In a case of awkward timing, a judge on Tuesday dismissed a securities class action against Transocean Ltd. on the basis of an appellate decision that the U.S. Supreme Court agreed to consider reversing just the day before.
In a 10-page ruling, U.S. District Judge Lorna Schofield in Manhattan dismissed as time-barred claims that Transocean misled shareholders about its safety record. Schofield based her decision on a June 2013 ruling by the U.S. Court of Appeals for the Second Circuit, which adopted a defendant-friendly approach to determining whether the statute of repose for securities claims could be tolled in litigation against IndyMac. The Supreme Court granted cert in that case, Public Employees’ Retirement System of Mississippi v. IndyMac MBS Inc., on Monday.
Transocean is one of the world’s largest offshore drilling contractors and was the owner of the Deepwater Horizon oil rig at the center of BP plc’s 2010 oil spill in the Gulf of Mexico. In the aftermath of the Deepwater Horizon disaster, Scott + Scott brought a securities class action on behalf of shareholders of GlobalSantaFe Corp, which Transocean acquired in 2007. The suit alleged that Transocean falsely stated in proxy statements relating to the merger that it was in compliance with environmental laws.
The first judge assigned to the case, Laura Taylor Swain, ruled in 2011 that one of Scott + Scott’s two named plaintiffs didn’t have standing. Soon after, Transocean’s defense lawyers at Munger Tolles & Olson moved to dismiss the case, arguing that the remaining named plaintiff didn’t join the case within the applicable three-year statute of repose (statutes of repose are like statutes of limitations, except less easily tolled).
By early 2013, it was clear that the case would live or die on one question: Did the commencement of the class action toll the statute of repose for all putative class members? That exact issue was before the Second Circuit in consolidated securities class action litigation against now-defunct IndyMac and its underwriters, so Swain stayed Transocean’s motion to dismiss until she could see how the Second Circuit would rule.
The Second Circuit ultimately decided last June that the filing of a class action doesn’t toll the statute of repose. It appeared that Scott + Scott’s case was toast. But on Monday the Supreme Court gave the plaintiffs a glimmer of hope by agreeing to decide the question once and for all.
Scott + Scott quickly fired off a letter to Schofield, who inherited the Transocean case from Swain, informing her of the cert grant in IndyMac. “This is significant because if the Supreme Court reverses IndyMac‘s holding … then defendants’ motion will lack a legal foundation,” the lawyers wrote.
Schofield’s ruling on Tuesday didn’t include any mention of the Supreme Court’s decision. But the Transocean plaintiffs will inevitably appeal her ruling to the Second Circuit, which can stay the case pending a ruling from the high court in IndyMac. From Scott + Scott’s perspective, it probably doesn’t matter who issues the stay, as long as the case survives long enough to be revived, potentially, by the Supreme Court’s ruling.
Scott + Scott’s Geoffrey Johnson declined to comment. Transocean’s lawyer, John Spiegel of Munger Tolles, referred us to a Transocean spokesperson, who told us the company is “pleased with the judge’s decision to dismiss the case.”