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SUPREME COURT OF THE UNITED STATES
_________________
No. 16–373
_________________
CALIFORNIA PUBLIC EMPLOYEES’ RETIREMENT
SYSTEM, PETITIONER v. ANZ SECURITIES, INC., et al.
on writ of certiorari to the united states
court of appeals for the second circuit
[June 26, 2017]
Justice Kennedy delivered the opinion of the
Court.
The suit giving rise to the case before the
Court was filed by a plaintiff who was a member of a putative class
in a class action but who later elected to withdraw and proceed in
this separate suit, seeking recovery for the same illegalities that
were alleged in the class suit. The class-action suit had been
filed within the time permitted by statute. Whether the later,
separate suit was also timely is the controlling question.
I
A
The Securities Act of 1933 “protects investors
by ensuring that companies issuing securities . . . make
a ‘full and fair disclosure of information’ relevant to a public
offering.” Omnicare, Inc. v. Laborers Dist. Council
Constr. Industry Pension Fund, 575 U. S. ___, ___ (2015)
(slip op., at 1) (quoting Pinter v. Dahl, 486
U. S. 622, 646 (1988) ); see 48Stat. 74, as amended, 15
U. S. C. §77a et seq. Companies may offer
securities to the public only after filing a registration
statement, which must contain information about the company and the
security for sale. Omnicare, 575 U. S., at ___–___
(slip op., at 1–2). Section 11 of the Securities Act
“promotes compliance with these disclosure provisions by giving
purchasers a right of action against an issuer or designated
individuals,” including securities underwriters, for any material
misstatements or omissions in a registration statement. Id.,
at ___ (slip op., at 2); see 15 U. S. C. §77k(a).
The Act provides time limits for §11 suits.
These time limits are set forth in a two-sentence section of the
Act, §13. It provides as follows:
“No action shall be maintained to enforce
any liability created under [§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 [§11] more
than three yearsafter the security was bona fide offered to
thepublic . . . .” 15 U. S. C. §77m.
So there are two time bars in the quoted
provision; and the second one, the 3-year bar, is central to this
case.
B
Lehman Brothers Holdings Inc. formerly was one
of the largest investment banks in the United States. In 2007 and
2008, Lehman raised capital through a number of public securities
offerings. Petitioner, California Public Employees’ Retirement
System (sometimes called CalPERS), is the largest public pension
fund in the country. Petitioner purchased securities in some of
these Lehman offerings; and it is alleged that respondents, various
financial firms, are liable under the Act for their participation
as underwriters in the transactions. The separate respondents are
listed in an appendix to this opinion.
In September 2008, Lehman filed for bankruptcy.
Around the same time, a putative class action concerning Lehman
securities was filed against respondents in the United States
District Court for the Southern District of New York. The operative
complaint raised claims under §11, alleging that the registration
statements for certain of Lehman’s 2007 and 2008 securities
offerings included material misstatements or omissions. The
complaint was filed on behalf of all persons who purchased the
identified securities, making petitioner a member of the putative
class. Petitioner, however, was not one of the named plaintiffs in
the suit. The class action was consolidated with other securities
suits against Lehman in a single multidistrict litigation.
In February 2011, petitioner filed a separate
complaint against respondents in the United States District Court
for the Northern District of California. This suit was filed more
than three years after the relevant transactions occurred. The
complaint alleged identical securities law violations as the
class-action complaint, but the claims were on petitioner’s own
behalf. The suit was transferred and consolidated with the
multidistrict litigation in the Southern District of New York. Soon
thereafter, a proposed settlement was reached in the putative class
action. Petitioner, apparently convinced it could obtain a more
favorable recovery in its separate suit, opted out of the
class.
Respondents then moved to dismiss petitioner’s
indi-vidual suit alleging §11 violations as untimely under the
3-year bar in the second sentence of §13. Petitioner countered that
its individual suit was timely because that 3-year period was
tolled during the pendency of the class-action filing. The
principal authority cited to support petitioner’s argument that the
3-year period was tolled was American Pipe & Constr. Co.
v. Utah, 414 U. S. 538 (1974).
