CLIENT PUBLICATION
LITIGATION | MAY 3, 2016
Second Circuit Holds Sarbanes-Oxley’s Five-Year Statute
of Repose Applies to Claims Under Sections 9(f) and 18(a),
but Reaffirms That Three-Year Repose Period Applies to
Section 14 Claims
Twenty-five years ago, in Ceres Partners, the Second Circuit held that the implied private right
of action under Section 14 of the Securities and Exchange Act of 1934 (“Exchange Act”) was
subject to a three-year repose period, based on analogizing such claims to the express private
rights of action in Sections 9(f) and 18(a) of the Exchange Act and then borrowing those
statutes’ then-applicable three-year statutes of repose.1 In 2002, the Sarbanes-Oxley Act
(“SOX”) extended the repose period for private rights of action involving claims of “fraud, deceit,
manipulation, or contrivance” to five years.2 In DeKalb County Pension Fund v. Transocean Ltd.,
No. 14-0894-cv (2d Cir. Apr. 29, 2016), the Second Circuit reexamined its Ceres holding in light
of SOX, and (1) resolving disagreements among district courts within the Second Circuit, held
that claims under Sections 9(f) and 18(a) are subject to SOX’s five-year statute of repose, but
(2) claims under Section 14 are nevertheless still subject to a three-year statute of repose. The
Transocean Court further held that Section 14’s repose period begins to run on the date of the
defendant’s last culpable act or omission—i.e., when the allegedly misleading proxy statement
was issued—not when the plaintiff’s claim may have accrued or been discovered.
Background
On October 2, 2007, GlobalSantaFe Corp. (“GSF”), an offshore oil and gas drilling contractor, and Transocean, one
of the largest international providers of offshore oil and gas contract drilling services, disseminated a joint proxy
concerning a proposed merger between the companies. The proxy statement included representations regarding
Transocean’s compliance with various environmental laws, its training and safety programs, and its equipment
maintenance. GSF’s shareholders, including DeKalb County Pension Fund (“DeKalb”), approved the merger in
November 2007.
At the time of the merger, Transocean owned the Deepwater Horizon oil-drilling rig, which exploded on April 20,
2010, causing the worst oil spill in US history. In the wake of that disaster, Transocean’s stock lost more than half of
its value.
1 See Ceres Partners v. GEL Assocs., 918 F.2d 349, 361-62 (2d Cir. 1990).
2 See 28 U.S.C. § 1658(b).
