The opinion of the court was delivered by: Shira A. Scheindlin, U.S.D.J.
This document relates to: 09 Civ. 2568 09 Civ. 2592 09 Civ. 2603 09 Civ. 2611
Class action complaints alleging securities fraud against Guillaume Hannezo - along with defendants Vivendi, S.A. and Jean-Marie Messier - were first files on July 18, 2002. On March 26, 2007, an order was entered granting class certification, but excluding the Individual Plaintiffs ("IPs") - along with all other putative members of the class of Vivendi investors who were from countries other than the United States, France, England and the Netherlands - from the class. One of the IPs promptly filed a Rule 23(f) petition seeking leave to appeal the March 26, 2007 order's exclusion of him (and the other IPs) from the class. The petition was denied on May 8, 2007, and over a period of months in lte 2007 the IPs - along with other individual Vivendi shareholders who were excluded from the class - filed thirty-five complaints against Vivendi, Messier, and Hannezo. Hannezo moved to dismiss all but two of the individual actions against him for failure to serve him in a timely manner. A March 16, 2009 order granted Hannezo's motion and dismissed the IPs' actions without prejudice, ruling that the Rule 4(m) exception for defendants in foreign countries did not apply because "plaintiffs did not attempt service within the 120 day window."*fn1 On March 19 and March 20, 2009 - days after the March 16 order - the IPs whose actions were dismissed commenced new actions against Hannezo asserting claims under Sections 10(b) and 20(a) of the Exchange Act. Hannezo now moves to dismiss the IPs' newly commenced actions against him as time-barred. For the reasons stated below, Hannezo's motion is denied.
Section 804 of the Sarbanes-Oxley Act of 2002*fn2 ("SOX") amended 28 U.S.C. § 1658 by lengthening the statute of limitations for private causes of action alleging securities fraud in violation of Sections 10(b) and 20(a) of the Exchange Act from the earlier of one year after the discovery of the facts constituting the violation or three years after the occurrence of such violation, to the earlier of two years after the discovery of the facts constituting the violation or five years after the occurrence of such violation. The effective date of SOX was July 30, 2002.
Under the doctrine established by the Supreme Court in American Pipe & Construction Co. v. Utah*fn3 and its progeny:
[T]he commencement of a class action suspends the applicable statute
of limitations as to all asserted members of the class who would have
been parties had the suit been permitted to continue as a class
action. Once the statute of limitations has been tolled, it remains
tolled for all members of the putative class until class certification
is denied.*fn4 In a series of cases, the Supreme Court
held that the filing of a class action tolls the statute of
limitations for class members who seek to intervene after the class
certification motion is denied,*fn5 for class members
who opt out after the certification motion is granted,*fn6
and for class members who file individual actions after class
certification is denied.*fn7
Hannezo concedes that the July 18, 2002 filing of the class action complaint tolled the statute of limitations for the IPs' claims until at least the March 26, 2007 order excluding the IPs from the class. Thus, the actions that the IPs commenced in late 2007 were timely as they were filed within the one-year statute of limitations. Because the IPs did not properly complete - or even attempt - service on Hannezo, those timely actions were dismissed and I must now determine whether the IPs' subsequent March 2009 actions are timely as well. At issue is: (1) whether the applicable limitations period is the pre-SOX one-year or the post-SOX two-years; (2) whether the Rule 23(f) petition seeking leave to appeal the class certification decision further tolled the statute of limitations; and (3) the date on which the statute of limitations began to run. If the statute of limitations began running on July 2, 2002 - the date on which Hannezo claims the IPs were on inquiry notice of their claims - and was tolled only from the July 18, 2002 filing of the class action through the March 26, 2007 order, even a two-year limitation period would end on March 10, 2009, nine to ten days before the IPs commenced these actions. Thus, the IPs claims are time-barred unless: (1) the two-year limitations period applies, and either (2) the Rule 23(f) petition further tolled the statute until May 8, 2007; or (3) the statute began to run at some point before July 9, 2002.
A. The Applicable Statute of Limitations
In amending 28 U.S.C. § 1658 by lengthening the statute of limitations for private causes of action alleging securities fraud in violation of Sections 10(b) and 20(a) of the Exchange Act, section 804(b) of SOX specified that "[t]he limitations period provided by section 1658(b) of title 28, United States Code, as added by this section, shall apply to all proceedings addressed by this section that are commenced on or after the date of enactment of this Act."*fn8 Under the plain meaning of the statute, the longer two-year statute of limitations period provided by SOX is applicable because the IPs' actions were commenced on March 19, 2009 - after the July 30, 2002 effective date of SOX.
Hannezo argues that section 804(b) does not apply to the IPs' actions
because they are not "new proceedings" for purposes of the SOX statute
of limitations.*fn9 In support of this, Hannezo cites
Adelphia Communications Corp. Securities and Derivative
Litigation,*fn10 which held that "when determining the
applicability of SOX, a duplicative action filed after [SOX's]
enactment will be
considered a 'de facto amendment,' not a new proceeding."*fn11
Yet the complaints at issue are not amendments of a prior
complaint, nor are they duplicative of the class action complaint. An
action is duplicative only "if the 'claims, parties, and available
relief do not significantly differ between the two
actions.'"*fn12 Although the class plaintiffs' July
18, 2002 action may involve similar claims and seek similar relief as
those filed by the IPs in 2007 and 2009, they do not involve the same
parties. The effect of the March 26, 2007 order was to exclude the IPs
from the class, removing them from the existing proceedings and
offering them the opportunity to initiate new and non-duplicative
proceedings, which they did in late 2007 and again in March, 2009. The
IPs' March 2009 actions are duplicative of their 2007 actions, but
that is of no import as the 2007 actions were dismissed ...