Tello v. Dean Witter Reynolds, Inc.

[PUBLISH]

IN THE UNITED STATES COURT OF APPEALS
FILED
FOR THE ELEVENTH CIRCUIT U.S. COURT OF APPEALS
________________________ ELEVENTH CIRCUIT
JULY 27, 2007
No. 03-12545 THOMAS K. KAHN
________________________ CLERK

D. C. Docket No. 02-02115-CV-T-26-EAJ

MARK TELLO,
on behalf of himself and all
others similarly situated,

Plaintiff-Appellee,

versus

DEAN WITTER REYNOLDS, INC.,
n.k.a. Morgan Stanley DW, Inc.,
PAUL GRANDE,

Defendants-Appellants,

MARK RODGERS,

Defendant.

________________________

Appeal from the United States District Court
for the Middle District of Florida
_________________________

(July 27, 2007)
Before EDMONDSON, Chief Judge, BIRCH and FARRIS,* Circuit Judges.

BIRCH, Circuit Judge:

The interlocutory appeal in this class-action, securities-fraud case asks us to

decide whether the amended statute of limitations in the Public Company

Accounting Reform and Investor Protection Act of 2002, the Sarbanes-Oxley Act

(“SOA”), 28 U.S.C. § 1658(b), revives securities-fraud actions that were time-

barred before the effective date of the SOA. Following our determination that

specific facts relating to inquiry notice were necessary for our decision, we

returned this case to the district judge on limited remand. Tello v. Dean Witter

Reynolds, Inc., 410 F.3d 1275 (11 th Cir. 2005). After reviewing the facts

concerning inquiry notice produced on limited remand, we conclude that this class-

action, securities-fraud case was time-barred by both the former statute of

limitations and the SOA statute of limitations, when it was filed. Accordingly, we

reverse denial of defendants’ motion to dismiss and remand for dismissal.

I. BACKGROUND

A. Factual and Procedural History

This class-action, securities-fraud case concerns alleged conduct by Dean

Witter Reynolds, Inc., currently known as Morgan Stanley DW, Inc., and its

*
Honorable Jerome Farris, United States Circuit Judge for the Ninth Circuit, sitting by
designation.

2
former brokers Mark Rodgers and Paul Grande (collectively, “Dean Witter”)

regarding e-Net, Inc. stock for Internet telephone service from January 1, 1998,

until August 19, 1998.1 On October 1, 2002, the Securities and Exchange

Commission (“SEC”) issued an Order Instituting Public Administrative and Cease-

and-Desist Proceedings Pursuant to Sections 15(b) and 21C of the Securities

Exchange Act of 1934, Making Findings and Imposing Remedial Sanctions

(“SEC” Order) on Dean Witter, Rodgers, and Grande. The class-action complaint

was filed on November 15, 2002, by then class representative E. Paul Roberts, who

subsequently was replaced as class representative by Mark Tello. Tello, 410 F.3d

at 1277 n.1.

Dean Witter moved to dismiss the complaint and argued that the SOA

statute of limitations, which is two years from the date of discovery or five years

from the date of the securities fraud, that became effective on July 30, 2002, does

not control this case. 28 U.S.C. 1658(b). Instead, Dean Witter contended that the

former statute of limitations governed, which required bringing an action within

one year after discovery of the facts constituting the securities fraud or three years

1
The short-squeeze that artificially inflated the e-Net stock price by Dean Witter, and
Rodgers’s unauthorized purchases of e-Net stock in accounts of his clients, including
falsification of order tickets and false statements to his clients to discourage them from selling e-
Net stock during the relevant time period that was the basis of the alleged securities fraud in this
case, is described in our previous opinion. Tello, 410 F.3d at 1276-78.

3
after the violation. 15 U.S.C. § 78i(e). Although the original district judge

determined that the SOA limitations period revives formerly time-barred claims

and denied Dean Witter’s motion to dismiss, he nonetheless permitted Dean Witter

to seek appellate determination of this question.

On interlocutory appeal, we determined that our circuit law on inquiry notice

required that we know whether the class had sufficient inquiry notice of the alleged

securities fraud to have filed the class-action complaint before the effective date of

the SOA. At the preliminary, motion-to-dismiss stage of the case, these facts had

not been developed. Accordingly, on limited remand, we asked the reassigned

district judge to provide the answers to two questions: “(1) What established

inquiry notice to the plaintiff class, and when did that occur?” and “(2) When did

the plaintiff class have sufficient information to file suit?” Tello, 410 F.3d at 1294.

B. Proceedings on Limited Remand

The district judge conducted a status conference and requested that the

parties provide him with a joint stipulation of the time that they would need for the

limited discovery required to answer our inquiry-notice questions. The parties

stipulated that they would need ninety days to conduct limited discovery necessary

to answer our questions and that this limited discovery would consist of an

exchange of document requests and Tello’s deposition. Thereafter, the district

4
judge entered an order scheduling limited discovery and briefs on the inquiry-

notice issues to be addressed on limited remand to be followed by an evidentiary

hearing and oral argument.

In the brief for the class with accompanying exhibits on remand, Tello’s

position is that there was no inquiry notice of Dean Witter’s far-ranging scheme

regarding e-Net stock until it was exposed and delineated in the SEC Order on

October 1, 2002. He asserts that the class complaint was filed promptly within six

weeks after the SEC Order issued. In contrast, Dean Witter’s view, supported by

its brief and exhibits, is that the precipitous drop in e-Net stock, combined with

numerous articles in nationally and regionally distributed publications, addressing

the abrupt decline in the price of e-Net stock, put the putative class on inquiry

notice of the allegations in the complaint no later than August 14, 2000, the date

that the last such nationally significant article was published. Consequently, the

class was on notice well before the new SOA statute of limitations became

effective on July 30, 2002, the former statute of limitations controls, and this case

was time-barred under the prior, three-year repose statute. As we explain

hereinafter, neither side is correct in stating the cause of inquiry notice from which

to calculate the time required to file the class-action complaint.

The evidentiary hearing purportedly sought to resolve the two questions that

5
we posed to the district judge on limited remand: (1) what established inquiry

notice for the plaintiff class and when? and (2) when did the class have sufficient

information to file its class-action complaint? Accepting the time period for the

alleged securities fraud conduct by Dean Witter as stated in the complaint, January

1, 1998, through August 19, 1998, the parties agree that the alleged fraud ended on

August 19, 1998. Dean Witter presented evidence that three events established

inquiry notice for the plaintiff class. First was the 80 percent drop in e-Net stock

that occurred from August 18, 1998, to September 11, 1998, during which time “e-

Net’s CEO was issuing public statements saying nothing ha[d] changed about the

company.” Second Supp. R. at 17. Tello purchased 1,500 shares of e-Net stock on

July 13, 1998, at $17 and 1/16 per share, and he purchased 1,000 shares of e-Net

stock on July 15, 1998, at the same price. Tello Dep. at 42-44. As of July 1998, he

had invested over $40,000 in e-Net stock, a substantial investment that Tello

testified caused him to “check the price regularly.” Id. at 44.

