In our March issue, we reported that the Supreme Court had agreed to hear arguments in IndyMac MBS and discussed the significant additional burdens an adverse ruling would impose on institutional investors. This month, Berman DeValerio, on behalf of the Los Angeles County Employees Retirement Association (“LACERA”), filed a brief arguing that the adverse lower court ruling should be reversed.
At issue is a fundamental, if arcane, question for investors. Does the filing of a purported class action complaint suspend all statutory deadlines for all investors who would be part of the proposed class if it were eventually certified? In other words, can investors affected by an alleged stock fraud continue to sit back as “absentee” class members once a complaint is filed, secure in the knowledge that they can either collect their share in any eventual recovery or opt out once the case resolves?
If the Supreme Court agrees with the Second Circuit Court of Appeals decision in Public Employees’ Retirement System of Mississippi v. IndyMac MBS, the answer is no. Parting with 40 years of jurisprudence, the Second Circuit found that the clock continues to tick on the statute that gives investors three years from the date of a public offering of securities to bring suit under the Securities Act of 1933.
Such an adverse ruling would undermine efficiency, one of the main reasons the class-action mechanism was devised. It could force investors to closely monitor all the cases that impact them to make sure they don’t miss any deadlines and “intervene” in such instances to protect their rights. It also could increase the workload for judges, who benefit from the streamlining class actions provide.
For more on the Supreme Court case, read our previous newsletter article by clicking here. You can also read the petitioner’s brief (click here) and the LACERA brief in support of the petitioner (click here).
*In August 2017, our firm name changed to Berman Tabacco. Case references and content published before that date may refer to the firm under our prior name, Berman DeValerio.