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Police and Fire Retirement System of City of Detroit v. General Retirement System of City of Detroit

United States Court of Appeals, Second Circuit

June 27, 2013

Police and Fire Retirement System of the City of Detroit, individually, Police and Fire Retirement System of the City of Detroit, on behalf of all others similarly situated, Wyoming State Treasurer, Wyoming Retirement System, Plaintiffs,
v.
IndyMac MBS, Inc., Deutsche Bank Securities Inc., Goldman, Sachs & Company, Morgan Stanley & Company, Credit Suisse Securities (USA) LLC, Defendants-Appellees, General Retirement System of the City of Detroit, Los Angeles County Employees Retirement System aka "LACERA, " Public Employees' Retirement System of Mississippi "PERS, " Proposed Intervenors-Appellants, Residential Asset Securitization Trust 2006-A5CB, et al., Defendants.

Argued On December 5, 2012

We consider here an appeal from an order of the United States District Court for the Southern District of New York. See In re IndyMac Mortgage-Backed Sec. Litig., 793 F.Supp.2d 637 (S.D.N.Y. 2011) ("IndyMac II") (Lewis A. Kaplan, Judge). The lead plaintiff and proposed intervenors in this case allege misrepresentations and omissions in the offering and sale of certain financial instruments which they purchased. This appeal presents an unsettled question of law: whether the tolling rule set forth by the Supreme Court in American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974) ("American Pipe")—that "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, " id. at 554—applies to the three-year statute of repose in Section 13 of the Securities Act of 1933, as amended, 15 U.S.C. § 77m. This appeal also requires us to decide whether non-party members of a putative class can avoid the effect of a statute of repose using the "relation back" doctrine of Federal Rule of Civil Procedure 15(c) to amend the class complaint and intervene in the action as named parties.

We hold that: (1) American Pipe's tolling rule does not apply to the three-year statute of repose in Section 13; and (2) absent circumstances that would render the newly asserted claims independently timely, neither Rule 24 nor the Rule 15(c) "relation back" doctrine permits members of a putative class, who are not named parties, to intervene in the class action as named parties in order to revive claims that were dismissed from the class complaint for want of jurisdiction. In practical terms, the litigants in these cases may not circumvent Section 13's statute of repose by invoking American Pipe or Rule 15(c). Accordingly, we AFFIRM the June 21, 2011 order of the District Court, insofar as it partially denied motions to intervene by proposed intervenors-appellants.

Robin F. Zwerling (Jeffrey C. Zwerling, Justin M. Tarshis, on the brief), Zwerling, Schachter & Zwerling, LLP, New York, NY, for Proposed Intervenor-Appellant General Retirement System of the City of Detroit.

Joseph J. Tabacco Jr. (Patrick T. Egan, on the brief), Berman DeValerio, Boston, MA, for Proposed Intervenor-Appellant Los Angeles County Employees Retirement System.

Michael J. Miarmi, Joy A. Kruse, Lieff, Cabraser, Heimann & Bernstein, LLP, New York, NY, for Proposed Intervenor-Appellant Public Employees' Retirement System of Mississippi.

William R. Stein, Scott H. Christensen, Hughes Hubbard & Reed LLP, Washington, DC, for Defendant-Appellee IndyMac MBS, Incorporated.

Robert F. Serio (Aric H. Wu, Jason W. Myatt, Dean J. Kitchens, on the brief), Gibson, Dunn & Crutcher LLP, Los Angeles, CA, for Defendants-Appellees Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Goldman, Sachs & Co., and Morgan Stanley & Co. LLC.

Lawrence M. Rolnick, Thomas E. Redburn, Jr., Sheila Sadighi, Lowenstein Sandler PC, New York, NY, for Amicus Curiae W.R. Huff Asset Management Co., LLC in support of Intervenors-Appellants.

Before: Cabranes, Raggi, and Carney, Circuit Judges.

Jose A. Cabranes, Circuit Judge:

This appeal presents an unsettled question of law: whether the tolling rule set forth by the Supreme Court in American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974) ("American Pipe")— that "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, " id. at 554—applies to the three-year statute of repose in Section 13 of the Securities Act of 1933 ("Securities Act"), 15 U.S.C. § 77m.[1] In addition, we are called upon to decide whether non-party members of a putative class can avoid the effect of a statute of repose using the "relation back" doctrine of Federal Rule of Civil Procedure 15(c) to amend the class complaint and intervene in the action as named parties.[2]

This appeal comes to us from an order of the United States District Court for the Southern District of New York (Lewis A. Kaplan, Judge) denying, in relevant part, proposed intervenors-appellants' motions to intervene.[3] See In re IndyMac Mortgage-Backed Sec. Lit., 793 F.Supp.2d 637 (S.D.N.Y. 2011) ("IndyMac II"). The lead plaintiff and other putative class members alleged that defendants had made fraudulent misrepresentations and omissions in the offering and sale of certain financial instruments which they purchased. Following the District Court's dismissal of certain claims, as well as the expiration of the three-year statute of repose under Section 13, several putative class members sought to intervene in the action to revive the dismissed claims on either of two theories: (1) that the American Pipe tolling rule operated to preserve their right to sue, or (2) that Rule 15(c) of the Federal Rules of Civil Procedure allowed them to "relate back" their otherwise untimely claims to the surviving claims in the class complaint. The District Court rejected these two theories and denied the motions to intervene as barred under Section 13's statute of repose. This appeal by proposed intervenors-appellants followed.

We hold that: (1) American Pipe's tolling rule does not apply to the three-year statute of repose in Section 13; and (2) absent circumstances that would render the newly asserted claims independently timely, neither Federal Rule of Civil Procedure 24 nor the Rule 15(c) "relation back" doctrine permits members of a putative class, who are not named parties, to intervene in the class action as named parties in order to revive claims that were dismissed from the class complaint for want of jurisdiction. In practical terms, the proposed intervenors may not circumvent Section 13's statute of repose by invoking American Pipe or Rule 15(c). Accordingly, we AFFIRM the June 21, 2011 order of the District Court, insofar as it partially denied motions to intervene by the proposed intervenors.

I. BACKGROUND

This appeal arises from two securities class actions, consolidated by the District Court, asserting claims for violations of Sections 11, 12(a) and 15 of the Securities Act[4] against IndyMac MBS, Inc. ("IndyMac MBS"), an issuer of mortgage-backed securities, and certain of its officers, directors, and underwriters (jointly, "defendants"). As relevant here, IndyMac MBS issued securities known as mortgage pass-through certificates ("Certificates") "in 106 different offerings pursuant to three registration statements and the related prospectuses and prospectus supplements."[5]IndyMac, 718 F.Supp.2d 495, 498 (S.D.N.Y. 2010) ("IndyMac I"). The Police and Fire Retirement System of the City of Detroit ("Detroit PFRS") and the Wyoming State Treasurer and the Wyoming Retirement System (jointly, "Wyoming" or "Wyoming entities") commenced two separate putative class actions against the IndyMac defendants on behalf of asserted class members who had purchased Certificates in some of the 106 offerings. The District Court then consolidated the Detroit PFRS and Wyoming actions, and appointed Wyoming lead plaintiff of the consolidated action, pursuant to the Private Securities Litigation Reform Act ("PSLRA"), 15 U.S.C. § 78u–4.[6]Although Wyoming ...


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