## Facts

- Institutional investors bought Medtronic securities and brought a putative class action alleging securities fraud tied to Medtronic’s spinal-fusion product, INFUSE (rhBMP-2).
- INFUSE had limited FDA-approved indications, while off-label use allegedly became widespread, including cervical-spine procedures.
- Plaintiffs alleged Medtronic sponsored and influenced clinical studies and publications, and that physician authors had significant financial ties to Medtronic.
- Public information emerged over time about safety concerns and adverse events, including a 2008 FDA public health notification warning of serious complications associated with certain off-label cervical uses.
- Independent publications and a Senate Finance Committee investigation criticized conflicts of interest and suggested Medtronic’s involvement in drafting or shaping journal articles and minimizing adverse events.
- Plaintiffs alleged Medtronic’s public statements and omissions misled investors about INFUSE’s safety profile, conflicts of interest, off-label risks, and related regulatory and litigation exposure, inflating the stock price.
- The complaint was filed June 27, 2013 in the District of Minnesota under Exchange Act § 10(b) and Rule 10b-5, and § 20(a).
- The district court granted summary judgment for defendants, holding the claims were time-barred under 28 U.S.C. § 1658(b)’s two-year limitations period (and also barred in part by the five-year repose period), relying on an inquiry-notice approach.
- Plaintiffs appealed, arguing accrual must follow Merck’s discovery rule, including discovery of facts supporting scienter.

## Issues

1. When does the two-year limitations period in 28 U.S.C. § 1658(b)(1) begin for § 10(b)/Rule 10b-5 claims: upon “storm warnings” (inquiry notice) or upon actual/constructive discovery of facts constituting the violation, including scienter?
2. Whether summary judgment was proper on limitations grounds given the sequence of public disclosures about INFUSE, the literature, and the Senate investigation.
3. Whether, and to what extent, any claims were independently barred by § 1658(b)(2)’s five-year statute of repose.

## Decision

- The Eighth Circuit reversed the summary judgment ruling that most claims were barred by the two-year statute of limitations.
- The court held the district court applied an incorrect standard by effectively starting the limitations period from inquiry notice rather than Merck’s discovery rule.
- The court remanded for further proceedings because reasonable factfinders could differ on when a reasonably diligent plaintiff would have discovered facts constituting the violation, including scienter.
- The Eighth Circuit affirmed dismissal to the extent any claims were indisputably barred by the five-year statute of repose.

## Legal Principles

- Under 28 U.S.C. § 1658(b)(1), the two-year limitations period for § 10(b)/Rule 10b-5 begins when the plaintiff actually discovered, or a reasonably diligent plaintiff would have discovered, the facts constituting the violation, including scienter.
- Post-Merck, “inquiry notice” or “storm warnings” may be relevant to diligence but do not, by themselves, trigger accrual absent discoverable facts constituting the violation.
- Public controversy, regulatory attention, or negative safety information does not necessarily establish discovery of a securities-fraud scheme or facts supporting scienter.
- Under § 1658(b)(2), the five-year statute of repose is an absolute bar for claims based on statements or omissions more than five years before suit, regardless of discovery.
- Summary judgment on limitations is improper where the discovery date depends on contested inferences from complex public disclosures and reasonable jurors could disagree.

## Conclusion

The Eighth Circuit held that the limitations analysis for Exchange Act fraud claims must follow Merck’s discovery rule, including discovery of scienter-related facts, and that widespread public safety concerns about a product do not necessarily establish discovery of securities fraud; it nonetheless enforced § 1658(b)’s five-year repose to bar any claims outside that outer period.


W. Va. Pipe Trades Health & Welfare Fund v. Medtronic, Inc., 845 F.3d 384 (8th Cir. 2016)