Court Opinion

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Opinions of the United
2006 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

1-13-2006

Benak v. Alliance Cap Mgmt
Precedential or Non-Precedential: Precedential

Docket No. 05-1070

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                                                      Precedential

             UNITED STATES COURT OF APPEALS
                  FOR THE THIRD CIRCUIT

                            No. 05-1070

             PATRICIA BENAK, on behalf of Alliance
                     Premier Growth Fund

                                 v.

  ALLIANCE CAPITAL MANAGEMENT L.P.; JOHN D.
  CARIFA; ALFRED HARRISON; MARK D. GERSTEN;
 RUTH BLOCK; DAVID H. DIEVLER; JOHN H. DOBKIN;
WILLIAM H. FOUL, JR.; JAMES M. HESTER; CLIFFORD L.
          MICHEL; DONALD J. ROBINSON

           On Appeal from the United States District Court
                   for the District of New Jersey
                      (D.C. No. 01-cv-05734)
              Honorable Jose L. Linares, District Judge *

             Submitted Under Third Circuit LAR 34.1(a)
                        November 18, 2005

       *
         By order entered May 10, 2002, the U.S. District Court for
the District of New Jersey consolidated the proceedings at Nos. 01-
cv-05734, 01-cv-06127, 02-cv-00672, 02-00994, and 02-cv-1385
for all purposes. The caption when the appeal was initially
docketed included the captions for all the individual actions. By
order dated May 25, 2005, the District Court noted that all
plaintiffs’ complaints had been dismissed in action No. 01-cv-
05734. As such, this opinion shall be captioned in No. 01-cv-05734
only.
Before: BARRY and AMBRO, Circuit Judges, and POLLAK,**
                    District Judge

               (Opinion Filed: January 13, 2006)

James Bonner, Esq.
Shalov, Stone & Bonner
485 Seventh Avenue
Suite 1000
New York, NY 10018

Counsel for Appellants Patrick J. Goggins, Laura H. Goggins,
and Fred B. Voigt

Mark A. Kirsch, Esq.
Clifford Chance US
31 West 52 nd Street
New York, NY 10019
       -AND-
Herbert J. Stern, Esq.
Stern & Kilcullen
75 Livingston Avenue
Roseland, NJ 07068

Counsel for Appellees Alliance Cap. Mgmt., John D. Carifa,
Alfred Harrison, and Mark D. Gersten

G. Stewart Webb, Jr., Esq.
Venable
2 Hopkins Plaze
1800 Mercantile Bank & Trust Bldg.
Baltimore, MD 21201

      **
         The Honorable Louis H. Pollak, District Judge, United
States District Court for the Eastern District of Pennsylvania,
sitting by designation.

                              2
       -AND-
John L. Hardiman, Esq.
Sullivan & Cromwell
125 Broad Street
New York, NY 10004

Counsel for Appellees Alliance Premier Growth Fund, Ruth
Block,
David H. Dievler, John H. Dobkin, William H. Foulk, Jr., James
M. Hester, Clifford L. Michel, and Donald J. Robinson

                  OPINION OF THE COURT

BARRY, Circuit Judge

        Appellees – Alliance Capital Management L.P. (“Alliance
Capital”), which was the investment advisor to the Alliance
Premier Growth Fund, Inc. (the “Fund”); Alfred Harrison, the
premier portfolio manager of the Fund; and a number of former
directors and officers of the Fund – and appellants, shareholders
in the Fund from October 30, 2000 through November 29, 2001
(the “Class Period”), are before us on appellants’ appeal of the
District Court’s dismissal of their complaint on statute of
limitations grounds. We will affirm.

                       I. Background

          During the Class Period, the Fund – a long term capital
growth fund – held and continued to purchase shares of Enron
stock. As of November 30, 2000, the Fund held $157,536,750
worth of Enron stock, as indicated in the Fund’s 2000 annual
report to the SEC. (Amended Class Action Compl. (“Am.
Compl.”) ¶ 73, A89.) Over the course of the next six months,
the Fund acquired an additional 4,765,800 shares. Apparently,
no Fund report issued between the May 31, 2001 semi-annual
report and Enron’s bankruptcy. During that time period,

                                3
however, concerns about Enron’s solvency began to be discussed
publicly.

