Clock Ran Out Long Ago on Corporate Insider Suit

(CN) - A woman who filed 55 lawsuits against banks for securities fraud cannot sue because of the statute of limitations, the Supreme Court ruled Monday.

Vanessa Simmonds claims that financial institu­tions like Credit Suisse unfairly profited from various initial public offerings that they underwrote in the 1990s and 2000. The Securities Exchange Act allows shareholders to sue corporations that realize any profits from the purchase and sale, or sale and purchase, of the company's securities within any six-month period. Shareholders have two years after the date such profit was realized to file suit.

In 55 lawsuits filed in 2007, Simmonds claimed to meet the two-year time limit because the underwriters never disclosed any changes to their ownership interests as required by Section 16(a) of the Securities Exchange Act.

After consolidating the lawsuits, the Western District of Washington dismissed on the basis that the two-year window had elapsed. The 9th Circuit reversed, however, finding that the failure to make required disclosures tolls the statute of limitations.

On Monday, the Supreme Court concluded otherwise.

"Assuming that is correct, it does not follow that the limitations period is tolled until the §16(a) statement is filed," Justice Antonin Scalia wrote for the unanimous court. "Section 16 itself quite clearly does not extend the period in that manner. The 2-year clock starts from 'the date such profit was realized.' §78p(b). Congress could have very easily provided that "no such suit shall be brought more than two years after the filing of a statement under subsection (a)(2)(C)." But it did not." (Italics in original.)

"Allowing tolling to continue beyond the point at which a §16(b) plaintiff is aware, or should have been aware, of the facts underlying the claim would quite cer­tainly be inequitable and inconsistent with the general purpose of statutes of limitations: 'to protect defendants against stale or unduly delayed claims,'" Scalia added (italics in original).

"The potential for such endless tolling in cases in which a reasonably diligent plaintiff would know of the facts underlying the action is out of step with the purpose of limitations periods in general," the decision states. "And it is especially at odds with a provision that imposes strict liability on puta­tive insiders. Had Congress intended this result, it most certainly would have said so."

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