Exploring Corporate Governance Around the World

By Allison Garrett, Senior Vice President for Academic Affairs at Oklahoma Christian University

Thursday, September 14, 2006

Sarbanes-Oxley Statute of Limitations Case

The United States Court of Appeals for the Fifth Circuit decided a case this week regarding whether the statute of limitations and statute of repose under the Sarbanes-Oxely Act revived claims that were extinguished under the shorter limitations periods that applied prior to the Act's passage. The decision, Margolies v. Deason, is available here.

The district court had dismissed all claims brought by Margolies as time-barred. Margolies had alleged violations of sections 11 and 12 of the '33 Act and section 10(b) and Rule 10b-5 under the '34 Act. The district court relied on the Supreme Court's decision in Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, 501 U.S. 350 (1991), a case in which the Supreme Court held that claims under these section were time-barred because the suit was not brought within 3 years of the sale or offering of securities.

Margolies had argued that Section 804 of the Sarbanes-Oxley Act controlled instead, and changed the applicable limitations periods to 2 years after discovery and the statute of repose to 5 years after the violation.

The Fifth Circuit found the Second Circuit's retroactivity analysis from In re Enter. Mortgage Acceptance Co. Sec. Litig., 391 F.3d 401 (2d Cir. 2005), persuasive. All other circuits but one that have considered the issue have reached the same conclusion.

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