In re: Barclays Bank Plc Securities Litigation

Filing 140

OPINION & ORDER re: 115 MOTION to Add Paul Spindel as a Named Plaintiff. filed by Dennis Askelson, Alfred Fait. Lead Plaintiffs' motion to add Paul Spindel as a named plaintiff is DENIED. Lead Plaintiff Askelson may move for c lass certification in accordance with the procedures as set forth in the Revised Scheduling Order. See Dkt. 126 at 8. The Clerk is directed to terminate the motion at Docket 115. (As further set forth in this Order) (Signed by Judge Paul A. Crotty on 11/19/2015) (lmb) Modified on 11/19/2015 (lmb).

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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

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In re BARCLAYS BANK PLC
SECURITIES LITIGATION

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IELECTRONICALLY FILED
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09 Civ. 1989 (PAC)

OPINION & ORDER

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HONORABLE PAUL A. CROTTY, United States District Judge:
This case deals with alleged material misstatements and omissions in the offering
materials associated with the sale of American Depositary Shares ("ADS") ofBarclays Bank
PLC ("Barclays"), in violation of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933
("Securities Act"). Initially, the case dealt with four ADS offerings (Series 2, 3, 4 and 5)
between April 2006 and April2008. Several class action complaints were filed in early 2009
and, upon order from the Court, lead plaintiffs filed a consolidated amended complaint in
February 2010. In January 201 1, the Court dismissed the consolidated amended complaint. In

re Barclays Bank PLC Sec. Litig. , 2011 WL 31548 (S.D.N.Y. Jan. 5, 201 1). Plaintiffs appealed,
and on August 19, 2013 the Second Circuit affirmed the dismissal of the claims as to the Series
2, 3 and 4 offerings, but reversed as to the Series 5 offering claims and remanded to permit lead
plaintiffs to file a proposed second consolidated amended complaint with respect to the Series 5
ADS offering of April 8, 2008. Freidus v. Barclays Bank PLC, 734 F.3d 132 (2d Cir. 2013).
Lead plaintiffs Dennis Askelson and Alfred Fait filed the Second Consolidated Amended
Complaint on September 16, 2013, asserting claims individually and on behalf of all other

1

similarly situated purchasers. 1 Dkt. 66. The Court issued on order on July 9, 2014 confirming
the appointment of Askelson and Fait as lead plaintiffs ("Lead Plaintiffs"). Dkt. 91.
On March 6, 2015, Lead Plaintiffs filed a motion for class certification. Dkt. 102. But in
April 2015, they informed Defendants that, due to health issues, Fait might withdraw as a named
plaintiff. On November 18, 2015, counsel for Lead Plaintiffs filed notice ofFait's death. Dkt.
139. They propose replacing Fait with nonparty Paul Spindel as a named plaintiff and putative
class representative.
Spindel certified that he was a putative class member since he purchased Series 5 ADS in
the April 8, 2008 offering on behalf of his wife Ann Spindel and she had assigned all ofher
rights and claims with respect to these shares to her husband. See Dkt. 116, Ex. 1 and 2. In May
2015, the Court directed the parties to brief the issue, and soon after Lead Plaintiffs moved to
add Spindel as a new named plaintiff, pursuant to Fed. R. Civ. P. 15 and 21. Dkt. 113, 115.
Defendants oppose the motion, arguing that (i) Lead Plaintiffs cannot relate back Spindel's
claims to their timely claims since the Securities Act statute of repose bars tolling; and (ii)
adding Spindel is improper because it follows an unexplained delay and would prejudice
defendants. Def. Mem., Dkt. 119.
The Court holds that the Securities Act' s statute of repose bars Lead Plaintiffs from using
Rules 15 and 21 to relate back Spindel' s otherwise untimely claims. The motion to add Spindel
as a named plaintiff is DENIED.
I.

Standard of Review

"On motion or on its own, the court may at any time, on just terms, add or drop a party."
Fed. R. Civ. P. 21. This includes the power to add new named plaintiffs in a putative class

1

A complete list ofDefendants is provided in the Second Consolidated Amended Complaint at,]~ 25-59 .

2

action. See Duling v. Gristede 's Operating Corp., 265 F.R.D. 91, 96 (S.D.N.Y. 2010).
Generally, courts assess motions to add new parties pursuant to Rule 21 in the same manner as
requests to amend a complaint under Rule 15. See id. ("[T]he same standard of liberality applies
under either [Rule 21 or Rule 15]"). Rule 15(a)(2) provides that the court should "freely give
leave when justice so requires," which the Second Circuit has interpreted to mean that leave
should be granted unless "there is evidence of undue delay, bad faith, undue prejudice to the nonmovant, or futility." Milanese v. Rust-Oleum Corp., 244 F.3d 104, 110 (2d Cir. 2001). 2

II.

