In this litigation we must determine which statute of limitations is applicable to a private suit brought pursuant to § 10(b) of the Securities Exchange Act of 1934, 48 Stat. 891, 15 U. S. C. § 78j(b), and to Securities and Exchange Commission Rule 10b-5, 17 CFR §240.10b-5 (1990), promulgated thereunder.
The controversy arises from the sale of seven Connecticut limited partnerships formed for the purpose of purchasing and leasing computer hardware and software. Petitioner Lampf, Pleva, Lipkind, Prupis & Petigrow is a West Orange, N. J., law firm that aided in organizing the partnerships and that provided additional legal services, including the preparation of opinion letters addressing the tax consequences of investing in the partnerships. The several plaintiff-respondents purchased units in one or more of the partnerships during the years 1979 through 1981 with the expectation of realizing federal income tax benefits therefrom.
The partnerships failed, due in part to the technological obsolescence of their wares. In late 1982 and early 1983, plaintiff-respondents received notice that the United States Internal Revenue Service was investigating the partnerships. The IRS subsequently disallowed the claimed tax benefits because of overvaluation of partnership assets and lack of profit motive.
On November 3, 1986, and June 4, 1987, plaintiff-respondents filed their respective complaints in the United States District Court for the District of Oregon, naming as defendants petitioner and others involved in the preparation
After consolidating the actions for discovery and pretrial proceedings, the District Court granted summary judgment for the defendants on the ground that the complaints were not timely filed. App. to Pet. for Cert. 22A. Following precedent of its controlling court, see, e. g., Robuck v. Dean Witter & Co., 649 F.2d 641 (CA9 1980), the District Court ruled that the securities claims were governed by the state statute of limitations for the most analogous forum-state cause of action. The court determined this to be Oregon's 2-year limitations period for fraud claims, Ore. Rev. Stat. § 12.110(1) (1989). The court found that reports to plaintiff-respondents detailing the declining financial status of each partnership and allegations of misconduct made known to the general partners put plaintiff-respondents on "inquiry notice" of the possibility of fraud as early as October 1982. App. to Pet. for Cert. 43A. The court also ruled that the distribution of certain fiscal reports and the installation of a general partner previously associated with the defendants did not constitute fraudulent concealment sufficient to toll the statute of limitations. Applying the Oregon statute to the facts underlying plaintiff-respondents' claims, the District Court determined that each complaint was time barred.
Plaintiff-respondents maintain that the Court of Appeals correctly identified common-law fraud as the source from which § 10(b) limitations should be derived. They submit that the underlying policies and practicalities of § 10(b) litigation do not justify a departure from the traditional practice of "borrowing" analogous state-law statutes of limitations. Petitioner, on the other hand, argues that a federal period is appropriate, contending that we must look to the "1-and-3-year" structure applicable to the express causes of action in § 13 of the Securities Act of 1933, 48 Stat. 84, as amended, 15 U. S. C. § 77m, and to certain of the express actions in the
It is the usual rule that when Congress has failed to provide a statute of limitations for a federal cause of action, a court "borrows" or "absorbs" the local time limitation most analogous to the case at hand. Wilson v. Garcia, 471 U.S. 261, 266-267 (1985); Automobile Workers v. Hoosier Cardinal Corp., 383 U.S. 696, 704 (1966); Campbell v. Haverhill, 155 U.S. 610, 617 (1895). This practice, derived from the Rules of Decision Act, 28 U. S. C. § 1652, has enjoyed sufficient longevity that we may assume that, in enacting remedial legislation, Congress ordinarily "intends by its silence that we borrow state law." Agency Holding Corp. v. Malley-Duff & Associates, Inc., 483 U.S. 143, 147 (1987).
The rule, however, is not without exception. We have recognized that a state legislature rarely enacts a limitations period with federal interests in mind, Occidental Life Ins. Co. of Cal. v. EEOC, 432 U.S. 355, 367 (1977), and when the operation
Rooted as it is in the expectations of Congress, the "state-borrowing doctrine" may not be lightly abandoned. We have described federal borrowing as "a closely circumscribed exception," to be made "only `when a rule from elsewhere in federal law clearly provides a closer analogy than available state statutes, and when the federal policies at stake and the practicalities of litigation make that rule a significantly more appropriate vehicle for interstitial lawmaking.'" Reed v. United Transportation Union, 488 U.S. 319, 324 (1989), quoting DelCostello, 462 U. S., at 172.
