SCOTUS to Address 'American Pipe' Tolling Doctrine

The U.S. Supreme Court recently granted certiorari in Public Employees’ Retirement System of Mississippi v. IndyMac MBS.¹ to resolve a recurring issue in securities cases involving initial public offerings—whether the commencement of a class action tolls the three-year statute of repose in §13 of the Securities Act of 1933, which applies to claims under §§11 and 12(a)(2) of the Act. The issue turns on the interplay between the seemingly absolute language of §13, which provides that “[i]n no event” may a Securities Act case be commenced more than three years after the public offering or sale, and the Supreme Court’s ruling in American Pipe & Construction v. Utah,² which held the commencement of a class action suspends the statute of limitations for putative class members. The Second and Tenth Circuits, and other federal courts, are divided on whether the tolling doctrine of American Pipe extends to the statute of repose in §13. The Supreme Court’s June 9, 2014, opinion in CTS v. Waldburger³ will bear heavily on the issue, given its emphasis on the distinction between statutes of limitations and statutes of repose. This article examines the split in authority on the application of American Pipe tolling and the impact of Waldburger on the IndyMac appeal to be heard in the upcoming term.

‘American Pipe’ Tolling Doctrine

In American Pipe, the state of Utah commenced a putative class action alleging violations of §1 of the Sherman Act. Seeking class certification, the state purported to represent, inter alia, certain “public bodies and agencies of the state and local government in the State of Utah.”⁴ The district court denied certification because the numerosity element of Rule 23(a) of the Federal Rules of Civil Procedure was not met. Days later, municipalities and water districts that had been members of the putative class filed motions to intervene. The district court denied the motions because the statute of limitations had run on their claims. The Ninth Circuit reversed, and the Supreme Court affirmed, holding that “the commencement of a class action suspends the applicable statute of limitations as to all asserted members of the class who would have been parties had the suit been permitted to continue as a class action.”⁵ A contrary rule, it continued, allowing participation only by potential class members who had filed motions to intervene before the limitations period expired, would “deprive Rule 23 class actions of the efficiency and economy of litigation which is a principal purpose of the procedure.”⁶

Application to §13