E-Alert Case Updates

Former General Counsel to Rite Aid Loses Fraud Suit

Brown v. NQGRG
No. CCB-09-1684 (D. Md. 2010)
By Kevin M. Cox, Associate
Semmes, Bowen & Semmes (www.semmes.com)

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.