A large group of institutional investors has filed an amicus brief in a case that could impact the time frame for investors to sue for damages under federal securities laws, and whether such claims are preserved in class actions.
The legal doctrine of tolling, which allows the time period set by a statute of limitations to be paused in such actions, has been addressed differently in several court circuits, and a case accepted by the Supreme Court that was expected to resolve it was settled early. That puts the action back in individual circuits.
The brief was filed Tuesday by 55 public pension funds and other institutional investors representing $1.5 trillion of assets, plus the National Conference on Public Employee Retirement Systems representing 500 pension funds with $2 trillion in assets, in the 3rd U.S. Circuit Court of Appeals in Philadelphia, in North Sound Capital LLC et al. vs. Merck & Co. Inc. et al. The District Court allowed the tolling, but Merck appealed the decision.
If the 3rd Circuit holds that filing a securities class action does not allow the deadlines to be paused — contrary to a 1974 Supreme Court decision in American Pipe & Construction Co. vs. Utah that addressed the impracticalities of filing individual actions related to a statute of limitations for the claims of unnamed class members — it could force institutional investors to protect their interests by filing individual claims, if class certification is denied or decertified.
“Any rule that requires greater and unnecessary expense and wasteful participation in litigation in order to obtain compensation for the victims of securities violations will have a great adverse impact on institutional investors,” said Blair Nicholas, a partner with Bernstein Litowitz Berger & Grossmann, who prepared the amicus brief.