                                                        [DO NOT PUBLISH]


            IN THE UNITED STATES COURT OF APPEALS
                                                               FILED
                    FOR THE ELEVENTH CIRCUIT U.S. COURT OF APPEALS
                      ________________________ ELEVENTH CIRCUIT
                                                           MAY 11, 2006
                            No. 05-13740                 THOMAS K. KAHN
                        Non-Argument Calendar                CLERK
                      ________________________

                 D. C. Docket No. 04-02162-CV-TMP-W

BETTY LOU BAILEY, individually
and on behalf of all others
similarly situated,

                                                          Plaintiff-Appellant,

                                 versus

CUMBERLAND CASUALTY & SURETY COMPANY,
DORINCO REINSURANCE COMPANY,
JOSEPH M. WILLIAMS,
CAROL S. BLACK,
FERNANDO RUIZ,


                                                       Defendants-Appellees.


                      ________________________

               Appeal from the United States District Court
                  for the Northern District of Alabama
                     _________________________

                            (May 11, 2006)
Before MARCUS, WILSON and PRYOR, Circuit Judges.

PER CURIAM:

      Betty Lou Bailey appeals the dismissal with prejudice of her putative class

action on the ground that the statute of limitations for her securities fraud claims

had expired. Bailey argues that the magistrate judge erroneously determined that

her cause of action accrued when she was first notified that her investment was no

longer insured. Bailey also argues that the magistrate judge abused his discretion

when he declined to grant leave to amend. We affirm.

                                 I. BACKGROUND

      In fall 1998, an investment advisor representing Associated Investment

Management, Inc. (AIM), a securities brokerage firm, contacted Bailey. AIM

offered Bailey the opportunity to invest in its Insured Risk Management Program.

Under the Program, AIM would manage Bailey’s investment by purchasing and

selling shares in mutual funds. Bailey would receive a percentage of the profits

from this trading, but the key feature of the Program was that the principal she

invested would be insured against loss. The Program required Bailey to continue

her investment for five years.

      In October 1998, Bailey invested approximately $44,000 in the Program.

On October 16, 1999, Bailey “rolled up” the to-date profits of her account, which



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was then valued at more than $48,000. By “rolling up” her account, Bailey

renewed the five-year investment period.

      The Cumberland Casualty and Surety Company and Dorinco Reinsurance

Company, defendants in this action, provided the insurance for the Program

through an agreement with AIM. This agreement limited AIM to certain “trading

protocols” when managing accounts in the Program, but AIM did not follow these

protocols. In April 2001, Cumberland and Dorinco cancelled the insurance policy

covering the Program.

      In May 2001, AIM or one of its agents notified Bailey that the insurance

coverage of her investment account had been cancelled by Cumberland and

Dorinco. The letter stated that AIM believed the cancellation was wrongful and

that AIM would contest it. The letter also advised Bailey that she was still

“bound” by the five-year investment period.

      The value of Bailey’s account steadily declined from 2000 until the

expiration of her investment period on October 16, 2004. In July 2004, Bailey and

other investors in the Program filed this action against Cumberland, Dorinco, and

several of their employees (but not AIM or its employees). The putative class

alleged the defendants violated section 10(b) of the Securities Exchange Act, 15




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U.S.C. § 78j, and various state laws. The parties consented to the exercise of

dispositive jurisdiction by a magistrate judge. See 28 U.S.C. § 636(c).

      Cumberland and Dorinco moved to dismiss for failure to state a claim and

failure to file within the statute of limitations. The magistrate judge found that

Bailey’s cause of action against Cumberland and Dorinco accrued when she was

notified that the insurance companies had cancelled their coverage of the Program

and expired well before July 2004. The magistrate judge also found that Bailey

was not entitled to equitable tolling because the assertions of AIM that the

insurance would be reinstated could not be attributed to Cumberland or Dorinco.

The magistrate judge alternatively concluded that Bailey failed to plead with

particularity her claim under section 10(b).

      The magistrate judge dismissed with prejudice Bailey’s section 10(b) claim.

Bailey’s state-law claims were dismissed without prejudice. The magistrate judge

denied the other members of the putative class leave select another representative.

                           II. STANDARD OF REVIEW

      This Court reviews de novo the grant of a motion to dismiss and “accepts as

true the factual allegations in a plaintiff’s complaint and construes the facts in the

light most favorable to a plaintiff.” Kirwin v. Price Commc’ns Corp., 391 F.3d

1323, 1325 (11th Cir. 2004). “We review the district court’s refusal to grant leave



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to amend for abuse of discretion, although ‘we review de novo the underlying legal

conclusion of whether a particular amendment to the complaint would be futile.’”

