108 A.D.3d 658
N.Y. App. Div.2013Background
- Plaintiffs sue for breach of contract; defendants raise ninth affirmative defense and first counterclaim seeking rescission under §15(a) of the Securities Act of 1934.
- Supreme Court granted plaintiffs’ motion to strike the ninth affirmative defense and to dismiss the first counterclaim as time-barred.
- Defendants contend no implied private right of action to rescind exists under §29(b) of the Act.
- Court acknowledges an implied private right to rescind exists but holds the asserted defense and counterclaim are untimely.
- Section 29(b) provides a 1-year and 3-year window for action; CPLR 203(d) cannot extend this repose, which is an absolute bar.
- Defendants interposed the challenged defense and counterclaim more than three years after the violation, so the Court affirms the dismissal and strike as to timeliness.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is there an implied private right to rescind under §29(b) for a §15(a) violation? | Plaintiffs argue such an implied right exists. | Defendants argue no implied right exists. | Yes, implied right exists. |
| Are the ninth defense and first counterclaim timely under §29(b) and CPLR 203(d)? | Plaintiffs contend timeliness is satisfied or extended. | Defendants contend timely but were filed beyond 3-year repose. | Untimely; time-barred. |
Key Cases Cited
- Lampf, Pleva, Lipkind, Prupis & Petigrow v Gilbertson, 501 US 350 (1991) (implied right to rescind under §29(b) recognized; timing governs action)
- Mills v Electric Auto-Lite Co., 396 US 375 (1970) (statutory timing framework for private actions under securities laws)
- Regional Props., Inc. v Financial & Real Estate Consulting Co., 678 F.2d 552 (2d Cir. 1982) (illustrates applicability of §29(b) to rescission claims)
- Carter Fin. Corp. v Atlantic Med. Mgt., 262 AD2d 178 (1999) (state appellate court applying §29(b) timelines to rescission claims)