Klein v. Auchincloss, Parker & Redpath
| Decision Date | 04 January 1971 |
| Docket Number | No. 177,Docket 34989.,177 |
| Citation | 436 F.2d 339 |
| Parties | Ernest KLEIN, Plaintiff-Appellant, v. AUCHINCLOSS, PARKER & REDPATH, Spear, Leeds & Kellogg, James Crane Kellogg III, and Raymond E. Grabowski, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Second Circuit |
Ernest Klein, pro se.
Denis B. Sullivan, Reavis & McGrath, New York City, for defendants-appellees Spear, Leeds & Kellogg, James Crane Kellogg III and Raymond E. Grabowski.
Roger L. Zissu, Davis, Polk & Wardwell, New York City, for defendant-appellee Auchincloss, Parker & Redpath.
Before SMITH and FEINBERG, Circuit Judges, and LEVET,* District Judge.
Plaintiff appeals from an order of the United States District Court for the Southern District of New York, Inzer B. Wyatt, Judge, granting summary judgment in favor of defendants and dismissing the actions against them on the grounds that the claims under the Securities and Exchange Act of 1934, 15 U. S.C. § 78a et seq. ("the 1934 Act"), were barred by the applicable statutes of limitations. We reverse.
Plaintiff charged in his complaint that on November 25, 1959, he employed defendant Auchincloss, Parker & Redpath ("A.P.R."), stockbrokers, to sell twenty shares of Superior Oil of California, owned by plaintiff, at the then prevailing market price on the New York Stock Exchange. Two days later he received written confirmation from A.P.R. that it had sold the shares at the price of $1280 per share. Plaintiff further alleged that A.P.R. represented to him that the sale was made to a disinterested third party at the prevailing market price, and on the basis of these representations he delivered the shares to A.P.R. In reality, plaintiff charges, these representations were untrue (and made with knowledge of their falsity), in that the shares were transferred to the other defendants, agents of A.P.R., and the then prevailing market price was higher than $1280 per share. That price, it is alleged, was merely the artificially fixed result of price manipulation. Such activities by defendants are said to violate sections 9 and 10(b) of the 1934 Act (15 U.S.C. §§ 78i, 78j).
This action was commenced on November 24, 1969, almost ten years after the allegedly fraudulent activities of defendants took place. Judge Wyatt was of the opinion that plaintiff's claims under both sections of the 1934 Act were untimely as a matter of law. Section 9 of the 1934 Act contains within it its own statute of limitations (15 U.S.C. § 78i(e)):
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.
The lower court was clearly correct in holding that plaintiff's action under this section was barred, since there can be no question that the action was not commenced within the requisite period under section 9.
More serious difficulties arise in regard to plaintiff's claim under section 10(b). No period of limitation is prescribed in this section, and therefore it becomes necessary to examine the law of New York State and apply the six-year limitation on fraud actions contained in C.P.L.R. § 213(6). Fischman v. Raytheon Mfg. Co., 188 F.2d 783, 787 (2d Cir.1951); cf. Klein v. Bower, 421 F.2d 338, 343 (2d Cir.1970). It is true, of course, that plaintiff failed to bring this action within six years. New York law also provides, however, that:
* * * where the time within which an action must be commenced is computed either from the time when facts were discovered or from the time when facts could with reasonable diligence have been discovered, or from either of such times, the action must be commenced within two years after such actual or imputed discovery or within the period otherwise provided, computed from the time the cause of action accrued, whichever is longer. C.P.L.R. § 203(f).
Thus, if plaintiff had neither actual nor constructive notice of the fraud prior to the...
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