California Public Employees’ Retirement System v. ANZ Securities, Inc.
582 US ___ (2017)

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Justia Opinion Summary

In 2007-2008, Lehman Brothers raised capital through public securities offerings. Petitioner, the largest public pension fund in the country, purchased some of those securities. A 2008 putative class action claimed that financial firms were liable under the Securities Act of 1933, 15 U.S.C. 77k(a), for their participation as underwriters in the transactions, alleging that certain registration statements for Lehman’s offerings included material misstatements or omissions. More than three years after the relevant offerings, petitioner filed a separate complaint with the same allegations. A proposed settlement was reached in the putative class action, but petitioner opted out. The Second Circuit affirmed dismissal of the individual suit, citing the three-year bar in Section 13 of the Act. The Supreme Court affirmed. Section 13’s first sentence states a one-year limitations period; the three-year time limit is a statute of repose, not subject to equitable tolling. Its instruction that “[i]n no event” shall an action be brought more than three years after the relevant securities offering admits of no exception. The statute runs from the defendant’s last culpable act (the securities offering), not from the accrual of the claim (the plaintiff’s discovery of the defect). 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. The timely filing of a class-action complaint does not fulfill the purposes of a statutory time limit for later-filed suits by individual class members.

  • Syllabus  | 
  • Opinion (Anthony M. Kennedy)  | 
  • Dissent (Ruth Bader Ginsburg)

NOTE: Where it is feasible, a syllabus (headnote) will be released, as is being done in connection with this case, at the time the opinion is issued.The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader.See United States v. Detroit Timber & Lumber Co., 200 U. S. 321 .

SUPREME COURT OF THE UNITED STATES

Syllabus

CALIFORNIA PUBLIC EMPLOYEES’ RETIREMENT SYSTEM v. ANZ SECURITIES, INC., et al.

certiorari to the united states court of appeals for the second circuit

No. 16–373. Argued April 17, 2017—Decided June 26, 2017

Section 11 of the Securities Act of 1933 gives purchasers of securities “a right of action against an issuer or designated individuals,” including securities underwriters, for any material misstatements or omissions in a registration statement. Omnicare, Inc. v. Laborers Dist. Council Constr. Industry Pension Fund, 575 U. S. ___, ___; see 15 U. S. C. §77k(a). Section 13 provides two time limits for §11 suits. The first sentence states that an action “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 . . . .” The second sentence provides that “[i]n no event shall any such action be brought . . . more than three years after the security was bona fide offered to the public . . . .” §77m.

In 2007 and 2008, Lehman Brothers Holdings Inc. raised capital through several public securities offerings. Petitioner, the largest public pension fund in the country, purchased some of those securities; and it is alleged that respondents, various financial firms, are liable under the Act for their participation as underwriters in the transactions. In 2008, a putative class action was filed against respondents in the Southern District of New York. The complaint raised §11 claims, alleging that the registration statements for certain of Lehman’s 2007 and 2008 securities offerings included material misstatements or omissions. Because the complaint was filed on behalf of all persons who purchased the identified securities, petitioner was a member of the putative class.

In February 2011, more than three years after the relevant securities offerings, petitioner filed a separate complaint against respondents in the Northern District of California, alleging violations identical to those in the class action on petitioner’s own behalf. Soon thereafter, a proposed settlement was reached in the putative class action, but petitioner opted out of the class. Respondents then moved to dismiss petitioner’s individual suit, alleging that the §11 violations were untimely under the 3-year bar in the second sentence of §13. Petitioner countered that the 3-year period was tolled during the pendency of the class-action filing, relying on American Pipe & Construction Co. v. Utah, 414 U. S. 538 . The trial court disagreed, and the Second Circuit affirmed, holding that American Pipe’s tolling principle is inapplicable to the 3-year bar. It also rejected petitioner’s alternative argument that the timely filing of the class action made petitioner’s individual claims timely as well.

Held: Petitioner’s untimely filing of its individual complaint more than three years after the relevant securities offering is ground for dismissal. Pp. 4–17.

(a) Section 13’s 3-year time limit is a statute of repose not subject to equitable tolling. Pp. 4–14.

