Court Opinion

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Opinions of the United
2007 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

8-27-2007

In Re: Exxon Mobil
Precedential or Non-Precedential: Precedential

Docket No. 05-4571

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Recommended Citation
"In Re: Exxon Mobil " (2007). 2007 Decisions. Paper 487.
http://digitalcommons.law.villanova.edu/thirdcircuit_2007/487

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                                       PRECEDENTIAL

     UNITED STATES COURT OF APPEALS
          FOR THE THIRD CIRCUIT

                   No. 05-4571

   IN RE: EXXON MOBIL CORP. SECURITIES
               LITIGATION

         Ohio Public Employees Retirement Fund,
         State Teachers Retirement Fund of Ohio
         and Antonio N. Martins,*

                             Appellants

                *Pursuant to Rule 12(a), F.R.A.P.

     Appeal from the United States District Court
             for the District of New Jersey
 (D.C. Civil Action Nos. 04-cv-01257 & 04-cv-01921)
     District Judge: Honorable Freda L. Wolfson

              Argued January 8, 2007

Before: McKEE, AMBRO, and FISHER, Circuit Judges.
                 (filed: August 27, 2007 )

Daniel B. Allanoff, Esquire
Meredith, Cohen, Greenfogel & Skirnick
117 South 17th Street, 22nd Floor
Philadelphia, PA 19103

Erin K. Flory, Esquire
Steve W. Berman, Esquire
Hagen, Berman, Sobol & Shapiro
1301 5th Avenue, Suite 2900
Seattle, WA 98101

John C. Murdock, Esquire (Argued)
Murdock, Goldenberg, Schneider & Groh
35 East 7th Street, Suite 600
Cincinnati, OH 45202

      Counsel for Appellants

James W. Quinn, Esquire
Joseph S. Allerhand, Esquire
John A. Neuwirth, Esquire
Weil, Gotshal & Manges
767 Fifth Avenue, 27th Floor
New York, NY 10153

Paul F. Carvelli, Esquire
McCusker, Anselmi, Rosen, Carvelli & Walsh
127 Main Street
Chatham, NJ 07928

                               2
Gregory S. Coleman, Esquire (Argued)
Marc S. Tabolsky, Esquire
Weil, Gotshal & Manges
8911 Capital of Texas Highway
Suite 1350, Building One
Austin, TX 78759

       Counsel for Appellees

                 OPINION OF THE COURT

AMBRO, Circuit Judge

        By most accounts, the merger between Exxon and Mobil
has been quite successful. Shareholders in the new ExxonMobil
have benefitted from a tremendous increase in stock price since
the companies’ merger in 1999. But the plaintiffs here, former
shareholders of Mobil, want more. They allege that a
misrepresentation by Exxon made in the course of the merger
negotiations and ensuing votes caused them to receive fewer
shares in the combined corporation than they otherwise were
entitled. We will never know the merits of this allegation
though, for we agree with the District Court that this lawsuit is
not timely under the relevant statutes.

                               3
               I. Allegations in the Complaint1

       Quite unlike the prevailing price of oil as we consider
this case, world oil prices in the late 1990s, as measured in
constant dollars, were near historic lows. At least partly in
response to that market condition, Exxon Corporation and Mobil
Corporation—already giants in the oil industry—announced
plans on December 1, 1998, to merge into the world’s largest oil
company, ExxonMobil Corporation. The merger was to take the
form of a stock-for-stock exchange whereby, in relevant detail,
each share of Mobil stock would be exchanged for 1.32015
shares of ExxonMobil, thus giving former Mobil shareholders
about 30% ownership in the new company. Shareholders of
both companies voted on and approved the stock-for-stock
merger on May 27, 1999, and the Federal Trade Commission
blessed it some six months later. The merger took effect (i.e.,
shares in the old companies were exchanged for new shares in
ExxonMobil) on November 30, 1999.

  1
    “[W]hen ruling on a defendant’s motion to dismiss, a judge
must accept as true all of the factual allegations contained in the
complaint.” Erickson v. Pardus, 551 U.S. ___, 127 S. Ct. 2197,
2200 (2007) (citing Bell Atlantic Corp. v. Twombly, 550 U.S.
___, 127 S. Ct. 1955, 1965 (2007)). On an appeal from the
grant of a motion to dismiss, we apply the same standard as does
a district court. Yarris v. County of Del., 465 F.3d 129, 134 (3d
Cir. 2006).

                                4
        Prior to the companies’ respective shareholder votes, on
March 26, 1999, Exxon filed its required Securities and
Exchange Commission (SEC) Form 10-K for the year ending
the previous December 31.           That filing, in turn, was
incorporated by reference in the proxy statement issued by both
Exxon and Mobil in anticipation of the merger votes. Plaintiffs
assert that Exxon’s Form 10-K—and, therefore, the proxy
statement—was false or misleading. And though their eight-
part, three-count, 261-paragraph complaint (canvassing, inter
alia, the history of Exxon Corporation, the science and
technology of oil drilling, and the “objectives, concepts, and
principles” of modern accounting methods) is prolix, the basic
theory of plaintiffs’ case can be simply stated.2

        Because oil prices in the late 1990s were so low, certain
oil reserves owned by Exxon had become uneconomical to tap.
That is, the cost of extracting a barrel of oil from some of its
deposits exceeded the revenue that could be generated from the
sale of that barrel.      According to Generally Accepted

   2
     Allegations of fraud must be pleaded “with particularity,”
F ED. R. C IV. P. 9(b), and pleading requirements are heightened
even further in securities fraud cases by the Private Securities
Litigation Reform Act of 1995 (“PSLRA”). Still, it should not
be forgotten that the “plain statement” rule still applies in these
cases, as it does in every civil case. See F ED R. C IV. P. 8(a)
(requiring “a short and plain statement of the claim showing that
the pleader is entitled to relief” (emphases added)).

