Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-13-03315/USCOURTS-ca8-13-03315-0/pdf.json

Nature of Suit Code: 370
Nature of Suit: Other Fraud
Cause of Action: 

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United States Court of Appeals

For the Eighth Circuit

___________________________

No. 13-3315

___________________________

Herschel Zarecor and Mona Zarecor, Individually and on behalf of their IRAs;

Herschel Zarecor, III, Individually and on behalf of his IRA,

lllllllllllllllllllll Plaintiffs - Appellants,

v.

Morgan Keegan & Company, Inc.,

lllllllllllllllllllll Defendant - Appellee.

____________

Appeal from United States District Court 

for the Eastern District of Arkansas - Little Rock

____________

 Submitted: December 9, 2014

 Filed: September 1, 2015

____________

Before WOLLMAN, COLLOTON, and BENTON, Circuit Judges.

____________

COLLOTON, Circuit Judge.

Herschel and Mona Zarecor and their son Herschel Zarecor III brought

Arkansas, New Jersey, and federal securities fraud claims against Morgan Keegan &

Company, Inc. The Zarecors alleged that they relied on misrepresentations made by

Morgan Keegan, and misrepresentations by others that Morgan Keegan prepared,

influenced, or approved, in purchasing securities that caused them substantial losses. 

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The district court granted Morgan Keegan’s motion to dismiss all claims as timebarred, and denied the Zarecors leave to amend the complaint after judgment. We

affirm the dismissal of the Zarecors’ claims under Arkansas law and federal law, but

conclude that the claim under New Jersey law was timely filed under the law of that

jurisdiction as best we can predict it. We therefore affirm in part and reverse in part.

I.

We recite the facts according to the amended complaint and matters of public

record cited by the parties. See Dittmer Props., L.P. v. Fed. Deposit Ins. Corp., 708

F.3d 1011, 1021 (8th Cir. 2013). The Zarecors invested nearly $800,000, including

reinvested dividends and distributions, in the RMK Advantage Income Fund, the

RMK Strategic Income Fund, and the RMK Multi-Sector High Income Fund

(collectively, the RMK Funds) to secure their retirement. Morgan Keegan was the

lead underwriter for the RMK Funds and was heavily involved in the operations of

the Funds.

The Zarecors allege that Morgan Keegan omitted facts regarding the dividend

policies and the structure of the RMK Funds and misrepresented the quality of the

RMK Funds in conversations with Herschel Zarecor. According to the Zarecors,

Morgan Keegan also “was intimately involved with” misrepresentations and

omissions regarding securities that the RMK Funds made in filings with the Securities

and Exchange Commission, prospectuses, and other marketing materials. The

Zarecors allege that Morgan Keegan prepared key sections of the documents, and

approved the S.E.C. filings and marketing materials. For instance, the Zarecors allege

that although the RMK Funds’ public filings promised that some of the assets held

by the Funds would be evaluated independently and in good faith, Morgan Keegan

and a fund manager unilaterally set the prices for the assets. This unilateral action

allegedly manipulated the share prices of the RMK Funds.

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Relying on these alleged misrepresentations, the Zarecors invested most of

their retirement savings in the RMK Funds. When the Funds collapsed in 2007, the

Zarecors lost $718,577, close to ninety percent of their total investment.

Some history of litigation involving the RMK Funds is relevant to whether the

Zarecors timely filed their claims in this action. On December 21, 2007, plaintiffs

unrelated to the Zarecors filed a class action against Morgan Keegan and other

defendants in the United States District Court for the Western District of Tennessee. 

According to an order in the case cited by the Zarecors, the district court consolidated

two pending suits, and the plaintiffs filed a consolidated amended complaint in

February 2011. The plaintiffs sued on behalf of a class of individuals and entitiesthat

purchased securities of four mutual funds, including the RMK Funds at issue in this

case.

