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The Supreme Court Grants Certiorari To Determine Whether Tolling Under American Pipe Applies To A Statute Of Repose

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  • Posted on: Jan 18 2017

On January 13, 2017, the United States Supreme Court agreed to consider whether, under American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974) (“American Pipe”), the filing of a securities class action lawsuit tolls the statute of repose found in Section 13 of the Securities Act of 1933 (the “Act”).  In American Pipe, the Court held that “the commencement of a class action suspends the applicable statute of limitations as to all asserted members of the class who would have been parties had the suit been permitted to continue as a class action.” 414 U.S. at 554.  This was the second time, the Court granted certiorari to consider the issue.

In Public Employees’ Retirement System of Mississippi v. IndyMac MBS, Inc., 134 S. Ct. 1515 (2014), cert. dismissed as improvidently granted, 135 S. Ct. 42 (2014), the Court granted certiorari to decide whether the tolling doctrine established under American Pipe applies to securities claims subject to the three-year repose period set forth in Section 13 of the Act. The issue was never decided by the Court because the case was settled.

The Supreme Court’s January 13, 2017 order granting the petition for a writ of certiorari in California Public Employees’ Retirement System v. ANZ Securitites Inc. can be found here.


ANZ Securities arose out of the collapse of Lehman Brothers. Prior to its bankruptcy in 2008, Lehman Brothers operated as a global investment bank whose stock traded on the New York Stock Exchange. Between July 2007 and January 2008, Lehman Brothers raised over $31 billion through debt offerings. The California Public Employees’ Retirement System (“CalPERS”), the largest pension fund in the United States, purchased millions of dollars of those securities.

On June 18, 2008, a putative class action complaint was filed in the Southern District of New York (the “Class Action”), alleging that the defendants, who were involved in underwriting the debt offerings, were liable under Section 11 of Act for making false and misleading statements in the registration statements. Among other things, the Class Action alleged that the registration statements contained untrue statements and omitted material facts concerning Lehman’s accounting practices (including improperly removing tens of billions of dollars from its balance sheet), risk-management activities (including its accumulation of illiquid assets), and exposure to risky mortgage and real estate-related assets.

In February 2011, more than three years after the securities were offered to the public, but before the district court had decided whether to certify the class, CalPERS decided to file its own complaint against the defendants in the Northern District of California. Cal. Pub. Emps.’ Ret. Sys. v. Fuld, No. 3:11-cv-00562-EDL (N.D. Cal. Feb. 7, 2011). CalPERS also alleged violations of the Act. The case was subsequently transferred to the Southern District of New York and consolidated with the Class Action for pretrial purposes.

Later that year, the parties to the Class Action reached a settlement and the district court preliminarily certified a class for settlement purposes. Upon receiving the court-ordered notice of the settlement, CalPERS opted out to pursue its own claims individually.  The district court, however, dismissed CalPERS’ individual suit as untimely. In so doing, it rejected CalPERS’ tolling argument that the pendency of the Class Action rendered CalPERS’ individual lawsuit timely. CalPERS appealed.

On July 8, 2016, the Second Circuit affirmed.  In a summary order (here), the Second Circuit held that the timely filing of the Class Action had not tolled the statute of repose for CalPERS. CalPERS had argued that because the Class Action “was commenced by a named plaintiff with proper standing,” its claims were timely filed.  The Second Circuit rejected this argument as “inconsistent with the reasoning of IndyMac.”

IndyMac made no reference to the standing of named plaintiffs when it concluded that American Pipe tolling did not apply to section 13’s statute of repose; its conclusion was instead derived from two longstanding principles. First, if American Pipe is grounded in equity, its tolling rule cannot affect a legislatively enacted statute of repose. Second, if American Pipe establishes a “legal” tolling principle grounded in Rule 23, to apply it to a statute of repose would violate the Rules Enabling Act by permitting a procedural rule to abridge the substantive rights created by statutes of repose. Accordingly, under IndyMac’s reasoning, the inapplicability of American Pipe tolling to a statute of repose turns on the nature of the tolling rule and its ineffectiveness against statutes of repose, not whether the named plaintiffs have proper standing to assert claims on behalf of a class. [Citations omitted.]

Notably, the Second Circuit acknowledged that there is a split among the circuits on the issue, stating that the tolling question “may be ripe for resolution by the Supreme Court.”  Presently, the Tenth, Seventh and Federal Circuits hold that the filing of a putative class action tolls the statute of repose, while the Second, Sixth and Eleventh Circuits hold that such a filing does not toll the Act’s statute of repose. The Second Circuit emphasized that “unless and until the Supreme Court informs us that our decision was erroneous, IndyMac continues to be the law of the Circuit and its reasoning controls the outcome of the case.”

The Cert. Petition:

On September 22, 2016, CalPERS filed a petition to the Supreme Court for a writ of certiorari (here), seeking to have the Court reverse the Second Circuit’s decision.  CalPERS presented two questions for the Court’s review, the first of which was presented in the dismissed IndyMac petition: 1) “Does the filing of a putative class action serve, under the American Pipe rule, to satisfy the three-year time limitation in Section 13 of the Securities Act with respect to the claims of putative class members? (Question granted in IndyMac)”; and 2) “May a member of a timely filed putative class action file an individual suit on the same causes of action before class certification is decided, notwithstanding the expiration of the relevant time limitations?” To invite review, CalPERS cited the split of authority among the circuits.

On January 13, 2017 the Supreme Court granted CalPERS’ petition, but only as to the first of the two questions presented, e.g., whether American Pipe tolls the Act’s statute of repose. The Court denied the writ on the second question presented.

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