A three-judge panel of the 3rd U.S. Circuit Court of Appeals has unanimously decided to dismiss the securities suit brought forth by investors in a mutual fund that lost $900 million by waiting to sell its holdings in Enron until two days prior to the firm's bankruptcy, according to Law.com.
In Benak v. Alliance Capital Management, the judges concluded that the mutual fund investors waited too long before going to court, as the one-year statute of limitations had already passed when the Alliance investors filed the suit.
The court said that it understands that a mutual fund investor usually has "less reason to monitor the health of companies in which he or she is invested," and is "less likely to have accurate, contemporaneous information regarding where his or her money is invested."
"Although we cannot say that inquiry notice was triggered as a matter of law prior to Enron's bankruptcy, [the investors] were surely on notice shortly thereafter," wrote Circuit Judge Maryanne Trump Barry. "The combination of [the investors'] knowledge that Alliance had Enron holdings as of the prior summer, the news reports regarding Enron in the fall of 2001, the company's highly publicized bankruptcy, the publicity in the immediate aftermath of the bankruptcy referencing Alliance' Enron-related losses, and the filing of [a derivative suit] placed appellants on the inquiry notice prior to Dec. 13, 2001," the judge ruled.
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