Tuesday, December 07, 2004

No New Life to Barred Claims. The question in In re Enterprise Mortgage Acceptance Co., LLC Securities Litigation (really three unconsolidated appeals heard together) is whether section 804 of the Sarbanes-Oxley Act revived previously expired securities claims. The Second Circuit has held that previously time barred claims are not revived pursuant to that section.

In each of the cases, the plaintiffs had initiated actions for securites fradu prior to the passage of the Act. Then, after the Act was enacted, one plaintiff added additional claims and another added an additional defendant, trying to take advantage of the Act's extended statute of limitations.

The Court noted that normally statutes are not given retroactive effect. If the statute does not clearly provide that Congress intended it to be applied retroactively, then the statute will not be given retroactive effect if giving such retroactive effect would impair rights a party possessed when he acted, increase a party's liability for past conduct, or impose new duties with respect to transactions already completed.

The Court concluded that Congress did not clearly give the statute retroactive effect. Further, the Court held that reviving time-barred claims has an impermissible retroactive effect by stripping defendants of an affirmative defense.

The decision can be found here.

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