LEWIS A. KAPLAN, District Judge.
This putative class action arises from the collapse of the United States market for mortgage-backed securities. The securities at issue here, known as mortgage pass through certificates (the "Certificates"), were issued pursuant to three registration statements and related prospectuses and prospectus supplements (the "Offering Documents") filed by IndyMac MBS, Inc. ("IndyMac MBS"). The Court assumes familiarity with its prior opinion.
I. The Securities
A Certificate is a type of mortgage-backed security that entitles its owner to a
II. The Action and Motions
On May 14, 2009, Police and Fire Retirement System of the City of Detroit ("Detroit"), which allegedly had purchased certain Certificates, brought a putative class action asserting that the Offering Documents contained misrepresentations and omissions in violation of federal securities laws.
Defendants then filed a number of motions to dismiss the ACC.
Second, the Court dismissed Wyoming's claims against Bank of America ("BoA"), which Wyoming had sued in its alleged capacity as "successor in interest" to Countrywide Securities Corporation ("Countrywide") and Merrill, Lynch, Pierce, Fenner & Smith ("Merrill Lynch"), underwriters of several of the offerings at issue. The Court did so on the ground that the ACC failed to allege any facts supporting a departure from the general rule that a parent corporation is not liable for its subsidiaries' acts solely by virtue of its ownership interest.
The motions at issue here stem from those two holdings. The motions to intervene aim to cure Wyoming's standing deficiency with respect to numerous offerings.
In addition, Wyoming seeks leave to amend the ACC to add Countrywide and Merrill Lynch as defendants with respect to the claims concerning offerings that they allegedly underwrote.
I. Motions to Intervene
A. Statute of Repose
As noted in IndyMac I, "no Section 11 claim may be brought `more than three years after the security was bona fide offered to the public,'" and "no Section 12(a)(2) claim may be brought `more than three years after the sale.'"
Although some cases have reached a different result, this Court is persuaded by Judge Castel's recent ruling that neither American Pipe nor any other form of tolling may be invoked to avoid the three year statute of repose set forth in Section 13 of the Securities Act of 1933.
With that conclusion in mind, the Court considers which, if any, of the claims that movants seek to assert are barred by the applicable statutes of repose.
The Court turns first to the position of movant Detroit.
When Detroit filed its complaint on May 14, 2009, it asserted, inter alia, claims in connection with the INDX 2007-AR5 offering—the only offering in which it apparently had purchased Certificates.
Defendants argue, inter alia, that at least some of the claims that Detroit seeks to assert now are barred by the statute of repose. The INDX 2007-AR5 offering occurred on April 2, 2007.
Defendants argue that the filing of the ACC superseded the Detroit complaint and that the claims that Detroit now seeks to assert are, in effect, brand new claims that are time-barred. Detroit contends that the claims that it asserted in its original complaint, filed before consolidation, remain pending. On that theory, there obviously would be no need for intervention. More importantly, though, the claims that Detroit asserted in its original complaint are not still pending as part of this action.
It is true, of course, that consolidation alone does not "merge [two] suits into a single cause."
After consolidating the actions, and in accordance with the PSLRA,
When Wyoming, following the consolidation of the two actions, filed the consolidated complaints naming only itself as a plaintiff, the effect of its doing so was to drop Detroit as a plaintiff in both actions, a fact obvious to Detroit on the face of those pleadings. To be sure, the consolidated Wyoming complaints asserted claims with respect to the INDX 2007-AR5 offering. But those pleadings did not allege that Wyoming—the only plaintiff—had purchased Certificates in that offering. Detroit perhaps took comfort in that fact coupled with its status as a member of the alleged class. But any such comfort was misplaced, as several courts by that time had held that class plaintiffs lack standing to bring claims relating to securities that they themselves had not purchased.