(1) The two categories of statutory time bars—statutes of limitations and statutes of repose—each have “a distinct purpose.” CTS Corp. v. Waldburger, 573 U. S. ___, ___. Statutes of limitations are designed to encourage plaintiffs “ ‘to pursue diligent prosecution of known claims,’ ” id., at ___, while statutes of repose “effect a legislative judgment that a defendant should ‘be free from liability after the legislatively determined period of time,’ ” id., at ___. For this reason, statutes of limitations begin to run “when the cause of action accrues,” while statutes of repose begin to run on “the date of the last culpable act or omission of the defendant.” Id., at ___.

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. The instruction that “[i]n no event” shall an action be brought more than three years after the relevant securities offering admits of no exception. The statute also runs from the defendant’s last culpable act (the securities offering), not from the accrual of the claim (the plaintiff’s discovery of the defect).

This view is confirmed by §13’s two-sentence structure. 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 . Section 13’s history also supports the classification. The 1933 Securities Act’s original 2-year discovery period and 10-year outside limit were shortened a year later. The evident design of the shortened period was to protect defendants’ financial security by reducing the open period for potential liability. Pp. 4–7.

(2) The determination that the 3-year period is a statute of repose is critical here, 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 , ___. 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. A statute of repose implements a “ ‘legislative decisio[n] that . . . there should be a specific time beyond which a defendant should no longer be subjected to protracted liability.’ ” CTS, 573 U. S., at ___. The unqualified nature of that determination supersedes the courts’ residual authority and forecloses the extension of the statutory period based on equitable principles. Thus, the Court repeatedly has stated that statutes of repose are not subject to equitable tolling. See, e.g., id., at ___–___. Pp. 7–8.

(3) The tolling decision in American Pipe derived from equity principles and therefore cannot alter the unconditional language and purpose of the 3-year statute of repose. The source of the tolling rule applied in American Pipe is the judicial power to promote equity, not the power to interpret and enforce statutory provisions. Nothing in the decision suggests that its tolling rule was mandated by a statute or federal rule. Moreover, the Court relied on cases that are paradigm applications of equitable tolling principles, see 414 U. S., at 559. Thus, the Court has previously referred to American Pipe as “equitable tolling.” See, e.g., Irwin v. Department of Veterans Affairs, 498 U. S. 89 , and n. 3. Pp. 8–11.

(4) Petitioner’s counterarguments are unpersuasive. First, petitioner contends that this case is indistinguishable from American Pipe, but the statute there was one of limitations, which may be tolled by equitable considerations even where a statute of repose may not. Second, petitioner argues that the timely filing of a class-action complaint fulfills the purposes of a statutory time limit with regard to later filed suits by individual members of the class. But by permitting a class action to splinter into individual suits, the application of American Pipe tolling here would threaten to alter and expand a defendant’s accountability, contradicting the substance of a statute of repose. Third, petitioner contends that dismissal of its individual suit as untimely would eviscerate its ability to opt out, but it does not follow from any privilege to opt out that an ensuing suit can be filed without regard to mandatory time limits. Fourth, petitioner argues that declining to apply American Pipe tolling to statutes of repose will create inefficiencies, but 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. ___, ___. And petitioner’s practical concerns likely are overstated. Pp. 11–14.

(b) Also unpersuasive is petitioner’s alternative argument: that §13’s requirement that an “action” be “brought” within three years of the relevant securities offering is met here because the filing of the class-action complaint “brought” petitioner’s individual “action” within the statutory time period. This argument presumes 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 a “suit”—not to the general content of claims. Taken to its logical limit, petitioner’s argument would make an individual action timely even if it were filed decades after the original securities offering—provided a class-action complaint had been filed within the initial 3-year period. Congress would not have intended this result. This argument is also 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. Pp. 14–15.

(c) The final analysis is straightforward. Because §13’s 3-year time bar is a statute of repose, it displaces the traditional power of courts to modify statutory time limits in the name of equity. And 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 thus ground for dismissal. Pp. 16–17.

655 Fed. Appx. 13, affirmed.

Kennedy, J., delivered the opinion of the Court, in which Roberts, C. J., and Thomas, Alito, and Gorsuch, JJ., joined. Ginsburg, J., filed a dissenting opinion, in which Breyer, Sotomayor, and Kagan, JJ., joined.

Primary Holding

Section 13 of the Securities Act of 1933 provides a three-year limitation on bringing claims under Section 11 that functions as a statute of repose and is not subject to equitable tolling.

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