Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca2-14-00894/USCOURTS-ca2-14-00894-0/pdf.json

Parties Involved:
Bricklayers and Masons Local Union No. 5, Ohio Pension Fund

DeKalb County Pension Fund
Appellant
Robert L. Long
Appellee
Jon A. Marshall
Appellee
Transocean Inc.
Appellee
Transocean Ltd.
Appellee

Document Text:

14‐0894‐cv

DeKalb Cty. Pension Fund v. Transocean Ltd.

In the 

United States Court of Appeals 

for the Second Circuit    

AUGUST TERM 2015

No. 14‐0894‐cv

DEKALB COUNTY PENSION FUND,

on behalf of itself and all others similarly situated,

Plaintiff‐Appellant,

v.

TRANSOCEAN LTD., ROBERT L. LONG,

JON. A MARSHALL, and TRANSOCEAN INC.,

Defendants‐Appellees.

*

   

On Appeal from the United States District Court

for the Southern District of New York

   

ARGUED: AUGUST 18, 2015

DECIDED: MARCH 17, 2016

   

Before: CABRANES, RAGGI, and WESLEY, Circuit Judges.

 * The Clerk of Court is directed to amend the caption of this appeal as

indicated above.

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On appeal from the March 14, 2014 judgment of the United

States District Court for the Southern District of New York (Lorna G.

Schofield, Judge) dismissing as time‐barred by the applicable three‐

year statutes of repose the complaint of plaintiff‐appellant DeKalb

County Pension Fund (“DeKalb”) against defendants‐appellees

Transocean Ltd., Robert L. Long, Jon A. Marshall, and Transocean

Inc. for alleged violations of Sections 14(a) and 20(a) of the Securities

Exchange Act of 1934, 15 U.S.C. §§ 78n(a), 78t(a), and Securities and

Exchange Commission Rule 14a‐9, 17 C.F.R. § 240.14a‐9.

We hold that: (1) Sections 9(f) and 18(a) of the 1934 Act, 15

U.S.C. §§ 78i(f), 78r(a), provide “private right[s] of action that

involve[ ] a claim of fraud, deceit, manipulation, or contrivance,” to

which a five‐year statute of repose now applies after the passage of

the Sarbanes‐Oxley Act of 2002 (“SOX”), Pub. L. No. 107‐204, 116

Stat. 745, but that Section 14(a) does not provide such a private right

of action; (2) the same three‐year statutes of repose that applied to

Sections 9(f) and 18(a) before the passage of SOX, which we

borrowed and applied to Section 14 in Ceres Partners v. GEL

Associates, 918 F.2d 349 (2d Cir. 1990), still apply to Section 14(a)

today; (3) the statutes of repose applicable to Section 14(a) begin to

run on the date of the defendant’s last culpable act or omission; (4)

DeKalb’s lead‐plaintiff motion does not “relate back” under Rule

17(a)(3) of the Federal Rules of Civil Procedure to the filing of the

original class‐action complaint; (5) the Private Securities Litigation

Reform Act of 1995, Pub. L. No. 104‐67, 109 Stat. 737, does not toll

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the statutes of repose applicable to Section 14(a); and (6) the tolling

rule that the Supreme Court described in American Pipe &

Construction Co. v. Utah, 414 U.S. 538 (1974), does not extend to the

statutes of repose applicable to Section 14(a).

Accordingly, we AFFIRM the District Court’s March 14, 2014

judgment dismissing DeKalb’s Section 14(a) claim as time‐barred by

the applicable three‐year statutes of repose and its Section 20(a)

claim for failure to state a claim upon which relief can be granted.

   

GEOFFREY M. JOHNSON (Thomas L.

Laughlin & David R. Scott, on the brief),

Scott+Scott LLP, New York, NY, for

Plaintiff‐Appellant.

JOHN W. SPIEGEL, Munger, Tolles & Olson

LLP, Los Angeles, CA, for Defendants‐

Appellees Transocean Ltd., Transocean Inc.,

and Robert T. Long.

Peter Ligh, Sutherland Asbill & Brennan

LLP, New York, NY, for Defendants‐

Appellees Transocean Ltd., Transocean Inc.,

and Robert T. Long.

Todd S. Fishman, Allen & Overy LLP, New

York, NY, for Defendant‐Appellee Jon. A.

Marshall.

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JOSÉ A. CABRANES, Circuit Judge:

A statute of limitations “creates a time limit for suing in a civil

case, based on the date when the claim accrued.”1 By contrast, a

statute of repose “puts an outer limit on the right to bring a civil

action[,] . . . measured not from the date on which the claim accrues

but instead from the date of the last culpable act or omission of the

defendant”—“in essence an absolute bar on a defendant’s temporal

liability.”2

This appeal concerns the latter, “relatively rare” species of

limitations period.3 Specifically, the principal questions presented

are the following: what statute of repose applies to Section 14(a) of

the Securities Exchange Act of 1934 (the “1934 Act”), 15 U.S.C.

§ 78n(a), and when does that statute of repose begin to run?

In conjunction with Securities and Exchange Commission

(“SEC”) Rule 14a‐9, 17 C.F.R. § 240.14a‐9, Section 14(a) prohibits

“solicitation . . . made by means of any proxy

statement . . . containing any statement which . . . is false or

 1 CTS Corp. v. Waldburger, 134 S. Ct. 2175, 2182 (2014) (internal quotation

marks omitted).

2  Id. at 2182–83 (alterations and internal quotation marks omitted).

3  See Christopher R. Leslie, Den of Inequity: The Case for Equitable Doctrines

in Rule 10b‐5 Cases, 81 Cal. L. Rev. 1587, 1642 (1993) (“[I]t bears repeating that

statutes of repose for federal causes of action are relatively rare.”).

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misleading with respect to any material fact.”4 Section 14(a) “do[es]

not expressly provide a private right of action,” but “[t]he Supreme

Court [has] recognized an implied private right of action for injury

caused by [its] violation.”5 Because the private right of action in

Section 14(a) is implied and not express, it is no surprise that a

statute of repose is not to be found in its text. “[W]e are [therefore]

faced with the awkward task of discerning the limitations period

that Congress intended courts to apply to a cause of action it really

never knew existed.”6

We have taken up this task before, some 25 years ago. In Ceres

Partners v. GEL Associates, 918 F.2d 349 (2d Cir. 1990), we concluded

that the implied private rights of action in Section 14 were

“analogous” to the express private rights of action in Sections 9(f)

and 18(a) of the 1934 Act, 15 U.S.C. §§ 78i(f),7 78r(a),8 in large part

 4 Section 14(a) appears in a section of the 1934 Act titled “Proxies,” and

states that “[i]t shall be unlawful for any person, . . . in contravention of such

rules and regulations as the [SEC] may prescribe . . . , to solicit . . . any proxy or

consent or authorization in respect of [certain] securit[ies].” 15 U.S.C. § 78n(a).

Rule 14a‐9 is one such rule or regulation. See Wilson v. Great Am. Indus., 855 F.2d

987, 991 (2d Cir. 1988).  

5 Grace v. Rosenstock, 228 F.3d 40, 47 (2d Cir. 2000) (citing J.I. Case Co. v.

Borak, 377 U.S. 426 (1964)).

6 Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, 501 U.S. 350, 359

(1991).

7 Section 9(f) appears in a section of the 1934 Act titled “Manipulation of

security prices,” and states that “[a]ny person who willfully participates in any

act or transaction in violation of subsections (a), (b), or (c) of this section, shall be

liable to any person who shall purchase or sell any security at a price which was

affected by such act or transaction . . . .” 15 U.S.C. § 78i(f).

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because these actions share common goals.9 We then borrowed the

three‐year statutes of repose applicable to Sections 9(f) and 18(a) at

the time, and applied them to Section 14.10  

Approximately 12 years after we decided Ceres, however,

Congress passed the Sarbanes‐Oxley Act of 2002 (“SOX”), Pub. L.

 8 Section 18(a) appears in a section of the 1934 Act titled “Liability for

misleading statements,” and reads as follows:

Any person who shall make or cause to be made any statement in

any application, report, or document filed pursuant to this chapter

or any rule or regulation thereunder or any undertaking

contained in a registration statement as provided in subsection (d)

of section 78o of this title, which statement was at the time and in

the light of the circumstances under which it was made false or

misleading with respect to any material fact, shall be liable to any

person (not knowing that such statement was false or misleading)

who, in reliance upon such statement, shall have purchased or

sold a security at a price which was affected by such statement, for

damages caused by such reliance, unless the person sued shall

prove that he acted in good faith and had no knowledge that such

statement was false or misleading . . . .

