June 26, 2017

The U.S. Supreme Court's Monday ruling that suits over securities offerings are subject to time limits that can't be extended by class action filings will give public companies a measure of certainty against unexpected claims, experts said, but will require more legwork from institutional investors to preserve their claims and could gum up courts with premature opt-out litigation.

Justice Anthony Kennedy wrote the decision for a 5-4 majority of the high court that upheld a Second Circuit decision dismissing the California Public Employees' Retirement System's opt-out action against a group of bank underwriters as untimely, finding a three-year time limitation in Section 13 of the Securities Act of 1933 functions as a statute of repose that can't be tolled by the filing of a class action.

Experts agreed that the decision will make things easier for defendants by providing a clear picture of potential claims by the end of the three-year deadline. But securities attorneys also said Justice Ruth Bader Ginsburg raised pressing concerns about the burden the decision will place on investors and courts.

Daniel S. Sommers, the co-chair of Cohen Milstein Sellers & Toll PLLC's securities litigation and investor protection practice group, agreed with Justice Ginsburg's assessment that the opinion will negatively impact smaller investors.

"This opinion will certainly leave small retail investors out in the cold, there's no doubt about that," Sommers said, explaining that smaller investors don't have the resources to monitor securities class actions across the country and file individual cases if necessary.

As for institutional investors, plaintiffs attorneys said pension funds and other major investors leading cases will now have a duty to ensure every class member is aware of the opt-out deadline.

The full article can be read here.