• January 3, 2009

Abbotts v. Campbell, 8th Cir. Case No. 08-1349 (filed 12/29/08)

Investors in an ultimately worthless venture brought claims admittedly well beyond the applicable six-year Minnesota statute of limitation, seeking equitable tolling under Minnesota law. A crucial fact in the case was that a particular document, defendants’ waiver of certain rules governing the sale of securities, had been unknown to the investors and had been in the custody of the U.S. government. The investor/plaintiffs argued that this key fact for their claims would not have been ascertainable even in the exercise of due diligence. The District Court (D. Minn. (Kyle, J.)) disagreed with the argument and rendered summary judgment against them on the issue, a judgment affirmed on appeal.

In such cases, “the plaintiff bears the burden of proving that she could not, through reasonable diligence, have discovered the facts constituting the fraud until within six years of the commencement of the action.” Here, the Eighth Circuit agreed with the district court: “it appears that the Investors gave no thought to [a claim against defendants] until an attorney’s solicitation letter touting a previous success arrived eleven years after the loss. The record reflects indifference and opportunism rather than reasonable diligence.”

Plaintiff’s counsel, at oral argument before the Eighth Circuit, emphasized the challenge of obtaining documents from the government during a pending investigation; the district court and Eighth Circuit clearly thought it more relevant that plaintiffs had not even tried to do so.

The take-away: “time happens.” This lesson should not be lost on alleged victims of Madoff, Petters, and the like as they cast their nets further out in the hope of getting recoveries from those less central to their losses but still implicated.

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