Predictably, this determination is a delicate one. Recognizing, however, that a period must be selected,
Second, assuming a uniform limitations period is appropriate, the court must decide whether this period should be derived from a state or a federal source. In making this judgment, the court should accord particular weight to the geographic character of the claim:
Finally, even where geographic considerations counsel federal borrowing, the aforementioned presumption of state borrowing requires that a court determine that an analogous federal source truly affords a "closer fit" with the cause of action at issue than does any available state-law source. Although considerations pertinent to this determination will necessarily
In the present litigation, our task is complicated by the nontraditional origins of the § 10(b) cause of action. The text of § 10(b) does not provide for private claims.
In a case such as this, we are faced with the awkward task of discerning the limitations period that Congress intended courts to apply to a cause of action it really never knew existed. Fortunately, however, the drafters of § 10(b) have provided guidance.
We conclude that where, as here, the claim asserted is one implied under a statute that also contains an express cause of action with its own time limitation, a court should look first to the statute of origin to ascertain the proper limitations period. We can imagine no clearer indication of how Congress would have balanced the policy considerations implicit in any limitations provision than the balance struck by the same Congress in limiting similar and related protections. See DelCostello, 462 U. S., at 171; United Parcel Service, Inc. v. Mitchell, 451 U.S. 56, 69-70 (1981) (opinion concurring in judgment). When the statute of origin contains comparable express remedial provisions, the inquiry usually should be at an end. Only where no analogous counterpart is available should a court then proceed to apply state-borrowing principles.
In the present litigation, there can be no doubt that the contemporaneously enacted express remedial provisions represent "a federal statute of limitations actually designed to accommodate a balance of interests very similar to that at stake here — a statute that is, in fact, an analogy to the present lawsuit more apt than any of the suggested state-law parallels." DelCostello, 462 U. S., at 169. The 1934 Act contained a number of express causes of action, each with an
Section 9 of the 1934 Act, 15 U. S. C. § 78i, pertaining to the willful manipulation, of security prices, and § 18, 15 U. S. C. § 78r, relating to misleading filings, target the precise dangers that are the focus of § 10(b). Each is an integral element of a complex web of regulations. Each was intended to facilitate a central goal: "to protect investors
We therefore conclude that we must reject the Commission's contention that the 5-year period contained in § 20A, added to the 1934 Act in 1988, is more appropriate for § 10(b) actions than is the 1-and-3-year structure in the Act's original remedial provisions. The Insider Trading and Securities Fraud Enforcement Act of 1988, which became law more than 50 years after the original securities statutes, focuses upon a specific problem, namely, the "purchasing or selling [of] a security while in possession of material, nonpublic information," 15 U. S. C. § 78t-1(a), that is, "insider trading." Recognizing the unique difficulties in identifying evidence of such activities, the 100th Congress adopted § 20A as one of "a variety of measures designed to provide greater deterrence, detection and punishment of violations of insider trading." H. R. Rep. No. 100-910, p. 7 (1988). There is no indication that the drafters of § 20A sought to extend that enhanced protection to other provisions of the 1934 Act. Indeed, the text of § 20A indicates the contrary. Section 20A(d) states: "Nothing in this section shall be construed to limit or condition the right of any person to bring an action to enforce a requirement of this chapter or the availability of any cause of action implied from a provision of this chapter." 15 U. S. C. § 78t-1(d).
The Commission further argues that because some conduct that is violative of § 10(b) is also actionable under § 20A, adoption of a 1-and-3-year structure would subject actions based on § 10(b) to two different statutes of limitations. But § 20A also prohibits insider trading activities that violate sections of
Finally, the Commission contends that the adoption of a 3-year period of repose would frustrate the policies underlying § 10(b). The inclusion, however, of the 1-and-3-year structure in the broad range of express securities actions contained in the 1933 and 1934 Acts suggests a congressional determination that a 3-year period is sufficient. See Ceres Partners v. GEL Associates, 918 F.2d 349, 363 (CA2 1990).
Thus, we agree with every Court of Appeals that has been called upon to apply a federal statute of limitations to a § 10(b) claim that the express causes of action contained in the 1933 and 1934 Acts provide a more appropriate statute of limitations than does § 20A. See Ceres Partners, supra; Short v. Belleville Shoe Mfg. Co., 908 F.2d 1385 (CA7 1990), cert. pending, No. 90-526; In re Data Access Systems Securities Litigation, 843 F.2d 1537 (CA3), cert. denied sub nom. Vitiello v. I. Kahlowsky & Co., 488 U.S. 849 (1988).
