Andrew M. STEIN, et al. v. REGIONS MORGAN KEEGAN SELECT HIGH INCOME FUND, INC., et al.
Nos. 15-5903, 15-5905
United States Court of Appeals, Sixth Circuit
May 19, 2016
821 F.3d 780
Some state courts, following this logic, have constitutionalized the common law rule. They have held that statutes that “authorize[ ] an arrest, without a warrant, for a misdemeanor not committed in the presence of the officer making the arrest” are unconstitutional, Polk v. State, 167 Miss. 506, 142 So. 480, 481 (1932)—either under the Fourth Amendment, its State‘s equivalent, or both, see, e.g., Ex parte Rhodes, 202 Ala. 68, 79 So. 462, 464-67 (1918); In re Kellam, 55 Kan. 700, 41 P. 960, 961 (1895); see also Gunderson v. Struebing, 125 Wis. 173, 104 N.W. 149, 151 (1905); Robison v. Miner, 68 Mich. 549, 37 N.W. 21, 25 (1888), overruled by Burroughs v. Eastman, 101 Mich. 419, 59 N.W. 817, 819 (1894). Some commentators have urged modern courts to do the same. See, e.g., Schroeder, supra, 58 Mo. L. Rev. at 777, 853.
With sound arguments on each side, it‘s no wonder that the Court has left the question open, even while deciding related questions about warrantless arrests. See, e.g., Moore, 553 U.S. at 168-73, 128 S.Ct. 1598; Atwater, 532 U.S. at 341 n. 11, 121 S.Ct. 1536; Watson, 423 U.S. at 414-24, 96 S.Ct. 820. And it‘s no wonder that some judges have flagged the issue. See, e.g., Veatch, 627 F.3d at 1258-59 (Colloton, J.); Gramenos, 797 F.2d at 441 (Easterbrook, J.). Today, however, is not the day to address it.
For these reasons, we affirm.
Andrew M. STEIN, et al. (15-5903); Canale Funeral Directors, Inc., et al. (15-5905), Plaintiffs-Appellants,
v.
REGIONS MORGAN KEEGAN SELECT HIGH INCOME FUND, INC., et al., Defendants-Appellees.
Nos. 15-5903, 15-5905.
United States Court of Appeals, Sixth Circuit.
Argued: April 19, 2016.
Decided and Filed: May 19, 2016.
Before: COLE, Chief Judge; CLAY and GIBBONS, Circuit Judges.
OPINION
CLAY, Circuit Judge.
Plaintiffs, investors seeking recovery for substantial investment losses, appeal the district court‘s dismissal of their actions filed pursuant to the Securities Act of 1933,
BACKGROUND
Factual Background
The remaining Plaintiffs on appeal, Andrew M. Stein, Stein Holdings, Inc., Stein Investments, LLC, (collectively, the “Stein Plaintiffs”), Warren Canale, and Canale Funeral Directors, Inc., (collectively, the “Canale Plaintiffs”), invested and lost significant amounts of money in five investment funds: the Regions Morgan Keegan Select High Income Fund, Inc., RMK High Income Fund, the RMK Advantage Income Fund, the RMK Strategic Income Fund, and the RMK Multi-Sector High Income Fund, all of which are named as Defendants in this action (the “Funds”). The Select Fund is an open-end fund, while the rest are closed-end funds. After the Funds lost nearly 90% of their value in 2007 and 2008, management of the four closed-end funds was turned over to a different investment advisor in July 2008. The remaining funds were deemed “unsalvageable” at an indeterminate date. Some regulatory activity ensued in subsequent years, but Plaintiffs allege no further misconduct by any Defendant after the transfer of the closed-end funds. When Plaintiffs filed this action in 2013, they also named as Defendants the Funds’ investment advisor, Regions Investment Management, Inc., and Regions Investment Management‘s two corporate parents, RFC Financial Holding, LLC and Regions Financial Corporation.
