United States: Supreme Court To Decide Applicable Tolling Rule For The Securities Act's Statute Of Repose

The United States Supreme Court is set to decide later this term an important but technical decision concerning the time in which a plaintiff may bring a private securities claim under Section 11 of the Securities Act of 1933. On April 17, 2017, the Supreme Court held oral argument in California Public Employees' Retirement System v. ANZ Securities, Inc., et al. (No. 16-373) to resolve a question that has divided appellate courts: the circumstances under which a Section 11 claim can be tolled pending a class certification determination. As large institutional investors such as pension funds are increasingly pursuing standalone securities actions that parallel class action suits, the Court's decision could have significant implications for private securities litigation. A decision is expected to be issued early summer 2017.

Legal Background

Under Section 11 of the Securities Act, purchasers of securities may bring actions against certain persons involved in preparing and disseminating a registration statement that contains material misstatements or omissions; such actions are subject to a one-year statute of limitations and a three-year statute of repose found in Section 13 of the Securities Act:

No action shall be maintained to enforce any liability created under [Section 11] . . . unless brought within one year after the discovery of the untrue statement or the omission, or after such discovery should have been made by the exercise of reasonable diligence . . . In no event shall any such action be brought to enforce a liability created under [Section 11] . . . more than three years after the security was bona fide offered to the public . . . . 15 U.S.C. § 77m.

The Supreme Court previously held in American Pipe & Construction v. Utah, 414 U.S. 538 (1974), that the filing of a putative class action tolls the statute of limitations for the putative members of a proposed class pending a class certification decision. The applicability of American Pipe tolling in the context of the statute of repose has divided lower courts.

This question has significant practical implications. Over the last two decades, institutional investors such as pension funds have taken an increasingly significant role in securities litigation. Traditionally, these institutions have assumed that American Pipe tolling would cover their claims and they could take a "wait and see" position when a private class action was filed. Where institutional investors were satisfied with the resolution of the class action, they could choose to participate in the class; otherwise they could opt out of the class action and file a standalone claim. If the Supreme Court concludes that American Pipe tolling does not extend the three-year statute of repose, the "wait and see" approach will no longer be feasible.

Background on the CalPERS Case

The California Public Employees' Retirement System (CalPERS) is the nation's largest pension fund. Between July 2007 and January 2008, CalPERS purchased millions of dollars of debt securities issued by Lehman Brothers. On June 18, 2008, another retirement fund filed a putative class action in the Southern District of New York alleging that ANZ Securities and several dozen other financial institutions (ANZ defendants) involved in underwriting Lehman's debt securities were liable under Section 11 for making material misstatements and omissions in Lehman's registration statements. CalPERS filed its own complaint in February 2011 in the Northern District of California, which was subsequently transferred to the Southern District of New York and consolidated with the class action for pretrial purposes. Later that year, the proposed class reached a settlement and was certified for settlement purposes; CalPERS then opted out of the class settlement to pursue its own claim. The district court dismissed CalPERS's complaint, holding that its claims were barred by the three-year statute of repose.

The Second Circuit affirmed, holding that American Pipe tolling "does not affect the statute of repose embodied" in the Securities Act. See In re Lehman Brothers Securities and Erisa Litigation, 655 Fed. Appx. 13, 15 (2d Cir. 2016). In reaching this conclusion, the Second Circuit relied primarily on a prior decision, Police & Fire Ret. Sys. Of city of Detroit v. IndyMac MBS, Inc., 721 F. 3d 95 (2d Cir. 2013), which held that American Pipe tolling did not apply to Section 13's statute of repose.1 The Second Circuit reasoned alternatively that: (i) tolling is an inherently equitable principle, and to the extent American Pipe "is grounded in equity, its tolling rule cannot affect a legislatively enacted statute of repose"; and (ii) to the extent American Pipe establishes "a 'legal' tolling principle grounded in Rule 23, to apply it to a statute of repose would violate the Rules Enabling Act by permitting a procedural rule to abridge the substantive rights created by statutes of repose." Id. The Second Circuit also rejected CalPERS's arguments that its claims were essentially filed because it fell within the putative class before exercising its right to opt-out, and that time-barring its claims violates the due process considerations embodied in Rule 23's opt-out mechanism.

Other appellate courts have reached different conclusions on this issue.2 Most notably, the Tenth Circuit held that "American Pipe tolling applies to [Section 13's] statute of repose." Joseph v. Wiles, 223 F. 3d 1155, 166-68 (10th Cir. 2000). The Tenth Circuit concluded that: (i) American Pipe addressed legal—not equitable—tolling; (ii) tolling "the limitations period for class members while class certification is pending" serves FRCP Rule 23 by encouraging judicial economy; and (iii) that both limitations periods were satisfied when the class action was filed because "defendants were on notice of the substantive claim as well as the number and generic identifies of potential plaintiffs." Id. at 1166-68.

Oral Argument: Statutory Text vs. Practical Considerations

CalPERS began oral argument by urging the Court to find "that American Pipe tolling applies to both of the time limits set forth in Section 13 of the Securities Act."3 CalPERS argued that its action was always on file because the class action was brought within Section 13's one-year limitation and thus it was necessarily brought within its three-year limitation. CalPERS further argued that American Pipe was an interpretation of FRCP Rule 23, and that the congressional intent behind Section 13 was to limit its one-year "discovery" limitation with its three-year limitation. Throughout its argument, CalPERS referenced the increased opt-out litigation that would burden district courts if the Court ruled against it. In contrast, the ANZ defendants focused on the plain text of Section 13, arguing that it supports their position that the three-year limitation is a statute of repose that cannot be tolled for any reason. The financial institutions also characterized CalPERS's argument about increased opt-out litigation as a "parade of horribles," and noted that since IndyMac, the Second Circuit has not experienced a surge in opt-out litigation.

During oral argument, Justices Gorsuch (in his first day on the Supreme Court bench) and Alito were focused on the statutory text and plain meaning of the language, while Justice Kagan was focused on the policy argument and practical consequences noting that denying tolling is "kind of guaranteed to create make-work for district courts, to be essentially irrelevant for large investors, and for small investors to lose their claims."

Implications for Securities Class Actions

While the CalPERS case concerns a claim brought under the Securities Act of 1933, the decision will likely have implications for claims brought under the anti-fraud provisions of the Securities Exchange Act of 1934, which are subject to a five-year statute of repose.

A ruling that American Pipe does not apply to the three-year time limit, in the short run, would result in dismissal of a number of actions brought by institutional investors. In the long run, however, institutional investors might avoid this with increased "protective filings" at the outset of a case before class certification.


1. In 2014, the Supreme Court initially granted certiorari to review the IndyMac decision but subsequently dismissed the IndyMac writ as improvidently granted.

2. Since the Second Circuit decision in IndyMac, both the Sixth and Eleventh Circuits have found American Pipe tolling inapplicable to the Securities Act's statute of repose. See Stein v. Regions Morgan Keegan Select High Income Fund, Inc., 821 F.3d 780 (6th Cir. 2016); Dusek v. JPMorgan Chase & Co., 832 F.3d 1243 (11th Cir. 2016).

3. Notably, CalPERS does not concede that the three-year limitations period in Section 13 is a statute of repose.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.