Second was the Washington Post article, “A ‘Doonesbury’ Imitation That’s

No Laughing Matter,” which was published on September 14, 1998. Tello testified

that “[t]his is the only article that I ever read about e-Net.” Id. at 132. In

conjunction with the dramatic drop in the price of e-Net stock, he asserted that this

Washington Post article “made me think that the stock price took a nose dive. I

6
read this, and in my opinion, the whole world had read it and were running to sell

their e-Net.” Id. at 133. Recognizing that the signs of the collapse of e-Net stock

were on the Internet from numerous postings and articles following the drastic

drop in e-Net stock value, the Washington Post article explains that, while e-Net

revenue rose 32 percent to $723,000, expenses rose 300 percent to $4,200,000.

“Only in cyberspace and satiric cartoons did anyone argue that a start-up company

could be worth 200 times its annual revenue.” Jerry Knight, “A ‘Doonesbury’

Imitation That’s No Laughing Matter,” The Washington Post, Sept. 14, 1998. The

company never made a profit. The price of e-Net stock plummeted from a high of

$19 a share to $2.78 and 1/8 a share, which caused 85 percent of the investment of

e-Net shareholders to evaporate and made e-Net a repetitive source of commentary

on Internet investment bulletin boards. Such commentary, noted in the

Washington Post article, included TheStreet.com,2 which had warned that, with the

2
TheStreet.com article, titled, “Entangled in e-Net,” which is referenced in the
Washington Post article, states in relevant part:

e-Net’s (ETEL) longs and shorts are caught in a mess.

Shares of Internet telephony concern have slipped by more than 50% since
they closed at 19 Aug. 17, but the longs may still be in for more pain, as e-Net has
filed to sell 1.1 million shares in a secondary offering that will go effective
shortly.

e-Net’s share-price gyrations should serve as a cautionary tale for
investors interested in betting on small-cap technology stocks. Despite minuscule
revenues and a number of tough competitors, e-Net’s stock almost tripled in a few
months, seemingly more on speculation than on news—and then just as

7
mysteriously fell back sharply.

This little Germantown, Md.-based company reported just $723,000 in
sales for its fiscal year ended March 1998 while ringing up losses of $3.9 million.
Sales to three companies made up 82 of that revenue. Yet, as recently as two
weeks ago, the company boasted a market capitalization in excess of $154
million. That’s 213 times revenue.

Despite the hype surrounding Internet telephony last year, 2-year-old e-
Net was a sleeper when it went public on Nasdaq in April 1997. In late March e-
Net shares began to climb, nearly tripling to 18 3/8 from 6 ½ in late June. The
shares then hovered around that level for almost five weeks in heavy trading,
never once closing below 17, while the Nasdaq tumbled 7%. In mid-August, after
bumping briefly to a 20 intraday high, the stock began a slow nosedive. On
Tuesday[,] the company’s shares skidded 1 1/8 to 9 ½, even as the stock market
rallied.

Some investors who asked not to be named expressed concern that the
run-up in e-Net’s stock price this spring was unjustified. “I’m disconcerted at the
recent stock activity,” says one investor who is long the stock (and who would
benefit if the stock price rose).

Two shorts (who would benefit if the stock price fell) and one long
believe that a player, trading through market maker Morgan Stanley Dean Witter,
amassed a large position and kept the stock above 17 for six weeks this summer.
Shares started their decline Aug. 19, the same day that shorts say Dean Witter
stopped its buying pattern. In prior weeks Dean Witter was a consistent buyer at
17, the three people say.

This persistent buying helped push up the price and made the short-sellers
sweat. Price fluctuation is unlikely to go away. The short interest in the stock
soared to about 719,100 shares as of Aug. 14—nearly 9% of outstanding stock,
and more than double the level in mid-July.

But e-Net, with a float of only 2.1 million shares, has the shorts hurting
even as the price has fallen. Two money managers who had been short e-Net say
they recently were “brought in.” A buy-in occurs if the lender demands its stock
back, and cannot get shares elsewhere, forcing the short to “cover” by buying
stock and returning it to the lender prematurely. The short might lose money or
make less than intended.

“All said, I probably haven’t made any money” as a result of the buy-ins,
said one money manager recently, even though he had shorted the stock at 17.

8
stock value down to $9, “E-Net stock might tank when those freshly registered

shares were unloaded.” Id. Since e-Net “stock was sold privately and not

registered with the Securities and Exchange Commission, it could not be traded

and did not dilute the holdings of current investors.” Id.

A spokesman for Morgan Stanley Dean Witter declined to comment on
trading activity. A Securities and Exchange Commission spokesman declined to
say whether the regulator is investigating e-Net trading. A Nasdaq official also
declined to comment.

Of more immediate concern to investors is e-Net’s plan to sell 1.1 million
common shares, including 750,000 shares that were issued in a private placement
in April, according to an amended document filed with the SEC Aug. 25. The
rest is covered by warrants priced at between 8 and 9 and issued to the
underwriters and placement agents. Holders will be able to sell when the
registration goes effective, according to an SEC official familiar with the filing.
The SEC declined to say when that might take place.

The added shares could weigh on a stock that already is feeling pressure.
....
For a company whose losses are five times as large as sales, there are
some questions regarding how e-Net compensated a part-owner and executive.
According to a recent SEC document, the company paid legal fees of $380,000 to
Thomas Prousalis, an attorney and 11% owner, for his work with the IPO in April
1997. Prousalis had already received $100,000 for an offering that was aborted in
September 1996. The company originally intended to go public thorough Stratton
Oakmont, which was expelled from the securities industry in late 1996 amid
charges of bilking investors.

In addition, e-Net rented an airplane from a company owned by its CEO,
Rob Veschi, paying $62,900 in the March fiscal year. Veschi takes home an
annual salary of $175,000 along with a 50% bonus that “is not subject to any
performance criteria.”

Investors, on the other hand, should pay attention to performance. Or pay
the price.

Kevin Petrie, Entangled in e-Net, TheStreet.com, Sept. 2, 1998 (emphasis added).

9
 But on Aug. 25 E-Net disclosed in filings available on the
Internet that it had registered those shares and two other batches,
dumping an additional 1.125 million shares on the market.
....
In fact, according to sources familiar with trading in the stock
report, investors who held the newly issued stock already had cashed
in their investment before the shares were even registered, when the
stock was still trading in the high teens.
Selling unregistered stock is illegal, but what some investors are
believed to have done was to get out in advance by short-selling—that
is, borrowing stock from someone else and then selling it. Usually,
short-sellers “cover” their positions and repay the stock loans by
purchasing the stock later at a lower price. But in this case, they
simply used the newly registered shares to repay the stock loans.
Sale of the new shares was the third strike for E-Net
stockholders, who already had been whacked by the overall stock
market decline and the severe tech stock correction.