The District Court disagreed with petitioner’s
argument, holding that the 3-year bar in §13 is not subject to
tolling. The Court of Appeals for the Second Circuit affirmed. In
agreement with the District Court, the Court of Appeals held that
the tolling principle discussed in American Pipe is
inapplicable to the 3-year time bar. In re Lehman Brothers
Securities and ERISA Litigation, 655 Fed. Appx. 13, 15 (2016).
As the Court of Appeals noted, there is disagreement about whether
the tolling rule of American Pipe applies to the 3-year time
bar in §13. Compare Joseph v. Wiles, 223 F. 3d
1155, 1166–1168 (CA10 2000), with Stein v. Regions Morgan
Keegan Select High Income Fund, Inc., 821 F. 3d 780,
792–795 (CA6 2016), and Dusek v. JPMorgan Chase &
Co., 832 F. 3d 1243, 1246–1249 (CA11 2016).
The Court of Appeals also rejected petitioner’s
alternative argument that its individual claims were “essentially
‘filed’ in the putative class complaint,” so that the filing of the
class action within three years made the individual claims timely.
655 Fed. Appx., at 15.
This Court granted certiorari. 580 U. S.
___ (2017).
II
The question then is whether §13 permits the
filing of an individual complaint more than three years after the
relevant securities offering, when a class-action complaint was
timely filed, and the plaintiff filing the individual complaint
would have been a member of the class but for opting out of it. The
answer turns on the nature and purpose of the 3-year bar and of the
tolling rule that petitioner seeks to invoke. Each will be
addressed in turn.
A
As the Court explained in CTS Corp. v.
Waldburger, 573 U. S. ___ (2014), statutory time bars
can be divided into two categories: statutes of limitations and
statutes of repose. Both “are mechanisms used to limit the temporal
extent or duration of liability for tortious acts,” but “each has a
distinct purpose.” Id., at ___–___ (slip op., at 5–6).
Statutes of limitations are designed to
encourage plaintiffs “to pursue diligent prosecution of known
claims.” Id., at ___ (slip op., at 6) (internal quotation
marks omitted). In accord with that objective, limitations periods
begin to run “when the cause of action accrues”—that is, “when the
plaintiff can file suit and obtain relief.” Id., at ___
(slip op., at 5) (internal quotation marks omitted). In a
personal-injury or property-damage action, for example, more often
than not this will be “ ‘when the injury occurred or was
discovered.’ ” Ibid.
In contrast, statutes of repose are enacted to
give more explicit and certain protection to defendants. These
statutes “effect a legislative judgment that a defendant should be
free from liability after the legislatively determined period of
time.” Id., at ___–___ (slip op., at 6–7) (internal
quotation marks omitted). For this reason, statutes of repose begin
to run on “the date of the last culpable act or omission of the
defendant.” Id., at ___ (slip op., at 6).
The 3-year time bar in §13 reflects the
legislative objective to give a defendant a complete defense to any
suit after a certain period. From the structure of §13, and the
language of its second sentence, it is evident that the 3-year bar
is a statute of repose. In fact, this Court has already described
the provision as establishing “a period of repose,” which
“ ‘impose[s] an outside limit’ ” on temporal liability.
Lampf, Pleva, Lipkind, Prupis & Petigrow v.
Gilbertson, 501 U. S. 350, 363 (1991) .
The statute provides in clear terms that “[i]n
no event” shall an action be brought more than three years after
the securities offering on which it is based. 15 U. S. C.
§77m. This instruction admits of no exception and on its face
creates a fixed bar against future liability. See CTS,
supra, at ___–___ (slip op., at 6–7); cf. United
States v. Brockamp, 519 U. S. 347, 350 (1997)
(noting that a statute that “sets forth its time limitations in
unusually emphatic form . . . cannot easily be read as
containing implicit exceptions”). The statute, furthermore, runs
from the defendant’s last culpable act (the offering of the
securities), not from the accrual of the claim (the plaintiff’s
discovery of the defect in the registration statement). Under
CTS, this point is close to a dispositive indication that
the statute is one of repose.
This view is confirmed by the two-sentence
structure of §13. In addition to the 3-year time bar, §13 contains
a 1-year statute of limitations. The limitations statute runs from
the time when the plaintiff discovers (or should have discovered)
the securities-law violation. The pairing of a shorter statute of
limitations and a longer statute of repose is a common feature of
statutory time limits. See, e.g., Gabelli v. SEC, 568
U. S. 442, 453 (2013) (“[S]tatutes applying a discovery rule
. . . often couple that rule with an absolute provision
for repose”). The two periods work together: The discovery rule
gives leeway to a plaintiff who has not yet learned of a violation,
while the rule of repose protects the defendant from an
interminable threat of liability. Cf. Merck & Co. v.
