PUTTING TO REST
STATUTES OF REPOSE
By
Prof. Anthony Michael Sabino
Law schools teach a great many things. Yet, notwithstanding their best efforts, even the finest institutions inevitably overlook certain crucial topics. One of them is the precise difference between a “statute of limitations” and a “statute of repose.” An inability to distinguish the less familiar latter from the oft-discussed former can result in the loss of a right to commence an action or, conversely, the omission of a conclusive defense. Too often it is only by way of painful experience that one acquires a clear understanding of these temporal constraints and their ramifications.
Fortunately, the Second Circuit recently obliged us with a fresh decision that set in exquisite counterpoise the characteristics of a statute of repose and the traits which define its more popular cousin. In Moreira v. Société Générale, S.A., ___ Fed.4th ____ (No. 23-394) (2d Cir. January 7, 2025) (“Moreira”), the appellate court ultimately denied the plaintiffs recovery of assets confiscated by the Castro regime in 1960. Nevertheless, the august tribunal set in place a benchmark that shall no doubt further our understanding of the limitary periods specified in a plethora of federal (as well as state and local) enactments.
An appreciation of Moreira commences with its antecedents, one of which was overtly cited by the Second Circuit, while the other played a more subtle, but no less influential, role in formulating this new landmark.
CALPERS
Moreira’s principal forebear is CALPERS v. ANZ Securities, 582 U.S. 497 (2017). Preferring to litigate closer to its home in the Northern District of California, the plaintiff pension fund “opted-out” of a securities fraud class action already pending in the Southern District of New York, see Fed. R. Civ. P. 23, and filed an individual lawsuit asserting violations of Section 11 of the 1933 Securities Act in connection with an initial public offering of shares in the pre-bankruptcy Lehman Brothers. See 15 U.S.C. § 77k.
To CALPERS’s undoubted dismay, the Supreme Court decreed that the later-filed action was time-barred. Applying Section 13 of the ’33 Act, the high bench remonstrated that the pension fund’s allegations had to be brought within one year of the discovery of the purported wrongdoing, and in no event no more than three years after the securities were purchased. See 15 U.S.C. § 77m. For reason that its solo litigation was filed more than three years after the IPO, CALPERS’s rights had already been extinguished by the repose leg of the limiting statute.
Writing for the high bench, Justice Kennedy elucidated that Section 13’s one-year/three-year temporal constraints exemplify the key distinctions between and the differing objectives of limitary provisions and statutes of repose. Whereas the one-year bar encourages complainants to file their claims in a timely manner, the mandate for repose after the lapse of three years grants certainty to putative defendants that liability no longer exists.
In addition, the supreme bench ruled that the time allowed for initiating individual lawsuits cannot be extended by “relating back” to previously filed actions; thus in CALPERS, the plaintiff was foreclosed from “piggybacking” onto the timely filed New York class action.
Finally, the Supreme Court made it abundantly clear that the doctrines of “tolling,” equitable or otherwise, while generally capable of halting the running of statutes of limitation, have no impact whatsoever upon provisions for repose. The essence of the latter limitary constraint, opined Justice Kennedy, is to forbid the commencement of any lawsuit after a date certain, and any holding to the contrary would defeat that singular purpose.
China Agritech
Moreira’s second, albeit unspoken, cornerstone is China Agritech, Inc. v. Resh, 584 U.S. 732 (2018). There, in a manner alike to CALPERS, the Supreme Court addressed one of the restrictive periods prescribed for that other great pillar of the federal securities laws, the Securities and Exchange Act of 1934. See 15 U.S.C. §78a, et seq. Notably ensconced in the Judicial Code, it confines actions alleging violations of the ’34 Act’s anti-fraud provisions to no later than the earlier of two years from the date the wrongdoing is discovered or no more than five years after the purported infraction. See 28 U.S.C. § 1658(b).
Dismissing a follow-on class suit as untimely, China Agritech expressly forbade a subsequent putative class representative from “piggybacking” onto a timely filed predecessor case. Justice Ginsburg pointed out that when class certification has been denied, see Rule 23, infra, the clock starts to run again, liberating complainants to either intervene in the former class representative’s original action or go their own way with fresh litigation. See also American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974). These alternative pathways, opined the high Court, are justified by the need to preserve individual rights to relief. The assumption is, of course, that the original collective filing or any individual action comports with the two-year/five-year temporal constraint.