In these circumstances, Detroit abandoned the pursuit of its own claims with respect to the INDX 2007-AR5 Certificates on or shortly after the date on which Wyoming failed to include Detroit as a plaintiff in the consolidated complaints. As there had been no adjudication of those claims, that abandonment was without prejudice at the time it occurred. But time continued to pass. Now that Detroit has awakened to its predicament, it finds that the three year statute of repose with respect to its Section 11 and associated Section 15 claims has expired. In view of Congress's categorical language, the Court may not overlook the consequences of that expiration. Insofar as Detroit seeks leave to intervene to assert those claims, the motion must be denied.
The situation is different with respect to Detroit's Section 12(a)(2) and associated
2. The Other Proposed Intervenors
All but one of the offerings upon which the rest of the putative intervenors seek to sue occurred more than three years before the pertinent motions to intervene. The exception is INDA 2007-AR3, as to which Philadelphia seeks to sue. Those Certificates first were offered on June 1, 2007.
All but six of the remaining Certificate purchases upon which movants seek to bring Section 12(a)(2) and related Section 15 claims occurred more than three years before the pertinent motions to intervene.
B. Statute of Limitations
It remains to be considered whether the claims not barred by a statute of repose nevertheless are barred by the applicable statute of limitations.
Claims under Sections 11, 12(a)(2) and 15 must be "brought within one year after the discovery of the untrue statement or the omission, or after such discovery should have been made by the exercise of reasonable diligence."
1. Application of American Pipe Where Class Representative Lacked Standing
In American Pipe, the respondents moved to intervene in a civil antitrust action in which they had been putative class members after the named plaintiff—the State of Utah—failed to win class certification for lack of numerosity. The petitioners argued that the statute of limitations had expired on the claims that respondents sought to assert. The Court, however, held 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
The putative intervenors argue that the statute of limitations governing the claims they seek to assert was tolled under American Pipe. Defendants counter that American Pipe does not apply where, as here, the putative class plaintiff did not have standing to assert the claims at issue. Neither the Supreme Court nor the Second Circuit has addressed this issue,
Excluding movants' claims as time-barred would undermine the policies of efficiency and economy served by Rule 23 and American Pipe. Putative class members in movants' position would be unable to rely on their purported representatives. They instead would be forced to make protective filings to preserve their claims in the event that those representatives were determined not to have standing. As the Supreme Court stated, "a rule requiring successful anticipation of th[is] determination . . . would breed needless duplication of motions."
Nor would tolling surprise defendants or force them to defend against stale claims. The original class complaints notified defendants of the claims that movants now seek to assert. Defendants therefore were apprised "[w]ithin the period set by the statute of limitations . . . [of] the essential information necessary to determine both the subject matter and the size of the prospective litigation."
Parenthetically, class certification has not yet been ruled upon here. This case therefore does not implicate Korwek v. Hunt,
Defendants argue also that American Pipe tolling does not apply for jurisdictional reasons. The argument, which is premised on a Seventh Circuit decision that did not consider American Pipe,
The question before this Court is the same one faced by any court considering the application of American Pipe: Should the claims that movants seek to assert, despite the apparent expiration of the applicable statutes of limitations, nevertheless be treated as timely for equitable reasons on account of the earlier filed complaint? Tolling is not something that the Court "does"—and for which it would need jurisdiction—during the pendency of the earlier complaint. The inquiry is based on present considerations. Defendants appear to be laboring under the misconception that statutes of limitations may be tolled only where a court has jurisdiction over the pertinent claims during the period of tolling. This simply is not the case. Under the discovery rule, for example, a statute of limitations may be tolled for a period during which the facts giving rise to a claim are not even known to the prospective plaintiff—let alone put before a court of competent jurisdiction.
3. The Timeliness of the Claims that Movants Seek to Assert
As stated above, the statute of limitations for the claims that movants seek to assert began running on June 30, 2008. And, as the Court held in IndyMac I, "the relevant complaint for purposes of the statutes of limitations . . . is that filed in this action on May 14, 2009" by Detroit.
