United States Court of Appeals - Analysis & Opinion |...

United States Court of Appeals for the

Third Circuit

Nos. 16-1364, 16-1365, 16-1366 and 16-1367

NORTH SOUND CAPTIAL LLC; NORTH SOUND LEGACY INTERNATIONAL; NORTH SOUND LEGACY INSTITUTIONAL; UNITED FOOD COMMERCIAL

WORKERS LOCAL 1500 PENSION FUND,

Plaintiffs-Appellees,

– against –

MERCK & CO. INC.; MERCK SCHERING PLOUGH PHARMACEUTICALS; MSP DISTRIBUTION SERVICES C LLC; MSP SINGAPORE CO. LLC; RICHARD T.

CLARK; DEEPAK KHANNA,

Defendants-Appellants. ––––––––––––––––––––––––––

APPEAL FROM UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY No.: 3-14-cv-00242

BRIEF FOR PLAINTIFFS-APPELLEES KIRBY MCINERNEY

DANIEL HUME IRA M. PRESS MEGHAN J. SUMMERS 825 Third Avenue, 16th Floor New York, New York 10022 (212) 371-6600

Attorneys for Plaintiffs-Appellees

Case: 16-1367 Document: 003112303765 Page: 1 Date Filed: 05/23/2016

i

CORPORATE DISCLOSURE STATEMENT (Federal Rule of Appellate Procedure 26.1)

Plaintiff-Appellee Colonial First State Investments Ltd. (“Colonial First”) is

a nongovernmental corporate entity. Colonial First is a wholly-owned subsidiary of

the Commonwealth Bank of Australia, a publicly held corporation.


ii

TABLE OF CONTENTS

CORPORATE DISCLOSURE STATEMENT ......................................................... i

TABLE OF AUTHORITIES ................................................................................... iv

ISSUE PRESENTED FOR REVIEW ....................................................................... 1

STATEMENT OF RELATED CASES ..................................................................... 2

STATEMENT OF THE CASE .................................................................................. 2

SUMMARY OF THE ARGUMENT ........................................................................ 4

ARGUMENT ............................................................................................................. 8

I. Plaintiffs’ Exchange Act Claims Are Timely .................................................... 8

II. American Pipe Applies to the Exchange Act’s Five-Year Periods..................10

A. American Pipe Applies on Its Face .....................................................10

1. The Supreme Court’s American Pipe Decision ........................10

2. The Period at Issue in American Pipe Was a Statute of Repose ...................................................................................12

3. Applying American Pipe to the Five-Year Periods Is Consonant with the Legislative Scheme ...................................15

B. When Class Members Remain in the Class, American Pipe Always Tolls Statutes of Repose .........................................................20

C. American Pipe Is Legal Tolling ..........................................................23

1. American Pipe Lacks the Characteristics of Equitable Tolling .......................................................................................24

2. American Pipe Is Legal or Statutory in Nature ........................28

a. American Pipe Is an Interpretation of Rule 23 ...............29

b. Defendants’ Arguments Are Without Merit ...................32


iii

D. American Pipe’s Application to Statutes of Repose Does Not Conflict with the REA .........................................................................34

1. Whether a Time Limitation Is Substantive or Procedural Is Irrelevant to the REA Analysis .................................................35

2. Even Under Defendants’ Standard, American Pipe Tolling of the Five-Year Periods Is Valid Under the REA ...................38

a. The Five-Year Periods Do Not Involve Substantive Rights ..............................................................................39

b. Applying American Pipe to Statutes of Repose Does Not Enlarge a Plaintiff’s Substantive Right to Bring Suit ..................................................................................41

c. Applying American Pipe to Statutes of Repose Does Not Abridge Defendants’ Substantive Rights ................43

III. Defendants’ Position Would Impair Rule 23’s Efficient Operation and Render Constitutionally-Grounded Opt-Out Rights Meaningless ............45

A. American Pipe Tolling of Statutes of Repose Is Necessary to Ensure Rule 23’s Efficient Operation .................................................46

B. Refusing to Apply American Pipe to Statutes of Repose Would Render Opt-Out Rights Meaningless ..................................................49

C. Applying American Pipe to Statutes of Repose Does Not Frustrate Defendants’ Ability to Negotiate Class Action Settlements ...............51

CONCLUSION ........................................................................................................53


iv

TABLE OF AUTHORITIES

Cases

Adams Pub. Sch. Dist. v. Asbestos Corp., 7 F.3d 717 (8th Cir. 1993) ....................................................................................23

Am. Pipe & Constr. Co. v. Utah, 414 U.S. 538 (1974) ...................................................................................... passim

Angles v. Dollar Tree Stores, Inc., 494 F. App’x 326 (4th Cir. 2012) .........................................................................42

Arctic Slope Native Assoc., Ltd. v. Sebelius, 583 F.3d 785 (Fed. Cir. 2009) ....................................................................... 31, 41

Arivella v. Lucent Techs., Inc., 623 F. Supp. 2d 164 (D. Mass. 2009) ...................................................... 18, 23, 45

Beach v. Ocwen Fed. Bank, 523 U.S. 410 (1998) ....................................................................................... 39, 40

Bright v. United States, 603 F.3d 1273 (Fed. Cir. 2010) ......................................................... 25, 26, 29, 31

Burlington N. & Santa Fe Ry. Co. v. Poole Chem. Co., 419 F.3d 355 (5th Cir. 2005) ................................................................................43

Burlington N. R.R. Co. v. Woods, 480 U.S. 1 (1987) ..................................................................................................37

Caviness v. DeRand Res. Corp., 983 F.2d 1295 (4th Cir. 1993) ..............................................................................15

Chardon v. Fumero Soto, 462 U.S. 650 (1983) ................................................................................. 30, 33, 41

Cohen v. Telsey, No. 09 Civ. 2033, 2009 WL 3747059 (D.N.J. Nov. 2, 2009) ..............................24


v

Credit Suisse Secs. (USA) LLC v. Simmonds, 132 S. Ct. 1414 (2012) ..........................................................................................30

Crown, Cork & Seal Co., Inc. v. Parker, 462 U.S. 345 (1983) ...................................................................................... passim

CTS Corp. v. Waldburger, 134 S. Ct. 2175 (2014) .................................................................................. passim

Dungan v. Morgan Drive-Away, Inc., 570 F.2d 867 (9th Cir. 1978) ................................................................................13

Edward J. DeBartolo Corp. v. Fla. Gulf Coast Bldg. & Constr. Trades Council, 485 U.S. 568 (1988) ..............................................................................................51

Edwards v. Boeing Vertol Co., 717 F.2d 761 (3d Cir. 1983) .................................................................................23

Eisen v. Carlisle & Jacquelin, 417 U.S. 156 (1974) ...................................................................................... passim

Eisenberg v. Gagnon, 766 F.2d 770 (3d Cir. 1985) .................................................................................19

Farley v. Koepp, 788 F.3d 681 (7th Cir. 2015) ................................................................................34

FDIC v. RBS Secs., Inc., 798 F.3d 244 (5th Cir. 2015) ................................................................................14

Fed. Housing Fin. Agency v. UBS Am. Inc., 712 F.3d 136 (2d Cir. 2013) .................................................................................14

Footbridge Ltd. Trust v. Countrywide Fin. Corp., 770 F. Supp. 2d 618 (S.D.N.Y. 2011) ..................................................................18

Glater v. Eli Lilly & Co., 712 F.2d 735 (1st Cir. 1983) .................................................................................49

Greyhound Corp. v. Mt. Hood Stages, Inc., 437 U.S. 322 (1978) ..............................................................................................13


vi

Grispino v. New England Mut. Life Ins. Co., 358 F.3d 16 (1st Cir. 2004) ...................................................................................23

Grossman v. Waste Mgmt., Inc., 100 F.R.D. 781 (N.D. Ill. 1984) ............................................................................19

Haas v. Pittsburgh Nat’l Bank, 526 F.2d 1083 (3d Cir. 1975) ........................................................................ 25, 30

Hall v Variable Annuity Life Ins. Co., 727 F.3d 372 (5th Cir. 2013) ................................................................................32

Hatfield v. Halifax PLC, 564 F.3d 1177 (9th Cir. 2009) ..............................................................................31

Holland v. Florida, 560 U.S. 631 (2010) ..............................................................................................24

Hood v. N.J. Dep’t of Civil Serv., 680 F.2d 955 (3d Cir. 1982) .................................................................................26

Hubbard v. Corr. Med. Servs., Inc., No. 04 Civ. 3412, 2008 WL 2945988 (D.N.J. July 30, 2008) ..............................49

In re BP plc Sec. Litig., No. 13 Civ. 1393, 2014 WL 4923749 (S.D. Tex. Sept. 30, 2014) ................ 42, 44

In re Enron Corp. Secs., 465 F. Supp. 2d 687 (S.D. Tex. 2006) ..................................................................41

In re Exxon Mobil Corp. Sec. Litig., 500 F.3d 189 (3d Cir. 2007) ................................................................ 8, 12, 14, 43

In re Health S. Corp. Sec. Litig., 334 F. App’x 248 (11th Cir. 2009) .......................................................................51

In re Heaper, 214 B.R. 576 (8th Cir. 1997) ................................................................................40

In re Merck & Co., Inc. Sec., Derivative & Erisa Litig., MDL No. 1658, 2012 WL 6840532 (D.N.J. Dec. 20, 2012) ................... 27, 32, 51


vii

In re Microsoft Corp. Antitrust Litig., No. 05 Civ. 1087, 2005 WL 1298643 (D. Md. June 10, 2005) ............................13

In re WorldCom Sec. Litig., 496 F.3d 245 (2d Cir. 2007) .................................................................................42

Int’l Fund Mgmt. S.A. v. Citigroup, 822 F. Supp. 2d 368 (S.D.N.Y 2011) ...................................................................22

John Hancock Life Ins. Co. (U.S.A.) v. JP Morgan Chase & Co., 938 F. Supp. 2d 440 (S.D.N.Y. 2013) ..................................................................27

John R. Sand & Gravel Co. v. United States, 552 U.S. 130 (2008) ..............................................................................................18

Johnson v. Ry. Express Agency, Inc., 421 U.S. 454 (1975) ....................................................................................... 16, 45

Jones v. Morton, 195 F.3d 153 (3d Cir. 1999) .................................................................................24

Joseph v. Wiles, 223 F.3d 1155 (10th Cir. 2000) .................................................................... passim

Keystone Res. Inc. v. Am. Tel. & Tel. Co., 646 F. Supp. 1355 (W.D. Pa. 1986) ......................................................................13

King v. Kan. City S. Indus., Inc., 519 F.2d 20 (7th Cir. 1975) ..................................................................................19

Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, 501 U.S. 350 (1991) ....................................................................................... 17, 23

Landsman & Funk PC v. Skinder-Strauss Assocs., 640 F.3d 72 (3d Cir. 2011) ...................................................................................37

Leyse v. Bank of Am., Nat’l Ass’n, 538 F. App’x 156 (3d Cir. 2013) ....................................................... 12, 15, 23, 30

Lieberman v. Cambridge Partners LLC, 432 F.3d 482 (3d Cir. 2006) .................................................................................42


viii

Lozano v. Montoya Alvarez, 134 S. Ct. 1224 (2014) ..........................................................................................24

Mayfield v. Barr, 985 F.2d 1090 (D.C. Cir. 1993) ............................................................................50

McKowan Lowe & Co., Ltd. v. Jasmine, Ltd., 295 F.3d 380 (3d Cir. 2002) .................................................................... 25, 46, 48

Morgan Stanley Mortg. Pass-Through Certificates Litig., No. 09 Civ. 2137, 2012 WL 1448796 (S.D.N.Y. Apr. 24, 2012) ........................28

Muchinski v. Wilson, 694 F.3d 308 (3d Cir. 2012) .................................................................................24

Nat’l Credit Union Admin. Bd. v. Nomura Home Equity Loan, Inc., 764 F.3d 1199 (10th Cir. 2014) ............................................................................14

Nuveen Mun. Trust ex rel. Nuveen High Yield Mun. Bond Fund v. WithumSmith Brown, P.C., 692 F.3d 283 (3d Cir. 2012) .................................................................................36

Pabon v. Mahanoy, 654 F.3d 385 (3d Cir. 2011) .................................................................................24

Pace v. DiGuglielmo, 544 U.S. 408 (2005) ..............................................................................................24

Phillips Petroleum Co. v. Shutts, 472 U.S. 797 (1985) ................................................................................. 25, 48, 49

Police & Fire Ret. Sys. of Detroit v. IndyMac MBS, Inc., 721 F.3d 95 (2d Cir. 2013) ........................................................................... passim

Prudential Ins. Co. of Am. v. Bank of Am., N.A., 14 F. Supp. 3d 591 (D.N.J. 2014) .........................................................................32

