Opinion ID: 502715
Heading Depth: 2
Heading Rank: 2

Heading: Defendants Bradshaw and Hutton

Text: 28 The Jensens' federal securities claims against broker Bradshaw and his employer, Hutton, are also time-barred. In their complaint, the Jensens fault Bradshaw and Hutton for fraudulently inducing them into investing in the cattle feeding investment programs through the use of many material misrepresentations and omissions, among them being: (1) the statement that Bradshaw would closely supervise the cattle feeding investments; (2) the failure to reveal that Hutton had underwritten the Granada cattle feeding program offering to ensure that Granada would be capable of paying for a feedlot purchased from Hutton; (3) the statement that the Jensens would make a million dollars and be drinking champagne in three years; (4) the failure to reveal that Granada would perform the marketing and management functions of the program; (5) the failure to deliver to the Jensens the private placement memorandum of Granada's offering; and (6) the failure to reveal that Hutton would receive one dollar out of every five-dollar management fee paid by the Jensens to Granada. 29 Despite his assurance that he would closely supervise their investment program, by March 1979 Bradshaw had not contacted the Jensens for two years. At that time, upon learning from Eller of substantial losses in Granada's cattle feeding program, Esther Jensen called Bradshaw, who insisted that the Jensens had made a profit. She felt that Bradshaw was very menacing during their discussion. In an April 4, 1979 letter to Eller, Sterling Jensen criticized Bradshaw for praising Snellings' efforts, saying that Bradshaw was continuing the myth that George [Snellings] was working his ass off on our behalf. He also noted that Bradshaw should have told them of their losses, but did not. Thus, it appears that by spring 1979 the Jensens had knowledge of sufficient inconsistencies concerning Bradshaw and Hutton to trigger a duty to inquire further. 30 Even if these signs of notice were insufficient to trigger a duty to investigate Bradshaw and Hutton, information contained in Weathers' first memorandum, in July 1979, clearly constituted sufficient notice. Weathers wrote that there were possible secret profits paid by Hutton to Snellings; that the Jensens were suspicious that Bradshaw had received payments from Snellings for referring the Jensens to him; that Bradshaw had misrepresented who was to perform the management of the cattle feeding programs; that Hutton had underwritten Granada's offering in an effort to ensure payment on a feedlot sold by Hutton to Granada; that Hutton received one dollar out of every five-dollar management fee collected by Granada; and that Bradshaw collected nonessential brokerage commissions by having the hedging done through his office in Dallas rather than through Granada, at double the cost to the Jensens. In his memorandum, Weathers advised that these extra brokerage commissions should be explored. This memorandum clearly provided them with sufficient storm warnings to alert a reasonable person to the possibility that there were material misrepresentations or omissions on the part of Bradshaw and Hutton in their investment transactions. 31 Contrary to their contention on appeal, the evidence shows that the Jensens were aware from the outset that attorney Weathers was not investigating Bradshaw, Hutton or Granada. Indeed, after Weathers' first memorandum, the Jensens did themselves initiate an inquiry regarding Bradshaw and Hutton, and questioned Eller regarding the extra brokerage commissions. The inquiry, however, did not proceed with reasonable diligence. 32 We find no merit in the Jensens' contention that the information they had by July 1979 was insufficient to trigger the limitations period because they did not know whether it was true. They did have knowledge of facts sufficient to excite further inquiry in a reasonable person, which, if pursued, would have disclosed the fraud. 6 We concur in the district court's ruling that the statute of limitations had run on the Jensens' federal securities claims against Bradshaw and Hutton.