Finally, a remarkable feature of China Agritech, and one highly relevant to the discussion at hand, is Justice Ginsburg’s parenthetical addressing the respective roles of limitary restrictions and statutes of repose. The eminent jurist concisely postulated that a limiting proviso begins to run when the cause of action accrues (that is to say, when the erstwhile plaintiff can sue for relief), whereas “[a] statute of repose, by contrast, begins to run on the date of the last culpable act or omission of the defendant” (internal quotations omitted).
Moreira
The foundation now firmly in place, we may turn to Moreira itself. The Helms-Burton Act grants the federal courts jurisdiction over a private cause of action for the “wrongful confiscation or taking of property belonging to United States nationals by the Cuban government.” See 22 U.S.C. § 6081, et seq. Although promulgated in 1996, the law’s effective date had been delayed for well over a decade by a succession of U.S. Presidents exercising an embedded suspension proviso. See id. at § 6085(c).
With the suspension finally abrogated, the plaintiffs, successors-in-interest to certain private banks seized by Castro’s communists in 1960, commenced litigation against various non-U.S. banks which had allegedly “’traffick[ed]’ in that confiscated property,” id. at § 6081(6), including the venerable French institutions Société Générale and BNP Paribas. Yet the statutory scheme expressly forbade the bringing of suit “more than 2 years after the trafficking giving rise to the action has ceased to occur.” Id. at § 6084.
The Second Circuit was therefore compelled to decide if the plaintiffs’ action was timely pursuant to this temporal constraint. From the outset, the tribunal framed the question as whether the two-year bar was a limitary period or a statute of repose. If the former, equitable tolling might play a role; if the latter, then the prescribed interval “may be tolled pursuant ‘only to legislatively created exceptions’ codified in the statute” (citation omitted).
Moreira expounds that statutes of limitation and statutes of repose deliberately impact different actors, in service of distinctive ends. A limitary enactment encourages would-be plaintiffs to be diligent in initiating suit; in contradistinction, its repose counterpart assures potential defendants that they are relieved of liability after a certain date.
A limitations statute “begins to run” from the moment there is an injury sufficient to accrue a claim. Said restrictions are to be respected, declared Circuit Judge Sack, as such enactments embody deliberate choices by elected lawmakers to delimit the time during which plaintiffs must act or forego their rights. Equitable tolling, a judicially created exception to be sure, comes into play only where some extraordinary circumstance “thwarts” the initiation of suit.
Standing in sharp contrast are statutes of repose, which Moreira affirmed commence running from the “last culpable act or omission of the defendant.” The Second Circuit forcefully proclaimed that repose provisos are not subject to tolling, equitable or otherwise, unless conjoined with clear exceptions stopping the clock.
Invoking the straightforward test enunciated by the supreme tribunal in CALPERS, infra, Circuit Judge Sack reminds that a true statute of repose has three primary attributes: 1) it unambiguously commences to run from the putative defendant’s last culpable act; 2) it fixes a date subsequent to which liability cannot be assessed, and admits no exceptions thereto; and 3) the provision for repose is typically paired with a time bar which runs from the moment the claim accrues, “a common marker of a statute of limitations.” The panel further clarified that statutory language such as “shall not” or “may not” is generally characteristic of a constraint of repose, given that each prohibits litigation after a specified time.
Finding that the proviso before it commenced running, without statutory exceptions, from the date the alleged harm ceased, Moreira concluded it was a statute of repose, requiring the dismissal of all claims predating the plaintiffs’ filing by two or more years.
Notwithstanding what law school or hard experience has taught us, it is vital that practitioners and judges alike fully comprehend the distinctions between statutes of limitation and statutes of repose, their respective impact upon divergent parties, and how each advances contrasting objectives. The Second Circuit’s new decision in Moreira, in conjunction with the high Court precedents from which it evolved, will facilitate that cognizance across a broad spectrum of statutory regimes.
Prof. Anthony Michael Sabino, partner, Sabino & Sabino, P.C., is also a Professor of Law, Tobin College of Business, St. John’s University. Anthony.Sabino@sabinolaw.com.
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