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Former General Counsel to Rite Aid Loses Fraud Suit
(August 2010) By Kevin M. Cox, Associate
For more information, contact Paul Farquharson.
Brown v. NQGRG, No. CCB-09-1684, (D. Md. Aug. 2. 2010) |
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The United States District Court for the District of
Maryland dismissed the fraud suit of former Rite Aid general counsel, Franklin
S. Brown, against Rite Aid's Ex-CEO, Martin L. Grass, and the Baltimore-based
law firm of Neuberger, Quinn, Gielen, Rubin and Gibber (“NQGRG”). The court
dismissed Mr. Brown's case because he waited too long to sue the Defendants.
Specifically, federal court Judge Catherine C. Blake found that Mr. Brown and
his wife, Karen C. Brown, filed suit after expiration of the applicable
three-year statute of limitations.
The Browns' Complaint alleged that Rite Aid's lawyers,
NQGRG, conspired with Rite Aid's former CEO to hide the fact that Mr. Brown's
signature had been forged on documents in the 1994 sale of a Rite Aid
subsidiary, a New Jersey company known as Sera-Tec. Mr. Brown, who is serving a
ten-year prison sentence for fraud, argued that his window for filing suit did
not begin to toll until long after the separate fraud lawsuit by Rite Aid was
filed against he and Mr. Grass. He claimed in his lawsuit, filed last year, that
he had only learned of the cover-up in June 2006, after receiving an affidavit
in the course of Rite Aid's fraud suit over the sale of Sera-Tec.
Judge Blake disagreed with Mr. Brown and found that the
Browns were on notice when Rite Aid filed its lawsuit in September 2005.
Specifically, Judge Blake wrote “Upon the filing of the Rite Aid Complaint,
the Browns knew they had been accused of fraud and of harboring secret false
documents, and Mr. Brown had already had occasion to have seen one such
document.” Therefore, the Browns were on inquiry notice as a matter of law
as of September 2005, regardless of whether they knew precisely how the
alleged fraud had been executed or had implicated them.
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