June 26, 2017

Supreme Court Decides California Public Employees' Retirement System v. ANZ Securities, Inc., No. 16-373

On June 26, 2017, the United States Supreme Court decided California Public Employees’ Retirement System v. ANZ Securities, Inc., No. 16-373, holding that the three-year statute of repose in the Securities Act of 1933 cannot be tolled by a pending class action, and as a result, a class member cannot file its own individual suit after the three-year period has run.

Under the Securities Act, any action must be brought within one year of discovery of the untrue statement or omission or within one year after the discovery should have been made with reasonable diligence, but “[i]n no event” may an action be brought more than three years after the security was offered to the public.

After Lehman Brothers failed, a putative class action was filed within the limitations periods alleging that Lehman had violated the Securities Act of 1933 by making misstatements or omissions in public securities offerings and that the underwriters of the offerings were liable for the violations. California Public Employees’ Retirement System (CalPERS) was among the investors who had purchased the securities at issue, making it a putative class member, but it filed its own individual suit as well—only it did so more than three years after the securities had been offered. After a class settlement was reached, CalPERS opted out of the class and proceeded with its individual action. Defendants moved to dismiss CalPERS’ suit as untimely, and the lower courts agreed.

The Supreme Court affirmed, holding that the three-year bar in the Act is a statute of repose that is not subject to equitable tolling. Statutes of repose, held the Court, are meant to create certainty for defendants. Given that purpose, they override the courts’ ability to apply equitable tolling unless there is some indication in the statue that the legislature did not intend to provide complete repose but instead anticipated an extended period for suit under some circumstances. Here, Congress instructed that “[i]n no event” may an action be brought after three years. “This instruction admits of no exception and on its face creates a fixed bar against future liability.” The emphasis on finality is particularly clear given that the Act also includes a one-year statute of limitations, which could be tolled. As a result, CalPERS’ suit is untimely, as it was filed more than three years after the securities were publicly offered.

Justice Kennedy delivered the opinion of the Court, in which Chief Justice Roberts and Justices Thomas, Alito, and Gorsuch joined. Justice Ginsburg filed a dissenting opinion, in which Justices Breyer, Sotomayor, and Kagan joined.

Download the Opinion of the Court.

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