                                5
Accounting Principles (“GAAP”) promulgated by the Financial
Accounting Standards Board (“FASB”), uneconomical assets,
like some of Exxon’s oil reserves, require specific accounting
treatment. In March 1995, FASB issued Statement of Financial
Accounting Standard No. 121 (“SFAS 121” ), which generally
requires that if ever a long-term asset’s expected future cash
flow is less than its book value, the asset should be classified as
“impaired” and its fair value be recognized as a revenue loss for
the accounting period in which the asset becomes impaired.
Once a company characterizes an asset as impaired, it is
irreversible. That is, even if an asset were to become
unimpaired, the previously recognized accounting loss cannot be
reversed—either in that accounting period or nunc pro
tunc—until the asset is actually sold.

       Exxon did not follow the impairment procedure
mandated by SFAS 121. Instead, as candidly stated in its Form
10-K, Exxon’s policy was to undertake “disciplined, regular
review” of its assets. This “aggressive asset management
program,” in its estimation, would provide “a very efficient
capital base.” Consistent with these statements, Exxon did not
recognize any of its oil reserves as impaired and, therefore, did
not report the accounting losses that such a recognition would
have required. In contrast, every other major oil company
recognized impaired assets and their resulting effect on net
income during the same time-frame. The size of these write-
downs on revenue at other oil companies in 1998 ranged from
$78 million to $3.52 billion.

                                6
        Using these figures as reference points, plaintiffs estimate
that Exxon should have recognized 1998 impairments losses of
between $3.37 billion and $5.37 billion. This, of course, would
have reduced Exxon’s net income by the same amount and,
consequently, affected its share price. The resulting lower share
price, in turn, would have led Mobil to demand a higher
exchange rate (i.e., more shares of ExxonMobil) in its merger
with Exxon. The evidence of this, plaintiffs say, is that one of
the means by which the two companies decided that each share
of Mobil stock would be exchanged for 1.32015 shares of
Exxon stock was by consulting a “price/earnings analysis”
performed by the investment banking firm Goldman Sachs.
Earnings in Exxon’s case would have been lower had it
recognized the asset impairments. Given the size of the
impairments that plaintiffs allege Exxon should have taken,
Mobil shareholders would have received an additional 2.3–9%
stake in ExxonMobil. This corresponds with damages to those
shareholders estimated in the complaint to total between $4.6
billion and $18 billion.

        None of these allegations, however, suggests that Exxon
fraudulently issued its 1998 Form 10-K, which plaintiffs are
required to do to make out a valid securities fraud claim. For
this, plaintiffs allege other facts. First, they suggest that the
timing of Exxon’s decision not to recognize its impaired oil
reserves is suspicious—in the midst of merger negotiations and
votes (both of which would likely turn out more favorable to
Exxon the higher its earnings appeared). Second, plaintiffs cite

                                 7
the claims of a confidential witness who held various financial
analyst positions in Exxon’s accounting department and first
came forward in 2003. In 1995, when SFAS 121 was first
issued, the witness had calculated that its effect on Exxon’s
financial reports would be to require at least a $700 million
write-down in earnings. When the witness reported these
calculations to supervisors, they purportedly responded that
Exxon’s Chairman and CEO Lee R. Raymond instead had
decreed that SFAS 121 would have “no impact” on Exxon’s
financial reports. The witness, claiming that Exxon has a
“military-like culture,” interpreted Raymond’s statement to be
tantamount to “marching orders for [the] Executive Staff, i.e.,
they now had to justify . . . ‘no impact.’” Later, the witness was
also told not to conduct any further impairment analyses.

         Third, even if Exxon were allowed to ignore SFAS 121
and follow its own “disciplined, regular review” of its assets as
part of an “aggressive asset management program,” plaintiffs
allege that Exxon’s claim that it did not need to recognize any
of its assets as impaired under its own program did not comport
with its contemporaneous public statements. If Exxon had
performed a bona fide analysis of any sort and determined that
its oil reserves were not impaired, then it would necessarily have
to expect that oil prices would rebound from their 1998 levels.
As Exxon told the SEC in an investigation relating to this very
issue, “the corporation does not view temporarily low oil prices
as a trigger event for conducting the impairment tests.”
Plaintiffs, however, cite numerous public statements from

                                8
Exxon officials (including congressional testimony by
Raymond) that they allege indicate that Exxon in fact did not
view 1998 oil prices to be temporarily low—or, at the very least,
that Exxon was unsure whether prices would rebound. See, e.g.,
Compl. ¶ 199 (quoting Raymond’s congressional testimony:
“The only thing I can tell you about the price for the next two
years is we don’t have a clue . . . .”).