Id. (emphasis added). Tello admitted that it would not be unreasonable for

investors with considerable shares of e-Net stock to ascertain the meaning of a

short squeeze through various articles and Internet postings referencing this term.3

Id. at 146. While he did not consult any Internet articles or postings, Tello testified

that he did not think it would be unreasonable after reading the Washington Post

article for interested investors to locate articles on the Internet regarding e-Net. Id.

at 136.

The Washington Post article on e-Net stock was referred to Tello by his

3
Tello acquired Internet service after January 1997. Tello Dep. at 151. While five
Internet postings have been addressed in this litigation, some 900 were available to those
interested in researching e-Net stock. Second Supp. R. at 43.

10
stepfather, E. Paul Roberts, whom Tello succeeded as class representative, and who

told Tello: “You should read that article. You need to read that article.” Id. at 39.

After reading the article, Tello testified as to his reaction: “It was not good about

the company. It talked about how the company’s valuation was—it was way

overhauled and how they weren’t making any money. It just wasn’t a very good

article.” Id.

Importantly, Tello testified that the Washington Post article alerted him, as

well as “everybody else,” of the catastrophic problems with e-Net stock and Dean

Witter’s involvement:

Q. Is it also your understanding of the complaint that one of the ways
in which Dean Witter and its employees allegedly manipulated the
stock price of e-Net was by creating and promoting a plan to withhold
from the short sellers a certain amount of stock to affect a short
squeeze? Is that your understanding of the complaint?
....
A. Yes.
Q. And is it your understanding that the short squeeze somehow
manipulated the price of the e-Net stock?
A. Yes.
Q. And do you have any evidence to believe that there was a short
squeeze put in place with respect to e-Net?
A. That’s what the SEC order detailed.
Q. Have you seen anything else at any time that referenced a short
squeeze in connection with e-Net?
A. No. I read the Washington Post article in September of . . . 1998.
And that was the only article that I read about the company until I
then was presented with the case and the SEC order in 2003. And it
was my understanding that it was due to that one Washington Post
article that the whole stock just plummeted.

11
 Q. What did you base that understanding on? Is that something you
came to on your own conclusion or something that someone told you?
A. No, something that I came to on my own, you know, justification.
My stepfather told me about the article, I read it, and it just seemed
like everybody else had read it and had sold their shares because the
article scared them so much. And the dot-com industry was just going
gangbusters, and it was, I guess, right around that time that the bubble
started bursting.
....
Q. Would [a June 21, 2000, St. Petersburg Times article concerning a
similar experience with e-Net stock to that of Tello] have caused you
to do any further fact-finding to look into why e-Net fell as much as it
did while you owned it?
A. No. Because I had already formed my opinion that it was because
of the Washington Post news article.

Tello Dep. at 55-56, 99 (emphasis added). “Waiting for the inevitable bounce,” id.

at 133, however, Tello did not sell his e-Net stock until April 1999 for less than $4

a share, id. at 131.

The third source of inquiry notice proffered by Dean Witter is the article,

“Borrower, Beware” published in Fortune magazine on August 14, 2000. At the

evidentiary hearing, counsel for Dean Witter explained that this article was

important because it specifically discusses Dean Witter and Mark Rodgers as well

as the allegations of unauthorized trading in e-Net stock, breach of fiduciary duty,

and Dean Witter’s settlement of the claim for $531,000.4 Dean Witter’s counsel

4
Using various investors who had lost their retirement savings through investments
involving margins, the article is revealing and chilling. One of the investors, David Spaulding, a
sixty-year-old captain of three charter fishing boats, explains how he asked Dean Witter broker
Mark Rodgers in Clearwater, Florida, to manage his retirement portfolio that was valued at over

12
specified the significance of the Fortune article to this class action and as the third

factor constituting inquiry notice:

Why that reference to unauthorized trading is important is
because, as alleged in the lawsuit here, unauthorized trading doesn’t
just hurt the person in whose account it supposedly took place. As the
Plaintiff[]s allege here, unauthorized trading[,] especially in a thinly
traded stock like e-Net[,] can be a tool that is used to create demand
for a stock, and manipulate the price of the stock.
So it is our position that these three events taken together, the
dramatic decline in price [of e-Net stock], the Washington Post article,
and the Fortune article, that is what established inquiry notice. That is
what gave a reasonably objective investor enough notice to at least
begin investigating the possibility that his rights ha[d] been infringed.

Second Supp. R. at 19-20 (emphasis added).

Significantly, Tello knew Edward Ratkovich, a longtime friend of Tello’s

stepfather, Roberts, the original plaintiff and class representative in this case.

Ratkovich was the second largest stockholder of e-Net stock, and he asked Tello to

replace his stepfather as the class representative in March 2003. The same counsel

$900,000 at the end of 1997. In June 1998, Rodgers bought $150,000 of e-Net stock, and, over
the next two months, continued purchasing e-Net until it was half of Spaulding’s portfolio.
Spaulding contends that the e-Net trades were unauthorized and that he asked Rodgers to get out
of the margin immediately. Ultimately, Spaulding lost his entire retirement savings, nearly
$1,000,000, he had to sell the rest of his portfolio to meet the margin calls, and he still owed
Prudential over $400,000 for his margin debt. Spalding, who went from being secure to being in
the hole in a few short weeks, filed a complaint against Dean Witter and Rodgers with NASD
Regulation, which included breach of fiduciary duty and unauthorized trading. Dean Witter
settled with Spaulding for $531,000. Rodgers and Prudential opted for arbitration; Spaulding
was awarded $380,000, but $275,000 was deducted to reimburse Prudential for its outstanding
margin debt. Margaret Boitano, “Borrower, Beware,” 142 Fortune 132, Aug. 14, 2000.

13
who represents Tello in this case represented Ratkovich in a complaint filed in

May 1999 against Dean Witter and Mark Rodgers, the details of which are

discussed in a May 16, 1999, article in the St. Petersburg Times.5

Ratkovich and others, who pursued arbitration proceedings, had the same

allegations of securities fraud against Dean Witter that Tello makes for the class in

this case. These legal proceedings against Dean Witter plus the various articles not

only in national publications, like the Washington Post and Fortune, but also in

regional Florida newspapers, led Dean Witter’s counsel to argue at the evidentiary

hearing:

[W]hether Mr. Tello chose to read all of these sources or not, I
submit, is immaterial. Once you are on a reasonable duty of inquiry,
you are charged with knowledge of these. If you don’t look at them,
they are going to be imputed to you.
The reasonable investigation on that date also would have led
an investor to no fewer than seven articles referencing the price
decline, and no fewer than five articles referencing the short squeeze
and misstatements designed to discourage people from selling. All of
that is part of the Complaint.
. . . [W]e believe the answer to the Eleventh Circuit’s second
question should be that the putative class upon a reasonably diligent
investigation could have had access to sufficient information to file a
suit no later than August 14, 2000.