Necessarily, we also reject plaintiff-respondents' assertion that state-law fraud provides the closest analogy to § 10(b). The analytical framework we adopt above makes consideration of state-law alternatives unnecessary where Congress has provided an express limitations period for correlative remedies within the same enactment.
Finally, we address plaintiff-respondents' contention that, whatever limitations period is applicable to § 10(b) claims, that period must be subject to the doctrine of equitable tolling. Plaintiff-respondents note, correctly, that "[t]ime requirements in lawsuits . . . are customarily subject to `equitable tolling.'" Irwin v. Department of Veterans Affairs, 498 U.S. 89, 95 (1990), citing Hallstrom v. Tillamook County, 493 U.S. 20, 27 (1989). Thus, this Court has said that in the usual case, "where the party injured by the fraud remains in ignorance of it without any fault or want of diligence or care on his part, the bar of the statute does not begin to run until the fraud is discovered, though there be no special circumstances or efforts on the part of the party committing the fraud to conceal it from the knowledge of the other party." Bailey v. Glover, 21 Wall. 342, 348 (1875); see also Holmberg v. Armbrecht, 327 U.S. 392, 396-397 (1946). Notwithstanding this venerable principle, it is evident that the equitable tolling doctrine is fundamentally inconsistent with the 1-and-3-year structure.
The 1-year period, by its terms, begins after discovery of the facts constituting the violation, making tolling unnecessary. The 3-year limit is a period of repose inconsistent with tolling. One commentator explains: "[T]he inclusion of the three-year period can have no significance in this context other than to impose an outside limit." Bloomenthal, The Statute of Limitations and Rule 10b-5 Claims: A Study in Judicial Lassitude, 60 U. Colo. L. Rev. 235, 288 (1989). See also ABA Committee on Federal Regulation of Securities, Report of the Task Force on Statute of Limitations for Implied Actions 645, 655 (1986) (advancing "the inescapable conclusion that Congress did not intend equitable tolling to apply in actions under the securities laws"). Because the purpose of the 3-year limitation is clearly to serve as a cutoff, we hold that tolling principles do not apply to that period.
Litigation instituted pursuant to § 10(b) and Rule 10b-5 therefore must be commenced within one year after the discovery of the facts constituting the violation and within three years after such violation.
The judgment of the Court of Appeals is reversed.
It is so ordered.
JUSTICE SCALIA, concurring in part and concurring in the judgment.
Although I accept the stare decisis effect of decisions we have made with respect to the statutes of limitations applicable to particular federal causes of action, I continue to disagree with the methodology the Court has very recently adopted for purposes of making those decisions. In my view, absent a congressionally created limitations period state periods govern, or, if they are inconsistent with the purposes of the federal Act, no limitations period exists. See Agency Holding Corp. v. Malley-Duff & Associates, Inc., 483 U.S. 143,
The present case presents a distinctive difficulty because it involves one of those so-called "implied" causes of action that, for several decades, this Court was prone to discover in — or, more accurately, create in reliance upon — federal legislation. See Thompson v. Thompson, 484 U.S. 174, 190 (1988) (SCALIA, J., concurring in judgment). Raising up causes of action where a statute has not created them may be a proper function for common-law courts, but not for federal tribunals. See id., at 191-192; Cannon v. University of Chicago, 441 U.S. 677, 730-749 (1979) (Powell, J., dissenting). We have done so, however, and thus the question arises what statute of limitations applies to such a suit. Congress has not had the opportunity (since it did not itself create the cause of action) to consider whether it is content with the state limitations or would prefer to craft its own rule. That lack of opportunity is particularly apparent in the present case, since Congress did create special limitations periods for the Securities Exchange Act of 1934 causes of actions that it actually enacted. See 15 U. S. C. §§ 78p(b), 78i(e), 78r(c); see also § 77m.
