Lampf v. Gilbertson

Supreme Court of the United States · 1991 · Federal Courts

Federal CourtsSecurities Exchange Act § 10(b)Rule 10b-5Statutes of limitations§ 10(b)Rule 10b-5implied cause of actionborrowing doctrine

Facts

The plaintiffs purchased interests in computer-leasing limited partnerships from 1979 through 1981. They alleged they were induced to invest by misrepresentations in offering memoranda concerning tax benefits, profitability, marketability of software, and appraisals. The partnerships failed, and after IRS investigation the claimed tax benefits were disallowed; plaintiffs said they became aware of the alleged misrepresentations only in 1985. They filed their complaints in 1986 and 1987, more than three years after the alleged misrepresentations.

Issue

What statute of limitations governs a private action implied under § 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5? Also, if the applicable period is the federal 1-and-3-year structure, does equitable tolling apply to the three-year period?

Rule

When Congress has not supplied a limitations period for a federal cause of action, courts ordinarily borrow the most analogous state period, but may borrow a federal one when a federal rule clearly provides a closer analogy and better fits federal policies and litigation practicalities. Where an implied claim arises under a statute that also contains comparable express causes of action with their own limitations periods, courts should look first to the statute of origin. For private § 10(b) and Rule 10b-5 actions, suit must be commenced within one year after discovery of the facts constituting the violation and within three years after the violation; the three-year repose period is not subject to equitable tolling.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Seattle, Nora Vega sued Cascadia Meridian Securities in federal court under § 10(b) and Rule 10b-5, alleging she bought notes after reading a misleading investor packet. Washington's fraud statute would allow the suit, but the filing came 2 years after Nora discovered the alleged deception and 2 years and 8 months after the sale.

Which limitations rule should the court apply to determine timeliness?

Explanation. For private § 10(b) and Rule 10b-5 actions, the Court held that courts should look first to the statute of origin when the implied claim arises under a statute containing comparable express causes of action with explicit time limits. The 1933 and 1934 Acts provide the appropriate analogue, yielding a uniform 1-year-after-discovery and 3-year-after-violation scheme, rather than state fraud or blue-sky periods or the later 5-year insider-trading period.