Realmonte v. Reeves, 169 F.3d 1280 (10th Cir. 1999) ..................................................................... 23, 51


ix

Ryan v. Microsoft Corp., No. 14 Civ. 04634, 2015 WL 7429495 (N.D. Cal. Nov. 23, 2015) .....................13

Sain v. City of Bend, 309 F.3d 1134 (9th Cir. 2002) ..............................................................................34

Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co., 559 U.S. 393 (2010) ................................................................................... 7, 35, 36

Sibbach v. Wilson & Co., 312 U.S. 1 (1941) ........................................................................................... 29, 35

Smart-El v. Corr. Med. Servs., No. 04 Civ. 3413, 2008 U.S. Dist. LEXIS 44376 (D.N.J. June 5, 2008) .............49

Sperling v. Hoffmann-La Roche, Inc., 145 F.R.D. 357 (D.N.J. 1992) ...............................................................................32

Sperling v. Hoffmann-La Roche, Inc., 24 F.3d 463 (3d Cir. 1994) ........................................................................... passim

State Farm Mut. Auto Ins. Co. v. Boellstorff, 540 F.3d 1223 (10th Cir. 2008) .................................................................... passim

Stein v. Regions Morgan Keegan Select High Income Fund, Inc., Nos. 15-5903, 15-5905, 2016 U.S. App. LEXIS 9142 (6th Cir. May 19, 2016) ................................................................................. 31, 36

Stone Container Corp. v. United States, 229 F.3d 1345 (Fed. Cir. 2000) ............................................................................31

Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007) ..............................................................................................19

Thomas v. Corr. Med. Servs., Inc., No. 04 Civ. 3358, 2009 WL 737105 (D.N.J. Mar. 17, 2009) ...............................49

Tillman v. Georgia, 466 F. Supp. 2d 1311 (S.D. Ga. 2006) .......................................................... 27, 38


x

Tosti v. Los Angeles, 754 F.2d 1485 (9th Cir. 1985) ..............................................................................23

U.S. Express Lines Ltd. v. Higgins, 281 F.3d 383 (3d Cir. 2002) .................................................................................37

United Airlines, Inc. v. McDonald, 432 U.S. 385 (1977) ..............................................................................................33

United States v. Inn Foods, Inc., 383 F.3d 1319 (Fed. Cir. 2004) ..................................................................... 27, 38

Utah v. Am. Pipe & Constr. Co., 473 F.2d 580 (9th Cir. 1973) ................................................................................11

Utah v. Am. Pipe & Constr. Co., 50 F.R.D. 99 (C.D. Cal. 1970) ....................................................................... 11, 12

Vinson v. Seven Seventeen HB Phila. Corp., No. 00 Civ. 6334, 2001 WL 1774073 (E.D. Pa. 2001) ........................................32

Walker v. Armco Steel Corp., 446 U.S. 740 (1980) ..............................................................................................34

Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011) ..........................................................................................49

Williams v. Wells Fargo Home Mortg., Inc., 410 F. App’x 495 (3d Cir. 2011) ................................................................... 39, 40

Wm. H. McGee & Co. v. Liebherr Am., Inc., 789 F. Supp. 861 (E.D. Ky. 1992) ........................................................................37

Wyser-Pratte Mgmt. Co., Inc. v. Telxon Corp., 413 F.3d 553 (6th Cir. 2005) ................................................................................49

Yang v. Odom, 392 F.3d 97 (3d Cir. 2004) ...................................................................... 19, 46, 48


xi

Statutes and Rules

15 U.S.C. § 16(i) ............................................................................................... 11, 16

15 U.S.C. § 78t-1(a) ................................................................................................... 9

15 U.S.C. § 78t-1(b)(4) ........................................................................................9, 16

15 U.S.C. § 78u-4 .....................................................................................................19

15 U.S.C. § 78u-4(a)(3)(B)(i) ..................................................................................28

28 U.S.C. § 1658(b) ................................................................................................... 8

28 U.S.C. § 1658(b)(2).............................................................................................16

Fed. R. Civ. P. 23(c)(2)(B). .............................................................................. 49, 51

Fed. R. Civ. P. 3 .......................................................................................................34

Other Authorities

Advisory Committee Notes on Fed. R. Civ. P. 23(c)(2) (1966) ..............................50

Br. for Pet., Am. Pipe & Constr. Co. v. Utah, No. 72-1195 (U.S. filed June 20, 1973), 1973 WL 172291 .................................13

Br. of Civil Procedure & Securities Law Professors as Amici Curiae in Supp. of Pet. for a Writ of Cert., Pub. Emps.’ Ret. Sys. of Miss. v. IndyMac MBS, Inc., No. 13-640 (U.S. filed Dec. 26, 2013), 2013 WL 8114524 .......................... 20, 47

Developments in the Law – Class Action, 89 Harv. L. Rev. 1318 (1976) ...............................................................................44

Michael J. Kaufman & John M. Wunderlich, Leave Time for Trouble: The Limitations Periods Under the Securities Laws, 40 Iowa J. Corp. L. 143 (2014) .............................................................................47

Pet. for Cert., Am. Pipe & Constr. Co. v. Utah, No. 72-1195 (U.S. filed Mar. 2, 1973), 1973 WL 346627 ...................................13

S. Rep. No. 107-146 (2002) .............................................................................. 17, 41


Plaintiffs-Appellees (“Plaintiffs”) submit this brief in opposition to

Defendants-Appellants’ (“Defendants”) appeal from the August 26, 2015 Order of

the United States District Court for the District of New Jersey (Wolfson, J.),

denying Defendants’ motions to dismiss. (JA 0003-4).1

ISSUE PRESENTED FOR REVIEW

In American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974)

(“American Pipe”), the Supreme Court declared that “the filing of a timely class

action complaint commences the action for all members of the class” and “tolls the

running of the statute for all purported members of the class.” Id. at 550, 553

(emphasis added). This rule applies not only to those class members who remain in

the class action, but also to those who “opt out” and “file separate suits.” Crown,

Cork & Seal Co., Inc. v. Parker, 462 U.S. 345, 351-52 (1983) (“Crown”) (citing

Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 176 n.13 (1974)).

The issue raised by this appeal is whether, under American Pipe, the filing of

a timely class action complaint suspends the Securities Exchange Act of 1934’s

(“Exchange Act”) five-year statutes of repose for subsequent individual opt-out

actions properly brought under Federal Rule of Civil Procedure 23. Consistent with

the District Court below, the vast majority of federal courts to address the issue

have held that the filing of a class action under American Pipe suspends all

1 All references to “(JA____)” are to the Joint Appendix.


2

statutory limitations periods, including statutes of repose.

STATEMENT OF RELATED CASES

These cases have not been before this Court previously, but they are related

to two class actions that were litigated in the United States District Court for the

District of New Jersey against Defendants between 2008 and 2013. See In re

Schering-Plough Corp./Enhance Sec. Litig., No. 08 Civ. 397 (D.N.J.) (JA 0811-87)

(the “Schering Class Action”); In re Merck & Co., Inc. Vytorin/Zetia Sec. Litig.,

No. 08 Civ. 2177 (D.N.J.) (JA 0888-940) (the “Merck Class Action”) (collectively,

the “Class Actions”). Plaintiffs are former class members in the Class Actions,

which asserted the same Exchange Act claims, against the same Defendants, based

on the same misconduct that Plaintiffs assert here. Plaintiffs excluded themselves

from the Class Actions on March 1, 2013 to pursue their claims individually.

STATEMENT OF THE CASE

Between December 6, 2006 and March 28, 2008, Plaintiffs purchased Merck

& Co., Inc. (“Merck”) and Schering-Plough Corporation (“Schering”) (collectively

“Merck/Schering”) securities at prices that were artificially inflated by Defendants’

misrepresentations and omissions regarding the Merck/Schering joint venture drug,

Vytorin. (JA 0064-65, 0250, 0425, 0621). Plaintiffs allege that Defendants

misrepresented and omitted material information about Vytorin, and that

Defendant Cox sold Schering securities while in possession of material, nonpublic


3

information. (JA 0065-68, 0075, 0226-28, 0251-53, 0258, 0409-11, 0425-29, 0621-

25). When Defendants revealed the truth on January 14 and March 30, 2008,

Merck/Schering stock prices declined materially, causing significant shareholder

losses. (JA 0068-69, 0205-16, 0253-54, 0388-99, 0429-31, 0597-600, 0625-27,

0794-97).

On January 18 and May 5, 2008, the Class Actions were filed asserting

claims against Defendants under sections 10(b), 20(a), and 20A of the Exchange

Act. (See JA 0827, 0898). The District Court certified the classes on September 25,

2012,2 approved the class notices in a December 27, 2012 Order, and the notices

were published on or around January 17, 2013.3 The notices provided a March 1,

2013 opt-out deadline. (JA 0008). However, they did not mention that because this

deadline fell more than five years after Defendants’ last alleged misrepresentations

and insider trades, class members that opted-out might be left with nothing but

time-barred claims. 4

2 See Schering Class Action, ECF Nos. 314, 315; Merck Class Action, ECF Nos. 250, 251. 3 See Schering Class Action, ECF Nos. 337, 419-1 at ¶ K; Merck Class Action, ECF Nos. 272, 328-1 at ¶ M; Schering Class Action, Notice of Pendency of Class Action, available at http://www.labaton.com/en/cases/upload/Schering-Notice-of-Pendency.pdf (“Schering Notice”); Merck Class Action, Notice of Pendency of Class Action, available at http://www.blbglaw.com/cases/00130_data /NoticeofPendency (“Merck Notice”). 4 See Schering Notice at 4; Merck Notice at 4.


http://www.labaton.com/en/cases/upload/Schering-Notice-of-Pendency.pdf

http://www.labaton.com/en/cases/upload/Schering-Notice-of-Pendency.pdf

http://www.blbglaw.com/cases/00130_data

4

Plaintiffs, who were members of the certified classes, opted-out of the Class

Actions on March 1, 2013.5 Less than one year later, on November 14, 2013 and

January 14, 2014, Plaintiffs filed their individual complaints, which assert the same

claims under sections 10(b), 20(a), and 20A of the Exchange Act that they

previously asserted as class members.6

On November 17, 2014, Defendants moved to dismiss Plaintiffs’ Exchange

Act claims as untimely under the applicable five-year repose periods. (JA 0037,

0043, 0048, 0053). On August 26, 2015, the District Court denied Defendants’

motions to dismiss, holding that under American Pipe, the filing of the Class

Actions suspended the five-year periods, and therefore, Plaintiffs’ claims, filed less

than one year after Plaintiffs opted-out of the classes, were timely. (JA 0003-0027).

On January 7, 2016, the District Court granted Defendants’ motion to certify to this

Court under 28 U.S.C. § 1292(b) the question of whether American Pipe applies to

statutes of repose. (JA 0031-34). On February 11, 2016, this Court granted

Defendants’ request to appeal. (JA 0001-2).

SUMMARY OF THE ARGUMENT

The District Court properly determined that Plaintiffs’ Exchange Act claims

5 See Schering Class Action, ECF No. 419-1 at Appendix 1; Merck Class Action, ECF No. 328-1 at Appendix 1; (JA 0009). 6 (See JA 0057-415) (the “Schering Complaints”); (see JA 0416-810) (the “Merck Complaints”).


5

are timely under American Pipe because they were brought on Plaintiffs’ behalf by

the timely filing of the Class Action complaints. Defendants argue that the District

Court erred because the five-year periods at issue are “statutes of repose” to which

American Pipe does not apply. This argument is misplaced for at least five reasons.

First, in American Pipe, the Supreme Court held that the timely filing of a

class complaint commences the action for all class members. Because both statutes

of repose and statutes of limitation cease to run when a plaintiff commences suit

against a defendant, there is no justification for treating the two differently under

American Pipe. That American Pipe applies to all limitations periods, including

statutes of repose, is confirmed by the fact that the time period at issue in American

Pipe was itself a statute of repose.

The Supreme Court also specifically rejected Defendants’ argument that

American Pipe does not apply to “substantive” time periods, stating that the

“proper test is not whether a time limitation is ‘substantive’ or ‘procedural,’ but

whether tolling the limitation in a given context is consonant with the legislative

scheme.” 414 U.S. at 557-58. Here, tolling is not only consonant with the strong

policy favoring class actions in securities-fraud cases, it is also consonant with the

five-year periods themselves, which, like the period at issue in American Pipe,

merely limit the time within which a suit may be “brought” or “commenced.”

Because, according to American Pipe, the claims of all class members are


6

“brought” upon the timely filing of the class complaint, a defendant’s right not to

be sued outside the five-year period is undisturbed when a class member merely

assumes individual responsibility for its timely filed claims.

