Financial Negligence Claim Reversed in Mississippi Supreme Court

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Financial Negligence Claim Reversed in Mississippi Supreme CourtIn Gloria Baker, et al. v. Raymond James & Associates Inc., et al., the Mississippi Supreme Court on March 4 reinstated a trial court ruling that Mississippi’s latent-injury discovery-rule exception to the catch-all, three-year limitations period did not apply where the lay plaintiffs, though inexperienced and unsophisticated investors, received monthly account statements showing “substantial losses” on their managed retirement investments. Bradley was part of the team that assisted Raymond James in this signal victory.

The plaintiffs filed suit in 2017, alleging, among other things, a negligence claim against their financial advisor and the advisor’s then-employer Morgan Keegan (now Raymond James). The advisor invested the plaintiffs’ retirement assets from 2002 to 2013. During those years, the plaintiffs received monthly account statements showing substantial losses. The defendants moved for summary judgment based on the three-year statute of limitations, arguing the cause of action accrued at the latest in 2008, when each plaintiff had received written confirmation that one of each of their “investments had sustained a 90 percent loss.” The plaintiffs asserted that their losses were latent injuries. In Mississippi, a latent injury tolls the limitations period if the injury is inherently undiscoverable in nature or when it is unrealistic to expect a layman to perceive the injury. The trial court rejected the latent-injury theory and entered summary judgment in favor of Raymond James and the other defendants. The court concluded that “[t]o discover their injuries, Plaintiffs simply had to glance at their account statements, which would have alerted them to the substantial losses about which they now complain.” The court emphasized that it “does not require advanced degrees or financial backgrounds to realize that those statements showed investment activity inconsistent with their objectives.”

The Mississippi Court of Appeals reversed the trial court, finding that a genuine issue of material fact existed as to whether the plaintiffs’ injury was latent considering the complexity of financial investment, the plaintiffs’ financial inexperience, the fact that the plaintiffs at all times received a monthly retirement check, and the advisor’s reassurance when the plaintiffs questioned him about their losses. Judge David McCarty dissented, joined by Presiding Judge Jack Wilson and Judge Sean Tindell, and wrote “[i]f someone plunges a knife into your belly and you start to bleed, you know you have been injured. Each month, the retirees were jabbed by the clearly shown losses in their accounts… [T]hey knew… it was not getting better—no matter what [their advisor] told them.” Judge McCarty concluded, “the wound was apparent.”

After agreeing to hear the case, the Mississippi Supreme Court reversed the Court of Appeals and reinstated the trial court’s judgment. The court agreed with the reasoning in both the trial court’s ruling and Judge McCarty’s dissent. The court also distinguished Bennett v. Hill Boren P.C., 52 So. 3d 364 (Miss. 2011), in which the court found a latent injury in legal malpractice due to active concealment. The plaintiffs relied on Bennett to recast their negligence claim as a claim for “stockbroker malpractice,” a claim not recognized in Mississippi. Regardless of how the plaintiffs labeled their claim, the court held that the financial advisor’s repeated assurances that their investments were okay “is not—by itself—evidence of any active concealment” where their monthly account statements indicated that the financial advisor made “bad or risky investments… not in line with their investment growth objectives.”

The court’s decision is important for two key reasons. First, the decision reaffirms the importance of financial institutions providing clear, monthly account statements to their clients — a good paper trail is crucial to establishing a limitations defense, particularly when a plaintiff relies on alleged oral representations by a defendant, and can be an important part of any defense on the merits as well. Second, the decision acts as a barrier to countless stale financial-negligence claims that could have been resurrected had the Mississippi Court of Appeals’ decision stood.