On Monday, June 27, 2011, the Supreme Court granted Certiorari in Credit Suisse Securities (USA) LLC v. Simmonds, Case No. 10-1261. The case involves the right of an issuer (or, in this case, a shareholder bringing a derivative suit) to recover short swing profits obtained by a beneficial owner, director, or officer by reason of his relationship to the issuer under Exchange Act 16(b).
The specific question to be presented to the Court is:
Whether the two-year time limit for bringing an action under Section 16(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78p(b), is subject to tolling, and, if so, whether tolling continues even after the receipt of actual notice of the facts giving rise to the claim.
Kevin LaCroix's excellent blog, The D & O Diary, has a detailed discussion of the case here. As Mr. LaCroix explains, the plaintiff filed 54 derivative complaints under Section 16(b) in connection with 54 IPOs in 1999 and 2000, alleging that underwriters had arranged for post-IPO stock purchases of the issuers' securities at progressively higher prices (known as "laddering"). The plaintiff seeks disgorgement, claiming they were short-swing profits. The District Court, among other things, dismissed 24 of the 54 cases on the basis of Section 16(b)’s two-year statute of limitations. The Ninth Circuit reversed as to the statute of limitations issue, ruling that the statute is tolled until there has been adequate disclosure of the trade (when the defendant files a Section 16(a) disclosure statement). Since defendants did not file a Section 16(a) statement, the Ninth Circuit held that the claims are not time-barred. Simmonds v. Credit Suisse Securities (USA) LLC, No. 09-35262 (9th Cir. Jan. 18, 2011).
The case will be heard by the Supreme Court next term.