Reynolds, 559 U. S. 633, 650 (2010) (reasoning that
2-year discovery rule would not “subject defendants to liability
for acts taken long ago,” because the statute also included an
“unqualified bar on actions instituted ‘5 years after such
violation’ ”).
The history of the 3-year provision also
supports its classification as a statute of repose. It is
instructive to note that the statute was not enacted in its current
form. The original version of the 1933 Securities Act featured a
2-year discovery period and a 10-year outside limit, see §13,
48Stat. 84, but Congress changed this framework just one year after
its enactment. The discovery period was changed to one year and the
outside limit to three years. See Securities Exchange Act of 1934,
§207, 48Stat. 908. The evident design of the shortened statutory
period was to protect defendants’ financial security in
fast-changing markets by reducing the open period for potential
liability.
B
The determination that the 3-year period is a
statute of repose is critical in this case, for the question
whether a tolling rule applies to a given statutory time bar is one
“of statutory intent.” Lozano v. Montoya Alvarez, 572
U. S. 1 , ___ (2014) (slip op., at 8). The purpose of a
statute of repose is to create “an absolute bar on a defendant’s
temporal liability,” CTS, 573 U. S., at ___ (slip op.,
at 6) (alteration and internal quotation marks omitted); and that
purpose informs the assessment of whether, and when, tolling rules
may apply.
In light of the purpose of a statute of repose,
the provision is in general not subject to tolling. Tolling is
permissible only where there is a particular indication that the
legislature did not intend the statute to provide complete repose
but instead anticipated the extension of the statutory period under
certain circumstances.
For example, if the statute of repose itself
contains an express exception, this demonstrates the requisite
intent to alter the operation of the statutory period. See 1 C.
Corman, Limitation of Actions §1.1, pp. 4–5 (1991) (Corman); see,
e.g., 29 U. S. C. §1113 (establishing a 6-year
statute of repose, but stipulating that, in case of fraud, the
6-year period runs from the plaintiff’s discovery of the
violation). In contrast, where the legislature enacts a general
tolling rule in a different part of the code—e.g., a rule
that suspends time limits until the plaintiff reaches the age of
majority—courts must analyze the nature and relation of the
legislative purpose of each provision to determine which controls.
See 2 Corman §10.2.1, at 108. In keeping with the statute-specific
nature of that analysis, courts have reached different conclusions
about whether general tolling statutes govern particular periods of
repose. Ibid., n. 15.
Of course, not all tolling rules derive from
legislative enactments. Some derive from the traditional power of
the courts to “ ‘apply the principles . . . of
equity jurisprudence.’ ” Young v. United States,
535 U. S. 43, 50 (2002) (alteration omitted). The classic
example is the doctrine of equitable tolling, which permits a court
to pause a statu-tory time limit “when a litigant has pursued his
rights diligently but some extraordinary circumstance prevents him
from bringing a timely action.” Lozano, 572
U. S., at ___ (slip op., at 7). Tolling rules of that
kind often apply to statutes of limitations based on the
presumption that Congress “ ‘legislate[s] against a background
of common-law adjudicatory principles.’ ” Id., at ___
(slip op., at 8).
The purpose and effect of a statute of repose,
by contrast, is to override customary tolling rules arising from
the equitable powers of courts. By establishing a fixed limit, a
statute of repose implements a “ ‘legislative decisio[n] that
as a matter of policy there should be a specific time beyond which
a defendant should no longer be subjected to protracted
liability.’ ” CTS, 573 U. S., at ___ (slip
op., at 7). The unqualified nature of that determination supersedes
the courts’ residual authority and forecloses the extension of the
statutory period based on equitable principles. For this reason,
the Court repeatedly has stated in broad terms that statutes of
repose are not subject to equitable tolling. See, e.g., id.,
at ___–___ (slip op., at 7–8); Lampf, Pleva, 501 U. S.,
at 363.