15 U.S.C. § 78r(a).

9 See Ceres, 918 F.2d at 361–62. When Ceres and many of the other cases

discussed in this opinion were decided, the private right of action now contained

in Section 9(f) was contained in Section 9(e). To avoid confusion, we will refer

only to Section 9(f) here.  

10 Id. The statute of repose then applicable to Section 9(f) stated that “[n]o

action shall be maintained to enforce any liability created under this section,

unless brought . . . within three years after [the] violation.” 15 U.S.C. § 78i(f).

Similarly, the statute of repose then applicable to Section 18(a) stated that “[n]o

action shall be maintained to enforce any liability created under this section

unless brought . . . within three years after [the] cause of action accrued.” Id.

§ 78r(c).

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No. 107‐204, 116 Stat. 745. Section 804(b) of SOX, now codified at 28

U.S.C. § 1658(b), extended to five years the statute of repose

applicable to certain “private right[s] of action that involve[ ] a claim

of fraud, deceit, manipulation, or contrivance.” Section 1658(b) thus

necessitates a reexamination of our holding in Ceres. Because in that

case we borrowed the three‐year statutes of repose then applicable

to Sections 9(f) and 18(a) and applied them to Section 14, we must

determine whether Sections 9(f), 18(a), or 14(a) provide “private

right[s] of action that involve[ ] a claim of fraud, deceit,

manipulation, or contrivance,” to which a five‐year statute of repose

would now apply.  

We hold that Sections 9(f) and 18(a) do indeed provide

“private right[s] of action that involve[ ] a claim of fraud, deceit,

manipulation, or contrivance,” to which a five‐year statute of repose

now applies by virtue of the enactment of SOX, but that Section

14(a) does not provide such a private right of action. Accordingly,

borrowing the statute of repose applicable to Sections 9(f) and 18(a)

and applying it to Section 14 is no longer appropriate, because doing

so would frustrate, rather than “effect[,] Congress’ objectives in

enacting the securities laws.”11  

We therefore hold that the same three‐year statutes of repose

we applied to Section 14 in Ceres—i.e., the three‐year statutes of

repose that, until Congress passed SOX, applied to Sections 9(f) and

 11 Musick, Peeler & Garrett v. Emp’rs. Ins. of Wausau, 508 U.S. 286, 295

(1993).

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18(a)—still apply to Section 14(a) today. We further hold that, like all

statutes of repose, the statutes of repose applicable to Section 14(a)

begin to run on “the date of the [defendant’s] last culpable act or

omission.”12

Primarily for these reasons, we AFFIRM the March 14, 2014

judgment of the United States District Court for the Southern

District of New York (Lorna G. Schofield, Judge), dismissing the

Section 14(a) claim asserted by plaintiff‐appellant DeKalb County

Pension Fund (“DeKalb”) as time‐barred by the applicable three‐

year statutes of repose, and dismissing DeKalb’s claim under Section

20(a) of the 1934 Act, 15 U.S.C. § 78t(a), for failure to state a claim

upon which relief can be granted.

BACKGROUND  

On October 2, 2007, GlobalSantaFe Corp. (“GSF”), “an

offshore oil and gas drilling contractor,” and defendant‐appellee

Transocean Inc. (“Transocean”), “one of the largest international

providers of offshore contract drilling services for oil and gas,”

jointly disseminated a proxy statement concerning a proposed

merger between the companies.13 The proxy statement included

numerous representations regarding Transocean’s compliance with

 12 Waldburger, 134 S. Ct. at 2182.

13 Joint Appendix (“J.A.”) 564, 566. Following its reorganization as a Swiss

company in 2008, “Transocean Inc.” changed its name to “Transocean Ltd.,” J.A.

570–71, which explains the presence of both names in the caption of this appeal.

The company will be referred to as “Transocean” throughout this opinion.

Case 14-894, Document 100-1, 03/17/2016, 1729539, Page8 of 43
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various environmental laws, its training and safety programs, and

its equipment maintenance, among other subjects.14 GSF’s

shareholders, including DeKalb, approved the merger at a

November 9, 2007 shareholder meeting.15 Pursuant to the merger’s

terms, DeKalb exchanged each of its GSF shares for .4757

Transocean shares and a $22.46 cash payment.16  

At the time of the merger, Transocean owned various offshore

oil‐drilling rigs throughout the world—including the now‐infamous

Deepwater Horizon, which exploded on April 20, 2010,

“causing . . . the worst oil spill in U.S. history.”17 In the wake of the

Deepwater Horizon disaster, Transocean’s stock lost more than half of

its value.18

On September 30, 2010, Bricklayers and Masons Local Union

No. 5, Ohio Pension Fund (“Bricklayers”) filed a class‐action

complaint against Transocean, as well as defendants‐appellees

Robert L. Long and Jon A. Marshall, the chief executive officers of

Transocean and GSF, respectively, at the time of the merger.19

Bricklayers alleged that the proxy statement disseminated in

advance of the merger “contained false and material statements and

 14 J.A. 566.

15 J.A. 566, 569.

16 J.A. 564.

17 J.A. 564, 568.

18 J.A. 568–69.

19 J.A. 21, 26.

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omissions regarding Transocean’s dangerously lax safety protocols

for oil drilling and reoccurring issues with [its] blowout

preventer . . . technology,” in violation of Section 14(a).20

DeKalb made its first appearance in the action on December 3,

2010, when it filed a motion to be appointed as lead plaintiff.21 The

District Court subsequently appointed as lead plaintiff “the DeKalb‐

Bricklayers Group,” which DeKalb and Bricklayers had formed

together in light of “their respective financial stakes in the litigation

and their mutual dedication to the prosecution of the action on

behalf of the named class.”22

On April 7, 2011, the DeKalb‐Bricklayers Group filed an

amended class‐action complaint, in which it asserted violations of

Section 14(a), Rule 14a‐9, and Section 20(a).23 “Section 20(a)

establishes secondary liability for ‘every person who, directly or

indirectly, controls any person’ directly liable under the” 1934 Act.24

“To state a claim of control person liability under [Section] 20(a), a

 20 J.A. 22.

21 J.A. 387–88.

22 J.A. 446–48.

23 J.A. 450, 455.

24 Steginsky v. Xcelera Inc., 741 F.3d 365, 371 n.6 (2d Cir. 2014) (alterations

omitted) (quoting 15 U.S.C. § 78t(a)).

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plaintiff must show,” inter alia, “a primary violation by the

controlled person.”25

On March 30, 2012, the District Court dismissed Bricklayers

from the action for lack of standing, finding that it had “failed to

proffer any facts showing that it was eligible to vote” on the merger

or “that it retained its Transocean stock after” the Deepwater Horizon

disaster.26 This dismissal left DeKalb as the sole lead plaintiff.

DeKalb filed a second amended class‐action complaint on April 18,

2012, in which it again asserted Section 14(a), Rule 14a‐9, and Section

20(a) claims.27  

On August 30, 2013, defendants‐appellees filed a motion

under Rule 12(b)(6) of the Federal Rules of Civil Procedure to

dismiss DeKalb’s Section 14(a) claim on the ground that it was time‐

barred by the applicable statutes of repose, which motion the

District Court granted on March 14, 2014.28 In granting the motion,

the District Court borrowed the three‐year statutes of repose that

applied to Sections 9(f) and 18(a) before the passage of SOX and

applied them to DeKalb’s Section 14(a) claim, but did not address

whether SOX had extended Section 9(f)’s or Section 18(a)’s statutes

 25 Carpenters Pension Tr. Fund of St. Louis v. Barclays PLC, 750 F.3d 227, 236

(2d Cir. 2014) (internal quotation marks omitted).

26 See Bricklayers & Masons Local Union No. 5 Ohio Pension Fund v.

Transocean Ltd., 866 F. Supp. 2d 223, 237 (S.D.N.Y. 2012).

27 J.A. 559, 564.

28 See DeKalb Cty. Pension Fund v. Transocean Ltd., 36 F. Supp. 3d 279, 280,

286 (S.D.N.Y. 2014).

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of repose to five years, apparently assuming that it had not.29 The

District Court did, however, reject DeKalb’s argument that § 1658(b)

applies directly to Section 14(a).30 The District Court also held that

the applicable three‐year statutes of repose began to run on October

2, 2007, the date on which GSF and Transocean jointly disseminated

the allegedly false and misleading proxy statement; that the statutes

of repose therefore required DeKalb to have filed its Section 14(a)

claim before October 2, 2010; and that DeKalb’s Section 14(a) claim

was consequently time‐barred, inasmuch as DeKalb did not even

appear in the action until December 3, 2010, approximately two

months after the deadline had passed.31 The District Court also held

that, because a Section 20(a) claim “is necessarily predicated on a

primary violation of securities law, the dismissal of [DeKalb’s

Section] 14(a) claim necessarily mean[t] the dismissal of [DeKalb’s

Section] 20 claim as well.”32 DeKalb timely appealed.33

   

 29 See id. at 282–84.

30 See id. See the text following note 10 for the relevant language from

§ 1658(b).

