Before Seitz, Chief Judge, and Gibbons and Sloviter, Circuit Judges.
On January 5, 1978, James R. Roberts filed a complaint, individually and as a class representative, charging Magnetic Metals Company (Magnetic), Magmetco, Inc. (Magmetco), David C. Langworthy, and Butcher & Singer, Inc. (Butcher) with violations of sections 10(b) and 14(a) of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78j(b), 78n(a) (1976), Rules 10b-5 and 14a-9 promulgated thereunder, 17 C.F.R. §§ 240.10b-5, 240.14a-9 (1978), and common law fraud. The transaction complained of is a merger of Magnetic, a New Jersey corporation, into Magmetco, a Pennsylvania corporation, approved by stockholder vote on June 25, 1975, as a result of which those Magnetic stockholders unallied with the Langworthy interests received $6.50 in cash for each share of Magnetic stock tendered, while those Magnetic stockholders allied with the Langworthy interests received Magmetco stock. The district court dismissed the complaint, holding that the federal law claims were time-barred by N.J.S.A. 49:3-71(e) (1970), a provision modeled on the Uniform Securities Act § 410(e), that plaintiff had not adequately alleged facts which would toll the application of that time-bar on grounds of fraudulent concealment, and that the pendent state common law breach of fiduciary duty claim would not, under the circumstances, be entertained.*fn1 This appeal followed. We conclude that the governing statute of limitations for the federal law claims is not N.J.S.A. 49:3-71(e), but N.J.S.A. 2A:14-1 (Supp.1979). Thus we reverse. Since the latter statute provides a six-year period within which to bring an accrued cause of action we have no occasion to discuss the fraudulent concealment issues.
No federal statute imposes an express limitation upon actions brought under sections 10(b) and 14(a) of the Securities Exchange Act. In such circumstances a federal court must apply the limitations law of the state in which it sits. Johnson v. Railway Express Agency, 421 U.S. 454, 462, 95 S. Ct. 1716, 44 L. Ed. 2d 295 (1975); United Auto Workers v. Hoosier Cardinal Corp., 383 U.S. 696, 703-05, 86 S. Ct. 1107, 16 L. Ed. 2d 192 (1966); Cope v. Anderson, 331 U.S. 461, 463, 67 S. Ct. 1340, 91 L. Ed. 1602 (1947); Holmberg v. Armbrecht, 327 U.S. 392, 395, 66 S. Ct. 582, 90 L. Ed. 743 (1946); Gelman v. Westinghouse Elec. Corp., 556 F.2d 699, 701 (3d Cir. 1977); Kubik v. Goldfield, 479 F.2d 472, 477 n. 12 (3d Cir. 1973); Loss, Securities Regulation 1771-72 (2d ed. 1961). When Congress has been silent on the applicable limitations period federal courts have presumed that its intended policy with respect to repose is deference to the policy of repose of the forum state, rather than national uniformity. Holmberg v Armbrecht, 327 U.S. at 392, 66 S. Ct. 582, 90 L. Ed. 743 ; Rawlings v. Ray, 312 U.S. 96, 97, 61 S. Ct. 473, 85 L. Ed. 605 (1940); Chattanooga Foundry & Pipe Works v. Atlanta, 203 U.S. 390, 397, 27 S. Ct. 65, 51 L. Ed. 241 (1906); Campbell v. Haverhill, 155 U.S. 610, 613-621, 15 S. Ct. 217, 39 L. Ed. 280 (1895). The starting point, therefore, for determining applicable state statutes of limitations is to inquire whether, assuming the operative facts alleged in the complaint, a state court would entertain an action for the relief sought; in this case the award of money damages. If it would do so, no state policy of repose is implicated, and no deference with respect to a federal law basis for recovery growing out of those operative facts is appropriate.
What Mr. Roberts alleges is that in May of 1975, when he held 600 shares of Magnetic, a publicly held corporation, eighty-four percent of which was controlled by Langworthy interests, David A. Langworthy announced a proposed squeeze out merger in which the public shareholders would receive $6.50 a share and the family stockholders would receive all the stock of Magmetco. At the time of the merger Magnetic stock possessed a book value of $11.77 a share. The stock traded in the over-the-counter market for $2.50 to $5.50 a share. In connection with the proposed merger the management of Magnetic sent its shareholders a proxy statement soliciting a favorable vote, and included therein a letter from Butcher indicating that $6.50 was a fair cash price for the Magnetic shares. Most, or all, of the public shareholders surrendered their shares for the $6.50. In soliciting favorable stockholder action the defendants failed to disclose numerous material facts and made numerous material misrepresentations, the details of which need not be set forth. Through their omissions and misrepresentations they induced Roberts and other shareholders to believe that they had no practical alternative to accepting the $6.50 offered for their shares. Shortly after the merger's consummation the Langworthy interests sold their stock in Magmetco to another corporation for a price of over $15.00 per old Magnetic share.
