Cal. Pub. Employees' Ret. Sys. v. ANZ Sec., Inc.
| Decision Date | 26 June 2017 |
| Docket Number | No. 16–373.,16–373. |
| Citation | 137 S.Ct. 2042,198 L.Ed.2d 584 |
| Parties | CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM, Petitioner v. ANZ SECURITIES, INC., et al. |
| Court | U.S. Supreme Court |
Thomas C. Goldstein, Bethesda MD, for petitioner.
Paul D. Clement, Washington, DC, for respondents.
Darren J. Robbins, Joseph D. Daley, Thomas E. Egler, Robbins Geller Rudman & Dowd LLP, San Diego, CA, Thomas C. Goldstein, Kevin K. Russell, Tejinder Singh, Goldstein & Russell, P.C., Bethesda MD, for petitioner.
Victor L. Hou, Jared Gerber, Cleary Gottlieb Steen & Hamilton LLP, New York, NY, Paul D. Clement, Jeffrey M. Harris, Matthew D. Rowen, Kirkland & Ellis LLP, Washington, DC, for respondents.
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.
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. ––––, ––––, 135 S.Ct. 1318, 1323, 191 L.Ed.2d 253 (2015) (quoting Pinter v. Dahl, 486 U.S. 622, 646, 108 S.Ct. 2063, 100 L.Ed.2d 658 (1988) ); see 48 Stat. 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 –––– – ––––, 135 S.Ct., at 1323. 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 ––––, 135 S.Ct., at 1323 ; 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:
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.
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 individual 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, 94 S.Ct. 756, 38 L.Ed.2d 713 (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 (C.A.10 2000), with Stein v. Regions Morgan Keegan Select High Income Fund, Inc., 821 F.3d 780, 792–795 (C.A.6 2016), and Dusek v. JPMorgan Chase & Co., 832 F.3d 1243, 1246–1249 (C.A.11 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).
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.
As the Court explained in CTS Corp. v. Waldburger, 573 U.S. ––––, 134 S.Ct. 2175, 189 L.Ed.2d 62 (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 –––– – ––––, 134 S.Ct., at 2182.
Statutes of limitations are designed to encourage plaintiffs "to pursue diligent prosecution of known claims." Id., at ––––, 134 S.Ct., at 2182–2183 (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 ––––, 134 S.Ct., at 2182 (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 –––– – ––––, 134 S.Ct., at 2183 (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 ––––, 134 S.Ct., at 2182.
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, 111 S.Ct. 2773, 115 L.Ed.2d 321 (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 –––– – ––––, 134 S.Ct., at 2182–2183 ; cf. United States v. Brockamp, 519 U.S. 347, 350, 117 S.Ct. 849, 136 L.Ed.2d 818 (1997) (). 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...
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