31 See id. at 284–85.

32 Id. at 286 (citation and internal quotation marks omitted).

33 J.A. 642–43.

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DISCUSSION

“We review de novo the grant of a motion to dismiss under

Rule 12(b)(6) . . . , accepting as true the factual allegations in the

complaint and drawing all inferences in the plaintiff’s favor.”34  

I. The Three‐Year Statutes of Repose that Applied to Sections 9(f)

and 18(a) Before the Passage of SOX Continue to Apply to

Section 14(a)

Before turning to the question of whether § 1658(b) applies to

Sections 9(f), 18(a), or 14(a), it will be helpful to briefly describe our

decision in Ceres, given its importance to our inquiry.

In Ceres, the plaintiff alleged violations of Section 10(b), 15

U.S.C. § 78j(b), Section 14(d), 15 U.S.C. § 78n(d), and Section 14(e), 15

U.S.C. § 78n(e), all of the 1934 Act, as well as SEC Rule 10b‐5, 17

C.F.R. § 240.10b‐5.35 As in this case, the plaintiff brought those claims

pursuant to implied private rights of action.36 The two questions

presented on appeal were whether those claims should be governed

by a “uniform federal limitary period,” instead of whatever statute

of repose applied to the most analogous state statute; and if so, what

 34 Biro v. Conde Nast, 807 F.3d 541, 544 (2d Cir. 2015); see also Fed. Hous. Fin.

Agency v. UBS Ams. Inc., 712 F.3d 136, 140 (2d Cir. 2013) (reviewing de novo the

denial of a motion to dismiss an action as time‐barred by a statute of repose).

35 See 918 F.2d at 350.

36 See id. at 361–62.

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that period should be.37 Answering the first question in the

affirmative, we moved to the second.38

We began by explaining that the 1934 Act “provides for a

number of private actions,” including those under Sections 9(f) and

18(a), and that the “goal of these sections, as for [Section] 10(b), is to

ensure full disclosure, to prohibit conduct recognized as

manipulative and deceptive, and to give the SEC the authority to

take steps to counter other conduct having the same effect. Thus, the

actions available under the 1934 Act share common goals.”39   We

then observed that the express private rights of action found in

Sections 9(f) and 18(a), “for which a . . . three‐year statute of [repose

was] provided[,] . . . are closely related to the right of action implied

under [Section] 10(b) and Rule 10b‐5,” and that there is also a

“permissible overlap between actions under [Section] 10(b) and

those under” Section 11 of the Securities Act of 1933 (the “1933 Act),

15 U.S.C. § 77k, to which a three‐year statute of repose also

 37 Id. at 350. In Ceres, we used the term “statute of limitations” to refer to

both statutes of limitations and statutes of repose. The terms “are often

confused,” UBS Ams., 712 F.3d at 140 (internal quotation marks omitted), and

their “general usage . . . has not always been precise,” Waldburger, 134 S. Ct. at

2186. Notwithstanding the nomenclature that we employed, it is indisputable

that the three‐year component of the “one‐year/three‐year limitations period”

that we discussed in Ceres is a statute of repose, not a statute of limitations. See

Lampf, 501 U.S. at 362 (describing the same three‐year component as a “period of

repose”); see also In re Exxon Mobil Corp. Sec. Litig., 500 F.3d 189, 194 & n.6 (3d Cir.

2007) (same); Blaz v. Belfer, 368 F.3d 501, 503 (5th Cir. 2004) (same).

38 Ceres, 918 F.2d at 352–61.

39 Id. at 361 (citation omitted).

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applied.40 Finally, because “Sections 14(d) and 14(e) of the 1934

Act . . . are similarly provisions designed to ensure that security

holders receive full disclosure,” they “substantially overlap”

Sections 9 and 18(a) and Rule 10b‐5 as well.41 Accordingly, we

concluded that since Congress has provided in Sections 9(f) and

18(a) express rights of action “that so substantially overlap” the

rights of action implied under Sections 10(b) and 14, “and has

provided a limitations period with respect to those express rights,

the specified period provides a far more appropriate analogy than

do state statutes devoted to different types of claims.”42  

Thus, to summarize, we analogized the implied private rights

of action in Sections 10(b) and 14 of the 1934 Act to the express

private rights of action in Sections 9(f) and 18(a) of the 1934 Act and

Section 11 of the 1933 Act, on the basis of the common goals that

these actions share. We then borrowed the three‐year statutes of

repose applicable to the express private rights of action and applied

them to the implied private rights of action. Notably, however, we

did not take a position regarding to which of the express rights of

action the implied rights of action were most similar. That is, we did

not decide whether Sections 10(b) and 14 were more like Section 9(f),

Section 18(a), or Section 11. Of course, there was no need for us to do

 40 Id.

41 Id. at 361–62.

42 Id. at 362.

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so—at the time, Sections 9(f), 18(a), and 11 all had three‐year statutes

of repose.

It also bears mentioning that the Supreme Court expressed its

approval of Ceres in Lampf, Pleva, Lipkind, Prupis & Petigrow v.

Gilbertson, 501 U.S. 350 (1991). In Lampf, the Supreme Court took up

the question of “which statute of [repose] is applicable to a private

suit brought pursuant to” Section 10(b) and Rule 10b‐5.43 Just as we

had in Ceres, the Court looked to Sections 9(f) and 18(a) for its

answer, as those sections “target the precise dangers that are the

focus of [Section] 10(b).”44 According to the Court, all three sections

were “intended to facilitate a central goal: to protect investors

against manipulation of stock prices through regulation of

transactions upon securities exchanges and in over‐the‐counter

markets, and to impose regular reporting requirements on

companies whose stock is listed on national securities exchanges.”45

Additionally, the Court noted that, “[i]n adopting the 1934

Act, . . . Congress also amended the limitations provision of the 1933

Act,” adopting a three‐year statute of repose “for each cause of

action contained therein.”46

Thus, the Court found, “there can be no doubt that the[se]

contemporaneously enacted express remedial provisions represent a

 43 501 U.S. at 352.

44 Id. at 360.

45 Id. at 360–61 (internal quotation marks omitted).

46 Id. at 360.

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federal statute of [repose] actually designed to accommodate a

balance of interests very similar to that at stake” in Section 10(b) and

Rule 10b‐5.47 The Court therefore “agree[d] with every Court of

Appeals that ha[d] been called upon to apply a federal statute of

limitations to a [Section] 10(b) claim that the express causes of action

contained in the 1933 and 1934 Acts provide [the] appropriate”

statute of repose, and the Court cited Ceres in support of that

conclusion.48

A. Section 1658(b) Applies to Section 9(f)

We now turn to the question of whether § 1658(b) applies to

Section 9(f). Although neither the Supreme Court nor we have

previously addressed this issue, several lower courts have suggested

that it does.49 These decisions are sound. While it is true that

§ 1658(b) did not expressly repeal the limitations period in Section

9(f), “an implied repeal will . . . be found where provisions in two

 47 Id. at 359 (internal quotation marks omitted).  

48 Id. at 362 (citing Ceres, 918 F.2d 349).

49 See Silberstein v. Aetna, Inc., No. 13‐CV‐8759 (AJN), 2015 WL 1424058, at

*7 n.1 (S.D.N.Y. Mar. 26, 2015) (“[Section] 9(f) has . . . been amended to create

a . . . five‐year period for actions involving fraud or deceit by [SOX].”); Friedman

v. Rayovac Corp., 295 F. Supp. 2d 957, 974–75 (W.D. Wis. 2003) (“Although [SOX]

did not expressly repeal the limitations period in [Section 9(f)], to the extent that

the two statutes conflict, the more recent statute would control.”); see also Small v.

Arch Capital Grp., Ltd., No. 03‐CV‐5604 (JFK), 2005 WL 696903, at *7 (S.D.N.Y.

Mar. 24, 2005) (“The enactment of [SOX] . . . extended the [statute of]

limitations . . . in [Section 9(f)] to two years . . . .”).

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statutes are in irreconcilable conflict.”50 This standard accurately

describes the relationship between § 1658(b) and Section 9(f).

