with a cause of action for the relief requested but the common law would, it was the state common law limitations period which applied to the federal securities action.
Defendants attempted to distinguish these cases. First, defendants suggested that this plaintiff would not be barred from bringing a Pennsylvania Securities Act action in spite of the lack of privity because § 501 of the Act has a broad scope and remedial purpose.
However, Judge Sloviter, speaking for the court, has stated that § 501 provides the " sole source of civil liability" for violations of § 401 (the section modelled after § 10(b) of the 1934 Act), and that, "it only gives the seller or buyer the right to sue the person purchasing or selling the security." Biggans, supra at 609-10. Privity is required under the Pennsylvania Securities Act and there is no privity here.
Defendants also contended that plaintiff does not state a cause of action for common law fraud on these alleged facts. But it is not necessary to find that Pennsylvania courts would in fact permit plaintiff to recover for fraud; we must only determine that plaintiff's allegations reasonably state such a claim. Biggans, supra at 610; Sharp, supra at 192.
Defendants advanced three reasons why plaintiff has not stated a cause of action for fraud. First, such an action demands proof that is clear and convincing, Snell v. Commonwealth of Pennsylvania, State Examining Board, 490 Pa. 277, 416 A.2d 468, 470 (1980); an action under § 10(b) must be proved only by a fair preponderance of the evidence. See, Healey v. Catalyst Recovery of Pennsylvania, Inc., 616 F.2d 641, 648 n.5 (3d Cir. 1980). This distinction is of no significance here. It might bear on the policy considerations in choosing an appropriate § 10(b) statute of limitations, see, Roberts, supra at 458, but that choice has already been made in this Circuit after a comparison of § 10(b) with relevant Pennsylvania statutory and common law remedies. That lack of privity precludes a private action under the Pennsylvania Securities Act was deemed determinative in holding the common law fraud limitations period applicable. Biggans, supra at 609-10; Sharp, supra at 192. Because the burden of proof affects not plaintiff's ability to get to trial but the standard to be applied at trial, it does not suggest retreat from the result reached in Roberts, Biggans, and Sharp.
Second, defendants argued that in a class action the statute of limitations for fraud is inappropriate because the Pennsylvania Supreme Court has stated that an action for fraud "is not generally appropriate for resolution in a plaintiff-class action," Klemow v. Time, Inc., 466 Pa. 189, 197 n.17, 352 A.2d 12, 16 n.17, cert. denied, 429 U.S. 828, 50 L. Ed. 2d 91, 97 S. Ct. 86 (1976). But the facts of a particular case sounding in fraud may sometimes support its certification as a class action. In Sharp v. Coopers & Lybrand, Order of February 19, 1976 (Docket Entry #20, Civil Action No. 75-1313, E.D.Pa.), aff'd in part and vacated in part on other grounds, 649 F.2d 175, 192 (3d Cir. 1981), a Rule 10b-5 class action with one count stating a common law claim for fraudulent misrepresentations, certification of a class was held not to be an abuse of discretion.
Finally, defendants asserted that common law fraud requires proof of reliance but private Rule 10b-5 actions for "fraud on the market" and "omissions" do not. Cf., Thomas v. Seaman, 451 Pa. 347, 304 A.2d 134 (1973) and Affiliated Ute Citizens v. United States, 406 U.S. 128, 153, 31 L. Ed. 2d 741, 92 S. Ct. 1456 (1972). In Sharp, the Court of Appeals stated that the "proper approach to the problem of reliance is to analyze the plaintiff's allegations, in light of the likely proof at trial, and determine the most reasonable placement of the burden of proof of reliance;" the court held that in the circumstances of that case plaintiffs were not required affirmatively to prove reliance as to misrepresentations or fraudulent omissions. Sharp, supra at 188-89. The court there nonetheless also held that where the defendant is not the seller, "a state securities action will not lie. The only remedy under state law would appear to be common law fraud . . ." and that statute governed. Id. 192. We have accordingly held that the statute of limitations for common law fraud governs this action.
The statute of limitations for fraud in Pennsylvania is not clear. In 1976, the Pennsylvania Legislature revised the statutory periods of limitations for actions commenced after June 27, 1978.
Title 42 Pa.C.S.A. § 5524(3) mandates that actions "for taking, detaining or injuring personal property . . ." be commenced within two years; 42 Pa.C.S.A. § 5527(6) provides that "any civil action or proceeding which is neither subject to another limitation specified in this subchapter nor excluded from the application of a period of limitation by Section 5531 (relating to no limitation)," is subject to a limitation of six years.
The new Code does not explicitly state whether torts for injuring personal property include wrongs that are not physical or tangible. Some commentators have stated that the previous six-year limitation still controls as to fraud:
. . . The statute is strangely ambiguous and too little time has elapsed since its enactment to have an appellate decision resolving the issue. The alternative to the "catch-all" statute is the two year limitations period. . . . The oblique reference to injuries to personal property in § 5524(3) would seem to embrace only wrongful actions involving some physical or tangible impact. This view is reinforced by the fact that the legislature, . . . did not make clear an intention to shorten the period for fraud. Comment, Statute of Limitations Applicable to 10b-5 Actions Arising in Pennsylvania, 53 Temple L.Q. 70, 81 (1980).