Second Circuit Blunts Impact of American Pipe Tolling; Plaintiffs Must Bring ’33 Act Claims Before the Three Year Statute of Repose Expires

The Second Circuit last week ruled on a key aspect of the timing of securities suits. Under the Supreme Court’s decision in American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974), plaintiffs are often able to revive claims by relying on earlier-filed class actions to toll the statute of limitations. RMBS plaintiffs have recently turned to American Pipe when their putative class actions are dismissed for lack of standing. 

In In re IndyMac Mortgage-Backed Securities Litigation, lead plaintiffs lacked standing to bring certain claims, which were dismissed by the district court. Other members of the asserted class—who had not been named as plaintiffs—sought to intervene in the action in order to bring those dismissed claims. Judge Lewis A. Kaplan of the United States District Court for the Southern District of New York denied the investors’ motions to intervene.

On June 27, the Second Circuit affirmed. The court held that neither American Pipe tolling, nor the “relation back” provisions in Rule 15(c) of the Federal Rules of Civil Procedure, revives claims that are untimely under the three year statute of repose in Section 13 of the ’33 Act. Unlike statutes of limitations, which govern the availability of remedies to plaintiffs, statutes of repose are understood to extinguish plaintiffs’ rights. Under this decision, Section 13’s plain language will govern and ’33 Act claims will be untimely if brought more than three years from the date the securities were offered.

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