As noted, § 1658(b) applies to “a private right of action that

involves a claim of fraud, deceit, manipulation, or contrivance.”51 In

view of this language, we agree with the Third and Fourth Circuits

that, at a minimum, Congress clearly intended it to apply to “claims

requiring proof of fraudulent intent.”52 A claim arising under

Section 9(f), “the statutory provision that governs securities price

manipulation claims,”53 is exactly that, as it “contain[s] requirements

of both manipulative motive and willfulness.”54 Thus, the statutes of

repose contained in § 1658(b) and Section 9(f) both purport to apply

to Section 9(f), but prescribe different periods of time. As such, they

“are in irreconcilable conflict,” and “the later [statute] to the extent

 50 Carcieri v. Salazar, 555 U.S. 379, 395 (2009) (alteration and internal

quotation marks omitted).

51 28 U.S.C. § 1658(b).

52 In re Exxon Mobil Corp. Sec. Litig., 500 F.3d at 197; see also Jones v.

Southpeak Interactive Corp. of Del., 777 F.3d 658, 667–68 (4th Cir. 2015) (same).

53 Merck & Co. v. Reynolds, 559 U.S. 633, 646 (2010).

54 Crane Co. v. Westinghouse Air Brake Co., 419 F.2d 787, 794 (2d Cir. 1969);

see also Ernst & Ernst v. Hochfelder, 425 U.S. 185, 209 n.28 (1976) (holding that

Section 9(f) “contains a state‐of‐mind condition requiring something more than

negligence”); Chemetron Corp. v. Bus. Funds, Inc., 682 F.2d 1149, 1161 & n.18 (5th

Cir. 1982) (holding that Section 9(f) requires, inter alia, “a misstatement or

omission . . . of material fact . . . made with scienter” (internal quotation marks

omitted)), vacated and remanded on other grounds, 460 U.S. 1007 (1983).

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of the conflict [therefore] constitutes an implied repeal of the earlier

one.”55  

Relying primarily on a single sentence from a Senate Judiciary

Committee report, other lower courts have suggested that § 1658(b)

“was not intended to conflict with existing limitations periods for

any express private rights of action under the federal securities

laws” (such as Section 9(f)), but was instead intended to apply only

to express private rights of action lacking limitations periods or to

implied private rights of action (such as Section 10(b)).56 As the

Supreme Court has “repeatedly held,” however, “the authoritative

statement is the statutory text, not the legislative history or any other

extrinsic material.”57 In fact, the Court has cast a wary eye on the

specific type of report on which these district‐court decisions were

based:

[J]udicial reliance on legislative materials like

committee reports, which are not themselves subject to

the requirements of Article I, may give unrepresentative

committee members—or, worse yet, unelected staffers

and lobbyists—both the power and the incentive to

attempt strategic manipulations of legislative history to

 55 Kremer v. Chem. Constr. Corp., 456 U.S. 461, 468 (1982) (internal

quotation marks omitted).

56 See, e.g., In re Metro. Sec. Litig., 532 F. Supp. 2d 1260, 1283–84 (E.D.

Wash. 2007) (internal quotation marks omitted) (quoting S. Rep. No. 107‐146, at

29 (2002) (Conf. Rep.)); In re Alstom SA Sec. Litig., 406 F. Supp. 2d 402, 415

(S.D.N.Y. 2005) (same).

57 Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 568 (2005).

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secure results they were unable to achieve through the

statutory text.58

What is more, the particular report in question seems to be

especially unreliable. The specific sentence therefrom on which these

lower courts relied was preceded by the following introduction:

We believe current law likely provides an adequate

length of time in which people who have been

defrauded can file suit . . . . Regrettably, the sponsors of

[the original Senate version of the bill] prevailed in their

effort to extend the current statute of [repose], and we

would like to clarify our understanding of the intended

parameters of that extension.59

In other words, the sentence that formed the basis for these

decisions appears to have been drafted by those senators who lost

the battle to prevent § 1658(b)’s passage, and therefore may have

been engaging in the type of “strategic manipulations of legislative

 58 Id.; see also Nw. Envtl. Def. Ctr. v. Bonneville Power Admin., 477 F.3d 668,

684 n.13 (9th Cir. 2007) (“Reports are usually written by staff or lobbyists, not

legislators; few if any legislators read the reports; they are not voted on by the

committee whose views they supposedly represent, much less by the full Senate

or House of Representatives; they cannot be amended or modified on the floor

by legislators who may disagree with the views expressed therein.” (internal

quotation marks omitted)).

59 S. Rep. No. 107‐146, at 28–29 (2002) (Conf. Rep.).

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history” against which the Supreme Court has warned, in an effort

to curtail the effect of legislation they disfavored.60  

Further, even if legislative history were driving our

determination, there would be plenty of other evidence to

counterbalance this language.61 We need not, however, resort to any

such evidence. “[C]ourts must presume that a legislature says in a

statute what it means and means in a statute what it says there.

When the words of a statute are unambiguous, then, this first canon

is also the last: judicial inquiry is complete.”62 Here, as discussed

above, § 1658(b) speaks for itself—by its terms, it applies to “private

right[s] of action that involve[ ] a claim of fraud, deceit,

manipulation, or contrivance,” not some subset thereof. 63

B. Section 1658(b) Applies to Section 18(a)

We next consider whether § 1658(b) applies to Section 18(a)—

another issue that we have not previously addressed, and on which

 60 Exxon Mobil Corp., 545 U.S. at 568; see also Nw. Envtl. Def. Ctr., 477 F.3d

at 684 n.13 (“Committee reports often contain what some committee members

wanted in the bill, but did not get, and are often written . . . after a bill is passed.”

(internal quotation marks omitted)).

61 See, e.g., 148 Cong. Rec. S7418‐01 (daily ed. July 26, 2002) (statement of

Sen. Leahy) (stating that § 1658 is “meant . . . to govern all the already existing

private causes of action under the various federal securities laws that have been

held to support private causes of action” (emphasis supplied)).

62 Conn. Nat’l Bank. v. Germain, 503 U.S. 249, 253–54 (1992) (citations and

internal quotation marks omitted).

63 28 U.S.C. § 1658(b).

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lower courts in our Circuit have also split.64 This question is more

difficult to resolve, because unlike Section 9(f), Section 18(a) does not

require a plaintiff to plead or prove scienter.65 But it does not

necessarily follow that Section 18(a) is not “a private right of action

that involves a claim of fraud, deceit, manipulation, or

contrivance.”66

Section 1658(b) does not define “fraud.” As a result, we look

to its common‐law meaning, because “[i]t is a settled principle of

interpretation that, absent other indication, Congress intends to

 64 Compare In re Pfizer Inc. Sec. Litig., 584 F. Supp. 2d 621, 641–42 (S.D.N.Y.

2008) (holding that § 1658(b) does not apply to Section 18(a)), with In re Adelphia

Commc’ns Corp. Sec. & Derivative Litig., No. 03‐MD‐1529 (LMM), 2005 WL

1679540, at *4 (S.D.N.Y. July 18, 2005) (holding that it does).

65 See Ross v. A.H. Robins Co., 607 F.2d 545, 555–56 (2d Cir. 1979) (“To

establish a [Section] 10(b) violation, the plaintiff must plead and prove that the

defendant acted with scienter in making a material misstatement or omission. A

plaintiff seeking recovery under [Section] 18 faces a significantly lighter burden.

He must merely plead and prove that a document filed with the [SEC] contains a

material misstatement or omission. If he can show reliance on that statement,

liability is established  . . . .” (emphasis removed)); see also Deephaven Private

Placement Trading, Ltd. v. Grant Thornton & Co., 454 F.3d 1168, 1172 (10th Cir.

2006) (“[T]he district court erred in holding that a claim under Section 18(a)

requires [a plaintiff] to plead scienter.”); In re Suprema Specialties, Inc. Sec. Litig.,

438 F.3d 256, 283 (3d Cir. 2006) (“A Section 18 plaintiff . . . bears no burden of

proving that the defendant acted with scienter or any particular state of mind.”);

In re Stone & Webster, Inc., Sec. Litig., 414 F.3d 187, 193 (1st Cir. 2005) (“Under

[Section 18(a)], . . . a plaintiff bears no burden of proving that the defendant acted

with any particular state of mind.”).

66 28 U.S.C. § 1658(b).

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incorporate the well‐settled meaning of the common‐law terms it

uses.”67  

The eighth edition of Black’s Law Dictionary—which is the

edition published closest in time to the passage of SOX68—defines

“fraud” in pertinent part as follows: “1. A knowing

misrepresentation of the truth or concealment of a material fact to

induce another to act to his or her detriment. . . . 2. A

misrepresentation made recklessly without belief in its truth to

induce another person to act.”69 The question, then, is whether

Section 18(a) “involves a claim of a knowing misrepresentation of

the truth or concealment of a material fact to induce another to act to

his or her detriment,” or “involves a claim of a misrepresentation

made recklessly without belief in its truth to induce another person

 67 United States v. Castleman, 134 S. Ct. 1405, 1410 (2014) (internal quotation

marks omitted); see also United States v. Coplan, 703 F.3d 46, 59–60 (2d Cir. 2012)

(interpreting “fraud” and “defraud” according to their established common‐law

meanings); cf. Antonin Scalia & Brian A. Garner, Reading Law: The Interpretation of

Legal Texts 320 & n.6 (2012) (noting that this “age‐old principle . . . has been

applied to such terms as . . . fraud”).