Ziemba v. Cascade Int’l, Inc., 256 F.3d 1194, 1199 (11th Cir. 2001) (quoting

Harris v. Ivax Corp., 182 F.3d 799, 802 (11th Cir. 1999)).

                                  III. DISCUSSION

      Our discussion is divided into two parts. First, we address Bailey’s

argument that dismissal under Rule 12(b)(6) was erroneous. Because we conclude

that the statute of limitations expired, we decline to address whether Bailey

pleaded with particularity her securities fraud claim. Second, we discuss whether

the magistrate judge abused his discretion when he declined to grant the putative

class leave to identify another lead plaintiff.

                A. Bailey Failed to File Her Securities Fraud Claim
                         Within the Statute of Limitations.

      The statute of limitations for private suit under section 10(b) of the

Exchange Act begins to run at the “discovery of the facts constituting the

violation.” Theoharous v. Fong, 256 F.3d 1219, 1228 (11th Cir. 2001) (quoting

Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, 501 U.S. 350, 364, 111 S.

Ct. 2773, 2782 (1991)). “Discovery occurs when a potential plaintiff has inquiry

or actual notice of a violation.” Id. (quoting Kauthar SDN BHD v. Sternberg, 149

F.3d 659, 670 (7th Cir. 1998)). “Inquiry notice is triggered by evidence of the

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possibility of fraud, not full exposition of the scam itself.” Id. at 1228 (quoting

Sterlin v. Biomune Sys., 154 F.3d 1191, 1203 (10th Cir. 1998)). The statute of

limitations begins to run as soon as the plaintiff is “on notice that something may

have been amiss.” Id. (quoting Sterlin, 154 F.3d at 1203).

      The statute of limitations for Bailey’s securities fraud claim against

Cumberland and Dorinco began to run when she received the letter that they no

longer insured the Program. The letter provided actual notice to Bailey that

Cumberland and Dorinco would not perform under their agreement with AIM, and

she was at least on inquiry notice that the Program would not be insured at all. The

assurances of AIM that it would seek to reinstate the insurance coverage may have

been enough to trigger equitable tolling against AIM, but not against Cumberland

and Dorinco.

      With May 2001 as the time of accrual of Bailey’s action, even the longer

statute of limitations under the Sarbanes-Oxley Act expired well before Bailey

filed her action in July 2004. See 28 U.S.C. § 1658(b) (defining the statute of

limitations as “the earlier of—(1) 2 years after the discovery of the facts

constituting the violation; or (2) 5 years after such violation”). Because

amendment of Bailey’s complaint would not have remedied this defect, granting




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leave to amend would have been futile. See Harris, 182 F.3d at 807-08. The

magistrate judge did not err when he dismissed Bailey’s complaint with prejudice.

              B. The Magistrate Judge Did Not Abuse His Discretion
               When He Denied the Putative Class Leave to Identify
                             Another Lead Plaintiff.

      Bailey argues that the magistrate judge abused his discretion because he

denied the putative class the opportunity to identify another lead plaintiff, but

Bailey cites no authority for this proposition. Each of the cases cited by Bailey

deals with a class that was already certified. See, e.g., Birmingham Steel Corp. v.

TVA, 353 F.3d 1331, 1340 (11th Cir. 2003). In Birmingham Steel, we reversed

the decertification of a class based on the inadequacy of the class representative

when the district court failed to provide leave to find a suitable substitution. Id. at

1342. Central to our decision was that “once certified, a class acquires a legal

status separate from that of the named plaintiffs.” Id. at 1336 (citing Lynch v.

Baxley, 651 F.2d 387, 388 (5th Cir. Unit B July 1981)); see also Sosna v. Iowa,

419 U.S. 393, 399, 95 S. Ct. 553, 557 (1975).

      The putative class represented by Bailey was never certified and never

achieved this separate legal status. Further, the members of the putative class are

not prejudiced by the decision of the magistrate judge because their individual

claims were tolled from the time the class action was filed until the complaint was



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dismissed. See Griffin v. Singletary, 17 F.3d 356, 360 (11th Cir. 1994) (quoting

Crown, Cork & Seal Co. v. Parker, 462 U.S. 345, 353-54, 103 S. Ct. 2392, 2397-

98 (1983)). The magistrate judge did not abuse his discretion when he denied the

putative class the opportunity to identify another lead plaintiff.

                                 IV. CONCLUSION

      Because Bailey’s complaint is barred by the statute of limitations and the

magistrate judge did not abuse his discretion when he denied the putative class the

opportunity to identify another lead plaintiff, we

      AFFIRM.




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