Remember when we posted about the Mortgage-Backed Securities sleeper defense regarding the statute of repose tied to the Securities Acts of ’33 and ’34 https://findsenlaw.wordpress.com/2012/03/07/fhfa-litigation-for-freddie-and-fannie-vs-tbtf-banks). Well, a version of that defense was blown out of the water in the recent decision of In re Bear Stearns Mortgage Pass-Through Certificates Litigation, (S.D. N.Y. Mar. 30, 2012).In re Bear Stearns Mar. 30 Order
Holdings regarding statute of limitations and statute of repose of the Securities Act of 1933:
- The Supreme Court’s invalidation of the inquiry notice standard for the Securities Act of ’34 extends to claims brought under the ’33 Act. The operative question is whether a plaintiff could have pled ’33 Act claims with sufficient particularity to survive a 12(b)(6) motion to dismiss more than one year prior to the filing of the operative complaint.
- Commencement of the class action tolled the statute of repose for all members of the putative class
The question before the Court is whether the Supreme Court’s invalidation of the inquirynotice standard for ’34 Act claims extends to claims brought under Sections 11 and 12(a)(2) ofthe ’33 Act. The Court concludes, in accord with the majority of judges in this district, that it does. See In re Wachovia Equity Sec. Litig., 753 F.Supp.2d 326, 370-71, n.3 9 (S.D.N.Y. 2011) (applying Merck to claims under Sections 11 and 12(a)(2) of the ’33 Act); New Jersey Carpenters Health Fund v. Residential Capital LLC, Nos. 08 CV 8781(HB), 08 CV 5093(HB), 2011 WL 2020260, at *4 (S.D.N.Y. May 19, 2011); Brecher v. Citigroup Inc., 797 F.Supp.2d 354, 367(S.D.N.Y. 2011); but see In re IndyMac Mortgage-Backed Securities Litigation, 793 F.Supp.2d 637, 648 (S.D.N.Y. 2011) (holding that Merck is limited to claims brought under the ’34 Act).In light of Merck and City of Pontiac the Court finds that Defendants’ focus on inquiry noticeis misplaced. The operative question is no longer when a reasonable plaintiff would have known that she had a likely cause of action and inquired further. Rather, the question is whether a plaintiff could have pled ’33 Act claims with sufficient particularity to survive a 12(b)(6) motion to dismiss more than one year prior to the filing of the operative complaint. Whether sufficient facts existed at that time is, by definition, a fact-intensive inquiry and, thus, generally ill-suited for resolution at the motion to dismiss stage.