Copyright (c) 1993 San Diego Law Review Association
San Diego Law Review
COMMENT: Triggering One-Year Limitations on Section 10(b) and Rule 10b-5 Actions: Actual or Inquiry Discovery?
30 San Diego L. Rev. 917
CHARLES BENJAMIN NUTLEY
Securities fraud lawsuits under Rule 10b-5 are governed by the one- and three-year limitative period in section 9(e) of the Securities Exchange Act. The one-year period is triggered by the plaintiff's discovery of the facts constituting the violation. Courts differ, however, on the correct discovery standard for section 9(e). This Comment addresses whether courts should apply an inquiry notice standard or an actual notice standard to trigger the one-year limitative period.
A limitative period is a time limit for bringing a lawsuit. A person with a cause of action must bring suit within the limitative period or be barred from asserting the claim. 1 Limitative periods strike a balance between the interests of claimants and the interests of defendants. Claimants have a specified period to discover and assert their
claims, a convention that encourages claimants to investigate and bring actions promptly. Defendants have the benefit of eventual relief from the threat of liability if the claimant fails to assert a claim within the limitative period. 2 Limitative periods prevent plaintiffs from unfairly disadvantaging or surprising defendants by bringing "stale" claims from long in the past so that evidence and witnesses are no longer available and memories have become unreliable. 3
Usually, the limitative period to be applied to a cause of action is clear because it is explicitly included in a statute creating the cause of action or in a general "statute of limitations" enumerating limitative periods for various causes of action. A problem arises, however, ...
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