Russell Dusek v. JPMorgan Chase & Co.
832 F.3d 1243
11th Cir.2016Background
- Bernard Madoff ran a massive Ponzi scheme through BLMIS; it collapsed when he was arrested on December 11, 2008 and a trustee liquidated BLMIS.
- The trustee used a Net Investment Method to calculate customer claims, treating customers who deposited more than they withdrew as "net losers."
- JPMorgan maintained bank accounts for BLMIS and entered a global settlement in 2014 including payments to the bankruptcy trustee and to the Shapiro class (limited to net losers).
- Plaintiffs (former BLMIS customers) filed this putative class action in Middle District of Florida in March 2014 alleging (among other things) control-person liability under § 20(a) and a federal RICO claim against JPMorgan and two JPMorgan employees.
- The district court dismissed the § 20(a) claim as time‑barred under the five‑year statute of repose and dismissed the RICO claim as precluded by the PSLRA; the Eleventh Circuit affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether American Pipe tolling saves Plaintiffs’ § 20(a) claim from § 1658(b)(2)’s five‑year statute of repose | Shapiro class action tolling under American Pipe prevented the repose from expiring; tolling is a "legal" rule tied to Rule 23 | Statute of repose is absolute and cannot be tolled; American Pipe constitutes equitable tolling not applicable to repose (and tolling would improperly enlarge substantive rights) | American Pipe tolling does not apply to the five‑year statute of repose; § 20(a) claim untimely and dismissed |
| Whether Plaintiffs’ federal RICO claim is permissible given the conduct alleged | Alleged predicate acts (mail/wire fraud) and failure to report suspicious activity support RICO damages | PSLRA bars reliance on conduct that would be actionable as securities fraud to establish RICO liability | RICO claim barred by PSLRA because the alleged conduct was essentially securities fraud; dismisssed |
Key Cases Cited
- CTS Corp. v. Waldburger, 134 S. Ct. 2175 (2014) (distinguishes statutes of repose from statutes of limitation and holds repose not subject to equitable tolling)
- American Pipe & Constr. Co. v. Utah, 414 U.S. 538 (1974) (class action tolling rule for statutes of limitations under Rule 23)
- Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, 501 U.S. 350 (1991) (discusses repose and tolling in securities context)
- Joseph v. Wiles, 223 F.3d 1155 (10th Cir. 2000) (applied American Pipe tolling to a statute of repose—contrasting authority)
- Police & Fire Ret. Sys. of City of Detroit v. IndyMac MBS, Inc., 721 F.3d 95 (2d Cir. 2013) (rejected American Pipe tolling for repose based on Rules Enabling Act concerns)
- Stein v. Regions Morgan Keegan Select High Income Fund, Inc., 821 F.3d 780 (6th Cir. 2016) (joined Second Circuit in declining to toll repose; explains substantive rights vested by repose)
- Smith v. Bayer Corp., 564 U.S. 299 (2011) (characterizes American Pipe tolling as grounded in judicial-administrative policy/equitable tolling)
- Irwin v. Dep’t of Veterans Affairs, 498 U.S. 89 (1990) (discusses equitable tolling principles)