Plaintiffs allege that these catastrophic losses occurred because the Funds were overvalued and heavily concentrated in certain types of risky securities. According to Plaintiffs, Defendants unlawfully concealed the Funds’ risks, overvaluation, and lack of diversification from investors and the SEC, and Plaintiffs relied on these material misrepresentations of fact in deciding to invest in the Funds. All Plaintiffs have previously sought recourse for their losses—either in arbitration, in court, or both.
Canale Funeral Arbitration
Plaintiffs’ contracts with Morgan Keegan & Co., Inc.—which underwrote and provided services to the Funds but is not a defendant in this case—contained an arbitration clause covering “all controversies between you and Morgan Keegan (or any of Morgan Keegan‘s present or former officers, directors, agents or employees) which may arise from any account or for any cause whatsoever.” (Stein R. 13-2 at
Stein Plaintiffs’ Arbitration
On August 29, 2008, the Stein Plaintiffs filed a statement of claim against Morgan Keegan & Co., Inc. before FINRA alleging that the Funds’ illiquidity, risk, and valuation had been misrepresented. Unlike Canale Funeral, the Stein Plaintiffs alleged violations of federal securities laws, including various sections of the Securities Act of 1933, the Securities Exchange Act of 1934, and
Stein Plaintiffs’ 2008 Lawsuit
On August 29, 2008—the same day that they filed their FINRA claim—the Stein Plaintiffs filed a complaint in Tennessee state court, which did not name any Defendant in the present action, making largely the same factual claims and alleging violation of federal securities laws and the Tennessee Securities Act, civil conspiracy, and professional negligence. After the case was removed to the United States District Court for the Western District of Tennessee, but before the defendants had answered or filed a motion to dismiss, the Stein Plaintiffs voluntarily dismissed the case. On December 31, 2008, the district court entered an order and judgment dismissing the case without prejudice.
The Rice Action
On February 25, 2009, some nineteen investors filed suit in Alabama state court over their losses from the Funds in a case called Grantland Rice II, et al. v. Regions Financial Corporation, et al. An amendment to the amended complaint filed on January 5, 2010 added the Stein Plaintiffs and Warren Canale (but not Canale Funeral) as plaintiffs. The second amended Rice complaint, which named only Regions Financial Corporation and Regions Investment Management of the current Defendants, described the collapse of the Funds, and alleged the same misrepresentations with respect to risk, liquidity, and diversification.1 The Rice plaintiffs framed their claims solely in terms of state law, claiming common-law misrepresentation and fraudulent concealment, violation of several states’ securities laws, negligent supervision, and conspiracy. After the trial court denied a motion to dismiss, the Rice defendants sought mandamus relief, which the Alabama Supreme Court granted in
Actions by other plaintiffs
Plaintiffs in this action were hardly the only RMK investors to seek recourse in the courts. Two class actions, In re: Morgan Keegan Open-End Mutual Fund Litig., No. 2:07-cv-2784, and Willis, et al. v. Morgan Keegan & Company, Inc. et al., No. 2:07-cv-2830, were filed in the United States District Court for the Western District of Tennessee in December 2007. After numerous suits were filed in various fora, the Judicial Panel on Multidistrict Litigation transferred the remaining lawsuits to the United States District Court for the Western District of Tennessee in February 2009. The district court provisionally certified a class for settlement purposes in In re: Morgan Keegan on November 30, 2015. The district court approved the settlement in Willis and certified the class action on August 5, 2013.