The class action plaintiffs claimed that Morgan Keegan was liable as a

“controlling person” under § 20(a) of the Securities Exchange Act of 1934, 15 U.S.C.

§ 78t(a), for violations of § 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and S.E.C.

Rule 10b-5, 17 C.F.R. § 240.10b-5, that were committed by other defendants,

including the RMK Funds, over whom Morgan Keegan exercised control. The

plaintiffs also alleged that Morgan Keegan violated §§ 11 and 12(a)(2) of the

Securities Act of 1933. 15 U.S.C. §§ 77k, 771. The Zarecors were part of the

putative class because they purchased securities of three of the four funds at issue. 

The parties agree that the Zarecors opted out of the class at some point. The class

action eventually was resolved by settlement.

On July 27, 2009, the Zarecors filed a statement of claim in arbitration with the

Financial IndustryRegulatory Authority (FINRA), alleging that Morgan Keegan had

violated New Jersey securities law, N.J. Stat. Ann. § 49:3-71(a)(2)-(4), and Arkansas

securities law, Ark. Code § 23-42-106 (1999). Herschel and Mona Zarecor are

citizens of Arkansas, while Herschel Zarecor III is a citizen of New Jersey. On

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August 12, 2010, the Zarecors amended their claim to include an alleged violation of

§ 10(b) of the Exchange Act and Rule 10b-5. Zarecor v. Morgan Keegan & Co., No.

4:10CV01643 SWW, 2011 WL 5592861, at *1 n.2 (E.D. Ark. July 29, 2011). The

FINRA arbitration panel awarded the Zarecors $541,000 on October 27, 2010, but a

district court later vacated the award, holding that the dispute was not subject to

arbitration under FINRA rules. Id. at *2, *6. The court denied the Zarecors’ motion

for reconsideration on November 10, 2011. Zarecor v. Morgan Keegan & Co., No.

4:10CV01643 SWW, 2011 WL 5508860, at *4 (E.D. Ark. Nov. 10, 2011).

The Zarecors filed the current action a week later, on November 17, 2011. 

They alleged that Morgan Keegan is liable to Herschel and Mona Zarecor as a broker

dealer under Arkansas securities law, Ark. Code § 23-42-106(c) (1999), and to

Herschel Zarecor III under New Jersey securities law. N.J. Stat. Ann. § 49:3-71(d). 

In August 2013, the Zarecors moved for leave to file an amended complaint and

attached the amended complaint. The proposed amendment added factual allegations

and a claim that Morgan Keegan violated § 10(b) and Rule 10b-5 by making material

false statements and omissions and by manipulating the price of assets. The proposed

amendment also altered the claims under Arkansas and New Jersey law to assert that

Morgan Keegan was liable not only as a broker dealer, as the first complaint had

asserted, but also as a control person.

Morgan Keegan opposed leave to amend, but moved to dismiss all claims,

including those in the proposed amendment. The district court granted leave to

amend and dismissed all claims as time-barred. The Zarecors then moved under

Federal Rules of Civil Procedure 59(e) and 60(b) for post-judgment leave to amend

the complaint a second time. The Zarecors sought to include a claim for controlperson liability under § 20(a) of the Exchange Act, but the court denied the motion

based on undue delay.

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II.

The Zarecors appealthe district court’s dismissal oftheir claims astime-barred. 

They argue that the statutes of limitations governing their claims are each subject to

a discovery rule providing that the limitations period does not begin until they could

have discovered the fraud. With the benefit of a discovery rule, the Zarecors argue,

the claims were timely filed. The Zarecors also contend that the FINRA arbitration

and the 2007 class action tolled the statutes of limitations and rendered this action

timely. We review the district court’s ruling de novo, Bradley Timberland Res. v.

Bradley Lumber Co., 712 F.3d 401, 406 (8th Cir. 2013), considering the complaint

itself and matters of public record that are capable of judicial notice. Tellabs, Inc. v.

Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007); Dittmer Props., L.P., 708

F.3d at 1021.

