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Securities; Statute of repose

Statute of repose

The period in which a private suit for a federal securities violation may be brought begins with the fraud or other misconduct on which the suit is based, not when a harm befalls the plaintiff from the misconduct.

“Interpreting ‘violation’ in subsection (2) to mean the completed tort would produce its own anomalies. Imagine a person who bought General Motors stock in 1935 allegedly on the basis of a deliberately false oral assurance, communicated privately by a GM official, that GM would never bargain with a union. In 2009, when GM goes bankrupt, at least in part because of contracts it had negotiated with the auto workers union governing health benefits, the buyer’s granddaughter (his heir) sues for securities fraud. The alleged misrepresentation, having been private, did not affect the stock price until (let us say) 2008, and so any harm from it did not occur until then. If the five-year deadline of subsection (2) began its count down in 2008, the outer limit for suing would be 2013—78 years after the alleged misrepresentation was made—if ‘violation’ in section 1658(b)(2) is the completed statutory tort.”


11-1459 McCann v. Hy-Vee, Inc.

Appeal from the United States District Court for the Northern District of Illinois, Nordberg, J., Posner, J.
Attorneys: For Appellant:

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