December 11, 2018

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U.S. District Court Holds that Certain Claims by Opt-Out Plaintiffs Are Barred by the Statute of Repose

In a recent ruling in In re: BP p.l.c. Securities Litigation the United States District Court for the Southern District of Texas dismissed claims asserted by opt-out plaintiffs as time barred by the Exchange Act’s statute of repose pursuant to the U.S. Supreme Court’s ruling in ANZ Securities. This decision underscores that institutional investors should closely monitor the statutes of limitation and repose applicable to securities fraud claims to ensure they are not later barred from recovery.

This decision stems from the various class actions that were filed against BP in the Southern District of Texas. Initially, some of the classes included common stock and English securities law claims that were added to avoid Morrisons bar on asserting claims under the U.S. securities laws to recover potential losses for transactions that occur on non-U.S. exchanges. While the class actions—with a much narrower time scope—were eventually settled, they only included American Depository Receipts (ADRs).  Those who had common stock claims as well partially opted out to pursue these claims. For more information, see our prior blog entitled U.S. Courts Continue to Deny Attempts to Bring Foreign Law Actions in U.S. Courts to Recover for Potential Losses in Foreign Transactions.

In its September 18, 2018 opinion, the court addressed the BP defendants’ motion for judgment on the pleadings to dismiss over a dozen Exchange Act claims, which arose from alleged misstatements and omissions related to the 2010 Deepwater Horizon oil spill. The defendants argued that all Exchange Act claims based upon alleged misstatements made more than five years before the filing of the individual actions at issue were foreclosed by the Exchange Act’s statute of repose—an argument that they made on two prior occasions.

Previously, the defendants first raised the statute of repose argument in a 2014 motion to dismiss. However, in its September 2014 decision denying the motion, the court applied American Pipe tolling, which provides that “the filing of a class action tolls applicable statutes of limitations as to all putative class members until class certification is denied or until the individual ceases to be a member of the class.” At the time of the court’s 2014 decision, there was a circuit split as to whether American Pipetolling applied to statutes of repose. The district court held that American Pipe tolling was a legal rule, not equitable, and determined that it applied to the Exchange Act claims at issue in denying the BP defendants’ motion.

However, in light of the Supreme Court’s June 26, 2017 decision in ANZ Securities, resolving the circuit split, the Texas court reanalyzed the BP defendants’ repose-based arguments. In ANZ Securities, the plaintiff opted out of a putative class of investors when the class action settled, and, like the plaintiffs in the BP cases, had filed a separate complaint.  Since the complaint in ANZ Securities was filed after expiration of the Securities Act’s three-year statute of repose period, the Supreme Court dismissed the Securities Act claims—reasoning that American Pipe tolling is equitable in nature, and therefore could not toll the statute of repose.

The BP defendants argued that ANZ Securities clarified that American Pipe tolling is an equitable rule, and since equitable tolling does not apply to statutes of repose, the Exchange Act’s five-year statute of repose barred all claims based upon alleged misstatements made more than five years before the filing of the actions. The plaintiffs presented three procedural counterarguments, one of which was that the court’s decision as to the BP defendants’ motion to dismiss established the law of the case regarding American Pipe tolling, and that this prior holding could not be disturbed. The Court rejected this argument under precedent that “[a] court may reexamine its prior decision if ‘controlling authority has since made a contrary decision of the law applicable to such issues.’”

Substantively, the plaintiffs sought to distinguish ANZ Securities—pointing to the fact that it concerned the Securities Act’s three-year statute of repose, and arguing that the Exchange Act’s five-year time-bar instead qualified as a statute of limitations to which American Pipe tolling applies. However, the court rejected this argument as well because: (1) “[c]ourts routinely characterize the Exchange Act’s five-year statutory limitation restriction as a ‘statute of repose’”; and (2) similar to the Securities Act, the Exchange Act’s limitations statute provides two different terms—“a shorter one that begins after the discovery of the facts constituting the violation, and a longer one that begins after the violation itself.” According to the court, this “support[ed] a conclusion that the longer time-restriction, calculated from the defendant’s acts, is intended to be a statute of repose.”

