Summary: Horton purchased a Life Fund 5.1, LLC capital appreciation bond (also known as a zero-coupon bond) from a company that subsequently filed for bankruptcy. More than two years after the purchase date of the bond, Horton filed a lawsuit against the company and the individuals involved in the sale in Oklahoma County District Court Case No. CJ-2009-12041, alleging misrepresentations and omissions in the sale of securities, fraud, breach of fiduciary duty, and negligence. The defendants filed a motion for summary judgment on the grounds that plaintiff's cause of action fell outside of the applicable statute of limitations. The Oklahoma County District Court granted summary judgment. Plaintiff appealed. Plaintiff's appeal was first heard by the Oklahoma Court of Civil Appeals, which ruled that no factual disputes existed in the evidentiary materials as to when the limitations periods ran and that Horton was aware of the defendants' tortious conduct more than two years before she filed her petition. The Oklahoma Supreme Court granted certiorari to review the case and overturned the Court of Civil Appeals.
Legal Issues: Statutes of limitation require that a legal action be brought within certain time limits from the accrual of the cause of action. In Oklahoma, the accrual of the cause of action can be defined by statute, but in no event can the accrual of the cause of action take place before each element of the cause of action has materialized. In short, your time to file does not begin until you are legally capable of filing. Also, in some instances Oklahoma recognizes the "discovery rule" which states that the statute of limitations is tolled until the plaintiff knew or should have known about the accrual of the cause of action.
Summary judgment should be granted only if the court determines that there is no dispute as to any material fact and that the moving party is entitled to judgment as a matter of law. When there are questions of material fact, the case proceeds to trial for the jury or judge to hear evidence and make a decision of fact.
This case revolves around the four theories of law presented by the plaintiff as the basis for her suit: misrepresentations and omissions in the sale of securities under the Oklahoma Securities Act, fraud, breach of fiduciary duty, and negligence.
Misrepresentation and omissions in the sale of securities: The Oklahoma Securities Act is found at 71 O.S. §§ 1-101 et seq. In relevant part, the Act prohibits the sale of securities by means of an untrue statement of a material fact or an omission to state a material fact and creates a civil liability for doing so. A two year statute of limitations applies to this civil liability. 71 O.S. §1-509(J)(2). The Oklahoma Supreme Court looked to the legislative commentary and ruled that the statute of limitations is to be interpreted in the same way as the similar federal statute. Thus, the cause of action accrues either: 1) when the plaintiff has an actual knowledge of the misrepresentation, or; 2) when the plaintiff should have known of the misrepresentation through the exercise of reasonable diligence. Because the question of when the plaintiff should have known through the exercise of reasonable diligence is a question of fact that remained in controversy, the summary judgment as to the misrepresentation claim was overruled.
Fraud: Pursuant to 12 O.S. § 95(A)(3) the statute of limitations for fraud is two years, but "the cause of action in such case shall not be deemed to have accrued until the discovery of the fraud." A party discovers fraud when he or she ascertains each element of the claim. In determining when a party makes discovery, the court must bear in mind that a claim of fraud requires specific pleading. 12 O.S. §2009(B). Because the question of when the plaintiff knew regarding each element of her fraud claim remained a question in controversy, the summary judgment as to the fraud claim was overruled.
Breach of Fiduciary Duty and Negligence: The Oklahoma Supreme Court noted that while some fiduciary relationships are explicitly defined by the law, the existence of a fiduciary duty not defined by law is a question of fact. A claim of breach of fiduciary duty and a claim of negligence are essentially the same, except that the standard of care which a fiduciary owes to the plaintiff is higher. Regardless, the statute of limitations calculation is the same in questions of breach of fiduciary duty and negligence each accrue when a party ascertains each element of his or her claim. Because the question of when the plaintiff knew, or should have known, regarding the elements of her claim remained in controversy the summary judgment as to both claims was overruled.
Discussion: When filing a motion for summary judgment, the moving party must present the court with sufficient evidence that is available in the court's record to show that any potential questions of fact are not disputed. This procedure is available when one party is attempting to use the judicial process to delay or bring a frivolous action. If there are no questions of material fact in dispute, then there is no need for a trial. The purpose of a trial is to present evidence regarding the facts of the case. If the facts of the case are established, all that remains is for the court to apply the appropriate laws and enter a ruling. However, if there are questions of material fact that cannot be established then a hearing should be held regarding those questions. After the hearing, when the facts have been determined, the law is applied and the court enters judgment.
With the overruling of the defendant's motion for summary judgment, this case will be returned to the Oklahoma County District Court for further proceedings.
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