The Zarecors bring three different securities fraud claims that arise under the

laws of Arkansas, New Jersey, and the United States, respectively. The parties agree

with the district court that the law of each respective jurisdiction governing the

timeliness of claims applies to the claims arising under the laws of that jurisdiction. 

Accordingly, the parties have waived any objection to the district court’s choice of

law, and we will decide the appeal on the same basis. See Kostelec v. State Farm Fire

& Cas. Co., 64 F.3d 1220, 1224 (8th Cir. 1995).

A.

The Zarecors’ claim under § 10(b) of the Securities Exchange Act, 15 U.S.C.

§ 78j(b), is timely if it was filed no later than two years “after the discovery of the

facts constituting the violation.” 28 U.S.C. § 1658(b)(1). Under the federal discovery

rule, the statute of limitations begins to run when a plaintiff actually discovers, or “a

reasonably diligent plaintiff would have discovered, the facts constituting the

violation.” Merck & Co. v. Reynolds, 559 U.S. 633, 637 (2010) (internal quotation

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marks omitted). The facts constituting the violation include scienter, or “that a

defendant made a material misstatement with an intent to deceive.” Id. at 648-49. 

The limitations period does not begin to run when a plaintiff is put merely on “inquiry

notice,” or when there are “storm warnings,” such that “the facts would have

prompted a reasonably diligent plaintiff to begin investigating.” Id. at 653 (emphasis

added) (internal quotation marks omitted). Instead, the statute of limitations is

triggered when the reasonably diligent plaintiff would have discovered “the facts

constituting the violation” after an appropriate investigation. Id. (internal quotation

marks omitted); see Pension Tr. Fund v. Mortg. Asset Securitization Transactions,

Inc., 730 F.3d 263, 272-73, 276-79 (3d Cir. 2013).

We conclude that by the end of 2007, a reasonably diligent plaintiff would have

begun investigating the decline in value of the RMK Funds. By that time, the

Zarecors had lost most of their investment in the Funds, and a class action complaint

had been filed alleging that Morgan Keegan was liable for securities fraud in

connection with at least one of the RMK Funds. A reasonably diligent plaintiff who

had purchased securities in the RMK Funds would have noticed that complaint, and

begun to inquire whether Morgan Keegan was at fault for the substantial decline in

value of the Zarecors’ assets. Id. at 278.

We need not pinpoint exactly when a reasonably diligent plaintiff would have

then discovered “the facts constituting the violation” under the federal discovery rule. 

By July 2009, the Zarecors filed a statement of claim in arbitration with the Financial

IndustryRegulatoryAuthority alleging that Morgan Keegan did not disclose the risky

structure of the securities and “misrepresented hundreds of millions of dollars of

asset-backed securities as being corporate bonds and preferred stocks.” These alleged

clear and material misrepresentations of the structure and quality of securities are

sufficient to show facts constituting the violation alleged in this action, including an

intent to deceive. Cf. Merck, 559 U.S. at 649-50. Yet the Zarecors did not bring suit

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on their federal claim until more than two years later, in November 2011. By then,

the two-year statute of limitations had expired.

The Zarecors contend, however, that the 2007 class action tolled the statute of

limitations for their federal securities fraud claim under the rule of American Pipe &

Construction Co. v. Utah, 414 U.S. 538 (1974). American Pipe held that where a

class action is not certified because the proposed class is not sufficiently numerous,

“the commencement of a class action suspends the applicable statute of limitations

as to all asserted members of the class who would have been parties had the suit been

permitted to continue as a class action.” Id. at 553-54; see Crown, Cork & Seal Co.

v. Parker, 462 U.S. 345, 349-50 (1983). The district court ruled that the Zarecors’

claims were not tolled pursuant to American Pipe because the doctrine tolls a statute

of limitations only for claims that are identical to those asserted in a class action, and

the Zarecors’ claims were different from those pleaded in the 2007 class action. The

Zarecors contend that American Pipe tolling should apply because the claims they

pleaded, although different causes of action, were based on the same factual

information that underlay the class action complaint.

