The opinion of the court was delivered by: PETER K. LEISURE
This is an action brought by a mutual fund shareholder alleging violations of several provisions of the Investment Company Act of 1940 (the "ICA"), 15 U.S.C. §§ 80a-1 to -64 (1988 & Supp. III 1991), and common law breach of fiduciary duty. Defendants move for dismissal of two of plaintiff's four claims pursuant to Fed R. Civ. P. 12(b)(1) and 12(b)(6). For the reasons stated below, the Court dismisses plaintiff's Fourth Claim, brought under § 20(a) of the ICA, 15 U.S.C. 80a-20(a) (1988), as time-barred. The Court also dismisses plaintiff's First Claim, brought under various other provisions of the ICA and state law, to the extent it seeks relief under the ICA and to the extent it seeks relief under state law for damages accruing prior to October 12, 1990.
Defendant Prudential-Bache Utility Fund, Inc. (the "Fund") is a registered mutual fund, established in 1981, which invests in the securities of utility companies. Plaintiff Allen Merine is a shareholder in the Fund. In 1989, a proxy statement was distributed to Fund shareholders soliciting their approval of a plan (the "Distribution Plan") establishing certain distribution fees. The plan was approved at a shareholder meeting in 1990. Under this plan, Merine and others who purchased shares between 1981 and 1985 (the "Original Purchaser Class") pay higher service fees than certain other Fund shareholders.
I. MERINE'S CLAIM UNDER § 20(a) OF THE ICA
Merine's Fourth Claim is that the 1989 proxy statement describing the proposed Distribution Plan was materially misleading in violation of § 20(a) of the ICA and Rule 20a-1 promulgated thereunder, 17 C.F.R. § 270.20a-1 (1993).
Defendants seek dismissal of Merine's § 20(a) claim on the grounds that it is time-barred.
Private causes of action under § 20(a) are implied rather than express. Brown v. Bullock, 194 F. Supp. 207, 230-234 (S.D.N.Y.), aff'd, 294 F.2d 415 (2d Cir. 1961). The ICA, however, does contain two express causes of action with accompanying limitations periods: Section 36(a) of the ICA, 15 U.S.C. § 80a-35(a) (1988), permits the Securities and Exchange Commission (the "SEC") to bring an action for "breach of fiduciary duty involving personal misconduct in respect of any registered investment company" within five years; section 36(b), 15 U.S.C. § 80a-35(b) (1988), permits a private right of action to recover for excessive fees paid to an "investment adviser of a registered investment company . . . or any affiliated person of such investment adviser" for the period starting one year before such an action is instituted.
When a court must determine the applicable limitations period for a claim implied under a federal statute that also contains an express cause of action with its own limitations period, a court must first ascertain whether it would be appropriate to borrow this express limitations period. Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, 501 U.S. 350, 359, 115 L. Ed. 2d 321, 111 S. Ct. 2773 (1991). In the present case, it is not appropriate to borrow one of the express limitations periods in § 36 of the ICA, because the focus of § 36 is not comparable to the focus of § 20(a). Section 20(a) prohibits the solicitation of proxies from investment company shareholders through the use of materially false or misleading statements. By contrast, § 36(a) addresses "personal misconduct" by investment company officers, directors, investment advisers and principal underwriters, and § 36(b) is a narrow provision concerning excessive fees, a problem distinct from that addressed by § 20(a). 15 U.S.C. § 80a-35; see Schuyt v. Rowe Price Prime Reserve Fund, 622 F. Supp. 169, 177 (S.D.N.Y. 1985) (stating that unlike § 20(a), § 36(b) does not provide redress for material misstatements in or omissions from proxy statements). Thus, since the protections of § 36 are not similar to those provided in § 20(a), the limitations periods applicable under § 36 do not indicate "how Congress would have balanced the policy considerations implicit in" choosing a limitations period for § 20(a). Lampf, 501 U.S. at 359.
Since the ICA does not provide a limitations period appropriate for private causes of action under § 20(a), the Court must determine whether a limitations period should be borrowed from a different federal source or from state law. Federal borrowing is appropriate "'where (1) a federal rule . . . clearly provides a closer analogy than state alternatives, and (2) the federal policies at stake and the practicalities of the litigation render the federal limitation "a significantly more appropriate vehicle for interstitial lawmaking."'" United Paperworkers Int'l Union Local 340 v. Specialty Paperboard, Inc., 999 F.2d 51, 53 (2d Cir. 1993) (quoting Phelan v. Local 305, United Ass'n of Journeymen, 973 F.2d 1050, 1058 (2d Cir. 1992) (quoting DelCostello v. Brotherhood of Teamsters, 462 U.S. 151, 172, 76 L. Ed. 2d 476, 103 S. Ct. 2281 (1983)), cert. denied, 113 S. Ct. 1415 (1993)).
The practicalities that the Court must consider are of two kinds. The first is whether the "statutory claim in question covers a multiplicity of types of actions, leading to the possible application of a number of different types of state statutes of limitations." United Paperworkers, 999 F.2d at 53 n.6 (quoting Ceres Partners v. Gel Assocs., 918 F.2d 349, 357 (2d Cir. 1990)); accord Lampf, 501 U.S. at 357 (plurality portion of opinion) (noting that "where a federal cause of action tends in practice to 'encompass numerous and diverse topics and subtopics,' such that a single state limitations period may not be consistently applied within a jurisdiction, . . . the federal interests in predictability and judicial economy counsel the adoption of one source, or class of sources, for borrowing purposes.") (quoting Wilson v. Garcia, 471 U.S. 261, 273, 85 L. Ed. 2d 254, 105 S. Ct. 1938 (1985)).
The second practical consideration in determining whether a uniform federal limitations period is desirable is whether the challenged action is multistate in nature such that, in the absence of such uniformity, the limitations periods of several states would typically be applicable to a single claim. See Ceres, 918 F.2d at 357. This consideration figured prominently in the Supreme Court's determination, in Agency Holding Corp. v. Malley-Duff & Assocs., 483 U.S. 143, 97 L. Ed. 2d 121, 107 S. Ct. 2759 (1987), that RICO should be governed by a uniform federal limitations period:
The practicalities of RICO litigation present equally compelling reasons for federal pre-emption of otherwise available state statutes of limitations . . . . RICO cases commonly involve interstate transactions, and conceivably the statute of limitations of several States could govern any given RICO claim . . . . The use of state statutes would present the danger of forum shopping and, at the very least, would ...