Second Supp. R. at 31 (emphasis added). In contrast, Tello’s counsel maintained

5
Dean Witter’s counsel explained at the evidentiary hearing that “the market
manipulation allegation in the Ratkovich case really speaks volumes” as to information that was
available on the same allegations regarding Dean Witter’s conduct concerning e-Net stock long
before the class action complaint was filed in this case. Second Supp. R. at 75.

14
that the SEC order was the operative date of inquiry notice, “the defining moment

in history when a reasonable investor should have been on both inquiry notice, and

had facts sufficient to bring a claim.” Id. at 51.

Following the evidentiary hearing, the district judge issued a five-page

order, a copy of which is attached as the Appendix to this opinion. The judge

states that, in compliance with his discovery order on our limited remand,

the parties submitted 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 [evidentiary] hearing by two hours of vigorous
oral argument. Neither party elected to present testimony at the
hearing.

1 First Supp. R. 65 at 2 n.1.

With the substantial evidence produced on limited remand, the district judge

failed to delineate in his order any process that he used to analyze when inquiry

notice occurred for the class and when there was sufficient information to file the

class-action complaint, the two questions that we remanded the case for him to

answer. Instead, he conclusively stated:

After affording the parties a full hearing on the inquiry notice
question, the district court finds no such moment [when the plaintiff
class was on inquiry notice of the alleged securities fraud by Dean
Witter relative to e-Net stock]. Unsurprisingly, the plaintiffs’ theory
places inquiry notice on October 1, 2002, after the effective date of

15
 Sarbanes-Oxley (Doc. 60). Equally unsurprisingly, the defendants’
theory places inquiry notice on or before August 14, 2000 (Doc. 58).
(Of course, the statute of repose barred the plaintiffs’ action on
August 20, 2001, irrespective of inquiry notice). The parties’
irreconcilable versions of the pertinent history present genuine issues
of material fact resolvable only by a jury.

Id. at 3-4 (footnote omitted). Then, “irrespective of inquiry notice,” the judge

proceeded to analyze the legal question before us on interlocutory appeal

concerning whether the SOA revives time-barred cases. Id. at 4. Therefore, we

must decide if the testimony and evidence produced by the parties on limited

remand in the district court resolve the inquiry-notice issues that we need answered

before deciding the question presented to us on interlocutory appeal, which

involves determining which statute of limitations governs in this case.

II. DISCUSSION

A. Consideration of Facts Before the District Court

When this court remands a case to a district court with specific factual

questions to resolve, we expect the district judge to answer those questions.

Because of our circuit law on inquiry notice, which includes factual

determinations, we are unable to answer the interlocutory question on appeal until

we know which statute of limitations controls in this case. The former statute of

limitations for securities fraud actions was “within one year after the discovery of

the facts constituting the violation and within three years after such violation.” 15

16
U.S.C. § 78i(e); Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, 501 U.S.

350, 364 & n.9, 111 S.Ct. 2773, 2782 & n.9 (1991). The remedial SOA statute of

limitations is “(1) 2 years after the discovery of the facts constituting the violation;

or (2) 5 years after such violation.” 28 U.S.C. § 1658(b). To comply with our

circuit inquiry-notice requirements, we asked the district judge on limited remand

to make the factual determinations necessary for our legal decision on interlocutory

appeal and to tell us: “(1) What established inquiry notice to the plaintiff class, and

when did that occur?” and “(2) When did the plaintiff class have sufficient

information to file suit?” Tello, 410 F.2d at 1294.

Although the parties produced the documentation necessary to answer these

questions, including the revealing deposition of Tello, the district judge has given

us no indication that he reviewed and analyzed the considerable documents

produced on limited remand. Instead, he first characterizes our limited remand

from an interlocutory appeal from a motion to dismiss as “an unusual event.”6 1

6
Because we are not factfinders, when we need facts to resolve legal questions before us,
we return the case to the district court on limited remand for the requisite factfinding or
determination of specific factual issues. See, e.g., Callahan v. Campbell, 427 F.3d 897, 924 (11th
Cir. 2005) (limited remand to determine unaddressed claims had been ordered in habeas corpus
case); Rolling Greens MHP, L.P. v. Comcast SCH Holdings L.L.C., 374 F.3d 1020, 1023 (11th
Cir. 2001) (per curiam) (limited remand for determination of citizenships of the parties);
Williams v. Best Buy Co., 269 F.3d 1316, 1321 (11th Cir. 2001) (limited remand to develop the
record and make factual findings concerning the amount in controversy at the time of removal);
O’Neal v. United States, 258 F.3d 1265, 1270, 1277 (11th Cir. 2001) (limited remand with
instructions to recalculate the interest deduction at the conclusion of estate-tax case); Lucero v.
Trosch, 121 F.3d 591, 595 (11th Cir. 1997) (limited remand had been ordered to conduct an

17
First Supp. R. 65 at 2. Second, the judge simply recited the dates that the parties

considered to be operative for inquiry notice: for the class, October 1, 2002, the

date of issuance of the SEC Order; for Dean Witter, August 14, 2000, the date of

publication of the Fortune article, describing specifically Dean Witter’s securities

fraud. The judge did not address whatsoever the documents that the parties

presented to substantiate those two dates. Consequently, the judge announced that

he could not determine inquiry notice, apparently based only on the evidentiary

hearing. Third, seemingly ignoring the inquiry-notice issue that we sent to him for

resolution, the district judge proceeded to address the statute-of-limitations issue

before us on interlocutory appeal. The comments of the district judge and his

failure to provide the answers to factual questions that we needed to resolve the

threshold issue of inquiry notice before we can make the legal statute-of-

limitations determination were unhelpful and judicially inefficient by declining to

inquiry as to whether injunctive relief was moot regarding operator of abortion clinic); James v.
Singletary, 995 F.2d 187, 187 (11th Cir. 1993) (per curiam) (limited remand to determine
competence to stand trial had been ordered in habeas corpus case); Atlantic States Legal Found.
v. Tyson Foods, Inc., 897 F.2d 1128, 1143 (11th Cir. 1990) (limited remand for 120 days to
calculate penalties for environmental pollution of poultry processing plant and reasonable
attorney’s fees, including evidence form both sides as to number of violations, expense of
compliance with federal law, and increased economic gain from noncompliance). Indeed, the
former Fifth Circuit issued a limited remand in a case pursuant to a petition for rehearing for the
district judge to determine if the operative one-year statute of limitations controlled. Equal
Employment Opportunity Comm’n v. Griffin Wheel Co., 521 F.2d 223, 225 (5th Cir. 1975) (per
curiam). Limited remands at various litigation stages clearly are not “unusual.” 1 First Supp. R.
65 at 2.

18
follow our specific instructions on limited remand.