68 See Sandifer v. U.S. Steel Corp., 134 S. Ct. 870, 876 (2014) (interpreting a

statutory term “as taking [its] . . . common meaning” from “the era of [the

statute’s] enactment” (internal quotation marks omitted)).

69 Fraud, Black’s Law Dictionary (8th ed. 2004); cf. McCullen v. Coakley, 134 S.

Ct. 2518, 2547 (2014) (Scalia, J., concurring in the judgment) (referring to Black’s

Law Dictionary to determine the common‐law meaning of a statutory term);

Schiller v. Tower Semiconductor Ltd., 449 F.3d 286, 300 (2d Cir. 2006) (referring to

Black’s Law Dictionary to determine the “well‐accepted meanings” of terms used

in the securities laws).

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to act.” Focusing in particular on the second of these two

formulations, we conclude that it does.

On its face, Section 18(a) unquestionably “involves a claim of

a misrepresentation made . . . to induce another person to act.”70

And the Supreme Court has strongly indicated that, in order for a

plaintiff to recover under Section 18(a), such a misrepresentation

also must have been “made recklessly without belief in its truth,” at

the very least.

In Ernst & Ernst v. Hochfelder, 425 U.S. 185 (1976), the Court

stated that Section 18(a) “contains a state‐of‐mind condition

requiring something more than negligence,” and that its “legislative

history . . . suggests something more than negligence on the part of

the defendant is required for recovery.”71 Relying on this language,

we noted in Ross v. A.H. Robins Co., 607 F.2d 545 (2d Cir. 1979), that

“a party may not be held liable under [Section] 10(b) unless he acted

with scienter. It may well be that a similar requirement attaches to

[Section] 18 liability.”72 The Supreme Court used even stronger

 70 See 15 U.S.C. § 78r(a) (“Any person who shall make or cause to be made

any statement . . . , which statement was at the time and in the light of the

circumstances under which it was made false or misleading with respect to any

material fact, shall be liable to any person . . . who, in reliance upon such statement,

shall have purchased or sold a security at a price which was affected by such

statement . . . . ” (emphasis supplied)); see also Cent. Bank of Denver, N.A. v. First

Interstate Bank of Denver, N.A., 511 U.S. 164, 178 (1994) (discussing Section 18(a)’s

“reliance requirement” (internal quotation marks omitted)).

71 425 U.S. at 209 n.28, 211 n.31.

72 607 F.2d at 555.

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language in Musick, Peeler & Garrett v. Employers Insurance of Wausau,

508 U.S. 286 (1993), in which it stated that Section 18(a) “involve[s]

defendants who have violated the securities law with scienter”;

contrasted Section 18(a) with Sections 11 and 12 of the 1933 Act, 15

U.S.C. §§ 77k, 77l, and Section 16 of the 1934 Act, 15 U.S.C. § 78p,

which “do not require scienter in all instances”; and described

Section 18(a) as prohibiting an “intentional tort[ ].”73  

In light of the Court’s statement that Section 18(a) requires

“scienter,” it is useful to define that term. For purposes of the

securities laws, the Supreme Court has defined it as “a mental state

embracing intent to deceive, manipulate, or defraud.”74 This

definition corresponds almost exactly to § 1658(b)’s references to

“deceit,” “manipulation,” and “fraud.”75 Moreover, the Supreme

Court has explained that “the intent motivating [Section 18(a)] is . . .

to deter fraud and manipulative practices in the securities markets,”76

 73 508 U.S. at 296–97. As the Supreme Court has explained, “[i]ntentional

torts . . . , as distinguished from negligent or reckless torts, generally require that

the actor intend the consequences of an act, not simply the act itself.” Straub v.

Proctor Hosp., 562 U.S. 411, 417 (2011) (alterations, emphasis, and internal

quotation marks omitted).

74 Hochfelder, 425 U.S. at 193 & n.12; accord United States v. Newman, 773

F.3d 438, 447 (2d Cir. 2014) (same); Scienter, Black’s Law Dictionary (10th ed. 2014)

(defining “scienter” in part as “[a] mental state consisting in an intent to deceive,

manipulate, or defraud,” and noting that “[i]n this sense, the term is used most

often in the context of securities fraud”).

75 See 28 U.S.C. § 1658(b).

76 Musick, 508 U.S. at 296 (emphasis supplied) (internal quotation marks

omitted).

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and we have explained that one of Section 18(a)’s goals is to

“prohibit conduct recognized as manipulative and deceptive”77—

language that, like the definition of “scienter,” matches § 1658(b)’s

references to “fraud,” “manipulation” and “deceit.”78

We also think it significant that Section 18(a) imposes liability

“unless the person sued shall prove that he acted in good faith and

had no knowledge that such statement was false or misleading.”79

The presence of this good‐faith defense means that, as a practical

matter, Section 18(a) actions will generally involve proof of a

defendant’s state of mind, and recovery will be permitted only

where a defendant acted, at a minimum, recklessly. Congress’s

inclusion of this defense thus further demonstrates that it intended

Section 18(a) to reach only fraudulent misrepresentations, rather

than negligent or innocent ones.80  

 77 Ceres, 918 F.2d at 361 (emphasis supplied).

78 28 U.S.C. § 1658(b); see also Lampf, 501 U.S. at 360–61 (stating that

Section 18(a) “was intended to facilitate a central goal: to protect investors

against manipulation of stock prices” (emphasis supplied) (internal quotation

marks omitted)).

79 15 U.S.C. § 78r(a).

80 We also note that a good‐faith defense such as that contained in Section

18(a) makes perfect sense in the context of a private right of action that involves a

misrepresentation “made recklessly without belief in its truth,” but would make

far less sense in the context of a private right of action that involved a

misrepresentation made merely negligently, or that imposed strict liability. Cf.

Nelson v. First Nat’l Bank & Trust Co. of Williston, 543 F.3d 432, 436 (8th Cir. 2008)

(suggesting “that a negligent act can[ ] be made in good faith”); United States v.

Dowlin, 408 F.3d 647, 667 (10th Cir. 2005) (affirming jury instructions that “[a]n

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Lastly, we have explicitly stated that Section 18(a) “create[s]

[a] private right[ ] of action for various types of fraud,”81 and we

have described a violation of Section 18(a) as “fraud” on at least one

other occasion.82  

Taken together, these factors lead us to join the Fifth Circuit in

concluding that, like Section 9(f), Section 18(a) is governed by

§ 1658(b), the provision that codifies Section 804(b) of SOX.83 A

plaintiff asserting a Section 18(a) claim is, in essence, asserting a

fraud claim—a fraud claim with respect to which the defendant, and

not the plaintiff, uncharacteristically bears the burden of proof

regarding scienter, but a fraud claim no less.84  

 

honest belief or good faith belief by the defendants that the statements or

representations made were true is a complete and total defense to the charge of

securities fraud” (internal quotation marks omitted)); Mortenson v. Nat’l Union

Fire Ins. Co. of Pittsburgh, 249 F.3d 667, 670 (7th Cir. 2001) (stating that, as

concerns “strict liability crimes, . . . [a] defendant’s state of mind is irrelevant”).

81 Ceres, 918 F.2d at 361 (emphasis supplied).

82 See Kahn v. Kohlberg, Kravis, Roberts & Co., 970 F.2d 1030, 1037 (2d Cir.

1992) (discussing a Section 18(a) claim for “fraud in connection with a

registration statement”).

83 See Blaz, 368 F.3d at 503 (“Pursuant to . . . § 1658(b) . . . , th[e] statute of

repose [in Section 18(c) of the 1934 Act] . . . has been extended to five years . . . .”).