C
Petitioner contends that the 3-year provision
is subject to tolling based on the rationale and holding in the
Court’s decision in American Pipe. The language of the
3-year statute does not refer to or impliedly authorize any
exceptions for tolling. If American Pipe had itself been
grounded in a legislative enactment, perhaps an argument couldbe
made that the enactment expressed a legislative objective to modify
the 3-year period. If, however, the tolling decision in American
Pipe derived from equity principles, it cannot alter the
unconditional language and purpose of the 3-year statute of
repose.
In American Pipe, a timely class-action
complaint was filed asserting violations of federal antitrust law.
414 U. S., at 540. Class certification was denied because the
class was not large enough, see Fed. Rule Civ. Proc. 23(a)(1), and
individuals who otherwise would have been members of the class then
filed motions to intervene as individual plaintiffs. The motions
were denied on the grounds that the applicable 4-year time bar had
expired. See 15 U. S. C. §15b. The Court of Appeals
reversed, permitting intervention.
This Court affirmed. It held the individual
plaintiffs’ motions to intervene were timely because “the
commencement of a class action suspends the applicable statute of
limitations as to all asserted members of the class.” American
Pipe, 414 U. S., at 554. The Court reasoned that
this result was consistent “both with the procedures of Rule 23 and
with the proper function of the limitations statute” at issue.
Id., at 555. First, the tolling furthered “the purposes of
litigative efficiency and economy” served by Rule 23. Id.,
at 556. Without the tolling, “[p]otential class members would be
induced to file protective motions to intervene or to join in the
event that a class was later found unsuitable,” which would “breed
needless duplication of motions.” Id., at 553–554. Second,
the tolling was in accord with “the functional operation of a
statute of limitations.” Id., at 554. By filing a class
complaint within the statutory period, the named plaintiff
“notifie[d] thedefendants not only of the substantive claims being
brought against them, but also of the number and generic identities
of the potential plaintiffs who may participate in the judgment.”
Id., at 555.
As this discussion indicates, the source of the
tolling rule applied in American Pipe is the judicial power
to promote equity, rather than to interpret and enforce statutory
provisions. Nothing in the American Pipe opinion suggests
that the tolling rule it created was mandated by the text of a
statute or federal rule. Nor could it have. The central text at
issue in American Pipe was Rule 23, and Rule 23 does not so
much as mention the extension or suspension of statutory time
bars.
The Court’s holding was instead grounded in the
traditional equitable powers of the judiciary. The Court described
its rule as authorized by the “judicial power to toll statutes of
limitations.” Id., at 558; see also id., at 555 (“the
tolling rule we establish here” (emphasis added)). The Court
also relied on cases that are paradigm applications of equitable
tolling principles, explaining with approval that tolling in one
such case was based on “considerations ‘deeply rooted in our
jurisprudence.’ ” Id., at 559 (quoting Glus v.
Brooklyn Eastern Dist. Terminal, 359 U. S. 231, 232
(1959) ; alteration omitted); see also 414 U. S., at
559 (citing Holmberg v. Armbrecht, 327 U. S. 392
(1946) ). The Court noted too that “bad faith” was not the cause of
the District Court’s denial of class certification. 414
U. S., at 553 (internal quotation marks omitted).
Perhaps for these reasons, this Court has
referred to American Pipe as “equitable tolling.” See
Irwin v. Department of Veterans Affairs, 498
U. S. 89 , and n. 3 (1990); see also Young, supra,
at 49; Greyhound Corp. v. Mt. Hood Stages, Inc., 437
U. S. 322 , n. (1978) (Burger, C. J., concurring) (using
American Pipe as an example of “[t]he authority of a federal
court, sitting as a chancellor, to toll a statute of limitations on
equitable grounds”). It is true, however, that the American
Pipe Court did not consider the criteria of the formal doctrine
of equitable tolling in any direct manner. It did not analyze, for
example, whether the plaintiffs pursued their rights with special
care; whether some extraordinary circumstance prevented them from
intervening earlier; or whether the defendant engaged in
misconduct. See Holland v. Florida, 560 U. S.
631, 649 (2010) (identifying these considerations); Young,
535 U. S., at 50 (same). The balance of the Court’s reasoning
nonetheless reveals a rule based on traditional equitable powers,
designed to modify a stat-utory time bar where its rigid
application would create injustice.
D
This analysis shows that the American
Pipe tolling rule does not apply to the 3-year bar mandated in
§13. As explained above, the 3-year limit is a statute of repose.
