Supreme Court Clarifies Statute of Limitations for Private Securities Fraud Actions

April 27, 2010

On April 27, 2010, the United States Supreme Court held in Merck & Co. v. Reynolds that the two-year statute of limitations for federal securities fraud that runs from discovery of "the facts constituting the violation" is not triggered until the plaintiff discovers, or a reasonably diligent plaintiff would have discovered, "the fact of scienter, 'a mental state embracing intent to deceive, manipulate, or defraud.'" In so ruling, the Court largely swept away case law in the majority of the federal courts of appeals that had started the limitations period when a plaintiff was put on "inquiry notice" or encountered "storm warnings" of the possibility of fraud.

To read FKSA's memorandum on the decision, click here.