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Tomlinson v. Goldman

December 16, 2009


The opinion of the court was delivered by: Elaine E. Bucklo United States District Judge


Plaintiffs filed suit against defendants Goldman, Sachs & Company ("Goldman") and John M. Youngdahl ("Youngdahl"), an employee of Goldman during the relevant time period (collectively, "defendants"), alleging that they violated the Commodity Exchange Act ("CEA"), 7 U.S.C. § 1 et seq. (Count I). The complaint, premised on injury allegedly caused by defendants' October 31, 2001 trading of 30-year bonds and bond futures, was not filed until March 11, 2009. Goldman argues that dismissal is appropriate because the complaint was filed outside the prescribed two-year statute of limitations and, alternatively, that to the extent plaintiffs' claim is premised on defendants' trading of 30-year bonds alone, it should be dismissed. Youngdahl joins in Goldman's motion.

I decline to address defendants' second argument because I find the complaint was not timely filed. For the following reasons, defendants' motion to dismiss is granted.


The complaint alleges that a consultant hired by Goldman, Peter Davis ("Davis"), attended a confidential quarterly refunding conference at the Treasury Department ("Department") on October 31, 2001, from 9:00 a.m. until approximately 9:25 a.m. At the conference, a Department spokesperson informed attendees of a pending announcement of the Department's intention to suspend the issuance of the 30-year bond later that morning. The information provided at the conference was embargoed until 10:00 a.m. Despite the embargo, Davis called various clients, including Goldman through its employee Youngdahl, and told them about the Department's announcement. The announcement was accidently published early on the Department's website at 9:43 a.m., but by that time employees at Goldman, with an eight-minute head start, had already started trading 30-year bonds and bond futures in significant numbers. Such trading is alleged to have caused plaintiffs, who were not privy to the inside information, to incur substantial losses on positions in 30-year bond futures and options by November 1, 2001. The SEC began investigating Goldman and Davis in connection with Goldman's October 31, 2001 bond market trading shortly thereafter. The results of that investigation were published on September 3, 2003.*fn1


A motion to dismiss tests the sufficiency of a complaint, not its merits. Gibson v. Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990). In resolving a motion under Rule 12(b)(6), I must accept all well-pleaded allegations in the complaint as true and consider the facts in the light most favorable to the plaintiff. Americanos v. Carter, 74 F.3d 138, 140 (7th Cir. 1996). Although a complaint need not anticipate or overcome a statute of limitations defense, dismissal may be appropriate if the plaintiff alleges facts sufficient to establish that defense. Hollander v. Brown, 457 F.3d 688, 691 n. 1 (7th Cir. 2006).


A claim under the CEA must be "brought not later than two years after the date the cause of action arises." 7 U.S.C. § 25(c); accord Stephan v. Goldinger, 325 F.3d 874, 876 (7th Cir. 2003). "[I]t is the discovery of the injury, not the elements of a particular claim, that gets the clock ticking." The Cancer Found., Inc. v. Cerberus Capital Mgmt., L.P., 559 F.3d 671, 674 (7th Cir. 2009); see also United States v. Duke, 229 F.3d 627, 630 (7th Cir. 2000) ("The discovery rule does not permit the victim of an alleged wrong to postpone the running of the statute of limitations by willfully closing his a known probability that he has been injured.")

The parties agree that the Premium Partners litigation, a related class action, tolled the limitations period between March 11, 2004 (the Premium Partners filing date), and August 22, 2008 (denial of class certification). The parties disagree as to whether news releases and articles published between October 31, 2001, and April 23, 2002,*fn2 gave plaintiffs inquiry notice of their CEA claim and whether defendants' denials of liability support tolling of the limitations period.

Defendants argue that if the limitations period did not begin running when plaintiffs' injury was complete (on November 1, 2001), the discovery rule only delayed its start until no later than April 23, 2002. By April 2002, the following facts were publicly available from multiple news sources: 1) Goldman was one of Davis' clients; 2) Goldman received the embargoed information from Davis while it was still confidential; 3) Goldman traded 30-year bonds and bond futures during the eight-minute period immediately before the Department's announcement became public; 4) Goldman made a profit on such trading; 5) 30-year bond prices rose before the Department's announcement became public and continued to rise thereafter; 6) the 30-year bond market experienced the largest price rally in some fourteen years on October 31, 2001; 7) the SEC began investigating these October 31, 2001, events in November 2001; 8) Goldman and Davis were specifically named in the SEC investigation; and 9) as a result of the SEC investigation, Goldman and Davis were issued Wells notices - a precursor to formal charges.

The news releases and articles relaying these facts included statements issued by Goldman publicly admitting that it received the embargoed information regarding 30-year bonds from Davis, traded on it, and made a profit, although liability for these actions was repeatedly denied. In short, Goldman's position was that Davis never mentioned the bond information was confidential, so it improperly traded on that information by mistake. Davis' conflicting position, that he told all of his clients about the embargo, was also reported.

Plaintiffs contend that the cited news reports are vague and did not provide sufficient notice of their injuries because the facts reported did not address every element of their CEA claim.*fn3

But "[a] plaintiff does not need to know that his injury is actionable to trigger the statute of limitations -- the focus is on the discovery of the harm itself, not the discovery of the elements that make up a claim." See Cancer Found., 559 F.3d at 674. More specifically, plaintiffs claim the news reports did not suggest that Goldman's alleged plan to manipulate the markets was "pre-meditated" and did not include the volume, type, or timing of Goldman's trades. This argument is not persuasive. First, although the specific volume of trading was not included, the type and timing of Goldman's trades were. 30-year bond market irregularities were also reported in detail, including information that price changes in the bond market started before the Department's announcement became public, when Goldman "stepped ...

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