       Plaintiffs filed a three-count complaint in the U.S.
District Court for the District of New Jersey against Exxon and
Raymond for alleged violations of (1) § 14(a) of the Securities
Exchange Act, 15 U.S.C. § 78n(a), and SEC Rule 14a-9
promulgated thereunder (filing a false or misleading proxy
statement);3 (2) § 10(b) of the Securities Exchange Act, 15

  3
    Section 14(a) of the Act provides that “[i]t shall be unlawful
for any person, . . . in contravention of such rules and
regulations as the [Securities and Exchange] Commission may
prescribe . . . , to solicit or to permit the use of his name to
solicit any proxy or consent or authorization in respect of any
[registered] security . . . .” 15 U.S.C. § 78n(a). In turn, SEC
Rule 14a-9 provides in relevant part that
        [n]o solicitation subject to this regulation shall be
        made by means of any proxy statement . . . which,
        at the time and in the light of the circumstances
        under which it is made, is false or misleading with
        respect to any material fact, or which omits to
        state any material fact necessary in order to make
        the statements therein not false or misleading or

                                9
U.S.C. § 78j(b), and SEC Rule 10b-5 promulgated thereunder
(securities fraud);4 and (3) § 20(a) of the Securities Exchange

       necessary to correct any statement in any earlier
       communication with respect to the solicitation of
       a proxy for the same meeting or subject matter
       which has become false or misleading.
17 C.F.R. § 240.14a-9(a). We refer to claims brought pursuant
to 15 U.S.C. § 78n(a) and Rule 14a-9 as “§ 14(a) claims.”
  4
    Section 10(b) of the Act provides that “[i]t shall be unlawful
for any person . . . (b) [t]o use or employ, in connection with the
purchase or sale of any security . . . , any manipulative or
deceptive device or contrivance in contravention of such rules
and regulations as the [Securities and Exchange] Commission
may prescribe . . . .” 15 U.S.C. § 78j. In turn, SEC Rule 10b-5
provides that
       [i]t shall be unlawful for any person, directly or
       indirectly . . .
               (a) [t]o employ any device, scheme, or
       artifice to defraud,
               (b) [t]o make any untrue statement of a
               material fact or to omit to state a material
               fact necessary in order to make the
               statements made, in the light of the
               circumstances under which they were
               made, not misleading, or
               (c) [t]o engage in any act, practice, or
               course of business which operates or
               would operate as a fraud or deceit upon

                                10
Act, 15 U.S.C. § 78t(a) (derivative liability for Raymond).5 The
District Court granted Exxon’s motion to dismiss because it
ruled that both the § 14(a) and § 10(b) claims were barred by the
statute of limitations and, in any event, the § 10(b) claim was not
properly pleaded. Plaintiffs appeal each of these rulings, but we
need only address the timeliness issues.

                         II. Discussion

       The Securities Exchange Act did not explicitly provide
a private right of action for claims under either § 10(b) or

             any person, in connection with the
             purchase or sale of any security.
17 C.F.R. § 240.10b-5. We refer to claims brought pursuant to
15 U.S.C. § 78j(b) and Rule 10b-5 as “§ 10(b) claims.”
   5
   Section 20(a) of the Act provides that
      [e]very person who, directly or indirectly, controls
      any person liable under any provision of this
      chapter or of any rule or regulation thereunder
      shall also be liable jointly and severally with and
      to the same extent as such controlled person to
      any person to whom such controlled person is
      liable, unless the controlling person acted in good
      faith and did not directly or indirectly induce the
      act or acts constituting the violation or cause of
      action.
15 U.S.C. § 78t(a).

                                11
§ 14(a). As early as 1946, though, courts had begun to
recognize implied private rights of action based on § 10(b), see,
e.g., Kardon v. Nat’l Gypsum Co., 69 F. Supp. 512 (E.D. Pa.
1946), and the Supreme Court, at least implicitly, approved, see,
e.g., Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 730
(1975); Affiliated Ute Citizens v. United States, 406 U.S. 128,
150–54 (1972); Superintendent of Ins. v. Bankers Life & Cas.
Co., 404 U.S. 6, 13 n.9 (1971). The same is true for § 14(a).
J.I. Case Co. v. Borak, 377 U.S. 426, 430–31 (1964).

        Having created these causes of action, courts then began
to consider the time-frame within which they must be brought.
For decades the general practice was to “borrow” the statute of
limitations from the closest analogous state-law cause of action.
See, e.g., Bath v. Bushkin, Gaims, Gaines & Jonas, 913 F.2d
817, 818 (10th Cir. 1990); Nesbit v. McNeil, 896 F.2d 380, 384
(9th Cir. 1990); O’Hara v. Kovens, 625 F.2d 15, 17 (4th Cir.
1980); Forrestal Vill., Inc. v. Graham, 551 F.2d 411, 413 (5th
Cir. 1977).

       Recognizing the need to “minimize ‘uncertainty and
time-consuming litigation’” inherent in that approach, our Court
was the first to advocate and adopt uniform limitations periods
for § 10(b) claims. In re Data Access Sys. Sec. Litig., 843 F.2d
1537, 1543 (3d Cir. 1988) (en banc) (quoting Malley-Duff &
Assocs., Inc. v. Crown Life Ins. Co., 792 F.2d 341, 348 (3d Cir.
1986)). In Data Access we determined that using the limitations
periods set out in other sections of the Securities Exchange Act

                               12
would lead to the uniformity and certainty desired. Specifically,
we adopted the one-year statute of limitations and the three-year
statute of repose 6 that was prevalent throughout the Securities
Exchange Act for the express rights of action that the legislation
did create (e.g., §§ 9(e), 18(c), and 29(b)). Three years later, in
Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, the
Supreme Court approved this framework. 501 U.S. 350, 358–62
(1991). Specifically, the Court adopted the limitations periods
found in § 9(e) of the Securities Exchange Act as the controlling
provision. Id. at 364 n.9. Soon after the Court’s approval of our
Data Access decision, we extended its reasoning to § 14(a)
claims as well. See Westinghouse Elec. Corp. v. Franklin, 993
F.2d 349, 353 (3d Cir. 1993).