See supra, at 5–7. And the object of a statute of repose, to
grant complete peace to defendants, supersedes the application of a
tolling rule based in equity. See supra, at 7–8. No feature
of §13 provides that deviation from its time limit is permissible
in a case such as this one. To the contrary, the text, purpose,
structure, and history of the statute all disclose the
congressional purpose to offer defendants full and final security
after three years.
Petitioner raises four counterarguments, but
they are not persuasive. First, petitioner contends that this case
is indistinguishable from American Pipe itself. If the
3-year bar here cannot be tolled, petitioner reasons, then there
was no justification for the American Pipe Court’s contrary
decision to suspend the time bar in that case. American
Pipe, however, is distinguishable. The statute in American
Pipe was one of limitations, not of repose; it began to run
when “ ‘the cause of action accrued.’ ” 414 U. S.,
at 541, n. 2 (quoting 15 U. S. C. §15b). The
statute in the instant case, however, is a statute of repose.
Consistent with the different purposes embodied in statutes of
limitations and statutes of repose, it is reasonable that the
former may be tolled by equitable considerations even though the
latter in most circumstances may not. See supra, at 7–8.
Second, petitioner argues that the filing of a
class-action complaint within three years fulfills the purposes of
a statutory time limit with regard to later filed suits by
individual members of the class. That is because, according to
petitioner, the class complaint puts a defendant on notice as to
the content of the claims against it and the set of potential
plaintiffs who might assert those claims. It is true that the
American Pipe Court, in permitting tolling, suggested that
generic notice satisfied the purposes of the statute of limitations
in that case. See 414 U. S., at 554–555. While this was deemed
sufficient in balancing the equities to allow tolling under the
antitrust statute, it must be noted that here the analysis differs
because the purpose of a statute of repose is to give the defendant
full protection after a certain time.
If the number and identity of individual suits,
where they may be filed, and the litigation strategies they will
use are unknown, a defendant cannot calculate its potential
liability or set its own plans for litigation with much precision.
The initiation of separate individual suits may thus increase a
defendant’s practical burdens. See, e.g., Cottreau, Note,
The Due Process Right To Opt Out of Class Actions, 73 N. Y. U.
L. Rev. 480, 486, and n. 29 (1998) (“A defendant’s transaction
costs are likely to be reduced by having to defend just one
action”). The emergence of individual suits, furthermore, may
increase a defendant’s financial liability; for plaintiffs who opt
out have considerable leverage and, as a result, may obtain
outsized recoveries. See, e.g., Coffee, Accountability and
Competition in Securities Class Actions: Why “Exit” Works Better
Than “Voice,” 30 Cardozo L. Rev. 407, 417, 432–433 (2008);
Perino, Class Action Chaos? The Theory of the Core and an Analysis
of Opt-Out Rights in Mass Tort Class Actions, 46 Emory L. J.
85, 97 (1997). These uncertainties can put defendants at added risk
in conducting business going forward, causing destabilization in
markets which react with sensitivity to these matters. By
permitting a class action to splinter into individual suits, the
application of American Pipe tolling would threaten to alter
and expand a defendant’s accountability, contradicting the
substance of a statute of repose. All this is not to suggest how
best to further equity under these circumstances but simply to
support the recognition that a statute of repose supersedes a
court’s equitable balancing powers by setting a fixed time period
for claims to end.
Third, petitioner contends that dismissal of its
individ-ual suit as untimely would eviscerate its ability to opt
out, an ability this Court has indicated should not be disregarded.
See Wal-Mart Stores, Inc. v. Dukes, 564 U. S.
338, 363 (2011) . It does not follow, however, from any privilege
to opt out that an ensuing suit can be filed without regard to
mandatory time limits set by statute.
Fourth, petitioner argues that declining to
apply American Pipe tolling to statutes of repose will
create inefficiencies. It contends that nonnamed class members will
inundate district courts with protective filings. Even if
petitioner were correct, of course, this Court “lack[s] the
authority to rewrite” the statute of repose or to ignore its plain
import. Baker Botts L. L. P. v. ASARCO LLC, 576
U. S. ___, ___ (2015) (slip op., at 12).
And petitioner’s concerns likely are overstated.
