It was the Supreme Court’s first full day with new Justice Neil Gorsuch, and the case they heard: California Public Employees’ Retirement System v. ANZ Securities.
CalPERS on Monday argued in favor of loosening the deadlines for investors to file securities lawsuits.
More from the National Law Review:
The case before the court, California Public Employees’ Retirement System v. ANZ Securities, dealt with a narrow issue of deadlines for initiating litigation. But it comes up when investors seek to opt out of settlements and sue issuers individually for false information in registrations.
The Securities Act of 1933 states that lawsuits cannot be filed more than three years after the securities offering. But citing a 1974 Supreme Court precedent American Pipe & Construction v. Utah, CalPERS claims that deadline can be tolled or delayed while class actions are under way.
“All manner of satellite litigation” could proliferate if statutory deadlines are interpreted too strictly, Tom Goldstein of Goldstein & Russell told the justices on behalf of the California pension fund, the largest in the nation. Because of the complexity of securities litigation, a three-year “statute of repose” limit advocated by defendants is too short, Goldstein argued, and would compel investor groups to file separate litigation early to protect their rights to opt out of class actions.
But Paul Clement of Kirkland & Ellis disputed Goldstein’s “parade of horribles,” noting that the three-year statute of repose has been in place for several years in the Second Circuit, without an avalanche of new litigation.
Justices Neil Gorsuch and Anthony Kennedy asked several pointed questions suggesting they weren’t very sympathetic towards CalPERS.
More background on the case, from the NLR:
The case before the court stems from the financial crisis of 2008. CalPERS sued the bankrupt Lehman Brothers and ANZ Securities, one of its underwriters, claiming false statements in registration documents. The pension fund had been part of a class action, but it opted out after a settlement was reached.
The timeline resulted in a conflict between statutory provisions that impose a deadline on when such lawsuits must be filed. The U.S. Court of Appeals for the Second Circuit ruled that the three-year deadline could not be put off. But the Second Circuit ruling also said the issue was “ripe for resolution by the Supreme Court” because of a circuit split over the issue.