        In their amended class action complaint of December 8,
2003, appellants referenced numerous news accounts beginning
as early as September of 2000 and accelerating in the late
summer and early fall of 2001 regarding Enron’s financial health
and accounting practices.1 The end of October and beginning of
November brought more specific accounts of trouble at Enron.2

       1
         See Am. Compl. ¶ 328 (citing a September 20, 2000 Wall
Street Journal article questioning an accounting practice of Enron);
¶ 346 (“[T]he public criticism of Enron’s financial reporting
intensified dramatically following the time Alliance initiated its
investment in Enron.”); ¶¶ 348-50 (“One prominent article that
placed Defendants on notice of Enron’s unduly aggressive
accounting was a March 5, 2001 article in Fortune”); ¶¶ 355-57 (a
May 9, 2001 report on TheStreet.com); ¶ 359 (a July 20, 2001
article in TheStreet.com); ¶ 370 (an August 15, 2001 Business
Week Online article about the departure of Skilling); ¶ 371 (an
August 15, 2001 report by Off Wall Street); ¶ 372 (an August 29,
2001 New York Times article); ¶ 373 (an August 30, 2001 article in
TheStreet.com); ¶ 374 (a September 9, 2001 New York Times
article); ¶ 375 (a September 17, 2001 Fortune article); ¶ 377 (an
October 1, 2001 article in Fortune); ¶ 380-81 (an October 16, 2001
TheStreet.com article); ¶¶ 383, 386-87 (articles on October 17, 18,
and 19, 2001 in The Wall Street Journal); ¶¶ 395, 398
(TheStreet.com on October 22, 2001); ¶ 407 (Wall Street Journal
reports on October 23 that the SEC had begun an inquiry into
Enron and its relationships with partnerships overseen by Fastow);
¶¶ 408, 411 (New York Times articles on October 23 and 25); ¶ 416
(an October 26, 2001 Wall Street Journal article).
       2
        See Am. Compl. ¶¶ 417, 418, 420, 424, 426, 427, 428, 434,
435, 436, 438, 441.
       In addition to press coverage, Standard & Poor lowered
Enron’s credit rating on November 1, 2001, stating that
       [t]he company’s financial flexibility has continued to
       diminish. This crisis in investor confidence can be traced,
       in Standard & Poor’s view, directly to the company’s

                                 4
Concern continued to heighten as November waned,3 particularly
focused around a proposed acquisition of Enron by Dynegy that
fell through in late November.4 Throughout this period,
Alliance’s internal analysts gave voice to these concerns.5

        Enron finally collapsed, filing for bankruptcy on
December 2, 2001. In the days immediately following that
filing, reports of investors surprised by the collapse and the
losses they sustained pervaded the media.6 Of particular
relevance here, Alliance’s large stake in Enron was referenced
and Fund portfolio manager Harrison was quoted regarding
Enron’s demise.7

      inability to calm investors that are unsure about the strength
      of Enron’s core energy marketing business and the viability
      of the company’s plan to restore its credit profile.
(Am. Compl. ¶ 425, A182.)
       3
           See, e.g., Am. Compl. ¶¶ 444, 447.
       4
        See id. ¶¶ 446, 453 (“On November 28, 2001, Dynegy
cancelled its proposed merger with Enron, thereby making a
bankruptcy filing inevitable.”).
       5
           See, e.g., id. ¶¶ 448-51.
       6
        See, e.g., A780 (Washington Post published article on
December 2, 2001 under headline “At Enron, the Fall Came
Quickly; Complexity, Partnerships Kept Problems From Public
View”); A816 (International Herald Tribune article on December
10, 2001 entitled “What to Learn From the Fall of Enron, a Firm
that Fooled So Many”).
       7
        See A642 (December 4, 2001 Dow Jones News Service
article noting that Harrison “defended his optimism” and
“remained bullish on Enron even after Dynegy Inc. (DYN)
proposed to acquire it early last month”); A648 (Wall Street
Journal reports on December 5, 2001 that “Harrison . . .
acknowledged that, in retrospect, he missed some warning signs.
‘Nobody except very smart short sellers dug into all the footnotes
that might have been there.’”); A786 (Dow Jones News Service

