The 10b-5 Daily has been following the district court split over whether the new statute of limitations in the Sarbanes-Oxley Act of 2002 revives time-barred claims.
Sarbanes-Oxley extends the statute of limitations for federal securities fraud to the earlier of two years after the discovery of the facts constituting the violation or five years after such violation. Although the legislation clearly provides that it “shall apply to all proceedings addressed by this section that are commenced on or after the date of enactment of this Act [July 30, 2002],” left unresolved is whether Congress intended to revive claims that had already expired under the earlier one year/three years statute of limitations. District courts have gone both ways on this question and the issue is currently before the U.S. Court of Appeals for the 11th Circuit.
There has been another relevant district court opinion out there for over a year, but it has only recently appeared on Westlaw (and in F. Supp. 2d). The court in In re Heritage Bond Litigation, 289 F. Supp. 2d 1132 (C.D. Cal. 2003) addressed whether the statute of limitations barred the plaintiffs’ Section 20(a) claims for control person liability based on statements made more than three years before the initial filing of the suit. The plaintiffs first asserted the claims in a complaint filed on July 24, 2002, a few days before the passage of Sarbanes-Oxley, and then filed a new and separate complaint asserting the same claims on August 30, 2002. In an opinion issued last January, the court held that “while the amended statute of limitations may apply to proceedings filed after passage of the Act, it cannot apply to claims already barred at the time of its enactment, regardless of the filing date.” Accordingly, the plaintiffs’ Section 20(a) claims were dismissed.