Petitioner has not offered evidence of any recent influx of
protective filings in the Second Circuit, where the rule affirmed
here has been the law since 2013. This is not surprising. The very
premise of class actions is that “ ‘small recoveries do not
provide the incentive for any individual to bring a solo action
prosecuting his or her rights.’ ” Amchem Products, Inc.
v. Windsor, 521 U. S. 591, 617 (1997) . Many individual
class members may have no interest in protecting their right to
litigate on an individ-ual basis. Even assuming that they do, the
process is un-likely to be as onerous as petitioner claims. A
simple motion to intervene or request to be included as a named
plaintiff in the class-action complaint may well suffice. See,
e.g., Brief for Washington Legal Foundation as Amicus
Curiae 6–11 (describing procedures); Brief for Securities
Industry and Financial Markets Association et al. as Amici
Curiae 16, 19–20 (same). District courts, furthermore, have
ample means and methods to administer their dockets and to ensure
that any additional filings proceed in an orderly fashion. Cf.
Dietz v. Bouldin, 579 U. S. ___, ___ (2016)
(slip op., at 6) (“[D]istrict courts have the inherent authority to
manage their dockets and courtrooms with a view toward the
efficient and expedient resolution of cases”).
III
Petitioner makes an alternative argument that
does not depend on tolling. Petitioner submits its individual suit
was timely in any event. Section 13 provides that an “action” must
be “brought” within three years of the relevant securities
offering. See 15 U. S. C. §77m. Petitioner argues that
requirement is met here because the filing of the class-action
complaint “brought” petitioner’s individual “action” within the
statutory time period.
This argument rests on the premise that an
“action” is “brought” when substantive claims are presented to any
court, rather than when a particular complaint is filed in a
particular court. The term “action,” however, refers to a judicial
“proceeding,” or perhaps to a “suit”—not to the general content of
claims. See Black’s Law Dictionary 41 (3d ed. 1933) (defining
“action” as, inter alia, “an ordinary proceeding in a court
of justice”); see also id., at 43 (“The terms ‘action’ and
‘suit’ are . . . nearly, if not entirely, synonymous”).
Whether or not petitioner’s individual complaint alleged the same
securities law violations as the class-action complaint, it defies
ordinary understanding to suggest that its filing—in a separate
forum, on a separate date, by a separate named party—was the same
“action,” “proceeding,” or “suit.”
The limitless nature of petitioner’s argument,
furthermore, reveals its implausibility. It appears that, in
petitioner’s view, the bringing of the class action would make any
subsequent action raising the same claims timely. Taken to its
logical limit, an individual action would be timely even if it were
filed decades after the original securities offering—provided a
class-action complaint had been filed at some point within the
initial 3-year period. Congress would not have intended this
result.
Petitioner’s argument also fails because it is
inconsistent with the reasoning in American Pipe itself. If
the filing of a class action made all subsequent actions by
putative class members timely, there would be no need for tolling
at all. Yet this Court has described American Pipe as
creating a tolling rule, necessary to permit the ensuing individual
actions to proceed. See, e.g., American Pipe, 414
U. S., at 555; Irwin, 498 U. S., at 96, n. 3;
Crown, Cork & Seal Co. v. Parker, 462 U. S.
345, 350 (1983) . Indeed, the American Pipe Court reasoned
that the class-action complaint “was filed with 11 days yet to run”
in the statutory period, so the motions for intervention were
timely only if filed within 11 days after the denial of class
certification. 414 U. S., at 561. If the filing of the class
action “brought” any included individual actions, it would have
sufficed for the Court to note the date on which the class action
was filed and deem all subsequent individual actions proper,
regardless when filed.
* * *
Tolling may be of great value to allow injured
persons to recover for injuries that, through no fault of their
own, they did not discover because the injury or the perpetrator
was not evident until the limitations period otherwise would have
expired. This is of obvious utility in the securities market, where
complex transactions and events can be obscure and difficult for a
market participant to analyze or apprehend. In a similar way,
tolling as allowed in American Pipe may protect plaintiffs
who anticipated their interests would be protected by a class
action but later learned that a class suit could not be maintained
for reasons outside their control.
The purpose of a statute of repose, on the other
hand, is to allow more certainty and reliability. These ends, too,
are a necessity in a marketplace where stability and reliance are
essential components of valuation and expectation for financial
actors. The statute in this case reconciles these different ends by
its two-tier structure: a conventional statute of limitations in
the first clause and a statute of repose in the second.