                                       5
       Moreover, in the week following Enron’s collapse, The
New York Times reported a potential conflict of interest of an
Alliance insider, Frank Savage, who was on the boards of both
Alliance and Enron during the relevant period of time.8 The
same day that the Times article appeared, Patricia Benak filed a
complaint (the “Benak complaint”) against Alliance in the U.S.
District Court for District of New Jersey, alleging Investment
Company Act claims.9 The complaint in the litigation now
before us was initially filed on December 13, 2002 – more than a
year after the Enron bankruptcy and the Benak complaint – in
the U.S. District Court for the Southern District of New York by
Patrick and Laura Goggins (the “Goggins complaint”), and was
transferred to the District of New Jersey on August 13, 2003.
The factual basis of the Goggins complaint, as subsequently
amended, closely tracks that of the Benak complaint.

        According to the Goggins complaint, in October and
November 2001, as the reports of Enron’s worsening financial
state increased, appellees continued to invest in the company.10

reports on December 4 that Harrison “admitted he had missed
repeated signs of trouble at Enron Corp. and kept adding to his
already hefty holding in the company until shortly before its
collapse became unavoidable”); A787.).
       8
           See A801 (December 7, 2001 New York Times article).
       9
        The Benak case, “a consolidated action comprising six
derivative lawsuits filed on behalf of the Fund against Alliance
Capital,” (transfer order, A57), was later dismissed for the
insufficiency of its legal claims.
       10
         See Am. Compl. ¶ 421, A181 (“Harrison’s response to this
torrent of negative news regarding Enron: he caused the Fund to
expend an additional $78,828,905 to purchase Enron shares
between October 22, 2001 and October 30, 2001.”); ¶ 443 (“Even
this obvious train wreck did not deter Harrison from purchasing
Enron stock. Between November 13, 2001 and November 19,
2001, he caused the Fund to waste an additional $43,706,333.56
purchasing Enron common stock.”).

                                 6
As already noted, media coverage around and after Enron’s fall
included reference to Alliance’s holdings in Enron, and either
explicitly or implicitly referenced Alliance’s losses.11 Alliance’s
continued investment up until Enron’s bitter end, despite the
negative news accounts and communications to and by analysts
at Alliance manifesting concern about Enron’s solvency,12 was
the basis for appellants’ §§ 11 and 12 claims.13 Appellants argue
that the Fund’s publicized claims regarding the type of
investment strategies employed and companies invested in were
materially misleading in light of the Fund’s continued and
increasing stake in Enron in the autumn of 2001.

        Appellees pointed to the same reports of Enron’s
financial state to assert their affirmative defense that appellants
were on inquiry notice prior to December 13, 2001 – one year
before the December 13, 2002 filing of the initial
Goggins complaint. They also point to the December 7, 2001
filing of the Benak complaint. In response, appellants argue that
information critical to their complaint was not available until
after December 13, 2001, in particular, that they had no way of
knowing what Alliance’s Enron holdings were until they
received the Fund’s report early in 2002. They also cite a Senate
report published in the summer of 2002 that revealed important
information about potential relevant conflicts at Alliance,
although they did not reference that report in their initial
complaint.

     The District Court dismissed the Goggins complaint on
December 10, 2004. Its opinion reviewed the newspaper

       11
        See, e.g., A762 (The Wall Street Journal reports that,
based on the September 30, 2001 filing, the Fund’s stake had
dropped in value by about $445 million through November 28,
2001); see also A805)).
       12
            See, e.g., Am. Comp. ¶ 422.
       13
         See id. ¶ 456 (“Shamefully, only on November 30, 2001,
when Enron’s bankruptcy was a foregone conclusion, did the Fund
sell any of its Enron Stock.”) (emphasis in original).

