The U.S. Supreme Court asked the acting solicitor general for the federal government’s view before deciding whether to grant a writ of certiorari in a federal securities litigation action stemming from a 9th U.S. Circuit of Appeals’ opinion — Betz v. Trainer Wortham & Company Inc. — involving the statute of limitations period for securities fraud claims under Section 10(b) of the Securities Exchange Act of 1934. In Betz, the court would be asked to address the standard for inquiry notice required to trigger the running of the statute of limitations period for securities fraud. The Private Securities Litigation Reform Act of 1995 requires that a claim for securities fraud must be filed "not later than the earlier of (1) 2 years after the discovery of the facts constituting the violation; or (2) 5 years after such violation."
The case has gained the attention of the Supreme Court because the 9th Circuit adopted a scienter-based definition of inquiry notice and deepened an already existing conflict between the circuits on whether the statute of limitations begins to run when the investor is put on inquiry notice or later when a reasonably diligent investigation would have actually uncovered the fraud. If one of the purposes of the PSLRA was to create greater uniformity in the handling of private securities actions in the federal courts, this purpose is not reflected in the divergence of views on inquiry notice presented in current circuit court jurisprudence. We will briefly review the Betz case and then discuss the different approaches to inquiry notice taken by the circuit courts.
9th Circuit’s Opinion in Betz