When confronted with this situation, the only thing to be said for applying my ordinary (and the Court's pre-1983 traditional) rule is that the unintended and possibly irrational results will certainly deter judicial invention of causes of action. That is not an unworthy goal, but to pursue it in that fashion would be highly unjust to those who must litigate past inventions. An alternative approach would be to say that since we "implied" the cause of action we ought to "imply" an appropriate statute of limitations as well. That is just enough, but too lawless to be imagined. It seems to me the most responsible approach, where the enactment that has been the occasion for our creation of a cause of action contains a limitations period for an analogous cause of action, is to use
I join the judgment of the Court, and all except Part II-A of the Court's opinion.
JUSTICE STEVENS, with whom JUSTICE SOUTER joins, dissenting.
In my opinion, the Court has undertaken a lawmaking task that should properly be performed by Congress. Starting from the premise that the federal cause of action for violating § 10(b) of the Securities Exchange Act of 1934, 48 Stat. 891, 15 U. S. C. § 78j(b), was created out of whole cloth by the Judiciary, it concludes that the Judiciary must also have the authority to fashion the time limitations applicable to such an action. A page from the history of § 10(b) litigation will explain why both the premise and the conclusion are flawed.
The private cause of action for violating § 10(b) was first recognized in Kardon v. National Gypsum Co., 69 F.Supp. 512 (ED Pa. 1946). In recognizing this implied right of action, Judge Kirkpatrick merely applied what was then a well-settled rule of federal law. As was true during most of our history, the federal courts then presumed that a statute enacted to benefit a special class provided a remedy for those members injured by violations of the statute. See Texas & Pacific R. Co. v. Rigsby, 241 U.S. 33, 39-40 (1916).
During the ensuing four decades of administering § 10(b) litigation, the federal courts also applied settled law when they looked to state law to find the rules governing the timeliness of claims. See DelCostello v. Teamsters, 462 U.S. 151, 172-173 (1983) (STEVENS, J., dissenting).
The Court's rejection of the traditional rule of applying a state limitations period when the federal statute is silent is not justified by this Court's prior cases. Despite the majority's recognition of the traditional rule, ante, at 355, it effectively repudiates it by holding that "[o]nly where no analogous counterpart [within the statute] is available should a court then proceed to apply state-borrowing principles." Ante, at 359. The Court's principal justification for this departure is that it took similar action in DelCostello, supra. I registered my dissent in that case for reasons similar to those I express today. In that case there was nothing in the statute to lead me to believe that Congress intended to depart from our settled practice of looking to analogous state limitations. Id., at 171-173. Likewise in this case, I can find nothing in the Securities Exchange Act of 1934 that leads me to believe that Congress intended us to depart from our traditional rule and overrule four decades of established law.
The other case on which the Court primarily relies, Agency Holding Corp. v. Malley-Duff & Associates, Inc., 483 U.S. 143 (1987), is distinguishable from this case. Agency Holding did not involve a change in a rule of law that had been settled for 40 years. Furthermore, in that case, the Court found an explicit intent to pattern the RICO private remedy after the Clayton Act's private antitrust remedy. The remedy in the Clayton Act was subject to a 4-year statute of limitations, and the Court reasonably inferred that Congress wanted the same limitations period to apply to both statutes. The Court has not found a similar intent to pattern § 10 of the Securities Exchange Act of 1934 after those sections subject to a 1-and-3-year limitation. See ante, at 359-361.
The policy choices that the Court makes today may well be wise — even though they are at odds with the recommendation of the Executive Branch — but that is not a sufficient
JUSTICE O'CONNOR, with whom JUSTICE KENNEDY joins, dissenting.
I agree that predictability and judicial economy counsel the adoption of a uniform federal statute of limitations for actions brought under § 10(b) and Rule 10b-5. For the reasons stated by JUSTICE KENNEDY, however, I believe we should adopt the 1-year-from-discovery-rule, but not the 3-year period of repose. I write separately only to express my disagreement with the Court's decision in Part IV to apply the new limitations period in this case. In holding that respondents' suit is time barred under a limitations period that did not exist before today, the Court departs drastically from our established practice and inflicts an injustice on the respondents. The Court declines to explain its unprecedented decision, or even to acknowledge its unusual character.
Respondents, plaintiffs below, filed this action in Federal District Court in 1986. Everyone agrees that, at that time, their claims were governed by the state statute of limitations for the most analogous state cause of action. This was mandated by a solid wall of binding Ninth Circuit authority dating
One might get the impression from the Court's matter-of-fact handling of the retroactivity issue that this is our standard practice. Part IV of the Court's opinion comprises, after all, only two sentences: the first sentence sets out the 1-and-3-year rule; the second states that respondents' complaint is untimely for failure to comply with the rule. Surely, one might think, if the Court were doing anything out of the ordinary, it would comment on the fact.