                                  7
accounts and public information cited in the complaint, as well
as additional newspaper articles submitted by appellees, and
concluded that this information, along with knowledge that the
Fund held Enron shares prior to the bankruptcy filing, was more
than sufficient to place appellants on inquiry notice prior to
December 13, 2001. The Court also referenced the Benak
complaint, noting that its early filing was somewhat probative of
the information that was available to reasonable investors at the
time.

            II. Jurisdiction and Standard of Review

        We have jurisdiction under 28 U.S.C. § 1291. The
District Court dismissed the complaint under Rule 12(b)(6) of
the Federal Rules of Civil Procedure. Our review of that
dismissal, therefore, is plenary. See Gallo v. City of
Philadelphia, 161 F.3d 217, 221 (3d Cir. 1998). We must accept
as true all allegations in the complaint and draw all reasonable
inferences from those facts in the light most favorable to
plaintiffs – here, appellants. Rocks v. City of Philadelphia, 868
F.2d 644, 645 (3d Cir. 1989). The dismissal must be upheld “if
it appears to a certainty that no relief could be granted under any
set of facts which could be proved.” D.P. Enters., Inc. v. Bucks
County Community College, 725 F.2d 943, 944 (3d Cir. 1984).
We need not, however, credit “bald assertions” or “legal
conclusions.” Evancho v. Fisher, 423 F.3d 347, 351 (3d Cir.
2005).

                           III. Analysis

       There is no dispute that the relevant statute of limitations
for appellants’ claims is “one year after discovery of the facts
constituting the violation and within three years after such
violation.” 15 U.S.C. § 78i(e).14 Appellants filed the initial

       14
         A statute of limitations defense is an affirmative one, and
in order to undergird a dismissal, must appear on the face of the
complaint. “A complaint showing that the governing statute of
limitations has run on the plaintiff’s claim for relief is the most

                                 8
Goggins complaint on December 13, 2002. The relevant date,
therefore, for evaluating appellants’ notice of their claims is
December 13, 2001.

        In dismissing the amended class action complaint, the
District Court applied an inquiry notice standard. In In re
NAHC, Inc. Sec. Litig., 306 F.3d 1314 (3d Cir. 2002), we made it
clear that “[t]o the extent a securities fraud plaintiff was on
inquiry notice of the basis for claims more than one year prior to
bringing the action, his or her claim is subsequently time-barred
by the requisite statute of limitations.” Id. at 1325. “[T]he one-
year period begins to run when the plaintiffs ‘discovered or in
the exercise of reasonable diligence should have discovered the
basis for their claim’ against the defendant.” Id. (quoting
Gruber v. Price Waterhouse, 697 F. Supp. 859, 563 (E.D. Pa.
1988)).

       Whether the plaintiffs, in the exercise of
       reasonable diligence, should have known of the
       basis for their claims depends on whether they had
       “sufficient information of possible wrongdoing to
       place them on ‘inquiry notice’ or to excite ‘storm
       warnings’ of culpable activity.”

Id. (adding that the “test for ‘storm warnings is an objective one,
based on whether a ‘reasonable investor of ordinary intelligence
would have discovered the information and recognized it as a
storm warning’”) (citations omitted); see In re DaimlerChrysler
AG Sec. Litig., 269 F. Supp. 2d 508, 513 (D. Del. 2003).
Plaintiffs cannot avoid the time bar simply by claiming they
lacked knowledge “of the details or ‘narrow aspects’ of the
alleged fraud.” NAHC, 306 F.3d at 1326 (quoting In re
Prudential Ins. Co. of Am. Sales Practices Litig., 975 F. Supp.
584, 599 (D.N.J. 1997)). Rather, the clock starts when they

common situation in which the affirmative defense appears on the
face of the pleading and provides a basis for a motion to dismiss
under Rule 12(b)(6) . . . .” Charles Alan Wright and Arthur R.
Miller, 5B Federal Practice and Procedure § 1357 at 714 (2004).