84 Cf. Ross, 607 F.2d at 556 (suggesting that “the defendant’s state of mind”

is relevant to a Section 18(a) claim, and that “the ultimate outcome of the

litigation may hinge upon who bears the burden of establishing” it); Deephaven

Private Placement Trading, Ltd., 454 F.3d at 1172 (suggesting that “[t]he state of

mind with which the defendant acted” is relevant to a Section 18(a) claim, but

that it “enters the case as a defense”); Magna Inv. Corp. v. John Does One Through

Two Hundred, 931 F.2d 38, 40 (11th Cir. 1991) (suggesting that a defendant’s “bad

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C. Section 1658(b) Does Not Apply to Section 14(a)

The import of the foregoing analysis is that the landscape has

fundamentally changed since we decided Ceres. To recapitulate, in

Ceres, our primary points of reference for determining which statute

of repose applies to Section 14 were the statutes of repose that

applied to Sections 9(f) and 18(a) before the passage of SOX. But

§ 1658(b) has since extended those statutes of repose to five years.85

Thus, if we were to take the same analytical approach that we

took in Ceres to the question before us today—i.e., borrow the

statutes of repose applicable to Sections 9(f) and 18(a)—the statute of

repose applicable to Section 14(a) would be five years. But this

would be an absurd result, undeniably contrary to clearly expressed

congressional intent, and would frustrate, rather than “effect[,]

Congress’ objectives in enacting the securities laws.”86 We would,

essentially, be applying § 1658(b) to Section 14(a), albeit indirectly.

And yet, Congress has specified that § 1658(b) applies only to

 

faith” is relevant to a Section 18(a) claim, but that the plaintiff does not bear the

burden of proving it).

85 It should be noted that the Supreme Court has held that § 1658(b) also

extended to five years the statute of repose applicable to Section 10(b). See Merck,

559 U.S. at 638 (applying § 1658(b) to Section 10(b)); see also Staehr v. Hartford Fin.

Servs. Grp., Inc., 547 F.3d 406, 411 (2d Cir. 2008) (same).

86 Musick, 508 U.S. at 295.

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“private right[s] of action that involve[ ] a claim of fraud, deceit,

manipulation, or contrivance,”87 which Section 14(a) does not.88

Confronted, then, with one of the “inevitable . . . difficult

problems regarding the interplay of the [1934 Act’s] express and

implied remedies” that we predicted “such a complex scheme of

regulation” would “spawn,”89 we resort to a simpler methodology.

 87 28 U.S.C. § 1658.

88 See Wilson, 855 F.2d at 995 (“Under Rule 14a‐9, plaintiffs need not

demonstrate that the omissions and misrepresentations resulted from knowing

conduct undertaken by the director defendants with an intent to deceive.

Liability can be imposed for negligently drafting a proxy statement.” (citation

omitted)); see also Beck v. Dobrowski, 559 F.3d 680, 682 (7th Cir. 2009) (“There is no

required state of mind for a violation of section 14(a); a proxy solicitation that

contains a misleading misrepresentation or omission violates the section even if

the issuer believed in perfect good faith that there was nothing misleading in the

proxy materials.”); In re Exxon Mobil Corp. Sec. Litig., 500 F.3d at 196 (“Violations

of § 14(a) . . . may be committed without scienter; in other words, no culpable

intent is required.”). But see SEC v. Das, 723 F.3d 943, 953 (8th Cir. 2013) (noting

that the Eighth Circuit has “concluded that scienter is an element, at least for

Rule 14a‐9 claims against outside directors and accountants” (alterations and

internal quotation marks omitted)); Ind. State Dist. Council of Laborers & Hod

Carriers Pension & Welfare Fund v. Omnicare, Inc., 719 F.3d 498, 507 n.3 (6th Cir.

2013) (“In this Circuit § 14(a) does in fact require proof of scienter to state a

claim.”), vacated and remanded on other grounds sub nom. Omnicare, Inc. v. Laborers

Dist. Council Constr. Indus. Pension Fund, 135 S. Ct. 1318 (2015).

89 Ross, 607 F.2d at 551.

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“We assume that Congress is aware of existing law when it

passes legislation.”90 Thus, we presume that, when Congress passed

SOX, it was “aware of [two features of] the judicial background

against which it [was] legislat[ing]”91: (1) Ceres and many similar

decisions borrowing the three‐year statutes of repose then applicable

to Sections 9(f) and 18(a) and applying them to Section 14(a);92 and

(2) myriad decisions holding that “[l]iability can be imposed [under

Section 14(a)] for negligently drafting a proxy statement.”93 Put

 90 Miles v. Apex Marine Corp., 498 U.S. 19, 32 (1990); see also Cannon v. Univ.

of Chi., 441 U.S. 677, 696–97 (1979) (“It is always appropriate to assume that our

elected representatives, like other citizens, know the law . . . .”).

91 Siebert v. Conservative Party of N.Y. State, 724 F.2d 334, 337 (2d Cir. 1983).

92 See Ceres, 918 F.2d at 364; Westinghouse Elec. Corp. by Levit v. Franklin,

993 F.2d 349, 353 (3d Cir. 1993) (“[W]e find that Section 14(a) claims . . . are

similar and related to explicit causes of action enumerated in the [1934 Act] for

which Congress did expressly provide a limitations period of . . . in no event

more than three years after such violation.” (internal quotation marks omitted));

Gilliam v. Hobert, 952 F. Supp. 319, 322 (W.D. Va. 1997) (implicitly holding that a

three‐year statute of repose applies to Section 14(a)); Hamilton v. Cunningham, 880

F. Supp. 1407, 1411 (D. Colo. 1995) (“[T]he . . . three‐year limitations period

governs . . . § 14(a) claims . . . .”).

93 Wilson, 855 F.2d at 995; see also Herskowitz v. Nutri/Sys., Inc., 857 F.2d

179, 190 (3d Cir. 1988) (“A material misrepresentation even when made

negligently rather than intentionally or recklessly, can still inflict the anticipated

harm, and is thus deemed actionable.”); Shidler v. All Am. Life & Fin. Corp., 775

F.2d 917, 927 (8th Cir. 1985) (affirming the district court’s dismissal of the

plaintiffs’ Section 14(a) claim “[b]ecause the defendants were not negligent”);

SEC v. Arthur Young & Co., 590 F.2d 785, 787 (9th Cir. 1979) (“assum[ing], without

deciding, that in a statutory enforcement proceeding [brought by the SEC],

negligence, rather than scienter, constitutes the standard by which an

accountant’s or auditor’s performance must be measured” under Section 14(a));

Gruss v. Curtis Publ’g Co., 534 F.2d 1396, 1403 (2d Cir. 1976) (describing

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differently, Congress must have known that, by extending only the

statute of repose applicable to “private right[s] of action that

involve[ ] a claim of fraud, deceit, manipulation, or contrivance,”94

the statutes of repose applicable to Section 14(a) would remain

intact. And from this knowledge, we conclude that Congress

“affirmatively intended to preserve” them.95 We therefore hold that

 

“negligence” as “the standard of culpability we have held applicable as a

minimum in damage suits for violations of” Section 14(a)); Gould v. Am.‐Hawaiian

S.S., 535 F.2d 761, 777 (3d Cir. 1976) (“[T]he district court held negligence to be

the appropriate standard under section 14(a) and we agree.”); Republic Tech.

Fund, Inc. v. Lionel Corp., 483 F.2d 540, 551 n.11 (2d Cir. 1973) (holding that

“negligence alone suffices to establish culpability” under Section 14(a) (emphasis

in original)); Gerstle v. Gamble‐Skogmo, Inc., 478 F.2d 1281, 1300–01 (2d Cir. 1973)

(“[W]here the plaintiffs represent the very class who were asked to approve a

merger on the basis of a misleading proxy statement and are seeking

compensation from the beneficiary who is responsible for the preparation of the

statement, they are not required to establish any evil motive or even reckless

disregard of the facts.”); Dasho v. Susquehanna Corp., 461 F.2d 11, 29 & n.45 (7th

Cir. 1972) (holding that, under Section 14(a), “[t]he ‘scienter’ required in common

law fraud is not necessary”); cf. Hochfelder, 425 U.S. at 209 n.28 (“[S]ome courts

have concluded that proof of scienter is unnecessary in an action [under Section

14(a)] for damages by the shareholder recipients of a materially misleading proxy

statement against the issuer corporation.”). But see Adams v. Standard Knitting

Mills, Inc., 623 F.2d 422, 428 (6th Cir. 1980) (“conclud[ing] that scienter should be

an element of liability in private suits under [Section 14(a)] as they apply to

outside accountants”).

94 28 U.S.C. § 1658(b).

95 See Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Curran, 456 U.S. 353,

381–82 (1982) (“[T]he fact that a comprehensive reexamination and significant

amendment of the [statute] left intact the statutory provisions under which the

federal courts had implied a cause of action is itself evidence that Congress

affirmatively intended to preserve that remedy.”); see also Fiero v. Fin. Indus.

Regulatory Auth., Inc., 660 F.3d 569, 577 (2d Cir. 2011) (finding significant that the

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the same three‐year statutes of repose that we applied to Section 14

in Ceres—which are the three‐year statutes of repose that, until

Congress passed SOX, applied to Sections 9(f) and 18(a)—still apply

to Section 14(a) today.

