As noted in a previous blog, in Police & Fire Retirement Systems of City of Detroit v. IndyMac MBS, Inc., 721 F.3d 95 (2d Cir. 2013), the Second Circuit held that tolling under American Pipe – which plaintiffs had often used to revive claims by relying on earlier-filed class actions – does not apply to statutes of repose, including Section 13 of the ’33 Act. The significance of IndyMac was felt in New Jersey Carpenters Health Fund, et al. v. Residential Capital, et al., No. 08 CV 8781, 08 CV 5093 (S.D.N.Y. Dec. 18, 2013), where Hon. Harold Baer, Jr. was asked to reconsider his pre-IndyMac order denying defendants’ motion to dismiss a securities class action involving mortgage-backed securities. Upon reconsideration, Judge Baer dismissed one of the defendants, Deutsche Securities Inc., and several claims against other defendants, finding that intervening plaintiffs did not have standing to sue because the claims were not filed within the ’33 Act’s three-year statute of repose. As the case highlights, IndyMac’s effect will continue to be felt in pending cases – Judge Baer held that it should be applied retroactively – and will significantly limit the timing of future lawsuits.
In New Jersey Carpenters, plaintiffs alleged that defendants made material misstatements and omissions in violation of the ’33 Act in connection with mortgage-backed securities offerings. More than three years after several of these offerings, a group of plaintiffs sought to intervene. Despite the three-year period of repose, intervening plaintiffs argued that they had timely filed because they had previously brought separate actions against defendants over the securities at issue, tolling the statute. Relying on American Pipe, Judge Baer initially agreed and denied defendants motion to dismiss on these grounds. In light of IndyMac, however, upon reconsideration, the Court found that intervening plaintiffs lacked standing on offerings that occurred more than three years before they intervened. This meant that Deutsche Bank AG was dismissed altogether because it was only sued in connection with time-barred offerings, and certain claims against other defendants were dismissed as well.
However, in accordance with the Second Circuit’s decision in NECA-IBEW Health & Welfare Fund v. Goldman Sachs & Co., 693 F.3d 145 (2d Cir. 2012), Judge Baer allowed claims filed more than three years after the statute of repose, but which shared the “same set of concerns” as timely filed claims, to proceed. The IndyMac decision expressly stated that it did not alter NECA-IBEW’s holding that one class of investors may have standing to bring claims on behalf of another class if the claims share the “same set of concerns.” Judge Baer found that several of the claims had the same originator as timely filed claims and therefore implicated the “same set of concerns.”