Morin v. Trupin, 799 F. Supp. 342 (S.D.N.Y. 1992)

*343 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.

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.

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 *344 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 ACTIONThe 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 ACTIONAny 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.

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.

*345 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 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:

*346
   Name[4]          Purchase  Discovery[5]  Complaint[6]
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

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 "establish[ed] a new principle of law ... by overruling clear precedent on which litigants may have relied," and, moreover, was not "clearly foreshadowed" at the time the relevant complaints in these cases were filed. See Chevron, 404 U.S. at 106-07, 92 S. Ct. at 355; Welch I, 923 F.2d at 993; Rabin v. Fivzar Assocs., 801 F. Supp. 1045, 1049-50 (S.D.N.Y.1992) (change in rule wrought by Ceres not "clearly foreshadowed" in July 1990). Second, retroactive application of the statute of limitations established in Ceres would not serve the purpose of the new rule. See Welch I, 923 F.2d at 994-95. Finally, the equities weigh in favor of nonretroactivity. *347 Among other things, as in Welch I, the plaintiffs have alleged that their discovery of the alleged fraud, and thus the delay in filing suit, was caused by the defendant's active concealment. See id.

Because the Ceres rule is therefore inapplicable to the § 10(b) claims of those plaintiffs filing on or before November 8, 1990, the appropriate limitations periods under pre-Ceres law must be determined and applied.

Prior to Ceres, courts within the Second Circuit traditionally applied the forum state's most analogous statute of limitations to claims under § 10(b). See Welch I, 923 F.2d at 993; Armstrong, 699 F.2d at 86-87. In this district, that statute of limitations is to be found in both New York's statute of limitations for common law fraud actions as well as its "borrowing statute." See Armstrong, 699 F.2d at 87; Arneil, 550 F.2d at 779. In the case of plaintiffs who were residents of New York State at the time of the injury, the former period, found in N.Y.Civ.Prac.L.R. § 213(8) (McKinney 1990 Supp.) applies: the action must be commenced within six years of the commission of the alleged fraud or two years from the time the alleged wrongdoing was, or with reasonable diligence should have been, discovered. Armstrong, 699 F.2d at 87. In the case of plaintiffs who were nonresidents when the cause of action accrued, N.Y.Civ.Prac.L. & R. § 202 (McKinney 1990) applies. Under this "borrowing statute," a court is to apply the limitations period "of either [New York] or the place without [New York] where the cause of action accrued," whichever is shorter. "Thus, if a suit brought in the `place' of the plaintiff's residence would be time-barred, the suit in a New York federal court is time barred." Ceres, 918 F.2d at 353 (citations omitted).

Although federal courts look to state law for the applicable limitations period, they look to federal law for guidance as to the appropriate accrual and equitable tolling principles, See IIT v. Cornfeld, 619 F.2d 909, 929 (2d Cir.1980) (period commences to run "when the plaintiff has actual knowledge of the alleged fraud or knowledge of facts which in the exercise of reasonable diligence should have led to actual knowledge"); Baskin v. Hawley, 807 F.2d 1120, 1130-31 (2d Cir.1986).

A plaintiff must bring a § 10(b) action in federal court. Thus, in applying the rule of "the place without the state where the cause of action accrued" a federal court sitting in New York does not automatically turn to state law but rather must look to the statute of limitations that would be applied by the federal district court where the nonresident plaintiff resided at the time of the injury. See Ceres, 918 F.2d at 353; Ahmed v. Trupin, 781 F. Supp. 1017, 1022-23 (S.D.N.Y.1992).

The relevant plaintiffs in the Morin and Alberti actions reside in California, Colorado, Connecticut, Florida, Illinois, New Jersey, New York, Ohio, Oregon, Pennsylvania, Utah and Virginia. Thus, it is necessary to determine what statute of limitations *348 would be applied by district courts in the Second, Third, Fourth, Fifth, Sixth, Seventh, Ninth, Tenth and Eleventh Circuits.