      At the time of the events described in plaintiffs’
complaint, this is where the law stood: for securities claims

   6
    A statute of limitations is “[a] law that bars claims after a
specified period.” B LACK’S L AW D ICTIONARY 1450 (8th ed.
2004) [hereinafter B LACK’S]. It is generally subject to a
“discovery rule,” meaning that it does not begin to run until the
plaintiff is aware (or should be aware) of his claim. A statute of
repose is “[a] statute barring any suit that is brought after a
specified time since the defendant acted.” Id. at 1451. It is
generally not subject to a discovery rule. See Lampf, Pleva,
Lipkind, Prupis & Petigrow v. Gilbertson, 501 U.S. 350, 363
(1991). Further material differences between statutes of
limitations and repose are discussed in Part II.B., infra.

                                13
brought under §§ 10(b) and 14(a), the limitations periods
consisted of a one-year statute of limitations and a three-year
statute of repose. On July 30, 2002, however, the Public
Company Accounting Reform and Investor Protection Act of
2002—better known as the Sarbanes-Oxley Act or, simply,
Sarbanes-Oxley—was enacted. Pub. L. No. 107-204, 116 Stat.
745. In relevant part, Sarbanes-Oxley extended the limitations
periods for “private right[s] of action that involve[] a claim of
fraud, deceit, manipulation, or contrivance in contravention of
a regulatory requirement concerning the securities laws.” Id.
§ 804(a), 28 U.S.C. § 1658(b). Such actions now have the
benefit of a two-year statute of limitations and a five-year statute
of repose. Id.

        Because of the timing of both the underlying events and
the filing of this case, we have a perfect storm of issues
concerning the timeliness of plaintiffs’ complaint. For any of
their claims to be ruled timely, each of the following three
conditions must be met:

       (1) Sarbanes-Oxley’s timing extensions must
       apply retroactively to these claims, even though
       the underlying violation had already taken place
       when that legislation was enacted;7

   7
    This is the question left open by our decision in Lieberman
v. Cambridge Partners, L.L.C., 432 F.3d 482, 488 (3d Cir. 2005)
(“We do not decide . . . whether Congress intended Section 804

                                14
        (2) the statute of repose must begin as of the date
        of the merger (Nov. 30, 1999) between Exxon and
        Mobil, not the date that the joint proxy statement
        was issued (Mar. 26, 1999); and

        (3) the statute of limitations must not have begun
        to run until on or after February 17, 2002 (two
        years prior to filing the complaint), leaving only
        the statute of repose as the limitations period of
        any material concern.

       What this means is that if Sarbanes-Oxley does not apply
to any given claim raised by plaintiffs (#1 above), then, by any
calculation, § 9(e)’s three-year statute of repose ran out over a
year before plaintiffs filed this suit.

Proxy Statement     Merger                 Sarbanes-Oxley    Complaint
——3—————3—————————3—————3——
Mar. 26, 1999     Nov. 30, 1999             July 30, 2002  Feb. 17, 2004
                        .— — — — — — — — — — — — — — — - ----------
                                    3 years

Additionally, if the repose period started on the date of the proxy
statement rather than the date of the merger (#2 above), the five-
year time-frame provided by Sarbanes-Oxley would not apply
here. This is because Sarbanes-Oxley was passed more than
three years after the proxy statement was issued, and we have

[of Sarbanes-Oxley] to have a general retroactive effect.”).

                                    15
already held that it did not revive previously extinguished
claims. See Lieberman v. Cambridge Partners, L.L.C., 432 F.3d
482, 488–92 (3d Cir. 2005). Thus, the pre-Sarbanes-Oxley
three-year statute of repose would operate to bar plaintiffs’
claims.

Proxy Statement        Merger              Sarbanes-Oxley    Complaint
——3—————3—————————3—————3——
Mar. 26, 1999 Nov. 30, 1999            July 30, 2002        Feb. 17, 2004
      .— — — — — — — — — — — — — — — - ---------
                  3 years

And finally, if plaintiffs became aware (or should have become
aware) that the proxy statement was false, misleading, or
fraudulent before February 17, 2002, then the statute of
limitations would operate independently to bar their claims (#3
above).

        A.        Application of Sarbanes-Oxley in this Case

                  1.        Can Sarbanes-Oxley’s longer limitations
                            periods apply to any of the claims raised
                            in plaintiffs’ complaint?

        To repeat, in Lieberman we held that the lengthier
limitations periods provided by Sarbanes-Oxley did not apply to
claims that had expired under the limitation periods in place
prior to the passage of that legislation, even if the claims were
filed after its enactment and would be timely under its

                                     16
provisions. 432 F.3d at 488–92. We explicitly reserved the
question, however, whether that Act lengthened the limitations
periods for claims on which the periods were already running
but had not yet expired. Id. at 488.

        Though there is a “presumption against retroactive
legislation [that] is deeply rooted in our jurisprudence,”
Landgraf v. USI Film Prods., 511 U.S. 244, 265 (1994), it is
also the case that if Congress has expressly provided for
retroactive effect, a court must “enforce[] the statute as written,”
Lieberman, 432 F.3d at 488. As noted above, in § 804(b) of
Sarbanes-Oxley Congress explicitly stated that “[t]he limitations
period[s] provided by section 1658(b) of title 28, United States
Code, as added by this section, shall apply to all proceedings
addressed by this section that are commenced on or after the
date of enactment of this Act.” 116 Stat. 801. Congress used
the terms “proceedings . . . that are commenced” instead of
“claims that accrue” or similar such language. The plain
meaning of these words directs that claims filed after July 30,
2002, receive the benefit of the extended limitations periods,
even if the shorter periods had already begun (but had not
expired) on the underlying causes of action. Hence, the types of
claims listed in 28 U.S.C. § 1658(b) and raised in suits with
timing like this one—filed in 2004 but complaining of events in
1999—get the benefit of Sarbanes-Oxley’s two-year statute of
limitations and five-year statute of repose. The lingering
question, though, is whether each of plaintiffs’ claims here is in
fact within the scope of 28 U.S.C. § 1658(b).

