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SUPREME COURT OF THE UNITED STATES
_________________
No. 10–1261
_________________
CREDIT SUISSE SECURITIES (USA) LLC,
et al., PETITIONERS
v. VANESSA SIMMONDS
on writ of certiorari to the united states
court of appeals for the ninth circuit
[March 26, 2012]
Justice Scalia delivered the opinion of the
Court.
We consider whether the 2-year period to file
suit against a corporate insider under §16(b) of the Securities
Exchange Act of 1934, 15 U. S. C. §78p(b), begins to run
only upon the insider’s filing of the disclosure statement required
by §16(a) of the Act, §78p(a).
I
Under §16(b) of the Exchange Act, 48Stat. 896,
as amended, a corporation or security holder of that corporation
may bring suit against the officers, directors, and certain
beneficial owners[
1] of the
corporation who realize any profits from the purchase and sale, or
sale and purchase, of the corporation’s securities within any
6-month period. “The statute imposes a form of strict liability”
and requires insiders to disgorge these “short-swing” profits “even
if they did not trade on inside information or in- tend to profit
on the basis of such information.”
Gollust v.
Mendell,
501 U.S.
115, 122 (1991). Section 16(b) provides that suits must be
brought within “two years after the date such profit was
realized.”[
2] 15
U. S. C. §78p(b).
In 2007, respondent Vanessa Simmonds filed 55
nearly identical actions under §16(b) against financial
institutions that had underwritten various initial public offerings
(IPOs) in the late 1990’s and 2000, including these
petitioners.[
3] In a
representative complaint, she alleged that the underwriters and the
issuers’ insiders employed various mechanisms to inflate the
aftermarket price of the stock to a level above the IPO price,
allowing them to profit from the aftermarket sale. App. 59. She
further alleged that, as a group, the underwriters and the insiders
owned in excess of 10% of the outstanding stock during the relevant
time period, which subjected them to both disgorgement of profits
under §16(b) and the reporting requirements of §16(a).
Id.,
at 61. See 15 U. S. C. §78m(d)(3); 17 CFR
§§240.13d–5(b)(1) and 240.16a–1(a)(1) (2011). The latter requires
insiders to disclose any changes to their ownership interests on a
document known as a Form 4, specified in the Securities and
Exchange Commission regulations. 15 U. S. C.
§78p(a)(2)(C); 17 CFR §240.16a–3(a). Simmonds alleged that the
underwriters failed to comply with that requirement, thereby
tolling §16(b)’s 2-year time period.[
4] App. 62.
Simmonds’ lawsuits were consolidated for
pretrial purposes, and the United States District Court for the
Western District of Washington dismissed all of her
complaints.[
5]
In re:
Section 16(b) Litigation, 602 F. Supp. 2d 1202 (2009). As
relevant here, the court granted petitioners’ motion to dismiss 24
complaints on the ground that §16(b)’s 2-year time period had
expired long before Simmonds filed the suits. The United States
Court of Appeals for the Ninth Circuit reversed in relevant part.
638 F.3d 1072 (2011). Citing its decision in
Whittaker v.
Whittaker Corp., 639 F.2d 516 (1981), the court held that
§16(b)’s limitations period is “tolled until the insider discloses
his transactions in a Section 16(a) filing, regardless of whether
the plaintiff knew or should have known of the conduct at issue.”
638 F. 3d, at 1095. Judge Milan Smith, Jr., the author of the
panel opinion, also specially concurred, expressing his
disagreement with the
Whittaker rule, but noting that the
court was compelled to follow Circuit precedent.
Id., at
1099–1101. We granted certiorari, 564 U. S. ___ (2011).
II
Petitioners maintain that these suits were
properly dismissed because they were filed more than two years
af-ter the alleged profits were realized. Pointing to dictum in
Lampf, Pleva, Lipkind, Prupis & Petigrow v.
Gilbertson,
501 U.S.
350 (1991), petitioners argue that §16(b)’s limitations period
is a period of repose, which is not to be “extended to account for
a plaintiff’s discovery of the facts underlying a claim.” Brief for
Petitioners 17. See
Lampf,
supra, at 360, n. 5
(“Section 16(b) . . . sets a 2-year . . .
period of repose”). We do not reach that contention, because we
conclude that, even assuming that the 2-year period can be
extended, the Ninth Circuit erred in de-termining that it is tolled
until the filing of a §16(a) statement.
In adopting its rule in
Whittaker, the
Ninth Circuit ex-pressed its concern that “[i]t would be a simple
matter for the unscrupulous to avoid the salutary effect of Section
16(b) . . . simply by failing to file . . .
reports in violation of subdivision (a) and thereby concealing from
prospective plaintiffs the information they would need” to bring a
§16(b) action. 639 F. 2d, at 528 (internal quotation marks
omitted). Assuming that is correct, it does not follow that the
limitations period is tolled until the §16(a) statement is filed.
Section 16 itself quite clearly does not extend the period in that
manner. The 2-year clock starts from “the date such profit was
realized.” §78p(b). Congress could have very easily provided that
“no such suit shall be brought more than two years after
the
filing of a statement under subsection (a)(2)(C).” But it did
not. The text of §16 simply does not support the
Whittaker
rule.
The
Whittaker court suggested that the
background rule of equitable tolling for fraudulent
concealment[
6] operates to toll
the limitations period until the §16(a) statement is filed. See 639
F. 2d, at 527, and n. 9. Even accepting that equitable
tolling for fraudulent concealment is triggered by the failure to
file a §16(a) statement, the
Whittaker rule is completely
divorced from long-settled equitable-tolling principles.
