15 U.S.C. § 77q(a), Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b) and SEC rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5, and Section 15(c)(1) of the Securities Exchange Act of 1934, 15 U.S.C. § 78o(c)(1) and SEC rules 15c1-2 and 15c1-7 thereunder, 17 C.F.R. §§ 240.15c1-2, 15c1-7.
Defendant asserts that the claim is barred by the applicable Pennsylvania Statute of Limitations, which it contends is 70 P.S. § 1-504(a),
the three year but not more than one year from date of discovery statute of limitations contained in the Pennsylvania Securities Act. The action was filed June 21, 1974. It is averred in the complaint that the substantive facts of the cause of action occurred between 1967 and June of 1970,
and that plaintiff had no knowledge of the fraud prior to November, 1971.
(Thereby implying that plaintiff had knowledge of the fraud as of that date). If the Pennsylvania Blue Sky Law's statute of limitations applies, then the claim is barred. The Court must decide, therefore what statute of limitations is applicable to plaintiff's claims.
Although Congress mandated explicit statutes of limitations for the sections of the federal securities law which in terms provide for private causes of action,
the implied rights of action created by the federal courts for violations of other sections
of these laws are not so limited. Many courts have been confronted with the problems of determining which limitation period should be applied. The general rule which has evolved is that the timeliness of a federal cause of action for which no statute of limitations is provided, "is to be determined, as a matter of federal law, by reference to the appropriate state statute of limitations." United Auto Workers v. Hoosier Cardinal Corp., 383 U.S. 696, 705, 86 S. Ct. 1107, 1113, 16 L. Ed. 2d 192 (1966); Cope v. Anderson, 331 U.S. 461, 67 S. Ct. 1340, 91 L. Ed. 1602 (1947); Campbell v. Haverhill, 155 U.S. 610, 15 S. Ct. 217, 39 L. Ed. 280 (1894); M'Cluny v. Silliman, 28 U.S. (3 Pet.) 270, 7 L. Ed. 676 (1830).
With respect to implied private rights of action under the federal securities laws, the dilemma faced by most courts has been whether the applicable statute of limitations should be that provided for common law fraud or that contained in the state's Blue Sky Law. The period chosen should be "one which best effectuates the federal policy at issue." Charney v. Thomas, 372 F.2d 97, 100 (6th Cir. 1976). Early cases seemed to favor the common law fraud statute of limitations. Charney v. Thomas, supra; Janigan v. Taylor, 344 F.2d 781 (1st Cir. 1965); Fratt v. Robinson, 203 F.2d 627 (9th Cir. 1953). However, partly because of the advent of state Blue Sky statutes more closely resembling the federal securities laws, more recent decisions favor the Blue Sky statute of limitations. Hudak v. Economic Research Analysts, 499 F.2d 996 (5th Cir. 1974); Parrent v. Midwest Rug Mills, Inc., 455 F.2d 123 (7th Cir. 1972); Vanderboom v. Sexton, 422 F.2d 1233 (8th Cir. 1970). These decisions express sound policy and should be followed wherever there is an applicable state Blue Sky statute of limitations.
There is some question, however, whether the Pennsylvania Blue Sky statute of limitations is applicable to this case. In 1972, the Pennsylvania legislature passed a new Blue Sky law
to take effect January 1, 1973. Prior to that time there had been no Blue Sky statute of limitations and the 6 year fraud limitations period of 12 P.S. § 31 had been applied to federal securities law actions in Pennsylvania. Jennings v. Boenning & Co., 388 F. Supp. 1294 (E.D.Pa.1975); Tober v. Charnita, Inc., 58 F.R.D. 74 (M.D.Pa.1973). As previously stated, the operative facts of this litigation and the discovery of the fraud occurred before January 1, 1973.
Although it is clear that the Blue Sky limitations period should govern federal securities law causes of action such as this one which arise after January 1, 1973, it is equally clear that by the express terms of the New Pennsylvania Blue Sky law, the 6 year fraud statute of limitations should apply to this case. 70 P.S. § 1-704 covers applicability of prior law to situations occurring before January 1, 1973, providing in part,
(a) Except as expressly provided in this section, prior law exclusively governs all suits, actions, prosecutions or proceedings which are pending or may be initiated on the basis of facts or circumstances occurring before the effective date of this act.