On April 29, the United States Court of Appeals entered an amended order (previously decided on March 17, 2016) that affirmed the decision of the United States District Court for the Southern District of New York in DeKalb County Pension Fund v. Transocean Ltd., Robert L. Long, Jon A. Marshall, and Transocean Inc. The central issues in the case were (i) what statute of repose applies to a § 14(a) claim under the Securities Exchange Act of 1934? and (ii) when does the statute of repose began to run? This was a particularly thorny question because the private right of action in § 14(a) is implied, not express, and there is thus no clear guidance in the statute.

The case has its origins in 2007, when GlobalSantaFe Corp. (“GSF”) and Transocean Inc. (“Transocean”) jointly issued a proxy statement concerning a proposed merger. The proxy statement included representations concerning Transocean, and GSF’s shareholders, including Plaintiff-Appellee Dekalb, County Pension Fund (“DeKalb”) approved the merger. At the time, Transocean owned Deepwater Horizon and other offshore oil-drilling rigs. After the Deepwater Horizon disaster, Transocean’s stock lost over half of its value.

In 2010, the Bricklayers and Masons Local Union No. 5, Ohio Pension Fund (“Bricklayers”) filed a class action complaint alleging that the 2007 proxy statement included false and material statements and omissions. DeKalb sought to be appointed lead plaintiff on December 3, 2010, and Bricklayers and DeKalb were made joint leads. On April 7, 2011, they filed an amended class-action complaint, alleging claims that the Defendants had violated § 14(a), Rule 14a-9, and § 20(a) of the 1934 Act. Bricklayers was then dismissed for lack of standing, and DeKalb filed a second amended class action complaint, again asserting claims under § 14(a), Rule 14a-9, and § 20(a). The Defendants moved to dismiss, arguing that DeKalb’s claims were barred by the applicable statutes of repose. The District Court granted the Defendants’ motion.

DeKalb appealed, and the Second Circuit affirmed, finding that the § 14(a) claims were time-barred and that the § 20 claim failed to state a claim. More specifically, the Second Circuit held:

(1) Sections 9(f) and 18(a) of the 1934 Act, 15 U.S.C. §§ 78i(f), 78r(a), provide “private right[s] of action that involve[ ] a claim of fraud, deceit, manipulation, or contrivance,” to which a five‐year statute of repose now applies after the passage of the Sarbanes‐Oxley Act of 2002 (“SOX”)…but that Section 14(a) does not provide such a private right of action; (2) the same three‐year statutes of repose that applied to Sections 9(f) and 18(a) before the passage of SOX…still apply to Section 14(a) today; (3) the statutes of repose applicable to Section 14(a) begin to run on the date of the defendant’s last culpable act or omission; (4) DeKalb’s lead‐plaintiff motion does not “relate back” under Rule 17(a)(3) of the Federal Rules of Civil Procedure to the filing of the original class‐action complaint; (5) the Private Securities Litigation Reform Act…does not toll the statutes of repose applicable to Section 14(a); and (6) the tolling rule that the Supreme Court described in American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974), does not extend to the statutes of repose applicable to Section 14(a).

The Second Circuit’s ruling clarifies the application of the statutes of repose for the 1934 act claims under § 14(a) and should provide clear authority for defendants responding to § 14(a) claims.