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Argument preview: Rules for timely filing of securities class actions before the court next week

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California Public Employees’ Retirement System v. ANZ Securities presents such a basic question about class actions that it is astonishing the answer is not already settled: If a plaintiff files a class-action complaint that includes your claims, does that count as your complaint for purposes of filing your action in time? Or do you have to file your own complaint before the deadline for filing expires? This becomes important any time a litigant decides that it wants to litigate the dispute separately from the class; when it “opts out” of the class litigation, it has to file a separate complaint. In this case, for example, CalPERS opted out of a settlement of which it disapproved in a major class action against underwriters of Lehman Brothers securities; the class-action complaint had been filed in a timely manner, but the U.S. Court of Appeals for the 2nd Circuit held that CalPERS’ individual complaint, filed after it opted out, was untimely.

The Supreme Court has addressed this question before, in its 1974 decision in American Pipe & Construction v. Utah. In that case, the court held that the class complaint did count as the claim of the individual claimants for purposes of statutes of limitation; more specifically, it held that the class complaint “tolled,” or suspended, the statute of limitations so that the individual claimant’s later complaint was timely. In the securities laws, though, there are two different kinds of filing deadlines. The first, statutes of limitation, are relatively short and run from the time when the claimant discovers the problem that gives it a right to sue; the second, statutes of repose, are relatively long and run from the date of the violation in question. We know from American Pipe that the class-action complaint tolls the statute of limitations, but the 2nd Circuit (like most of the lower courts) has held that it does not toll statutes of repose.

The relevant statute simply says that no “action” shall be brought after the relevant deadline; it would not be at all difficult to read the statute to support either side’s position. So the great bulk of what the parties are arguing about is appropriate policy for class actions. For the plaintiffs’ part (CalPERS in this case), the argument is obvious: A rule that the class-action complaint does not protect individual claimants from the statute of repose means that individual claimants will need to file their own separate complaints as the statute of repose approaches, flooding the dockets of federal courts in the process and destroying the case-management value of class actions. Moreover, in low-dollar class actions (areas like the Fair Labor Standards Act, for example), the ruling well might deny relief altogether, as the individual cases would not warrant the costs of separate complaints.

The defendants are ANZ Securities and a large group of parties related to the underwriting of Lehman Brothers securities. They rely on the Supreme Court’s practice of vigorously applying statutes of repose like the one at issue here. The most recent case, for example, the 2014 decision in CTS Corp. v. Waldburger, describes those statutes as an “absolute … bar” to liability, one that cannot be extended “for any reason,” not “even in cases of extraordinary circumstances.” They also counter CalPERS’ assertion that a contrary decision will cause a flood of litigation, pointing out that the 2nd Circuit, home to much of the nation’s securities litigation, has applied this rule since 2013 without any great difficulty.

The recent concern of several members of the court about the costs of class actions has been conspicuous. Even in the absence of Justice Antonin Scalia, the justices well may see the case through that lens. The challenge for CalPERS in the argument will be to overcome any skepticism about class actions and persuade the court to see this as a case about docket management.

[Disclosure: Goldstein & Russell, P.C., whose attorneys contribute to this blog in various capacities, is among the counsel to the petitioner in this case. The author of this post, however, is not affiliated with the firm.]

Recommended Citation: Ronald Mann, Argument preview: Rules for timely filing of securities class actions before the court next week, SCOTUSblog (Apr. 10, 2017, 5:34 PM),