Hultman v. Mattson

Background

Charlene Hultman alleged that Kenneth W. Mattson persuaded her and her late husband to invest $380,000 in Divi Divi in 2011 and $420,000 in Specialty Properties in 2013. After her husband’s death in 2020, Hultman became the sole owner of both investments. She received account statements and monthly distributions until 2024.

In April and May 2024, Hultman received communications stating that Mattson had resigned from positions at LeFever Mattson and had engaged in unauthorized transactions involving Divi Divi. Madison Trust Company later informed her that her account balance had fallen to $458.92. Hultman filed claims for securities fraud under Section 10(b) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b-5, financial abuse of an elder, fraud, breach of fiduciary duty, conversion, and a constructive trust.

Motion and Federal Claim

Mattson and KS Mattson Partners, LP moved to dismiss, and LeFever Mattson, Divi Divi, and Specialty Properties joined the motion. The court addressed Hultman’s sole federal claim under Section 10(b) and Rule 10b-5.

The court held that the claim was barred by the five-year statute of repose. A statute of repose sets an outside deadline that generally cannot be extended by delayed discovery or equitable tolling. Hultman did not dispute that the investments were purchased in 2011, 2013, and no later than 2016, while she filed the complaint in 2024.

Hultman argued that later account statements, valuations, and monthly distributions constituted securities fraud within five years of filing. The court rejected that argument because she did not allege that she purchased or sold the relevant securities during that period. The court concluded that post-purchase statements that allegedly induced her to keep holding the investments did not themselves establish a Section 10(b) claim connected to a qualifying purchase or sale. The court therefore found that Hultman had failed to state a claim under Section 10(b) or Rule 10b-5.

State Claims and Bankruptcy Stay

Because the court dismissed the only federal claim, it declined to exercise supplemental jurisdiction over Hultman’s remaining state-law claims. It dismissed those claims without prejudice as to Mattson and KS Mattson Partners, LP.

LeFever Mattson and Divi Divi filed Chapter 11 bankruptcy petitions while the motion was pending. The court stated that the proceeding was stayed as to those two defendants under the bankruptcy stay provisions.

Disposition

Judge Jon S. Tigar granted the motion to dismiss Hultman’s Section 10(b) claim against Mattson and KS Mattson Partners, LP without leave to amend, finding that amendment would be futile. The court dismissed Hultman’s remaining state-law claims against those defendants without prejudice. The case was stayed as to LeFever Mattson and Divi Divi pending resolution of their bankruptcy proceedings.