Barring retroactive application of Ceres, a district court sitting in the Second Circuit on or before June 19, 1991 would have applied the forum state's most analogous statute of limitations. As discussed above, New York residents are subject to the two-year/six-year limitations period contained in N.Y.Civ.Prac.L.R. § 213(8) (McKinney 1990 Supp.); nonresidents are subject to the shorter of New York's two-year/six-year period and the limitations period of the party's residence.

Based upon the application of New York's two-year/six-year statute of limitations, the § 10(b) claims of the following New York plaintiffs are hereby reinstated:

    Name         Purchase    Discovery    Complaint
Certilman (A)      02/85        03/90      05/22/90
Chisolm (A)        02/85        03/90      05/22/90
M & R Kaufman (A)  02/85        03/90      05/22/90
Kelley (A)         02/85        03/90      05/22/90
Mohiuddin (A)      02/85        03/90      05/22/90
Gary Rogers (A)    02/85        03/90      05/22/90
Sendar (A)         02/85        03/90      05/22/90
Smith (A)          02/85        03/90      05/22/90

Prior to Ceres, the statute of limitations for § 10(b) claims accruing in Connecticut was the state's "blue sky" limitations period of two years. See Welch I, 923 F.2d at 993; Luca v. Hanson Indus., Fed.Sec. L.Rep. (CCH) ¶ 95,672 1990 WL 163969 (D.Conn.1990); Conn.Gen.Stat. § 36-498(f) (1990). This period commences to run when the plaintiff has actual knowledge of the alleged fraud or knowledge of facts which in the exercise of reasonable diligence should have led to actual knowledge. Cornfeld, 619 F.2d at 929. Under this limitations period, which is applicable here because it is shorter than New York's two-year/six-year period, the § 10(b) claims of the following plaintiffs would have been timely on June 19, 1991 and are therefore reinstated:

    Name         Purchase    Discovery    Complaint
Gorr-Stifel (A)    02/85        03/90      05/22/90
Stifel (A)         02/85        03/90      05/22/90

On June 19, 1991, a district court sitting within the Third Circuit would have applied the statute of limitations established in In re Data Access Sys. Secs. Litig., 843 F.2d 1537 (3d Cir.1988) (en banc), cert. denied, 488 U.S. 849, 109 S. Ct. 131, 102 L. Ed. 2d 103 (1988); see Ceres, 918 F.2d at 353 (applying Data Access rule to § 10(b) claim of New Jersey resident). In that case, the Third Circuit adopted a uniform statute of limitations for § 10(b) claims of "one year after the plaintiff discovers the facts constituting the violations, and in no event more than three years after such violation." Id. at 1550. Although not relevant here, the Third Circuit has held that its holding is to be applied retroactively. See Hill v. Equitable Trust Co., 851 F.2d 691, 698 (3d Cir. 1988), cert. denied, 488 U.S. 1008, 109 S.Ct. *349 791, 102 L. Ed. 2d 782 (1989). This period is shorter than New York's two-year/six-year period, and is therefore applicable to the claims of the New Jersey and Pennsylvania plaintiffs.

Applying the Data Access rule, the § 10(b) claims of the following Pennsylvania and New Jersey plaintiffs would not have been timely on June 19, 1991. Accordingly, the motion to reinstate is denied as to the following plaintiffs:

    Name         Purchase    Discovery    Complaint
R. Ratner (M)      12/85
                   02/86      04/89    05/23/89
DiLullo (A)        02/85      03/90    05/22/90
Harkins (A)        02/85      03/90    05/22/90

