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John Courtade
Attorney at Law
4408 Spicewood Springs Road
Austin, Texas 78759
tel: 512.502.1135
fax: 512.502.1138


I generally distribute this discussion of limitations to an investor when he or she first contacts me. Since an investor may not decide to go forward at that time and since I do not agree to represent an investor or take any action on an investor's behalf until we have reviewed the facts together and have signed a written agreement about my representation, I stress the importance of statutes of limitations, which have the effect of barring claims after a certain time.

Limitations periods for federal claims are applicable anywhere in the United States. Limitations periods for state claims, either statutory (such as a state securities law) or common law (such as fraud or negligence) vary state-by-state. The limitations periods that apply to the common claims in investor-broker litigation brought in Texas are stated below. Other periods will govern claims in other states. Most state claims have limitations periods of two years or more, but there are occasional unexpected traps.

          Limitations periods for common investor claims in Texas are:


          Fraud under the federal securities laws               2 years/ 5 year cut-off *

          (Rule 10b-5)  


          Fraud under Texas Securities Act                       3 years/ 5 year cut-off *


          Common law fraud                                              4 years


          Deceptive Trade Practices Act ("DTPA")           2 years


          Breach of contract                                              4 years


          Negligence/ negligent misrepresentation            2 years

Whether any of these claims pertain in a specific case depends on the facts, but they are the claims that I make most often in such situations. Such statutes will generally begin running on the day that the wrongdoing occurs, e.g., the date of a fraudulent sale or a breach of contract. Separate transactions may have separate limitations periods. Also, different claims based on the same transaction may have different limitations periods. For example, 2-1/2 years after a stock transaction, a claim under the Texas Securities Act would clearly be allowed, but a claim for negligence or under the DTPA might be barred. These limitations periods can in many cases be extended by the "discovery" rule, although the ones with the asterisks can't be extended past the cut-off. The discovery rule means that the statute begins running when the plaintiff knew or should have known of the wrong. This is also sometimes referred to as "inquiry notice." The investor doesn't have to know everything, just enough to know that there's a problem that needs investigation. Awareness of a large loss, for example, might put an investor on inquiry notice and start the clock ticking. If an investor exceeds the initial limitations period, it then becomes an issue in the litigation when he or she should have known there was a problem. If a court (or an arbitration panel) rules that the limitations period for a claim has passed, then the claim is barred, no matter how meritorious.

These remarks are intended as a general discussion, not legal advice. I do not give legal advice in a general memorandum such as this, which cannot deal with every possible exception or qualification to these rules. I want you to be aware, however, of the seriousness of the limitations issue. Aside from the legal issue of the limitations periods, time works against you as a practical matter simply because memories fade. Putting a claim together requires a lot of work with an attorney examining you on the facts from various angles, and it is to your definite advantage to undertake it while the facts are relatively fresh in your mind.

All content Copyright (C) 2004, John Courtade, and may not be used without explicit permission.

*Not Certified by the Texas Board of Legal Specialization [explanation]