Orgone Capital III, LLC v. Keith Daubenspeck

Summary

The Seventh Circuit affirmed dismissal of securities fraud claims as time-barred under Illinois' three-year statute of limitations (815 ILCS 5/13(D)). The court held that common law claims for fraud, breach of fiduciary duty, and negligent misrepresentation arising from securities purchases are governed by the Illinois securities law limitations period, regardless of choice-of-law provisions. The court also held that the limitations period begins to run upon inquiry notice—when the plaintiff has notice of facts that would lead a reasonable person to investigate—and that public disclosures such as a private research report and congressional hearings provided such notice. The district court properly considered the original complaint's allegations of notice even after amendment, as those facts were judicially noticeable public records.

Holdings

1. Claims arising from securities purchases, including common law claims for fraud, breach of fiduciary duty, and negligent misrepresentation, fall within the scope of the Illinois securities law and its three-year statute of limitations, regardless of choice-of-law provisions in some purchase agreements.
2. Plaintiffs' claims are time-barred because they had notice of facts that would lead to actual knowledge of the alleged violations more than three years before filing suit, specifically by April 2013.

Questions Presented

1. Whether plaintiffs' claims are governed by Illinois securities law's three-year statute of limitations or by Delaware law with a longer period.
2. Whether plaintiffs' claims are time-barred under the three-year statute of limitations.

Disposition

affirmed