The Supreme Court started another term this week. One granted petition of interest is DeKalb County Pension Fund v. Transocean Ltd., which arises out of the Second Circuit’s ruling that the filing of a putative Rule 23 class action does not suspend the three-year period of repose for claims brought under Section 14(a) of the Securities Exchange Act. In so ruling, the Second Circuit declined to extend to “statutes of repose” the Supreme Court’s landmark holding in American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974), that “statutes of limitations” are tolled for all putative class members. Quick primer: A statute of limitations is typically based on when a plaintiff experiences harm associated with the legal injury. A statute of repose, on the other hand, is a time limit that is triggered by an event unconnected to the harm – such as the date a stock was first offered for sale. Courts have typically held that statutes of limitations can be equitably tolled, while statutes of repose are stricter and cannot. In DeKalb County, the consequences of applying the statute of repose were significant. The plaintiff filed suit within the period of repose and moved for lead plaintiff status after the period of repose had expired. The court denied the motion, finding him to be a flawed representative, and consequently held that the claims of the class were time-barred. With DeKalb County, the Court will resolve a circuit split. In Joseph v. Wiles, 223 F. 3d 1155 (10th Cir. 2000), the Tenth Circuit held that American Pipe tolling does apply because statutes of repose are subject to tolling that is legal (as opposed to equitable) in nature, like that which occurs when an action is commenced and class certification is pending, and arises from the procedures set forth in Rule 23. The Court granted certiorari on this question two years ago, but later dismissed its order as “improvidently granted.” Public Employees’ Retirement System v. IndyMac MBS, 134 S. Ct. 1515 (2014).
The Court’s ruling could have far reaching implications. Although the case sub judice arises under Section 14(a), the question presented is broader and encompasses all periods of repose. Accordingly, the Court’s ruling may affect federal cases applying statutes of repose in a variety of areas of the law, including the product defect and ERISA contexts. See 735 ILCS 5/13-213 (product action in Illinois must be commenced within shorter of 10 years from date of sale/delivery to user or 12 years from original sale) and In re Enron Corp. Sec. Derivative & ERISA Litig., 465 F. Supp. 2d 687, 717 (S.D. Tex. 2006).
DeKalb County Pension Fund v. Transocean Ltd., No. 16-206