Monday's U.S. Supreme Court decision in a closely watched securities case was the first class action in which newly appointed Justice Neil Gorsuch participated — and he didn't disappoint.
Gorsuch joined the majority in the U.S. Supreme Court's 5-4 decision in California Public Employees' Retirement System v. ANZ Securities, in which the court ruled that the time period after which a defendant could no longer be sued by shareholders was a statute of repose that couldn't be tolled.
The CalPERS case involved the frame for investors to bring individual claims under the U.S. Securities Act of 1933 while a related class action was pending. The ruling was particularly significant to institutional investors, who often bring their own securities suits rather than participate in a class action.
Plaintiffs attorneys said the ruling would invite more suits, flooding the courts.
Many investors will be forced to sue before they want to, said Dan Sommers, co-chairman of the Securities Litigation and Investor Protection practice group at Washington's Cohen Milstein Sellers & Toll. "That is one of the real adverse consequences of the majority decision," he said. "It's needlessly forcing investors to make premature decisions about their participation in the case when up until now they were protected by the Supreme Court's American Pipe ruling and made those decisions at an appropriate time to stay in the class or to opt out."
Institutional investors will have to more closely monitor class actions to make those decisions, which will take more time and money, he said.
But the court found the burden to be "less onerous" than plaintiffs claimed. Plaintiffs could simply file a motion to intervene in the class action, or ask to be included as a named class representative.
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