In American Pipe, the Supreme Court concluded that a class action tolls

statutes of limitations “as to all asserted members of the class.” 414 U.S. at 554. The

Court reasoned that restricting the tolling doctrine to those class members who filed

motions to intervene “would deprive Rule 23 class actions of the efficiency and

economy of litigation which is a principal purpose of the procedure” by encouraging

“needless duplication of motions.” Id. at 553-54. The Court also explained that the

purposes of a statute of limitations are to “ensur[e] essential fairness to defendants”

and to bar plaintiffs who have “slept on [their] rights.” Id. at 554-55 (internal

quotation mark omitted). Tolling a statute of limitationsfor all class members did not

frustrate these purposes, because the action “notifie[d] the defendants . . . of the

substantive claims” as well as “the number and generic identities of the potential

plaintiffs.” Id.; see Crown, Cork & Seal Co., 462 U.S. at 352-53. This court has said

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that whether a plaintiff’s participation in a class action ends with a decision to opt out

rather than with denial of class certification “is irrelevant to the applicability of the

American Pipe rule.” Adams Pub. Sch. Dist. v. Asbestos Corp., 7 F.3d 717, 718 n.1

(8th Cir. 1993).

We conclude, however, that American Pipe tolling should be limited to claims

filed in a later action that are the same as those pleaded in the putative class action. 

As the Supreme Court later observed, “the tolling effect given to the timely prior

filings in American Pipe . . . depended heavily on the fact that those filings involved

exactly the same cause of action subsequently asserted.” Johnson v. Ry. Express

Agency, Inc., 421 U.S. 454, 467 (1975). A broader rule would not enhance the

“efficiency and economy” of Rule 23 class actions. The Supreme Court’s concern

was that without tolling, putative class members would needlessly bring motions to

intervene or a multiplicity of actions raising identical claims. Crown, Cork & Seal,

462 U.S. at 350-51; American Pipe, 414 U.S. at 553-54. But where a putative class

member wishes to pursue a claim that is outside the scope of the class action, his

separate timely lawsuit is not “needless,” because the class action would not

prosecute his different claim. A class action also does not notify defendants of

substantive claims that are different from those pleaded in the action, so tolling of the

time limits applicable to those different claims does not safeguard “essential fairness

to defendants.” American Pipe, 414 U.S. at 553-55; see Johnson, 421 U.S. at 467 &

n.14. Because the federal claim brought by the Zarecors against Morgan Keegan is

different from the claims that were alleged in the 2007 class action, American Pipe

tolling does not apply. Accord Williams v. Boeing Co., 517 F.3d 1120, 1136 (9th Cir.

2008); Raie v. Cheminova, Inc., 336 F.3d 1278, 1283 (11th Cir. 2003) (per curiam);

Cullen v. Margiotta, 811 F.2d 698, 734-36 (2d Cir. 1987) (Meskill, J., dissenting);

cf. In re Copper Antitrust Litig., 436 F.3d 782, 794 (7th Cir. 2006).

The Zarecors also contend that the federalstatute oflimitations wastolled from

the time they filed the FINRA arbitration on July 27, 2009, until the district court

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denied the Zarecors’ motion for reconsideration of its decision to vacate the arbitral

award on November 10, 2011. They rely on a provision of former FINRA Rule

12206(c), then applicable, that “where permitted by applicable law, when a claimant

files a statement of claim in arbitration, any time limits for the filing of the claim in

court will be tolled while FINRA retains jurisdiction of the claim.” Morgan Keegan

responds that FINRA never “retain[ed] jurisdiction of the claim” under Rule

12206(c), because a district court later ruled that the dispute was not arbitrable, see

Zarecor, 2011 WL 5592861, at *6, and because “applicable law” did not permit

tolling while an arbitral proceeding was pending.