Prior to June 19, 1991, district courts within the Fourth Circuit applied the state statute of limitations that "`most clearly addresses the same or similar policy considerations as are addressed by the federal right being asserted.'" Howard v. Haddad, 962 F.2d 328, 330 & n. 3 (4th Cir.1992) (quoting Gurley v. Documation, Inc., 674 F.2d 253, 258 (4th Cir.1982). Thus, a district court sitting in Virginia, the only relevant Fourth Circuit state here, would apply the two-year limitations period of Virginia's blue sky law, Va.Code Ann. § 13.1-522(D) (Michie 1991). See Gurley v. Documation, 674 F.2d 253, 258-59 (4th Cir.1982). This period begins to run when the plaintiff should reasonably have been expected to discover the alleged fraud. See id. at 259. Thus, the § 10(b) claim of the following plaintiff is hereby reinstated:

    Name         Purchase    Discovery    Complaint
F. Schuler (M)     12/85
                   10/85        9/88      11/29/88

A district court sitting in Texas, the relevant Fifth Circuit state here, would apply the two-year statute of limitations applied in actions under Texas's the general fraud statute. See Corwin v. Marney, Orton Invs., 843 F.2d 194, 197 (5th Cir.) (citing Wood v. Combustion Eng., Inc., 643 F.2d 339, 346 (5th Cir.1981) and Breen v. Centex Corp., 695 F.2d 907, 911 (5th Cir.1983)); Tex.Bus. & Comm.Code § 27.01 (1992), cert. denied, 488 U.S. 924, 109 S. Ct. 305, 102 L. Ed. 2d 324 (1988). Under federal law, this period begins to run on the date the plaintiff discovered, or reasonably should have discovered, the defendant's alleged misdeeds. See Corwin, 843 F.2d at 197. Applying this rule, the § 10(b) claim of the following plaintiff is hereby reinstated:

    Name         Purchase    Discovery    Complaint
A. Maskaur (M)     09/86        11/88     11/29/88

A district court sitting in Ohio, the relevant Sixth Circuit state, would apply Ohio's four-year statute of limitations for common law fraud. See Hoover v. Langston Equip. Assocs., Inc., 958 F.2d 742, 745 (6th Cir.1992); Silverberg v. Thomson McKinnon Secs., Inc., 787 F.2d 1079, 1082 (6th Cir.1986); Ohio Rev.Code Ann. § 2305.09(C) (Baldwin 1992). Under federal law, the period starts to run when the fraud was or should have been discovered in the exercise of reasonable diligence. See Gaudin v. KDI Corp., 576 F.2d 708, 712 (6th Cir.1978). Because this period is longer than that contained in § 213(8), New York's 2-year/6-year period applies to the claims of the Ohio plaintiffs. Therefore, the claims of the following plaintiffs are hereby reinstated:

    Name        Purchase           Discovery    Complaint
Coremco (M)        Transfer from
                   J. McNamee, who
                   purchased
                          02/86       09/88        11/29/88
T. Rogers (A)             02/85       04/90        05/22/90

The Seventh Circuit poses a significantly more difficult question than any other circuit. On June 19, 1991, the rule in the Seventh Circuit was the uniform federal period of one year from discovery of the facts constituting the violation and not more than three years from the date of the alleged violation. See Short v. Belleville Shoe Mfg. Co., 908 F.2d 1385, 1392-93 (7th Cir.1990), cert. denied, ___ U.S. ___, 111 S. Ct. 2887, 115 L. Ed. 2d 1052 (1991). However, the retroactivity of Short has not yet been resolved by the Seventh Circuit, see id. at 1389-90; see also, e.g., Pommer v. Medtest Corp., 961 F.2d 620, 627-28 (7th Cir.1992); Radiology Ctr., S.C. v. Stifel, Nicolaus & Co., 919 F.2d 1216, 1221 (7th Cir.1990); Robin v. Arthur Young & Co., 915 F.2d 1120, 1122 (7th Cir.1990), cert. denied, ___ U.S. ___, 111 S. Ct. 1317, 113 L. Ed. 2d 250 (1991), and is the subject of disagreement among Illinois district courts, compare, e.g., Cortes v. Gratkowski, 795 F. Supp. 248 (N.D.Ill.1992) (under "principles of retroactivity" as they existed on June 19, 1991, court applied Chevron analysis and held against retroactive application); Bankard v. First Carolina Comms., No. 89 C 8571, slip op., 1992 WL 3694 (Jan. 6, 1992) (absent evidence indicating that plaintiff did not rely on prior precedent, Short does not apply retroactively); with Ferguson v. Lurie, No. 89 C 2283, slip op., 1992 WL 23486 (N.D.Ill. Feb. 5, 1992) (Short applies retroactively to plaintiff's claim); Lewis v. Hermann, 775 F. Supp. 1137, 1145 (N.D.Ill.1991) (absent evidence of plaintiff's reliance on prior holdings, Short applies retroactively); Greenberg v. Boettcher & Co., 755 F. Supp. 776, 785 (N.D.Ill.1991) (Short applies retroactively); Reshal Assocs., Inc. v. Long Grove Trading Co., 754 F. Supp. 1226, 1240-41 (N.D.Ill. 1990).