II. The Three Year Statutes of Repose Applicable to Section 14(a)

Begin to Run on the Date of the Defendant’s Last Culpable Act

or Omission

Having concluded that Section 14(a)’s three‐year repose

period is not affected by § 1658(b), we must now determine when

that period begins to run.

The three‐year statute of repose previously applicable to

Section 9(f) stated that “[n]o action shall be maintained to enforce

any liability created under this section, unless brought . . . within

three years after such violation,”96 while the three‐year statute of

repose previously applicable to Section 18(a) stated that “[n]o action

shall be maintained to enforce any liability created under this section

unless brought . . . within three years after such cause of action

accrued.”97 In the case before us, DeKalb argues that, because of this

difference in language, we must choose between the two standards,

 

Financial Industry Regulatory Authority’s (“FINRA”) “reliance upon

[alternative] enforcement methods was known to Congress, [but] Congress left

that reliance unaltered” in subsequent legislation, in holding that FINRA was

“not authorized to enforce the collection of its fines through the courts”).

96 15 U.S.C. § 78i(f) (emphasis supplied).

97 Id. § 78r(c) (emphasis supplied).

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and urges us to pick Section 18(a)’s “accrual” standard rather than

Section 9(f)’s “violation” standard.98 According to DeKalb, its

Section 14(a) claim is timely under the “accrual” standard, because it

“accrued on April 20, 2010, the date the Deepwater Horizon disaster

revealed that . . . Transocean had systematically violated numerous

health, safety and environmental laws on the Deepwater Horizon

drilling rig and on a company‐wide basis.”99

DeKalb cites Lampf, arguing that it requires us to determine

which section is most analogous to Section 14(a) and then to apply

that section’s repose language to Section 14(a). We are not

persuaded. In Lampf, the Supreme Court recognized that the 1934

Act’s statutes of repose, including those in Sections 9(f) and 18(a), all

“relate to . . . three years after violation,” regardless of any differences

in statutory language.100 Thus, we conclude that, when applying a

statute of repose, we do not need to choose between these two

standards, because Lampf dictates the same result.

In urging otherwise, DeKalb invokes “the discovery rule,”

pursuant to which, “where a plaintiff has been injured by fraud and

remains in ignorance of it without any fault or want of diligence or

care on [its] part, the bar of the statute does not begin to run until

 98 See Pl.’s Br. 34.

99 Id. at 36. See Gabelli v. SEC, 133 S. Ct. 1216, 1220 (2013) (holding, in the

context of a statute of limitations, that the “standard rule” is that “a claim accrues

when the plaintiff has a complete and present cause of action” (internal

quotation marks omitted)).

100 501 U.S. at 355 n.2 (emphasis supplied); see also id. at 360 & n.6.

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the fraud is discovered,” or until “it could have been discovered”

“in the exercise of reasonable diligence.”101 This argument fails not

only because, as explained in Part I of this opinion, Section 14(a)

claims do not demand fraud, but also because the discovery rule

does not extend to statutes of repose. As courts have observed,

statutes of repose “are surgical strikes by the legislature against the

discovery rule”102 that consequently “override[ ]” it.103 And the

Supreme Court has unambiguously characterized the three‐year

limitations period previously applicable to Section 18(a) as a statute

of “repose,” not a statute of limitations.104

We are bound by this characterization—with which, it should

be noted, DeKalb agrees.105 In any event, holding that the statutes of

repose applicable to Section 14(a) begin to run only when the alleged

claim was or could have been discovered—an inherently fluid

 101 Gabelli, 133 S. Ct. at 1221 (internal quotation marks omitted).

102 Hinkle by Hinkle v. Henderson, 85 F.3d 298, 302 (7th Cir. 1996) (citation

omitted).

103 Chang v. Baxter Healthcare Corp., 599 F.3d 728, 733 (7th Cir. 2010); see also

Wike v. Vertrue, Inc., 566 F.3d 590, 595 (6th Cir. 2009) (“[A] statute of repose [is]

not subject to a discovery rule . . . .”); Archer v. Nissan Motor Acceptance Corp., 550

F.3d 506, 508 (5th Cir. 2008) (suggesting that the discovery rule does not apply to

statutes of repose); cf. Waldburger, 134 S. Ct. at 2180, 2187–89 (holding that a

federal statute’s discovery rule preempted state statutes of limitations but not

state statutes of repose).

104 See Lampf, 501 U.S. at 360 & n.6; see also In re Exxon Mobil Corp. Sec.

Litig., 500 F.3d at 194; Blaz, 368 F.3d at 503.

105 See, e.g., Pl.’s Br. at ii, 34 (“DeKalb’s Section 14(a) Claim Is Timely

Under Section 18(a) [sic] Statute of Repose”).

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calculus—would defeat their “distinct purpose,” which is to “effect a

legislative judgment that a defendant should be free from liability

after the legislatively determined period of time.”106 Indeed, an

“injury need not [even] have occurred, much less have been

discovered,” for a statute of repose to begin to run.107 Instead, the

statutory period is “measured . . . from the date of the [defendant’s]

last culpable act or omission.”108

Accordingly, we hold that the three‐year statutes of repose

applicable to Section 14(a) begin to run on the date of the

violation,109 which we consider to be the date of the defendant’s last

culpable act or omission.110 Because Section 14(a) and Rule 14a‐9

jointly prohibit “solicitation . . . made by means of any proxy

statement . . . containing any statement which . . . is false or

misleading with respect to any material fact,”111 the relevant date in

this case was October 2, 2007, when GSF and Transocean jointly

 106 Waldburger, 134 S. Ct. at 2183 (internal quotation marks omitted).

107 Id. at 2182 (emphasis supplied) (internal quotation marks omitted).

108 Id.

109 See Westinghouse, 993 F.2d at 353 (concluding that, “like Section 10(b)

claims,” Section 14(a) claims “are similar and related to explicit causes of

action . . . for which Congress did expressly provide a limitations period of . . . in

no event more than three years after such violation” (internal quotation marks

omitted)).

110 See Waldburger, 134 S. Ct. at 2182 (explaining that statutes of repose

“are measured not from the date on which the claim accrues but instead from the

date of the last culpable act or omission of the defendant”).

111 17 C.F.R. § 240.14a‐9(a); see also ante note 4.

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disseminated the allegedly false and misleading proxy statement.112

DeKalb therefore had until October 2, 2010 to file its Section 14(a)

claim, but it did not appear in the action until December 3, 2010.113

As a result, DeKalb’s claim is time barred.

III. DeKalb’s Lead‐Plaintiff Motion Does Not “Relate Back” Under

Rule 17(a)(3) of the Federal Rules of Civil Procedure to

Bricklayers’ Filing of the Original Class Action Complaint

DeKalb also argues that, even if it did not appear in the action

until after the applicable statutes of repose had run, “the District

Court’s opinion would still need to be reversed [or] remanded

because [Bricklayers’] original class action complaint was timely

filed” on September 30, 2010, and DeKalb’s “lead plaintiff motion [of

December 3, 2010] relates back to the initial filing.”114 In making this

argument, DeKalb relies on Rule 17(a)(3) of the Federal Rules of

Civil Procedure, which provides the following:

The court may not dismiss an action for failure to

prosecute in the name of the real party in interest until,

after an objection, a reasonable time has been allowed

for the real party in interest to ratify, join, or be

substituted into the action. After ratification, joinder, or

 112 J.A. 564, 566. Cf. Lampf, 501 U.S. at 364 (concluding that plaintiffs’

Section 10(b) claims were untimely because they were brought “more than three

years after petitioner’s alleged misrepresentations”).

113 J.A. 387–88.

114 Pl.’s Br. 39–40.

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substitution, the action proceeds as if it had been

originally commenced by the real party in interest.

According to DeKalb, “the consolidated complaint naming

DeKalb as a lead plaintiff should be deemed timely filed on

September 30, 2010 because DeKalb was substituted in as the ‘real

party in interest.’”115

Rule 17(a)(3), however, has no bearing here. That rule “was

added . . . to avoid forfeiture and injustice when an understandable

mistake has been made in selecting the party in whose name the

action should be brought” and “codifie[d] the modern judicial

tendency to be lenient when an honest mistake has been made in

selecting the proper plaintiff.”116 DeKalb has not even suggested that

whatever “mistake” may have led to its tardy appearance was

“understandable” or “honest,” nor pointed to a “semblance of any

reasonable basis” therefor.117 Rather, “through minimal diligence,

[DeKalb] could have avoided the operation of the . . . statute of

repose simply by making [a] timely motion[ ] to intervene in the

 115 Pl.’s Br. 40.

116 Cortlandt St. Recovery Corp. v. Hellas Telecomms., S.À.R.L., 790 F.3d 411,

421 (2d Cir. 2015) (emphasis supplied) (internal quotation marks omitted).

