after the relevant assets were sold.” (Maj.Op. 245.) 1 Schmidt’s main argument on appeal is that the District Court improperly con *254 sidered matters outside the record regarding the events in question in dismissing his case. This is a diversionary tactic, and is incorrect. The District Court’s reference to documents in its opinion that demonstrate that Schmidt’s concession was correct, i.e., that all the events in question did occur prior to the requisite two-year period, was not necessary to the dismissal. Once Schmidt conceded his tardiness, the sole relevant issue was whether the discovery rule would save him, and the District Court determined, based on Schmidt’s own assertions, that it would not. Schmidt’s protestations and Majority’s extensive narrative as to what the Amended Complaint revealed are, therefore, a red herring and beside the point. The District Court’s ruling was based on the fact that Schmidt failed to assert why, with the exercise of reasonable diligence, he could not have known of the injury, i.e., that the prices were too low, as the discovery rule requires. Dilworth v. Metro. Life Ins. Co., 418 F.3d 345, 349 (3d Cir.2005). The Majority makes passing reference to a weaker burden that Schmidt could actually satisfy, i.e., that he didn’t know the prices until later. But that is not the test or the burden. Schmidt has never come close to setting forth any facts as to why he, a very sophisticated investor, who kept himself aware of the value of these assets, could not have known, after the proxy statement revealed the dissolution plan in May 2009, that the sale prices — presumably available through some investigation — were inadequate. 2 Indeed, before the District Court at oral argument, Schmidt’s counsel conceded that Schmidt received notice in 2010 of sales of certain assets previously owned by Genaera and that, for the next two years, “he was putting together all the facts and circumstances.” (App.1583a.) Before our panel at oral argument, Schmidt’s counsel insisted that the discovery rule applies because he did not “learn” of the Defendants’ alleged wrongdoing until 2011. That argument is insufficient because “a plaintiffs subjective knowledge is insufficient to invoke the discovery rule.” Vitalo v. Cabot Corp., 399 F.3d 536, 543 (3d Cir. 2005). In other words, “[mjistake, misunderstanding, or lack of knowledge in themselves do not toll the running of the statute.” Fine v. Checcio, 582 Pa. 253, 266 , 870 A.2d 850 (2005). At oral argument, despite repeated questions, Schmidt did not provide any indication of what, if anything, he did by way of diligence, or any reason why he could not have learned of the alleged wrongdoing earlier. A plaintiff, faced with a clear “miss” of the statute of limitations, must come forth with some basis for invoking the discovery rule. See Mest v. Cabot Corp., 449 F.3d 502, 511 (3d Cir.2006) (“the plaintiff attempting to apply the discovery rule bears the burden of demonstrating that he exercised reasonable diligence in determining the existence and cause of his injury.”). See also Hooker v. CitiMortgage, Inc., Civ. *255 09-973, 2012 WL 174967 , at *3 (M.D.Pa. Jan. 20, 2012) (dismissing claims because “Plaintiff has failed to meet her burden of establishing equitable tolling because she has made no argument as to how she was reasonably diligent in investigating and bringing the instant claims.... ”); Haagensen v. Pennsylvania State Police, Civ. 08-727, 2009 WL 1437608 , at *6 (W.D.Pa. May 21, 2009) (recommending dismissal because “Plaintiff bears the burden of demonstrating that these exceptions [discovery rule or equitable tolling] to the statute of limitations apply.”). As the District Court explained in its opinion, “to toll the statute of limitations on every plaintiffs mere assertion that he needed time to put together all the facts and circumstances would eviscerate the very concept of a limitations period.” (Dist.Ct.Op.12.) “Although the purpose of the ‘discovery rule’ is to mitigate in worthy cases the harshness of an absolute and rigid period of limitations, the rule cannot be applied so loosely as to nullify the purpose for which a statute of limitations exists.” Ingénito v. AC & S, Inc., 430 Pa.Super. 129 , 633 A.2d 1172, 1176 (1993). This is not a matter of consideration of matters outside the record; this is, instead, a matter of what a plaintiff who has failed to comply with the statute of limitations must do to satisfy the discovery rule. Tellingly, Schmidt does not argue that there are facts he would have adduced if this matter had been treated, as he urges, as a motion for summary judgment. 3 I suggest there are none, and remand is therefore unnecessary. I would affirm. . At oral argument before the District Court, Schmidt’s counsel acknowledged that "we missed the two-year period by a couple of weeks.” (App. 1576a.) . In the Amended Complaint, Schmidt pled facts that actually undermined the applicability of the discovery rule. He stated that "[i]n 2009, Genaera had several valuable assets” including IL9, Pexiganan, and the Aminosterol Assets, and that “[t]hese were all valuable assets in which Genaera had invested large sums of money in their development over the previous decade.” (App.67a-68a.) He also stated that he “throughout the years has held many conversations with Genaera officers and directors concerning the Core Assets, their value and the prospects for their commercial exploitation and/or monetization.” (App.69a.) If he knew that the assets were so valuable and that they had been the subject of considerable investment over the previous decade, then surely he was on inquiry notice when he received the proxy statement indicating that Genaera was liquidating its shares for pennies on the dollar. . I suggest that to tell District Court judges that, in deciding a motion to dismiss, they cannot take into account the concessions and candor of counsel at oral argument unless they first convert the motion to one for summary judgment is to exalt form over substance and waste judicial resources. --- Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/9804285. Public record. Not legal advice.