Heide Betz v. Trainer Wortham & Company, Inc. et al
Filed October 4, 2007 Amended February 26, 2008
No: 05-15704
CV-03-03231-SI
Cite as 05-15704

USCA for the Ninth Circuit, Reverses Trial Court’s Ruling

In 1999, Heide Betz, a retired art dealer, sold her house for $2.2 Million.

One day, Betz invested her $2.2 million with Trainer Wortham after being assured by David Como and Carmen Castro that she could withdraw $15,000 per month from her portfolio while leaving her entire principal intact.

Although her account balance dropped steeply, David Como and Carmen Castro continuously reassure Betz that the failure to come up to the expected output was only temporary and that on the coming days her account balance would revert back to its original state.

After her balance with Trainer Wortham had declined further, Betz filed her complaint on July 11, 2003.  In her complaint she alleged that Como, Vile, Trainer Wortham, and First Republic Bank (collectively, Trainer Worthamhad) had made the following acts and violations, namely:

• committed securities fraud in violation of § 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and13468


• Rule 10b-5 of the Securities Exchange Commission, 17 C.F.R. § 240.10b-5.

The defendants moved for summary judgment on the ground that Betz’s federal securities fraud claim was barred by the statute of limitations.

The district court granted the summary judgment for the defendants and rules that:

• Betz’s claims were time-barred because the latter had inquiry notice of the defendants’ violations of § 10(b) before July 11, 2001.

Betz’s appealed the judgment of the trial court.

On Appeal, the Ninth Circuit Court of Appeals confirmed that the statute of limitations for federal securities law claims begins to run as soon as the plaintiff has "inquiry notice" of the facts forming the alleged fraud, not only when the plaintiff has actual notice that the defendants have made a fraudulent misrepresentation.

Further, the court added that an investor has inquiry notice when sufficient indicia of fraud exists that would cause a reasonable investor to inquire into whether she has been defrauded, and investor, in exercise of reasonable diligence, should have discovered facts giving rise to claim.

On the other hand, the appellate court addressed the issue on the existence of a genuine dispute of whether there existed facts sufficiently probative of fraud to cause reasonable investor to conduct further investigation.

The court has this to say that, viewing the facts in the light most favorable to Betz, a rational jury could conclude that a reasonable investor in Betz’s shoes would not have initiated further inquiry before July 11, 2001.

In full, the appellate court reversed the district court judgment and orders the remand of the case for further proceeding.