May 03, 2016
Twenty-five years ago, in Ceres Partners, the Second Circuit held that the implied private right of action under Section 14 of the Securities and Exchange Act of 1934 (“Exchange Act”) was subject to a three-year repose period, based on analogizing such claims to the express private rights of action in Sections 9(f) and 18(a) of the Exchange Act and then borrowing those statutes’ then-applicable three-year statutes of repose. In 2002, the Sarbanes-Oxley Act (“SOX”) extended to five years the repose period applicable to private rights of action involving claims of “fraud, deceit, manipulation, or contrivance.” In DeKalb County Pension Fund v. Transocean Ltd., No. 14-0894-cv (2d Cir. Apr. 29, 2016), the Second Circuit reexamined its Ceres holding in light of SOX, and (1) resolving disagreements among district courts within the Second Circuit, held that claims under Sections 9(f) and 18(a) are subject to SOX’s five-year statute of repose, but (2) claims under Section 14 are nevertheless still subject to a three-year statute of repose. The Transocean Court further held that Section 14’s repose period begins to run on the date of the defendant’s last culpable act or omission — i.e., when the allegedly misleading proxy statement was issued — not when the plaintiff’s claim may have accrued or been discovered.
View full memo, Second Circuit Holds Sarbanes-Oxley’s Five-Year Statute of Repose Applies to Claims Under Sections 9(f) and 18(a), but Re-Affirms That Three-Year Repose Period Applies to Section 14 Claims