Although these district courts by and large employ a Chevron test in reaching their results, but see Berning v. A.G. Edwards & Sons, Inc., 774 F. Supp. 480, 484 (N.D.Ill.1991) (questioning viability of Chevron; holding Lampf retroactive under Beam), the emphasis of their analysis appears to differ somewhat from that of the Second Circuit. As the parties have not briefed the application of the Seventh Circuit's retroactivity law as it existed on June 19, 1991, determination of the reinstatement motion as to the Seventh Circuit plaintiffs shall be deferred pending appropriate briefing.

Prior to Lampf, courts in the Ninth Circuit applied the forum state's statute of *351 limitations for general fraud claims. See, e.g., Nesbit v. McNeil, 896 F.2d 380, 384 (9th Cir.1990); Davis v. Birr, Wilson & Co., 839 F.2d 1369, 1369-70 (9th Cir.1988); Volk v. D.A. Davidson & Co., 816 F.2d 1406, 1411-12 (9th Cir.1987).

California's statute of limitations for fraud actions is three years. See Clark v. Bear Stearns & Co., 966 F.2d 1318 (9th Cir.1992); Davis, 839 F.2d at 1369-70; Cal. Civ.Proc.Code § 338(d) (Deering 1992). The three-year period begins to run when the plaintiff has actual knowledge of the fraud or knowledge of facts sufficient to put a reasonable person on notice. The question of notice of fraud is one for the trier of fact. Stitt v. Williams, 919 F.2d 516, 522 (9th Cir.1990). However, this period is longer than New York's two-year/six-year period and is therefore inapplicable. Applying the statute of limitations contained in § 213(8), the § 10(b) claims of the following plaintiffs would have been timely on June 19, 1991 and are therefore reinstated:

    Name        Purchase     Discovery    Complaint
L & S Graves (M)   10/85        09/88      11/29/88
R & M Nejdl (M)    02/86        07/89      10/18/89
M. Hay (M)         02/86        03/89      05/23/89
J. Wheeler (M)     02/86        09/89      10/18/89
R & L Goodwin
Califinvest (A)    02/85        04/90      06/28/90
Arco Gunite (A)    02/85        03/90      05/22/90
Califinvest (A)    02/85        04/90      06/28/90
W & R Evans (A)    02/85        03/90      05/22/90
R & L Goodwin
Califinvest (A)    02/85        04/90      06/28/90
Gunther Trust (A)  02/85        03/90      05/22/90
Hay (A)            02/85        03/90      05/22/90
Kauppi (A)         02/85        03/90      05/22/90
B & F Norton
Califinvest (A)    02/85        04/90      06/28/90
M & D Norton
Califinvest (A)    02/85        04/90      06/28/90
F & K Whitney (A)  02/85        03/90      05/22/90
J. Wise (A)        02/85        04/90      06/28/90