Apparently not. This Court has, on several occasions, announced new statutes of limitations. Until today, however, the Court had never applied a new limitations period retroactively to the very case in which it announced the new rule so as to bar an action that was timely under binding Circuit precedent. Our practice has been instead to evaluate the case at hand by the old limitations period, reserving the new rule for application in future cases.
We followed precisely the same course several years later in Saint Francis College v. Al-Khazraji, 481 U.S. 604 (1987). We declined to apply a decision specifying the applicable statute of limitations retroactively because doing so would bar a suit that, under controlling Circuit precedent, had been filed in a timely manner. We relied expressly on the analysis of Chevron Oil, holding that a decision identifying a new limitations period should be applied only prospectively where it overrules clearly established Circuit precedent, where retroactive application would be inconsistent with the purpose of the underlying statute, and where doing so would be "manifestly inequitable." Saint Francis College, supra, at 608-609.
Chevron Oil and Saint Francis College are based on fundamental notions of justified reliance and due process. They reflect a straightforward application of an earlier line of cases holding that it violates due process to apply a limitations period retroactively and thereby deprive a party arbitrarily of a
Only last Term, eight Justices reaffirmed the commonsense rule that decisions specifying the applicable statute of limitations apply only prospectively. See American Trucking Assns., Inc. v. Smith, 496 U.S. 167 (1990). The question presented in American Trucking was whether an earlier decision of the Court — striking down as unconstitutional a particular state highway tax scheme — would apply retroactively. In the course of explaining why the ruling would not apply retroactively, the plurality opinion relied heavily on our statute of limitations cases:
Four other Justices, while disagreeing that Chevron Oil's retroactivity analysis should apply in other contexts, reaffirmed its application to statutes of limitations. The dissenting Justices stated explicitly that it would be "most inequitable to [hold] that [a] plaintiff ha[s] `"slept on his rights"' during a period in which neither he nor the defendant could have known the time limitation that applied to the case." American Trucking, supra, at 220 (STEVENS, J., dissenting), quoting Chevron Oil, supra, at 108.
Earlier this Term, the Court observed that "the doctrine of stare decisis serves profoundly important purposes in our legal system." California v. Acevedo, 500 U.S. 565, 579 (1991). If that is so, it is difficult to understand the Court's decision today to apply retroactively a brand new statute of limitations. Part IV of the Court's opinion, without discussing the relevant cases or even acknowledging the issue, declines to follow the precedent established in Chevron Oil, Saint Francis College, and American Trucking, not to mention Wilson and Brinkerhoff-Faris.
The Court's cursory treatment of the retroactivity question cannot be an oversight. The parties briefed the issue in this Court. See Brief for Respondents 45-48; Reply Brief for Petitioner 18-20. In addition, the United States, filing an amicus curiae brief on behalf of the Securities and Exchange Commission, addressed the issue explicitly, urging the Court to remand so that the lower court may address the retroactivity question in the first instance. Nevertheless,
Even if I agreed with the limitations period adopted by the Court, I would dissent from Part IV of the Court's opinion. Our prior cases dictate that the federal statute of limitations announced today should not be applied retroactively. I would remand so that the lower courts may determine in the first instance the timeliness of respondents' lawsuit.
JUSTICE KENNEDY, with whom JUSTICE O'CONNOR joins, dissenting.
I am in full agreement with the Court's determination that, under our precedents, a uniform federal statute of limitations is appropriate for private actions brought under § 10(b) of the Securities Exchange Act of 1934 and that we should adopt as a limitations period the 1-year-from-discovery rule Congress employed in various provisions of the 1934 Act. I must note my disagreement, however, with the Court's simultaneous adoption of the 3-year period of repose Congress also employed in a number of the 1934 Act's provisions. This absolute time bar on private § 10(b) suits conflicts with traditional limitations periods for fraud-based actions, frustrates the usefulness of § 10(b) in protecting defrauded investors, and imposes severe practical limitations on a federal implied cause of action that has become an essential component of the protection the law gives to investors who have been injured by unlawful practices.