                                17
               2.      Which of plaintiffs’ claims benefit from
                       the extended limitations periods
                       provided by Sarbanes-Oxley?

       There can be no question that 28 U.S.C. § 1658(b) covers
claims based on § 10(b) of the Securities Exchange Act. The
statute refers explicitly to “private right[s] of action that
involve[] a claim of fraud . . . in contravention of . . . the
securities laws.” 28 U.S.C. § 1658(b). Indeed, the implied
cause of action recognized under § 10(b) is widely known and
referred to as “securities fraud.” See, e.g., Insider Trading and
Securities Fraud Enforcement Act of 1988, Pub. L. 100-704,
102 Stat. 4681; Lampf, 501 U.S. at 376. To conclude that
§ 1658(b) does not apply to § 10(b) claims would be absurd.

         But does § 1658(b) also apply to plaintiffs’ § 14(a)
claim? Section 1658(b), by its terms, applies to claims that
“involve[] . . . fraud, deceit, manipulation, or contrivance.” This
wording closely tracks the language of § 10(b), which prohibits
employing “any manipulative or deceptive device or
contrivance.” Violations of § 14(a), on the other hand, may be
committed without scienter; in other words, no culpable intent
is required. See Cal. Pub. Employees’ Ret. Sys. v. The Chubb
Corp., 394 F.3d 126, 143–44 (3d Cir. 2004) (“In contrast to
section 10(b) . . . , scienter is not a necessary element in alleging
a section 14(a) claim.”). For liability to attach under § 14(a), all
that is required is that a proxy statement be “false or misleading
with respect to any material fact.” 17 C.F.R. § 240.14a-9(a).

                                 18
        Given this material distinction, we conclude that
Congress did not intend to include § 14(a) claims within the
scope of § 1658(b), but rather intended that provision to apply
to § 10(b) claims and other claims requiring proof of fraudulent
intent.8 Several district courts have done the same analysis and
reached the same conclusion when deciding § 1658(b)’s
relevance to § 14(a) and other securities-related claims. See
Virginia M. Damon Trust v. N. Country Fin. Corp., 325 F. Supp.
2d 817, 822–24 (W.D. Mich. 2004) (holding that § 1658(b) does
not apply to claims brought under § 14 of the Securities
Exchange Act); In re Global Crossing, Ltd. Sec. Litig., 313 F.
Supp. 2d 189, 196–98 (S.D.N.Y. 2003) (same);9 cf. In re Alstom
SA Sec. Litig., 406 F. Supp. 2d 402, 412–18 (S.D.N.Y. 2005)

   8
     A plain reading of Rule 10b-5 would suggest that § 10(b)
claims likewise do not always require proof of scienter. See 17
C.F.R. § 240.10b-5(b) (making it unlawful simply to “make any
untrue statement of a material fact”). The Supreme Court,
however, has ruled that despite Rule 10b-5’s apparent breadth,
it cannot reach conduct beyond that covered by the text of 15
U.S.C. § 78j(b), which clearly requires fraudulent intent. Ernst
& Ernst v. Hochfelder, 425 U.S. 185, 212–14 (1976).
       9
     The Global Crossing Court was the first to analyze this
question in any detail. In addition to the textual and logical
reasons for its conclusion, that Court noted that the limited
legislative history also lent some support. See In re Global
Crossing, 313 F. Supp. 2d at 197 n.6; see also In re Alstom SA
Sec. Litig., 406 F. Supp. 2d 402, 415 (S.D.N.Y. 2005).

                              19
(holding the same for §§ 11, 12(a)(a), and 15 of the Securities
Act of 1933); In re Firstenergy Corp. Sec. Litig., 316 F. Supp.
2d 581, 601 (N.D. Ohio 2004) (§§ 11 and 12(a)(2) of the
Securities Act of 1933); Amy Grynol Gibbs, Note, It’s About
Time: The Scope of Section 804 of the Sarbanes-Oxley Act of
2002, 38 G A. L. R EV. 1403 (concluding that § 1658(b) does not
apply to claims under § 11 of the Securities Act of 1933).

        Plaintiffs, as a fall-back position, next argue that even if
§ 14(a) claims are not necessarily based in fraud (and thus
would not generally get the benefit of § 1658(b)’s extended
statute of limitations), their particular § 14(a) claim does sound
in fraud and therefore does fall within the scope of § 1658(b).
Lending some support to this notion—that we should look at
claims in a practical manner, not a “categorical” one—is that,
under our precedent, if a claim not otherwise requiring proof of
scienter nonetheless sounds in fraud, then Federal Rule of Civil
Procedure 9(b)’s heightened pleading standard applies.10 See
Shapiro v. UJB Fin. Corp., 964 F.2d 272, 287–89 (3d Cir.
1992); see also Rombach v. Chang, 355 F.3d 164, 170–71 (2d
Cir. 2004). Plaintiffs therefore ask whether it is fair that the
same thinking that is used to impose Rule 9(b) burdens on their
§ 14(a) claim (sounding in fraud) be used to deny them the
benefits of § 1658(b), which applies to fraud claims.

