The Supreme Court Clarifies The Standard For Determining When A Plaintiff "Discovers" Fraud For Limitations Purposes In Section 10(b) Actions

On April 27, 2010, the Supreme Court issued its decision in Merck & Co. v. Reynolds, holding that the two-year statute of limitations applicable to actions brought under Section 10(b) of the Securities Exchange Act of 1934 accrues when the plaintiff actually discovers the facts constituting the violation, including scienter, or when a reasonably diligent plaintiff would have discovered such facts -- whichever occurs first. The decision, discussed in the below memo, resolves a conflict among the circuits on the role of “inquiry notice” in triggering the limitations period, and provides ammunition to plaintiffs seeking to avoid dismissal of complaints on grounds that they are time-barred.