As the Court recognizes, in the absence of an express limitations period in a federal statute, courts as a general matter should apply the most analogous state limitations period or, in rare cases, no limitations period at all. This rule does not apply, however, "when a rule from elsewhere in federal law clearly provides a closer analogy than available state statutes, and when the federal policies at stake and the practicalities of litigation make that rule a significantly more appropriate vehicle for interstitial lawmaking." DelCostello v.
This is not a case where the Court identifies a specific statute and follows each of its terms. As the Court is careful to note, the 1934 Act does not provide a single limitations period for all private actions brought under its express provisions. Rather, the Act makes three separate and distinct references to statutes of limitations. The Court rejects outright one of these references, a 2-year statute of repose for actions brought under § 16 of the 1934 Act, 15 U. S. C. § 78p(b), and purports to follow the other two. §§ 78i(e), 78r(c). The latter two references employ 1-year, 3-year schemes similar to one the Court establishes here, but each has its own unique wording. The Court does not identify any reasons for finding one to be controlling, so it is unnecessary to engage in close grammatical construction to separate the 1-year discovery period from the 3-year statute of repose.
It is of even greater importance to note that both of the statutes in question relate to express causes of action which in their purpose and underlying rationale differ from causes
Section 10(b) provides investors with significant protections from fraudulent practices in the securities markets. Intended as a comprehensive antifraud provision operating even when more specific laws have no application, § 10(b) makes it unlawful to employ in connection with the purchase or sale of any security "any manipulative or deceptive device or contrivance" in violation of the Securities and Exchange Commission's rules. 15 U. S. C. § 78j. Although Congress gave the Commission the primary role in enforcing this section, private § 10(b) suits constitute "an essential tool for enforcement of the 1934 Act's requirements," Basic Inc. v. Levinson, 485 U.S. 224, 231 (1988), and are "`a necessary supplement to Commission action.'" Bateman Eichler, Hill Richards, Inc. v. Berner, 472 U.S. 299, 310 (1985) (quoting J. I. Case Co. v. Borak, 377 U.S. 426, 432 (1964)). We have made it clear that rules facilitating § 10(b) litigation "suppor[t] the congressional policy embodied in the 1934 Act" of combating all forms of securities fraud. Basic, supra, at 245.
The practical and legal obstacles to bringing a private § 10(b) action are significant. Once federal jurisdiction is established, a § 10(b) plaintiff must prove elements that are similar to those in actions for common-law fraud. See Herman & MacLean v. Huddleston, 459 U.S. 375 (1983). Each requires proof of a false or misleading statement or material omission, Santa Fe Industries, Inc. v. Green, 430 U.S. 462 (1977), reliance thereon, Basic, 485 U. S., at 243; cf. id., at 245 (reliance presumed in § 10(b) cases proving "fraud-on-the-market"),
The real burden on most investors, however, is the initial matter of discovering whether a violation of the securities laws occurred at all. This is particularly the case for victims of the classic fraudlike case that often arises under § 10(b). "[C]oncealment is inherent in most securities fraud cases." American Bar Association, Report of the Task Force on Statute of Limitations for Implied Actions, 41 Bus. Lawyer 645, 654 (1985). The most extensive and corrupt schemes may not be discovered within the time allowed for bringing an express cause of action under the 1934 Act. Ponzi schemes, for example, can maintain the illusion of a profit-making enterprise for years, and sophisticated investors may not be able to discover the fraud until long after its perpetration. Id., at 656. Indeed, in Ernst & Ernst, the alleged fraudulent scheme had gone undetected for over 25 years before it was revealed in a stockbroker's suicide note. 425 U. S., at 189.
