as to the retroactivity of Sarbanes-Oxley, this Court is duty-bound to adhere to Foss.

Defendants argue that the claim of any member of the class who purchased Household
securities prior to July 30, 1999 expired under the three-year statute of repose applicable prior to
the Sarbanes-Oxley Act. In other words, defendants assume that the “violation” that triggers the
statute of repose is the purchase of Household securities, Plaintiff did not address the issue.

Courts have held that the triggering event for the statute of repose is defendant’s
misreprescntation or omission in connection with the sale or purchase of a security.

Wafra Leasing Corp. v. Prime Capital Corp., 192 F. Supp. 2d 852, 864 (N.D. Ill. 2002); Antell v.
Arthur Andersen LLP, No, 97 C 3456, 1998 WL 245878 at *5-6 (N.D. Ill. May 4, 1998). Cf
Beard v. J.4. Case Co., 823 F.2d 1095, 1097 n.1 (7th Cir. 1987) (“[A] period of repose bars a suit
a fixed number of years after an action by the defendant . . . , even if this period ends before the
plaintiff suffers any injury.”) But see Otto v. Variable Annuity Life Ins. Co., 816 F. Supp. 458,
461 n.3 (N.D, Tll.1992) (“[A] violation of § 10(b) and Rule 10b-5 is comprised not only of a
misrepresentation or omission of material fact, but also includes the purchase or sale of any
securily.”) (citations and quotations omitted). ‘he Court finds persuasive the reasoning of those
cases holding that the statute of repose commences when a defendant makes a misrepresentation
or omission in comection with the sale or purchase of a security.

Under the three-year statute of repose, claims based on any misrepresentation or
omission in connection with the sale or purchase of a security that occurred before July 30, 1999
expired before the Sarbanes-Oxley Act became effective on July 30, 2002. See 501 U.S. at 364.
These claims expired regardless of the fact that plaintiffs allege they did not have inquiry notice
as to these claims until much later. See Neal v. Honeywell, Inc., 33 F.3d 860, 865 (7th Cir. 1994)
(“The statute of repose for a federal securities claim may expirc before the plaintiff discovers the

5


On July 30, 2002, Congress enacted the Sarbanes-Oxley Act, which provides that
securities claims involving “fraud, deceit, manipulation, or contrivance in contravention of a
regulatory requirement concerning the securities laws” may be brought not later than the earlier
of two years after the discovery of the facts constituting the violation or five years afier the
violation. See 28 U.S.C. § 1658(b). Further, the Act’s limitations period “appl[ics] to all
proceedings addressed by this section that are commenced on or after the date of cnactment of
this Act.” See id. (comments).

The instant lawsuit was filed on August 19, 2002, i.e., after the enactment of the
Sarbanes-Oxley Act. ‘hus, it would seem, the Satbanes-Oxley limitations period would apply.

However, all is not that simple. In some cases, applying the Sarbanes-Oxley limitations
would resurrect previously time-barred claims, thereby putting defendants at risk of liability
where previously they had been out of the woods, so to speak.

In Foss y. Bear, Stearns Co., 394 F.3d 540, 542 (7th Cir. 2005), a post-Sarbanes-Oxley
securities fraud action, the Seventh Circuit affirmed the district court’s dismissal of the
complaint for failure to state a claim and held that the plaintiff's § 10(b) and Rule 10b-5 claim
based on a violation that occurred outside of the three-year statute of repose period applicable
prior to the enactment of the Sarbanes-Oxley Act* was barred because the Act is not retroactive
and does not revive expired claims. fd al 541-42. Although plaintiffs rely on Tello v. Dean
Witter Reynolds, Tnc., 410 F.3d 1275, 1289 (11th Cir. 2005), in which the Eleventh Circuit held

that the factual record was too undeveloped to determine whether to make a legal determination

“Prior to the enactment of the Sarbanes-Oxley Act, a plaintiff was required to file a
securities fraud claim “within one year after the discovery of the facts constituting the violation
and within three years after such violation.” Lampf, 501 U.S. at 359,

4



fraud.”), abrogated on other grounds, Graham County Soil & Water Conservation Dist. v.

United States ex rel, Wilson, 125 8.Ct. 2444, 2449 (2005); see also Lampf, 501 U.S. at 363
(stating that tolling principles do not apply to the three-ycar statute of repose). Accordingly, the

Court grants defendants’ motion.

CONCLUSION
For the reasons set forth above, the Court grants defendants’ motion for judgment on the
pleadings [doc. no. 243-1] which seeks to dismiss part of the Amended Consolidated Class
Action Complaint, The Court dismisses with prejudice the § 10(b) claims based on any
misrepresentation or omission that occurred before July 30, 1999 in connection with the sale or

purchase of a security.

SO ORDERED ENTERED: HOY 2006

hdd li bow

HON. RONALD A. GUZMAN
United States Judge



IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

LAWRENCE E. JAFFE PENSION
PLAN, on Behalf of Itself and All Others
Similarly Situated,

Plaintiff,

vY 02 C 5893 (Consolidated)
HOUSEHOLD INTERNATIONAL, INC.,
MERRILL LYNCH, PIERCE, FENNER,
& SMITH, INC., GOLDMAN SACHS &
CO., INC., ARTHUR ANDERSEN, L.L.P.,
WILLIAM F, ALDINGER, DAVID A.
SCHOENHOLZ, GARY GILMER,

J.A. VOZAR, ROBERT J. DARNALL,
GARY G. DILLON, JOHN A.
EDWARDSON, MARY JOHNSTON
EVANS, J. DUDLEY FISHBURN,

CYRUS F, FREIDHEIM, LOUIS E. LEVY,
GEORGE A. LORCH, JOHN D.
NICHOLS, JAMES B. PITBLADO,

8. JAY STEWART, and LOUIS W.
SULLIVAN,

Judge Ronald A. Guzman

eee

Defendants.