These factual allegations state a claim that the defendants used manipulative or deceptive devices or practices in violation of section 10(b), and made untrue statements, or omitted material facts in connection with a proxy solicitation in violation of section 14(a). Because enforcement of the Securities Exchange Act is, by virtue of section 27, 15 U.S.C. § 78aa (1976), rendered a matter of exclusive federal jurisdiction, recovery on a cause of action implied from section 10(b) and 14(a) could not be had in a state court. But the same allegations of fact state a cause of action under state law for breach of fiduciary duty and for common law fraud. See Bilotti v. Accurate Forming Corp., 39 N.J. 184, 188 A.2d 24 (1963); Judson v. Peoples Bank & Trust Co., 25 N.J. 17, 134 A.2d 761 (1957); Riverside Trust Co. v. Collin, 114 N.J.Eq. 157, 168 A. 377 (1933). Thus the very transactions giving rise to the section 10(b) and section 14(a) claims would be cognizable in New Jersey courts. And it is clear which statute of limitations a New Jersey court would apply to these claims: the six-year statute of limitations provided by N.J.S.A. 2A:14-1 governing actions for common law fraud. The statute on which the district court relied, N.J.S.A. 47:3-71(e), would not have been applied to Roberts' claims. Litigation over the transactions alleged would, in a New Jersey court, be alive, not in repose.
The district court, recognizing that in a New Jersey court the action would proceed, nevertheless chose to apply a provision in a statute which is wholly inapplicable to the transactions alleged in the complaint. The civil liability provision of the New Jersey Uniform Securities Act, section 49:3-71(a), provides:
(1) offers or sells a security in violation of sections 8(b), 9(a) or 13 of this Act, or
(2) offers or sells a security by means of any untrue statement of material fact or any omission to state a material fact necessary in order to make the statement made, in the light of the circumstances under which they are made, not misleading (the buyer not knowing of the untruth or omission) Is liable to the person buying the security from him . . . . (emphasis added).
By its own terms the New Jersey Uniform Securities Act protects Buyers of securities. It provides no protection to sellers or tenderers of securities. It prohibits unlawful representations concerning registrations, N.J.S.A. § 49:3-55 (1970), persons from acting as broker-dealers, agents, or investment advisors unless duly registered, N.J.S.A. § 49:3-56 (1970), and the sale of unregistered securities. N.J.S.A. § 49:3-60 (1970). However, it has nothing to do with the fiduciary duties of officers, directors, or insiders, nor with frauds perpetrated by buyers or tenderees in a merger. Indeed, unlike section 10(b), section 49:3-71 does not contemplate the implication of additional remedies. See N.J.S.A. § 49:3-71(h) (1970). Consequently, it lacks even potential application to these transactions.
Nor does the New Jersey Uniform Securities Act preempt the field with respect to sellers' liability. In section 49:3-71(h) it provides:
The rights and remedies provided by this act are in addition to any rights or remedies that may exist at law or in equity . . ..
Thus New Jersey's common law remedies for breach of fiduciary duty and for fraud are undisturbed by the enactment, in 1967, of the New Jersey Uniform Securities Act. The savings clause negates any suggestion that the two-year time-bar of section 49:3-71(e) was intended to supplant time-bars otherwise applicable to pre-existing causes of action.
In justifying its departure from the statute of limitations which New Jersey would apply to litigation arising out of the facts alleged the district court reasoned:
The duty of this court is not to apply the limitations period of the state statute under which the plaintiff might obtain relief. Were this the controlling question, the six year fraud provision would necessarily apply. This court's analysis, as mentioned earlier, must instead focus on (1) the most similar or analogous statute which; (2) best effectuates the purpose of the federal legislation. 463 F. Supp. at 940.
Applying this test the court concluded that the cause of action provided by the New Jersey Uniform Securities Act, as opposed to that provided by New Jersey common law, was more nearly analogous to that recognized under sections 10(b) and 14(a) of the Securities Exchange Act. However, since the New Jersey Uniform Securities Act is wholly inapplicable to the transaction alleged in the complaint the analogy escapes us. Indeed, because the facts alleged in the complaint are actionable both under the 1934 Act and under New Jersey common law the closer analogy is the one rejected by the district court.
In the second part of its analysis, the determination of the state statute of limitations best effectuating the purposes of the Securities Exchange Act, the court pointed to the one-year statutes of limitations found in section 13 of the Securities Act of 1933, 15 U.S.C. § 77m (1976), and in sections 9(e), 18, and 29 of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78i(e), 78r(c), 78cc(b) (1976), and to the two-year statute of limitations found in section 16 of the 1934 Act. 15 U.S.C. § 78p(b) (1976). From these the district court concluded that Congress generally favored relatively short limitations periods in civil securities suits. And from this perceived favoritism it divined a congressional intent to apply shorter state statutes of limitations to section 10(b) and 14(a) actions. 463 F. Supp. at 941.
