The Dismissed Cert Petition in IndyMac MBS, Inc.: Now What?

Kenneth J. Vianale, March 4, 2015

 The Supreme Court Dismisses the Petition for Certiorari in IndyMac        

                On September 29, 2014, the Supreme Court dismissed the petition for certiorari in Public Employees’ Retirement System of Mississippi v. IndyMac MBS, Inc., No. 13-640, writing simply: “The writ of certiorari is dismissed as improvidently granted.”

The appeal unfortunately became moot.  In the week before oral argument was scheduled, October 6, 2014, the Supreme Court learned of the parties’ $340 million settlement in the trial court, as to all underwriters but one. Final settlement approval will thus result in dismissal of the claims against IndyMac MBS Inc. (“IndyMac”).

 The Second Circuit’s Decision Stands

                 Thus the 2d Circuit’s decision is binding on trial courts in that circuit. And those courts hear a big chunk of the nation’s securities class actions — nearly double the number of securities cases in 2012 as the next highest circuit. (Petitioner’s Br. at 20, available on www.scotusblog or from this author) (citing Renzo Comoli, et al., NERA Economic Consulting, Recent Trends in Securities Class Action Litigation: 2012 Full-Year Review 9 (Jan. 29, 2013), available at

The 2d Circuit’s IndyMac decision, reported at 721 F.3d 95, may pose problems for securities investors. The Second Circuit held that American Pipe tolling of the statute of limitations does not apply to Section 11 and 12(a)(2) claims because those statutes are governed by Section 13 of the ’33 Act, which is a “statute of repose,” not a statute of limitations. American Pipe is the Supreme Court case holding that “the commencement 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.” American Pipe & Construction Co. v. Utah, 414 U.S. 538, 554 (1974).

 IndyMac May Be Trouble for Large Investors

                 Under the 2d Circuit’s IndyMac decision, investors can no longer rely on American Pipe to protect their claims if class certification is denied. Generally, absent class members can rely on the filing of a class action to toll the statute of limitations on their individual claims. The statute is tolled until the court makes a determination on class certification. Under the 2d Circuit’s decision, however, the 3-year statute of repose that applies to claims under Section 11 and 12(a)(2) continues to run even after a class action has been filed. The 3-year statute of repose means that “in no event” may an investor bring suit 3 years “after the security was bona fide offered to the public” in cases brought under Section 11 or Section 12(a)(1), and with respect to cases brought under Section 12(a)(2), “more than three years after the sale.”  (15 U.S.C. §77m) (Section 13 of the ’33 Act: Limitation of Actions).

Thus, if, for some reason, the class action is dismissed, voluntarily or involuntarily, or class certification denied, the 3-year statute of repose may well have expired before individual absent class members can file a case of their own.

So, as a practical matter, investors with large losses in a security and who are relying on a class action pending within the 2d Circuit to vindicate their rights, must now at a minimum take the following precautions:

(a) calculate the expiration date of the 3-year statute of repose on their ’33 Act claims; and

(b) monitor the ongoing class action regularly. This will require periodic review of the docket sheet on PACER, plus an analysis of the main pleadings as well. The key documents on file may give the reviewer a feel for which way the wind is blowing: do the pleadings hint that the case is doomed to dismissal?  In doubtful cases, an investor may be forced to move to intervene in the action if they think they can salvage the case, or they may want to file their own lawsuit.  Either way, this is an unfortunate development for all parties. Note that the Tenth Circuit avoids the problem altogether by extending American Pipe tolling to Section 13’s three-year statute of repose. See Joseph v. Wiles, 223 F.3d 1155, 1168 (10th Cir. 2000).

Please Note: Information contained in this alert is for the general education and knowledge of our readers. It is not legal advice and should not be relied upon as such. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.


Click below for printer friendly PDF version.

IndyMac – Publications