Two recent decisions by judges from the U.S. District Court for the Southern District of New York have put the federal securities laws on a collision course with the basic principles of economy and efficiency animating Federal Rule of Civil Procedure 23 governing class actions. In Footbridge Ltd. Trust v. Countrywide Fin. Corp.1 and In re Lehman Bros. Sec. and ERISA Litig.,2 Southern District Judges P. Kevin Castel and Lewis A. Kaplan, respectively, each dismissed as untimely efforts to cure defective class action claims after the outer statutory time limits for asserting such claims had run.
Both cases concluded that the tolling principle embodied in American Pipe and Constr. Co. v Utah3—that “the commencement of a class action suspends the applicable statute of limitations as to all asserted members of the class who would have been parties had the suit been permitted to continue as a class action”—could not be used to extend the applicable “statute of repose” which provides that “[i]n no event shall any…action be brought…more than three years after” the offering or sale of the security in question.4 These decisions, discussed in detail below, are likely to shake up the plaintiffs’ securities bar, and may well result in a greater number of plaintiffs demanding a seat at the table if they lose confidence that the time clock will be suspended during a class action that purports to cover their claims.
Dual Time Limits
