Securities Litigation Alert: Second Circuit Addresses American Pipe Tolling and "Relation Back" in Federal Securities Class Actions

On June 27, 2013, the Second Circuit resolved a question of law that previously had been unsettled in this Circuit when it held, in In re IndyMac Mortgage-Backed Sec. Litig., No. 11-2998-cv(L), that the Supreme Court's tolling rule established in American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974) - which provides 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 - does not apply to the three-year statute of repose in Section 13 of the Securities Act of 1933, as amended, 15 U.S.C. § 77m (the "Securities Act"). As the Second Circuit emphasized in its decision, statutes of limitations and statutes of repose serve distinct purposes. Whereas the former limits the availability of remedies and may be subject to equitable tolling, the latter creates a substantive right protecting a party from liability for certain causes of action after a specific cut-off date and therefore is "subject [only] to legislatively created exceptions, and not to equitable tolling[.]" IndyMac, at 11-12 (citations and quotations omitted). The Second Circuit also held that members of a putative class, who are not named as parties in the class complaint, cannot use Federal Rule of Civil Procedure 15(c)'s "relation back" doctrine to revive untimely claims that were dismissed on jurisdictional grounds.