Second, Defendants’ argument ignores that American Pipe already tolls the

statutes of repose on class members’ claims when those class members remain in

the class. If Defendants were correct that American Pipe can never toll a statute of

repose then where, as here, class certification is granted after the repose period has

expired, there would be no class left; only the named plaintiffs and those class

members who filed separate complaints before the end of the repose period would

have timely claims. This is not the law.

Third, American Pipe is “legal” tolling because it is an interpretation of the

statutorily-enacted Rule 23 – a fact that the overwhelming majority of courts,

including every Circuit Court and every district court in this Circuit to decide the

issue, have recognized. Defendants provide no support for their assertion that

American Pipe is “equitable” beyond reference to a handful of cases that refer to

American Pipe as such in dicta. Moreover, Defendants fail to address the

fundamental differences between equitable tolling – which extends a limitations

period and excuses an untimely filing – and American Pipe – which does not

involve “tolling” at all but instead merely acknowledges that class members’

claims are brought at the time the class action is commenced.


7

Fourth, applying American Pipe to the five-year periods does not conflict

with the Rules Enabling Act (“REA”) by enlarging or abridging substantive rights

because the five-year periods are not “substantive” in nature. And even if they

were, the substantive or procedural nature of the affected time period “makes no

difference” to the REA analysis. Shady Grove Orthopedic Assocs., P.A. v. Allstate

Ins. Co., 559 U.S. 393, 409 (2010). Rather, as both the Supreme Court and this

Court have acknowledged, the proper test is whether the Federal Rule in question

– here, Rule 23 as interpreted by American Pipe – regulates procedure. And as the

District Court correctly concluded, because American Pipe governs the procedure

by which class members’ claims are commenced, it is valid under the REA,

regardless of any incidental impact on substantive rights.

Moreover, even if the substantive nature of the affected time period were

relevant, applying American Pipe here is still permissible. Because each class

member has brought suit on its claims when the class complaint is filed, a class

member’s decision to pursue those claims individually does not create a new cause

of action, nor does it revive an expired claim. Rather, the class member’s

individual suit merely constitutes a change in the procedural vehicle by which its

timely filed claims are prosecuted. Likewise, because each class member’s suit is

commenced by the timely filing of the class complaint, the defendants have

received the benefit of the right that the repose periods confer – namely, the right


8

to be sued within five years of the fraud.

Fifth, refusing to apply American Pipe to the five-year periods would

trample class members’ constitutionally-grounded opt-out rights because where, as

here, certification and notice thereof occurs outside the repose period, class

members would be left with nothing but time-barred claims. Such a predicament

would result in the filing of wasteful numbers of protective lawsuits following the

filing of every class action – precisely the multiplicity of actions that Rule 23 was

designed to avoid.

ARGUMENT

I. Plaintiffs’ Exchange Act Claims Are Timely

The District Court correctly held that Plaintiffs’ Exchange Act claims are

timely because 28 U.S.C. § 1658(b)(2)’s and 15 U.S.C. § 78t-1(b)(4)’s five-year

periods were suspended “pursuant to Rule 23, as interpreted by American Pipe,”

during the pendency of the Class Actions. (JA 0025-27).

28 U.S.C. § 1658(b) governs the timeliness of Plaintiffs’ 10(b) and 20(a)

claims and provides that “a private action . . . may be brought not later than the

earlier of – (1) 2 years after the discovery of the facts constituting the violation; or

(2) 5 years after such violation.” 28 U.S.C. § 1658(b). The five-year period “begins

to run on the date of the [last] alleged misrepresentation.” In re Exxon Mobil Corp.

Sec. Litig., 500 F.3d 189, 200 (3d Cir. 2007). The last alleged misrepresentation in


9

the Schering Complaints occurred on November 19, 2007, (JA 0197-98, 0381-82),

and the last alleged misrepresentation in the Merck Complaints occurred on

January 30, 2008, (JA 0547-48, 0744-45). However, as the District Court

recognized, the five-year period on Plaintiffs’ 10(b) and 20(a) claims was almost

immediately suspended pursuant to American Pipe when those claims were

brought on Plaintiffs’ behalf by the filing of the Schering Class Action on January

18, 2008, and the Merck Class Action on May 5, 2008. (JA 0025-27). Because

Plaintiffs filed the Schering and Merck Complaints on November 14, 2013 and

January 14, 2014, less than one year after Plaintiffs opted-out of the classes, their

claims are timely. (Id.)

15 U.S.C. § 78t-1(b)(4), which provides that “[n]o action may be brought . . .

more than 5 years after the date of the last transaction that is the subject of the

violation,” governs the timeliness of Plaintiffs’ 20A claims. The “transaction that is

the subject of the violation” is the “purchasing or selling [of] a security while in

possession of material, nonpublic information.” 15 U.S.C. §§ 78t-1(a), (b)(4).

Thus, the five-year period begins to run on the date of the last insider trade. Here,

Cox’s last alleged insider trade occurred on May 1, 2007. (JA 0226-27, 0410).

However, as the District Court recognized, the five-year period on Plaintiffs’ 20A

claims was suspended on January 18, 2008, when those claims were brought on

Plaintiffs’ behalf in the Schering Class Action, and it remained suspended until


10

March 1, 2013, when Plaintiffs opted-out of the class. (JA 0025-27). At that point,

Plaintiffs had over four years remaining to assume responsibility for their 20A

claims. (Id.). Thus, those claims, which Plaintiffs re-asserted less than one year

later in the Schering Complaints, are timely. (Id.).

II. American Pipe Applies to the Exchange Act’s Five-Year Periods

Defendants argue that the District Court’s decision should be reversed

because American Pipe applies only to “statutes of limitations” and the five-year

periods are “statutes of repose.” Br. of Defs.-Appellants (“Br.”) at 21-47. This

argument finds no support in American Pipe itself. Nor can it be reconciled with

the fact that American Pipe always tolls statutes of repose on the claims of class

members who remain in the class. Accordingly, American Pipe is not “equitable”

in nature, but instead, is derived from a statutory source – Rule 23. And because

American Pipe merely governs the procedure by which class members’ claims are

commenced, its application to statutes of repose complies with the REA.

A. American Pipe Applies on Its Face 1. The Supreme Court’s American Pipe Decision

On June 23, 1964, the United States filed complaints against American Pipe

& Construction Company, which culminated in a final judgment on May 24, 1968.

See American Pipe, 414 U.S. at 540-41. On May 13, 1969, Utah commenced a

class action against the same defendant based on the same conduct. Id. at 541. The


11

class action was deemed timely under 15 U.S.C. § 16(b), recodified as amended at

15 U.S.C. § 16(i), which provides that a private suit is “forever barred” unless it is

“commenced” within (i) “four years after the cause of action accrued,” or (ii) “one

year []after [the conclusion of] civil or criminal proceeding[s] . . . instituted by the

United States.” 15 U.S.C. § 16(i). Although the four-year accrual period had lapsed,

the class action was timely under the one-year period because it was filed eleven

days short of one year following final judgment in the United States’ case. See

American Pipe, 414 U.S. at 541-42 & n. 3.

On December 12, 1969, eight days after the court refused to certify the class,

former class members filed motions to intervene, which were denied as untimely.

See id. at 543-44 (citing Utah v. Am. Pipe & Constr. Co., 50 F.R.D. 99 (C.D. Cal.

1970)). The Ninth Circuit reversed, holding that the class members’ claims were

“actually commenced by Utah’s filing.” 414 U.S. at 544-45 (quoting Utah v. Am.

Pipe & Constr. Co., 473 F.2d 580, 584 (9th Cir. 1973)). The Supreme Court agreed,

holding that class members who wish to intervene “after the running of the

statutory period” do not assert a “separate cause of action which must individually

meet the timeliness requirements.” 414 U.S. at 550. Rather, “the filing of a timely

class action complaint commences the action for all members of the class . . . [and]

tolls the running of the statute.” Id. at 550, 553. In so holding, the Supreme Court

noted that class actions are “truly representative suit[s]” and therefore, upon timely


12

filing of a class complaint, class members “st[and] as parties to the suit until and

unless they receive[] notice thereof and cho[o]se not to continue.” Id. at 551. The

Supreme Court later extended its decision not only to those class members seeking

to intervene, but also to those who opt-out and file individual suits. See Crown, 462

U.S. at 351-52; Eisen, 417 U.S. at 176 n.13; see also Leyse v. Bank of Am., Nat’l

Ass’n, 538 F. App’x 156, 160 (3d Cir. 2013) (American Pipe applies “to all

asserted members of the class who file subsequent individual actions, not just

intervenors”).

2. The Period at Issue in American Pipe Was a Statute of Repose

Because both statutes of limitation and statutes of repose cease to run when a

plaintiff commences suit against a defendant, there is no justification for excluding

the latter from American Pipe’s operation. This conclusion is supported by the fact

that the one-year period at issue in American Pipe was itself a statute of repose.

As Defendants repeatedly point out, see Br. at 17-21, a limitations period

that runs from a specific event, rather than from accrual or discovery, is a statute of

repose, see CTS Corp. v. Waldburger, 134 S. Ct. 2175, 2186 (2014); In re Exxon

Mobil, 500 F.3d at 199-200. Thus, the one-year provision in American Pipe, which

runs from the conclusion of the government’s case, rather than from accrual or

discovery, is a statute of repose – something the parties and the courts in American

Pipe acknowledged. See, e.g., Utah v. Am. Pipe & Constr. Co., 50 F.R.D. at 103


13

(referring to the one-year period as the “antitrust statute of repose”); Pet. for Cert.

at 22, American Pipe, No. 72-1195 (U.S. filed Mar. 2, 1973), 1973 WL 346627, at

*22 (referring to the one-year period as a “statute of repose”); Br. for Pet. at 26,

American Pipe, No. 72-1195 (U.S. filed June 20, 1973), 1973 WL 172291, at *26

(arguing that “the congressional statute of repose has been violently wrenched, if

not replaced, by the Ninth Circuit’s interpretation of Rule 23”).

Since American Pipe, the Supreme Court itself has described the one-year

period as a “statute of repose.” Greyhound Corp. v. Mt. Hood Stages, Inc., 437

U.S. 322, 334 (1978) (“Although the plaintiff is correct in asserting that [15 U.S.C.

§ 16(i)] serves the . . . purpose of aiding private antitrust litigants . . . it is also true

that it is a statute of repose.”) (emphasis added) (internal citation omitted). Other

courts, including at least one court in this Circuit, have done the same. See, e.g.,

Keystone Res. Inc. v. Am. Tel. & Tel. Co., 646 F. Supp. 1355, 1358 (W.D. Pa.

1986); Dungan v. Morgan Drive-Away, Inc., 570 F.2d 867, 869-70 (9th Cir. 1978);

Ryan v. Microsoft Corp., No. 14 Civ. 04634, 2015 WL 7429495, at *9 (N.D. Cal.

Nov. 23, 2015); In re Microsoft Corp. Antitrust Litig., No. 05 Civ. 1087, 2005 WL

1298643, at *5 (D. Md. June 10, 2005).

Defendants elide this issue by (i) focusing on the four-year accrual provision

in American Pipe, which had long since expired and was not at issue, see 414 U.S.

at 545 n.10, (ii) referring to American Pipe’s one-year period merely as a


14

“suspension provision,” and (iii) arguing that the one-year period cannot be a

statute of repose because it does not run from “the date the defendant acted,” Br. at

22. But as Defendants admit elsewhere in their brief, this is not the rule. See id. at

17-19. Rather, any limitations period that “begins to run at a time unrelated to the

traditional accrual of the cause of action” is a “statute of repose,” CTS, 134 S. Ct.

at 2186, regardless of whether it runs upon the defendant’s act or upon another

“specific event,” In re Exxon Mobil, 500 F.3d at 199-200; see FDIC v. RBS Secs.,

Inc., 798 F.3d 244, 253 (5th Cir. 2015) (“[A] statute of repose . . . mandates that

there shall be no cause of action beyond a certain point.”).

Defendants also argue that because the Supreme Court spoke only of tolling

“statutes of limitation” and nowhere mentioned statutes of repose, American Pipe

only applies to the former. Br. at 23. But as the Supreme Court recognized in CTS,

courts generally use the term “statute of limitations” to refer to “any provision

restricting the time in which a plaintiff must bring suit,” including provisions that

are considered “statutes of repose.” 134 S. Ct. at 2185; see Fed. Housing Fin.

Agency v. UBS Am. Inc., 712 F.3d 136, 142-43 (2d Cir. 2013) (“[T]he courts –

including the Supreme Court . . . have long used the term ‘statute of limitations’ to

refer to statutes of repose.”). This is because statutes of repose are a “subcategory”

or “subspecies” of statutes of limitation. See Nat’l Credit Union Admin. Bd. v.

