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Keywords

plaintiffdefendantstatutemotionbankruptcystatute of limitations

plaintiffdefendantliabilitystatutestatute of limitationscase law

Related Cases

In re Global Crossing, Ltd. Securities Litigation, 313 F.Supp.2d 189

Facts

Global Crossing, founded in 1997, went public in 1998 and engaged in several securities offerings during a class period from February 1999 to January 2002. The plaintiffs alleged that the company misrepresented its financial condition, particularly through fraudulent accounting practices related to 'indefeasible rights of use' (IRUs) and misleading revenue reporting. The complaint detailed how these misrepresentations inflated the company's stock value, leading to significant losses for investors when the company declared bankruptcy in early 2002.

Global Crossing was founded in March 1997 for the purpose of building and selling the use of a worldwide fiber optic network for the transmission of internet and telecommunications data. It went public on August 13, 1998, and made several issues of securities throughout the class period.

Issue

The main legal issues included whether the claims were barred by the statute of limitations and whether the plaintiffs had standing to assert claims based on the alleged misrepresentations.

The only claims asserted by plaintiffs against these defendants are based on two sections of the securities laws which, as pointed out above and as plaintiffs themselves affirmatively *197 argue (P. Mem.43–44.), do not require any showing of fraudulent intent, but establish liability even for negligent representations.

Rule

The court applied the one-year/three-year statute of limitations under 15 U.S.C. § 77m for claims under sections 11 and 14 of the Securities Act, rejecting the plaintiffs' argument that the Sarbanes-Oxley Act's extended limitations period applied to their claims.

Accordingly, plaintiffs' causes of action against the moving defendants are governed by the one-year/three-year statute of limitations set forth in 15 U.S.C. § 77m and the case law cited above, and not by the two-year/five-year statute set forth in 28 U.S.C. § 1658.

Analysis

The court analyzed the timeline of events and the plaintiffs' knowledge of the alleged fraud, determining that the plaintiffs were on inquiry notice well before they filed their claims. The court found that the plaintiffs failed to demonstrate that they could not have discovered the alleged misrepresentations within the applicable statute of limitations period, leading to the dismissal of certain claims as time-barred.

To avoid dismissal, plaintiffs must allege facts that would establish, drawing all reasonable inferences in their favor, that they neither discovered nor should have discovered “by the exercise of reasonable diligence” the alleged misrepresentations of these defendants more than one year before claims were first asserted against them on January 28, 2003.

Conclusion

The court granted the defendants' motions to dismiss in part, ruling that some claims were time-barred while allowing others to proceed. The court emphasized the importance of the statute of limitations in securities fraud cases.

The court found that the article suggests that much was amiss and that this article by itself provided the required “storm warning”—knowledge of “circumstances [suggesting] to an investor of ordinary intelligence the probability that she has been defrauded”—that constitutes inquiry notice.

Who won?

The defendants prevailed in part, as the court dismissed several claims based on the statute of limitations, indicating that the plaintiffs had not acted within the required time frame to assert their claims.

The court emphasized the importance of the statute of limitations in securities fraud cases.

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