where, as here, the new rule is announced after the expiration of that period, the second Chevron factor is essentially neutral since retrospective application neither furthers nor retards the operation of the rule.
Here, however, as the Lead Underwriters argue, and the Court agrees, the posture of the case highlights an important, if not the primary, purpose of the Ceres opinion warranting retrospective application here. Chaus is a putative class action, potentially involving several thousand plaintiffs. If the Court declines to apply Ceres retroactively, the Court will have to look to the state of each non-resident class plaintiff to determine whether their claims would be time-barred. See Ceres, 918 F.2d at 353. If the Court does apply Ceres retrospectively, however, the Court and the parties will enjoy the economy of a uniform limitations period. Indeed, the court in Welch I, not burdened with applying multiple limitations periods in a large class action, did not address the institutional purpose of the rule announced in Ceres; namely, the adoption of a uniform limitations period for section 10(b) claims which would free the courts from the effort and "crazy-quilt consequences of borrowing from state law for federal securities claims." Id. at 357 As the Court of Appeals stated:
As a consequence [of referring to state law], if two suits are brought in different states seeking damages for a single act in violation of the federal securities laws, one suit may be barred while the other is not. Indeed, in a single such suit brought in a state whose law requires borrowing of the laws of an out-of-state plaintiff, the claims of some plaintiffs may be time-barred while those of other plaintiffs are not. The ABA Task Force concluded that this disarray serves no public purpose. This uncertainty and lack of uniformity promote forum shopping by plaintiffs and result in wholly unjustified disparities in the rights of parties litigating identical claims in different states. Neither plaintiffs nor defendants can determine their rights with any certainty. Vast amounts of judicial time and attorneys' fees are wasted. Moreover, managements of publicly held companies, as well as their auditors and attorneys, are frequently unable to assess the impact of possible litigation under rule 10b-5. This deprives investors of information adequate for informed evaluation of such companies' potential liabilities.
Id. at 355 (citation omitted). Accordingly, as the rationale of Ceres would serve to streamline this action in substantial furtherance of the uniform limitations period's stated goal, the Court holds that the circumstances and posture of this case favor retrospective application.
As for the third Chevron factor, the courts have held that the retroactive application of Ceres does not produce substantial inequitable results when the statute of limitations is unchanged by retroactive application. See, e.g., Hill v. Equitable Trust Co., 851 F.2d 691 (3d Cir. 1988), cert. denied, 488 U.S. 1008, 109 S. Ct. 791, 102 L. Ed. 2d 782 (1989) (applying retroactively the one-year/three year rule of In re Data Access Sec. 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) -- the Third Circuit analogue of Ceres -- after determining that plaintiffs were not prejudiced by retroactive application under Chevron test); McCarter v. Mitcham, 883 F.2d 196 205 (3d Cir. 1989); see also Ceres, 918 F.2d at 353 (affirming application of the Data Access rule to a New Jersey plaintiff pursuant to C.P.L.R. § 202).
In this case, retroactive application of Ceres would not produce inequitable results. If the Court applied Ceres retroactively, then the one-year/three-year statute of limitations would apply. If the Court did not apply Ceres retroactively, then the Court would look to the pertinent laws of the forum state to determine the appropriate statute of limitations, see Zola v. Gordon, 685 F. Supp. 354, 363 (S.D.N.Y. 1988), which, for a federal court sitting in New York, will include New York's borrowing statute, C.P.L.R. § 202.
Id. (quoting Arneil v. Ramsey, 550 F.2d 774, 779 (2d Cir. 1977)). For purposes of the borrowing statute, a cause of action accrues in the jurisdiction where plaintiff sustains loss, see Zola, 685 F. Supp. at 363 (quoting Stafford v. Int'l Harvester Co., 668 F.2d 142, 149-50 (2d Cir. 1981)), usually plaintiffs' place of residence. Id. (quoting Industrial Consultants Inc. v. H.S. Equities, Inc., 646 F.2d 746, 747 (2d Cir. 1981)). Since three of the four named plaintiffs reside within the Third Circuit, if Ceres was not applied retroactively Data Access would apply under the New York borrowing statute. Like Ceres, Data Access established a uniform one-year/three-year statute of limitations for claims arising out of Section 10(b) and Rule 10b-5. Data Access, 843 F.2d at 1550. Since the same one-year/three-year limitations period would apply to these three plaintiffs regardless of whether Ceres applied retroactively, retroactive application of Ceres does not produce substantial inequities.
Moreover, there is no indication that any of the plaintiffs relied on a longer limitations period applicable under pre-Ceres law. Plaintiffs' 10(b) and Rule 10b-5 claims are therefore barred for failure to plead compliance with the applicable one-year/three-year statute of limitations.
Although it is unclear whether failure to affirmatively plead compliance with the limitations period applicable to claims under Section 10(b) may properly result in dismissal under Rule 12 for failure to state a claim, failure to allege compliance where a limitations defense has properly been raised may result in a Rule 12 dismissal. See In re General Devel. Corp. Bond Lit., 800 F. Supp. 1128; 1992 U.S. Dist. LEXIS 10245 (S.D.N.Y July 8, 1992); Korwek v. Hunt, 646 F. Supp. 953, 958-59 (S.D.N.Y. 1986), aff'd, 827 F.2d 874 (2d Cir. 1987); Pomeroy v. Schlegel Corp., 780 F. Supp. 980, 982-84 (W.D.N.Y. 1990). As stated by the United States District Court for the Eastern District of Pennsylvania:
Once the defendant has raised the statute of limitations defense to a securities fraud claim, it is the plaintiff's burden to demonstrate they have filed their complaint within the limitations period. Such compliance must be apparent from the complaint.
Dolsky v. Johnson, [Current]Fed. Sec. L. Rep. (CCH) P 95,840, at 99,078 (E.D. Pa. Jan. 8, 1991) (citations omitted). Accordingly, for the reasons warranting dismissal of plaintiffs' §§ 11 and 12(2) claims, plaintiffs 10(b) and Rule 10b-5 claims are dismissed for failure to plead facts sufficient to satisfy the applicable one-year/three-year statute of limitations.
For the reasons set forth in Section I.A.1, the Chaus's motion, pursuant to Rules 4(j) and 12(b) of the Federal Rules of Civil Procedure, for an order dismissing the Amended Complaint, is granted, and the Amended Complaint is hereby dismissed with prejudice as time-barred. Alternatively, for the reasons set forth in Sections II.A. and B., the Amended Complaint is dismissed as against Bernard and Josephine Chaus as time-barred motion. For the reasons set forth in Sections II.A. and B., BCI's and the Lead Underwriters' motion, pursuant to Rule 12(b) of the Federal Rules of Civil Procedure, for an order dismissing the Amended Complaint, is granted, and the Amended Complaint is hereby dismissed with prejudice as time-barred as against these defendants.
SHIRLEY WOHL KRAM
UNITED STATES DISTRICT JUDGE
Dated: New York, New York
September 1, 1992