Procedural History
On October 25, 2013, the Stein Plaintiffs and the Canale Plaintiffs each filed nearly identical six-count complaints in the United States District Court for the Western District of Tennessee alleging violation of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933,
The Stein Plaintiffs amended their complaint once and the Canale Plaintiffs amended their complaint twice. In September 2014, after Defendants moved to dismiss both actions on a variety of grounds, the district court granted in part and denied in part Defendants’ motions to dismiss in nearly identical orders, in which it held that Plaintiffs’ claims were not untimely under the applicable statutes of limitations and repose, and were not barred by res judicata. The district court also declined to dismiss them as derivative. Defendants moved for reconsideration in both cases, arguing that the district court had improperly held that Wyser-Pratte Mgmt. Co. v. Telxon Corp., 413 F.3d 553 (6th Cir. 2005), was no longer binding precedent, and Wyser-Pratte obligated the district court to find that Plaintiffs’ claims were barred by the relevant statutes of limitations. Applying Wyser-Pratte, the district court granted the motions for reconsideration in both cases and dismissed Plaintiffs’ claims in full on July 31, 2015 on the grounds that Plaintiffs’ claims were barred by the statute of limitations. After Plaintiffs appealed, the two cases were consolidated for briefing and argument.
DISCUSSION
Standard of Review
This Court reviews de novo the grant of a motion to dismiss pursuant to
The district court‘s determination that a complaint was barred by the statute of limitations is a conclusion of law that this Court reviews de novo. Kelly v. Burks, 415 F.3d 558, 560 (6th Cir. 2005). While a complaint need not plead the absence of an affirmative defense such as the statute of limitations, when “the allegations in the complaint affirmatively show that the claim is time-barred ... dismissing the claim under Rule 12(b)(6) is appropriate.” Cataldo, 676 F.3d at 547 (citing Jones v. Bock, 549 U.S. 199, 215, 127 S.Ct. 910, 166 L.Ed.2d 798 (2007)). This Court may affirm a decision of the district court for any reason supported by the record, including on grounds different from those on which the district court relied. U.S. Postal Serv. v. Nat‘l Ass‘n of Letter Carriers, AFL-CIO, 330 F.3d 747, 750 (6th Cir. 2003).
A. Overview of statutes of limitation and statutes of repose
Defendants provide two alternative arguments that Plaintiffs’ claims are untimely: both the applicable statutes of limitations and statutes of repose bar Plaintiffs’ claims in their entirety. The Supreme Court recently clarified the distinctions between these related concepts, each of which may make a plaintiff‘s action untimely, in CTS Corp. v. Waldburger, 573 U.S. 1, 134 S.Ct. 2175, 189 L.Ed.2d 62 (2014); CTS concerned whether
Statutes of limitations require plaintiffs to pursue diligent prosecution of known claims. Statutes of limitations promote justice by preventing surprises through plaintiffs’ revival of claims that have been allowed to slumber until evidence has been lost, memories have faded, and witnesses have disappeared. Statutes of repose also encourage plaintiffs to bring actions in a timely manner, and for many of the same reasons. But the rationale has a different emphasis. Statutes of repose effect a legislative judgment that a defendant should be free from liability after the legislatively determined period of time. Like a discharge in bankruptcy, a statute of repose can be said to provide a fresh start or freedom from liability. Indeed, the Double Jeopardy Clause has been described as a statute of repose because it in part embodies the idea that at some point a defendant should be able to put past events behind him.
Id. at 2183 (internal alterations and citations omitted). Another “central distinction” between statutes of limitation and statutes of repose relates to the doctrine of equitable tolling:
Statutes of limitations, but not statutes of repose, are subject to equitable tolling, a doctrine that pauses the running of, or “tolls,” a statute of limitations when a litigant has pursued his rights diligently but some extraordinary circumstance prevents him from bringing a timely action. Statutes of repose, on the other hand, generally may not be tolled, even in cases of extraordinary circumstances beyond a plaintiff‘s control.... [A] statute of repose is a judgment that defendants should be free from liability after the legislatively determined period of time, beyond which the liability will no longer exist and will not be tolled for any reason.
Id. (internal quotations and citations omitted).
The statutes pursuant to which Plaintiffs seek to bring their claims impose time limits on bringing an action. Section 13 of the Securities Act of 1933,
No action shall be maintained to enforce any liability created under section 77k or 77l(a)(2) of this title unless brought within one year after the discovery of the untrue statement or the omission, or after such discovery should have been made by the exercise of reasonable diligence .... In no event shall any such action be brought to enforce a liability created under section 77k or 77l(a)(1) of this title more than three years after the security was bona fide offered to the public, or under section 77l(a)(2) of this title more than three years after the sale.
