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X Plumbers' & Pipefitters' Local #562 :Supplemental Plan & Trust, et al v. J.P. Morgan Acceptance Corporation I

December 13, 2011

X PLUMBERS' & PIPEFITTERS' LOCAL #562 :SUPPLEMENTAL PLAN & TRUST, ET AL., PLAINTIFFS,
v.
J.P. MORGAN ACCEPTANCE CORPORATION I, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Korman, District Judge.

MEMORANDUM & ORDER

I assume familiarity with the facts of this case, a full description of which can be found in a decision on the defendants' motion to dismiss filed contemporaneously with this memorandum and order. There, I held, inter alia, that the Lead Plaintiff did not have Article III standing to assert claims based on Certificates that it did not purchase. The motions at issue here attempt to partially cure this standing deficiency.

BACKGROUND

On May 3, 2011, nonparties General Retirement System of the City of Detroit ("Detroit GRS") and Police and Fire Retirement System of the City of Detroit ("Detroit PFRS") (collectively, "the Detroit Funds") filed a motion to intervene as named plaintiffs. Detroit Funds' Motion to Intervene, ECF No. 86. The Detroit Funds, purchasers of three Certificates listed in the Amended Complaint but not held by the Lead Plaintiff, argue that they are entitled to intervention as of right under F.R.C.P. 24(a)(2), or in the alternative, that they satisfy the requirements for permissive intervention under F.R.C.P. 24(b)(1). Detroit Funds Mem. Law 2-7, ECF No. 87. The Detroit Funds argue that their claims are timely because the Lead Plaintiff's filing of the complaint tolled the statute of limitations applicable to the Securities Act of 1933. They argue, alternatively, that their claims relate back to the filing of the original complaint under F.R.C.P. 15(c) for statute of limitations purposes. See Detroit Funds Reply Mem. Law, ECF No. 96. On October 17, 2011, 1199SEIU Health Care Employees Pension Fund ("1199 Fund," collectively with the Detroit Funds, "the Intervenors")-who bought one Certificate listed in the Amended Complaint not held by the Lead Plaintiff or the Detroit Funds-also moved to intervene as a named plaintiff, asserting the same arguments as the Detroit Funds and incorporating by reference the Detroit Funds' briefs. 1199 Fund Mem. Law, ECF No. 106.

DISCUSSION

I.Intervention As of Right Under Rule 24(a)

Rule 24(a)(2) provides that, "[o]n timely motion, the court must permit anyone to intervene who claims an interest relating to the property or transaction that is the subject of the action, and is so situated that disposing of the action may as a practical matter impair or impede the movant's ability to protect its interest, unless existing parties adequately represent that interest." FED. R. CIV. PRO. 24(a)(2). To establish this, "an applicant must (1) timely file an application, (2) show an interest in the action, (3) demonstrate that the interest may be impaired by the disposition of the action, and (4) show that the interest is not protected adequately by the parties to the action." New York News, Inc. v. Kheel, 972 F.2d 482, 485 (2d Cir. 1992). The Intervenors meet these requirements and the defendants do not argue otherwise.

II.Futility

The defendants argue that regardless of fulfilling the elements of Rule 24, the motions should be denied as futile. Defs.' Mem. Law 4, ECF No. 91. Indeed, though not mentioned in the rule itself, "futility is a proper basis for denying a motion to intervene." In re Merrill Lynch & Co., Inc. Research Reports Secs. Litig., Nos. 02-1484, 02-8472, 2008 WL 2594819, *5 (S.D.N.Y. Jun. 26, 2008). Specifically, the defendants argue that the Intervenors' claims are time-barred by the statute of limitations in Section 13 of the Securities Act of 1933:

No action shall be maintained to enforce any liability . . . 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 11 or 12(a)(1)] more than three years after the security was bona fide offered to the public, or under [Section 12(a)(2)] more than three years after the sale.

15 U.S.C. § 77m (2006). The first sentence of § 77m is customarily referred to as a statute of limitations because it establishes the event which triggers the accrual of a cause of action. The second sentence of § 77m places an outside date not dependent on the date of accrual on which a cause of action may be filed. Such a limitation is referred to as a statute of repose, even though it is an essential part of the statute of limitations and serves the same purposes. See, e.g., Davis v. Munie, 235 Ill. 620, 621, 85 N.E. 943, 944 (1908) ("Statutes of limitations are statutes of repose, intended to prescribe a definite limit of time within which the remedies included within their provisions must be prosecuted."). Indeed, in terms of the issue presented here, whether equitable tolling is applicable, the Supreme Court has more accurately described the applicable principle as follows: "It is hornbook law that limitations periods are customarily subject to equitable tolling . . . unless tolling would be inconsistent with the text of the relevant statute." Young v. United States, 535 U.S. 43, 49 (2002) (quotations and citations omitted). Against this backdrop, I turn to the issue whether the cause of action which the Intervenors assert is barred by the statute of limitations.

A.The First Sentence of Section 13

The first sentence of Section 13 requires that the claims here be 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 . . . ." 15 U.S.C. § 77m. This class action was filed on March 26, 2008, and plaintiff's counsel issued a press release describing the case on January 21, 2009. Decl. of James A. Harrod Ex. C, ECF No. 20. This placed the Intervenors' on inquiry notice prior to one year before filing these respective motions to intervene. See Menowitz v. Brown, 991 F.2d 36, 42 (2d Cir. 1996).

The Intervenors, however, argue that their claims are timely because filing of the class action tolled the statute of limitations-an argument with which the Supreme Court agreed in American Pipe & Constr. Co. v. Utah, 414 U.S. 538, 552-53 (1974). The Supreme Court there held that the statute of limitations was tolled for class members who moved to intervene after class certification was denied. The tolling created by American Pipe "depended heavily on the fact that [the timely prior filings] involved exactly the same cause of action subsequently asserted. This factor was more than an abstract or theoretical consideration because the prior filing in [American Pipe] necessarily operated to avoid the evil against which the statute of limitations was designed to protect." Johnson v. Railway Express Agency, Inc., 421 U.S. 454, 467-68 (1975). Moreover, failure to toll would "undermine the policies of 'efficiency and economy of litigation' that underlie Rule 23," In re Wachovia Equity Secs. Litig., 753 F. Supp. 2d 326, 372 (S.D.N.Y. 2011) (citing American Pipe), by punishing "class members for relying on the very thing Rule 23 is intended to provide: an efficient method for resolving class claims common to a class of individuals without the need for wasteful and duplicative litigation." In re Initial Public Offering Secs. Litig., Nos. 21-92, 01-9741, 01-10899, 2004 WL 3015304, *5 (S.D.N.Y. Dec. 27, 2004) (applying American Pipe tolling to intervenors' claims where the ...


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