William & Mary Law Review


Statutes of limitations, a long-standing bulwark of civil litigation, mitigate the risk that evidence of meritorious claims will become stale and relieve defendants who might be exposed to claims from unending uncertainty about whether claims will be brought. But these twin rationales are balanced against allowing plaintiffs sufficient time to discover and file meritorious claims. This balance is manifest in the judicial and congressional effort to fashion a statute of limitations for securities fraud claims. The Supreme Court in Merck & Co. v. Reynolds recently attempted to strike that balance in its interpretation of the statute of limitations for securities fraud claims under section 10(b) and Rule 10b-5. But we show that the Court has failed. Merck presents a pleading trap for victims of securities fraud that will preclude the adjudication of meritorious

Moreover, the Supreme Court’s Merck decision exemplifies a much more serious problem with the entire limitations regime for securities fraud. We demonstrate that the discovery provision in that regime should be discarded for a singular statute of repose as the discovery provision unnecessarily precludes meritorious claims without providing any more support for the twin rationales beyond what is already provided by a statute of repose alone. The repose provision by itself reduces the use of stale evidence and litigation uncertainty and it does not unnecessarily preclude meritorious claims. In this sense, our proposal bucks the trend of scholarship addressing the statute of limitations that advocates eliminating limitations periods entirely. We find that insights from behavioral economics and practical realities of market activity justify some measure of repose. Thus, we advocate abolishing the discovery provision in the statute of limitations but keeping the statute of repose.