We conclude that pursuit of arbitration did not toll the federal statute of

limitations. Although the Supreme Court has applied tolling under a different federal

statute when a plaintiff initially brought suit in a state court where venue was

improper, Burnett v. N.Y. Cent. R.R. Co., 380 U.S. 424, 428-32 (1965), arbitration is

different. A plaintiff who pursues arbitration is not required to await the outcome to

bring an action in court, and there is an accepted procedure for pursuing arbitration

and a lawsuitsimultaneously. As the FifthCircuit observed in an analogous situation,

a plaintiff may file suit within the statute of limitations and then seek a stay of the

action pending arbitration: “Such a course would have guaranteed that the lawsuit

was brought within the limitations period without waiving any right to arbitration

which may have existed.” Fonseca v. USG Ins. Servs., 467 F. App’x 260, 261 (5th

Cir. 2012). The First Circuit similarly explained that there is a means to give

procedural priority to arbitration without foreclosing a plaintiff’s right to bring a

timely action in court—“the bringing of suit within the limitations period, followed

by a stay of such proceedings pending the results of arbitration.” United States ex.

rel. Wrecking Corp. of Am. v. Edward R. Marden Corp., 406 F.2d 525, 526 (1st Cir.

1969) (per curiam). We believe that this reasoning is sound and should be applied

in the context of the federal securities statutes. The district court thus properly

dismissed the Zarecors’ federal claim as time-barred.

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B.

The Zarecors next contend that they timely filed their claim alleging securities

fraud under New Jersey law. That claim was time-barred “two years after the time

when the person aggrieved knew or should have known of the existence of his cause

of action.” N.J. Stat. Ann. § 49:3-71(g). The New Jersey statute of limitations begins

to run when the plaintiff “discovers, or by an exercise of reasonable diligence and

intelligence should have discovered that he may have a basis for an actionable claim.”

Martinez v. Cooper Hosp.-Univ. Med. Ctr., 747 A.2d 266, 270 (N.J. 2000) (internal

quotation mark omitted); see Henry v. N.J. Dep’t of Human Servs., 9 A.3d 882,

891-92 (N.J. 2010). Discovery of the basis for an actionable claim does not require

“knowledge of a specific basis for legal liability or a provable cause of action.”

Martinez, 747 A.2d at 270. Rather, the statute of limitations begins to run when a

plaintiff should have knowledge of injury and “that the injury is attributable to the

fault of another.” Henry, 9 A.3d at 892 (internal quotation mark omitted). 

We conclude that the Zarecors should have discovered their injury by late

2007, when their investment in the RMK funds had collapsed in value and other

parties had sued Morgan Keegan in a putative class action. The magnitude of the

Zarecors’ losses would have prompted a reasonably diligent and intelligent plaintiff

to investigate. An investigation would have revealed the class action complaint filed

on December 21, 2007, alleging that Morgan Keegan was liable for securities fraud

in connection with at least one of the RMK Funds. At that time, the Zarecors should

have discovered not only that they were injured, but also “that the injury is

attributable to the fault of another.” Henry, 9 A.3d at 892 (internal quotation mark

omitted). The statute of limitations therefore began to run in December 2007.

The two-year statute of limitations would have expired in December 2009

unless it was tolled by the arbitration proceeding that was filed in July 2009 or for

some other reason. Although we have concluded that the arbitration did not toll the

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federal statute of limitations, we must acknowledge that New Jersey law is very

generous to a plaintiff who pursues his claim in the wrong forum. In Galligan v.

