Appeal from the United States District Court for the Eastern District of Wisconsin. No. 77 C 294 -- Robert W. Warren, Judge .
Before Pell and Sprecher, Circuit Judges, and Markey, Chief Judge.*fn*
In this appeal we reaffirm for Wisconsin forum cases, as we have previously held for Illinois and Indiana forum cases, that a civil action brought under section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5, is governed by the forum state's securities law statute of limitations and not by its common law fraud limitation period nor by its catch-all limitation period.
In Count I of the complaint,*fn1 plaintiff sought damages from defendant accounting firm, alleging that defendant made false representations to him about the financial condition of the American City Bank & Trust Company of Milwaukee, Wisconsin, and its holding company, American Bankshares Corporation. Defendant's misrepresentations and non-disclosures assertedly caused plaintiff to buy Bankshares stock on May 17, 1974. The complaint alleged that the defendant acted "with intent to deceive, manipulate and defraud Plaintiff" and "knowingly or recklessly" concealed the distressed financial condition of the two companies from plaintiff. This was alleged to violate section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 thereunder.
The district court granted the defendant's motion for summary judgment, finding that the action was time-barred, 448 F. Supp. 84 (E.D.Wis.1978). The complaint was filed on May 17, 1977; defendant claimed the action was barred by the period of limitations contained in section 551.59(5) of the Wisconsin Statutes, which requires actions to be commenced within one year after discovery of the misrepresentation or within three years after the act itself, whichever expires first.*fn2 The district court held that the action was time-barred because "discovery of the fraud occurred when the plaintiff appeared in (a prior case*fn3) by answering the complaint therein on January 22, 1976." 448 F. Supp. at 86.
The district court held that Count I of the complaint resembled a cause made actionable by section 551.59*fn4 of the Wisconsin Statutes, so that the one-to-three year statute of limitations set out in that section applied. We vacated the summary judgment and remanded the cause for further proceedings because the plaintiff had failed to argue before the district court that Count I more closely resembled a cause actionable under section 551.41*fn5 of the Wisconsin Statutes, which might require application of a different statute of limitations. Unpublished order in Appeal No. 78-1576, September 26, 1978.
Upon remand, the district court held that further proceedings and consideration led to the same result, namely that the Wisconsin one-to-three year security act limitation applied to Count I and hence that the count was time-barred. 478 F. Supp. 1186 (E.D.Wis.1979). The plaintiff has again appealed.
Since no statute of limitations is provided for civil actions under section 10(b) of the Securities Exchange Act of 1934, the federal courts apply the limitation period applicable to the forum state's most closely analogous state law cause of action. Ernst & Ernst v. Hochfelder, 425 U.S. 185, 210 n. 29, 96 S. Ct. 1375, 1389, 47 L. Ed. 2d 668 (1976).
Consequently, the Seventh Circuit has held that a section 10(b) action brought in Illinois is governed by the three-year statute of limitations of the Illinois Securities Law. Parrent v. Midwest Rug Mills, Inc., 455 F.2d 123, 126 (7th Cir. 1972); Hupp v. Gray, 500 F.2d 993, 996 (7th Cir. 1974); Schaefer v. First National Bank of Lincolnwood, 509 F.2d 1287, 1291 (7th Cir. 1975), cert. denied, 425 U.S. 943, 96 S. Ct. 1682, 48 L. Ed. 2d 186 (1976); Tomera v. Galt, 511 F.2d 504, 508-09 (7th Cir. 1975); Goldstandt v. Bear, Stearns & Co., 522 F.2d 1265, 1267 (7th Cir. 1975); Wright v. Heizer Corp., 560 F.2d 236, 257 (7th Cir. 1977), cert. denied, 434 U.S. 1066, 98 S. Ct. 1243, 55 L. Ed. 2d 767 (1978); Nemkov v. O'Hare Chicago Corp., 592 F.2d 351, 353, 355 (7th Cir. 1979).
This court has similarly held that a section 10(b) action brought in Indiana is governed by the two-year statute of limitations of the Indiana Securities Regulation Act. LaRosa Bldg. Corp. v. Equitable Life Assurance Society, 542 F.2d 990, 993 (7th Cir. 1976).
Although we have not as yet determined the applicable Wisconsin statute of limitations in a section 10(b) action, district judges sitting in Wisconsin have held that such an action is governed by the one-to-three year statute of limitations of the Wisconsin blue sky law. Wis.Stat. § 551.59(5). See Kramer v. Loewi & Co., 357 F. Supp. 83, 87 (E.D.Wis.1973) (Reynolds, C. J.); Colonial Bank & Trust Co. v. American Bankshares Corp., 439 F. Supp. 797, 801-02 (E.D.Wis.1977) (Warren, J.); Colonial Bank & Trust Co. v. American Bankshares Corp., 442 F. Supp. 234, 238 (E.D.Wis.1977) (Warren, J.); Turner v. First Wisconsin Mortgage Trust, 454 F. Supp. 899, 904 (E.D.Wis.1978) (Reynolds, C. J.).
In Sperry v. Barggren, 523 F.2d 708, 710 (7th Cir. 1975), we noted that the Kramer case held that Wisconsin's one-to-three year limitation period, rather than its six-year statute of limitations for fraud, applied in section 10(b) actions. We added that "(since) neither party contests the correctness of the Kramer holding, we assume its validity." Id. at 710 n. 1.
Thus, ever since the Parrent decision in 1972, this circuit has uniformly adopted the limitation provision in the forum state's securities law, in section 10(b) cases, which is in accord with the majority of circuits.*fn6 Other circuits have applied the limitation provision which ...