York County v. HP, Inc

“[A] defendant establishes that a complaint is time-barred under §1658(b)(1) if it conclusively shows that either (1) the plaintiff could have pleaded an adequate complaint based on facts discovered prior to the critical date and failed to do so, or (2) the complaint does not include any facts necessary to plead an adequate complaint that were discovered following the critical date.”

Petitioners filed a class action on April 21, 2021, claiming Respondent’s printing supply distribution practices violated sections 10(b) and 20(a) of the Securities Exchange Act of 1934. Six weeks prior to Petitioners’ filing, the SEC issued an order fining Respondent $6 million for making incomplete and materially misleading disclosures due to those practices. Respondent moved to dismiss, claiming that Petitioners’ claims were not timely under the two-year statute of limitation imposed by 28 U.S.C. § 1658(b)(1). The district court found that all the materially misleading disclosures were made by Respondent in 2016 and granted the motion. “[A] defendant establishes that a complaint is time-barred under §1658(b)(1) if it conclusively shows that either (1) the plaintiff could have pleaded an adequate complaint based on facts discovered prior to the critical date and failed to do so, or (2) the complaint does not include any facts necessary to plead an adequate complaint that were discovered following the critical date.” The Court held that Respondent failed to show that Petitioners discovered all necessary facts to file suit prior to the critical date of April 21, 2019, and that the district court erred in dismissing Petitioners’ complaint on statute of limitations grounds. The Court reasoned that although Respondent’s disclosures were made prior to the critical date, Petitioner plausibly did not know those disclosures were based on potentially fraudulent practices until after SEC issued its order in September 2020. Thus, Petitioner could not plead “with sufficient detail and particularity” the scienter required to survive a motion to dismiss a fraud claim until after the critical date. REVERSED and REMANDED.