Overview
In a case we’ve covered before, Judge Sweet ruled today that claims over a CDO allegedly designed to fail — a practice called the “Magnetar Trade” — was filed “exactly one month too late” for the applicable five-year statute of limitations. The plaintiff, Intesa, argued that the clock began to run when the transaction closed, but Judge Sweet ruled that it ran instead from the last alleged misrepresentation, distinguishing an unpublished Second Circuit case:
Intesa cites to Arnold v. KPMG LLP, 334 Fed. Appx. 349 (2d Cir. 2009). Although Arnold holds that 1658(b)’s five-year deadline is triggered by transaction rather than the representation, Arnold is inapposite to the instant case because it addresses a scenario where the alleged misrepresentation was made after the purchase. Here, the last alleged misrepresentation occurred in March 2007, more than a month prior to the [transaction]. Moreover, Arnold is an unpublished summary order therefore does not constitute binding precedent Intesa alternatively contends that even if a "violation" for 1658(b) purposes is indeed the misrepresentation or omission, its § 10(b) claims are still timely, because "Defendants' fraudulent concealment continued up to (and well beyond) the date that Intesa became irrevocably committed to the [transaction] . . . ." Intesa, however, does not cite to any authority expressly supporting the concept of a "continuing omission" as applied to the 1658(b)'s five-year deadline, and indeed it does not appear that any such opinion exists. That is likely because applying the concept of a continuing omission to the five-year deadline would essentially render that element of 1658(b) a nullity with respect to any securities fraud case that does not involve a corrective disclosure.