Prior to Lampf, Oregon district courts applied Oregon's two-year limitations period for fraud to § 10(b) claims. See Lampf, 111 S. Ct. at 2777; Nesbit, 896 F.2d at 384; Ore.Rev.Stat. § 12.110(1) (1991). The statute of limitations is "not triggered [, however,] until the defrauded individual has actual or inquiry notice that a fraudulent misrepresentation has been made." Volk, 816 F.2d at 1412. Applying this rule, the § 10(b) claims of the following plaintiff are hereby reinstated:

    Name        Purchase     Discovery    Complaint
A. Petersen (M)    12/85
                   02/86        04/89      05/23/89

Prior to Lampf, federal courts within the Tenth Circuit applied the statute of limitations for fraud of the state in which the alleged violation occurred. See Bath v. Bushkin, Gaims, Gaines & Jonas, 913 F.2d 817, 818-19 (10th Cir.1990); Hackbart v. Holmes, 675 F.2d 1114, 1120 (10th Cir. 1982); see also Anixter v. Home-Stake Prod. Co., 939 F.2d 1420, 1440-41, modified, 947 F.2d 897 (10th Cir.1992).

Federal courts sitting in Utah would apply the three-year limitation period found in Utah Code Ann. § 78-12-26(3) (Michie 1992). See Loveridge v. Dreagoux, 678 F.2d 870, 874-75 (10th Cir.1982); Marchese v. Nelson, 700 F. Supp. 522, 524 (D.Utah 1988). Under that statute, the cause of action does not "accrue" until the aggrieved party discovers the facts constituting the alleged fraud. Loveridge, 678 F.2d at 874. This period is longer than New York's two-year/six-year period, and therefore is inapplicable. Applying New York's two-year/six-year period, the § 10(b) claims of the following plaintiffs would have been timely and are therefore reinstated:

    Name        Purchase     Discovery    Complaint
J. Seal (M)        02/86        09/89      10/18/89
Brown Trust (A)    02/85        03/90      05/22/90
Brown (A)                       03/90      05/22/90
Young Trust (A)    02/85        03/90      05/22/90
Young (A)        Transfer from
                 Young Trust    03/90      05/22/90

Colorado's statute of limitations for fraud is three years from the date the fraud was committed. Hackbart, 675 F.2d at 1120; Colo.Rev.Stat. §§ 13-80-108(3) (1991). Because this period is longer than that contained in § 213(8), New York's two-year/six-year period applies. Under that rule, the § 10(b) claim of the following plaintiffs is hereby reinstated:

    Name            Purchase     Discovery    Complaint
V & S Ritter (A)   02/85        03/90      05/22/90

A district court in Florida, the relevant Eleventh Circuit state, would apply Florida's two-year statute of limitations applicable to actions under Fla.Stat. § 517.301(1) (a), (2) (1991). See Knight v. E.F. Hutton & Co., 750 F. Supp. 1109, 1112 (M.D.Fla.1990). Under federal law, the running of this statute of limitations is tolled until the alleged fraud is discovered or reasonably should have been discovered in the exercise of reasonable diligence. See Osterneck v. E.T. Barwick Indus., Inc., 825 F.2d 1521, 1532, 1535 (11th Cir. 1987), aff'd, 489 U.S. 169, 109 S. Ct. 987, 103 L. Ed. 2d 146 (1989); Knight, 750 F. Supp. at 1112. Whether due diligence would have led to discovery more than two years before suit was filed is a jury question. Knight, 750 F. Supp. at 1112.

Applying the two-year Florida statute of limitations, the § 10(b) claim of the following plaintiff would have been timely and is hereby reinstated:

    Name        Purchase     Discovery    Complaint
Tulsiak            02/85        03/90      05/22/90

For the foregoing reasons, the motion by the Morin and Alberti plaintiffs is granted in part and denied in part.

It is so ordered.

[1] With respect to the Morin action, this opinion relates solely to those plaintiffs whose § 10(b) claims were dismissed as time-barred.

