According to the opinion, “The combination of appellants’ 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’s Enron-related losses, and the filing of the Benak complaint placed appellants on inquiry notice prior to December 13, 2001.” Enron filed bankruptcy on December 2, 2001, and a Securities Act complaint was filed against Alliance by Patricia Benak on December 7, 2001.
The court said that, though mutual fund investors pay for the convenience of passing the responsibility of monitoring companies they are invested in and may not even know in which securities the fund is invested, the investors in this case were given knowledge of the fund’s Enron holdings and the condition of Enron via media accounts. The plaintiffs had argued that they received reports on the fund’s holdings only twice per year and were unable to obtain such information between reports.
The appellate court agreed with the lower court that the numerous media accounts had placed the investors on ‘inquiry notice’ prior to December 13, 2001, and the filing of the current suit on December 13, 2002 (See Alliance Capital Slapped With Another Enron Related Suit ) was past the one-year statute of limitations for such cases.
The appellate court opinion is here .