Police & Fire Retirement System v. IndyMac MBS, Inc.
721 F.3d 95
2d Cir.2013Background
- Consolidated securities class action against IndyMac MBS and related defendants asserting Securities Act Sections 11, 12(a)(2), and 15 claims based on 106 offerings of mortgage-backed certificates.
- Wyoming entities were appointed lead plaintiff under the PSLRA and were the only named plaintiffs in the consolidated Amended Complaint; many claims involved offerings the Wyomings did not purchase.
- District Court dismissed for lack of standing all claims based on offerings the named plaintiffs did not buy, leaving those asserted class members without named-plaintiff standing to pursue those claims.
- Five class members (including Detroit Retirement, LACERA, and PERS) moved to intervene after the Section 13 three‑year statute of repose expired, arguing (1) American Pipe tolling preserved their rights and/or (2) Rule 15(c) relation back would revive the claims.
- District Court denied intervention; Second Circuit affirmed, holding American Pipe tolling does not apply to Section 13’s repose and nonparties cannot use Rule 15(c) or intervention to revive claims dismissed for lack of jurisdiction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does American Pipe tolling apply to the 3‑year statute of repose in §13 of the Securities Act? | American Pipe tolling should suspend the repose period for putative class members so they are not time‑barred after class dismissal. | Section 13’s three‑year period is a substantive statute of repose not subject to equitable tolling; extension would impermissibly alter substantive rights. | American Pipe tolling does not apply to §13’s statute of repose (both equitable and Rule‑23/legal bases rejected). |
| If American Pipe doesn't apply, can putative class members intervene as named plaintiffs and rely on Rule 15(c) relation back to revive repose‑barred claims? | Relation back to the timely class complaint allows nonparty class members to become named parties and preserve claims. | Intervention or relation back cannot cure an original lack of subject‑matter jurisdiction or extend substantive repose limits. | Rule 15(c) and intervention cannot be used by nonparty class members to revive claims dismissed for lack of jurisdiction; intervention cannot create jurisdiction. |
| If American Pipe is "legal" (Rule 23) rather than equitable, does Rules Enabling Act permit tolling of §13 via Rule 23? | Even if legal, Rule 23–based tolling is consistent with class procedures and should apply. | Rules Enabling Act forbids interpreting Rule 23 to abridge/modify substantive rights created by statute (i.e., §13 repose). | Applying American Pipe via Rule 23 to overcome §13 would violate the Rules Enabling Act; courts may not enlarge substantive rights. |
| Does PSLRA structure or class litigation policy require a different result to avoid multiplicity of suits? | Tolling/relation‑back is necessary to avoid multiplicative filings and protect putative class members. | Sophisticated investors can protect themselves by timely intervention or filing; policy concerns cannot override statutory repose. | Policy concerns do not justify judicially extending repose; Congress must change the statute if desired. |
Key Cases Cited
- American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974) (establishes tolling for putative class members upon filing of class action)
- Crown, Cork & Seal Co. v. Parker, 462 U.S. 345 (1983) (extends American Pipe tolling to subsequent individual suits by class members)
- Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, 501 U.S. 350 (1991) (characterizes §13’s three‑year limit as a statute of repose not subject to equitable tolling)
- Wal‑Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011) (cautions against interpreting Rule 23 to modify substantive rights under the Rules Enabling Act)
- Fed. Housing Fin. Agency v. UBS Americas Inc., 712 F.3d 136 (2d Cir. 2013) (distinguishes statutes of limitations from statutes of repose; repose extinguishes the cause of action)
- Disability Advocates, Inc. v. N.Y. Coal. for Quality Assisted Living, Inc., 675 F.3d 149 (2d Cir. 2012) (intervention cannot cure lack of subject‑matter jurisdiction in the original suit)