A recent ruling by the United States Court of Appeals for the Second Circuit signals that investors should be more proactive to protect their interests in securities fraud cases. In Police & Fire Retirement System of the City of Detroit v. IndyMac MBS, Inc. (IndyMac), the Court of Appeals held that the tolling rule established in American Pipe and Construction Co. v. Utah (American Pipe) does not apply to the three-year statute of repose in Section 13 of the Securities Act of 1933.1 This means that potential class members can no longer safely wait to see how a class action progresses before deciding whether to pursue their individual actions.
Background
Two class actions were filed against IndyMac MBS, Inc., asserting Securities Act claims relating to offerings of mortgage pass through certificates.2 The District Court consolidated the two class actions and appointed the Wyoming State Treasurer and the Wyoming Retirement System as lead plaintiffs.3 The District Court, however, dismissed for lack of standing all claims concerning the certificates the Wyoming entities did not purchase.4
Following the decision, five different pension funds moved to intervene as additional plaintiffs to the action to assert the claims with respect to the certificates they had purchased.5 Although the three-year period of the statute of repose in Section 13 had run on most of their claims, the putative intervenors argued that the statute of repose was tolled under the tolling rule in American...