“Many times, and in many contexts, this Court has admonished district

courts that their orders should contain sufficient explanations of their rulings so as

to provide this Court with an opportunity to engage in meaningful appellate

review.” Danley v. Allen, 480 F.3d 1090, 1091 (11 th Cir. 2007) (per curiam)

(including cases cited in this interlocutory appeal from a motion to dismiss and

remand for factfinding and legal analysis to substantiate the ruling). Because the

documents produced by the parties clearly resolve the inquiry-notice issues that we

wanted resolved by the district judge and because these documents were before the

district judge in the first instance pursuant to his order, albeit with no apparent

review, we have considered them and find the answers to our questions on limited

remand to be obvious.7 From the perspective of judicial efficiency, and because

the answers to our inquiry-notice questions are abundantly evident from the

testimony and documents produced by the parties on limited remand, we now use

7
If the answers to our questions had not been so plain from the testimony and evidence
produced on limited remand, we would have remanded for a possible bifurcated trial for a jury to
determine the facts necessary for the inquiry-notice determination presented to us on
interlocutory appeal, potentially before another judge. See Kennedy v. Tallant, 710 F.2d 711,
716 (11th Cir. 1983) (advisory jury in class action determined whether plaintiff filed the case
within two years of the securities fraud using due diligence to compute applicability of the
statute of limitations); see also United States v. Martin, 455 F.3d 1227, 1242 (11th Cir. 2006)
(judicial reassignment); United States v. Torkington, 874 F.2d 1441, 1447 (11th Cir. 1989) (per
curiam) (same). While that process may be necessary in future cases, it is not required in this
case, where the testimony and documentation are so clear that such a procedure would have been
judicially inefficient.

19
them to resolve the inquiry-notice issues so that we can proceed to decide the

statute-of-limitations issue that has been presented to us on interlocutory appeal.8

B. Inquiry Notice

In our previous opinion, we discussed inquiry notice in our circuit in detail,

which is significant for determining when knowledge of a potential securities fraud

occurred, and the determination of how much time would be needed to file a

complaint. Tello, 410 F.3d at 1283-88. While we know that the class action

complaint in this case was filed on November 15, 2002, which ostensibly would

place it under the SOA statute of limitations, we did not know from the record at

the motion-to-dismiss stage whether the plaintiff class had sufficient inquiry notice

and information to have filed the class-action complaint sooner and whether such

an earlier date would have placed the class under the former statute of limitations.

This was the purpose for our limited remand.

8
The district judge quotes from our prior opinion that “‘[w]hether a plaintiff had
sufficient facts to place him on inquiry notice of a claim for securities fraud . . . is a question of
fact, and as such is often inappropriate for resolution on a motion to dismiss under Rule
12(b)(6).’” 1 First Supp. R. 65 at 3 n.2 (quoting Tello, 410 F.3d at 1284) (emphasis added).
“Often,” however, is not “always,” and this is plainly a case where limited discovery on inquiry
notice makes the legal issue presented to us on interlocutory appeal dispositive without full
discovery. Rather than expressing his disagreement with our remand to him for limited, specific
factfinding, the district judge could have helped us greatly by reviewing the documentary
evidence produced by the parties, which demonstrated that they understood the limited facts that
we needed to resolve the statute-of-limitations question before us on interlocutory appeal. We
appreciate their assistance. Instead, the district judge elected to state his own view of how the
case should be resolved legally.

20
 Inquiry notice in our circuit occurs when there is factual evidence of the

possibility of securities fraud that would cause a reasonable person to investigate

whether his or her legal rights had been infringed. Id. at 1283. Actual proof of

securities fraud is not required for inquiry notice. Id. “[S]torm warnings” are

circumstances creating a duty of inquiry, such that an investor who acquires

knowledge of storm warnings and does not investigate whether a securities fraud

had occurred will have the available knowledge imputed to him or her. Id. Once

inquiry notice occurs, a prospective plaintiff enters a period of reasonable

diligence, which is the time necessary, exercising ordinary investigation, to

ascertain sufficient facts to file a complaint. Id. Remedial securities laws for

combating fraud, such as the SOA, are enacted with the recognition that many

securities frauds are inherently complex and, allowing time to develop the facts, is

judicially efficient. Id. at 1285-88.

We concluded our inquiry-notice analysis by explaining that “the task for the

district judge on remand will be to determine the point in time when the plaintiff

class had sufficient information of the alleged fraudulent securities conduct by

Dean Witter to file this class action.” Id. at 1288. We stated the two questions that

we wanted answered on limited remand: “(1) What established inquiry notice to

the plaintiff class, and when did that occur?” and “(2) When did the plaintiff class

21
have sufficient information to file suit?” Id. at 1294. Because the district judge

answered neither question, we proceed to answer each based on the testimony and

documentation produced by the parties on limited remand to the district judge.9

9
From his comments at the evidentiary hearing, the district judge appears to have been
annoyed with the limited remand in this case and did not undertake to analyze it in terms of our
inquiry-notice law. The parties, however, understood what we had requested as the exchange
between the district judge and Dean Witter’s counsel shows:

COUNSEL: I think we should go forward on limited discovery on the limited
inquiry issue . . . .
I suppose there is a way where there is not a question of fact. The way I
can see that is, all of the evidence we are relying on comes from the public record.
Newspaper articles, pleadings, complaints comes from the public record in terms
of inquiry notice.
THE COURT: Do you mean to say you think it may not be a subject of dispute,
or there may be no genuine issue?
COUNSEL: It may not be a genuine issue [of] fact . . . . [T]he facts are what they
are, and the test is not whether this is a particular investor who knew or should
have had inquiry notice, but whether a reasonable, objective person based on that
undisputed set of facts would have had inquiry notice.
I think that is something Your Honor could resolve, and make a finding to
the Eleventh Circuit. They then could decide, based on Your Honor’s findings,
whether the claim is time-barred, whether it has been revived, whether the old
statute of limitations applies or the Sarbanes-Oxley . . . .
THE COURT: That there may be no genuine issue?
COUNSEL: I think the public record is what it is. I think the test is whether a
reasonable person faced with that record would have [had] inquiry knowledge.

2 First Supp. R. at 16-17 (emphasis added).
Following limited discovery, Dean Witter’s counsel again explained to the district judge
at the evidentiary hearing the factual determinations that we expected him to make on limited
remand:

I think [the Eleventh Circuit is] asking you to determine whether you can say
based on the record evidence as a matter of law that inquiry notice occurred
before the Sarbanes-Oxley Act, and if so when.
I think you can make that determination. I will walk you through the
reasons why. They did leave open the possibility that Your Honor may not be
able to find that as a matter of law. You may find that there is a fact question
here.

22
 Again, I think based on the record evidence, and the standard that applies,
including the reasonable objective person standard, Your Honor can make a
decision as to when the putative class was on inquiry notice.

Second Supp. R. at 12-13 (emphasis added).