  10
    The Rule, in relevant part, provides that “[i]n all averments
of fraud or mistake, the circumstances constituting fraud or
mistake shall be stated with particularity.”

                                20
         Plaintiffs’ focus on perceived fairness is misplaced.
Rather, as we did when deciding Shapiro, we focus on the
policy choice of Congress as shown by the text and purpose of
the applicable law. First, the text of Rule 9(b) supported our
conclusion in Shapiro because, by its terms, the rule applied to
“averments” (i.e., allegations to be backed up with evidence).
Section 1658(b), however, refers to “right[s] of action.” This
distinction is significant because “averments,” when assembled,
are what constitute “right[s] of action,” and a statute using the
latter term—like § 1658(b)—necessarily applies at a higher level
of generality than a statute using the former term—like Rule
9(b). This point was not lost on us in Shapiro. See 964 F.2d at
288 (“Rule 9(b) refers to ‘averments’ of fraud, and thus requires
us to examine the actual allegations that support a particular
legal claim.”). Second, pleading with specificity, as required by
Rule 9(b), is intended to give defendants more certainty as to the
charges they must defend. Rombach, 355 F.3d at 171. As with
that policy choice made for the benefit of defendants, so too
does the policy choice of Congress to establish firm deadlines
for securities fraud claims help defendants. Allowing plaintiffs
effectively to bypass this policy judgment—and thereby select
the length of the limitations periods that will apply to a claim
merely by sounding their § 14(a) claim in fraud—would not
promote the principal reason for having time-bars: certainty for
defendants. We therefore see no reason to transpose our ruling
in Shapiro to this case.

       In ruling that § 14(a) claims do not fall within the scope

                               21
of § 1658(b), we recognize that this severs the tie between the
limitations periods applicable to § 10(b) claims and § 14(a)
claims that we recognized in Westinghouse. See 993 F.2d at
352–54 (holding that the same statute of limitations periods that
applied to claims under § 10(b) also apply to those under
§ 14(a)). Plaintiffs make much of this link in their filings before
us. But the law has materially changed since our decision in
Westinghouse, and to use its policy arguments to claim
otherwise ignores what has happened since.

        As explained above, in the absence of express limitations
periods for the § 14(a) implied right of action, Westinghouse
naturally relied on § 10(b)’s similar objectives—“fair corporate
suffrage” and “protect[ing] investors”—when deciding it could
use as well the same method (set out in Data Access, approved
in Lampf) when determining the time-bar for § 14(a) claims. Id.
at 353. Westinghouse did not say that the limitations periods for
§ 14(a) claims are, by their nature, the same as those for § 10(b)
claims. Rather, that case held that in the absence of any explicit
congressional command, there was good reason to think that
Congress would want § 14(a) claims—just as much as § 10(b)
claims—to be the same as every other securities claim. Thus,
the link established by Westinghouse for § 14(a) claims was not
to § 10(b), but instead (as with § 10(b) itself) to other causes of
action in the securities laws.

      When it comes to § 10(b) claims, though, there is now a
new consideration—namely, express limitations periods set by

                                22
a law that did not previously exist. That Congress has now
provided explicit, extended limitation periods for fraud-based
claims, such as those brought under § 10(b), is not cause to alter
the way we determine the applicable limitation periods for
§ 14(a) claims, which need not be fraud-based and, thus, still do
not have express limitation periods. Though Data Access and
Lampf have now been superseded by Sarbanes-Oxley as they
relate to the time limitations on § 10(b) claims, nothing in that
legislation indicates Congress’s desire to supersede the rationale
of those cases as applied in Westinghouse with respect to § 14(a)
claims.

        We hold that 28 U.S.C. § 1658(b) applies to claims under
15 U.S.C. § 78j(b) (i.e., § 10(b) claims), but not to claims under
15 U.S.C. § 78n(a) (i.e., § 14(a) claims). Because plaintiffs filed
their complaint over four years after the merger between Exxon
and Mobil,11 the previously applicable three-year statute of
repose still applies and serves as a bar to their § 14(a) claim.
Only plaintiffs’ § 10(b) claim, therefore, has the potential to be
viable given the facts here, and we thus continue with that claim
alone down the timing gauntlet.

   11
     Whether the merger date, in fact, marks the proper date on
which to start running the statute of repose is the focus of the
next section. That date, however, is the latest any party claims
that the statute of repose began to run.

                                23
        B.     When do §§ 9(e)’s and 1658(b)’s statutes of
               repose begin to run?

        As described above, the limitations period established by
28 U.S.C. § 1658(b) for securities fraud claims consists of a
“two-year/five-year” scheme; the pre-Sarbanes-Oxley set up,
taken from § 9(e) of the Securities Exchange Act, sported a
“one-year/three-year” scheme, but was identical to § 1658(b) in
all other material respects. Under both systems, courts have
consistently referred to the shorter time period as a statute of
limitations and the longer period as a statute of repose. See, e.g.,
Lampf, 501 U.S. at 360, 362, 363; Tello v. Dean Witter
Reynolds, Inc., No. 03-12545, ___ F.3d ___, 2007 WL 2141701,
at *6 (11th Cir. July 27, 2007); Margolies v. Deason, 464 F.3d
547, 551 (5th Cir. 2006). The question we address here is when
did § 9(e)’s and § 1658(b)(2)’s statutes of repose begin to
run—at the time of Exxon’s alleged misrepresentation (the
March 1999 proxy statement)12 or at the time its merger with

