Securities Regulation Daily Wrap Up, FRAUD AND MANIPULATION—DNev: Statute of Repose Barred Securities Fraud Suit; Negligence Claim Goes On, (May 1, 2013)
Organizations Mentioned:Pay By Touch | UBS Securities LLC | UBS Securities, LLC | Wachovia Corp. | Wachovia Corporation | Wells Fargo | Wells Fargo Advisors, LLC | Win-Win Gaming
By Mark S. Nelson, J.D.
A Rule 10b-5 fraud case had to be dismissed under the statute of repose, according to the district court in Nevada. The case arose when Kenneth Bott allegedly pitched several investments to Christian Bourdel while simultaneously getting hefty finders’ fees for steering investors to the companies’ shares. The case involved Wells Fargo Advisors LLC because Wells Fargo had acquired Mr. Bott’s former employer, Wachovia Corporation, during the recent financial crisis. The court similarly dismissed controlling person claims, but allowed a state negligence claim to proceed (Bourdel v. Wells Faro Advisors, LLC, April 30, 2013, Du, M.).
Repose barred suit. Mr. Bourdel urged the court to apply the discovery rule to find that the limitations period began to run in November 2011 and thus that his complaint filed on July 10, 2012, was timely filed. Mr. Bott first solicited Mr. Bourdel in May of 2003, and Mr. Bourdel first bought shares in the companies Mr. Bott pitched to him in June of that year. Mr. Bourdel found out about Mr. Bott’s alleged finders’ fees in November 2011. Prior discussions with Wells Fargo had, at least temporarily, convinced Mr. Bourdel that he had no case.
The court, however, said that the limitations and repose period for Rule 10b-5 actions required Mr. Bourdel to file suit within the earlier of 2 years following discovery or 5 years. Mr. Bott had left Wachovia Corporation by August 2005. As a result, Mr. Bourdel’s complaint was untimely. The court noted that the repose law operates to prevent a case from accruing and can severely penalize untimely plaintiffs.
Additionally, Mr. Bourdel had argued that his suit should be equitably tolled. The court, however, rejected this claim because the repose law is the “outer limit” and cannot be avoided due to the plaintiff’s knowledge or lack thereof.
The case is No. 2:12-cv-01213-MMD-CWH.
Companies: Pay By Touch; UBS Securities LLC; Wachovia Corporation; Wells Fargo Advisors, LLC; Win-Win Gaming
LitigationEnforcement: FraudManipulation NevadaNews