The fact remains, however, that Congress chose No uniform federal statute of limitations to govern actions based upon sections 10(b) and 14(a). In this circumstance, as indicated Supra, the Supreme Court has announced the rule that we must look not for an analogous federal limitations period, but for an analogous forum state limitations period. Johnson v. Railway Express Agency, 421 U.S. 454, 95 S. Ct. 1716, 44 L. Ed. 2d 295 (1975); United Auto Workers v. Hoosier Cardinal Corp., 383 U.S. 696, 86 S. Ct. 1107, 16 L. Ed. 2d 192 (1966); Cope v. Anderson, 331 U.S. 461, 67 S. Ct. 1340, 91 L. Ed. 1602 (1947). Much can be said, perhaps, for a different rule in a different context directing a federal court to statutes of limitations governing analogous federal causes of action. But the rule has been otherwise for many years, and an inferior federal court is not free to change it.
Moreover, this case is a particularly inappropriate one in which to make the change, because a federal policy of repose would not in any event prevail. As is so often the case with federal law, section 10(b) and section 14(a) are interstitial. The liabilities those sections impose coexist with state common law remedies. This lawsuit if brought in state court for common law fraud would not be time-barred. But because of the exclusive jurisdiction provision of section 27, the section 10(b) and section 14(a) causes of action can not be heard in state court. Thus, the effect of the district court's ruling was not to accommodate a state policy of repose, as required by governing Supreme Court decisions, but to deprive plaintiff of the only forum which possessed jurisdiction to consider all the legal bases for the relief sought.
The question here presented, whether the statute of limitations governing common law fraud should apply in section 10(b) and 14(a) actions has been considered by other courts. The common law fraud statute of limitations was held applicable in Stull v. Bayard, 561 F.2d 429, 431-32 (2d Cir. 1977), Cert. denied, 434 U.S. 1035, 98 S. Ct. 769, 54 L. Ed. 2d 783 (1978); Arneil v. Ramsey, 550 F.2d 774, 780 (2d Cir. 1977); IDS Progressive Fund, Inc. v. First of Michigan Corp., 533 F.2d 340 (6th Cir. 1976); United California Bank v. Salik, 481 F.2d 1012 (9th Cir.), Cert. denied, 414 U.S. 1004, 94 S. Ct. 361, 38 L. Ed. 2d 240 (1973); Mitchell v. Texas Gulf Sulphur Company, 446 F.2d 90, 103-04 (10th Cir.), Cert. denied, 404 U.S. 1004, 92 S. Ct. 564, 30 L. Ed. 2d 558 (1971); Charney v. Thomas, 372 F.2d 97, 99-100 (6th Cir. 1967); Fratt v. Robinson, 203 F.2d 627, 634-35 (9th Cir. 1953); Fischman v. Raytheon Mfg. Co., 188 F.2d 783, 787 (2d Cir. 1951); Jerome v. Ampre Corp. (1978 Transfer Binder) Fed.Sec.L.Rep. (CCH) P 96,343 (D.N.J.1978); Klapmeier v. Peat Marwick, Mitchell & Co., 363 F. Supp. 1212, 1217-18 (D.Mich.1973); Connelly v. Balkwill, 174 F. Supp. 49, 63-64 (N.D.Ohio 1959), Aff'd per curiam, 279 F.2d 685 (6th Cir. 1960); Tobacco & Allied Stocks, Inc. v. Transamerica Corp., 143 F. Supp. 323, 327-28 (D.Del.1956), Aff'd, 244 F.2d 902 (3d Cir. 1957). See also Janigan v. Taylor, 344 F.2d 781, 783 (1st Cir. 1965), Cert. denied, 382 U.S. 879, 86 S. Ct. 163, 15 L. Ed. 2d 120 (1965). We find the reasoning of these cases persuasive.
In opposition the defendants invoke several cases in which federal courts have looked to the time-bar of the forum state's Uniform Securities Act. In some of these cases the plaintiff was a buyer to whom section 410 of the Uniform Securities Act provides a cause of action. Parrent v. Midwest Rug Mills, Inc., 455 F.2d 123, 124-28 (7th Cir. 1972); Vanderboom v. Sexton, 422 F.2d 1233, 1236-41 (8th Cir.), Cert. denied, 400 U.S. 852, 91 S. Ct. 47, 27 L. Ed. 2d 90 (1970); See Newman v. Prior, 518 F.2d 97, 98-100 (4th Cir. 1975). Since the state law relied upon afforded the complainant a cause of action the adoption of the state policy of repose applicable to that cause of action was arguably correct. The defendants also rely on Hudak v. Economic Research Analysts, Inc., 499 F.2d 996, 999-1000 (5th Cir. 1974), Cert. denied, 419 U.S. 1122, 95 S. Ct. 805, 42 L. Ed. 2d 821 (1975) and Schaefer v. First National Bank of Lincolnwood, 509 F.2d 1287, 1293-95 (7th Cir. 1975), Cert. denied, 425 U.S. 943, 96 S. Ct. 1682, 48 L. Ed. 2d 186 (1976). In these cases the court applied the state statute of limitations applicable to a state statutory cause of action, not the Uniform Securities Act, which largely paralleled section 10(b) and Rule 10b-5. There is no such New Jersey statute applicable to sellers. Finally, the defendants rely on cases in which the court rejected a short state statute of limitations applicable to common law fraud actions in favor of a longer state statute of limitations applicable to securities law suits on the theory that adoption of the longer of two arguably applicable state ...