Opinion ID: 77735
Heading Depth: 2
Heading Rank: 5

Heading: Statute-of-Limitations Determination

Text: On interlocutory appeal, we essentially were asked to decide whether the former statute of limitations, with a one-year/three-year scheme, or the SOA statute of limitations, with a two-year/five-year scheme, governs this case. Dean Witter had the burden of proving the affirmative defense of a statute-of-limitations bar. Tello, 410 F.3d at 1292. This case was not filed until November 15, 2002, which generally would make the SOA statute of limitations applicable, since it applies to cases filed after its effective date of July 30, 2002. Nevertheless, the parties do not dispute that the short squeeze, securities fraud at issue in this case ended on August 19, 1998. The Washington Post article that provided inquiry notice was published in September 1998, and it is clear from Tello's deposition that this article constituted inquiry notice for Roberts and Tello as the successive class representatives. [17] The SEC Order is not the result of a judicial proceeding, and, while it would have provided supplementary evidence during discovery had the case been filed timely under the former statute of limitations, there was abundant information to have filed the class action and to have conducted full discovery without it. Both the former statute of limitations and the SOA statute of limitations have an inquiry-notice provision: one year after the discovery of the facts constituting the violation, 15 U.S.C. § 78i(e), and 2 years after discovery of the facts constituting the violation, 28 U.S.C. § 1658(b)(1). Dean Witter's alleged securities fraud concerning e-Net stock undisputedly ended in August 1998. Since the Washington Post article that established inquiry notice to Roberts and Tello was published in September 1998, this class action could have been filed under federal notice pleading within one year, or by September 1999, which also was within three years after such violation. 15 U.S.C. § 78i(e). Consequently, it was untimely when it was filed on November 15, 2002, under the former statute of limitations. Although the SOA statute of limitations extends the time period within which the class-action complaint could have been filed under inquiry notice by one year, or until September 2000, the class-action complaint also was untimely under inquiry-notice analysis when it was filed on November 15, 2002. Because of the September 1998 inquiry notice established by the Washington Post article, revealed by Tello's deposition, he cannot rely on the SOA repose period of five years from the violation, since the statute provides that the earlier of the two time periods controls. 28 U.S.C. § 1658(b). After reviewing the remedial nature of modified, extended statutes of limitations in our first opinion, we recognized [f]rom analogous Supreme Court and circuit precedent that the temporal reach [of § 1658(b)] inherently includes securities fraud that occurred prior to the date of enactment. Tello, 410 F.3d at 1282. Nonetheless, we concluded that § 1658(b) is applicable to the alleged fraudulent securities conduct in this case, provided inquiry notice was not sufficiently established to enable the plaintiff class to file this class action prior to the issuance of the SEC Order.  Id. at 1282-83 (emphasis added). As the testimony and evidence produced on limited remand revealed, inquiry notice was established in September 1998 by the Washington Post article. Because Tello and the class are time-barred under both the former statute of limitations and the SOA statute of limitations, the question of whether the SOA statute of limitations revives securities-fraud actions that were time-barred under the former statute of limitations is not presented in this case, as our inquiry-notice analysis has shown. Therefore, as we have explained, this class-action, securities-fraud case was time-barred by both the former and SOA statutes of limitation, even though it was filed following the effective date of the SOA. [18]