On May 19, 2016, the United States Court of Appeals for the Sixth Circuit affirmed the dismissal of two cases brought by investors in certain Morgan Keegan-affiliated investment funds stemming from losses incurred in the wake of the global credit crisis. Stein v. Regions Morgan Keegan Select High Income Fund, Inc., et al., Case No. 15-5903; Canale Funeral Directors, Inc. v. Regions Morgan Keegan Select High Income Fund, Inc., et al., Case No. 15-5905. In a case of first impression in the Sixth Circuit, the court ruled that the plaintiffs had waited too long to file suit and their claims were therefore barred by the three- and five-year statutes of repose under the Securities Act of 1933 and the Securities Exchange Act of 1934, respectively.
The plaintiffs filed their respective complaints on October 13, 2013, more than five years after the securities at issue were actually offered to the public. Therefore, unless the three- and five-year repose periods were somehow tolled, plaintiffs' claims were clearly time-barred. Plaintiffs attempted to argue that the class action tolling doctrine, as set forth in the United States Supreme Court's decision in American Pipe & Const. Co. v. Utah, 414 U.S. 538 (1974), tolled the repose period during the pendency of two class actions involving the same funds. Recognizing a circuit split over the issue of whether a securities plaintiff can rely on a pending class action to toll a repose period (as opposed to a limitations period), the Sixth Circuit ultimately endorsed the Second Circuit's holding in Police & Fire Ret. Sys. of City of Detroit v. IndyMac MBS, Inc., 721 F.3d 95 (2d Cir. 2013), agreeing that tolling was incompatible with the concept of a statute of repose, and that the 1933 Act and 1934 Act "are indeed unequivocal in extinguishing liability" after a specified period of time. The court declined to follow the Tenth Circuit's holding in Joseph v. Wiles, 223 F.3d 1155 (10th Cir. 2000), which extended American Pipe to statutes of repose. This decision is significant because it highlights the circuit split on the issue of whether American Pipe tolling applies to the statute of repose.