The Securities Act of 1933 prevents a securities purchaser from suing over an alleged material misstatement or omission in a registration statement more than three years after the offeringdate. A circuit split developed over whether this three-year time limit is subject to so-called “American Pipe tolling,” which equitably tolls a statute of limitations during the pendency of a putative class action. This week, in CalPERS v. ANZ Securities, Inc., the Supreme Court of the United States ruled, in a 5-4decision, that the three-year time bar is a statute of repose that is not susceptible to American Pipe tolling, affirming the Second Circuit. As a result, the Supreme Court held CalPERS’s complaint, filed more than three years after the offerings at issue, was time-barred and subject to dismissal, notwithstanding a timely-filed putative class action challenging the same registration statements. This important decision will impact litigation strategies in Securities Act class actions and reduces the time frame for exposure to litigation risks for issuers, underwriters, and directors and officers of public companies, thereby making the American capital markets potentially more attractive to issuers and investors.
ANZ arose out of the Lehman Brothers bankruptcy. In 2008, a putative class action was filed under Section 11 of the Securities Act against underwriters who handled various securities offerings for Lehman Brothers in 2007 and 2008. CalPERS, the largest pension fund in the country and a member of the putative class, but not a named or lead plaintiff, decided to pursue its own Section 11 action against the underwriters. By the time CalPERS filed its complaint in 2011, however, more than three years had elapsed since the challenged offerings. CalPERS argued that American Pipe tolling saved it from the Securities Act’s three-year bar, given the pending class action alleging similar claims, but the district court disagreed and the Second Circuit affirmed the dismissal.
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