Court Opinion

ID: 9467452
Source: CourtListenerOpinion
Date Created: 2023-08-05 01:49:06.191976+00
Date Added: 2024-06-11T17:40:21.108959
License: Public Domain

WEIS, Circuit Judge,
dissenting.
By its very nature a statute of limitations is arbitrary. It provides a cut-off, embodying a legislative policy decision when a person may be barred from a legal remedy. Chase Securities Corp. v. Donaldson, 325 U.S. 304, 314, 65 S.Ct. 1137, 1142, 89 L.Ed. 1628 (1945). Because of this preclusive effect, it is important that the public know in advance when the limitations period expires.
It is regrettable that no time has been fixed in the Securities Act for Section 10(b) suits, but it is understandable since the private cause of action was a judicial engraftment on the statute. Having created the remedy, the judiciary must now fill the interstices and provide for such matters as the appropriate limitation period.
In discussing this issue, many courts unfortunately have lost sight of the importance of notice. They have undertaken involved color matching of the federal statute with state Blue Sky laws, discussed which remedy is appropriate, in what circumstances, and have engaged in such esoteric discussions as whether the state laws require scienter.1 Indeed, in some eases, the statute of limitations issue — which should be a brief, preliminary inquiry — receives more attention than the merits of the controversy itself.
I realize that pitfalls may lurk in a simplistic approach, but at least some effort should be undertaken to make the search for the applicable period quick and direct. The route the majority takes arguably heads in that direction, but I fear still unduly complicates the matter. Following its opinion in Roberts v. Magnetic Metals Co., 611 F.2d 450 (3d Cir. 1979), the majority looks first to see what causes of action are available to a plaintiff under state law, and then determines what state statute of limitations would apply. But such detail is unnecessary.
The limitation period for a federal remedy is best found by looking to an analogous state remedy, not an exact duplicate. See Capos v. Mid-America National Bank, 581 F.2d 677, 680 (7th Cir. 1978).
Chief Judge Seitz, dissenting in Roberts, would simply look to the state’s statute that addresses the same regulatory area — in this case securities transactions — and apply that limitation if it best effectuates federal policy. 611 F.2d at 461. This approach is more consistent with the majority of circuits, where a “commonality of purpose” test is applied to determine the appropriate statute of limitations. See Morris v. Stifel, Nicolaus & Co., 600 F.2d 139, 145 (8th Cir. 1979) , and cases cited therein. Under such an analysis, the same or similar policy considerations are emphasized, rather than focusing on specific points of distinction, O’Hara v. Kovens, 625 F.2d 15, 18 (4th Cir. 1980) , as the majority’s opinion here tends to do.
Following the approach I advocate would make this a simple case. Pennsylvania has adopted a comprehensive Securities Act, Pa. Stat.Ann. tit. 70, §§ 1-101 to-704 (Purdon Supp.1980), which regulates the same area as the Securities Act of 1933 and indeed the very conduct involved in the case at bar.2 The Pennsylvania Act has a one year statute of limitations, Pa.Stat.Ann. tit. 70, § 1-501 (Purdon Supp.1980), which corresponds to the shorter periods favored in the *612federal Act, 15 U.S.C. §§ 78i(e), 78p(b), 78r(c), 78cc(b) (1976). Because the federal and state statutes express parallel policies, I see no need to proceed any further, and would apply the state one year statute of limitations to the federal claim as did the district judge.
The majority, however, goes on to a more detailed analysis. Although concluding that defendant’s alleged conduct is within the scope of the state statute, my colleagues nevertheless decide that plaintiff would have no right to recover damages under the state Act, and therefore apply the limitation of the catch-all general fraud statute. As I understand the majority approach, if the plaintiff had not alleged churning, but had based his claim on a sale to or purchase from another, then the one year limitation of the state securities law would apply. This result follows because there is specific authorization in the Pennsylvania statute for such a private right of action. Even though both suits would be brought under Section 10(b), therefore, one would have to be filed within one year — the other within two or six years. This continues the pattern of inconsistency begun in Roberts, where a seller of securities in New Jersey has six years to bring his suit under § 10(b), but a buyer presumably has only two years under the same statute. Thus, under this court’s construction, no uniform statute of limitations for all Section 10(b) cases exists even within the same state.
Nor am I persuaded by the majority’s conclusion that the plaintiff would not have a right to recover damages under the Pennsylvania statute. I agree with their conclusion that churning is prohibited by the state statute, and believe that possibly it would authorize a private cause of action similar to the one here.
The record does not disclose if the plaintiff bought some of the securities from the defendant. If he did, the Act specifically provides a remedy for damages. Moreover, the statute in § l-501(a) and (b) imposes liability on “any person” who violates §§ 1-403 or 404, which explicitly treat conduct of broker-dealers and investment ad-visors. Arguably the statute might be construed by the Pennsylvania Supreme Court to provide a private remedy for “churning.” This question has never been presented to the state courts and therefore the majority’s position is necessarily a prediction rather than a statement of state law.
The fact that the majority approach depends upon a detailed analysis of the underlying facts in the case at hand, as well as an uncertain prediction of state statutory interpretation, reveals the difficulties with utilizing an “exact match” approach. I believe that it would be far preferable in a suit under § 10(b) of the Securities Act to look to the statute of limitations of the state’s Blue Sky law. It not only furnishes a guidepost to the public, but gives some certainty to what is now a confused and inconsistent body of law.
I would affirm the judgment of the district court.

. See, e. g., Comment, Statute of Limitations Applicable to 10b-5 Actions Arising in Pennsylvania, 53 Temp.L.Q. 70 (1980).

. Compare 64 Pa.Code § 403.010(d) (1980) with 17 C.F.R. § 240.15c 1-7 (1980).