For over 40 years, putative class members have escaped some of the curbs against late-filed lawsuits that apply to normal cases. Last week, the United States Supreme Court brought back some of those curbs, threatening to reduce the number of spin-off cases that often result from class actions. Lawsuits under the Truth in Lending Act are directly affected.
The case, California Public Employees’ Retirement System v. Anz Securities, Inc., involved an unremarkable factual scenario. Investors in Anz sued the company for alleged violations of the Securities Act of 1933. The trial court certified a class of investors, but one of the largest shareholders, CalPERS, opted out. CALPers then filed a separate lawsuit. But that filing occurred after the three-year bar that the Securities Act establishes. The question the high court addressed was whether the pendency of the earlier class action tolled, or delayed, CalPERS’s deadline for filing its individual case.
In a five-to-four decision along strict liberal-conservative lines, the Supreme Court held that no tolling occurred. That is because the time limit in the Securities Act functions as a statute of repose, which imposes an absolute time bar. Other laws, by contrast, rely on statutes of limitations, which courts have equitable power to suspend in class and non-class cases alike.
Popular real estate laws fall into both categories. For example, the Real Estate Settlement Procedures Act has one- and three-year statutes of limitations (although an argument can be made that courts should interpret the relevant provision as a statute of repose). The Truth in Lending Act, however, provides for a three-year statute of repose for actions based on improper notice of rescission rights.
It remains to be seen how much the Supreme Court’s decision will affect class-action practice. In practical terms, the opinion undercuts the utility of a class member to opt out of a case and pursue his own lawsuit. It may be that opt-out plaintiffs will have to try to intervene in the existing case–rather than file separate suits–and hope that they can convince the trial court that their individual causes of action should get the benefit of the timing for the original case.