The opinion of the court was delivered by: JOEL A. PISANO, District Judge
The instant consolidated actions arise out of allegations that Steven
Mark Gergel, Hensley A. West, Martin D. Kidder, and Stephen J.
Clearman ("Defendants"), in their capacities as officers and/or directors
of World Access, Inc., a publicly held telecommunications company
headquartered in Atlanta, Georgia,*fn1 were "control persons" of that
corporation and caused it to commit multiple incidences of securities
fraud. Plaintiffs Pedro Yang, Carol Jackson, Peter S. Kelsch, James
Barberian, Joseph Kinosian and Karen Kinosian, on their own behalf and as
a class action pursuant to Fed.R.Civ.P. 23 assert four causes of action
against Defendants, alleging violations of Section 10(b) and Section
20(a) of the Exchange Act, 15 U.S.C. § 78j(b) and 78t(a),
Rule 10b-5, and Sections 11 and 15 of the Securities Act, 15 U.S.C. § 77(k)
Presently before this Court is Defendants' Motion to Dismiss on the
following grounds: (1) the applicable statute of limitations has
expired; (2) the filing of this action is in violation of the
"first-filed" rule; and (3) venue is improper. In the alternative,
Defendants move for a transfer of venue to the Northern District of
Georgia. The Court has federal question jurisdiction pursuant to
28 U.S.C. § 1331. The motion was opposed, and the Court decides the
motion without oral argument as permitted by Fed.R.Civ.P. 78. After
considering the parties' written submissions, and for all the reasons
discussed below, the Court grants Defendants' motion to dismiss on the
basis of the statute of limitations. Finding Plaintiffs' claims
time-barred, the Court declines to address Defendants' other grounds for
dismissal or their request for change of venue.
For the limited purpose of this motion to dismiss under Rule 12(b)(6)
of the Federal Rules of Civil Procedure, the Court accepts as true the
facts alleged in the amended complaint and all reasonable inferences
drawn from those facts. See Hayes v. Gross, 982 F.2d 104, 106 (3d Cir.
1992); see also infra II. Rule 12(b)(6) Standard. Accordingly, the facts
recited below are taken from Plaintiff's Class Action Complaint, and do
not represent this Court's factual findings.
Plaintiffs Pedro Yang, a New Jersey resident, Carol Jackson, a
Washington resident, and Peter S. Kelsch, a California resident, are the
proposed class representatives in the Yang action. They seek to represent
a class of themselves and all other persons or entities who:
(i) acquired securities of World Access, Inc.
("WAXS") in the merger of NACT Telecommunications,
Inc. ("NACT") into WAXS, which closed on October 29,
1998 . . . (ii) acquired securities of WAXS in the
merger of Telco Systems, Inc. ("Telco") into WAXS,
which closed on November 30, 1998 . . . or (iii)
purchased securities of WAXS in the open market during
the period April 29, 1997 through February 11, 1999
who were damaged by defendants' violations of the
federal securities laws.
(Compl. ¶ 1).*fn2
Plaintiffs claim that during the class period, Defendants "issued
materially false and misleading statements and omitted to disclose
material information concerning WAXS's products, revenues, earnings,
inventory, and sales practices. . . ." (Compl. ¶ 2). Plaintiffs
further allege that throughout the class period, Defendants "engaged in a
common course of conduct that operated as a fraud on the integrity of the
market for WAXS securities." (Compl. ¶ 3). This conduct allegedly
included issuing press releases, financial statements, and other
corporate documents that failed to disclose that one of WAXS's products,
a telephone switching product known as the "CDX Switch" was a
"non-functional development-stage prototype." (Compl. ¶ 3).
Plaintiffs make a series of allegations relating to WAXS's CDX Switch.
They claim that the company sold defective switches, continued to record
revenue in connection with the non-functioning switches, and otherwise
conducted business improperly in light of the non-functioning nature of
this key product. (Compl. ¶ 3). They also allege that Defendants
misrepresented that WAXS was not losing business due to financial
conditions in Asia during 1997-1998, materially overstated WAXS's sales,
revenues, assets, inventory and earnings, materially understated
corporate expenses, and failed to disclose the reasons the company's
inventory had ballooned. (Compl. ¶ 4).
Plaintiffs charge that as a result of these actions, the market price
of WAXS securities traded at artificially inflated levels throughout the
class period. (Compl. ¶ 7). Finally, Plaintiffs allege that
Defendants' fraud resulted in announced earnings substantially less than