[2] As held in the Opinion, plaintiffs' § 10(b) claims against defendant Abrams and the Becker Defendants were not pleaded with particularity as required by Rule 9(b), Fed.R.Civ.P. See Morin, 778 F. Supp. at 717-18, 731-32. Thus, any § 10(b) claims reinstated by this opinion are relevant only as against the Mintz Fraade Defendants. However, the court is cognizant of a pending motion to amend the Second Amended Complaints in the Morin and Alberti actions. Should that motion be granted, and should the § 10(b) claims against those defendants be found to satisfy Rule 9(b)'s pleading requirements, the holding of this opinion as to the timeliness of those claims shall apply to effect a reinstatement.

[3] The Mintz Fraade Defendants have not attacked the constitutionality of § 27A although the plaintiffs, curiously, have defended against a phantom challenge in their reply papers. As this issue is not properly before the court, it shall not be addressed. However, for the reasons expressed in Rabin v. Fivzar Assocs., 801 F. Supp. 1045 (S.D.N.Y.1992), the statute is not unconstitutional in this case, either facially or as applied.

[4] An "(M)" denotes a plaintiff in the Morin action. An "(A)" denotes a plaintiff in the Alberti action.

[5] The dates of discovery set forth throughout this opinion are those stated by the plaintiffs at Exhibit A to the Powers Affidavit in Further Support; they should not be construed as findings of fact although they have been treated as true for purposes of this motion. The court does find somewhat curious the Alberti plaintiffs' representation that they did not discover the alleged fraud until March, April or December of 1990. The Second Amended Complaint in Alberti alleges that "the plaintiffs were unable to ascertain the status of their limited partnership investments until August of 1989...." Second Amended Complaint ¶ 271. However, under the limitations periods applicable, as discussed infra, the calculus would not be effected if this date were substituted as the date of discovery for the Alberti plaintiffs.

Under the federal rule applicable in the relevant jurisdictions, the limitations period is not triggered until the plaintiff has actual or "inquiry" or "constructive" notice. See infra. Presumably, the date of "discovery" conceded by the plaintiffs is the date of actual discovery. The Mintz Fraade Defendants have made no attempt to establish when the plaintiffs should have discovered the alleged fraud in the exercise of reasonable diligence. Thus, this opinion does not pass upon the timeliness of the plaintiffs claims should that date indeed prove to be different.

[6] In the Opinion, this court rejected the plaintiffs' argument that the § 10(b) claims of the plaintiffs in the Blaikie, Petersen and Seal actions, and those of the plaintiffs added by amendment "relate back" to the date of the original Morin complaint. That holding is reaffirmed and is equally applicable to any Alberti plaintiffs added by amendment.

[7] Citing Stafford v. International Harvester Co., 668 F.2d 142, 150-54 (2d Cir.1981), the plaintiffs argue that the borrowing statute will not be applied if the defendant would not have been subject to suit in the state from which the statute would be borrowed. That case is inapplicable in the § 10(b) context for several reasons. First, Stafford was a diversity case implicating concerns not present where the cause of action is based on federal law. Second, as is apparent from the practice in § 10(b) actions of applying federal accrual and tolling principles, reference to state law does not require the wholesale adoption of the forum state's statute of limitations jurisprudence. Rather, the federal court looks only to the period provided under state law as an analogous reference. Third, the authoritative pre-Ceres Second Circuit case regarding statutes of limitations in § 10(b) actions explicitly defines the out-of-state place of accrual under § 202 to be the place where the loss took place without citing or referring to Stafford or considering the principles discussed in that case. See Armstrong, 699 F.2d at 89. Finally, even if Stafford were to apply in § 10(b) actions, the plaintiffs have not established that the defendants were not subject to suit in any of the relevant jurisdictions. Compare Stafford, 668 F.2d at 150 (all parties conceded that defendant could not be sued in state from which statute of limitations would be borrowed).