Nomura Home Equity Loan, Inc., 764 F.3d 1199, 1235 (10th Cir. 2014) (courts


15

generally “use the term ‘statute of limitations’ in the broad, generic sense and often

treat statutes of repose as a subcategory”); Caviness v. DeRand Res. Corp., 983

F.2d 1295, 1300 n.7 (4th Cir. 1993) (“limiting periods” are “generally referred to

as statutes of limitations, and a statute of repose is a subspecies”).

That American Pipe spoke generally of “statutes of limitation,” “timeliness

requirements,” and “statutory periods” is therefore unsurprising, see 414 U.S. at

550-51, 554, and in fact, demonstrates that the Supreme Court intended American

Pipe to apply to all limitation periods, including the “subcategory” labeled statutes

of repose. Indeed, this Court has held that American Pipe protects and tolls “the

claims” of all class members, rather than just the statutes of limitation on those

claims. See, e.g., Sperling v. Hoffmann-La Roche, Inc., 24 F.3d 463, 468 (3d Cir.

1994); Leyse, 538 F. App’x at 161.

3. Applying American Pipe to the Five-Year Periods Is Consonant with the Legislative Scheme

In American Pipe, the petitioner argued, similar to Defendants here, that

tolling could not apply to the one-year period because it was “substantive.” See

American Pipe, 414 U.S. at 556. The Supreme Court rejected this argument, stating

that “[t]he proper test is not whether a time limitation is ‘substantive’ or

‘procedural,’ but whether tolling the limitation in a given context is consonant with

the legislative scheme.” Id. at 557-58. Relying on this statement, Defendants argue

that American Pipe does not apply here because unlike in American Pipe, tolling


16

here would be inconsistent with the legislative scheme. See Br. at 23-25. This

argument is incorrect for two reasons.

First, applying American Pipe here is fully consonant with the repose

periods’ purpose: to confer on a defendant the right to have a claim brought against

it within a specified time period. See Points II.D.2.a, II.D.2.c, infra. The language

of the five-year periods here, just like the language of the one-year period in

American Pipe, talks only of the time within which an action may be “brought” or

“commenced.” Compare 28 U.S.C. § 1658(b)(2) (“[A] private right of action . . .

may be brought not later than . . . 5 years after [the] violation.”) (emphasis added)

and 15 U.S.C. § 78t-1(b)(4) (“No action may be brought . . . more than 5 years

after the . . . last transaction.”) (emphasis added), with 15 U.S.C. § 16(i) (“Any

action . . . shall be forever barred unless commenced” within one year following

conclusion of the government’s case) (emphasis added). And because, when

American Pipe applies, the claims of all class members have been “brought” or

“commenced” within the statutory period by the timely filing of a class complaint,

a defendant’s right not to be sued outside that period remains undisturbed. See

Johnson v. Ry. Express Agency, Inc., 421 U.S. 454, 475 (1975) (under American

Pipe, the filing of a class complaint commences the action for all class members

and apprises defendants of their claims “in a manner that fulfill[s] the policies of


17

repose and certainty”). 7

In arguing otherwise, Defendants rely solely on one misquoted sentence

from section 1658(b)’s legislative history, 8 which merely cites Lampf for the

unremarkable proposition that section 1658(b)(2)’s five-year period is not subject

to the discovery rule. See Br. at 24-25 ((mis)quoting S. Rep. No. 107-146, at 29

(2002) (citing Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, 501 U.S.

350, 363 (1991))). In Lampf, the Supreme Court considered whether the three-year

period then-applicable to 10(b) claims could be equitably tolled “until the fraud is

discovered.” 501 U.S. at 363. The Court held that it could not, reasoning that the

separate one-year period, which already ran from discovery, would have “no

significance” if the three-year period could also be tolled by discovery. Id. As

Defendants point out, see Br. at 24-25, when the one- and three-year provision was

replaced by section 1658(b)’s two- and five-year provision, the legislative history

confirms that Congress intended Lampf’s continued application. See S. Rep. No.

107-146, at 29 (“because . . . the two-year limitation . . . by its terms, begins after

7 Any argument that section 1658(b)’s “bifurcated” structure implies that the “outer limit cannot be tolled” by American Pipe, Br. at 16, 24-25, is foreclosed by American Pipe itself, in which the Supreme Court specifically applied tolling to the outer limit of section 16(i)’s bifurcated limitations period, see American Pipe, 414 U.S. at 541-42 & n.3. 8 Notably, Defendants do not cite section 78t-1(b)(4)’s legislative history, nor do they make any argument that American Pipe’s application to section 78t-1(b)(4) would be inconsistent with the legislative scheme. See Br. at 24-25.


18

discovery of the facts constituting the violation,” the “five-year outer limit is not

subject to equitable tolling”).

However, as discussed at Point II.C, infra, American Pipe is a form of legal

tolling that is entirely distinct from the equitable discovery rule addressed in Lampf.

As such, Lampf, and the legislative history’s reference thereto, is irrelevant. See,

e.g., Joseph v. Wiles, 223 F.3d 1155, 1166 (10th Cir. 2000) (Lampf, which held

that “equitable tolling does not apply to statutes of repose,” is “not relevant” to

American Pipe tolling, which is “legal . . . in nature”); Arivella v. Lucent Techs.,

Inc., 623 F. Supp. 2d 164, 177 (D. Mass. 2009) (“Lampf [is] limited exclusively to

the concept of equitable tolling and . . . American Pipe requires the tolling of

statutes of repose.”).9

Second, American Pipe’s application to the five-year periods is consonant

with the securities-litigation regime, including the “strong policy favoring class

actions in securities fraud actions.” Grossman v. Waste Mgmt., Inc., 100 F.R.D. 9 The legislative history is far more notable for what it does not say. From 1974, when American Pipe was decided, until the 2011 decision in Footbridge Ltd. Trust v. Countrywide Fin. Corp., 770 F. Supp. 2d 618 (S.D.N.Y. 2011), every court to decide the issue held that American Pipe tolls federal statutes of repose, see Arivella, 623 F. Supp. 2d at 177 (finding, after “copious research,” that all courts to examine the issue “have held that American Pipe requires the tolling of statutes of repose”). Yet, in 2002, when Congress enacted section 1658(b), it did not remove the five-year period from American Pipe’s ambit, thereby indicating its acceptance of the prevailing understanding at the time that American Pipe applies to statutes of repose. See John R. Sand & Gravel Co. v. United States, 552 U.S. 130, 139 (2008) (“Stare decisis in respect to statutory interpretation has special force, for Congress remains free to alter what we have done.”).


19

781, 784 (N.D. Ill. 1984) (citing King v. Kan. City S. Indus., Inc., 519 F.2d 20, 26

(7th Cir. 1975)). Indeed, this Court has recognized that “the effectiveness of the

securities laws” depends “in large measure on the application of the class action

device.” Yang v. Odom, 392 F.3d 97, 109 (3d Cir. 2004) (quoting Eisenberg v.

Gagnon, 766 F.2d 770, 785 (3d Cir. 1985)).

In recognition of the same policy, Congress included within the Private

Securities Litigation Reform Act of 1995 (“PSLRA”) provisions to facilitate class

action procedure, including provisions that require consideration of consolidation

of multiple actions asserting the same claims, and appointment of the movant with

the largest financial interest as lead plaintiff to manage the consolidated action on

behalf of the class. See 15 U.S.C. § 78u-4. The purpose of these provisions is to

channel as many claims as possible arising out of the same fraud into a single

action managed by a strong lead plaintiff and litigated by counsel selected by that

plaintiff. See Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 320-21

(2007). Refusing to apply American Pipe to the five-year periods would be entirely

inconsistent with this framework: instead of encouraging the efficient resolution of

securities claims in relatively few actions managed by relatively few plaintiffs, it

would incentivize the exact rush to the courthouse and multiplicity of filings that

the securities-litigation regime and Rule 23 were designed to avoid. See Crown,

462 U.S. at 350-51; see also Points II.C.2.a, III.A, infra.


20

B. When Class Members Remain in the Class, American Pipe Always Tolls Statutes of Repose

Defendants’ argument also fails because it overlooks the undisputed fact that

American Pipe always tolls statutes of repose in at least one situation: the repose

period is tolled for litigants who remain in the class after certification is granted. If

Defendants were correct that American Pipe can never toll a statute of repose, see

Br. at 12-13, 23-25, 34, then the running of the five-year periods would always

extinguish class members’ claims, regardless of whether the class were certified or

class members remained in the class. Accordingly, in cases where certification is

granted after the repose period has expired, there would be no class left; only those

individuals who were named plaintiffs in the class action or who filed separate

complaints before the end of the repose period would have timely claims.

Clearly, this is not the law. Classes are routinely certified, and settlements

routinely approved, well after the repose period on class members’ claims has

expired. See Br. of Civil Procedure & Securities Law Professors as Amici Curiae

in Supp. of Pet. for a Writ of Cert. (“IndyMac Amici Br.”) at 9, Pub. Emps.’ Ret.

Sys. of Miss. v. IndyMac MBS, Inc., No. 13-640 (U.S. filed Dec. 26, 2013), 2013

WL 8114524, at *9 (noting that 1658(b)(2)’s five-year period expires before a

certification determination in approximately 76% of Exchange Act class actions

that reach a certification decision). The Class Actions provide a perfect example.

There, absent American Pipe tolling, the repose periods would have expired on


21

May 1, 2012 for the 20A claims, November 19, 2012 for the 10(b) claims against

Schering, and January 30, 2013 for the 10(b) claims against Merck. (JA 0197-98,

0226-27, 0381-82, 0410, 0547-48, 0744-45). Nevertheless, the classes were

certified on September 25, 2012, settlement agreements were executed on June 3,

2013, and those settlements were approved by the court on October 1, 2013, well

after the repose periods would have expired. 10 These facts lead to only one

conclusion: American Pipe suspended the repose periods on class members’ claims

upon the timely filing of the Class Action complaints.

Unsurprisingly, Defendants nowhere suggest that Plaintiffs’ claims would

have been time-barred had they remained in the classes. Rather, Defendants

concede that upon timely filing of the Class Action complaints, “the class

action[s] . . . [were] deemed filed for class members,” including Plaintiffs. Br. at

39. Moreover, in their briefing below, Defendants argued that Plaintiffs could

have revived their allegedly time-barred claims by opting back into the classes

after Police & Fire Ret. Sys. of Detroit v. IndyMac MBS, Inc., 721 F.3d 95 (2d Cir.

2013) (“IndyMac”) was decided in June 2013, even though the repose periods on

those claims supposedly ran out 5-13 months earlier. See Mem. of Law in Supp. of

Defs.’ Mot. to Dismiss at 27, N. Sound Capital LLC, et al. v. Merck & Co., Inc., et

10 See Schering Class Action, ECF Nos. 314, 315, 419-1, 436-40; Merck Class Action, ECF Nos. 250, 251, 328-1, 349-53.


22

al., No. 3:13 Civ. 7240 (D.N.J. filed Jan. 30, 2015), ECF No. 18-1.11

Accordingly, Defendants are not really advocating for a statute of repose

exception to American Pipe at all. Rather, their argument is that Plaintiffs’ decision

to pursue their claims separately renders American Pipe tolling inapplicable to the

statute of repose on those claims – claims that (i) Defendants concede were timely

up until the second before Plaintiffs opted-out, and (ii) Plaintiffs could have

revived by opting back into the classes. But because “the pending class action[s]

prevented the statute of repose from extinguishing [D]efendants’ potential

liability,” there is no reason why that liability should “now be extinguished simply

because [P]laintiffs have . . . exercised their right to opt out . . . by commencing

their own individual lawsuits.” Int’l Fund Mgmt. S.A. v. Citigroup, 822 F. Supp.

2d 368, 381 (S.D.N.Y 2011). To the contrary, that result is foreclosed by Eisen and

Crown, in which the Supreme Court specifically declined to create an exception to

American Pipe based on a plaintiff’s decision to pursue its claims separately. See

11 The District Court recognized the absurdity of this argument:

Defendants’ position that Plaintiffs could and should have opted back into the class action upon the Second Circuit’s decision in Indymac . . . makes little sense. . . . [O]nce Plaintiffs opted out of the class action and, according to Defendants, the statutes of repose had already run, it is difficult to understand how Plaintiffs could have a viable claim, as class members or individual claimants, under Defendants’ logic that the statutes of repose cannot be tolled for any reason.

(JA 0026-27 at n.19).


23

Eisen, 417 U.S. at 176 n.13 (argument that class members could not “opt out”

because the statutory period had “long since run out on the claims of all class

members” was foreclosed by the “recent decision in [American Pipe]”); Crown,

462 U.S. at 352 (American Pipe applies to class members “who choose to file

separate suits”).12

C. American Pipe Is Legal Tolling

Defendants do not dispute that American Pipe applies to all limitations

periods, including statutes of repose, so long as litigants remain part of a class.