   12
    Like Exxon’s Form 10-K, which was incorporated into the
March 26, 1999, proxy statement, Exxon filed several Form 10-
Qs with the same alleged misrepresentation regarding impaired
assets. We reject plaintiffs’ assertion that these Form 10-Qs are
relevant to our discussion. Securities fraud requires that a
misrepresentation be “in connection with the sale or purchase of
any security.” 15 U.S.C. 78j(b) (emphasis added); see also 17
C.F.R. § 240.10b-5. The “sale” here is, of course, the merger
requiring the exchange of Mobil shares for shares of

                                24
Mobil was consummated (late November 1999). If it is the
former, then the three-year statute of repose provided by § 9(e)
serves to bar plaintiffs’ § 10(b) claim, as that period would have
expired four months before Sarbanes-Oxley became law.
(Again, under our precedent, Sarbanes-Oxley did not revive
previously extinguished claims. See Lieberman, 432 F.3d at
488–92.)

        A statute of repose bars “any suit that is brought after a
specified time since the defendant acted . . . , even if this period
ends before the plaintiff has suffered a resulting injury.”
B LACK’S at 1451 (emphasis added). Unlike statutes of
limitations, which traditionally do not begin to run until a cause
of action has accrued (i.e., when all required elements have
occurred) and the onset of which is often subject to delay by late
discovery of the injury (or when a reasonable person should
have discovered it), statutes of repose start upon the occurrence
of a specific event and may expire before a plaintiff discovers
he has been wronged or even before damages have been
suffered at all. Accord Nesladek v. Ford Motor Co., 46 F.3d
734, 737 n.3 (8th Cir. 1995) (“A statute of repose is different
from a statute of limitations . . . because a tort limitations statute

ExxonMobil. See Kahan v. Rosenstiel, 424 F.2d 161, 171 n.10
(3d Cir. 1970). Whatever statements Exxon may have made in
its subsequent Form 10-Qs, they were not “in connection with”
the exchange of shares at the merger. Only the proxy statement
served this function.

                                 25
does not begin to run until the injury, death, or damage
occurs—or until the cause of action accrues. On the other hand,
a statute of repose prevents the cause of action from accruing in
the first place.”); A DOLPH J. L EVY, S OLVING S TATUTE OF
L IMITATIONS P ROBLEMS § 3.01, at 76 (1987). It might be said
that statutes of repose pursue similar goals as do statutes of
limitations (protecting defendants from defending against stale
claims), but strike a stronger defendant-friendly balance. Put
more bluntly, there is a time when allowing people to put their
wrongful conduct behind them—and out of the law’s reach—is
more important than providing those wronged with a legal
remedy, even if the victims never had the opportunity to pursue
one.

       Thus, while it is true that for a § 10(b) claim to “accrue”
there must be an exchange of securities (here, the November
1999 consummation of the merger) 13 , see Dura Pharms., Inc. v.
Broudo, 544 U.S. 336, 341 (2005), and only then do plaintiffs
suffer any actual injury, nevertheless the specific acts targeted
by a § 10(b) cause of action are fraudulent statements
themselves. It therefore is more consonant with the traditional
understanding of how a statute of repose functions for the
repose periods of § 9(e) and § 1658(b)(2) to begin from the date
of Exxon’s alleged misrepresentation: the March 26, 1999,
proxy statement.

   13
        But see infra note 14.

                                 26
       Supporting this view is the text of the relevant statutes
themselves, especially in relation to the limitations periods
applicable to other causes of action provided by the Securities
Exchange Act. Notably, § 9(e) and § 1658(b)(2) set their
statutes of repose relative to the “violation,” not to the “accrual,”
of the cause of action. In light of our discussion above, this
word choice is important. Coupled with the observation that the
repose periods associated with other causes of action provided
by the same Act do use the term “accrue,” see, e.g., 15 U.S.C.
§ 78r(c) (§ 18 of the Act), this suggests that Congress knew that
the terms carried different meanings.

        The Supreme Court has also weighed in, although only
in a dictum. The concluding line of Lampf, which disposes of
the case, reads: “As there is no dispute that the earliest of
plaintiff-respondents’ complaints was filed more than three
years after petitioner’s alleged misrepresentations, plaintiff-
respondents’ claims were untimely.” Id. at 364 (emphasis
added). As the misrepresentations in Lampf occurred at about
the same time as the exchange of securities, whether the date to
begin running the statute of repose is the date of the
misrepresentation was not necessary to the Court’s decision.
Nonetheless its focus was on the alleged misrepresentation, not
the exchange of securities.

       For the reasons set out above—the traditional
understanding of how statutes of repose function, the text of
§§ 9(e) and 1658(b)(2), and a Supreme Court dictum—we hold

                                 27
that the repose period applicable to § 10(b) claims as set out in
§§ 9(e) and 1658(b)(2) begins to run on the date of the alleged
misrepresentation.14

