New Justice Neil Gorsuch’s first foray into securities class action law on the U.S. Supreme Court came on his first day on the bench Monday. Though he did not tip his hand explicitly, he showed less sympathy for plaintiffs than for defendants.
His predecessor, the late Antonin Scalia, usually expressed similar preferences, so the court may be ready to take on class action reforms again.
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.
Justice Anthony Kennedy seemed especially hostile to Goldstein’s position, suggesting it was “an attack on statutes of repose generally.”
Gorsuch asked Goldstein “where is the ambiguity” in the Securities Act provision, suggesting he did not think tolling should apply to the three-year limit.