117 Advanced Magnetics, Inc. v. Bayfront Partners, Inc., 106 F.3d 11, 20 (2d

Cir. 1997).

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action as [a] named plaintiff[ ], or by filing [its] own timely

action[ ].”118

In any event, DeKalb’s lead‐plaintiff motion cannot relate

back to Bricklayers’ complaint, because that complaint “was a

nullity.”119 Bricklayers was not dismissed because it lacked standing

to assert DeKalb’s claims—it was dismissed because it lacked

standing to assert its own claims. In other words, this is simply not a

“situation[ ] in which it [was] unclear at the time the action [was]

filed who had the right to sue and it [was] subsequently determined

that the right belonged to a party other than the party that instituted

the action.”120 Accordingly, we will not “distort[ ]” Rule 17(a)(3) to

allow DeKalb “to circumvent the limitations period.”121

 118 Police & Fire Ret. Sys. of City of Detroit v. IndyMac MBS, Inc., 721 F.3d 95,

112 (2d Cir. 2013).

119 See Cortlandt St., 790 F.3d at 423 (“[I]n the absence of a plaintiff with

standing, this lawsuit was a nullity, and there was therefore no lawsuit pending

for the real party in interest to ‘ratify, join, or be substituted into’ under Rule

17(a)(3) or otherwise.”).

120 Del Re v. Prudential Lines, Inc., 669 F.2d 93, 96 (2d Cir. 1982).

121 See Gardner v. State Farm Fire & Cas. Co., 544 F.3d 553, 563 (3d Cir. 2008)

(internal quotation marks omitted); cf. 6A Charles Alan Wright et al., Federal

Practice and Procedure § 1555 (3d ed. 2010) (“[I]t has been held that when the

determination of the right party to bring the action was not difficult and when no

excusable mistake had been made, then Rule 17(a)(3) is not applicable and the

action should be dismissed.”).

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IV. The Private Securities Litigation Reform Act of 1995 Does Not

Toll the Statutes of Repose Applicable to Section 14(a)

DeKalb further claims that “the 60‐day period provided by the

[Private Securities Litigation Reform Act of 1995 (“PSLRA”), Pub. L.

No. 104‐67, 109 Stat. 737,] for members of the prospective class to

move for appointment should legally toll the statute of repose.”122

DeKalb devotes a single paragraph to this argument. And no

wonder—it is a difficult one to fathom. The section of the PSLRA to

which DeKalb appears to be referring reads as follows, in pertinent

part:

Not later than 20 days after the date on which the

complaint is filed, the plaintiff . . . shall cause to be

published . . . a notice advising members of the

purported plaintiff class . . . that, not later than 60 days

after the date on which the notice is published, any

member of the purported class may move the court to

serve as lead plaintiff of the purported class.123

Nothing about this language even remotely suggests that the

PSLRA was intended to toll the applicable statutes of repose for the

60 days during which a member of the purported class may file a

lead‐plaintiff motion, and we have been unable to locate any

authority that even arguably supports this notion. Perhaps tellingly,

 122 Pl.’s Br. 41.

123 15 U.S.C. § 78u‐4(a)(3)(A)(i).

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DeKalb cites none. We therefore reject DeKalb’s argument out of

hand.124

V. The American Pipe Tolling Rule Does Not Extend to the

Statutes of Repose Applicable to Section 14(a)

Lastly, DeKalb asserts that so‐called “American Pipe tolling”—

that is, the tolling rule that the Supreme Court described in American

Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974)—applies here,

and renders its Section 14(a) claim timely. In so arguing, DeKalb

ignores our decision in Police & Fire Retirement System of City of

Detroit v. IndyMac MBS, Inc., 721 F.3d 95 (2d Cir. 2013).

In American Pipe, the Supreme Court held that “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

 124 See Fed. R. App. P. 28(a)(8) (stating that an appellant’s brief “must

contain . . . citations to the authorities . . . on which the appellant relies”); cf. Bldg.

Indus. Elec. Contractors Ass’n v. City of New York, 678 F.3d 184, 190 n.3 (2d Cir.

2012) (summarily “reject[ing] [an] argument . . . [that was] raised only in a single

paragraph of the brief and without citation to authority”); James D. Cox et al.,

Does the Plaintiff Matter? An Empirical Analysis of Lead Plaintiffs in Securities Class

Actions, 106 Colum. L. Rev. 1587, 1587 (2006) (“The lead plaintiff provision was

adopted to encourage a class member with a large financial stake to become the

class representative. Congress expected that such a plaintiff would actively

monitor the conduct of a securities fraud class action so as to reduce the litigation

agency costs that may arise when class counsel’s interests diverge from those of

the shareholder class.”).

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action.”125 And in IndyMac, “our conclusion [was] straightforward:

American Pipe’s tolling rule, whether grounded in equitable

authority or on Rule 23 [of the Federal Rules of Procedure], does not

extend to the statute of repose in Section 13” of the 1933 Act, 15

U.S.C. § 77m.126

We reasoned that, if the rule is equitable in nature, its

extension to Section 13’s statute of repose is barred by Lampf, in

which the Supreme Court stated that equitable “‘tolling principles

do not apply to that period.’”127 But critically, when the Court

referred to “that period” in Lampf, it was referring to not only

Section 13’s three‐year statute of repose, but also the three‐year

statutes of repose then applicable to Sections 9(f) and 18(a)—the very

same statutes of repose that we found applicable to Section 14(a) in

the first part of this opinion.128 As such, this aspect of our holding in

IndyMac—that if the American Pipe tolling rule is equitable in nature,

Lampf precludes its extension to Section 13’s statute of repose—

applies equally to the statutes of repose applicable to Section 14(a).

In IndyMac, we also reasoned that, if the American Pipe tolling

rule is legal in nature, its extension to Section 13’s statute of repose is

barred by the Rules Enabling Act.129 Underlying this determination

 125 414 U.S. at 554.

126 721 F.3d at 109.

127 Id. (quoting Lampf, 501 U.S. at 363).

128 See Lampf, 501 U.S. at 360–63.

129 IndyMac, 721 F.3d at 109 (citing 28 U.S.C. § 2072(b)).

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was our observation that, because “the statute of repose in Section

13 creates a substantive right,” and because “the Rules Enabling Act

forbids interpreting Rule 23 to abridge, enlarge, or modify any

substantive right,” “[p]ermitting a plaintiff to file a complaint or

intervene after the repose period set forth in Section 13 . . . has run

would therefore necessarily enlarge or modify a substantive right

and violate the Rules Enabling Act.”130 But we also stated that all

statutes of repose create a substantive right.131 Thus, this aspect of

our holding in IndyMac—that if the American Pipe tolling rule is legal

in nature, the Rules Enabling Act precludes its extension to Section

13’s statute of repose—applies equally to the statutes of repose

applicable to Section 14(a) as well.

Therefore, regardless of whether American Pipe’s tolling rule is

equitable or legal in nature, it does not extend to the statutes of

repose applicable to Section 14(a).

CONCLUSION

We have considered all of DeKalb’s other arguments and find

them to be without merit. Accordingly, for the foregoing reasons, we

hold as follows:  

 130 Id. (internal quotation marks omitted) (emphasis in original).

131 See id. at 106 (“[S]tatutes of repose create a substantive right in those

protected to be free from liability after a legislatively‐determined period of time.”

(emphasis in original) (alterations and internal quotation marks omitted).

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(1)   Sections 9(f) and 18(a) provide “private right[s] of

action that involve[ ] a claim of fraud, deceit,

manipulation, or contrivance,” to which a five‐year

statute of repose now applies under § 1658(b), but

Section 14(a) does not provide such a private right of

action.  

(2)   The same three‐year statutes of repose that applied to

Sections 9(f) and 18(a) before the passage of SOX, which

we borrowed and applied to Section 14 in Ceres, still

apply to Section 14(a) today.  

(3)   The statutes of repose applicable to Section 14(a) begin

to run on the date of the defendant’s last culpable act or

omission.  

(4)   DeKalb’s lead‐plaintiff motion does not “relate back”

under Rule 17(a)(3) to Bricklayers’ filing of the original

class‐action complaint.  

(5)   The PSLRA does not toll the statutes of repose

applicable to Section 14(a).  

(6)   The American Pipe tolling rule does not extend to the

statutes of repose applicable to Section 14(a).

Accordingly, we AFFIRM the District Court’s March 14, 2014

judgment dismissing DeKalb’s Section 14(a) claim as time‐barred by

the applicable three‐year statutes of repose and its Section 20 claim

for failure to state a claim upon which relief can be granted.

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