Westfield Centre Service, Inc., 412 A.2d 122 (N.J. 1980), the Supreme Court of New

Jersey held that a two-year statute of limitations for personal injury actions was

equitably tolled when the plaintiff sued in a federal court that lacked subject matter

jurisdiction before refiling the same claim in state court twenty-two days after the

limitations period expired. The court reasoned that “a mistake in the selection of a

court having questionable or defective jurisdiction should not defeat tolling of the

statute when all other purposes of the statute of limitations have been satisfied.” Id.

at 124. Because the plaintiff exhibited diligence by pursuing his claim (albeit in the

wrong forum), the defendantreceived timely notice that it could be required to defend

against the claim(albeit through the unconventional vehicle of a deficient complaint),

and the defendant was not prejudiced by “the mere lapse of 22 days” after the statute

of limitations expired, the court held that the action in state court was timely

commenced. Id. at 124-25.

A New Jersey appellate court later concluded that Galligan should be “read

broadly . . . in light of New Jersey’s frequent reference to equitable principles to

relieve the harshness of statutes of limitations.” Mitzner v. W. Ridgelawn Cemetery,

Inc., 709 A.2d 825, 827 (N.J. Super. Ct. App. Div. 1998). The court in Mitzner

allowed equitable tolling where a plaintiff first sued in a forum that lacked personal

jurisdiction over the defendant, and then refiled the same claim in New Jersey state

court approximately one month after the first case was dismissed and six months after

the statute of limitations expired. Id. at 827-29. The Third Circuit, citing “the

numerous cases in which New Jersey courts have flexibly applied the New Jersey

statute of limitations in order to avoid barring litigants on procedural grounds,”

likewise predicted that the state supreme court would apply Galligan and allow

tolling where a first action was filed in a forum that lacked personal jurisdiction. 

Jaworowski v. Ciasulli, 490 F.3d 331, 335 (3d Cir. 2007).

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The district court acknowledged Galligan but thought equitable tolling was

unavailable here, because the Zarecors failed to file suit at all, choosing instead to

pursue arbitration. That is a reasonable distinction that would be persuasive in some

jurisdictions, but our best evidence of New Jersey law is that a diligent pursuit of a

claim in arbitration also tolls the statute of limitations. In Schwartz v. Travelers of

New Jersey Insurance Co., 2009 WL 1405861 (N.J. Super. Ct. App. Div. May 21,

2009), a New Jersey appellate court, considering an insured’s claimagainst an insurer

for uninsured motorist benefits, agreed with a trial judge that a “demand for

arbitration—even if inconsistent with the type of arbitration required by the

policy—was sufficient to toll the statute of limitations.” Id. at *2. The court in

Schwartz ultimately held that the action was untimely, because the plaintiff waited

nearly six years after the defendant refused to arbitrate before suing, id. at *3, but it

is significant that both the trial court and the intermediate appellate court concluded

that a demand for arbitration tolled the statute of limitations. Given the breadth of

Galligan and the broad reading given to that decision by other New Jersey courts, our

best prediction of New Jersey law is that the Zarecors’ timely and diligent pursuit of

their claimin arbitration wassufficient to toll the statute of limitations. That a federal

court later concluded that the arbitration panel lacked jurisdiction does not preclude

equitable tolling under the reasoning of Galligan.

The Zarecors brought this action one week after the district court denied their

motion to reconsider its decision vacating the arbitral award in their favor. Accepting

that the statute of limitations was tolled from the filing of the claim in arbitration on

July 27, 2009, until the district court’s final ruling on November 10, 2011, the claim

based on New Jersey law was timely filed on November 17, 2011. We need not

address whether the 2007 class action also tolled the statute of limitations under New

Jersey law. See Staub v. Eastman Kodak Co., 726 A.2d 955, 963-67 (N.J. Super. Ct.

App. Div. 1999).

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C.

For the Arkansas securities fraud claim under Ark. Code § 23-42-106(c)

(1999), the time limit is established by the statute then in effect, Ark. Code § 23-42-

106(f) (1999): “No person may sue” under the statute “after three (3) years from the

effective date of the contract of sale.” The effective date of the Zarecors’ contract of

sale for securities was no later than the end of 2007. Although the Zarecors did not

allege when they purchased the securities, they aver that the collapse of the RMK

Funds caused their losses in 2007, and they could not have purchased the securities

after that date. The three-year time limit under Arkansas law thus concluded no later

than the end of 2010. The Zarecors brought their claim in November 2011, and it is

therefore untimely.