    14
       Even if we were to conclude that the statute of repose
should be calculated from when plaintiffs’ Mobil shares were
exchanged for shares in ExxonMobil, this suit might still be
time-barred. This is because one view holds that an “exchange”
of securities occurs not on the date they formally change hands,
but rather the date the parties become committed to exchange the
securities. Grondahl v. Merritt & Harris, Inc., 964 F.2d 1290,
1294 (2d Cir. 1992); Radiation Dynamics, Inc. v. Goldmuntz,
464 F.2d 876, 890–91 (2d Cir. 1972); Hill v. Equitable Bank,
655 F. Supp. 631, 638 (D. Del. 1987), aff’d sub nom. Hill v.
Equitable Trust Co., 851 F.2d 691 (3d Cir. 1988). Determining
the date of the relevant investment decision requires a “close
examination of the documents relevant to the formation” of the
exchange agreement, Hill, 655 F. Supp. at 638, to determine
“when parties to the transaction are committed to one another,”
Radiation Dynamics, 464 F.2d at 891. For a case using this
approach, see In re Colonial Ltd. P’ship Litig., 854 F. Supp. 64,
84–85 (D. Conn. 1994).
        Regardless whether we would adopt this approach, it is
unclear how it would apply in this case. Here, shareholders
approved the merger of Exxon and Mobil on May 27, 1999. If
that date is used as the date of “exchange,” then, just as is the
case under our holding here, the formerly applicable three-year
statute of repose would have expired before the passage of
Sarbanes-Oxley in July 2002, and plaintiffs’ § 10(b) claim
would not have been revived by that legislation. See Lieberman,

                               28
        Plaintiffs counter the analysis underlying this holding
with a single case: Baron v. Allied Artists Pictures Corp., 717
F.2d 105 (3d Cir. 1983). In Baron we were presented with the
question of when the then-applicable Delaware statute of
limitations began to run for a § 14(a) claim for damages. We
began our analysis by stating that “[i]t is a rule of general
application that a cause of action for the recovery of damages
accrues only when it could be prosecuted to a successful
conclusion.” Id. at 108. We then distinguished between an
action seeking injunctive relief and one for damages. In a
damages action, we said, the statute of limitations cannot begin
to run until the plaintiff has been injured—i.e., until damages
have been suffered. Id. at 108–09. Plaintiffs here argue that
because they are seeking damages, the limitations period,
pursuant to Baron, cannot begin running until the merger date,
for that is when their damages were suffered and, therefore,
when the alleged tort of securities fraud was completed by the
exchange of securities (from Mobil to ExxonMobil).

       In light of our discussion on this issue, though, Baron is

432 F.3d at 488–92. On another view though, the merger
context may require a more nuanced analysis. The necessity of
gaining approval from various governmental agencies, as well
as the possible existence of escape clauses in the merger
agreement itself, may delay the time when the parties may
properly be considered “committed.” Given our holding here,
we need not consider this question.

                               29
readily distinguishable: because it was decided under the pre-
Data Access/pre-Lampf framework, it dealt only with a statute
of limitations as borrowed from Delaware law. Baron had no
occasion to consider the effect of a statute of repose on its
holding. It is possible that Baron yet has currency when it
comes to the statute of limitations periods provided in §§ 9(e)
and 1658(b)(1), but we leave that question for another day.15

  15
     Because Baron applied federal law when determining when
the statute of limitations began (in contrast to its use of state law
to set the length of the limitations period itself), there is no
obvious reason why its holding would have been affected by
Data Access, Lampf, or Sarbanes-Oxley. Moreover, as our
discussion at the beginning of this section would suggest, Baron
is consistent with the general understanding about when a statute
of limitations begins to run: upon accrual of the cause of action
(i.e., when each element is complete) or when a reasonable
person would have known that he had a cause of action. With
the tort of securities fraud, this includes an exchange of
securities and in the merger context may not occur until the
merger is finally consummated. But see supra note 14. Baron’s
logic, therefore, may still apply when calculating §§ 9(e)’s and
1658(b)(1)’s statutes of limitations.
        We note, however, that, like § 1658(b)(2), the terms of
§ 1658(b)(1) also refer to a “violation.” Likewise with § 9(e).
To say that the statute of limitations begins at a different time
than the statute of repose would require the same word to have
two meanings within the same statutory provision—a significant
textual mountain to climb. One District Court in this Circuit has

                                 30
        Because the statute of repose applicable to § 10(b) claims
begins to run on the date of the alleged fraudulent statement,
plaintiffs here, under Lieberman, 432 F.3d at 488–92, cannot
benefit from Sarbanes-Oxley’s extension of the statute from
three years to five, as any such claim based on Exxon’s March
26, 1999, proxy statement became time-barred on March 26,
2002, over four months before Sarbanes-Oxley became law.
The District Court was correct to dismiss their § 10(b) claim as
untimely.

                        *   *   *    *   *

        Because 28 U.S.C. § 1658(b) does not apply to § 14(a)
claims, count one of plaintiffs’ suit is time-barred, and the
District Court was correct to dismiss it. Additionally, because
the statute of repose applicable to § 10(b) claims begins to run
on the date of an alleged misrepresentation, count two of
plaintiffs’ suit is time-barred, and the District Court was correct
in dismissing it as well. Finally, because plaintiffs’ § 20(a)
claim against Raymond is predicated on the existence of another

refused the challenge, concluding that both the statute of
limitations and statute of repose begin as of the date of an
alleged misrepresentation. In re Phar-Mor, Inc. Sec. Litig., 892
F. Supp. 676, 686–88 (W.D. Pa. 1995). How to reconcile the
text of § 1658(b)(1) with Baron and with the traditional
understanding of when a statute of limitations begins to run is an
undertaking we need not yet attempt.

                                31
valid securities claim (and, as noted, none exist), the District
Court again was correct to dismiss that claim. For these reasons,
the judgment of the District Court is affirmed.16

      16
        Given these holdings, we need not address whether
plaintiffs’ claims were barred by the applicable statute of
limitations or whether their § 10(b) claim was adequately
pleaded under Rule 9(b) and the PSLRA. We note, however,
that were we to reach the latter issue, we have doubt that the
§ 10(b) claim was adequately pleaded, as few of plaintiffs’
allegations raise the requisite “strong inference” that Exxon
acted fraudulently.

                               32