The court based its decision on the language and structure of 28 U.S.C. § 1658(b), which sets forth limitations periods applicable to Exchange Act claims. Like its analogue under the Securities Act, 15 U.S.C. §77m, the provision contains two time limits: a two-year period following discovery of the alleged fraud, and a five-year period following the actual violation.21 The court concluded that, as with the Securities Act, Congress intended the shorter period to be a statute of limitations, which can be equitably tolled, but intended the longer period to be a statute of repose, which is absolute, final, and not subject to equitable tolling.22 These decisions make clear that courts are serious about setting time limits on securities actions. In particular, the three-year and five-year statutes of repose under the Securities Act23 and Exchange Act,24 respectively, are strict bars to securities claims.

These statutes, which hold defendants strictly liable for making false statements to investors in offering materials, have a short limitations period—one year “after the discovery of the untrue statement … or after such discovery should have been made by the exercise of reasonable diligence.” 15 U.S.C. § 77m. Before 2010, the Second Circuit interpreted the “should have been made” portion of this statute as requiring “inquiry notice”—a claim accrued “when public information would lead a reasonable investor to investigate the possibility of fraud.”

In Pension Trust Fund for Operating Engineers v. Mortgage Asset Securitization Transactions, Inc., No. 12-3454, 2013 WL 5184064 (3d Cir. Sept. 17, 2013), the United States Court of Appeals for the Third Circuit joined the Seventh, Ninth and Eleventh Circuits, holding that Section 13 of the Securities Act of 1933 (“1933 Act”), 15 U.S.C. § 77m, does not require plaintiffs asserting a claim under the 1933 Act to plead with particularity compliance with the statute of limitations. In doing so, the Third Circuit split from the First, Eighth and Tenth Circuits, potentially triggering review by the United States Supreme Court.Plaintiffs, purchasers of mortgage-backed securities, sued UBS AG and several of its subsidiaries (collectively, “UBS”) for alleged misrepresentations in the securities’ offering documents and registration statements.

achs & Co., 693 F.3d 145, 156 (2d Cir. 2012)).Basic Inc. v. Levinson, 485 U.S. 224, 236 (1988).Ganino v. Citizens Utils. Co., 228 F.3d 154, 162 (2d Cir. 2000) (quoting, Basic, 485 U.S. at 231-32).In the Matter of Netshoes Sec. Litig., 64 Misc. 3d 926 (Sup. Ct., N.Y. County 2019); Nadoff v. Duane Reade, Inc., 107 Fed. App’x 250, 252 (2d Cir. 2004).In re Morgan Stanley Info. Fund Sec. Litig., 592 F.3d 347, 359 (2d Cir. 2010).See 15 U.S.C. § 77k(e) (“[I]f the defendant proves that any portion or all of such damages represents other than the depreciation in value of such security resulting from [the alleged misstatement or omission], such portion of or all such damages shall not be recoverable.”).Fed. Hous. Fin. Agency, 873 F.3d at 154 (alterations and internal quotation marks omitted).Akerman v. Oryx Commc’ns, Inc., 810 F.2d 336, 341 (2d Cir. 1987).Morgan Stanley, 592 F.3d at 359 (citing, 15 U.S.C. § 77l(a)(2)).Id.Id. (quoting 15 U.S.C. § 77l(a)(2)).Netshoes, 64 Misc. 3d at 933 (quoting, 15 U.S.C. §77m).Id. at 930.Benn v. Benn, 82 A.D.3d 548, 548 (1st Dept. 2011).Slip Op. at *2.Id. at **1, 4.Id. at *1.Id.Id. at n.1 (citations omitted). See also id. at *4.Id. (citation omitted).Id. at **1 and 4 (citing, American Pipe & Const. Co. v. Utah, 414 U.S. 538, 553-555 (1974)).Id. at **1 and 5.Id. at *1.Id.Id.Id.Id. (citations omitted).Id.Id.See also id. at *5.