                                 9
“‘should have discovered the general fraudulent scheme.’” Id.
(quoting Prudential, 975 F. Supp. at 599); see Mathews v.
Kidder, Peabody & Co., Inc., 260 F.3d 239, 252 (3d Cir. 2001)
(“[I]nvestors are presumed to have read prospectuses, quarterly
reports, and other information related to their investments.”); In
re Initial Public Offering Sec. Litig., 341 F. Supp. 2d 328, 345
(S.D.N.Y. 2004) (“A plaintiff in a securities fraud case ‘is
charged with knowledge of publicly available news articles and
analyst’s reports to the extent that they constitute storm warnings
sufficient to trigger inquiry notice.”) (citation omitted).

        Once defendants establish “storm warnings” in pressing
their affirmative defense, “the burden shifts to the plaintiffs to
show that they exercised reasonable due diligence and yet were
unable to discover their injuries.” Mathews, 260 F.3d at 252; see
DaimlerChrysler, 269 F. Supp. 2d at 513. “Whether the
plaintiffs exercised reasonable diligence is both a subjective and
objective inquiry.” DaimlerChrysler, 269 F. Supp. 2d at 513
(citing Mathews, 260 F.3d at 252). If they have not shown such
diligence, the knowledge they would have acquired through
investigation is imputed to them. See NAHC, 306 F.3d at 1326
(“‘Once on inquiry notice, plaintiffs have a duty to exercise
reasonable diligence to uncover the basis for their claims, and
are held to have constructive notice of all facts that could have
been learned through diligent investigation during the limitations
period.’”) (quoting Gruber, 697 F. Supp. at 864). In reviewing
the application of the inquiry notice standard in NAHC, we
quoted the finding below that the plaintiffs “were at least on
inquiry notice of their claims . . . and, in the exercise of
reasonable diligence, should have discovered the basis for the
claims within one year.” Id. (emphasis added). Plaintiffs
cannot, post hoc, excuse a failure to inquire by demonstrating the
difficulty they would have had attaining relevant information.
See id. at 1327 (“This Court has previously held that ‘excusing
Appellant’s lack of inquiry because, in retrospect, reasonable
diligence would not have uncovered their injury . . . would, in
effect, discourage investigation.”) (quoting Mathews, 260 F.3d at
252 n.16). Therefore, “if storm warnings existed, and the
[a]ppellants chose not to investigate, we will deem them on
inquiry notice of their claims.” Mathews, 260 F.3d at 252 n.16.

                                10
       The District Court compared this case to NAHC and
determined that inquiry notice was clearly established prior to
December 13, 2001 15 and that nothing in the complaint
demonstrated reasonably diligent efforts to investigate the
claims. Although, for the reasons discussed below, this case
does not so neatly fit into the paradigm outlined by NAHC, we
agree that appellants were on inquiry notice of their claims more
than one year prior to filing suit.

        Undergirding the inquiry notice analysis is the assumption
that a plaintiff either was or should have been able, in the
exercise of reasonable diligence, to file an adequately pled
securities fraud complaint as of an earlier date. In the case of a
direct investor – who one would assume has or can be deemed to
have consistent knowledge of his or her securities holdings – the
storm warning analysis becomes relatively simple. Upon reading
news reports regarding the financial woes of a particular
company and speculation regarding the management of that
company, a direct investor immediately has reason for concern.

