Morin v. Trupin, 88 Civ. 5743 (RWS)

• Decision Date: 27 July 1992
• Docket Number: No. 88 Civ. 5743 (RWS),89 Civ. 6639 (RWS) and 90 Civ. 3475 (RWS).,88 Civ. 5743 (RWS)
• Citation: 799 F. Supp. 342
• Parties: Simeon MORIN, et al., Plaintiffs, v. Barry H. TRUPIN, et al., Defendants. Norman E. GAAR, Plaintiff, v. Barry H. TRUPIN, et al., Defendants. Michael P. ALBERTI, M.D., et al., Plaintiffs, v. Barry H. TRUPIN, et al., Defendants.
• Court: U.S. District Court — Southern District of New York

799 F. Supp. 342

Simeon MORIN, et al., Plaintiffs, v. Barry H. TRUPIN, et al., Defendants.

Norman E. GAAR, Plaintiff, v. Barry H. TRUPIN, et al., Defendants.

Michael P. ALBERTI, M.D., et al., Plaintiffs, v. Barry H. TRUPIN, et al., Defendants.

Nos. 88 Civ. 5743 (RWS), 89 Civ. 6639 (RWS) and 90 Civ. 3475 (RWS).

United States District Court, S.D. New York.

July 27, 1992.

Fink Weinberger, P.C. (Stephen E. Power, of counsel), New York City, for plaintiffs.

D'Amato & Lynch (Stephen F. Willig, of counsel), New York City, for defendants Mintz & Zeiger, P.C., Frederick M. Mintz and Alan Fraade.

OPINION

SWEET, District Judge.

Plaintiffs in the related actions of Morin v. Trupin, No. 88 Civ. 5743, and Alberti v. Trupin, No. 90 Civ. 3475, have moved pursuant to § 476 of the FDIC Improvement Act of 1991, 15 U.S.C. § 78aa, to reinstate their claims under § 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and Rule 10b-5 which were previously dismissed as time-barred by opinion and order of this court dated November 18, 1991 (the "Opinion"). See Morin v. Trupin, 778 F.Supp. 711 (S.D.N.Y.1991). For the following reasons, the motion is granted in part and denied in part.

Background

The complaint in the Alberti action was filed on May 22, 1990. The plaintiffs in the Morin action, which is actually a consolidation of four separate actions, filed their complaints on August 17, 1988 (the Morin complaint), November 29, 1988 (the Blaikie complaint), May 23, 1989 (the Petersen complaint) and October 18, 1989 (the Seal complaint). These four complaints were consolidated under index number 88 Civ. 5743 in December of 1989. The Morin complaint was amended on April 4, 1991 to add additional plaintiffs. Additional plaintiffs were named in the Alberti action by Amended Complaint on June 28, 1990 and by the Second Amended Complaint on February 22, 1991. On November 19, 1991, the § 10(b) claims of all of the Alberti plaintiffs and of those Morin plaintiffs listed in the Opinion were dismissed as time-barred under the one-year/three-year statute of limitations established in the Supreme Court's June 20, 1991 opinion in Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, ___ U.S. ___, 111 S.Ct. 2773, 115 L.Ed.2d 321 (1991) and made retroactive by James B. Beam Distilling Co. v. Georgia, ___ U.S. ___, 111 S.Ct. 2439, 115 L.Ed.2d 481 (1991), an opinion handed down the same day.¹

On December 19, 1991, President Bush signed into law § 476 of the Federal Deposit Insurance Corporation Improvement Act of 1991, Pub.L. No. 102-242, 105 Stat. 2236 (codified at § 27A of the Securities Exchange Act of 1934, 15 U.S.C. § 78aa-1), which proscribed pro forma retroactive application of the Lampf rule. New section 27A provides that:

(a) EFFECT ON PENDING CAUSES OF ACTION—The limitation period for any private action implied under section 10(b) of this Act that was commenced on or before June 19, 1991, shall be the limitation period provided by the laws applicable in the jurisdiction, including principles of retroactivity, as such laws existed on June 19, 1991.

(b) EFFECT ON DISMISSED CAUSES OF ACTION—Any private civil action implied under section 10(b) of this Act that was commenced on or before June 19, 1991—

(1) which was dismissed as time barred subsequent to June 19, 1991, and

(2) which would have been timely filed under the limitation period provided by the laws applicable in the jurisdiction, including principles of retroactivity, as such laws existed on June 19, 1991,

shall be reinstated on motion by the plaintiff no later than 60 days after the date of enactment of this section.

The Morin and Alberti plaintiffs now move pursuant to § 27A(b) for reinstatement of their § 10(b) claims.² The Mintz Fraade Defendants, as defined in the Opinion, oppose the motion on the grounds that the plaintiffs' § 10(b) claims are untimely even under the law as it existed in this Circuit on June 19, 1991.³ The present motion was filed on February 4, 1992. Oral argument was heard on March 11, 1992 and the motion was considered fully submitted on March 27, 1992.

Discussion

There is no dispute that the Morin and Alberti plaintiffs have established three of the four elements necessary for reinstatement pursuant to § 27A(b): they filed these actions prior to June 19, 1991; their claims were dismissed as time-barred subsequent to June 19, 1991; and they brought this motion to reinstate on February 4, 1991, within 60 days of the enactment of § 27A on December 19, 1991.

The Mintz Fraade Defendants contend, however, that the § 10(b) claims previously dismissed would not have been timely under "the limitation period provided by the laws applicable in the jurisdiction, including principles of retroactivity, as such laws existed on June 19, 1991." There is no dispute that "the jurisdiction" to which the court must look for the applicable law is the Second Circuit.

