Perino’s Article Cited By U.S. Supreme Court

Professor Michael Perino‘s article, Class Action Chaos? The Theory of the Core and an Analysis of Opt-Out Rights in Mass Tort Class Actions, 46 Emory L. J. 85, 97 (1997), was cited in by the U.S. Supreme Court in a securities law case decided earlier this week, California Public Employees Retirement Sys. v. ANZ Securities, Inc., No. 16-373 (June 26, 2017).   mp

California Public Employees Retirement Sys. v. ANZ Securities, Inc. addresses whether the three-year statute of repose under the Securities Act of 1933 was tolled when a class action complaint against the plaintiffs was filed. The Court held that it was not, in part because allowing tolling might create incentives for strategic opt outs. Here is the relevant passage, which appears at p. 13 of the majority opinion:

If the number and identity of individual suits, where they may be filed, and the litigation strategies they will use are unknown, a defendant cannot calculate its potential liability or set its own plans for litigation with much precision. The initiation of separate individual suits may thus increase a defendant’s practical burdens. See, e.g., Cottreau, Note, The Due Process Right To Opt Out of Class Actions, 73 N. Y. U. L. Rev. 480, 486, and n. 29 (1998) (“A defendant’s transaction costs are likely to be reduced by having to defend just one action”). The emergence of individual suits, furthermore, may increase a defendant’s financial liability; for plaintiffs who opt out have considerable leverage and, as a result, may obtain outsized recoveries. See, e.g., Coffee, Accountability and Competition in Securities Class Actions: Why “Exit” Works Better Than “Voice,” 30 Cardozo L. Rev. 407, 417, 432–433 (2008); Perino, Class Action Chaos? The Theory of the Core and an Analysis of Opt-Out Rights in Mass Tort Class Actions, 46 Emory L. J. 85, 97 (1997). These uncertainties can put defendants at added risk in conducting business going forward, causing destabilization in markets which react with sensitivity to these matters. By permitting a class action to splinter into individual suits, the application of American Pipe tolling would threaten to alter and expand a defendant’s accountability, contradicting the substance of a statute of repose. All this is not to suggest how best to further equity under these circumstances but simply to support the recognition that a statute of repose supersedes a court’s equitable balancing powers by setting a fixed time period for claims to end.

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