Second Circuit Rejects The Application Of American Pipe's Tolling Rule And Rule 15(c)'s 'Relation Back' Doctrine To The Three-Year Statute Of Repose For Section 11 And 12(a) Claims

In In re IndyMac Mortgage-Backed Securities Litigation, No. 11-2998-CV, 2013 WL 3214588 (2d Cir. June 27, 2013), the United States Court of Appeals for the Second Circuit held that the tolling rule established by the United States Supreme Court in American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974), which suspends the applicable statute of limitations for putative class members upon the commencement of a class action, does not apply to the three-year statute of repose contained in Section 13 of the Securities Act of 1933 ("1933 Act"), 15 U.S.C. § 77m. The Court also held that the "relation back" doctrine of the Federal Rule of Civil Procedure 15(c) does not permit putative class members to intervene in the class action as named parties to revive claims that were previously dismissed for want of jurisdiction. This decision thus holds that litigants cannot circumvent Section 13's statute of repose for 1933 Act claims by invoking American Pipe or Rule 15(c).

The case began as two securities class actions alleging that IndyMac MCS, Inc., an issuer of mortgage-backed securities, violated Sections 11 and 12(a) of the 1933 Act, 15 U.S.C. §§ 77k, 77l, by making fraudulent misrepresentations and omissions in the offering and sale of certain financial instruments in 2006 and 2007. The United States District Court for the Southern District of New York consolidated the cases and appointed a lead plaintiff pursuant to the Private Securities Litigation Reform Act of 1995 ("PSLRA"), 15 U.S.C. §§ 78u-4, et seq.

The district court dismissed all claims arising from the offerings of securities not purchased by the lead plaintiff. Because the lead plaintiff failed to demonstrate injury arising from offerings of securities that plaintiff did not purchase, it could not demonstrate standing to assert the claims.

Several putative class members sought to intervene to assert the dismissed claims. By this time, however, more than three years had passed since the issuances of the securities. Under Section 13's statute of repose, actions to enforce a liability created by Sections 11 or 12(a) of the 1933 Act cannot be filed more than three years after the security was offered to the public or was sold. The intervenors nevertheless asserted two theories for why the claims were not time-barred under Section 13. First, they argued that American Pipe's tolling rule, which explicitly applies to statutes of limitations, applies equally to Section 13's statute of...