On June 19, 1991, the statute of limitations for § 10(b) claims within this jurisdiction was the one-year/three-year period established in Ceres Partners v. GEL Associates, 918 F.2d 349 (2d Cir.1990) "applied sparingly in light of the retroactivity principles enunciated in Welch v. Cadre Capital, 923 F.2d 989 (2d Cir.1991) ("Welch I"), vacated and remanded sub nom., Northwest Sav. Bank PaSa v. Welch, ___ U.S. ___, 111 S.Ct. 2882, 115 L.Ed.2d 1048 aff'd, 946 F.2d 185 (2d Cir.1991) ("Welch II")." Henley v. Slone, 961 F.2d 23, 26 (2d Cir.1992).

In Ceres, the second Circuit adopted a uniform statute of limitations for claims under § 10(b) and Rule 10b-5 of one year after the discovery of the alleged fraud and three years after the occurrence of the alleged conduct. See Ceres, 918 F.2d at 359, 364 (following Short v. Belleville Shoe Mfg. Co., 908 F.2d 1385 (7th Cir.1990) and In re Data Access Sys. Secs. Litig., 843 F.2d 1537 (3d Cir.) (en banc), cert. denied, 488 U.S. 849, 109 S.Ct. 131, 102 L.Ed.2d 103 (1988)). The court thereby broke from its longstanding practice of applying the forum state's most analogous state statute of limitations, including so-called "borrowing statutes," to claims under § 10(b) and Rule 10b-5. See, e.g., Armstrong v. McAlpin, 699 F.2d 79, 86-87 (2d Cir.1983); Stull v. Bayard, 561 F.2d 429, 431-32 (2d Cir.1977), cert. denied, 434 U.S. 1035, 98 S.Ct. 769, 54 L.Ed.2d 783 (1978); Arneil v. Ramsey, 550 F.2d 774 (2d Cir.1977). Although the Ceres court explicitly refused to address the retroactive effect of its ruling, see Ceres, 918 F.2d at 364, that question was soon resolved in Welch v. Cadre Capital, 923 F.2d 989 (2d Cir.) ("Welch I"), vacated and remanded sub nom., Northwest Savs. Bank, PaSa v. Welch, ___ U.S. ___, 111 S.Ct. 2882, 115 L.Ed.2d 1048 aff'd, 946 F.2d 185 (2d Cir.1991). After conducting the three-part test set forth in Chevron Oil Co. v. Huson, 404 U.S. 97, 92 S.Ct. 349, 30 L.Ed.2d 296 (1971), the Welch I court held that the limitations period established in Ceres did not apply retroactively to the case before it.

The effect of Welch I, therefore, was to establish that the retroactive application of Ceres must be determined on a case-by-case basis according to the Chevron test. See Litton Indus., Inc. v. Lehman Bros. Kuhn Loeb Inc., 967 F.2d 742, 751-52 (2d Cir.1992); Grondahl v. Merritt & Harriss, Inc., 964 F.2d 1290 (2d Cir. 1992); Henley, 961 F.2d at 25-26. If retroactive application is denied, the court returns to the Second Circuit's prior practice of applying the most analogous state statute of limitations.

Thus, under the present state of the law, Lampf applies only to those cases filed on or after June 20, 1991; Ceres applies only to those cases filed in the Second Circuit either (1) on or after November 8, 1990 or (2) before November 8, 1990 if application of the Chevron/Welch I test counsels retroactive application of the decision; and the forum state's most analogous statute of limitations applies to those cases filed on or before November 8, 1990 if application of the Chevron/Welch I test counsels against retroactive application of Ceres.

A. Claims Filed After November 8, 1990

A number of the Morin and Alberti plaintiffs filed their § 10(b) claims subsequent to Ceres and are thus subject to its one-year/three-year limitations period. Thus, the § 10(b) claims of the following Morin and Alberti plaintiffs, which were filed more than three years after the date of purchase, would not have been timely under the law as it existed in this jurisdiction on July 19, 1991. Accordingly, the motion to reinstate the § 10(b) claims of the following plaintiffs is denied:

                   Name4          Purchase  Discovery5  Complaint6
                W. Adkins (M)      10/85      11/90     4/04/91
                V. Campbell (M)    12/85      11/90     4/04/91
                E. Cole (M)        09/86      11/90     4/04/91
                R. Duca (M)        12/85      11/90     4/04/91
                G. Hamburg (M)     02/86      11/90     4/04/91
                S. Levine (M)      09/86      11/90     4/04/91
                J. Meyer (M)       02/86      11/90     4/04/91
                P. Miller (M)      12/85      11/90     4/04/91
                M. O'Donoghue (M)  12/85      11/90     4/04/91
                K. Rivera (M)      10/85      11/90     4/04/91
                N. Sendar (M)      12/85
                                   02/86      11/90     4/04/91
                A. Simoes (M)      02/86      11/90     4/04/91
                R. Tupper (M)      09/86      11/90     4/04/91
                H. Svare (M)       02/86      11/90     4/04/91
                E. Oge (M)         02/86      11/90     4/04/91
                P. Hall (M)        12/85      11/90     4/04/91
                Manto/Maxwell (A)  02/85      12/90     2/22/91
                Mungovan (A)       02/85      12/90     2/22/91
                Naseem (A)         02/85      12/90     2/22/91
                Schultz (A)        02/85      12/90     2/22/91
                E. Rodriguez (A)   02/85      12/90     2/22/91
                

B. Claims Filed Prior to November 8, 1990

Under the three-pronged Chevron/Welch I test, Ceres does not apply retroactively to the § 10(b) claims of those Morin and Alberti plaintiffs who filed their actions prior to November 8, 1990. First, Ceres "established a new principle of law ... by overruling clear precedent on...