The Zarecors contend that the Arkansas claim was timely filed because a

“discovery rule” tolled the running of the three-year period until they “could have

discovered the fraud.” The time limit for the Arkansas claim, however, runs from

“the effective date of the contract of sale,” not from a later date when fraud could

have been discovered. The authority cited by the Zarecors, Vanderboom v. Sexton,

422 F.2d 1233, 1240 (8th Cir. 1970), applied federal law rather than Arkansas law to

determine when the statute began to run, so it is inapplicable here. 

We see no basis in the Arkansas statute for applying a discovery rule. The

Arkansas Supreme Court, interpreting a prior version of Ark. Code § 23-42-106(f)

(1999) that said “[n]o person may sue . . . more than two (2) years after the contract

of sale,” held that the two-year limit could not “be extended by fraudulent

concealment of an untrue statement to such time as the untruth of the statement is

discovered,” because the words of the statute plainly foreclosed such an exception to

the time limit. Martin v. Pac. Ins. Co., 431 S.W.2d 239, 240 (Ark. 1968). The statute

was temporarily changed to incorporate a discovery rule that started the time limit

“when the person in exercise of reasonable care could have discovered the alleged

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violation,” 1971 Ark. Acts 326, but the legislature then reverted to a statute like the

one at issue in Martin. The version applicable here, Ark. Code § 23-42-106(f)

(1999), provides that “[n]o person may sue” more than a fixed number of years after

the contract of sale. We therefore conclude that Arkansas courts would not interpret

the statute to allow for tolling by a discovery rule.

The Zarecors also argue that their pursuit of the arbitration with FINRA tolled

the Arkansas time limit. They cite no authority from Arkansas, however, to suggest

that an arbitration could toll the limit of Ark. Code § 23-42-106(f) (1999). As with

the federal claim, we conclude that Arkansas law does not provide for tolling based

on the pursuit of an arbitration.

The Zarecors assert that their claim was nonetheless timely filed because the

2007 class action tolled the three-year limit. The Arkansas Supreme Court has

applied American Pipe tolling to a prior version of Ark. Code § 23-42-106(f), see

Blaylock v. Shearson Lehman Bros., 954 S.W.2d 939, 941 (Ark. 1997), so we will

presume that the doctrine is available to the Zarecors here. But given that “[t]he

tolling rule of American Pipe is a generous one, inviting abuse,” Crown, Cork &Seal

Co., 462 U.S. at 354 (Powell, J., concurring), we are not prepared based on the

authorities available to predict that Arkansas would broaden American Pipe to toll the

time limits for state-law claims that were not pleaded in the 2007 class action. We

therefore conclude that the district court properly dismissed the Arkansas claim as

untimely.

IV.

The Zarecors contend that the district court abused its discretion by denying

their post-judgment motion for leave to amend their complaint a second time. We

have concluded, however, that judgment should not have been entered for the

defendants on the claim under New Jersey law, so the motion for leave to amend

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should not have been treated as a “disfavored” post-judgment motion. See United

States ex rel. Roop v. Hypoguard USA, Inc., 559 F.3d 818, 824 (8th Cir. 2009). 

Considerations of undue delay are still relevant to whether leave should be granted

under Federal Rule of Civil Procedure 15(a)(2) while a case is pending, see Hammer

v. City of Osage Beach, 318 F.3d 832, 844-45 (8th Cir. 2003), but the district court

did not address the motion in that context. We therefore reverse the order denying

leave to amend and remand for the court to consider the motion anew in light of our

disposition concerning the statutes of limitations.

* * *

For these reasons, the judgment of the district court is affirmed in part and

reversed in part, and the case is remanded for further proceedings.

______________________________

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