Today, in CalPERS v. ANZ Securities, Inc. (pdf), the Supreme Court recognized a crucial limitation on the doctrine that allows a class action to toll the deadline for absent class members to bring their own separate individual suits. We’ve been following this issue in the CalPERS appeal for some time. (See our previous reports on this appeal.)

In a 5-4 decision authored by Justice Kennedy, the Court held that the American Pipe tolling doctrine does not apply to statutes of repose. As a result, the three-year statute of repose in the Securities Act of 1933 barred a suit that CalPERS had filed against the underwriters for certain Lehman Brothers debt securities more than three years after the securities were issued, but while a timely class action bringing similar claims was pending.

Even though lower courts had divided on the question and four Justices dissented, the majority’s reasoning follows fairly directly from established precedents. Consistent with Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson, the Court easily determined that the three-year period allowed for suits under § 13 of the Securities Act is a statute of repose. That statutory provision “creates a fixed bar against future liability,” “admits of no exception,” and “runs from the defendant’s last culpable act” rather than “the accrual of the claim.” Tellingly, the majority observed, § 13 also contains a separate one-year statute of limitations.

The majority then explained that statutes of repose are not subject to equitable tolling, as CTS Corp. v. Waldburger held. “The purpose and effect of a statute of repose . . . is to override customary tolling rules arising from the equitable powers of courts.” Statutes of repose, the Court emphasized, reflect a legislative determination that “there should be a specific time beyond which a defendant should no longer be subjected to protracted liability.” The “unqualified nature of that determination . . . forecloses the extension of the statutory period based on equitable principles.”

The only remaining question was whether the class-action tolling rule established by American Pipe & Construction Co. v. Utah provides for equitable tolling. Looking to American Pipe itself, the Court had no trouble answering that question affirmatively: “The source of the tolling rule applied in American Pipe is the judicial power to promote equity.” Having concluded that § 13’s three-year period is a statute of repose, that statutes of repose cannot be equitably tolled, and that American Pipe provides for equitable tolling, the Court ruled that American Pipe tolling could not apply to § 13’s three-year period.

The points raised by CalPERS in opposition did not persuade the majority. American Pipe tolling, the majority concluded, could properly be restricted to statutes of limitations. Otherwise, individual suits filed after expiration of § 13’s repose period could expand a defendant’s litigation burdens and liability beyond that imposed by a timely class action. The importance of opt-out rights would not justify ignoring mandatory time limits set by statute. Any risk of burdensome protective filings by class members seemed overblown to the Court. And the word “action” in the operative portion of § 13 could not be read to mean a claim brought in a class action on a separate date by a separate named party in a separate suit.

Writing for the dissenters, Justice Ginsburg argued that tolling § 13’s repose period would not implicate any of the reasons for that period because the class action gave the defendants all the notice of liability that they needed. She also described risks that some class members could lose their rights to proceed individually and that protective filings by other class members would “gum up the works of class litigation.” Interestingly, she also urged class counsel and district courts to notify class members as the expiration of any repose period approaches.

The CalPERS decision continues a longstanding trend of taking statutes of repose seriously. The Court is right to do so. When a legislature enacts an unqualified statute of repose, it is telling litigants and courts that the threat of litigation must end on a date certain. Judge-made tolling rules should not second-guess that instruction. As the Supreme Court recognized, there is no good reason to take a different approach just because a class action is or was pending.