Securities Litigation Alert: Supreme Court to Consider Statute of Limitations for Short-Swing Profit Claims Under Section 16(b) of the Exchange Act

On June 27, 2011, the Supreme Court granted certiorari in Credit Suisse Securities (USA) LLC v. Simmonds, to review a decision by the Ninth Circuit concerning the statute of limitations applicable to actions for recovery of short-swing profits under Section 16(b) of the Securities Exchange Act. By its express terms, Section 16(b) provides that "no such suit shall be brought more than two years after the date such profit was realized." The Ninth Circuit ruling under review held that the two-year period for bringing a Section 16(b) claim is equitably tolled until the defendant discloses the underlying securities transactions in accordance with Section 16(a) of the Securities Exchange Act and related SEC rules, even if the plaintiff had actual knowledge of the trades before such disclosure. The Supreme Court has agreed to consider whether the two-year period in Section 16(b) is subject to tolling and, if so, whether tolling continues even after the plaintiff receives actual notice of the facts giving rise to the claim. Both are important questions for directors and officers of public companies and institutional investors.