The Supreme Court has described this framework as a “1-year period after discovery combined with a 3-year period of repose.” Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, 501 U.S. 350, 360, 111 S.Ct. 2773, 115 L.Ed.2d 321 (1991). The Second Circuit has clarified that the one-year period is a statute of limitations, a characterization we adopt. Police & Fire Ret. Sys. of City of Detroit v. IndyMac MBS, Inc., 721 F.3d 95, 107 (2d Cir. 2013).
The Securities Exchange Act of 1934,
[A] private right of action that involves a claim of fraud, deceit, manipulation, or contrivance in contravention of a regulatory requirement concerning the securities laws, as defined in section 3(a)(47) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(47)), may be brought not later than the earlier of—
(1) 2 years after the discovery of the facts constituting the violation; or
(2) 5 years after such violation.
B. Tolling principles in class actions
Plaintiffs seek to apply the doctrine of American Pipe & Construction Co. v. Utah, 414 U.S. 538, 94 S.Ct. 756, 38 L.Ed.2d 713 (1974), to argue that the relevant statutes of limitation and of repose were tolled. In that case, eleven days short of a year after the defendant corporations signed a consent decree with the federal government in an antitrust case, the state of Utah filed an antitrust action of its own against the defendants, which it purported to maintain as a class action under
The Supreme Court extended American Pipe tolling to class members who opt out in Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 176 n. 13, 94 S.Ct. 2140, 40 L.Ed.2d 732 (1974), and to plaintiffs who file separate actions after the denial of class certification in Crown, Cork & Seal Co. v. Parker, 462 U.S. 345, 103 S.Ct. 2392, 76 L.Ed.2d 628 (1983). In Crown, Cork & Seal, two former employees of the defendant corporation had brought a putative class action alleging employment discrimination two months before the plaintiff received a “right-to-sue” letter from the EEOC. Id. at 347. Nearly two years after the plaintiff received the letter from the EEOC, the district court finally denied class certification, and the plaintiff filed a lawsuit of his own less than ninety days later.
the commencement of a class action suspends the applicable statute of limitations as to all asserted members of the class who would have been parties had the suit been permitted to continue as a class action. Once the statute of limitations has been tolled, it remains tolled for all members of the putative class until class certification is denied.
Id. at 353-54 (internal quotations and citations omitted).
Thus, American Pipe and Crown, Cork & Seal govern situations where a plaintiff files an action after the district court resolves the issue of class certification. However, this Court declined to extend American Pipe tolling to plaintiffs who file individual actions before the dis-
The parties and courts will not be burdened by separate lawsuits which, in any event, may evaporate once a class has been certified. At the point in [ ] litigation when a decision on class certification is made, investors usually are in a far better position to evaluate whether they wish to proceed with their own lawsuit, or to join a class, if one has been certified.
Id. (quoting In re WorldCom, Inc. Sec. Litig., 294 F.Supp.2d 431, 452 (S.D.N.Y. 2003)).