Id.Wyser-Pratte Mgmt. Co. v. Telxon Corp., 413 F.3d 553, 568–69 (6th Cir. 2005) (quoting In re WorldCom, Inc. Sec. Litig., 294 F. Supp. 2d 431, 452 (S.D.N.Y. 2003)).Id.See 15 U.S.C. § 77m (claims under Sections 11 and 12(a)(2) of the Securities Act must be 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”); 28 U.S.C. § 1658(b)(1) (fraud claims under the Exchange Act must be brought within “2 years after the discovery of the facts constituting the violation”). S. Boettrich & S. Starykh, NERA Economic Consulting, Recent Trends in Securities Class Action Litigation: 2018 Full-Year Review, at 22 (2019), https://www.nera.com/content/dam/nera/publications/2019/PUB_Year_End_Trends_012819_Final.pdf.See Aly, 2019 WL 4278045, at *1; N.W. Mut. Life Ins., 2019 WL 4278929, at *2.

In fact, at the time Congress enacted the FDCPA, many statutes included provisions that, in certain circumstances, would begin the running of a limitations period upon the discovery of a violation, injury, or some other event. See, e.g., 15 U.S.C. §77m (1976 ed.); 19 U.S.C. §1621 (1976 ed.); 26 U.S.C. §7217(c) (1976 ed.); 29 U.S.C. §1113 (1976 ed.). It is not our role to second-guess Congress’ decision to include a ‘violation occurs’ provision, rather than a discovery provision, in §1692k(d).

The Court, resolving a circuit split on the issue, affirmed 5-4. The majority held that 15 USC 77m contains a one year limitations period with a discovery trigger and a three year from securities issuance statute of repose, this construction is based on the plain language of 77m which includes the phrase “in no event” to set out the effect of the three year limit, there is no exception to the three year limit and the limitations and repose periods have been in the section since the enactment of the Securities Act of 1933. It rejected Systems’ argument that Court percent allowed tolling here as that case involved a limitations period not a repose period, allowing late opt out suits would burden defendants contrary to congressional intent, plaintiffs can opt out and timely file their own suits and any inefficiencies for the repose construction are minimal in practice and there are procedural mechanism for efficient protective filings.

In particular, the Court expressed the view that the statute of limitations under both the Securities Act and the Exchange Act are keyed to “discovery” of the facts constituting the alleged violation, a similarity on which at least some other district courts have also relied in extending Merck to Securities Act claims. See 15 U.S.C. §77m (actions under Securities Act cannot be 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”) with 28 U.S.C. §1658 (Exchange Act bars actions “two years after the discovery of the facts constituting the violation.”).

However, while limitations periods may be subject to tolling under judicially crafted equitable principles, the running of a repose period is tolled only where a statute so provides. Thus, statutes of repose are substantive in nature, extinguishing a cause of action after a period of time typically measured from the moment of the alleged wrongful act or omission.Both repose periods and limitations periods are frequent subjects of motion practice at the early stages of securities actions and other kinds of litigation.Congress included in Section 13 of the Securities Act, as amended, 15 U.S.C. §77m, both a statute of limitations and a statute of repose for claims under Sections 11 relating to material misstatements and omissions in a registration statement.Section 13 requires that actions be brought within one year after discovery of an untrue statement or omission, or within a year of when discovery should have been diligently made, a statute of limitations.But Section 13 also provides that no action may be brought more than three years after the security in question was offered to the public, a statute of repose.

The Court, resolving a circuit split on the issue, affirmed 5-4. The majority held that 15 USC 77m contains a one year limitations period with a discovery trigger and a three year from securities issuance statute of repose, this construction is based on the plain language of 77m which includes the phrase “in no event” to set out the effect of the three year limit, there is no exception to the three year limit and the limitations and repose periods have been in the section since the enactment of the Securities Act of 1933. It rejected Systems’ argument that Court percent allowed tolling here as that case involved a limitations period not a repose period, allowing late opt out suits would burden defendants contrary to congressional intent, plaintiffs can opt out and timely file their own suits and any inefficiencies for the repose construction are minimal in practice and there are procedural mechanism for efficient protective filings.