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Sarbanes-Oxley Limitations Period Applied, No Inquiry Notice

Shareholders survived a motion to dismiss their amended complaint alleging that the defendants fraudulently induced them to invest their retirement savings. The defendants requested that the court find the shareholder claims time-barred under the pre-Sarbanes-Oxley Act one-year statute of limitations, claiming that the plaintiffs were on inquiry notice of the violations due to the poor performance of their accounts, and failed to file a claim within one year of having knowledge of the fraud. The court (DC Kan) disagreed, noting that the Sarbanes-Oxley Act extended the one and three year limitations periods to two and five year periods. Additionally, the court stated that an account's poor performance alone did not constitute inquiry notice, and therefore the shareholder duty to use reasonable diligence in investigating whether a fraud had occurred was not triggered.

Jackson v. John Hancock Financial Services, Inc. (DC Kan) is reported at ¶93,966.