Accordingly, American Pipe cannot be considered “equitable tolling,” because, as

Defendants point out, such tolling does not apply to statutes of repose under any

circumstance. See Br. at 25-30; see also Lampf, 501 U.S. at 363. For this reason,

and because, as further discussed below, American Pipe lacks the characteristics of

equitable tolling, it is more properly considered legal tolling, which applies to

statutes of repose. 13

12 See also Leyse, 538 F. App’x at 160-62; Grispino v. New England Mut. Life Ins. Co., 358 F.3d 16, 20 (1st Cir. 2004); Adams Pub. Sch. Dist. v. Asbestos Corp., 7 F.3d 717, 718 n.1 (8th Cir. 1993); Realmonte v. Reeves, 169 F.3d 1280, 1284 (10th Cir. 1999); Tosti v. Los Angeles, 754 F.2d 1485, 1488 (9th Cir. 1985); Edwards v. Boeing Vertol Co., 717 F.2d 761, 766 (3d Cir. 1983), vacated on other grounds, 468 U.S. 1201 (1984);.

13 Courts routinely recognize that “the animating principles of legal tolling are compatible with tolling a statute of repose.” Arivella, 623 F. Supp. 2d at 177. The cases Defendants cite, see Br. at 23-24, are not to the contrary, see, e.g., IndyMac, 721 F.3d at 106 (acknowledging that statutes of repose are subject to “legislatively


24

1. American Pipe Lacks the Characteristics of Equitable Tolling

The Supreme Court has held that a litigant seeking equitable tolling must

establish “(1) that he has been pursuing his rights diligently, and (2) that some

extraordinary circumstance” prevented timely filing. Pace v. DiGuglielmo, 544

U.S. 408, 418 (2005); see Lozano v. Montoya Alvarez, 134 S. Ct. 1224, 1231-32

(2014) (same). This Court has similarly described equitable tolling as proper only

“when the petitioner has in some extraordinary way . . . been prevented from

asserting his or her rights” in a timely manner and can “show that he or she

exercised reasonable diligence in investigating and bringing [the] claims.” Jones v.

Morton, 195 F.3d 153, 159 (3d Cir. 1999); see Pabon v. Mahanoy, 654 F.3d 385,

399 (3d Cir. 2011) (same).

Deciding whether these two elements – extraordinary circumstances and

reasonable diligence – have been met is a “fact-specific” inquiry that “depends on

the circumstances faced by the particular petitioner.” Muchinski v. Wilson, 694

F.3d 308, 331 (3d Cir. 2012). And as Defendants themselves concede, see Br. at 26,

when equitable tolling applies, it (i) excuses a plaintiff’s failure to timely file suit,

and (ii) extends the time for bringing suit when such failure is without fault, see

Holland v. Florida, 560 U.S. 631, 650 (2010) (“Equitable tolling . . . asks whether created exceptions,” i.e., legal tolling); CTS, 134 S. Ct. at 2183 (noting that statutes of repose are not subject to “equitable tolling”); Cohen v. Telsey, No. 09 Civ. 2033, 2009 WL 3747059, at *9 (D.N.J. Nov. 2, 2009) (same).


25

federal courts may excuse a . . . failure to comply with federal timing rules.”);

Bright v. United States, 603 F.3d 1273, 1287-88 (Fed. Cir. 2010) (“Equitable

tolling is a principle that permits courts to modify a statutory time limit and extend

equitable relief.”).

American Pipe could not be more different.

First, American Pipe operates regardless of whether a plaintiff has acted

diligently. In fact, in American Pipe, the Supreme Court expressly refused to apply

a different rule to class members “who were unaware of the proceedings brought in

their interest or who demonstrably did not rely on the institution of those

proceedings” in failing to file suit. 414 U.S. at 552. The Supreme Court explained

that class members need not “take note of the suit . . . or exercise any responsibility

with respect to it” before “the existence and limits of the class have been

established and notice of membership has been sent.” Id.; see Phillips Petroleum

Co. v. Shutts, 472 U.S. 797, 809-11 (1985) (“[A]n absent class-action plaintiff is

not required to do anything. He may sit back and allow the litigation to run its

course.”); McKowan Lowe & Co., Ltd. v. Jasmine, Ltd., 295 F.3d 380, 384 (3d Cir.

2002) (American Pipe is “protective of passive, even unwitting, members of the

class”); Haas v. Pittsburgh Nat’l Bank, 526 F.2d 1083, 1097 (3d Cir. 1975)

(American Pipe applies to class members “who did not rely on the filing of the

[class] action”). If American Pipe turned on equitable principles, it would have


26

been limited to class members who relied on the class action in failing to file suit.

Second, determining whether American Pipe operates in a particular class

action does not involve a fact-specific inquiry, nor does it depend on whether

extraordinary circumstances stood in the way of any class member’s ability to sue.

Rather, American Pipe applies uniformly to all class members in every class action.

See American Pipe, 414 U.S. at 550 (“The filing of a timely class action complaint

commences the action for all members of the class.”) (emphasis added); Eisen, 417

U.S. at 181 (“[T]he start of a class action prior to the running of the statute protects

all members of the class.”) (emphasis added).

Third, American Pipe does not excuse an untimely filing by extending the

applicable limitations period; rather, the “timely” filing of a class complaint is a

prerequisite to American Pipe’s application. See 414 U.S. at 550; Hood v. N.J.

Dep’t of Civil Serv., 680 F.2d 955, 959 (3d Cir. 1982) (“[I]n order for the statute to

be tolled [under American Pipe], the original [class] complaint must have been

timely filed.”); Bright, 603 F.3d at 1288 (class action tolling procedures “can only

come into play once a class action complaint has been filed within the [applicable]

limitations period”). Upon timely filing of a class complaint, American Pipe

dictates that (i) the action is commenced not only for the named plaintiff, but for

all class members, and (ii) the applicable statutory periods stop running, which is

the inevitable result of the filing of any action. See United States v. Inn Foods,


27

Inc., 383 F.3d 1319, 1325 (Fed. Cir. 2004) (an action “commences for purposes of

the statute of limitations . . . by filing a complaint”); Tillman v. Georgia, 466 F.

Supp. 2d 1311, 1316 (S.D. Ga. 2006) (“commencement” of an action “sets the end

date for any statute of limitations”). 14

For this reason, American Pipe does not actually involve “tolling” at all but

instead, merely determines when a class member’s suit is commenced. See State

Farm Mut. Auto Ins. Co. v. Boellstorff, 540 F.3d 1223, 1232-33 (10th Cir. 2008)

(American Pipe “does not involving ‘tolling’ at all [because] [t]he class action

mechanism’s inherent representativeness means that each putative class member

has effectively been a party to an action against the defendant since a class action

covering him was filed”); In re Merck & Co., Inc. Sec., Derivative & Erisa Litig.,

MDL No. 1658, 2012 WL 6840532, at *4 (D.N.J. Dec. 20, 2012) (quoting Joseph,

223 F.3d at 1168) (American Pipe “does not involve ‘tolling’ at all [because the

plaintiff] has effectively been a party to an action against these defendants since a

class action covering him was requested”). In other words, under American Pipe,

class members are treated “as if they have instituted their own actions” at the time

14 Thus, Defendants’ reliance on John Hancock Life Ins. Co. (U.S.A.) v. JP Morgan Chase & Co., 938 F. Supp. 2d 440 (S.D.N.Y. 2013), see Br. at 29, is misplaced. Because the timely filing of class members’ claims via the class complaint is a prerequisite to American Pipe’s application, American Pipe never permits the filing of untimely claims.


28

the class action is filed. State Farm, 540 F.3d at 1229.15

Defendants ignore these disparities between American Pipe and equitable

tolling. Instead, Defendants merely point to a handful of cases in which American

Pipe was referred to as “equitable” in dicta. See Br. at 28-29. However, because

“[n]one of the[se] cases involved a dispute as to whether American Pipe is properly

denominated an equitable or legal tolling doctrine; nor did any of them address

whether American Pipe applies to statutes of repose,” they “are neither binding nor

instructive.” Morgan Stanley Mortg. Pass-Through Certificates Litig., No. 09 Civ.

2137, 2012 WL 1448796, at *1 (S.D.N.Y. Apr. 24, 2012). The District Court

rejected these cases for this very reason. (See JA 0019-20) (Defendants’ cited cases

refer to American Pipe as equitable only “in dicta and in passing” and in

“situation[s] where the distinction between legal and equitable tolling was not at

issue”).

2. American Pipe Is Legal or Statutory in Nature

As this Court has recognized, and as the District Court properly held,

15 Congress adopted this understanding of American Pipe when it enacted the PSLRA. Under the PSLRA, absent class members who wish to become lead plaintiff are not required to file their own individual complaints or to intervene in the suit. Rather, because they are already viewed as “parties,” they are merely required to file motions in the pending class action. See 15 U.S.C. § 78u-4(a)(3)(B)(i). Similarly, once selected, the lead plaintiff’s amended complaint does not need to be independently timely because his claims were already timely commenced when the initial complaint was filed.


29

American Pipe derives from a statutory source – Rule 23.16 See Sperling, 24 F.3d

at 468 (under American Pipe, “the claims of all class members under Rule 23 are

protected by the filing of an original, timely complaint”) (emphasis added); (JA

0021). Thus, American Pipe is not equitable, but is legal or statutory in nature.

a. American Pipe Is an Interpretation of Rule 23

In American Pipe, the Supreme Court concluded that the class action tolling

rule was an “interpretation of [Rule 23],” which was “necessary to insure

effectuation of the purposes of litigation efficiency and economy that the Rule in

its present form was designed to serve.” 414 U.S. at 555-56. In coming to this

conclusion, the Court stated:

[The idea that] one seeking to join a class after the running of the statutory period asserts a separate cause of action which must individually meet the timeliness requirements . . . [is] simply inconsistent with Rule 23 as presently drafted. A federal class action is no longer an invitation to joinder but a truly representative suit designed to avoid, rather than encourage, unnecessary filing of repetitious papers and motions.

Id. at 550. The Court also explained that a decision to the contrary

[w]ould frustrate the principal function of a class suit, because then the sole means by which members of the class could assure their participation in the judgment if notice of the class suit did not reach them until after the running of the limitations period would be to file earlier

16 “[T]he Supreme Court has held that the Federal Rules of Civil Procedure are deemed to have ‘the force [and effect] of a federal statute.’” Bright, 603 F.3d at 1279 (quoting Sibbach v. Wilson & Co., 312 U.S. 1, 13 (1941)).


30

individual motions to join or intervene as parties – precisely the multiplicity of activity which Rule 23 was designed to avoid.

Id. at 551.

Since American Pipe was decided, the Supreme Court has continued to

describe class action tolling as an “interpretation” of Rule 23. See, e.g., Chardon v.

Fumero Soto, 462 U.S. 650, 654 (1983) (“[T]his Court ha[s] interpreted the

Federal Rules of Civil Procedure to permit a federal statute of limitations to be

tolled between the filing of an asserted class action and the denial of class

certification.”) (emphasis added); Credit Suisse Secs. (USA) LLC v. Simmonds, 132

S. Ct. 1414, 1419 n.6 (2012) (American Pipe is often referred to as “legal tolling”

because it “is derived from a statutory source”); Crown, 462 U.S. at 350-51

(American Pipe prevents the “needless multiplicity of actions” that Rule 23 was

“designed to avoid”). This Court has done the same. See Haas, 526 F.2d at 1097

(American Pipe is based on the “efficiency and economy of litigation which is a

principal purpose of Rule 23”); Leyse, 538 F. App’x at 161 (“American Pipe is

compelled by the fact that [Rule 23] class actions are designed to avoid . . .

repetitious [filings].”).

Based on this reasoning, the Tenth and Federal Circuits – the only Circuit

courts to decide the issue – have held that American Pipe is legal tolling. See

Joseph, 223 F.3d at 1166-67 (American Pipe is “legal rather than equitable”


31

because it “serves the purposes of Rule 23”); 17 State Farm, 540 F.3d at 1234

(same); Bright, 603 F.3d at 1279, 1287-88 (American Pipe is “statutory” tolling

based on “the [Supreme] Court’s interpretation of Rule 23” not “equitable

tolling”); Arctic Slope Native Assoc., Ltd. v. Sebelius, 583 F.3d 785, 791 (Fed. Cir.

2009) (same); Stone Container Corp. v. United States, 229 F.3d 1345, 1354 (Fed.

Cir. 2000) (same).18

The Ninth Circuit has also noted that “[t]he class-action tolling discussed in

American Pipe and Crown is a species of legal tolling, not equitable tolling.”