23
C. Establishment of Inquiry Notice

Dean Witter asserts that three events collectively establish inquiry notice: (1)

the 80 percent drop in e-Net stock that occurred from August 18, 1998, to

September 11, 1998, (2) the Washington Post article, and (3) the Fortune magazine

article. Since the last of the publications, the Fortune article, was published on

August 14, 2000, that is the date by which Dean Witter contends that inquiry

notice was established for the purpose of assessing the running of the statute of

limitations. We address each of these occurrences as to establishing inquiry notice

in our circuit.

First, we have rejected a sharp decline in stock value as indicating securities

fraud, which would constitute inquiry notice. La Grasta v. First Union Secs., Inc.,

358 F.3d 840, 846-48 (11 th Cir. 2004). “There may be numerous reasons, other

than fraud, for a stock to decline (even steeply) in price.” Id. at 847. Such reasons

include “‘a depressed real estate market caused either by tight money or

recession,’” stock volatility, poor management, or general market conditions.10 Id.

10
As we have recognized,

to state the obvious, the stock market—where risk is inherent—is
not a place for those who are faint of heart or weak of stomach.
Individuals who put their money in equities in the hope of
garnering great returns do not have the peace of mind provided by
FDIC insurance, and must be willing to live with fluctuations in
the value of their investments.

24
at 846-47 (quoting Summer v. Land & Leisure, Inc., 664 F.2d 965, 969 (5 th Cir.

Unit B 1981)). Significantly, this was a period of time when the “dot com”

technology companies were highly volatile. The plunging price of e-Net stock,

however, did not cause Tello to sell his stock. Instead, he delayed seven months,

until April 1999, “[wa]iting for the inevitable bounce.” 11 Tello Dep. at 133.

Accordingly, inquiry notice was not caused by the drastic decline in value of e-Net

stock.

In contrast, Tello read the Washington Post article within a week of its

publication on September 14, 1998, on the advice of his stepfather, Roberts, who

also owned e-Net stock. Regarding his reaction to the article, Tello testified:

In my mind, the stock price plummeted because the writer of [the
Washington Post] article . . . let the cat out of the bag, and people
rushed to sell [their e-Net stock].
....
This is the only article that I ever read about e-Net. This is it.
....
[T]his is the one that caused—that made me think that the stock price
took a nose dive. I read this, and in my opinion, the whole world had
read it and were running to sell their e-Net.

Tello Dep. at 41, 132, 133 (emphasis added). The article notes that e-Net “became

a favorite on Internet investment bulletin boards. Yahoo alone lists some 900

La Grasta, 358 F.3d at 847.
11
Tello testified that Roberts, his stepfather and predecessor as class representative, told
him that e-Net “would bounce back up after it went down.” Tello Dep. at 41.

25
postings about e-Net stock, most of them apparently from amateur investors taken

with the company’s technology and lure of free long-distance calls.” Jerry Knight,

“A ‘Doonesbury’ Imitation That’s No Laughing Matter,” Washington Post, Sept.

14, 1998. While Tello did not consult the Internet bulletin boards referenced in the

Washington Post article, he admitted that it would not be “unreasonable” for an

interested reader to review the Internet bulletin boards after reading the article.

Tello Dep. at 136.

Inquiry notice for determining statute-of-limitations compliance is gauged

by the knowledge of the alleged securities fraud by the class representative. Franze

v. Equitable Assurance, 296 F.3d 1250, 1254 (11 th Cir. 2002). Inquiry notice

occurs when the representative learns “‘facts that would lead a reasonable person

to begin investigating the possibility that his legal rights had been infringed’”; the

“‘possibility of fraud’” is all that is required for inquiry notice, “‘not full exposition

of the scam itself.’” Id. (quoting Theoharous v. Fong, 256 F.3d 1219, 1228 (11 th

Cir. 2001)). Tello testified that he learned of the apparent securities fraud by Dean

Witter relating to e-Net stock from the Washington Post article that his stepfather,

Roberts, the preceding class representative and e-Net investor, told him to read.

Allowing for time to read the article, which, according to Tello, was not the day of

publication, but approximately a week later, inquiry notice was established at least

26
by the end of September 1998.

The Washington Post article describes the short squeeze utilized by Dean

Witter as to e-Net stock. As he testified, Tello’s reaction to the article was that it

was enough to scare investors into selling their e-Net stock. Additionally, the

article references Internet sites, such as TheStreet.com, where a concerned e-Net

investor could have acquired a substantial amount of information, as well as the

availability of Internet searches that would have located numerous articles about

Dean Witter’s short squeeze conduct as to e-Net stock in September 1998. Such

searches also would have revealed various arbitrations concerning e-Net. “With

the advent of the ‘information superhighway,’” information regarding securities is

“easily accessed” and “[a] reasonable investor is presumed to have information

available in the public domain” and will be “imputed with constructive knowledge

of this information.” Whirlpool Fin. Corp. v. GN Holdings, Inc., 67 F.3d 605, 610

(7 th Cir. 1995).

While determination of inquiry notice is done on a case-by-case basis using

our caselaw guidance, it is clear that the Washington Post article was inquiry notice

in this case for Tello, as he asserts repeatedly in his deposition. It is inconsistent

with the law of our circuit and Tello’s testimony for him to argue that inquiry

notice did not occur until the October 1, 2002, SEC Order, which was actual

27
knowledge. Full revelation of the securities fraud is not required for inquiry

notice, only notice of the possibility of fraud, which signals the need for the class

representative to commence sufficient investigation to file a complaint. Therefore,

inquiry notice is distinguished from actual knowledge or knowledge following full

discovery. After reading the Washington Post article in September 1998, Roberts,

the original class representative, and Tello had ample information to constitute

inquiry notice to have commenced the research necessary to file a class action case

within a year of that inquiry notice under the former statute of limitations.12 The

testimony and evidence produced during limited remand shows an abundance of

information about Dean Witter’s conduct regarding e-Net stock was available with

a simple Internet search.13

Importantly, however, Tello’s deposition, shows that the Washington Post

article was sufficient inquiry notice for both Roberts and Tello. “Inquiry notice in

our circuit as to securities fraud occurs when a potential plaintiff discovers facts

12
Indeed, Roberts’s longtime friendship with Ratkovich, the second largest stockholder
of e-Net stock, who filed his substantially similar case concerning e-Net stock in May 1999,
further alerted Roberts and Tello to Dean Witter’s short squeeze relative to e-Net stock and gave
them additional direct knowledge of the situation.
13
While other articles and Internet sources independently may not have provided inquiry
notice, Tello’s deposition testimony shows that, after reading the nationally circulated
Washington Post article, simple Internet searches would have revealed them. Consequently, in
the context of this case, they were available to him; therefore, knowledge of them is imputed to
Tello.

