Supreme Court holds that American Pipe class-action tolling rule does not apply to cases brought under Section 11 of the Securities Act of 1933

The decision is Calpers v. ANZ Securities. The vote is 5 to 4, with Justice Kennedy writing the majority opinion, and Justice Ginsburg writing the dissent.

Skipping all its nuances, the American Pipe rule provides generally that the statute of limitations for absent class members is tolled from the filing of a class-action complaint until the court resolves the issue of class certification. See generally American Pipe & Constr. Co. v. Utah, 414 U. S. 538 (1974); see also Crown, Cork & Seal Co. v. Parker, 462 U. S. 345 (1983). So, under the American Pipe rule, when class members learn of a class action, they need not worry that the limitations period will run out until after class certification is decided -- and the possibility that the statute of limitations could expire might worry them if they thought they would ever want to or need to sue individually on the claims advanced in the class action.

Section 11 of the Securities Act of 1933 gives securities purchasers the right to sue securities issuers and underwriters for material misstatements or omissions in a registration statement. (A registration statement is a bunch of documents, including a prospectus, filed with the SEC before the public offering of a security.) Suits brought to enforce section 11 are typically class actions. Section 13 of the Act says that "[i]n 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 viewed section 13 as a statute of repose, which "reflects the legislative objective to give a defendant a complete defense to any suit after a certain period" and generally is not subject to equitable exceptions. To oversimplify a bit, the Court held today that because a statute of repose has that purpose, it is different from a statute of limitations, which is "designed to encourage plaintiffs to pursue diligent prosecution of known claims” and is subject to a variety of equitable exceptions (including equitable tolling). And so, the Court held, the American Pipe rule -- which the majority viewed as a form of equitable tolling -- does not apply to a statute of repose like the one in section 13.

In dissent, Justice Ginsburg did not view the limitations/repose distinction as bearing on the American Pipe question. To her, because the class-action complaint here, like most class-action complaints, gave the defendants all the notice that statutes of limitations and repose are intended to provide -- notice of who was suing them and of the potential aggregate liability to which they might be exposed -- the American Pipe rule should apply.

Because her view did not prevail, Justice Ginsburg offered some advice to class counsel in future section 11 cases (and presumably in any case governed by what someone might view as a statute of repose). Relying on an amicus brief of retired federal judges, she noted that

Today’s decision impels courts and class counsel to take on a more active role in protecting class members’ opt-out rights. See [retired judges' amicus brief], at 11–13. As the repose period nears expiration, it should be incumbent on class counsel, guided by district courts, to notify class members about the consequences of failing to file a timely protective claim. “At minimum, when notice goes out to a class beyond [§13’s limitations period], a district court will need to assess whether the notice [should] alert class members that opting out . . . would end [their] chance for recovery.” Id., at 20.

Very interesting. It's not often that a dissenting Justice provides practical advice to lawyers about how to protect their clients' interests -- interests the Justice views as endangered by the majority opinion. The second bit of advice sounds like a great idea. As to the first bit of advice -- that counsel should provide notice to class members about an impending repose-period expiration date -- I wonder how that would work. Who is going to pay for this notice, which in some cases may need to go to tens of thousands (or even hundreds of thousands) of people? The defendants are sure not going to volunteer to pay (unless they get something more valuable in return). So, if this notice isn't going out with some other notice, class counsel will have a brand new bill on their hands, increasing the costs for class plaintiffs (which is exactly what defendants want). And this new cost might increase the likelihood of sub-optimal (or even sell-out) settlements.