       15
         We review the District Court’s decision to take judicial
notice of certain facts for abuse of discretion. NAHC, 306 F.3d at
1323. We see no basis to upset the District Court’s decision to take
judicial notice of newspaper articles supplied by appellees. The
inquiry notice analysis is an objective one. Whether appellants
read the articles or were aware of them is immaterial. They serve
only to indicate what was in the public realm at the time, not
whether the contents of those articles were in fact true. Cf. In re
Merrill Lynch & Co. Research Reports Sec. Litig., 289 F. Supp. 2d
416, 425 n.15 (S.D.N.Y. 2003) (“The Court may take judicial
notice of newspaper articles for the fact of their publication without
transforming the motion into one for summary judgment.”). Their
publication is "not subject to reasonable dispute in that it is . . .
capable of accurate and ready determination by resort to sources
whose accuracy cannot be questioned." Fed. R. Evid. 201(b)(2);
see Heliotrope Gen., Inc. v. Ford Motor Co., 189 F.3d 971, 981
n.18 (9th Cir. 1999) (“We take judicial notice that the market was
aware of the information contained in news articles submitted by
the defendants.”).

                                 11
Moreover, in being responsible for his or her own investments, a
direct investor has greater motivation – and therefore, one would
assume, be more likely – to stay informed. Upon receiving such
information and inquiring further regarding the accuracy of that
information, a direct investor – again, knowing the amount and
nature of his or her holdings – could file suit almost
immediately.

        The mutual fund investor is somewhat different. By its
very nature, a mutual fund permits an investor to pass along the
responsibility for maintaining consistent knowledge of the
condition of different companies. Fund investors may have little
idea at any one time in what securities their money is invested, a
benefit for which they have paid. Appellants, for example,
received a report on a semi-annual basis and counsel represented
to the District Court that an investor could not receive
information on the Fund’s holdings between such reports.
Appellants’ claims are about Alliance’s misdeeds and only
secondarily about Enron’s. See Lentell v. Merrill Lynch & Co.
Inc., 396 F.3d 161, 169 (2d Cir. 2005) (“Storm warnings in the
form of company-specific information probative of fraud will
trigger a duty to investigate.”) (emphasis added). Accordingly, a
mutual fund investor who sees numerous stories about troubles
at his or her fund is more akin to a direct investor confronted
with reports about a company in which he or she is invested.

        Appellees, as one would expect, see things differently.
They seize on appellants’ citations to numerous news articles
regarding Enron in the months leading up to the bankruptcy,
claiming that the publicity placed them on sufficient notice of
their claims long before December 13, 2001.16 The question of

       16
         It is worth noting that appellants’ potential knowledge of
Fund holdings in Enron – something relied on by appellees in
making their inquiry notice argument – could actually delay inquiry
notice. If appellants did know that the Fund was continuing to
acquire Enron stock, that itself could be interpreted, in light of
what the Fund told them about their investment strategy, as a
reassuring statement. See id. (“Reassurances can dissipate apparent

                                12
knowledge in the context of this case, however, is not
symmetrical. Appellees are mutual fund advisers who are
responsible for making investment choices on behalf of the
Fund’s investors. Appellants make a compelling argument that,
as “passive” mutual fund investors, they cannot be held to the
same notice standards as the appellees entrusted with their
money.

        In our estimation, the earliest a reasonable mutual fund
investor would have been on inquiry notice is at the time of, or
in the days immediately following, the Enron bankruptcy filing.
The articles leading up to the bankruptcy primarily report the
difficulty analysts were having determining what was happening
at the company. Speculation should not be given the same
weight as reports of objective wrongdoing. See Berry v. Valence
Tech., Inc., 175 F.3d 699, 704 (9th Cir. 1999) (“A press article’s
general skepticism about a company’s future prospects is not
sufficient to excite inquiry into the specific possibility of
fraud.”). Where, as here, the “bulk of the articles . . . generally
consisted of rampant speculation,” DaimlerChrysler, 269 F.
Supp. 2d at 515, a court should give them less weight in the
analysis. Interpreting speculation and weighing its relevance is
one of the important reasons for having a fund manager.