The practicalities of litigation, indeed the simple facts of business life, are such that the rule adopted today will "thwart the legislative purpose of creating an effective remedy" for victims of securities fraud. Agency Holding Corp. v. Malley-Duff & Associates, Inc., 483 U.S. 143, 154 (1987). By adopting a 3-year period of repose, the Court makes a § 10(b) action all but a dead letter for injured investors who by no conceivable standard of fairness or practicality can be expected to file suit within three years after the violation occurred. In so doing, the Court also turns its back on the almost uniform rule rejecting short periods of repose for fraud-based actions. In the vast majority of States, the only limitations periods on fraud actions run from the time of a victim's discovery of the fraud. Shapiro & Blauner, Securities Litigation in the Aftermath of In Re Data Access Securities
A reasonable statute of repose, even as applied against fraud-based actions, is not without its merits. It may sometimes be easier to determine when a fraud occurred than when it should have been discovered. But more important, limitations periods in general promote important considerations of fairness. "Just determinations of fact cannot be made when, because of the passage of time, the memories of witnesses have faded or evidence is lost." Wilson, 471 U. S., at 271. Notwithstanding these considerations, my view is that a 3-year absolute time bar is inconsistent with the practical realities of § 10(b) litigation and the congressional policies underlying that remedy. The 1-year-from-discovery rule is sufficient to ensure a fair balance between protecting the legitimate interests of aggrieved investors, yet preventing stale claims. In the extreme case, moreover, when the period between the alleged fraud and its discovery is of extraordinary length, courts may apply equitable principles such as laches should it be unfair to permit the claim. See DelCostello, 462 U. S., at 162; Holmberg v. Armbrecht,
The Court's decision today forecloses any means of recovery for a defrauded investor whose only mistake was not discovering a concealed fraud within an unforgiving period of repose. As fraud in the securities markets remains a serious national concern, Congress may decide that the rule announced by the Court today should be corrected. But even if prompt congressional action is taken, it will not avail defrauded investors caught by the Court's new and unforgiving rule, here applied on a retroactive basis to a pending action.
With respect, I dissent and would remand with instructions that a § 10(b) action may be brought at any time within one year after an investor discovered or should have discovered a violation. In any event, I would permit the litigants in this case to rely upon settled Ninth Circuit precedent as setting the applicable limitations period in this case, and join JUSTICE O'CONNOR's dissenting opinion in full.
Leonard Barrack filed a brief for the National Association of Securities and Commercial Law Attorneys as amicus curiae urging affirmance.
Briefs of amici curiae were filed for the Securities and Exchange Commission by Solicitor General Starr, Deputy Solicitor General Roberts, Michael R. Dreeben, James R. Doty, Paul Gonson, and Jacob H. Stillman; for the American Council of Life Insurance by Lawrence J. Latto, John Townsend Rich, Richard E. Barnsback, and Phillip E. Stano; for the Bond Investors Association by David J. Guin, David R. Donaldson, J. Michael Rediker, and Thomas L. Krebs; and for the Securities Industry Association by Thomas C. Walsh, John Michael Clear, Leo J. Asaro, and William J. Fitzpatrick.
"It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or of the mails, or of any facility of any national securities exchange —
. . . . .
"(b) To use or employ, in connection with the purchase or sale of any security . . . any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors." 15 U. S. C. § 78j.
Commission Rule 10b-5, first promulgated in 1942, now provides:
"It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange,
"(a) To employ any device, scheme, or artifice to defraud,
"(b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
"(c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person,
"in connection with the purchase or sale of any security." 17 CFR § 240.10b-5 (1990).
"No action shall be maintained to enforce any liability created under this section, unless brought within one year after the discovery of the facts constituting the violation and within three years after such violation." 15 U. S. C. § 78i(e).
Section 18(c) of the 1934 Act provides:
"No action shall be maintained to enforce any liability created under this section unless brought within one year after the discovery of the facts constituting the cause of action and within three years after such cause of action accrued." 15 U. S. C. § 78r(c).
"No action shall be maintained to enforce any liability created under section 77k or 77l(2) of this title unless brought within one year after the discovery of the untrue statement or the omission, or after such discovery should have been made by the exercise of reasonable dilligence, or, if the action is to enforce a liability created under section 77l(1) of this title, unless brought within one year after the violation upon which it is based. In no event shall any such action be brought to enforce a liability created under section 77k or 77l(1) of this title more than three years after the security was bona fide offered to the public, or under section 77l(2) of this title more than three years after the sale." 15 U. S. C. § 77m.
"Except as otherwise provided by law, a civil action arising under an Act of Congress enacted after the date of the enactment of this section may not be commenced later than 4 years after the cause of action accrues."
Section 313(c) states that the "amendments made by this section shall apply with respect to causes of action accruing on or after the date [December 1, 1990,] of the enactment of this Act." This new statute obviously has no application in the present litigation.
"A disregard of the command of the statute is a wrongful act, and where it results in damage to one of the class for whose especial benefit the statute was enacted, the right to recover the damages from the party in default is implied, according to a doctrine of the common law. . . . This is but an application of the maxim, Ubi jus ibi remedium." 241 U. S., at 39-40.