Plaintiffs argue vehemently that Wyser-Pratte is not binding on this Court because it constitutes an improper limitation of Supreme Court doctrine, represents the minority rule, and was wrongly decided. We recognize that Wyser-Pratte now represents the minority rule. Compare Glater v. Eli Lilly & Co., 712 F.2d 735, 739 (1st Cir. 1983) (approving in dicta of forfeiture rule), with State Farm Mut. Auto. Ins. Co. v. Boellstorff, 540 F.3d 1223, 1230 (10th Cir. 2008); In re Hanford Nuclear Reservation Litig., 534 F.3d 986, 1009 (9th Cir. 2008); In re WorldCom Sec. Litig., 496 F.3d 245, 254-56 (2d Cir. 2007) (holding that American Pipe tolling applies to plaintiffs who file actions while class certification is pending). That several of our fellow Circuits chose not to follow our reasoning does not make Wyser-Pratte any less binding, however; “a published prior panel decision ‘remains controlling authority unless an inconsistent decision of the United States Supreme Court requires modification of the decision or this Court sitting en banc overrules the prior decision.’” United States v. Elbe, 774 F.3d 885, 891 (6th Cir. 2014) (quoting Salmi v. Sec‘y of Health & Human Servs., 774 F.2d 685, 689 (6th Cir. 1985)).4 However fervently Plaintiffs might wish, and even though we may have doubts about its holding, we cannot today overrule Wyser-Pratte. Indeed, subsequent cases have recognized that it remains controlling law. See Phipps v. Wal-Mart Stores, Inc., 792 F.3d 637, 653 (6th Cir. 2015); In re Vertrue Inc. Mktg. & Sales Practices Litig., 719 F.3d 474, 480 (6th Cir. 2013).
C. Application of Wyser-Pratte to Plaintiffs’ actions
The Stein and Canale Plaintiffs each filed their initial federal court complaints on October 25, 2013. Because each Plaintiff sought recourse in arbitration or in court by early 2010 at the latest, Plain-
Before proceeding to Plaintiffs’ arguments about why Wyser-Pratte is inapplicable, we must first examine the class actions on which they rely. Plaintiffs argue that the statute of limitations was tolled under American Pipe by the In re Morgan Keegan and Willis class actions, which were filed in the United States District Court for the Western District of Tennessee on December 6, 2007 and December 21, 2007, respectively. Defendants Regions Financial Corporation, RFC Holding and Regions Investment Management were named in both actions (albeit, in the case of the latter two, under their former names); the closed-end funds were named in Willis; and the Select Fund was named in In re Morgan Keegan. Both actions asserted violations of Sections 11, 12(a)(2), and 15 of the Securities Act, Sections 10(b) and 20 of the Securities Exchange Act, and
Plaintiffs also offer three reasons why they have not forfeited their claims under Wyser-Pratte: the Alabama state court action in Rice was significantly different from the 2007 class action complaints because the Rice plaintiffs asserted only state-law claims; not all of the current Defendants were named as defendants in Rice; and Canale Funeral‘s FINRA arbitration against Morgan Keegan & Co.—a non-party to this case—did not force Canale Funeral to forfeit its claims against Defendants. Wyser-Pratte itself dispenses with the first of these contentions. In Wyser-Pratte, the plaintiff filed its lawsuit after unrelated plaintiffs filed separate lawsuits against the two corporate defendants; “[a]ll three actions ... alleged the same scheme to falsely inflate Telxon‘s financial results.” 413 F.3d at 558. Although the previous plaintiffs asserted federal securities fraud claims against one defendant while the later plaintiff relied only on Ohio state law to support its fraud allegation, we held that the later plaintiff had forfeited its Ohio fraud claim. Id. at 569. The 2007 class action complaints in Willis and In re Morgan Keegan complaint alleged the same misrepresentations with respect to risk, liquidity, and diversification as the second amended Rice complaint did (and the instant complaints continue to do), and framed their claims in terms of federal securities law; that the Rice plaintiffs proceeded purely on state law securities fraud theories does not allow the Stein Plaintiffs, and Warren Canale, who were plaintiffs in Rice, to evade Wyser-Pratte.
Plaintiffs’ final argument—that Canale Funeral‘s FINRA arbitration against non-party Morgan Keegan & Co. should not trigger Wyser-Pratte‘s forfeiture rule against Defendants—reveals still more subtleties that the district court glossed over. In granting reconsideration, the district court held that the Canale Funeral arbitration was an “independent action” sufficient to trigger Wyser-Pratte:
Under Vertrue and Wyser-Pratte, a plaintiff who chooses to file an independent action without waiting for a determination on the class certification issue may not rely on the American Pipe tolling doctrine.... Canale and Canale Funeral chose to pursue independent actions: Canale joined the Rice Case on January 5, 2010, and Canale Funeral filed a Statement of Claim with FINRA against Morgan Keegan on January 22, 2008. Canale and Canale Funeral chose not to wait for a decision on the class certification issues in Willis and the Open-End Fund Litigation. Once Canale joined the Rice action and Canale Funeral filed its Statement of Claim, they forfeited their opportunity to invoke the American Pipe tolling doctrine.
