BRADLEY v. ADVEST, INC., 2:17-cv-00407

Background

Plaintiffs purchased shares of two penny stocks, Telkonet, Inc. (TKOI) and Geo Global Resources, Inc. (GGR), between 2005 and 2007, alleging that broker Robert Feldman made repeated false representations to induce purchases.
Plaintiffs allege specific misrepresentations (government/GE contracts, large discoveries, control of float, insider relationships) and that Feldman kept them in the stocks by repeating those statements.
Plaintiffs filed suit (writ of summons 2011; Amended Complaint in federal court) alleging a federal securities claim (Rule 10b-5) and related state-law claims (Pennsylvania securities act, fraud, negligent misrepresentation, breach of fiduciary duty).
Defendants moved to dismiss under Rule 12(b)(6), attaching public stock-price data and SEC filings; Court took judicial notice of those public records.
Court held the §10b-5 claim time-barred under the 2‑year discovery limitation of 28 U.S.C. §1658(b)(1) because Plaintiffs were on inquiry notice by the end of 2007 and failed to investigate until 2010; dismissed the federal claim with prejudice.
Because the federal claim was dismissed early, the Court declined supplemental jurisdiction and dismissed the state-law claims without prejudice (noting they likely face state statute‑of‑limitations problems).

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the 5‑year statute of repose bars earlier misrepresentations	Repose should run from the last repeated misrepresentation, so claims tied to later repetitions survive	Repose bars any statements before Feb 4, 2006	Court: Repose runs from last alleged misrepresentation (Nov 2007); repose did not bar the claim
Whether the 2‑year discovery limitation bars the §10b‑5 claim	Plaintiffs lacked evidence of scienter until communications with company officials in early 2010	Plaintiffs were on inquiry notice by end of 2007 (stock collapse, public filings); a reasonably diligent investor would have investigated within 2 years	Court: §1658(b)(1) bars the §10b‑5 claim because Plaintiffs should have discovered the facts by end of 2007; claim dismissed with prejudice
Whether the Court may consider defendants’ public records on a 12(b)(6) motion	Plaintiffs: Court should not rely on extra‑pleading documents	Defendants: public SEC filings and stock prices are judicially noticeable public records	Court: May consider such public records; even without them, Plaintiffs’ own exhibit shows inquiry notice
Whether to retain supplemental jurisdiction over state claims after dismissing federal claim	Plaintiffs: implicit argument to proceed in federal court	Defendants: dismiss federal claim → state claims should be dismissed to state court	Court: Declined to exercise supplemental jurisdiction; state claims dismissed without prejudice (observing state SOL likely bars them)

Key Cases Cited

Ashcroft v. Iqbal, 556 U.S. 662 (pleading standard for plausibility)
Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (plausibility pleading standard)
Merck & Co. v. Reynolds, 559 U.S. 633 (statute of limitations/discovery rule for securities fraud)
Lum v. Bank of Am., 361 F.3d 217 (courts may consider complaint exhibits and public records on motion to dismiss)
In re Merck & Co., Inc. Sec. Litig., 432 F.3d 261 (judicial notice of stock prices and public filings)
In re NAHC Sec. Litig., 306 F.3d 1314 (taking judicial notice of SEC filings on dismissal motion)
Pension Trust Fund for Operating Eng’rs v. Mortg. Asset Sec. Trans., Inc., 730 F.3d 263 (inquiry‑notice and discovery standards)
CTS Corp. v. Waldburger, 573 U.S. 1 (statutes of repose measured from last culpable act)