       News reports are not given weight by courts in a vacuum,
but rather have significance in cases where “investors are
presumed to have read prospectuses, quarterly reports, and other
information related to their investments.” Mathews, 260 F.3d at
252.17 Here, those materials would be those issued by Alliance,
not Enron. Therefore, in refining an approach to the storm
warnings analysis in the mutual fund setting, there should be a

storm warnings ‘if an investor of ordinary intelligence would
reasonably rely on them to allay the investor’s concerns.’”). Once
Enron goes bankrupt, things of course change.
       17
         We have been careful not to look at the articles from the
perspective of what we now know about Enron. Enron, after all,
had yet to become Enron. What we have since learned should not
obscure the fact that many persons were surprised by Enron’s fall.

                                13
distinction drawn between news reports regarding a primary
investment vehicle – here, the Fund – and those concerning a
secondary relationship – Fund resources flowing to Enron. See
Lentell, 396 F.3d at 169 (“Pleading with sufficient particularity
may be especially difficult with claims against a ‘secondary’ or
‘tertiary’ wrongdoer (as opposed to an issuer or its officers and
directors).”); Levitt v. Bear Stearns & Co., Inc., 340 F.3d 94, 103
(2d Cir. 2003).

        As of the date of the bankruptcy, for the reasons already
explained, a Fund investor would have to take an additional step
to determine whether he or she was injured by Enron’s collapse.
There is a difference, in our view, between storm warnings
showing that a company is in trouble and public reports
regarding a fund’s holdings that would enable one to know
whether he or she is invested in the troubled company (a fact a
direct investor always would be deemed to know). See
Mathews, 260 F.3d at 251 (“[I]n most securities fraud actions,
the plaintiffs’ injuries are inextricably intertwined with
defendants’ misrepresentations. Discovery of one leads almost
immediately to discovery of the other.”).18 In short, the
reasonable mutual fund investor arguably has less reason to
monitor the health of companies in which he or she is invested
and is less likely to have accurate contemporaneous information
regarding where his or her money is invested. Both of these
distinguishing features inform the inquiry notice analysis here,
where we are not confronted with “a fraud that can be
apprehended ‘simply by examining . . . financial statements and
media coverage’ of the issuers.” Lentell, 396 F.3d at 169
(citations omitted).

      Where, as here, however, the knowledge gap is bridged
by media accounts noting the mutual fund’s holdings in the
defunct company, notice is triggered. Accordingly, although we
cannot say that inquiry notice was triggered as a matter of law

       18
        This observation was made in the context of contrasting
many RICO cases from the typical case arising out of securities
fraud. Mathews, 260 F.3d at 251.

                                14
prior to Enron’s bankruptcy, appellants were surely on notice
shortly thereafter. Therefore, despite our refining of the
analysis, we reach the same conclusion as reached by the District
Court. The combination of appellants’ knowledge that Alliance
had Enron holdings as of the prior summer, the news reports
regarding Enron in the fall of 2001, the company’s highly-
publicized bankruptcy, the publicity in the immediate aftermath
of the bankruptcy referencing Alliance’s Enron-related losses,19
and the filing of the Benak complaint20 placed appellants on
inquiry notice prior to December 13, 2001.

                          IV. Conclusion

        The December 10, 2004 order of the District Court will
be affirmed.

       19
         “[T]here was ample evidence in the public domain that the
Fund was losing hundreds of millions of dollars as a result of its ill-
considered Enron investment. As discussed, articles in the Wall
Street Journal, the Houston Chronicle, the San Francisco
Chronicle, and the New York Post reported that the Fund had
incurred paper losses ranging from $445 million to over $1 billion.
. . .” (District Ct. Op. at 11, A45).
       20
         We need not assess the factual sufficiency of that
complaint, nor whether its substance is appropriately considered in
making an objective inquiry. It simply serves, as the post-
bankruptcy articles about Alliance’s holdings serve, as a public
event connecting the downfall of Enron with Alliance’s investment
strategies. See Initial Public Offering, 341 F. Supp. 2d at 349
(“The filing of related lawsuits can suffice to put plaintiffs on
inquiry notice, where the alleged fraud is similar.”).

                                  15