Sagehorn

INTRODUCTION

This case involves a lawsuit based upon the Securities Act of 1933 (15 U.S.C. § 77a et seq.), hereafter referred to as the 1933 Act. Section 12(a)(1) of the 1933 Act creates civil liability for the sale of an unregistered security (§ 771(a)(1).) The purchaser can sue the seller in either state or federal court for rescission and recovery of the purchase price. Section 13 of the 1933 Act provides that the action is subject to a one-year statute of limitations that begins to run when the sale is made.

Here, three purchasers sued a seller of an unregistered security. The buyers, conceding that they had filed their action past the applicable one-year statute of limitations, relied upon the doctrine of equitable tolling to halt the running of the limitations period. They based their equitable tolling theory on evidence that the seller had affirmatively misrepresented to them that the security was registered. In a bench trial, the trial court found that the principle of equitable tolling applied to a section 12(a)(1) action and that the buyers had established its evidentiary foundations. The trial court awarded the buyers a total judgment of $301,000.

On this…