The statute of repose transforms the analysis.
In a hypothetical case with a different statutory scheme,
consisting of a single limitations period without an additional
outer limit, a court’s equitable power under American Pipe
in many cases would authorize the relief petitioner seeks. Here,
however, the Court need not consider how equitable considerations
should be formulated or balanced, for the mandate of the statute of
repose takes the case outside the bounds of the American
Pipe rule.
The final analysis, then, is straightforward.
The 3-year time bar in §13 of the Securities Act is a statute of
repose. Its purpose and design are to protect defendants against
future liability. The statute displaces the traditional power of
courts to modify statutory time limits in the name of equity.
Because the American Pipe tolling rule is rooted in those
equitable powers, it cannot extend the 3-year period. Petitioner’s
untimely filing of its individual action is ground for
dismissal.
The judgment of the Court of Appeals for the
Second Circuit is affirmed.
It is so ordered.
APPENDIX
Respondents are the following financial
securities firms: ANZ Securities, Inc.; Bankia, S. A.; BBVA
Securities Inc.; BMO Capital Markets Corp.; BNP Paribas FS, LLC;
BNP Paribas S. A.; BNY Mellon Capital Markets, LLC; CIBC World
Markets Corp.; Citigroup Global Markets Inc.; Daiwa Capital Markets
Europe Limited; DZ Financial Markets LLC; HSBC Securities (USA)
Inc.; HVB Capital Markets, Inc.; ING Financial Markets LLC; Mizuho
Securities USA Inc.; M. R. Beal & Company; Muriel Siebert
& Co. Inc.; nabSecurities LLC; Natixis Securities Americas LLC;
RBC Capital Markets LLC; RBS Securities, Inc.; RBS WCS Holding
Company; Santander Investment Securities Inc.; Scotia Capital (USA)
Inc.; SG Americas Securities, LLC; Sovereign Securities Corporation
LLC; SunTrust Capital Markets, Inc.; Utendahi Capital Partners, L.
P.; and Wells Fargo Securities, LLC.
SUPREME COURT OF THE UNITED STATES
_________________
No. 16–373
_________________
CALIFORNIA PUBLIC EMPLOYEES’ RETIREMENT
SYSTEM, PETITIONER
v. ANZ SECURITIES, INC., et al.
on writ of certiorari to the united states
court of appeals for the second circuit
[June 26, 2017]
Justice Ginsburg, with whom Justice Breyer,
Justice Sotomayor, and Justice Kagan join, dissenting.
A class complaint was filed against respondents
well within the three-year period of repose set out in §13 of the
Securities Act of 1933, 15 U. S. C. §77m. That complaint
informed respondents of the substance of the claims asserted
against them and the identities of potential claimants. See
American Pipe & Constr. Co. v.
Utah, 414
U. S. 538 –555 (1974);
Crown, Cork & Seal Co. v.
Parker, 462 U. S. 345, 353 (1983) . Respondents, in
other words, received what §13’s repose period was designed to
afford them: notice of their potential liability within a fixed
time window.
The complaint also “commence[d] the action for
all members of the class.”
American Pipe, 414 U. S., at
550. Thus, when petitioner California Public Employees’ Retirement
System (CalPERS) elected to exercise the right safeguarded by
Federal Rule of Civil Procedure 23(c)(2)(B)(v),
i.e., the
right to opt out of the class and proceed independently, CalPERS’
claim remained timely. See
American Pipe, 414 U. S., at
550 (demanding that class members “individually meet the timeliness
requirements . . . is simply inconsistent with Rule 23”).
Given the due process underpinning of the opt-out right, see
Wal-Mart Stores, Inc. v.
Dukes, 564 U. S. 338,
363 (2011) , I resist rendering the right illusory for CalPERS and
similarly situated class members. I would therefore reverse the
judgment of the Second Circuit. Accordingly, I dissent from today’s
decision, under which opting out cuts off any chance for
recovery.
I
CalPERS’ claim against respondents was timely
launched when the class representative filed a complaint pursuant
to §11 of the Securities Act, 15 U. S. C. §77k, on behalf
of all members of the described class, CalPERS among them. See
American Pipe & Constr. Co. v.
