Wednesday, February 15, 2006

Right Back Where We Started

After an unscheduled stop at the Eleventh Circuit, Judge Steven D. Merryday (M.D. Fla.) seemed a bit frustrated in the Tello v. Dean Witter action. Why? Well, because, as he put it, “the circuit court leaves unclear both why the issue of ‘inquiry notice’ might be resolvable by the district court without a jury and why resolution of a motion to dismiss pursuant to Rule 12(b)(6) requires an evidentiary hearing.” Indeed, he said he “is unaware of any precedent except this case for that procedure.”

But, pushing forward, he ordered limited discovery on the statute of limitation issue anyway, which eventually resulted in the submission by both sides of “memoranda accompanied by thirty-two exhibits comprising hundreds of pages of deposition, newspaper and magazine stories, business journal articles, online message-board postings, newspaper and magazine circulation data, annual corporate reports, and pertinent stock transactions--all of which the parties supplemented at the December 19, [2005] hearing by two hours of vigorous oral argument.” At the end of all this (which no doubt must have been overwhelmingly fun), Judge Merryday observed that “unsurprisingly, the plaintiffs' theory places inquiry notice on October 1, 2002, after the effective date of Sarbanes-Oxley,” and of course “equally unsurprisingly, the defendants' theory places inquiry notice on or before August 14, 2000.”

The result? Judge Merryday said that “because the circuit court acknowledges that resolving a disputed issue of inquiry notice is within the exclusive province of a jury, and because the plaintiffs in this case have demanded and perfected their right to a jury trial, the district court interprets the circuit court's mandate to require a determination whether, without improperly invading the province of the jury (that is, without resolving a "genuine issue of material fact"), the district court can identify the moment at which the plaintiffs were on "inquiry notice" of the alleged, actionable fraud.” So “after affording the parties a full hearing on the inquiry notice question, the district court finds no such moment.” “The parties' irreconcilable versions of the pertinent history present genuine issues of material fact resolvable only by a jury.”

So, after four years of litigation, it seems like the action is about where it was the day it was filed. Sounds like a great system, huh?

You can read Tello V. Dean Witter, issued January 25, 2006, at 2006 U.S. Dist. LEXIS 5211.

Nugget: “This remand to the district court results in an unusual event: a proceeding to determine a fact that the circuit court finds dispositive of a motion to dismiss under Rule 12(b)(6), Federal Rules of Civil Procedure (the disposition of which, to say the least, normally involves no judicial fact finding).”

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