Several of the underwriters argued that the two-year period in Section 16(b) barred plaintiff's claims because the underlying facts all had been disclosed publicly years earlier, in registration statements for the offerings and in complaints from prior related litigation. The Ninth Circuit, citing its decision in Whittaker v. Whittaker Corp., 639 F.2d 516 (9th Cir. 1981), disagreed, holding that Section 16(b)'s limitations period is "tolled until the insider discloses his transactions in a Section 16(a) filing," known as a Form 4, "regardless of whether the plaintiff knew or should have known of the conduct at issue."On March 26, 2012, by an 8-0 vote (Chief Justice John Roberts took no part in the case), the Supreme Court reversed.
The Ninth Circuit disagreed and held that, irrespective of when a company (or the shareholder suing on its behalf) gains constructive or actual knowledge of trades giving rise to short-swing profits, the two-year period under Section 16(b) is equitably tolled until the defendant discloses those trades on Form 4, as Section 16(a) of the Securities Exchange Act and related SEC rules require. The court noted that prior circuit precedent — the decision nearly thirty years earlier in Whittaker v. Whittaker Corp., 639 F.2d 516 (9th Cir. 1981), cert. denied, 454 U.S. 1031 (1981) — dictated its holding.