Utah, 414
U. S. 538, 550 (1974) (under Federal Rule of Civil Procedure
23, “the filing of a timely class action complaint commences the
action for all members of the class”). See also
ante, at 3
(CalPERS was part of putative class). Filing the class complaint
within three years of the date the securities specified in that
complaint were offered to the public also satisfied §13’s statute
of repose. As the Court observes,
ante, at 5, statutes of
repose “effect a legislative judgment that a defendant should be
free from [facing] liability after the legislatively determined
period of time.”
CTS Corp. v.
Waldburger, 573
U. S. ___, ___–___ (2014) (slip op., at 6–7) (internal
quotation marks omitted). A repose period assures a party who might
be drawn into litigation that, if no action is brought within a
specified time, he will be off the hook. But whether CalPERS stayed
in the class or eventually filed separately, respondents would have
known, within the repose period, of their potential liability to
all putative class members.
A class complaint “notifies the defendants not
only of the substantive claims being brought against them, but also
of the number and generic identities of the potential plaintiffs
who may participate in the judgment.”
Crown, Cork & Seal
Co. v.
Parker, 462 U. S. 345, 353 (1983) (quoting
American Pipe, 414 U. S., at 555). The class complaint
filed against respondents provided that very notice: It identified
“the essential information necessary to determine both the subject
matter and size of the prospective litigation,”
id., at
555—
i.e., the class of plaintiffs, the offering documents,
and the alleged untrue statements and misleading omissions in those
documents, see App. 50–66. “[A] defendant faced with [such]
information about a potential liability to a class cannot be said
to have reached a state of repose that should be protected.”
Developments in the Law: Class Actions, 89 Harv. L. Rev. 1318,
1451 (1976).
When CalPERS elected to pursue individually the
claims already stated in the class complaint against the same
defendants, it simply took control of the piece of the action that
had always belonged to it. CalPERS’ statement of the same
allegations in an individual complaint could not disturb anyone’s
repose, for respondents could hardly be at rest once notified of
the potential claimants and the precise false or misleading
statements alleged to infect the registration statements at
issue.[
1] CalPERS’ decision to
opt out did change two things: (1) CalPERS positioned itself to
exercise its constitutional right to go it alone, cutting loose
from a monetary settlement it deemed insufficient; and (2)
respondents had to deal with CalPERS and its attorneys in addition
to the named plaintiff and class counsel. Although those changes
may affect how litigation subsequently plays out, see
ante,
at 12–13, they do not implicate the concerns that prompted §13’s
repose period: The class complaint disclosed the same information
respondents would have received had each class member instead filed
an individual complaint on the day the class complaint was
filed.
II
Today’s decision disserves the investing
public that §11 was designed to protect. The harshest consequences
will fall on those class members, often least sophisticated, who
fail to file a protective claim within the repose period. Absent a
protective claim filed within that period, those members stand to
forfeit their constitutionally shielded right to opt out of the
class and thereby control the prosecution of their own claims for
damages. See
Wal-Mart Stores, Inc. v.
Dukes, 564
U. S. 338, 363 (2011) (“In the context of a class action
predominantly for money dam-ages,” the “absence of . . .
opt-out violates due process.”). Because critical stages of
securities class actions, including the class-certification
decision, often occur years after the filing of a class
complaint,[
2] the risk is high
that class members failing to file a protective claim will be
sad-dled with inadequate representation or an inadequate
judgment.
The majority’s ruling will also gum up the works
of class litigation. Defendants will have an incentive to slow walk
discovery and other precertification proceedings so the clock will
run on potential opt outs. Any class member with a material stake
in a §11 case, including every fiduciary who must safeguard
investor assets, will have strong cause to file a protective claim,
in a separate complaint or in a motion to intervene, before the
three-year period expires. See Brief for Retired Federal Judges as
Amici Curiae 9–14. Such filings, by increasing the costs and
complexity of the litigation, “substantially burden the courts.”
Id., at 13.
Today’s decision impels courts and class counsel
to take on a more active role in protecting class members’ opt-out
rights. See
id., 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.
* * *
For the reasons stated, I would hold that the
filing of the class complaint commenced CalPERS’ action under §11
of the Securities Act, thereby satisfying §13’s statute of repose.
Accordingly, I would reverse the judgment of the Second
Circuit.