28
evidencing securities fraud.” Tello, 410 F.3d at 1289 (citing Theoharous, 256 F.3d

at 1228). It is irrelevant that Tello replaced Roberts as the class representative in

April 2003 or that Rodgers was not Tello’s broker, because he is held to the

knowledge that he and Roberts had in September 1998 from the Washington Post

article, the only article that Tello testified that he read about the rapid fall of e-Net

stock, after Roberts referred it to him.14 Additionally, because they were aware

from the Washington Post article that specified the short squeeze that Dean Witter

had used with e-Net stock, knowledge of the other readily available articles

concerning e-Net stock was imputed to Roberts and Tello. Therefore, inquiry

notice was established by the end of September 1998 following the publication of

the Washington Post article, which is the answer to the first question that we asked

14
Tello testified that he did not read the Fortune article that Dean Witter contends is the
date of inquiry notice, August 14, 2000, and he is clear in his deposition that the Washington
Post article regarding Dean Witter’s short squeeze is the only article that he read concerning e-
Net’s stock-valuation plummet. The Washington Post article concerned Tello enough that he
determined to sell his e-Net stock, although he retained it for seven months hoping for a
rebound. Accordingly, we need not address the Fortune article as to inquiry notice for Tello,
because his deposition testimony makes clear that the Washington Post article was the source of
inquiry notice for Roberts and him, and it was published well before the Fortune article.
Nonetheless, we note from the documentation produced on limited remand that both the
Washington Post, viewed as a national newspaper, and nationally distributed Fortune magazine
have more subscriptions than Smart Money magazine, which had an article concerning a
securities fraud that we found to be the basis for inquiry notice in a class-action, securities-fraud
case. La Grasta, 358 F.3d at 846. Additionally, we upheld the finding in district court that
reading a newspaper article published in the Atlanta Journal provided inquiry notice in a class-
action, securities-fraud case. Kennedy, 710 F.2d at 714, 716.

29
the district judge to determine on limited remand.15

D. Timeliness of Filing Suit

With inquiry notice established as of September 1998, we next asked the

district judge to determine when the plaintiff class would have acquired sufficient

information to file suit. Tello, 410 F.3d at 1294. Dean Witter has produced a

plethora of articles about the plummet in the price of e-Net stock that were

available from 1998 through 2000 to interested investors. The Washington Post

article notes that 900 postings regarding the sharp drop in e-Net stock value could

have been located through the Internet on Yahoo alone. Significantly, Tello

testified that he and Roberts knew from the Washington Post article that Dean

Witter’s short squeeze as to e-Net stock was the reason for the drastic drop in its

value. The Washington Post article also referenced other articles, such as the

Internet article on TheStreet.com, which addressed the e-Net securities fraud in

more detail. Prior to 2000, “there w[ere] 13 lawsuits, arbitrations, filed against

15
The district judge did not respond to our question. Instead, he stated in his order:
“After affording the parties a full hearing on the inquiry notice question, the district court finds
no such moment [for inquiry notice.]” 1 First Supp. R. 65 at 3. We did not ask the district judge
to determine a single moment in time for inquiry notice. Publications are not necessarily read by
a class representative on the day of publication. We, however, did ask the district judge to
determine what established inquiry notice and generally when that occurred. From Tello’s
deposition, clearly the Washington Post article constituted inquiry notice, and Tello read the
article in September 1998. The district judge had the facts concerning inquiry notice plainly
before him following the limited discovery that he ordered on remand, yet he apparently
declined reviewing Tello’s deposition or the other documentary evidence that clearly would have
answered the questions that we posed to him on limited remand.

30
Dean Witter and Mr. Rodgers alleging fraud, unauthorized trading, and violations

of the securities laws.” Second Supp. R. at 32. These actions regarding e-Net

stock were proceeding in 1998 and 1999. Yet, Roberts waited until November 15,

2002, before filing this class-action case.

Under Federal Rule of Civil Procedure 8(a)(2), a complaint need include

only “a short and plain statement of the claim showing that the pleader is entitled

to relief.” Fed. R. Civ. P. 8(a)(2). By giving a defendant notice of the plaintiff’s

claim and the basis for it, “[t]his simplified notice pleading standard relies on

liberal discovery rules and summary judgment motions to define disputed facts and

issues and to dispose of unmeritorious claims.” Swierkiewicz v. Sorema, 534 U.S.

506, 512, 122 S.Ct. 992, 998 (2002); see In re Southeast Banking Corp., 69 F.3d

1539, 1551 (11 th Cir. 1995) (“‘Neither “notice pleading” requirements

(Fed.R.Civ.P. 8(a)(2)) nor the standards which govern dismissals under Rule

12(b)(6) require a claimant to set out in detail the facts upon which he bases his

claim.’” (citations omitted)). Consequently, Roberts, whose knowledge inures to

Tello, who replaced him as class representative, could have acquired sufficient

information for federal notice pleading to have filed a class-action complaint

within a year, assessed from inquiry notice in September 1998, after the

Washington Post article was published. Other similar actions concerning Dean

31
Witter’s conduct with respect to e-Net stock had been based on sufficient

information to proceed before 2000, and Ratkovich’s case concerning his e-Net

stock was filed on May 16, 1999, by the same counsel representing Tello in this

case.16 Moreover, Roberts and Tello, because of their friendship with Ratkovich,

the second largest shareholder of e-Net stock, had specific knowledge through him

and his similar e-Net lawsuit concerning Dean Witter’s short squeeze as to e-Net

stock.

The former statute of limitations for federal securities actions provided that a

16
At the evidentiary hearing, Dean Witter’s counsel noted that the 13 similar e-Net
arbitration cases had proceeded before the publication of the Fortune article on August 14, 2000:

In other words, these 13 people had enough information to make
allegations very similar to the allegations being made here. Now, I am not saying
every investor should have known about these 13 arbitrations, but I am saying
that these 13 arbitrations go to prove that there was enough information out there
before August 14, 2000 to allow the filing of a Complaint with these kinds of
allegations.
In fact, Your Honor, the Plaintiff’s counsel in this case as early as May 16,
1999, more than one year before I am arguing for, filed a complaint against Dean
Witter and Mark Rodgers on behalf of a gentleman called Edward Ratkovich,
who is identified in the May 16, 1999 St. Petersburg Times article as the, “Second
largest shareholder of e-Net.”
....
So as of May 16, 1999, there was enough information publically available
to make a charge of unauthorized trading for the purpose of market manipulation
in e-Net. That is what this claim is all about. I am talking about August 14, 2000.
This [filing of Ratkovich’s lawsuit] occurred on May 16, 1999.
I think the fact that Mr. Ratkovich was in a position to make those
allegations in May of 1999 supports our position that there was sufficient
information in the public as of August 14, 2000.

Second Supp. R. at 32-33 (emphasis added).

32
case must be “brought within one year after discovery of the facts constituting the

violation and within three years of the violation.” 15 U.S.C. § 78i(e). The

undisputed time period for the securities fraud at issue in this case was from

January 1, 1998, until August 19, 1998. Following the Washington Post article

about e-Net stock in September 1998, Roberts had sufficient time within a year, or

by September 1999, to have filed this case on behalf of the plaintiff class under

federal notice pleading. With all the information that was available as to e-Net

stock, which was imputed to him, whether he read it or not, he likely had more

knowledge of Dean Witter’s alleged securities fraud than is required by the

minimal amount of knowledge for federal notice pleading, which relies on

discovery to supply specific details of a particular securities fraud.

