Co-authored by Dean N. Razavi.

The U.S. Court of Appeals for the Seventh Circuit last week held that the Illinois doctrine of adverse domination for tolling the statute of limitations on an action does not apply where a defendant was not a co-conspirator of a wrong-doing officer or director.

Plaintiff Independent Trust Corporation (InTrust) was placed in receivership in 2000, after it was discovered that InTrust board members had used the corporation to engage in a Ponzi scheme. Defendants, Stewart Title Company and its related companies, received $27 million from InTrust as insurers of certain accounts related to the scheme. The Seventh Circuit affirmed dismissal of the InTrust receiver’s action to recover the wrongly transferred money from Stewart as barred by the statute of limitations. In affirming, the court rejected InTrust’s argument that the doctrine of adverse domination applied, which tolls the statute of limitations for claims by a corporation against its officers, directors, and their co-conspirators when the corporation is controlled by those wrongdoers. The court refused to expand the doctrine to cases where the defendant was not an alleged co-conspirator of the officers. Here, because Stewart was not a co-conspirator, the doctrine was inapplicable.

Independent Trust Corporation v. Stewart Information Services Corporation, No. 11-1208 (7th Cir. Jan. 6, 2012).