The Sarbanes-Oxley Act of 2002 (“SOX”) 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 the 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.
Two circuit courts (the 2nd and 7th) have declined to apply the new statute of limitations to revive time-barred claims. In the past week, the Eleventh and Eighth Circuits have also issued opinions addressing the question.
In its long-awaited decision in Tello v. Dean Witter Reynolds, Inc., 2005 WL 1279130 (11th Cir. June 1, 2005), the Eleventh Circuit held that it could not decide “the statutory-interpretation issue of whether previously time-barred claims are revived by the [SOX] statute of limitations” until the district court determined if the plaintiffs were on inquiry notice of their claims prior to the passage of the legislation.
In contrast, the Eight Circuit’s opinion in In re ADC Telecommunications, Inc. Sec. Litig., 2005 WL 1322576 (8th Cir. June 6, 2005) simply follows the earlier appellate holdings in finding that SOX did not revive time-barred claims. The opinion (in a footnote) and concurrence clarify that the issue of the retroactivity of the new statute of limitations (i.e., its application to “causes of action that had already accrued at the time of the change in law”) is separate from the issue of whether Congress intended to revive time-barred claims.
The 10b-5 Daily 