With regard to time needed to file this case, we asked the district judge:

“Specifically, without the SEC Order, could plaintiffs have been alerted to Dean

Witter’s fraudulent conduct concerning e-Net stock independently to enable them

to file suit before issuance of the SEC order evidencing securities fraud by Dean

Witter regarding plaintiffs’ investments?” Tello, 410 F.3d at 1294. Had the judge

reviewed Tello’s deposition, and thereby known that the Washington Post article

provided inquiry notice, the answer would have been “Yes,” as we have explained

based on the evidence produced on limited remand. Similarly, review of the

33
evidence produced on limited remand, particularly Tello’s deposition, would have

shown that the class-action complaint could have been filed within the former

statute of limitations, after inquiry notice was established by the end of September

1998.

E. Statute-of-Limitations Determination

On interlocutory appeal, we essentially were asked to decide whether the

former statute of limitations, with a one-year/three-year scheme, or the SOA statute

of limitations, with a two-year/five-year scheme, governs this case. The collective

defendants, Dean Witter, had the burden of proving the affirmative defense of a

statute-of-limitations bar. Tello, 410 F.3d at 1292. This class-action, securities-

fraud case was not filed until November 15, 2002, which generally would make the

SOA statute of limitations applicable, since it applies to cases filed after its

effective date of July 30, 2002. Nevertheless, the parties do not dispute that the

short squeeze, securities fraud at issue in this case ended on August 19, 1998. The

Washington Post article that provided inquiry notice was published in September

1998, and it is clear from Tello’s deposition that this article constituted inquiry

notice for Roberts and Tello as the successive class representatives.17 The SEC

17
We additionally have held that “‘a class representative whose claim is time-barred
cannot assert the claim on behalf of the class.’” Franze, 296 F3d at 1254 (quoting Piazza v.
Ebsco Indus., Inc., 273 F.3d 1341, 1347 (11th Cir. 2001)). It is regrettable that Roberts and
Tello, the successive class representatives, delayed until November 15, 2002, before filing suit

34
Order is not the result of a judicial proceeding, and, while it would have provided

supplementary evidence during discovery had the case been filed timely under the

former statute of limitations, there was abundant information to have filed the class

action and to have conducted full discovery without it.

Both the former statute of limitations and the SOA statute of limitations

have an inquiry-notice provision: “one year after the discovery of the facts

constituting the violation,” 15 U.S.C. § 78i(e), and “2 years after discovery of the

facts constituting the violation,” 28 U.S.C. § 1658(b)(1). Dean Witter’s alleged

securities fraud concerning e-Net stock undisputedly ended in August 1998. Since

the Washington Post article that established inquiry notice to Roberts and Tello

was published in September 1998, this class action could have been filed under

federal notice pleading within one year, or by September 1999, which also was

on behalf of the class that had purchased e-Net stock. Because there was so much exposure of
the Dean Witter’s alleged securities fraud concerning e-Net stock relatively soon after it
occurred, this is not the kind of case for which the remedial SOA was intended, cases where the
securities fraud could not have been discovered until after the former statute of limitations had
expired. Roberts and Tello, who were knowledgeable investors, had inquiry notice concerning
e-Net stock from the Washington Post article in September 1998, and their friendship with
Ratkovich, the second largest shareholder of e-Net stock, who recruited Tello to be Roberts’s
successor as class representative and filed his own case in May 1999, provided additional,
specific information concerning Dean Witter’s short squeeze with respect to e-Net stock. Given
the law of our circuit regarding inquiry notice and the available storm warnings concerning e-
Net stock, the delay in filing this class action cannot overcome the former, operative statute of
limitations. Consequently, a class of investors, who lost substantial money and savings because
of their purchase of e-Net stock and Dean Witter’s short-squeeze conduct and who were relying
on their successive class representatives to handle this class action for them, have been time-
barred in their securities-fraud case and deprived of potential recovery.

35
“within three years after such violation.” 15 U.S.C. § 78i(e). Consequently, it was

untimely when it was filed on November 15, 2002, under the former statute of

limitations. Although the SOA statute of limitations extends the time period within

which the class-action complaint could have been filed under inquiry notice by one

year, or until September 2000, the class-action complaint also was untimely under

inquiry-notice analysis when it was filed on November 15, 2002. Because of the

September 1998 inquiry notice established by the Washington Post article,

revealed by Tello’s deposition, he cannot rely on the SOA repose period of five

years from the violation, since the statute provides that the “earlier of ” the two

time periods controls. 28 U.S.C. § 1658(b).

After reviewing the remedial nature of modified, extended statutes of

limitations in our first opinion, we recognized “[f]rom analogous Supreme Court

and circuit precedent” that the “temporal reach [of § 1658(b)] inherently includes

securities fraud that occurred prior to the date of enactment.” Tello, 410 F.3d at

1282. Nonetheless, we concluded that Ҥ 1658(b) is applicable to the alleged

fraudulent securities conduct in this case, provided inquiry notice was not

sufficiently established to enable the plaintiff class to file this class action prior to

the issuance of the SEC Order.” Id. at 1282-83 (emphasis added). As the

testimony and evidence produced on limited remand revealed, inquiry notice was

36
established in September 1998 by the Washington Post article. Because Tello and

the class are time-barred under both the former statute of limitations and the SOA

statute of limitations, the question of whether the SOA statute of limitations

revives securities-fraud actions that were time-barred under the former statute of

limitations is not presented in this case, as our inquiry-notice analysis has shown.

Therefore, as we have explained, this class-action, securities-fraud case was time-

barred by both the former and SOA statutes of limitation, even though it was filed

following the effective date of the SOA.18

III. CONCLUSION

This case came to us on interlocutory appeal from denial of Dean Witter’s

motion to dismiss to decide whether the SOA statute of limitations revived

securities-fraud cases that were time-barred by the former statute of limitations.

Following limited remand, inquiry-notice analysis has revealed that this class-

action, securities-fraud case was time-barred by both the former statute of

limitations and the SOA statute of limitations, when it was filed. Consequently,

the question posed to us on interlocutory appeal is not presented on the facts of this

case. On remand, the district judge will dismiss this case as untimely filed.

18
We want to be clear that we establish no brightline rule governing which statute of
limitations applies in securities-fraud cases. Each case must be examined on its facts based on
inquiry notice to determine whether the former or the SOA statute of limitations applies.

37
Therefore, the denial of Dean Witter’s motion to dismiss is REVERSED, and this

case is REMANDED to the district judge to enter an order of dismissal.

38
EDMONDSON, Chief Judge, CONCURS in the result.

39