Hatfield v. Halifax PLC, 564 F.3d 1177, 1188 (9th Cir. 2009) (internal citations

omitted). And in Sperling, this Court likened American Pipe to the “legal tolling”

that suspends the limitations period on class members’ claims when a

representative action is commenced under the Age Discrimination in Employment

17 Defendants fault the District Court and other courts in this Circuit for relying on Joseph because it allegedly “did not provide any meaningful analysis to support th[e] view” that American Pipe is legal tolling. Br. at 30-31. This could not be further from the truth. In Joseph, the Tenth Circuit engaged in a lengthy analysis of American Pipe and its progeny, see 223 F.3d at 1166-68, and concluded that American Pipe is legal tolling based on the facts that it: (i) has none of the characteristics of equitable tolling, see id. at 1166-67; and (ii) “serves the purposes of Rule 23,” id. at 1167 – facts which also informed the District Court’s decision, (see JA 0017, 0021). 18 Neither the Second Circuit in IndyMac nor the Sixth Circuit in Stein v. Regions Morgan Keegan Select High Income Fund, Inc., Nos. 15-5903, 15-5905, 2016 U.S. App. LEXIS 9142 (6th Cir. May 19, 2016) decided what type of tolling American Pipe represents. See 721 F.3d at 109; 2016 U.S. App. LEXIS 9142, at *33.


32

Act. See 24 F.3d at 471-72.19

Unsurprisingly, the overwhelming majority of district courts to decide this

issue, 20 including every district court within this Circuit, have also held that

American Pipe is legal tolling. (See JA 0021); Prudential Ins. Co. of Am. v. Bank

of Am., N.A., 14 F. Supp. 3d 591, 618 (D.N.J. 2014); In re Merck & Co., Inc., 2012

WL 6840532, at *3; Vinson v. Seven Seventeen HB Phila. Corp., No. 00 Civ. 6334,

2001 WL 1774073, at *6 n.4 (E.D. Pa. 2001); see also Sperling v. Hoffmann-La

Roche, Inc., 145 F.R.D. 357, 361 (D.N.J. 1992) (referring to American Pipe as

“Rule 23 tolling”).

b. Defendants’ Arguments Are Without Merit

Despite this overwhelming weight of authority, Defendants argue that Rule

23 cannot be the source of American Pipe’s tolling rule because the Supreme

Court’s decision was “context-based,” in other words, it was based on the

construction of the Clayton Antitrust Act’s one-year provision and tolling in future

cases is only permitted if it is “consonant with the legislative scheme.” Br. at 27.

19 Moreover, in Hall v Variable Annuity Life Ins. Co., 727 F.3d 372 (5th Cir. 2013), the Fifth Circuit necessarily assumed that American Pipe applied to section 1658(b)(2) when it held that the “vacatur of certification caused American Pipe tolling to cease and the statute of repose to resume running.” Id. at 378. 20 See Pls.’ Mem. of Law in Opp’n to Defs.’ Mot. for Certification and Temporary Stay Pursuant to 28 U.S.C. § 1292(b) at 13-14 n.4, N. Sound Capital LLC, No. 3:13 Civ. 7240 (D.N.J. filed Nov. 6, 2015), ECF No. 27 (citing 35 district court cases for the proposition that American Pipe is “legal” and finding only 5 district court cases for the proposition that it is “equitable”).


33

However, the fact that a tolling rule must not effectively repeal a statutory time

limitation does not mean that American Pipe is not grounded in Rule 23. As Justice

Rehnquist later pointed out:

[S]ince the Clayton Act did not address the question [of tolling], and since the Court made no reference at all to state law, the source of the tolling rule applied by the Court was necessarily Rule 23. Any doubt as to this fact is removed by the Court’s lengthy discussion of the history, purposes, and intent of the Rule.

Chardon, 462 U.S. at 664-65 (Rehnquist, J., dissenting) (emphasis added). 21

Moreover, in subsequent cases, the Supreme Court has applied American

Pipe to class actions under different federal statutory schemes without any close

analysis of their limitations periods. See, e.g., Crown, 462 U.S. at 352-53; United

Airlines, Inc. v. McDonald, 432 U.S. 385, 392-93 (1977); Eisen, 417 U.S. at 176

n.13. These decisions confirm that American Pipe is a general rule grounded in

21 Defendants mischaracterize Chardon as “rejecting [the] argument that American Pipe established a uniform federal procedural rule applicable to [all] class actions.” Br. at 27. In Chardon, the majority held that in a section 1983 action, American Pipe could produce a renewal of time (rather than mere suspension) to accommodate relevant state law. See 462 U.S. at 661. Although the dissent would have held that American Pipe requires suspension in all cases, see id. at 665 (Rehnquist, J., dissenting), both the dissent and the majority agreed that American Pipe is a rule of general applicability. As the majority explained, “American Pipe . . . asserts a federal interest in assuring the efficiency and economy of the class-action procedure,” and “[s]ince the application of this state-law [renewal] rule gives unnamed class members the same protection as if they had filed actions in their own names which were subsequently dismissed, the federal interest set forth in American Pipe is fully protected.” Id. at 661.


34

Rule 23 and presumptively applies to all Rule 23 class actions involving federal

claims. 22

Moreover, that Rule 23 “says nothing at all about tolling,” Br. at 27, 31, is of

no consequence. American Pipe’s interpretation of Rule 23 is no different than

similar interpretations of Federal Rule of Civil Procedure 3, which, like Rule 23,

says nothing about “tolling.” Rather, Rule 3 merely states that a “civil action is

commenced by filing a complaint with the court.” Fed. R. Civ. P. 3. Nevertheless,

courts have interpreted Rule 3 as “tolling” the applicable statutory periods upon

commencement of an action. See Walker v. Armco Steel Corp., 446 U.S. 740, 751

n.11 (1980) (“[I]n suits to enforce rights under a federal statute Rule 3 means that

filing of the complaint tolls the applicable statute of limitations.”); Farley v. Koepp,

788 F.3d 681, 686 (7th Cir. 2015) (Rule 3 commencement “tolls the running of the

statute of limitations”); Sain v. City of Bend, 309 F.3d 1134, 1138 (9th Cir. 2002)

(discussing “Rule 3 tolling”). Such tolling is clearly based on a statutory source –

i.e., Rule 3 – regardless of whether that source mentions “tolling” within its text.

D. American Pipe’s Application to Statutes of Repose Does Not Conflict with the REA

Defendants next argue that even if American Pipe is legal tolling, its

22 This Court has come to the same conclusion. See, e.g., Sperling, 24 F.3d at 468-69 (under American Pipe, “[t]he law on limitations in Rule 23 actions is settled” and “individual satisfaction of the statute of limitations is not required in Rule 23 class actions,” regardless of the statutory scheme).


35

application to statutes of repose is barred by the REA. See Br. at 32. According to

Defendants, the five-year periods involve “substantive rights,” and permitting

Plaintiffs to assert Exchange Act claims outside the repose periods would “abridge,

enlarge, or modify” those rights in violation of the REA. Id. at 32-34.

But in American Pipe, the Supreme Court explicitly rejected this argument,

stating that “whether a time limitation is ‘substantive’ or ‘procedural’” is not the

“proper test” for determining whether a tolling rule complies with the REA. See

414 U.S. at 556-58. Moreover, even if the substantive or procedural nature of the

statutory period were relevant, American Pipe’s application to the five-year periods

would not violate the REA because (i) they do not involve substantive rights, and

(ii) even if they did, American Pipe does not abridge, enlarge, or modify any

substantive rights.

1. Whether a Time Limitation Is Substantive or Procedural Is Irrelevant to the REA Analysis

As the District Court correctly recognized, the Supreme Court has “long

held” that the “proper test” for determining whether a Federal Rule is valid under

the REA “is not whether the [affected] time limitation is ‘substantive’ or

‘procedural’,” American Pipe, 414 U.S. at 557-58, but whether the Federal Rule

“really regulate[s] procedure,” (JA 0022) (quoting Shady Grove, 559 U.S. at 406-

07); Sibbach, 312 U.S. at 14 (same). In other words, “compliance of a Federal Rule

with the [REA] is to be assessed by consulting the Rule itself, and not its effects in


36

individual applications.” Shady Grove, 559 U.S. at 410 (emphasis added). In fact,

the Supreme Court has stated in no uncertain terms that “the substantive nature of

[the affected statute], or its substantive purpose, makes no difference.” Id. at 409

(emphasis in original). Rather, what matters is “the substantive or procedural

nature of the Federal Rule.” Id. at 410; see Nuveen Mun. Trust ex rel. Nuveen High

Yield Mun. Bond Fund v. WithumSmith Brown, P.C., 692 F.3d 283, 303 (3d Cir.

2012) (“[The] [REA] inquiry does not depend on the substantive or procedural

nature or purpose of the affected [statute], but rather [the] substantive or procedural

nature of the Federal Rule.”). 23

A Federal Rule “regulates procedure,” and is therefore valid under the REA,

when it “governs only the manner and the means by which the litigants’ rights are

enforced.” (JA 0022) (quoting Shady Grove, 559 U.S. at 407). This is true even if

23 In its May 19, 2016 decision, the Sixth Circuit acknowledged that the proper test under the REA is whether “the Rule . . . really regulate[s] procedure.” Stein, 2016 U.S. App. LEXIS 9142, at *31 (internal citations omitted). In coming to its decision, however, the Sixth Circuit did not even attempt to analyze whether the “Rule,” i.e., Rule 23 as interpreted by American Pipe, regulates procedure. Instead, it turned the REA test on its head and erroneously analyzed whether “[s]tatutes of repose” regulate substance or procedure. Id. at *32-33 (statutes of repose are substantive because they “arguably affect rights, remedies, and rules of decision” and therefore American Pipe “does not apply to statutes of repose”). The Second Circuit in IndyMac did the same. See 721 F.3d at 109. These decisions are in direct conflict with the Supreme Court’s instruction that the “substantive nature” or “purpose” of the affected statute “makes no difference” because a Federal Rule “is not . . . valid in some cases and invalid in others – depending upon whether its effect is to frustrate . . . substantive law.” Shady Grove, 559 U.S. at 409.


37

the rule affects a litigant’s substantive rights under the affected statute. See U.S.

Express Lines Ltd. v. Higgins, 281 F.3d 383, 392 (3d Cir. 2002) (quoting

Burlington N. R.R. Co. v. Woods, 480 U.S. 1, 5 (1987)) (“Rules which incidentally

affect litigants’ substantive rights do not violate [the REA] if they are reasonably

necessary to maintain the integrity of that system of rules.”).

Following this framework, this Court has held that “Rule 23 ‘regulates

procedure’ [and therefore] it is authorized by [the REA] and is valid in all

jurisdictions, with respect to all claims, regardless of its incidental effect upon

[substantive] rights.” Landsman & Funk PC v. Skinder-Strauss Assocs., 640 F.3d

72, 91 n.27 (3d Cir. 2011). The same is true with respect to the Supreme Court’s

interpretation of Rule 23, which (i) as discussed at Point II.C.2.a, supra and Point

III, infra, is “reasonably necessary to maintain the integrity of [Rule 23],”

Burlington N. R.R. Co., 480 U.S. at 5, and (ii) like Rule 3,24 merely regulates the

procedure by which class members’ claims are commenced, (see JA 0023).

Far from modifying the rules of decision concerning statutes of limitation

and repose, American Pipe and Rule 3 enable courts to apply those rules. Without

procedural rules declaring when and how lawsuits are commenced, courts could

never determine, for example, whether a plaintiff “brought” suit within the five-

year periods because sections 1658(b)(2) and 78t-1(b)(4) do not specify when a 24 Rule 3 is “undoubtedly valid under the Enabling Act.” Wm. H. McGee & Co. v. Liebherr Am., Inc., 789 F. Supp. 861, 866 (E.D. Ky. 1992).


38

suit is brought. Rather, like most limitations provisions, those periods only “denote

the day on which the limitations period begins, but [not] . . . the day on which the

limitations period ends.” Inn Foods, Inc., 383 F.3d at 1324; see Tillman, 466 F.

Supp. 2d at 1316 (“Rule 3 ‘commencement’ also sets the end date for any statute

of limitations.”); American Pipe, 414 U.S. at 550-51 (“[T]he filing of a timely class

action complaint commences the action for all members of the class . . . [and]

satisfie[s] the . . . limitation provision.”).

2. Even Under Defendants’ Standard, American Pipe Tolling of the Five-Year Periods Is Valid Under the REA

Ignoring the Supreme Court’s and this Court’s precedent, Defendants rely

almost entirely on the Second Circuit’s erroneous analysis in IndyMac, and argue

that because the five-year periods are “statutes of repose” they necessarily

“extinguish[] a plaintiff’s cause of action” and create “substantive right[s] [for

defendants] to be free from liability” after five years. Br. at 33 (citing IndyMac,

721 F.3d at 106, 109). Accordingly, Defendants claim that applying American Pipe

to those periods would (i) “enlarge[] a plaintiff’s substantive right to bring a civil

action,” and (ii) “abridge[] a defendant’s substantive right to put past events behind

him.” Br. at 33-34.

