Last week the Second Circuit decided an unsettled question of law in In re IndyMac Mortgage-Backed Sec. Litig. The court held that the tolling rule does not extend to the three-year statute of repose in the 1993 Securities Act. The court also held that non-party members of a would-be class cannot intervene to revive claims previously dismissed for lack of jurisdiction. The court affirmed the District Court for the Southern District of New York’s denial of motions to intervene on behalf of plaintiffs not originally named in the class action.
The long-accepted tolling rule comes from the Supreme Court’s 1974 decision in American Pipe & Constr. Co. v. Utah. The tolling rule states that the filing 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.”
The Second Circuit said that tolling does not apply in this case because statutes of limitation and statutes of repose serve different, distinct purposes. Statutes of limitation limit the availability of remedies and may be subject to equitable tolling, while statutes of repose terminate a cause of action after a period of time and cannot be extended under equitable tolling principles.
The Second Circuit said that their “conclusion is straightforward: American Pipe’s tolling rule . . . does not extend to the statute of repose in Section 13.”