Tort: Company waited too long before suing its former president

Where a company sued its former president for breach of fiduciary duty, business conspiracy and fraud, but each of its claims was time barred or otherwise failed as a matter of law or fact, the former president prevailed on the claims and was awarded his attorneys’ fees and costs.

Background

Josh Clemente worked without pay for MIT LLC, a company founded by his father (Tim) and Fahmi Alubbad. Josh was the principal designer of MIT’s only product—a vehicle-mounted stairway called “ARES.” Tim promised Josh that he’d receive equity in return for his work. But Alubbad, MIT’s majority shareholder, repeatedly vetoed an equity transfer.

With Tim’s help, Josh obtained a patent on the ARES design. Tim attempted to convince Alubbad that MIT should trade Josh his long-promised equity in return for the patent. Instead Alubbad fired Tim, and MIT sued Tim and Josh. The district court granted summary judgment to defendants and awarded attorney’s fees and costs to Tim.

Fiduciary duty

MIT alleges that Tim breached his fiduciary duties to MIT as set out in the operating agreement by, among other things, allowing Josh to “improperly possess MIT’s intellectual property” and “empowering” Josh to obtain “a patent for ARES in his own name and without assignment to MIT.” Even if MIT is right in insisting that Delaware’s three-year statute of limitations applies, its claim is time barred.

Under Delaware law, contract and fiduciary claims begin to accrue “at the time of the wrongful act, even if the plaintiff is ignorant of the cause of action.” Here, MIT claims this claim accrued when Tim “secretly assist[ed] Josh with the filing of a provisional patent application [on the ARES design] in November of 2018.” November 2018 is obviously more than three years before MIT commenced the lawsuit.

But, according to MIT, during the Aug. 27, 2019, meeting with Alubbad and Alubbad’s lawyer, Tim said that he didn’t have a patent on the ARES but didn’t mention Josh’s provisional patent. MIT insists that non-disclosure tolled the statute of limitations by equitable tolling or fraudulent concealment.

This argument ignores the rest of the meeting. In this court’s view, an actor of ordinary intelligence and prudence in MIT’s shoes would have investigated whether Tim was, in fact, safeguarding MIT’s claims to the ARES design. Because MIT was on inquiry notice of this claim by the end of the August 2019 meeting, Count One is time barred.

Business conspiracy

It appears that the statute of limitations on a Virginia business conspiracy claim is five years. Thus, this count is barred if it accrued before Oct. 16, 2018.

MIT alleges that Tim’s fraudulent statements “falsely induc[ed] MIT into authorizing Josh to work on the development of the ARES as part of a conspiracy to convert MIT’s intellectual property and confidential information,” including through obtaining a patent. But based on MIT’s own allegations, the misrepresentations must have happened, at the latest, in 2017, when Josh obtained “the [computer-aided design] files produced by Cardinal Scientific and the source[]code produced by 21st Century for the ARES wireless controller.”

Because the alleged misrepresentations happened no later than 2017, and because harm occurred immediately upon Josh gaining access to MIT’s confidential information, Count Three is time barred.

Unjust enrichment

An unjust enrichment claimant may only recover damages to the extent that the defendant was actually benefitted. Since Josh’s patent is invalidated and he obtained no other benefits from MIT’s confidential information, the district court’s grant of summary judgment to Josh on this count is affirmed.

Fraud

A fraud claim only accrues “when such fraud . . . is discovered or by the exercise of due diligence reasonably should have been discovered”—that is, upon actual or inquiry notice, whichever comes first. The court finds that, by 2019 at the latest, MIT was put on notice as to the possibility of fraud—the possibility that Josh had not in fact signed a document that Josh wouldn’t acknowledge and that Tim couldn’t seem to find. As such, this count is time barred.

Breach of contract

In the amended complaint, MIT alternatively pleaded that Josh, in fact, entered a non-disclosure agreement with MIT in 2013 and breached it. Considering the record as a whole, even construing the evidence in the light more favorable to MIT, there was no dispute of material fact as to whether Josh signed an non-disclosure agreement. As such, summary judgment for Josh on this count was proper.

Attorneys’ fees

MIT hasn’t shown that the district court’s grant of attorney’s fees was premised on its knowledge of the substance of settlement negotiations. As Tim points out, in observing that Josh was willing to settle the case for $50,000, the district court was not referring to confidential discussions between the parties but rather was referring to an email that Josh sent in 2022.

Affirmed.

Mission Integrated Technologies LLC v. Clemente, Case No. 24-1932, Nov. 12, 2025. 4th Cir. (Quattlebaum), from EDVA at Alexandria (Brinkema). Laurin Howard Mills for Appellant. Andrew J. Henson and Rebecca LeGrand for Appellees. VLW 025-2-411. 26 pp.