On June 26, 2017, the Supreme Court decided CalPERS v. ANZ Securities, Inc., in which it declined to create a judicial exception to the statute of repose in Section 11 cases arising under the Securities Act of 1933. When Congress passed its cornerstone securities laws in 1933 and 1934, it created an express cause of action against misrepresentations made in connection with the initial offerings of securities. That cause of action was limited by a two-tier time limitation system: a one-year statute of limitations running from discovery of the misrepresentation and a three-year statute of repose running from the issuance of the security. Steamy stuff, right?
CalPERS, California’s state pension entity and frequent securities plaintiff, decided to opt-out of a timely class action to file its own separate suit outside of the three-year statute of repose. In 1974, the Supreme Court had created a form of equitable tolling of antitrust claims relating to individual suits and class-actions. In this case, the Supreme Court said that American Pipe involved tolling a statute of limitations, which courts can do, but that courts were not permitted to toll a statue of repose.
Three lessons here:
- New public companies can have confidence that they will not face new Section 11 suits following three years from their IPO. Definitely a cupcake worthy day to calendar for companies accepting public capital.
- Parties should be very careful in leaving class actions. Instead, they can consider a request to be added as a named plaintiff or other procedural decides inside a timely suit. (And lawyers should study the difference between a statute of limitations and a statute of repose.)
- Not everything that happens in the Supreme Court in June involves an existential crisis.
The opinion is available in full: https://www.supremecourt.gov/opinions/16pdf/16-373_pm02.pdf.