The federal securities laws have statutes of repose that bar a suit after a fixed number of years from the time the defendant acts in some way. There is an appellate split, however, over whether the existence of a class action tolls the applicable statute of repose for individual class members.
Under what is known as American Pipe tolling, “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.” American Pipe & Construction Co. v. Utah, 414 U.S. 538, 554 (1974). The Supreme Court found that its rule was “consistent both with the procedures of [Federal Rule of Civil Procedure] 23 and with the proper function of limitations statutes.” Id. at 555. In a later case, however, the Supreme Court also found that federal statutes of repose are not subject to equitable tolling. Lampf, Pleva, Lipkind, Prupis & Pettigrow v. Gilbertson, 501 U.S. 350, 364 (1991).
In attempting to reconcile these two cases, the federal appellate courts have come to different conclusions. The Tenth Circuit has held that American Pipe tolling is a type of legal tolling and, as a result, Lampf is not applicable. In contrast, the Second, Sixth, and Eleventh Circuits have held that statutes of repose create a substantive right to be free from liability after a legislatively-determined period of time. Whether the asserted tolling is equitable or legal, it cannot modify that substantive right.
The Supreme Court has granted cert in California Public Employees’ Retirement v. ANZ Securities, Inc., et al. (Second Circuit) to address this circuit split. (In 2014,the Court agreed to hear a case presenting the same question, but ultimately dismissed the writ of cert as improvidently granted.)
The official question presented is: “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?”
The case should be heard this spring with a decision issued by June 2017.
The 10b-5 Daily 