This argument not only misconstrues the REA analysis but also erroneously

assumes that the five-year periods involve substantive rights. Even assuming that

they did, this argument nevertheless fails because, as the District Court recognized,


39

it is based on a misunderstanding of how American Pipe operates. (See JA 0023-

25).

a. The Five-Year Periods Do Not Involve Substantive Rights

Whether a statute limits the time for bringing suit or extinguishes the

underlying right to bring a claim depends not on the application of extra-statutory

labels, but on the language enacted by Congress. See Beach v. Ocwen Fed. Bank,

523 U.S. 410, 416 (1998) (whether a statute extinguishes a right or bars a remedy

is a matter of what “Congress intended,” which depends on the “plain language” of

the relevant statute); Williams v. Wells Fargo Home Mortg., Inc., 410 F. App’x 495,

498-500 (3d Cir. 2011) (same).

In Beach, the Supreme Court explained that statutes whose terms provide

that an action “may or must be brought within a certain period of time” do not

implicate substantive rights. 523 U.S. at 416. More recently, in CTS, the Supreme

Court held that 42 U.S.C. § 9658(b)(2)’s reference to “applicable limitations

period,” defined as “the period . . . during which a civil action . . . may be brought”

did not refer to periods that implicate substantive rights. 134 S. Ct. at 2187. The

Supreme Court explained that because the provision referred to the period during

which an action “may be brought,” it presupposed that an action existed in the first

place, and this was inconsistent with substantive time periods, which, as

Defendants point out, see Br. at 17-21, can prevent a cause of action from ever


40

accruing, see 134 S. Ct. at 2187.

In contrast, the Supreme Court construed the statute in Beach as

extinguishing substantive rights because it “sa[id] nothing in terms of bringing an

action” and “instead provide[d] that the [underlying] ‘right . . . shall expire’ at the

end of the time period.” 523 U.S. at 417 (emphasis added); see Williams, 410 F.

App’x at 499 (same). And in CTS, the Supreme Court quoted N.C. Gen. Stat. Ann.

§ 1-52(16), which states that “[n]o cause of action shall accrue more than 10 years

from the last act or omission,” as an example of a period that extinguishes

substantive rights. 134 S. Ct. at 2187 (emphasis added).25

Here, sections 1658(b)(2) and 78t-1(b)(4) merely limit the time within which

a claim may be “brought,” making them procedural in nature. See American Pipe,

414 U.S. at 558 n.29 (noting that 15 U.S.C. § 16(i), which requires that claims be

“commenced” within one year following conclusion of the government’s case, is

“strictly a procedural limitation” that “in no way affect[s] the substantive rights of

individual litigants”); see also Beach, 523 U.S. at 416-17 (although 46 U.S.C. App.

§ 1303(6)’s one-year period runs from a specific event, i.e., “delivery of the

goods,” it is “nothing more than a bar to bringing suit” because it talks only of the

time within which a “suit is brought”). The legislative history confirms this. See S. 25 See also In re Heaper, 214 B.R. 576, 582 (8th Cir. 1997) (statute providing that “[a] claim for relief or cause of action . . . is extinguished” after a specified time did not merely “act[] upon the remedy” but was an “inherent part of the statutory right” to bring a cause of action) (emphasis added).


41

Rep. No. 107-146, at 9, 17 (describing 1658(b)’s five-year period as “barr[ing]

[investors] from the courthouse” rather than extinguishing investors’ claims); id. at

12 (section 1658(b) “is not meant to create any new private cause of action”).

b. Applying American Pipe to Statutes of Repose Does Not Enlarge a Plaintiffs’ Substantive Rights

Even if the five-year periods did involve substantive rights, American Pipe

does not enlarge a plaintiff’s substantive right to bring suit.

As discussed at Points II.C.1 and II.D.1, supra, American Pipe governs the

procedure by which class members’ claims are commenced. Once a class

complaint is filed, class members stand “as parties to the suit” until they receive

notice of the action and choose to opt-out. 414 U.S. at 550-51; see Chardon, 462

U.S. at 659 (under American Pipe, “unnamed plaintiffs should be treated as though

they had been named plaintiffs during the pendency of the class action”); State

Farm, 540 F.3d at 1229 (same); Arctic Slope Native Assoc., Ltd., 583 F.3d at 796

(“[P]utative class members should be treated the same as actual parties.”). For this

reason, American Pipe “does not involve ‘tolling’ at all” because the plaintiff has

“been a party to an action against the[] defendants since a class action covering

him was requested.” Joseph, 223 F.3d at 1168; In re Enron Corp. Secs., 465 F.

Supp. 2d 687, 717 n.40 (S.D. Tex. 2006) (same).26

26 Defendants argue that when a class complaint is filed, “it is the class action – and only the class action – that is deemed filed for class members.” Br. at 39. But


42

Accordingly, American Pipe’s application to statutes of repose does not

enlarge a plaintiff’s substantive right to bring suit by reviving extinguished claims.

See Br. at 32-40.27 Rather, when a class member pursues its claims individually,

“[it is not] assert[ing] a separate cause of action which must individually meet the

timeliness requirements.” American Pipe, 414 U.S. at 550. It is simply “assuming

responsibility” for the prosecution of its claims, In re BP plc Sec. Litig., No. 13 Civ.

1393, 2014 WL 4923749, at *5 (S.D. Tex. Sept. 30, 2014), – claims that were

already timely commenced by the filing of the class complaint. As the Tenth

Circuit has explained: in American Pipe, the Supreme Court held that class members who intervene “after the running of the statutory period” do not assert a “separate cause of action.” 414 U.S. at 550. The Supreme Court later extended this holding not only to those who intervene, but also to those who opt-out and pursue their claims separately. See Crown, 462 U.S. at 353; Eisen, 417 U.S. at 176 n.13. Thus, upon the filing of a timely class complaint, class members “are treated for limitations purposes as having instituted their own actions.” In re WorldCom Sec. Litig., 496 F.3d 245, 255 (2d Cir. 2007) (emphasis added); State Farm, 540 F.3d at 1229 (same); see also Angles v. Dollar Tree Stores, Inc., 494 F. App’x 326, 331 (4th Cir. 2012) (American Pipe “tolls an individual’s statute of limitations”) (emphasis in original). Any other interpretation would nullify Eisen and Crown. 27 Defendants’ reliance on Lieberman v. Cambridge Partners LLC, 432 F.3d 482 (3d Cir. 2006), is misplaced. See Br. at 33-34. There, this Court held that it could not retroactively apply a newly-enacted repose period to revive claims that had expired under the previously-applicable period, because doing so would “affect substantive rights by creating new causes of action.” 432 F.3d at 492. In contrast, Plaintiffs’ claims here never expired because they were timely commenced by the Class Action complaints. Thus, no new cause of action was created, and no substantive rights were affected, when Plaintiffs assumed responsibility for their timely-filed claims. The District Court distinguished Lieberman on this same basis. (See JA 0025).


43

When [the named plaintiff] filed a class action against State Farm in August 2000, alleging the same claims later asserted by [the individual plaintiff], [the named plaintiff] in essence pre-filed [the individual plaintiff’s] suit. Thereafter, when [the individual plaintiff] filed her independent suit she simply retook the reins from [the named plaintiff].

State Farm, 540 F.3d at 1233.

c. Applying American Pipe to Statutes of Repose Does Not Abridge Defendants’ Substantive Rights

Defendants’ argument that American Pipe’s application abridges their

substantive right to be free from liability is similarly misplaced. See Br. at 32-40.

For one, even “substantive” repose periods do not provide, as Defendants suggest,

an absolute right to “total repose” after a “date certain.” Id. at 20. Nor do repose

periods always “run without interruption once the necessary triggering event has

occurred.” Id. Rather, repose periods can always be interrupted by the filing of a

timely complaint. And once properly filed, litigation often continues well after the

repose period expires, just as it did in the Class Actions.

Accordingly, the only right any statute of repose provides to a defendant is

the right not to be sued after a certain time period. See Br. at 37 (citing In re Exxon

Mobil, 500 F.3d at 199-200) (the “goal” of a statute of repose is to “require filing

of actual claims by a date certain, and to assure defendants that claims not

instituted within the statutory window may never be brought”); see also Burlington

N. & Santa Fe Ry. Co. v. Poole Chem. Co., 419 F.3d 355, 363 (5th Cir. 2005) (“a


44

statute of repose establishes a right not to be sued” after a certain period of time).

American Pipe does not abridge this right because, as discussed above, when

it applies, the defendant has already been sued within the repose period by all class

members. See Developments in the Law – Class Action, 89 Harv. L. Rev. 1318,

1451 (1976) (a defendant “faced with information about a potential liability to a

class cannot be said to have reached a state of repose that should be protected”). As

the District Court correctly observed:

Viewing the filing of a class action as a “prefiling” of all unnamed class members’ claims means the concerns identified by the Second Circuit in Indymac – that applying American Pipe tolling somehow abridges a defendant’s substantive right to be free from suit after a specific period of time – is illusory. . . . [F]air notice of the type and number of claims . . . asserted against [the defendant] . . . [are] required for American Pipe tolling in the first instance [and therefore,] there is no unfair surprise when a class member assumes responsibility for [his] own individual claim.

(JA 0023-24) (quoting In re BP plc Sec. Litig., 2014 WL 4923749, at *5).28

Nor does the District Court’s reference to “notice” create an impermissible

exception to statutes of repose “based on notice to defendants that the plaintiff . . .

might take longer [than five years] to [bring its claim].” Br. at 36. Rather, because

American Pipe is only triggered when class members’ claims have been brought

28 Accordingly, Defendants’ contention that the District Court never embraced the argument that American Pipe defines when class members’ claims are commenced, see Br. at 38, is wrong.


45

within five years, it provides notice not of the fact that class members “might take

longer [than five years] to do so,” Br. at 36, but that they have already done so

within the statutory period.

In this way, American Pipe serves the purposes of repose and certainty by

ensuring that all claims arising out of a given fraud are brought within five years of

the misconduct. See Johnson, 421 U.S. at 475 (the filing of a class complaint gives

a defendant “timely notice [of class members’ claims] in a manner that fulfill[s] the

policies of repose and certainty”); American Pipe, 414 U.S. at 550, 558 (“the filing

of a timely class action complaint” fulfills “the policies of repose and certainty”);

Arivella, 623 F. Supp. 2d at 177 (“[T]he purpose of a statute of repose is to

demarcate a period in which a plaintiff must place a defendant on notice of his or

her injury . . . [and] [t]he filing of a class action, which is the only conduct that can

trigger American Pipe tolling, accomplishes the exact same goal.”).

III. Defendants’ Position Would Impair Rule 23’s Efficient Operation and Render Constitutionally-Grounded Opt-Out Rights Meaningless

According to Defendants, Plaintiffs were required to file their individual

complaints by April 2012 – before class certification – in order to preserve their

claims. See Br. at 18-19. But this rule would: (i) “result in significant numbers of

protective lawsuits following the filing of every class action,” “effectively

eviscerate[ing] the entire purpose of Rule 23,” (JA 0025); and (ii) render Rule 23’s

constitutionally-grounded opt-out rights “meaningless,” (JA 0026).


46

A. American Pipe Tolling of Statutes of Repose Is Necessary to Ensure Rule 23’s Efficient Operation

American Pipe is essential to Rule 23’s operation. See Point II.C.2.a, supra.

A rule to the contrary would “frustrate the principal function of a class suit,”

because absent tolling, the “sole means by which members of the class could

assure their participation . . . would be to file earlier individual motions . . .

precisely the multiplicity of activity which Rule 23 was designed to avoid.” 414

U.S. at 551; see Yang, 392 F.3d at 103; McKowen Lowe & Co., Ltd., 295 F.3d at

384.

Defendants appear to concede that requiring litigants “who wish to remain in

the class” to file protective suits before certification would result in “needless”

filings. See Br. at 41 (quoting Crown, 462 U.S. at 350-51). However, Defendants

single out a different group of litigants – “institutional investors who [wish to] opt

out” – as the only class members required to file suit before certification. Br. at 41-

42. According to Defendants, this requirement would not result in “needless”

filings because those litigants would opt-out regardless of whether the class is

certified. See id. This argument is flawed for a number of reasons.

First, it is unreasonable to assume that any litigant knows, in the early stages

of a class action, whether it will ultimately be in their best interest to pursue their

claims individually. Rather, the decision to opt-out is informed by events such as

discovery or decisions on substantive motions that may not occur before the end of


47

the repose period. Thus, it is difficult to imagine how a rule forcing class members

to opt-out before they have the ability to make an informed decision would not

result in needless filings.

