Supreme Court To Review Second Circuit’s Decision That American Pipe Tolling Does Not Apply To The Securities Act’s Three-Year Statute Of Repose

The Supreme Court of the United States has granted certiorari in Public Employees' Retirement System of Mississippi v. IndyMac MBS, Inc., taking up an issue that affects the management of class action securities litigation. Specifically, the United States Court of Appeals for the Second Circuit held that the tolling rule of American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974) - tolling statutes of limitations for putative class members upon the commencement of a class action - does not apply to the three-year statute of repose that governs claims under Sections 11, 12(a), and 15 of the Securities Act of 1933 (the "Securities Act").1See Police & Fire Ret. Sys. of Detroit v. IndyMac MBS, Inc., 721 F.3d 95 (2d Cir. 2013). The Supreme Court's review of the Second Circuit's holding in IndyMac is likely to resolve an issue on which some courts have disagreed.

Competing Views on Applicability of American Pipe Tolling

American Pipe and its progeny establish 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," regardless of whether putative class members seek to intervene in the class or file their own independent actions. IndyMac, 721 F.3d at 100, 105 (emphasis added) (quoting American Pipe, 414 U.S. at 554). The Court in American Pipe reasoned that tolling was appropriate because class action lawsuits satisfy the concerns behind limitations periods as to all putative class members. 414 U.S. at 550-51. The primary focus of IndyMac is whether class action tolling extends to the statute of repose found in Section 13 of the Securities Act, which, according to the Second Circuit, defines the contours of the plaintiff's underlying right to bring a lawsuit and the defendant's right to be free from liability after a fixed period of time. 721 F.3d at 106-07.

The Second Circuit, in IndyMac, and the Tenth Circuit, in Joseph v. Wiles, 223 F.3d 1155 (10th Cir. 2000), agree that if American Pipe tolling is considered an "equitable" rule derived from fairness concerns, then the rule cannot apply to Section 13's statute of repose in light of the Supreme Court's decision in Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, 501 U.S. 350, 363 (1991), which held that equitable tolling did not apply to certain repose periods in the federal securities laws (including the repose period in...