Wednesday, December 05, 2007

Ninth Circuit Holds that Either Actual or Inquiry Notice Can Start the Running of the Limitations Period on Federal Securities Fraud Claims

Per Betz v. Trainer Wortham & Co., Inc., 504 F.3d 1017 (9th Cir. Oct. 04, 2007):

We have held that the statute of limitations for a federal securities fraud claim begins to run when the plaintiff has either actual or inquiry notice that the defendants have made a fraudulent misrepresentation. See, e.g., Gray v. First Winthrop Corp., 82 F.3d 877, 881 (9th Cir.1996); Volk v. D.A. Davidson & Co., 816 F.2d 1406, 1412 (9th Cir.1987). In more recent cases, however, it has been suggested that under the United States Supreme Court's decision in Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, 501 U.S. 350, 111 S.Ct. 2773, 115 L.Ed.2d 321 (1991), only actual notice of the facts forming the alleged fraud, and not inquiry notice of those facts, triggers the running of the statute of limitations for a § 10(b) claim. See Berry v. Valence Tech., Inc., 175 F.3d 699, 704 (9th Cir.1999); see also Livid Holdings Ltd. v. Salomon Smith Barney, Inc., 416 F.3d 940, 951 (9th Cir.2005). The uncertainty introduced by our opinion in Berry led us to suggest in Livid Holdings that, notwithstanding our unequivocal pre- Lampf case law, we had “considered, but not made a final determination on whether actual or inquiry notice of the alleged fraud triggers the running of Rule 10b-5's statute of limitations.” Livid Holdings, 416 F.3d at 951.

We hold that either actual or inquiry notice can start the running of the statute of limitations on a federal securities fraud claim.


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