March 10, 2014
Today, the Supreme Court granted certiorari in one case of interest to the business community:
Securities Act—Statute of Repose—Tolling Of Class Actions Under American Pipe
Section 13 of the Securities Act contains a statute of repose that provides that “[i]n no event shall any such action be brought to enforce a liability created under [Section 11 of the Securities Act] more than three years after the security was bona fide offered to the public.” 15 U.S.C. § 77m. In American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974), the Supreme Court held that the commencement of a class action suspends the statute of limitations as to all asserted members of the class who would have been parties had the suit been permitted to proceed as a class action. Today, the Supreme Court granted certiorari in Public Employees’ Retirement System of Mississippi v. IndyMac MBS, Inc., No. 13-640, to determine whether tolling under American Pipe extends to Section 13’s statute of repose.
The Supreme Court’s decision will be of interest to the business community because, depending on the case’s resolution, securities issuers, underwriters, and other potential defendants might be exposed to liability in suits under Section 11 of the Securities Act commenced, revived, or expanded many years after the alleged misconduct occurred. More broadly, the decision may impact whether tolling under American Pipe could apply to repose periods in other statutes.
The Detroit Police & Fire Retirement System filed a putative class-action alleging that the defendants violated Section 11 of the Securities Act by issuing or underwriting mortgage pass-through certificates that contained purported misstatements and omissions of material fact. That case was later consolidated with a similar case filed by certain Wyoming entities, who were appointed as lead plaintiffs. The district court dismissed the claims as to many of the challenged pass-through certificates because the Wyoming entities did not purchase those certificates and thus lacked standing to assert the claims. By then, however, the Public Employees’ Retirement System of Mississippi and other putative class members who purchased certificates beyond those purchased by the Wyoming entities had moved to intervene in the suit and to amend the complaint pursuant to the “relation back” doctrine of Rule 15(c). But the district court denied the motion based on Section 13’s statute of repose, which had expired during the pendency of the case.
In affirming that decision, the Second Circuit rejected the argument that Section 13 should be tolled by the filing of a class action under American Pipe. The court reasoned that the American Pipe tolling rule cannot be applied to Section 13 because the Supreme Court has held that equitable tolling principles do not apply to the repose period in Section 13 and the Rules Enabling Act does not allow a court to use Rule 23—the source of any “legal” tolling—to “abridge, enlarge or modify” the repose promised by Section 13. According to the certiorari petition filed by the Public Employees’ Retirement System of Mississippi, the Second Circuit’s decision conflicts with a decision from the Tenth Circuit.
Absent extensions of time, amicus briefs in support of the petitioners will be due on May 1, 2014, and amicus briefs in support of the respondent will be due on June 2, 2014. Any questions about the case should be directed to Joshua Yount (+1 312 701 8423) in our Chicago office.
The Supreme Court also recently invited the Solicitor General to file a brief expressing the views of the United States in two cases of interest to the business community:
Bank of America, N.A. v. Rose, No. 13-662: The question presented is: When Congress has not authorized private enforcement of a federal statute and has foreclosed indirect enforcement, may a state law that borrows other statutes as predicates for liability be used to privately enforce that federal statute, based on a savings clause that permits States to enact their own laws relating to the specific subject of the federal legislation?
Missouri ex rel. KCP&L Greater Missouri Operations Co. v. Missouri Public Service Commission, No. 13-787: The question presented is whether the filed rate doctrine and Supremacy Clause permit a state public service commission to “trap” federally approved costs with a utility by recognizing the prudency of obtaining electric power from a plant in another state, but then barring the utility from recovering the Federal Energy Regulatory Commission-approved transmission costs of importing that power.
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