(Canale R. 36, Order Granting Reconsideration at Page ID 880.) Wyser-Pratte indeed applied its forfeiture doctrine to those plaintiffs who file “independent actions” prior to resolution of class certification in the initial class action. See 413 F.3d at 568-69. It did not, however, have occasion to delineate fully what types of independent actions would trigger its forfeiture rule, or under what circumstances; all three “actions” were federal court lawsuits before the same district judge, and the only remaining defendant on appeal had been named in one of the prior lawsuits. Id. at 558.
Canale Funeral proceeded in arbitration against Morgan Keegan & Co., which, although not a party to this case, was named as a defendant in Willis and In re Morgan Keegan. In essence, the district court ruled that Canale Funeral‘s arbitration against Morgan Keegan & Co., whose statement of claim described the same course of conduct as in the 2007 class action complaints, was sufficient to forfeit claims against parties not present at the arbitration (or bound by the arbitration clause), and dismissed its claims as to all Defendants in this action. If Wyser-Pratte does not necessarily cause plaintiffs to forfeit claims against parties not named in a subsequent action, it certainly does not compel this result, which would deprive Canale Funeral the opportunity to proceed against any other entity—and of any day in court whatsoever.
Because Plaintiffs filed this action during the pendency of the class certification proceedings in In re Morgan Keegan, they have forfeited American Pipe tolling with respect to the defendants named in that case: RFC Financial Holding, Regions Financial Corporation, Regions Investment Management, and the Select Fund. Their
D. Statutes of repose
Defendants argue that Plaintiffs’ claims are barred by the relevant statutes of repose, and that American Pipe tolling applies only to statutes of limitations. Plaintiffs counter that the Willis and In re Morgan Keegan litigation tolled the statute of repose pursuant to American Pipe, making their claims timely.
The statute of repose applicable to Plaintiffs’ claims arising under Sections 11 and 12(a)(2) of the Securities Act,
[i]n no event shall any ... action be brought to enforce a liability created under section 77k ... of this title more than three years after the security was bona fide offered to the public, or under section 77l(a)(2) of this title more than three years after the sale.
Although Plaintiffs’ complaints identify the dates that numerous allegedly false registration statements were made in violation of Section 11 of the Securities Act,
Because Plaintiffs filed their respective complaints on October 25, 2013—more than five years later—all of their claims are barred by the relevant three- or five-year statutes of repose, absent tolling of some kind. Plaintiffs argue that American Pipe applies to statutes of repose and served to toll the repose period while class certification was pending in Willis and In re Morgan Keegan. Notwithstanding the issues that Plaintiffs’ tolling claims might encounter under Wyser-Pratte, Plaintiffs must first convince this Court to extend American Pipe tolling to statutes of repose, an issue our Circuit has not yet had opportunity to resolve.
Our fellow Circuits are split. The Tenth Circuit held that American Pipe tolled statutes of repose pending class certification in Joseph v. Wiles, 223 F.3d 1155 (10th Cir. 2000), while the Second Circuit
Statutes of repose are intended to demarcate a period of time within which a plaintiff must bring claims or else the defendant‘s liability is extinguished. Here, the claim was brought within this period on behalf of a class of which Mr. Joseph was a member. Indeed, in a sense, application of the American Pipe tolling doctrine to cases such as this one does not involve “tolling” at all. Rather, Mr. Joseph has effectively been a party to an action against these defendants since a class action covering him was requested but never denied. Defendants’ potential liability should not be extinguished simply because the district court left the class certification issue unresolved. Consequently, we conclude that American Pipe tolling applies to the statute of repose governing Mr. Joseph‘s action.
