SECURITIES ACT OF 1933

California Public Employees’ Retirement System v. ANZ Securities, Inc., et al.

Issues

Does the timely filing of a class action lawsuit stop the running of the three-year time limit for individual class members to bring their claims under Section 13 of the Securities Act? 

This case presents the Supreme Court with an opportunity to clarify the applicability of the time limitations in Section 13 of the Securities Act of 1933 for individual claims brought after a class action lawsuit has been filed in the same matter. Petitioner California Public Employees' Retirement System (“CalPERS”) argues that Section 13 is a statute of limitation, which may be overridden by judge-made rule, as opposed to a statute of repose, which is not subject to judicial extension even in cases of extraordinary circumstances. Accordingly, CalPERS asserts that a prior Supreme Court decision, American Pipe, establishes that the filing of a class action tolls the statute of limitation as to all putative members of that class. Respondent ANZ Securities, however, argues that Section 13 is a statute of repose, and under the Second Circuit precedent the American Pipe tolling rule does not extend to statutes of repose. The outcome of this case could encourage litigation strategies that decrease court efficiency or, alternatively, benefit large investors at the expense of smaller ones. 

Questions as Framed for the Court by the Parties

Does the timely filing of a valid class action satisfy or toll the three-year filing period set by Section 13 of the Securities Act of 1933 with respect to subsequent opt-out suits by individual class members?

This case arose out of the 2008 collapse of Respondent Lehman Brothers Holdings Inc. (“Lehman Brothers”). See In Re Lehman Bros. Securities and ERISA Litigation, 799 F. Supp. 2d 258, 264 (S.D.N.Y. 2011). Lehman Brothers was a large investment bank, which traded its securities on the New York Stock Exchange.

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Cyan, Inc. et al. v. Beaver County Employees Retirement Fund

Issues

Can state courts adjudicate “covered class actions” that allege claims only under the Securities Act of 1933?

The Supreme Court will determine whether state courts can hear claims filed solely under the Securities Act of 1933 as “covered class actions.” The case arises out of a decrease in Cyan, Inc.’s stock prices, which led investors, including the Beaver County Employees Retirement Fund, to sue as a class in state court for alleged disclosure violations. Cyan argues that California state courts could not hear this case, because the Securities Act’s legislative history and existing regulatory structure suggests that Congress intended for all class actions filed under the Securities Act to be tried in federal courts. Beaver, on the other hand, claims that Congress intended to give state and federal courts concurrent jurisdiction—i.e., both state and federal courts can hear this case. The stakes of the case are also in dispute: organizations supporting Cyan claim that a Beaver victory would promote inconsistent Securities Act decisions in federal and state courts, encourage forum shopping, and harm the capital markets. Beaver’s supporters disagree, asserting that the effects of a decision in its favor would be minimal.

Questions as Framed for the Court by the Parties

Whether state courts lack subject-matter jurisdiction over “covered class actions,” 15 U.S.C. § 77v(a), that allege only claims under the Securities Act of 1933.

Congress enacted the Securities Act of 1933 (“Securities Act”) to regulate the securities industry after the 1929 stock market crash. Brief for Petitioners, Cyan, Inc., et al. at 2. The Securities Act allows securities acquirers to sue securities issuers if the issuers fail to comply with their obligations under the Securities Act. Id.

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Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund

Issues

Does Section 11 of the Securities Act of 1933 require a showing that an opinion contained in a registration statement was objectively wrong and subjectively false? 

The Supreme Court will decide whether, in a Section 11 claim, an opinion itself can be a misleading or untrue material fact if objectively wrong, or if a plaintiff must also show that the speaker did not subjectively believe the stated opinion. While Omnicare argues that an opinion is actionable only when subjectively wrong, Laborers District Counsel Construction Industry Pension Fund contends that an objectively wrong statement qualifies as misleading under Section 11 of the Securities Act of 1933. This decision will affect the liability stock issuers have in connection with public offerings and could potentially affect underwriters’ willingness to finance securities. 

Questions as Framed for the Court by the Parties

Section 11 of the Securities Act of 1933, 15 U.S.C. § 77k, provides a private remedy for a purchaser of securities issued under a registration statement filed with the Securities and Exchange Commission if the registration statement “contained an untrue statement of material fact or omitted to state a material fact required to be stated therein or necessary to make the statement therein not misleading.” Against that statutory backdrop, this case presents the following question:

For purposes of a Section 11 claim, may a plaintiff plead that a statement of opinion was “untrue” merely by alleging that the opinion itself was objectively wrong, as the Sixth Circuit has concluded, or must the plaintiff also allege that the statement was subjectively false—requiring allegations that the speaker’s actual opinion was different from the one expressed—as the Second, Third, and Ninth Circuits have held?

Petitioner Omnicare is a large pharmaceutical care services provider operating in Canada and the United States. See Ind. State Dist. Council, et al. v. Omnicare, Inc., et al., 719 F.3d 498, 500 (6th Cir. 2013). Omnicare engaged in a public offering of securities on December 15, 2005 where it offered 12.8 million shares of common stock.

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Acknowledgments

The authors would like to thank Professor Charles K. Whitehead for his advice and assistance with this preview. 

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Public Employees’ Retirement System of Mississippi v. IndyMac MBS, Inc., et al.

Issues

Does the filing of a putative class action serve, under the American Pipe rule, to suspend the three-year time limitation in § 13 of the Securities Act with respect to the claims of putative class members?

The Securities Act of 1933 (“Securities Act”) requires companies issuing a security to create offering documents that adequately outline the security’s risks to potential investors. Section 13 of the Securities Act requires a plaintiff to file a Securities Act claim within three years to allege the existence of material misstatements or omissions in these offering documents. In American Pipe & Construction Co. v. Utah, however, the Supreme Court held that many statutory time limits could be “tolled” or stopped when plaintiffs are potential members of an existing class action dealing with the same legal claim. This case should decide whether or not the time limitation in § 13 is the sort of limit subject to this “American Pipe rule.” The decision has implications for the efficiency of courts and stock issuers alike.

Questions as Framed for the Court by the Parties

Does the filing of a putative class action serve, under the American Pipe rule, to suspend the three-year time limitation in § 13 of the Securities Act with respect to the claims of putative class members?

Respondent IndyMac MBS, Inc. (“IndyMac”) is an issuer of a type of security known as mortgage pass-through certificates. See In re IndyMac Mortgage-Backed Securities Litigation, 718 F. Supp. 2d 495, 498–99 (S.D.N.Y. 2010).

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