SUPREME COURT REVERSES COURSE AND DECLINES TO HEAR STATUTE OF REPOSE TOLLING CASE

Just one week before oral argument, the Supreme Court dismissed the writ of certiorari it previously granted in Public Employees’ Retirement System of Mississippi v. IndyMac MBS, Inc. as “improvidently granted.” The highly anticipated case was set to address whether the American Pipe tolling rule, which tolls the applicable statute of limitations upon the filing of a putative class action, applies to the three-year statute of repose for claims arising under the Securities Act of 1933 (the “Securities Act”).

The Wyoming State Treasurer and the Wyoming Retirement System (collectively “Wyoming”) commenced a putative class action against IndyMac and other banks asserting violations of the Securities Act based on their issuance of mortgage pass-through certificates. Wyoming was the only named plaintiff, but the complaint raised claims on behalf of other class members who purchased the certificates in approximately 106 separate offerings. The district court dismissed all claims arising from the offerings that Wyoming did not purchase certificates in based on lack of standing. The dismissed claims included, amongst others, the claims of the Public Employees’ Retirement System of Mississippi (“PERS”). PERS and others then moved to intervene in the action to directly assert their claims with respect to the certificates they purchased in the dismissed offerings. The district court denied that motion, concluding that the claims were barred by the Securities Act’s statute of repose, which had run during the pendency of the putative class action. The Second Circuit affirmed, agreeing that the statute of repose was not subject to the American Pipe tolling rule because, unlike statutes of limitations, statutes of repose create a substantive right to be free from liability after a set period of time. The Second Circuit’s decision is directly in conflict with the Tenth Circuit’s decision in Joseph v. Wiles, 223 F.3d 1155 (10th Cir. 2000), and the Supreme Court granted PERS’s writ of certiorari earlier this year to resolve the issue.

On September 11, 2014, shortly before the scheduled oral argument, Wyoming and six bank defendants filed a proposed settlement agreement that would resolve Wyoming’s claims against those six defendants, but the agreement did not encompass claims against defendant Goldman Sachs. On September 23, 2014, the Supreme Court ordered the parties to brief how the settlement agreement would affect PERS’s appeal pending before the Court. The parties argued in letter briefs that PERS’s claims against Goldman Sachs would not be impacted because the settlement did not encompass Goldman Sachs. The Supreme Court apparently concluded that those claims should not be heard and dismissed the writ in a one sentence order on September 29, 2014.

The Supreme Court’s decision to dismiss the writ leaves intact the Second Circuit’s opinion and the current circuit split on the issue of whether American Pipe’s tolling rule applies to the Securities Act’s three-year statute of repose.