Accordingly, in finding that the Exchange Act’s five-year bar constitutes a statute of repose, and is not subject to equitable tolling, the court granted the BP defendants’ Motion for Judgment on the Pleadings as to the Exchange Act claims based upon alleged misstatements made more than five years before the filing of the actions. While the plaintiffs’ English securities law claims remain to be decided upon, this decision highlights the need for institutional investors to closely monitor the statutes of limitation and repose applicable to securities fraud claims, whether filed under the Securities Act or the Exchange Act, in the wake of the ANZ Securities decision.

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About this Author

Peter M. Saparoff, Mintz Levin Law Firm, Boston, Corporate Law Attorney
Member

Peter co-chairs the firm’s Securities Litigation Practice. He is one of the nation’s leading securities litigators. He has represented clients in well over 100 cases, investigations, and proceedings throughout the country. He has successfully defended SEC investigations, class actions, derivative suits, stock exchange proceedings, and state securities investigations, and has handled numerous FINRA arbitrations, among other matters. Peter also represents hundreds of institutional investors with respect to the monitoring and evaluation of securities class action settlements.

617-348-1725
Joel D. Rothman, Litigation Attorney, Mintz Levin, Law Firm
Associate

Joel’s practice encompasses a range of complex commercial, securities, insurance, and employment litigation matters, including advising institutional investors with respect to the monitoring and evaluation of both foreign and domestic securities class actions, representing shareholders in post-closing merger disputes, counseling insurance companies in coverage disputes, representing attorneys and insurance brokers against claims of professional negligence, and advising employers on all facets of the employment relationship. He also focuses his practice on representing and advising newspapers, publishers, and other media-related entities and individuals in defamation, invasion of privacy, and First Amendment matters. He regularly advises clients at all stages of civil litigation, from pre-litigation counseling and investigation through discovery, alternative dispute resolution, trial, and the appeals process.

Before joining the firm, Joel held a clerkship position with the Massachusetts Supreme Judicial Court, serving under, then Associate Justice, now Chief Justice, Ralph D. Gants. He has also held internship positions in the litigation sections of law firms in Boston.

Before beginning his legal career, Joel had a successful career in human resources, including positions as an independent contractor and human resources manager for large and small businesses in the software, medical device, retail and transportation industries. In these roles, he provided oversight and training on compliance with federal, state, and international regulations involving corporate ethics and managerial conduct, family and medical leave, minimum wage, work authorization, occupational safety and health, and discrimination prevention. In addition, he prepared training materials, assisted in gathering due diligence items, investigated employee grievances, and participated in union negotiations.

While in law school, Joel worked as a research assistant, aiding in drafting briefs as amicus curiae for two United States Supreme Court cases, one relating to the Affordable Care Act, and the other challenging a federal immigration statute on equal protection and fundamental rights grounds.

617-348-4495
Kevin C. Mortimer, Mintz Levin, real estate disputes attorney, construction matters lawyer
Associate

Kevin engages in an expansive array of litigation matters. With prior experience as a project management operational consultant at a boutique mechanical engineering subcontracting firm and a large commercial real estate company, Kevin provides a well-informed perspective for groups concentrated on real estate disputes and construction law. Kevin also employs his educational background in the field of economics in his contributions to matters concerning institutional class action recovery, securities litigation, and commercial litigation.

During...

617.348.1754
Associate

Ellen focuses her practice on securities litigation, including shareholder class actions and opt-outs thereto, and complex commercial litigation. She has experience taking and defending depositions, drafting briefs and other filings, as well as with internal investigations and patent matters. She represents public and private companies in a variety of industries, including life sciences.

Ellen also has an active pro bono practice. To date, she has successfully represented an individual seeking asylum and a Section 8 tenant facing eviction. She has also defended a victim of domestic...

1.212.692.6208
Associate

Alain’s practice focuses on civil litigation matters for public and private companies in a wide variety of industries. In addition, he maintains an active pro bono practice.

Alain rejoins Mintz Levin after working as a Summer Associate at the firm in 2016. During law school, Alain served as a judicial intern for the Honorable Gregory C. Flynn of the Waltham District Court and the District Court Appellate Division. He was also a criminal law teaching assistant and served as a summer law clerk at Free Speech For People, a legal advocacy organization dedicated to campaign finance...

1.617.348.1895