DeKalb County Pension Fund v. Transocean Ltd.
817 F.3d 393
2d Cir.2016Background
- DeKalb County Pension Fund joined a securities class action alleging Transocean and GlobalSantaFe issued a materially misleading proxy statement for their 2007 merger; the proxy was disseminated October 2, 2007.
- Deepwater Horizon disaster (April 20, 2010) later revealed safety problems; plaintiffs alleged the proxy omitted/ misrepresented safety and maintenance matters in violation of § 14(a) and SEC Rule 14a-9, and asserted secondary liability under § 20(a).
- DeKalb first appeared Dec. 3, 2010; Bricklayers filed the original class complaint Sept. 30, 2010 but was later dismissed for lack of standing, leaving DeKalb as lead plaintiff.
- District Court dismissed DeKalb’s § 14(a) claim as time-barred by a three-year statute of repose (running from Oct. 2, 2007) and dismissed the § 20(a) claim for failure to state a claim; DeKalb appealed.
- The panel reconsidered whether SOX/§ 1658(b) (which extended repose to five years for private actions "involving fraud, deceit, manipulation, or contrivance") applies to Sections 9(f), 18(a), or 14(a), and when Section 14(a)’s repose period begins to run.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 1658(b) (five-year repose for fraud-type private actions) applies to § 9(f) | §1658(b) does not repeal or replace §9(f)’s repose | §1658(b) governs §9(f) because §9(f) involves manipulative intent/fraud | §1658(b) applies to §9(f); five-year repose governs §9(f) |
| Whether §1658(b) applies to §18(a) | §1658(b) should not apply because §18(a) lacks a scienter pleading requirement | §1658(b) applies because §18(a) involves fraud-like claims and requires at least reckless/intentional conduct (defendant bears good-faith defense) | §1658(b) applies to §18(a); five-year repose governs §18(a) |
| Whether §1658(b) applies to §14(a) (and thus whether §14(a) is governed by five-year repose) | DeKalb: §1658(b) applies to §14(a) (directly or by analogy) so five-year repose should govern | Defendants: §14(a) does not involve fraud/ scienter and Congress did not extend repose for §14(a) | §14(a) is not a "private right of action that involves a claim of fraud, deceit, manipulation, or contrivance"; the three-year repose (as borrowed in Ceres) still applies to §14(a) |
| When the §14(a) statute of repose begins to run; do discovery, Rule 17(a)(3), PSLRA, or American Pipe tolling save the claim? | DeKalb: repose should run from discovery (Apr. 20, 2010) or relate back to timely filings; tolling doctrines apply | Defendants: discovery rule and American Pipe don’t apply to statutes of repose; Rule 17 and PSLRA do not trigger relation-back or tolling | Repose begins on last culpable act/omission (here Oct. 2, 2007); discovery rule, Rule 17(a)(3) relation-back, PSLRA lead-plaintiff period, and American Pipe tolling do not save DeKalb’s §14(a) claim; claim is time-barred |
Key Cases Cited
- Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, 501 U.S. 350 (1991) (endorses borrowing federal statutes of repose for implied securities claims and treats three-year period as a statute of repose)
- Merck & Co. v. Reynolds, 559 U.S. 633 (2010) (interprets §1658(b) as extending repose for fraud-type private actions)
- Ernst & Ernst v. Hochfelder, 425 U.S. 185 (1976) (discusses scienter requirement in securities claims and legislative history relevant to state-of-mind elements)
- Musick, Peeler & Garrett v. Employers Ins. of Wausau, 508 U.S. 286 (1993) (characterizes §18(a) as involving scienter/intentional tort and deterring manipulation)
- Ceres Partners v. GEL Associates, 918 F.2d 349 (2d Cir. 1990) (Second Circuit borrowed three-year repose for implied §14 claims by analogy to express remedies)
- American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974) (class-action tolling rule; court and subsequent precedent limit its applicability to statutes of repose)
- Police & Fire Retirement Sys. of City of Detroit v. IndyMac MBS, Inc., 721 F.3d 95 (2d Cir. 2013) (holds American Pipe tolling does not extend to statutes of repose and applies Rules Enabling Act analysis)