MEMORANDUM OPINION AND ORDER
Plaintiff Lawrence E. Jaffe Pension Plan, on behalf of itself and all others similarly
situated, brought this suit alleging violations of 15 U.S.C. § 78()(b) (*§ 10(b)” of the Exchange
Act of 1934 (“1934 Act”)) and 17 C.F.R. § 240.10b-5 (“Rule 10b-5”) against Household,
Houschold Officers, identified as Aldinger, Schoenholz, and Gilmer, and Arthur Andersen

(“Andersen”)! in Count I; violation of 15 U.S.C. § 78(t)(a) (“§ 20(a)” of the 1934 Act) by

‘On January 31, 2006, the Court entered a revised order preliminarily approving
settlement of the class claims against Arthur Andersen, L.L.P.


Household, and [lousehold Officers in Count II; violations of 15 U.S.C. §§ 77k, 771(a)(2), and
77o (*§§ 11, 12(a)(2), and 15” of the Securities Act of 1933 (“1933 Act”)) by Household,
Household Officers, Household Directors,? Andersen, Goldman Sachs & Co., Inc. and Merrill

Lynch, Pierce, Fenner & Smith, Inc. in Count III? and violations of §§ 11, 15 of the 1933 Act by

Household, Houschold Directors and Andersen in Count 1V. On December 3, 2004, the Court

certified the class solely as to the § 10(b) claims. Glickenhaus & Co. has been named lead
plaintiff.

All defendants except Andersen have moved pursuant to Federal Rule Civil Procedure
(“Rule”) 12(b)(6) and 12(c) to dismiss as time-barred § 10(b) claims that arose prior to July 30,
1999, For the reasons set forth in this Mcmorandum Opinion and Order, the Court treats

defendants’ motion as one for judgment on the pleadings and grants the motion.

FACTS
Because the Court has fully set forth the allegations in a prior opinion in this case, it will
not restate the facts in detail here. For a complete factual background, see Lawrence E. Jaffe

Pension Plan, 2004 WL 574665, at *1-3.

The Household Directors are identified as Aldinger, Schoenholz, Robert J. Darnall, Gary
G. Dillon, John A. Edwardson, Mary Johnston Evans, J. Dudley Fishburn, Cyrus F. reidheim,
Jr., Louis E, Levy, George A. Lorch, John D. Nichols, James B. Pitblado, S. Jay Stewart, and
Louis W. Sullivan, HFC is a wholly owned subsidiary of IIousehold and its directors are
identified as Aldinger, Schoenholz, Gilmer, and J.A. Vozar.

Goldman Sachs and Merrill Lynch were terminated as parties when the Court granted a
motion to dismiss Count II! in a previous Memorandum Opinion and Order, See Lawrence F.
Jaffe Pension Plan v. Household Int'l, Inc., No. 02 C 5893, 2004 WL 574665, at *18 (N.D. Ill.
Mar. 22, 2004),



DISCUSSION

Pursuant to Rule 12(b)(6) and 12(c), defendants have moved to dismiss for failure to state
a claim the class’ § 10(b) claims that arose more than three years prior to the enactment of the
Sarbanes-Oxley Act on July 30, 2002 as time-barred. Because a motion to dismiss for failure to
state a claim pursyant to Rule 12(b)(6) must be filed prior to any responsive pleading, which
have already been filed in this case, the Court treats the motion as one for judgment on the
pleadings, See N. Ind. Gun & Outdoor Shows, Inc. v. City of S. Bend, 163 F.3d 449, 452 n.3 (7th
Cir. 1998); Feb. R. Civ. P. 12(b)(6), 12(c). On a motion for judgment on the pleadings, the court
accepts “all well-pleaded allegations in the complaint as truc and draw[s] all reasonable
inferences in favor of the plaintiff.” Forseth v. Vill. of Sussex, 199 F.3d 363, 368 (7th Cir. 2000).
“[T]he motion should not be granted unless it appears beyond doubt that the plaintiff cannot
prove any facts that would support his claim for relief.” Thomason v. Nachtrieb, 888 F.2d 1202,
1204 (7th Cir. 1989).

A statute of repose is an affirmative defense that a defendant is required to plead under
Rule 8(c). Stirchak v. Shiley, No. 96 C 257, 1996 WI. 166958, at *1 (N.D, TI]. Apr. 5, 1996).
Usually “complaints do not have to anticipate affirmative defenses to survive ....” United
States v. Lewis, 411 F.3d 838, 842 (7th Cir. 2005). “The exception occurs where . . . the
allegations of the complaint itself set forth everything neccssary to satisfy the affirmative
defense, such as when a complaint plainly reveals that an action is untimely..." Zd. It is
important to note (hat tolling principles — equitable estoppel and equitable tolling — do not apply
to the statute of repose for securities fraud claims because its purpose is to set an outer limit that
is unaffected by what plaintiff knows. Lampj, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson,

501 U.S, 350, 363 (1991).