Thursday, May 1, 2008

Restrictive View of 10b-5 Statute of Limitations Prevails

Law.com - Judge Finds Securities Lawsuit Over Zyprexa Is Time-Barred

Judge Jack B. Weinstein, in the federal district court in New York, dismissed a securities class action case against Eli Lilly and Company that challenged the drug manufacturer's alleged misrepresentations about the anti-psychotic drug Zyprexa, holding that the plaintiffs failed to file their suit within the statute of limitations.

Judge Weinstein rules that the plaintiffs The "reasonably should have known" that they sustained damages because of Eli Lilly's purported fraud more than two years before filing the suit.

Federal securities laws claims have a two part statute of limitations - 5 years from the event or 2 years after the discovery of the facts constituting the violation.

While the plaintiff's argued that the two years began to run with the publication of three investigative articles about the drug in The New York Times in December 2006, Judge Weinstein ruled that the time began when when documentation supporting these potential claims first became available to attorneys and institutional investors.

That is a difficult position for individual investors, because despite Reg FD, access to information is not always equal, and the ability to process such information is not always present. Maybe attorneys and institutions knew when seeing the documentation, but that does not mean that investors knew of the fraud at that time.

But this may be a sign of things to come, as the pendulum of justice continues its swing back to corporate America:


The individual unsophisticated investor's lack of awareness is ignored; the law tilts the substantive-procedural balance against such a consumer. It applies the much-debated caveat emptor principle favoring greater and freer commerce by limiting litigation, and requiring dismissal of this case.


Caveat Emptor.
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