On July 13, 2023, the United States Court of Appeals for the Tenth Circuit reversed the dismissal of a putative class action asserting claims against a poultry producer and certain of its officers under Section 10(b) of the Securities Exchange Act of 1934. Hogan v. Pilgrim's Pride Corp., —F.4th—, 2023 WL 4508545 (10th Cir. 2023). Plaintiff alleged that the company made misrepresentations regarding its financial results, business operations, and a purported price-fixing scheme. The district court dismissed plaintiff's second amended complaint as barred by the Exchange Act's statute of repose, but the Tenth Circuit reversed, holding that the statute of repose did not apply.

The district court had granted defendants' motion to dismiss the first amended complaint, holding that plaintiff had failed to adequately allege facts establishing an underlying "antitrust conspiracy," on which plaintiff's Exchange Act claims were predicated. Id. at *2. Plaintiff had requested leave to amend in a footnote. The district court determined that a separate motion for leave to amend would be required, but that the dismissal would be without prejudice, because new facts to support plaintiff's claims might emerge through then-pending antitrust litigation. Id. Plaintiff then filed a motion to reconsider and, in the alternative, for leave to amend. The district court denied the motion to reconsider, but granted leave to amend, clarifying that it "ha[d] not yet reviewed the proposed Second Amended Complaint" and that plaintiff should submit his second amended complaint if there are "genuinely new facts that are materially different tha[n] those that the [c]ourt had already found to be insufficient to state a claim." Id. at *3.

The district court did not set a deadline for filing a second amended complaint, and plaintiff did not file it until nearly 19 months later. Id. The second amended complaint did not add any parties or causes of action or identify any new challenged statements; rather, it added factual allegations to support the existing claims that defendants had engaged in a price-fixing conspiracy. Id. Defendants moved to dismiss. The district court granted the motion, holding: (1) challenged statements made more than five years prior to the filing of the second amended complaint were barred by the Exchange Act's five-year statute of repose; (2) any claims based on more recent challenged statements were barred by Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 730–31 (1975), because "[p]laintiff had not been a purchaser or seller of securities within that five-year period." Pilgrim's Pride, 2023 WL 4508545, at *3. The district court dismissed with prejudice the claims barred by the statute of repose, declining to "excuse [plaintiff's] nearly two-year delay in refiling this case" and declining to apply potential exceptions to the repose period such as tolling for fraud claims or the relation-back doctrine. Id.

The Tenth Circuit reversed, holding that the statute of repose applies only to causes of action "brought" later than five years after the alleged violation, which the Court construed as meaning to "initiate or commence" a claim. Id. at *5. While noting that the repose period is "claim specific" and could therefore apply with respect to claims newly added by amendments to a complaint, the second amended complaint in this case was not barred by the statute of repose because it added no new parties or causes of action and did "not even add additional statements alleged to be fraudulent." Id. The Court further explained that this determination was consistent with the relation-back doctrine in Rule 15(c)(1)(B) of the Federal Rules of Civil Procedure, which permits amendments relating back to the date of the original pleading when "the amendment asserts a claim or defense that arose out of the conduct, transaction, or occurrence set out—or attempted to be set out—in the original pleading." Id.

The Court further explained that barring the second amended complaint would not "further the limited purposes of a statute of repose," noting, "[w]e are aware of no authority suggesting that statutes of repose are intended to protect litigants from evidence uncovered late in the course of litigation," which can take years in complicated cases. Id. at *6. The Court emphasized that "[o]nce a defendant's repose has been disturbed by the bringing of a claim, a statute of repose does not protect it from the customary travails of defending the claim." Id.

The Court also observed that the dismissal of the first amended complaint "might seem to mean that filing the [second amended complaint] amounted to 'bringing' a new action" because the new complaint "interrupt[ed] the repose that [d]efendants expected and were entitled to after dismissal of the [first amended complaint]." Id. However, the Court concluded that the order dismissing the first amended complaint was not a final judgment because it simply dismissed the first amended complaint, not the action. The Court explained that while a dismissal without prejudice could in some circumstances be considered a final judgment where no further proceedings are anticipated, here "further proceedings were anticipated" by the decision dismissing the first amended complaint because it explicitly authorized the filing of a second amended complaint (although the decision set no deadline for such a filing). Id. at *7. The Court explained that so long as the case remained open, defendants had no right to expect repose, and while defendants "may feel put upon because of the long delay until their entitlement to repose," they had other options to expedite the action and either could have requested that the district court impose a deadline for amendment or moved for dismissal for failure to prosecute. Id. at *8.

The Court thus reversed the dismissal and remanded for consideration of the adequacy of the second amended complaint. Id.

Hogan v. Pilgrim's Pride Corp.

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