Id. at 1168 (internal citations omitted).
IndyMac held that, regardless of whether American Pipe tolling were equitable or derived from a statutory source, it could not apply to statutes of repose. 721 F.3d 95. It noted that the Supreme Court had previously held that the “three-year limitation” of Section 13 of the Securities Act “is a period of repose inconsistent with tolling,” whose “purpose” was “‘clearly to serve as a cutoff,’ to which ‘tolling principles’ do not apply.” Id. at 107 (quoting Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, 501 U.S. 350, 363, 111 S.Ct. 2773, 115 L.Ed.2d 321 (1991)). IndyMac therefore held that Lampf had foreclosed equitable tolling of Section 13‘s three-year repose period. Id. at 109. If, however, American Pipe were instead a form of legal or class-action tolling derived from
Of these two cases, IndyMac has the more cogent and persuasive rule. Its holding is also more consistent with the Supreme Court‘s subsequent decision in CTS Corp. v. Waldburger. See 573 U.S. 1, 134 S.Ct. 2175. Like Lampf before it, CTS discussed at length the incompatibility of equitable tolling and statutes of repose: “a statute of repose is a judgment that defendants should be free from liability after the legislatively determined period of time, beyond which the liability will no longer exist and will not be tolled for any
The Supreme Court‘s discussion of the purposes of statutes of repose in CTS and Lampf is no less pertinent even assuming American Pipe tolling is a form of class-action tolling deriving its authority from
Statutes of repose arguably affect rights, remedies, and rules of decision: they confer on defendants a right to be free of liability by imposing an absolute temporal bar on claims, prevent recovery by plaintiffs after the repose period, and impose the additional decision rule that courts must rule in defendants’ favor if plaintiffs delay beyond the statutory period to bring suit. That statutes of repose vest a substantive right in defendants to be free of liability is underscored by the Supreme Court‘s analogies in CTS between statutes of repose and the ability to discharge debts in bankruptcy or to be free of double jeopardy in criminal proceedings. See 134 S.Ct. at 2183. Because statutes of repose give priority to defendants’ right to be free of liability after a certain absolute period of time (rather than plaintiffs’ ability to bring claims), we cannot endorse the Tenth Circuit‘s view—expressed prior to CTS—that “[d]efendants’ potential liability should not be extinguished simply because the district court left the class certification issue unresolved.” Joseph, 223 F.3d at 1168. We therefore join the Second Circuit in hold-
Plaintiffs filed the instant actions on October 25, 2013, asserting claims with repose periods of three and five years. If the repose periods began to run before October 25, 2010 for the Securities Act claims and October 25, 2008 for the Securities Exchange Act claims, Plaintiffs’ claims are barred in their entirety. Unquestionably, they did—the non-fund Defendants turned over management of the closed-end funds at some point in July 2008, and the complaints allege no misconduct whatsoever by any Defendant after that date. Plaintiffs’ claims are thus time-barred by the statutes of repose. We decline to address Defendants’ alternative arguments regarding res judicata and collateral estoppel.
CONCLUSION
For the reasons stated above, we AFFIRM the district court‘s dismissal of Plaintiffs’ claims in full on the grounds that they are barred by the applicable statutes of repose.
SIX STAR HOLDINGS, LLC, and Ferol, LLC, Plaintiffs-Appellees,
v.
CITY OF MILWAUKEE, Defendant-Appellant.
No. 15-1608.
United States Court of Appeals, Seventh Circuit.
Argued Nov. 9, 2015.
Decided April 13, 2016.
Notes
In declining to adopt a forfeiture rule, the Second Circuit read American Pipe and Crown, Cork & Seal as principally concerned with protecting the interests of class members, particularly “from being forced to file individual suits in order to preserve their claims,” rather than avoiding duplicative litigation. WorldCom, 496 F.3d at 256. Thus, by adopting a forfeiture rule grounded in judicial economy, Wyser-Pratte may have misapprehended the primary motivating concerns of American Pipe.