702 F. App'x 75
3rd Cir.2017Background
- Merck and Schering ran the ENHANCE clinical trial (2002–2006) for Vytorin; results made public in early 2008 showed no added clinical benefit, precipitating large market losses and securities litigation.
- Two putative class actions were filed in 2008 against Merck and Schering and certified by the district court in September 2012; class members were given notice and an opportunity to opt out by March 1, 2013.
- Institutional investors GIC Private Limited and North Sound Capital timely opted out on March 1, 2013 and later filed individual Exchange Act suits in late 2013 and early 2014 alleging §§ 10(b), 20(a), 20A claims and state common-law fraud.
- Defendants moved to dismiss under Rule 12(b)(6), arguing the Exchange Act five-year statutes of repose (28 U.S.C. § 1658(b)(2) and 15 U.S.C. § 78t‑1(b)(4)) barred the claims; plaintiffs argued American Pipe tolling applied.
- The district court held the Exchange Act time limits were statutes of repose but nevertheless applied American Pipe tolling (as having a "legal" basis tied to Rule 23) and denied the motions to dismiss.
- On interlocutory appeal, the Third Circuit (in light of the Supreme Court’s decision in ANZ Securities) concluded American Pipe tolling cannot extend or toll the Exchange Act statutes of repose and reversed, directing dismissal of the Exchange Act claims as time-barred.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether American Pipe tolling is legal or equitable in nature | American Pipe rests on Rule 23’s procedural operation and therefore has a legal/statutory foundation permitting tolling of repose periods | American Pipe is an equitable tolling doctrine and cannot be used to extend statutes of repose | Court treated ANZ as controlling and concluded American Pipe does not permit tolling of statutes of repose (i.e., cannot save these claims) |
| Whether American Pipe tolling can toll five‑year Exchange Act statutes of repose | Tolling under American Pipe should apply to allow opt‑outs to bring timely individual suits after class certification/opt‑out | Statutes of repose are absolute time bars; American Pipe may not be used to lengthen repose periods | Held that American Pipe tolling cannot be invoked to toll Exchange Act statutes of repose; claims untimely |
| Whether applying American Pipe tolling would violate the Rules Enabling Act (REA) by modifying substantive rights | American Pipe is procedural and incidental to substantive rights, so REA does not bar its application | Extending repose via Rule 23/American Pipe would alter substantive rights in violation of the REA | District court thought REA did not prohibit it, but Third Circuit reversed based on ANZ; tolling not available so REA issue became moot on appeal |
| Procedural posture: whether dismissal of Exchange Act claims is required | Plaintiffs argued tolling saved claims and dismissal was improper | Defendants argued claims were time‑barred and dismissal required | Court reversed district court and remanded with instructions to dismiss Exchange Act claims as time‑barred |
Key Cases Cited
- American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974) (established class‑action tolling for unnamed class members while certification is pending)
- California Public Employees’ Retirement System v. ANZ Securities, Inc., 582 U.S. (2017) (Supreme Court held American Pipe tolling does not extend federal statutes of repose)
- Weitzner v. Sanofi Pasteur, Inc., 819 F.3d 61 (3d Cir. 2016) (cited for jurisdictional/appeal procedural authority)