Second, the exception Defendants suggest is irrational. If American Pipe

were deemed inapplicable to statutes of repose, opt-out litigants would not be the

only ones required to file earlier suits. Rather, as the District Court recognized, all

absent class members, including those who wished to remain in the class, would be

forced to file individual suits to protect their rights in case certification is denied

after the repose period. (See JA 0025); Crown, 462 U.S. at 350. 29

Although courts could potentially streamline these filings to a certain extent

through consolidation or coordination, see Br. at 42-43, the filing of protective

suits by numerous absent class members, many of which would be filed solely to

preserve the timeliness of their claims, would still result in the exact “multiplicity

of activity which Rule 23 was designed to avoid,” American Pipe, 414 U.S. at 551.

American Pipe was designed to “clear[] that clutter by sidelining lawsuits that

might have been filed merely to preserve the option of later, individual 29 Section 1658(b)(2)’s five-year period expires before a class certification determination in approximately 76% of Exchange Act class actions that reach a certification decision. See IndyMac Amici Br. at 9, 2014 WL 8114524. Since there are over 200 securities class actions filed per year, and each represents potentially thousands of class members, the number of placeholder actions filed in American Pipe’s absence would be enormous. See Michael J. Kaufman & John M. Wunderlich, Leave Time for Trouble: The Limitations Periods Under the Securities Laws, 40 Iowa J. Corp. L. 143, 187 (2014).


48

intervention.” State Farm, 540 F.3d at 1229.

Third, Defendants’ argument would place an affirmative duty on absent

class members to apprise themselves of every class action’s existence before

certification. This requirement not only is unrealistic, but also directly conflicts

with Rule 23’s notice provisions and the Supreme Court’s statement that absent

class members do not have “any duty to take note of the [class action] suit, or . . .

exercise any responsibility with respect to it” before the class has been certified

and notice of membership has been sent. American Pipe, 414 U.S. at 552. Indeed,

the Supreme Court has repeatedly instructed that before certification and notice,

“an absent class-action plaintiff is not required to do anything. He may sit back and

allow the litigation to run its course.” Phillips Petroleum Co., 472 U.S. at 809-11.

This Court has provided class members with the same protection. See Yang, 392

F.3d at 111 (“Since American Pipe, it has been well-settled that would be class

members are justified – even encouraged – in relying on a class action to represent

their interests.”); McKowen Lowe & Co., 295 F.3d at 384 (“Not until the existence

and limits of the class have been established and notice of membership has been

sent does a class member have any duty to take note of the suit or to exercise any

responsibility with respect to it.”).

Fourth, requiring litigants to opt-out before certification would be unfair

because district courts in this Circuit often deny class members the benefit of


49

American Pipe altogether when they file suit before certification. See, e.g., Thomas

v. Corr. Med. Servs., Inc., No. 04 Civ. 3358, 2009 WL 737105, at *4 (D.N.J. Mar.

17, 2009) (“[A] plaintiff who chooses to file an independent action without waiting

for a determination on the class certification issue may not rely on the American

Pipe tolling doctrine.”); Hubbard v. Corr. Med. Servs., Inc., No. 04 Civ. 3412,

2008 WL 2945988, at *7 (D.N.J. July 30, 2008) (same); Smart-El v. Corr. Med.

Servs., No. 04 Civ. 3413, 2008 U.S. Dist. LEXIS 44376, at *10-12 (D.N.J. June 5,

2008) (same); accord Wyser-Pratte Mgmt. Co., Inc. v. Telxon Corp., 413 F.3d 553,

568-69 (6th Cir. 2005); Glater v. Eli Lilly & Co., 712 F.2d 735, 739 (1st Cir. 1983).

Accordingly, had Plaintiffs filed suit in April 2012 - before the expiration of

the repose periods and before class certification - they would have risked forfeiting

American Pipe altogether, even with respect to section 1658(b)(1)’s two-year

period, to which American Pipe would have otherwise unquestionably applied.

B. Refusing to Apply American Pipe to Statutes of Repose Would Render Opt-Out Rights Meaningless

Rule 23 specifies that class members must receive notice advising them of

their right to request exclusion from the class. See Fed. R. Civ. P. 23(c)(2)(B). The

Supreme Court has repeatedly held that this “opt-out” right is required to preserve

class members’ constitutional due process right to proceed outside the class action.

See Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2559 (2011) (citing Phillips

Petroleum Co., 472 U.S. at 812) (“In the context of a class action predominately


50

for money damages . . . absence of notice and opt-out violates due process.”).

Contrary to Defendants’ contentions, see Br. at 45, due process is not

satisfied if an opt-out is left with nothing but time-barred claims, see Eisen, 417

U.S. at 174 (“[P]rocess which is a mere gesture is not due process.”). Rather, due

process requires that class members be given the “opportunity to press [their]

claim[s] separately.” Crown, 462 U.S. at 351 (quoting Eisen, 417 U.S. at 176)

(emphasis added). As the Advisory Committee explained when Rule 23’s opt-out

provision was added, its purpose is to protect “the interests of the individuals in

pursuing their own litigations.” Advisory Committee Notes on Fed. R. Civ. P.

23(c)(2) (1966) (emphasis added). And opt-out plaintiffs can only pursue their own

litigations, or, as Defendants phrase it – try the “merits” of their individual claims,

see Br. at 45 (quoting Mayfield v. Barr, 985 F.2d 1090, 1092 (D.C. Cir. 1993)), – if

those claims are still timely, see Crown, 462 U.S. at 351 (“[A] class member would

be unable to press his claim separately if the limitations period had expired while

the class action was pending.”).

Here, the notices were dated January 17, 2013 and the opt-out deadline was

March 1, 2013. But absent American Pipe tolling, Plaintiffs’ Exchange Act claims

were already untimely – a fact that the notices failed to mention. Refusing to apply

American Pipe would therefore render Plaintiffs’ opt-out rights meaningless and

prevent the constitutionally-grounded opt-out procedure from protecting unnamed


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class members’ due process rights. See Crown, 462 U.S. at 351-52 (American Pipe

tolling ensures that “the right to opt out and press a separate claim remain[s]

meaningful”); Realmonte, 169 F.3d at 1284 (without American Pipe, Rule 23’s

opt-out provisions “would be irrelevant”); In re Merck & Co., Inc., 2012 WL

6840532, at *3 (same). Thus, Defendants’ proposed interpretation of the five-year

periods must be rejected. See Edward J. DeBartolo Corp. v. Fla. Gulf Coast Bldg.

& Constr. Trades Council, 485 U.S. 568, 575 (1988) (“Where an otherwise

acceptable construction of a statute would raise serious constitutional problems, the

Court will construe the statute to avoid such problems.”).

C. Applying American Pipe to Statutes of Repose Does Not Frustrate Defendants’ Ability to Negotiate Class Action Settlements

Defendants argue that “[p]ermitting plaintiffs to wait in the wings without

surfacing until after the repose period has run . . . frustrate[s] the ability of

defendants to negotiate global peace” and “discourage[s] defendants from agreeing

to class action settlements.” Br. at 44-45. These concerns are illusory.

First, Rule 23 only requires that class members be given one opt-out

opportunity, at the time the class is certified. See Fed. R. Civ. P. 23(c)(2)(B).30

Thus, in cases where settlements are finalized after the opt-out deadline, there is no

30 Although Rule 23(e)(4) provides that class members “may” be given a second opt-out opportunity where certification precedes settlement, this right is “wholly within the discretion of the district court.” In re Health S. Corp. Sec. Litig., 334 F. App’x 248, 254 n.12 (11th Cir. 2009).


52

uncertainty over future opt-out litigation, nor are defendants subject to “indefinite

lingering liabilities.” Br. at 45-46. Rather, defendants know exactly which litigants

may pursue their claims separately, and by what dates they must do so.

For example, in the Class Actions, the opt-out deadline was March 1, 2013

and the settlement agreements were executed on June 3, 2013. See Schering Class

Action, ECF No. 419-1 at ¶ K; Merck Class Action, ECF No. 328-1 at ¶ M.31 Thus,

on June 3, 2013, Defendants knew which class members would potentially be

pursuing their claims individually, along with the value of those claims.32 In fact,

the names of each opt-out, including Plaintiffs’, were attached to the settlement

agreements. See Schering Class Action, ECF No. 419-1 at Appendix 1; Merck

Class Action, ECF No. 328-1 at Appendix 1. That Plaintiffs purportedly “waited in

the wings” to opt-out “until after the repose period” had run therefore had no

impact on Defendants’ ability to negotiate a settlement, nor did it preclude

Defendants from “factor[ing] [Plaintiffs’] claims into the amounts paid to the 31 Plaintiffs opted-out before the settlement agreements were executed and the court did not permit a second opt-out opportunity post-settlement. See Schering Class Action, ECF No. 421 at ¶ 12; Merck Class Action, ECF No. 330 at ¶ 12, Thus, Defendants’ argument that Plaintiffs engaged in “one-way intervention” by waiting to opt-out until after settlement was reached, is incorrect. Br. at 46. Moreover, the 1966 amendments to Rule 23 remedied the issue of “one-way intervention,” by ensuring that “potential class members retain[ed] the option to participate in or withdraw from the class action only until [class certification is decided].” 414 U.S. at 547-49. 32 The notices required each opt-out to disclose its transactions in Merck/Schering securities. See Merck Notice at 4; Schering Notice at 4.


53

class.” Br. at 44.

Second, in cases where class members are permitted to opt-out post-

settlement (e.g., where settlement precedes certification or the court permits a

second opt-out opportunity), the concerns Defendants raise are already addressed

by the routine use of “blow provisions,” which permit defendants to cancel the

settlements if the number of opt-outs exceeds specified thresholds. Accordingly,

defendants can always factor in, and effectively limit, future opt-out litigation

during the course of settlement negotiations, regardless of when settlement occurs

in relation to the repose period’s expiration, and American Pipe tolling of statutes

of repose in no way limits defendants’ ability to do so.

CONCLUSION

For the foregoing reasons, Plaintiffs respectfully request that the Court

affirm the District Court’s August 26, 2015 Order denying Defendants’ motions to

dismiss Plaintiffs’ Exchange Act claims.

Dated: May 23, 2016 KIRBY McINERNEY LLP By: /s/ Daniel Hume Daniel Hume Ira M. Press Meghan J. Summers 825 Third Avenue, 16th Floor New York, NY 10022 (212) 371-6600

Counsel for Plaintiffs-Appellees


CERTIFICATE OF COMPLIANCE WITH FEDERAL RULE OF APPELLATE PROCEDURE 32(a)(7)(B)

The undersigned counsel for Plaintiffs-Appellees certifies that this brief

complies with the type-volume limitation set forth in Federal Rule of Appellate

Procedure 32(a)(7)(B) because it contains 13,986 words, excluding the parts of the

brief exempted by Federal Rule of Appellate Procedure 32(a)(7)(B)(iii). The brief

also complies with the typeface requirements of Federal Rule of Appellate

Procedure 32(a)(5) and the type-style requirements of Federal Rule of Appellate

Procedure 32(a)(6) because it has been prepared in a proportionally spaced

typeface, 14-point Times New Roman font, using Microsoft Word 2010.

In preparing this certificate, I relied on the word count program in Microsoft

Word 2010.

Dated: May 23, 2016

/s/ Daniel Hume Daniel Hume


CERTIFICATE OF COMPLIANCE WITH THIRD CIRCUIT LOCAL APPELLATE RULE 31.1(c)

The undersigned counsel for Plaintiffs-Appellees certifies that the text of the

electronic version of this brief filed on the CM/ECF system is identical to the text

of the paper copies that were sent by Federal Express overnight delivery to the

Clerk of the Court on May 23, 2016.

The undersigned counsel further certifies that a virus detection program has

been run on the file using Symantec End Point Protection, Corporate Edition,

Version 12.1.1101.401 and that no virus was detected by that program.

Dated: May 23, 2016



CERTIFICATE OF BAR MEMBERSHIP PURSUANT TO THIRD CIRCUIT LOCAL APPELLATE RULE 46.1(e)

The undersigned counsel for Plaintiffs-Appellees certifies that he is a

member in good standing of the bar of this Court.

Dated: May 23, 2016



CERTIFICATE OF SERVICE

I, Daniel Hume, Esq., certify that on May 23, 2016, I caused a true and

correct copy of the foregoing Brief of Plaintiffs-Appellees to be served by filing

with the Clerk of the Court for the United States Court of Appeals for the Third

Circuit using the CM/ECF system, and by electronic mail to the following counsel

of record for Defendants-Appellants:

TOMPKINS, MCGUIRE, WACHENFELD & BARRY LLP Brian M. English ([email protected]) William H. Trousdale ([email protected])

PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP Theodore V. Wells, Jr. ([email protected]) Daniel J. Kramer ([email protected]) Daniel J. Leffell ([email protected]) Charles E. Davidow ([email protected]) Daniel J. Juceam ([email protected])

Dated: May 23, 2016 /s/ Daniel Hume Daniel Hume


mailto:[email protected]

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