Supreme Court likely to consider recent Second Circuit case on whether class actions toll statutes of repose for securities violations

SRM Global Master Fund Ltd. P’ship v. Bear Stearns Cos., No. 14 Civ. 507 (2d Cir. July  14, 2016) (Lohier, J.):

Over two years ago, the Supreme Court was ready to consider whether the filing of a putative class action tolls the time in which a class member may file a claim on its own behalf under the Securities Act of 1933 when it granted the petition for certiorari in Public Employees’ Retirement System of Mississippi v. IndyMac MBS, Inc.  But then the lead plaintiffs in the case, Wyoming Retirement System and Wyoming State Treasurer, reached a $340 million settlement agreement with the six investment firms that had acted as underwriters in the issuance of mortgage-backed securities prior to the 2008 financial crisis.  

In preparing for oral argument, the Supreme Court came across the settlement and ordered the parties to answer:  “What should be the effect, if any, of the proposed settlement agreement now pending before the district court on the matter pending before this Court?” The lawyers on all sides answered that the case could go forward in the Court because claims against one of the underwriting firms sued in the case (Goldman Sachs & Co.) would have remained, but the Court dismissed the case as “improvidently granted.”  Among other things, the lead plaintiffs had stated in their answer that they were not seeking to collect anything from IndyMac and would dismiss any claims against that firm if the judge approved the settlement.

The Second Circuit’s recent decision in SRM Global Master Fund v. Bear Stearns, No. 14 Civ. 507 (2d Cir. July 14, 2016) was to be expected given that Police & Fire Retirement System of City of Detroit v. IndyMac MBS, Inc., 721 F.3d 95 (2d Cir. 2013), remains binding in the circuit.  The court held that statutes of repose may not be tolled.  While it may be true the Supreme Court had previously held in American Pipe & Construction Co. v. Utah, 414 U.S. 538, 554 (1974) that “the commencement of a class action suspends the applicable statute of limitations as to all asserted members of the class, this holding does not apply to a statute of repose because a statute of repose “is not a limitation of a plaintiff’s remedy, but rather defines the right involved in terms of the time allowed to bring suit.”  P. Stolz Family P’ship L.P. v. Daum, 355 F.3d 92, 102, 104 (2d Cir. 2004).

It would be shocking if the Supreme Court doesn't grant certiorari in this case, assuming that the plaintiffs file the petition.

Second Circuit's decision here:

Argument preview on the IndyMac case here:

The extensive briefing on the IndyMac case here: 

The Harvard Law Review Note criticizing IndyMac's reasoning (Note, Second Circuit Holds That American Pipe Class Action Tolling Doctrine Does Not Apply to Statute of Repose in Securities Act of 1933, 127 Harv. L. Rev. 1501 (2014)) is her:

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