Opinion ID: 381032
Heading Depth: 2
Heading Rank: 1

Heading: The Securities Laws Violations

Text: 12 There is no federal statute of limitations applicable to the provisions of the securities acts under which plaintiffs seek relief: Securities Exchange Act of 1934 § 10(b), 15 U.S.C. § 78j(b), and S.E.C. Rule 10b-5; Securities Act of 1933 § 17, 15 U.S.C. § 77q. As with other judicially implied causes of action, suits brought under these provisions are subject to the limitations period applied to actions of the same kind here fraud by the law of the state where the alleged violation occurred. Ernst & Ernst v. Hochfelder, 425 U.S. 185, 210 n. 29, 96 S.Ct. 1375, 1389 n. 29, 47 L.Ed.2d 668 (1976); Nickels v. Koehler Management Corp., 541 F.2d 611, 613 (6th Cir. 1976), cert. denied, 429 U.S. 1074, 97 S.Ct. 813, 50 L.Ed.2d 792 (1977). The statute of limitations for fraud in Colorado is three years. Colo.Rev.Stat. §§ 13-80-108, 13-80-109 (1973). 13 This court and others have held that while state statutes of limitations apply, tolling is a matter of federal law. See, e.g., Esplin v. Hirschi, 402 F.2d 94, 103 (10th Cir. 1968), cert. denied, 394 U.S. 928, 89 S.Ct. 1194, 22 L.Ed.2d 459 (1969); Janigan v. Taylor, 344 F.2d 781, 784 (1st Cir.), cert. denied, 382 U.S. 879, 86 S.Ct. 163, 15 L.Ed.2d 120 (1965). See also 1 A. Bromberg & L. Lowenfels, Securities Fraud & Commodities Fraud § 2.5(1), at 42 (1979). For reasons equally applicable to implied securities fraud actions, the Supreme Court has recently held that coordinate state tolling rules apply along with state statutes of limitations in suits brought under 42 U.S.C. § 1983. Board of Regents v. Tomanio, --- U.S. ----, ---- - ----, 100 S.Ct. 1790, 1794-96, 64 L.Ed.2d 440 (1980). We need not decide whether Board of Regents alters the law in securities fraud cases as well, because the state and federal tolling rules here coincide. Under both Colorado and federal law, the limitations period begins to run when the aggrieved party discovers, or should have discovered by the exercise of reasonable diligence, the facts constituting the fraud. Compare Holmberg v. Armbrecht, 327 U.S. 392, 397, 66 S.Ct. 582, 585, 90 L.Ed. 743 (1946); Bailey v. Glover, 88 U.S. (21 Wall.) 342, 347, 22 L.Ed. 636 (1875); de Haas v. Empire Petroleum Co., 435 F.2d 1223, 1225-26 (10 Cir. 1970) with Wright v. Nelson, 125 Colo. 217, 242 P.2d 243, 247-48 (1952); Pipe v. Smith, 5 Colo. 146 (1879); Colo.Rev.Stat. § 13-80-109 (1973). 14 The plaintiffs alleged that defendants failed to disclose obviously relevant information and took affirmative steps to hide the problems which form the basis of plaintiffs' complaints. 5 The district court did not challenge the sufficiency of plaintiffs' averments about defendants' actions; it found, instead, that because the fraud was readily discoverable on the land, the statute had run against plaintiffs. However, the plaintiffs' allegations, asserting affirmative conduct to conceal the fraud, are sufficient to invoke the doctrine of equitable tolling at this stage in the proceeding. See Rutledge v. Boston Woven Hose & Rubber Co., 576 F.2d 248, 250 (9th Cir. 1978). Cf. Conley v. Gibson, 355 U.S. 41, 47-48, 78 S.Ct. 99, 102-03, 2 L.Ed.2d 80 (1957). 15 The question of whether a plaintiff should have discovered the basis of his suit under the doctrine of equitable tolling does not lend itself to determination as a matter of law. See Dzenits v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 494 F.2d 168, 172-73 (10th Cir. 1974); de Haas v. Empire Petroleum Co., 435 F.2d 1223, 1226 (10th Cir. 1970); 6 L. Loss, Securities Regulation 3905 (2d ed. Supp. 1969); 10 C. Wright & A. Miller, Federal Practice & Procedure § 2734, at 651 (1973). We find no special rule that attaches to fraud in connection with real estate improvements. A special rule would be particularly questionable where, as here, the promised amenities were not to be built on land purchased by plaintiffs and where some construction had been undertaken. The complaint also alleges fraud involving water systems and sources, sewer facilities, zoning decisions, resale processing, availability of service fees, and other rates and charges for the municipal budget. None of these could be observed on the land purchased by plaintiffs. The possibility of a fiduciary relationship and the degree of plaintiffs' expertise in appreciating the significance of observable facts further complicate the due diligence issue. Dismissal of the securities claims on the pleadings was, therefore, improper. 6