Iowa makes three arguments that its claims are not barred by the statute of limitations. All are without merit.
First, Iowa argues in a footnote that being put on inquiry notice of its claims did not trigger the statute of limitations.
Second, Iowa contends that, even after the Court's decision in IndyMac I, "the `statute of limitations remain[ed] tolled for an intervening potential class members [sic] to continue the class action.'"
As the claims that Iowa seeks to assert are time-barred, it cannot intervene to assert them.
II. Motion for Leave to Amend the ACC
The Court turns now to the motion, made by Wyoming and several of the proposed intervenors, to amend the ACC to add Countrywide and Merrill Lynch as defendants to certain claims.
All of the offerings as to which Wyoming seeks to add claims against Countrywide and Merrill Lynch, and all of its purchases of securities in those offerings, occurred more than three years before Wyoming moved for leave to amend the ACC. Wyoming does not dispute that the claims it seeks to add, at least on their face, are barred by the applicable statutes of repose. Instead, it argues that the claims are timely under the FED.R.CIV.P. 15(c) relation back doctrine. But, as stated above, Rule 15's relation back doctrine cannot save claims otherwise barred by a statute of repose.
B. The Proposed Intervenors
Philadelphia, Los Angeles, Mississippi and Detroit Retirement—as distinguished from Detroit
As Detroit Retirement's motion to intervene is being denied in its entirety, the motion to amend must be denied as to that movant.
The motion to amend must be denied as to Philadelphia as well. Philadelphia seeks leave to amend the ACC to add Merrill Lynch as a defendant to claims respecting the INDA 2007-AR3 offering. That offering, however, occurred on June 1, 2007.
The Court is permitting Los Angeles and Mississippi to intervene to assert Section 12(a)(2) claims relating to the INDX 2006-AR31 and INDX 2006-AR 12 offerings, respectively. Merrill Lynch allegedly was the underwriter of each. As the motion to amend was filed within three
Under Rule 15(c)(1)(C)(ii), "an amendment to a pleading relates back to the date of the original pleading when . . . the party to be brought in by amendment . . . knew or should have known that the action would have been brought against it, but for a mistake concerning the proper party's identity." Movants argue that the amendment they seek to make to the ACC relates back to May 14, 2009, when Detroit filed the first complaint in this action. The parties dispute whether Wyoming's decision not to assert claims against Merrill Lynch in the ACC, but to sue BoA instead, was due to a "mistake."
In Krupski v. Costa Crociere S.p.A.,
Lead plaintiff Wyoming was quite aware of Merrill Lynch's alleged conduct and role in the events at issue. Specifically, the ACC alleges that "Merrill Lynch was listed as an underwriter and participated in the drafting and dissemination of one or more of the relevant Offering Documents."
Merrill Lynch was entitled to read the ACC and to assume that Wyoming, despite having a detailed awareness of Merrill Lynch's role and conduct in the events at issue, chose instead to sue BoA on the basis of the latter's independent status as Merrill Lynch's parent company. In all the circumstances, the claims that movants seek to assert against Merrill Lynch do not relate back to the earlier-filed complaint and therefore are barred by the
The motions to intervene as class representatives [DI 202, 219, 237] are granted with respect to (1) Philadelphia's Section 11 claims arising out of its purchase of INDA 2007-AR3 Certificates, (2) Philadelphia's Section 12(a)(2) claims arising out of its purchase of INDA 2007-AR1 Certificates, (3) Los Angeles's Section 12(a)(2)claims arising out of its purchase of INDX 2006-AR31 Certificates, (4) Detroit's Section 12(a)(2) claims arising out if its purchase of INDX 2007-AR5 Certificates, (5) Mississippi's Section 12(a)(2) claims arising out of its purchase of INDX 2006-AR12 Certificates, and (6) these movants' related Section 15 claims asserting vicarious liability for the underlying claims listed above. The motions to intervene are denied in all other respects.
The motion for leave to amend the ACC [DI 229] is denied in its entirety.