“Generally, a litigant seeking equitable tolling bears the burden
of establishing two elements: (1)
that he has been pursuing his
rights diligently, and (2) that some extraordinary
circumstances stood in his way.”
Pace v.
DiGuglielmo,
544 U.S.
408, 418 (2005) (emphasis added). It is well established,
moreover, that when a limitations period is tolled because of
fraudulent concealment of facts, the tolling ceases when those
facts are, or should have been, discovered by the plaintiff. 2 C.
Corman, Limitation of Actions §9.7.1, pp. 55–57 (1991). Thus, we
have explained that the statute does not begin to run until
discovery of the fraud “ ‘where the party injured by the fraud
remains in ignorance of it
without any fault or want of
diligence or care on his part.’ ”
Lampf,
supra, at 363 (quoting
Bailey v.
Glover, 21
Wall. 342, 348 (1875); emphasis added). Allowing tolling to
continue beyond the point at which a §16(b) plaintiff is aware, or
should have been aware, of the facts underlying the claim would
quite certainly be
inequitable and inconsistent with the
general purpose of statutes of limitations: “to protect defendants
against stale or unduly delayed claims.”
John R. Sand &
Gravel Co. v.
United States,
552
U.S. 130, 133 (2008).
The inequity of the
Whittaker rule is
especially apparent in a case such as this, where the theory of
§16(b) liability of underwriters is so novel that petitioners can
plausibly claim that they were not aware they were required to file
a §16(a) statement. And where they disclaim the necessity of
filing, the
Whittaker rule compels them either to file or to
face the prospect of §16(b) litigation in perpetuity. Simmonds has
acknowledged that “under her theory she could buy stocks in
companies who had IPOs 20 years ago and bring claims for
short-swing transactions if the underwriters had undervalued a
stock.” 602 F. Supp. 2d, at 1218. The potential for such
endless tolling in cases in which a reasonably diligent plaintiff
would know of the facts underlying the action is out of step with
the purpose of limitations periods in general. And it is especially
at odds with a provision that imposes strict liability on putative
insiders, see
Gollust, 501 U. S., at 122. Had Congress
intended this result, it most certainly would have said so.
Simmonds maintains that failing to apply the
Whittaker rule would obstruct Congress’s objective of
curbing short-swing speculation by corporate insiders. This
objective, according to Simmonds, is served by §16(a) statements,
which “provide the information necessary to trigger §16(b)
enforcement.” Brief for Respondent 24. Simmonds—like the Ninth
Circuit in
Whittaker—disregards the most glaring indication
that Congress did not intend that the limitations period be
categorically tolled until the statement is filed: The limitations
provision does not say so. This fact alone is reason enough to
reject a departure from settled equitable-tolling principles.
Moreover, §16’s purpose is fully served by the rules outlined
above, under which the limitations period would not expire until
two years after a reasonably diligent plaintiff would have learned
the facts underlying a §16(b) action. The usual equitable-tolling
inquiry will thus take account of the unavailability of sources of
information other than the §16(a) filing. Cf.,
e.g.,
Ruth v.
Unifund CCR Partners, 604 F.3d 908, 911–913
(CA6 2010);
Santos ex rel. Beato v.
United States,
559 F.3d 189, 202–203 (CA3 2009). The oddity of Simmonds’ position
is well demonstrated by the circumstances of this case. Under the
Whittaker rule, because petitioners have yet to file §16(a)
statements (as noted earlier they do not think themselves subject
to that requirement), Simmonds still has two years to bring suit,
even though she is so well aware of her alleged cause of action
that she has already sued. If §16(a) statements were, as Simmonds
suggests, indispensable to a party’s ability to sue, Simmonds would
not be here.
Simmonds also asserts that application of
established equitable-tolling doctrine in this context would be
in-consistent with Congress’s intention to establish in §16 a clear
rule that is capable of “mechanical application.” Brief for
Respondent 57 (internal quotation marks omitted). Equitable
tolling, after all, involves fact-intensive disputes “about what
the notice was, where it was disseminated, who received it, when it
was received, and whether it provides sufficient notice of relevant
Section 16(a) facts.”
Id, at 56–57. Of course this argument
counsels just as much in favor of the “statute of repose” rule that
petitioners urge (that is, no tolling whatever) as it does in favor
of the
Whittaker rule. No tolling is certainly an easily
administrable bright-line rule. And assuming some form of tolling
does apply, it is preferable to apply that form which Congress was
certainly aware of, as opposed to the rule the Ninth Circuit has
fashioned.[
7] See
Meyer
v.
Holley,
537 U.S.
280, 286 (2003) (“Congress’ silence, while permitting an
inference that Congress intended to apply
ordinary
background tort principles, cannot show that it intended to apply
an unusual modification of those rules”).
* * *
Having determined that §16(b)’s limitations
period is not tolled until the filing of a §16(a) statement, we
remand for the lower courts to consider how the usual rules of
equitable tolling apply to the facts of this case.[
8] We are divided 4 to 4 concerning, and thus
affirm without precedential effect, the Court of Appeals’ rejection
of petitioners’ contention that §16(b) establishes a period of
repose that is not subject to tolling. The judgment of the Court of
Appeals is vacated, and the case is remanded for further
proceedings consistent with this opinion.
It is so ordered.
The Chief Justice took no part in the
consideration or decision of this case.
