On October 14, 2004, the Office of the New York State Attorney General filed a lawsuit against Marsh, Inc. for the practice of accepting contingent commissions and cited a number of insurers, including The Hartford, in the complaint. The following day, Appellant Staehr filed his complaint against The Hartford on behalf of a putative class of shareholders. Staehr’s complaint alleged that shareholders were misled into investing in The Hartford based on the strength of its business, which was in part due to paying contingent commissions to brokers, which The Hartford failed to disclose. The district court found that the Plaintiffs’ claims were time-barred by the Sarbanes-Oxley two-year statute of limitations based on publicly available information that placed the Plaintiffs on inquiry notice in July of 2001.
On appeal, the main issue to be decided was whether the publicly available facts amounted to a “storm warning,” which triggered a duty to inquire and started the running of the limitation period. For a duty of inquiry to exist, the facts must “relate directly to the misrepresentations and omissions the Plaintiffs later allege in their action against the defendants,” analyzed under an objective standard. The Hartford contended that a duty to inquire arose based upon media reports, regulatory filings, and state court complaints. The circuit court determined that the media reports would not put an ordinary investor on notice because the reports primarily contained industry information, not information specific to The Hartford, the regulatory filings were not specific enough with respect to contingent commissions, and an unpublicized lawsuit containing similar allegations that was filed against subsidiaries of The Hartford in a California state court would not put an ordinary investor on notice. The Second Circuit vacated the decision granting the motion of dismiss as time-barred and remanded the case to the district court. Staehr v. The Hartford Financial Services Group, Inc., No. 06-3877-cv (2d Cir. Aug. 18, 2007).