Court Opinion

ID: 9487279
Source: CourtListenerOpinion
Date Created: 2023-08-05 12:12:17.738373+00
Date Added: 2024-06-11T17:52:10.692431
License: Public Domain

DAVID A. NELSON, Circuit Judge,
concurring in part and dissenting in part.
I agree that the claims of plaintiff Freeman, who lives in North Carolina, and plaintiffs Kabus, Powell, and Shear, who five in Florida, are time-barred whether or not § 27A(a) of the 1934 Act (15 U.S.C. § 78aa-1(a)) is constitutional. If § 27A(a) is constitutional, these claims are barred by the North Carolina and Florida statutes of limitation, as applied under Kentucky’s borrowing statute. If § 27A(a) is unconstitutional, the claims are barred by the “one year/three year” limitations period of § 9(e) of the 1934 Act.
As far as the claim of plaintiff Eyl is concerned, it strikes me as a close question whether the limitations period began to run in November of 1984 or December of 1985. As of October 2, 1984, Mr. Eyl was told in November of that year, only “between 20 & 30” units at the retirement project had been sold, whereas the marketing schedule had called for the sale of 76 units by July 31, 1984. Mr. Eyl was further told that the marketing agent had been fired, that no replacement had been hired, that the sales staff consisted of only one salesperson and one director, and that the underwriter and the trustee had become very active in attempting to arrive at a solution with the project’s board of directors. Mr. Eyl was reminded that interest and principal payments to the bondholders were to come mainly from occupancy fees, and he was told that the marketing efforts and results were “an area of concern for bondholders.” The information received by Mr. Eyl in November of 1984 may well have constituted “storm warnings” sufficient to “alert a reasonable investor to the possibility of fraudulent statements or omissions in his securities transaction.” See Jensen v. Snellings, 841 F.2d 600, 607 (5th Cir.1988). If the warnings received by Mr. Eyl in November of 1984 were not sufficient to start the clock running, on the other hand, the clock clearly began to run no later than December of 1985, when the first interest payment was missed.
Under the rationale on which the district court ultimately entered judgment in favor of the defendants, it made no difference at all whether Mr. Eyl’s cause of action accrued in 1984 or 1985; the claim was barred regardless, as long as § 27A(a) was deemed unconstitutional. Cases ought not to be decided on constitutional grounds where other grounds are available, however, and a non-constitutional ground may well be available here. I would therefore remand the case to the district court with instructions to reexamine the *345question of when Mr. Eyl’s claim accrued. If it should ultimately be determined that the claim accrued in 1984, there would be no need for us to pass judgment on the constitutionality of § 27A(a). I would prefer not to decide the constitutional issue unless it is clear that we have no alternative — and I am not yet persuaded that no alternative exists.