The Supreme Court agreed Monday to hear a case challenging a three-year time limit for investors to join or opt out of class-action lawsuits.
The petition, brought by the $20.1 billion Mississippi Public Employees' Retirement System, Jackson, is being supported by funds including the California Public Employees' Retirement System, California State Teachers' Retirement System, Colorado Public Employees' Retirement Association, Montana Board of Investments and Teacher Retirement System of Texas.
Public pension funds and other institutional investors have relied on a 1974 Supreme Court decision in American Pipe & Construction Co. vs. Utah that a statute of limitations can be suspended when other potential parties file. In June, the 2nd U.S. Circuit Court of Appeals, New York, disagreed, causing a judicial split that led the Supreme Court to take the case.
Limiting the time to remain in or opt out of a particular class action “has created a problem because the institutional investor can no longer wait to decide,” said Salvatore Graziano, a lawyer with Bernstein Litowitz Berger & Grossmann, New York, who represents the public pension systems. “There's going to be more litigation rather than less. We look at it (the Supreme Court review) as an opportunity to restore balance to the system.”
Agreeing with the 2nd Circuit's ruling, the public pension funds argue in a friend-of-the-court brief, “will force institutional investors to file hundreds of protective individual actions or seek to intervene in class actions,” and lead to “significantly higher costs” for monitoring and participating in securities lawsuits. Respondents Credit Suisse Securities, Deutsche Bank Securities, Goldman Sachs and Morgan Stanley argue in their brief that the case does not present a judicial split worth high court review.
The case, Public Employees' Retirement System of Mississippi vs. IndyMac MBS Inc., is one of several recent securities class-action cases taken on by the Supreme Court. Arguments will be held in the next term, which begins in October.
Calls to the Mississippi attorney general's office, which is handling the case for the retirement system, were not returned at press time.