Court Establishes Deadlines on Suits on Securities Fraud
WASHINGTON (AP) _ The U.S. Supreme Court on Thursday placed deadlines on some lawsuits charging securities fraud in a ruling likely to preclude many investors who claim they were bilked from suing.
The court also issued decisions affecting tax and libel cases.
In the securities fraud case, the justices ruled 5-4 that time limits imposed by federal law take precedence over longer statutes of limitations passed by the states.
The decision was a victory for a New Jersey law firm sued in Oregon by investors who said they were defrauded.
From 1979 to 1981, the investors purchased units in limited partnerships for the buying and leasing of computer equipment and computer software.
Each partnership was aimed at producing profits and tax benefits. The deals were put together by a West Orange, N.J., law firm, Lampf, Pleva, Lipkind, Prupis & Petigrow.
Although the partnerships lost money, investors did not investigate the reasons for the poor performance until 1986 when the Internal Revenue Service began disallowing their tax benefits. The investors then sued the law firm, charging it violated a federal securities law protecting against fraud.
The federal law, the Securities Exchange Act of 1934, requires plaintiffs to sue within three years of the time the alleged fraud is committed. The law also requires the suit be filed within one year after the alleged fraud is discovered.
Oregon law permits suits to be filed within two years of the time the investors become aware, or should have become aware, that fraud was a possibility.
The Supreme Court overturned a federal appeals court ruling which said the Oregon time limit applies.
In the tax case, the justices revived a liquor company's bid to get back $2.4 million it paid in Georgia taxes under a law later found to be unconstitutional.
The court, by a 6-3 vote, said its 1984 decision striking down a similar Hawaii tax law may be applied retroactively to Georgia's collection of taxes from 1982 through 1984.
But the reasoning behind the decision was fragmented as five of the justices wrote their own opinions. It was not clear how broadly the decision would expose other states to retroactive liability for invalidated tax laws. …