The U.S. Supreme Court has issued a decision in the CalPERS v. ANZ Securities case holding that the three-year statute of repose for Section 11 and Section 12(a) claims (misrepresentation in a registration statement or prospectus) is not subject to equitable tolling during the pendency of a class action. It is a 5-4 decision authored by Justice Kennedy.
In CalPERS, the Court found that the tolling “is permissible only where there is a particular indication that the legislature did not intend the statute to provide complete repose but instead anticipated the extension of the statutory period under certain circumstances.” In this case, the applicable provision of the Securities Act of 1933 “does not refer to or impliedly authorize any exceptions for tolling.” Indeed, the Court noted, “the text, purpose, structure, and history of the statute all disclose the congressional purpose to offer defendants full and final security after three years.”
The Court rejected the plaintiff’s assertion that the pendency of a class action should create an exception to these basic principles. In key part, the plaintiff argued that “the class complaint puts a defendant on notice as to the content of the claims against it and the set of potential plaintiffs who might assert those claims.” The Court found, however, that using equitable tolling to permit “a class action to splinter into individual suits . . . would threaten to alter and expand a defendant’s accountability, contradicting the substance of a statute of repose.” The Court also disagreed with the plaintiff’s contention that “nonnamed class members will inundate district courts with protective filings,” concluding that this concern was likely “overstated” given the nature of securities class actions. Finally, the Court held that the filing of a class action does not mean that the “actions” of every individual class member have been “brought” for purposes of satisfying the statute of repose.
Holding: Dismissal affirmed.
Quote of note: “The final analysis, then, is straightforward. The 3-year time bar in §13 of the Securities Act is a statute of repose. Its purpose and design are to protect defendants against future liability. The statute displaces the traditional power of courts to modify statutory time limits in the name of equity. Because the American Pipe tolling rule is rooted in those equitable powers, it cannot extend the 3-year period.”
Disclaimer: The author of The 10b-5 Daily filed an amicus brief on behalf of Washington Legal Foundation in support of the defendant. The amicus brief is cited on page 14 of the decision.