New York State High Court Rules That The Attorney General Has Three Years To Bring Investor Fraud Claims Under the Martin Act

On Tuesday, June 12, 2018, the New York State Court of Appeals held that the Martin Act, N.Y. Gen. Bus. L. Article 23-A, §§ 352 et seq., which “authorizes the Attorney General to investigate and enjoin fraudulent practices in the marketing of stocks, bonds and other securities within or from New York State[,]” is subject to C.P.L.R. 214(2)’s three-year limitation period rather than C.P.L.R. 213’s six-year period for, inter alia, actions “based upon fraud[.]”  See People v. Credit Suisse Securities USA LLC, et al., No. APL-2017-00056, slip op. at 2, 5-6 (N.Y. June 12, 2018).

The Court explained that C.P.L.R. 214(2) “generally imposes a three-year limitation period for ‘an action to recover upon a liability, penalty or forfeiture created or imposed by statute.’”  Id. at 5.  The provision “does not automatically apply to all causes of action in which a statutory remedy is sought, but only where liability would not exist but for a statute.”  Id. at 5 (internal citations and quotations omitted).  According to the Court, because the Martin Act “expands upon, rather than codifies, the common law of fraud” and “imposes numerous obligations – or ‘liabilities’ – that did not exist at common law,” the shorter limitation period of C.P.L.R. 214(2) governs.  Id. at 2, 10-11.