## Facts

- Investors who purchased American Express Co. common stock sued American Express and several senior officers and directors under § 10(b) and Rule 10b-5 based on alleged misstatements and omissions about losses and risk controls tied to a subsidiary’s high-yield bond portfolio.
- In Q1 2001, the company recorded approximately $182 million in high-yield investment losses and disclosed in a May 15, 2001 Form 10-Q that the losses reflected deterioration in the portfolio and losses from selling certain bonds.
- The Form 10-Q included a forward-looking projection that total losses on those investments for the remainder of 2001 were expected to be substantially lower than in the first quarter, along with general cautionary language about risks and uncertainties and the possibility of further losses if the high-yield sector deteriorated.
- Plaintiffs alleged the company already knew of portfolio-specific adverse developments and additional likely losses when it made the “substantially lower” projection and that the risk disclosure was boilerplate and did not address known, specific problems.
- The original complaint (filed July 17, 2002) alleged securities fraud based on misstatements and omissions regarding the portfolio; an amended complaint later added more detailed theories (including valuation and GAAP-related allegations and control failures) and added certain individual defendants.
- The district court dismissed certain amended-complaint claims as time-barred for failure to relate back under Rule 15(c) and dismissed remaining claims on the merits under Rule 12(b)(6).
- Plaintiffs appealed; defendants challenged appellate jurisdiction on the ground that the dismissal order granted leave to replead and argued certain claims and defendants were time-barred.

## Issues

1. Whether the court of appeals had jurisdiction when the notice of appeal referenced an order dismissing the amended complaint with leave to replead.
2. Whether allegedly time-barred claims and additions in the amended complaint related back to the original complaint under Federal Rule of Civil Procedure 15(c).
3. Whether the issuer waived a statute of limitations defense as to certain individual defendants.

## Decision

- The Second Circuit held it had appellate jurisdiction because, in context, the district court’s order effectively ended the case and was final for purposes of appeal.
- The court held the district court erred in dismissing two sets of amended-complaint allegations as time-barred because they related back to the original complaint under Rule 15(c).
- The court held the issuer waived the statute of limitations defense as to individual defendants Goeltz, Crittenden, and Henry.
- The court vacated the judgment and remanded, granting leave to replead only those claims previously dismissed as time-barred.

## Legal Principles

- Appellate jurisdiction may exist despite “leave to replead” language when the district court’s disposition, viewed in context, effectively terminates the action and functions as a final judgment.
- Under Rule 15(c), an amended complaint relates back when new allegations arise out of the same conduct, transaction, or occurrence described in the original pleading; added detail and additional theories may relate back when they concern the same alleged course of misstatements and omissions about the same subject matter.
- Statutes of limitation are affirmative defenses that can be waived if not timely and properly asserted and pursued in the district court.

## Conclusion

The Second Circuit treated the dismissal as final for appellate purposes, reinstated certain securities-fraud allegations by holding they related back to the original pleading, found waiver of a limitations defense as to specified individuals, and vacated and remanded with limited leave to replead the claims previously dismissed as untimely.


Slayton v. Am. Express Co., 460 F.3d 215 (2d Cir. 2006)