On June 26, 2017, the U.S. Supreme Court decided in California Public Employees’ Retirement System v. ANZ Securities, Inc., No. 16-373 (U.S.), that the class action tolling doctrine established in American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974), does not extend to the three-year statute of repose under Section 13 of the Securities Act of 1933 (the “Securities Act”).

The Supreme Court has now resolved a nationwide split of authority as to whether class action tolling under American Pipe applies to statutes of repose. This ruling will preserve and enforce defendants’ right of repose in Securities Act cases. Because statutes of repose are not tolled by the filing of a class action complaint, plaintiffs who wish to file an opt-out action must do so before the statute of repose has expired or else their individual claims will be extinguished—even if the plaintiff is a putative class member in an ongoing class action. This decision is likely to limit the ability of institutional investors to employ a strategy of remaining as absent class members in securities class actions for years until a settlement is reached, only then to opt out and seek a premium for themselves by threatening defendants with a continuation of the litigation.

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