As Mintz explained in its earlier blog post, on February 5, 2019, California State Teachers’ Retirement System (CalSTRS) moved to intervene in the Teva securities class action pending in the United States District Court for the District of Connecticut for the sole purpose of protecting its claims from expiration under the Securities Exchange Act of 1934’s 5-year statute of repose (i.e., the outer limit by which a plaintiff may bring suit). As explained in its papers, CalSTRS wished “to avoid the risk of a time-bar against its claims if the case is dismissed on procedural grounds and to preserve meaningful opt-out rights if a class is certified.” Notably, CalSTRS’ proposed order declared that “CalSTRS shall remain a passive member of the putative plaintiff class with all the associated rights and protections, including protection from being subject to discovery in this action.” Last week, the district court entered the order, granting CalSTRS’ motion for intervention for the limited purpose of tolling the statute of repose. While there is no longer a risk that the complaint will be dismissed (the vast majority of Plaintiffs’ claims have since survived dismissal), CalSTRS has successfully preserved its right to opt out if a class is certified.
Although no written decision was issued, the Court’s order, allowing CalSTRS to intervene for the sole purpose of tolling the statute of repose, implicitly relayed some rationale for its decision. First, in granting CalSTRS’ motion, the Court rejected defendants’ argument that the motion was “unwarranted and contrary to the . . . framework” of the Private Securities Litigation Reform Act of 1995 in permitting a passive intervenor. Second, in granting CalSTRS’ motion, the Court implicitly rejected defendants’ argument that CalSTRS’ motion to intervene must have been accompanied by a pleading other than the operative complaint in the class action. And third, in granting CalSTRS’ motion, the Court found the motion served to toll the statute of repose as of the date the motion was first filed.
Allowing CalSTRS (and others) to use motions to intervene to toll the statute of repose rather than forcing such putative class members to choose to forego their rights or file their own opt-out action may preserve resources and encourage efficiency of the courts. As class actions increasingly spend years on dockets (sometimes before a final motion to dismiss is adjudicated), putative class members will have a new choice: to intervene for the limited purpose of preserving their claims. As the District of Connecticut has condoned this option, we may see an increase in such motions. This is all the more likely in the wake of an upward trend for large institutional investors to opt-out -- said to have increased following the U.S. Supreme Court’s decision in Cal. Pub. Employees' Ret. Sys. v. ANZ Securities, Inc., which held American Pipe tolling does not apply to statutes of repose. See 137 S.Ct. 2042 (2017). Though the Defense bar may be dismayed that the district court’s action may make it easier for class members to preserve their right to opt out, such practice may benefit the Defense bar by allowing plaintiffs to defer (and ultimately forego) the filing of additional opt-out actions, each of which requires significant resources to oppose.