Relation Back of Spindel's Claims
Section 13 of the Securities Act bars claims made more than three years after the

underlying security has been offered or sold. 15 U.S.C. § 77m. Since the Series 5 ADS offering
occurred over seven years ago and Spindel is not a party to the case prior to class certification,

see Smith v. Bayer Corp., 131 S. Ct. 2368, 23 79 (20 11 ), his claims would be untimely, if added
today. Defendants contend that adding Spindel as a named plaintiff would be futile.
But Lead Plaintiffs correctly maintain that Rule 15(c) can generally be used to relate back
(and thus render timely) claims of a newly added plaintiff. Rule 15(c), which addresses relation
back of amendments to pleadings, does not explicitly address the situation of amending a
pleading to add a new plaintiffs claims. But the 1966 advisory notes to the Rule state that
adding claims by new plaintiffs should be analyzed in a manner analogous to adding claims
against new defendants under Rule 15(c)(I )(C). See Beach v. Citigroup Alternative Inc. LLC,

2

Defendants argue that, since the Court issued a Revised Scheduling Order in August 2015, Lead Plaintiffs must
show "good cause" in order to modify the Revised Scheduling Order and add a new party. See Def. Mem. at 16
(citing Fed. R. Civ. P. 16(b)). But the Revised Scheduling Order does not set a deadline to add new parties, so Lead
Plaintiffs do not seek or require a modification. See Dkt. 126 at~ 3. As such, the Rule 15 standard applies. See In
re Initial Public Offering Sec. Litig., 214 F.R.D. 117, 122 (S.D.N.Y. 2002) (applying Rule 15 for joinder of new
named plaintiff where there were no court-ordered deadlines).

3

No. 12 cv 7717 (PKC), 2014 WL 904650, at *19 (S.D.N.Y. Mar. 7, 2014). Under that Rule,
claims against a new defendant relate back to the original pleading, so long as the new defendant
knew or should have known that the action would have been brought against it and will not be
prejudiced in defending on the merits. 3 Fed. R. Civ. P. 15(c)(1)(C). By extension, a newly
added plaintiffs claims relate back to the original pleading provided that defendants knew or
should have known ofthe new claims and are not prejudiced. Beach, 2014 WL 904650, at *19.
"When an action is filed as a putative class action, defendants are on notice as to the
extent and nature of the claims." !d. at 20. "As such, allowing relation back of the newly named
plaintiff's claims under Rule 15(c), as long as they are identical to the claims already asserted
and would have been timely at the time of filing, would not unduly surprise or prejudice the
defendants." !d. Here, Spindel's claims under Sections 11 , 12(a)(2) and 15 are identical to those
of the Lead Plaintiffs. Adding Spindel as a named plaintiff would not change the nature of the
action or "surprise" defendants. Thus, absent other bars, Lead Plaintiffs can relate back
Spindel's otherwise untimely claims to their timely claims.

III.

Tolling the Section 13 Repose Period
But Defendants raise another argument more serious than their first argument: Rule 15(c)

relation back is not available to extend the three-year period under Section 13 because it is a
statute of repose rather than a temporal limitations period. Def. Mem. at 9-1 1. They cite the
Second Circuit's interpretation of Section 13 in Police & Fire Ret. Sys. of the City ofDetroit v.

3 The

Rule also requires that a "mistake" have been made in not previously adding the new party. Fed. R. Civ. P.
15(c)( 1)(C)(ii). In this Circuit, however, courts have "rejected the ' mistake' requirement when adding new named
plaintiffs in a class action and focus on whether the new plaintiff' s claims were reasonably foreseeable and whether
their addition would prejudice the defendants." Beach, 20 14 WL 904650, at *19 (collecting cases) ; but see In re
Morgan Stanley Mortg. Pass-Through Certificates Litig. , 23 F. Supp. 3d 203, 208-09 (S.D.N.Y. 2014) (applying the
" mistake" requirement in barring intervention by new plaintiffs).

4

IndyMac MBS, Inc., 721 F.3d 95 (2d Cir. 2013). There, the district court consolidated separate
purported class actions brought by the Police and Fire Retirement System of the City of Detroit
("Detroit PFRS") and the Wyoming State Treasurer and Wyoming Retirement System (jointly,
"Wyoming") against defendant IndyMac for Securities Act violations. !d. at 102. The district
comt appointed only Wyoming plaintiffs as lead plaintiffs and dismissed for lack of standing all
claims arising from offerings not purchased by the Wyoming entities. !d. at 102-03. Detroit
PFRS then sought to intervene after the three-year period, arguing that its claims were tolled or
related back to the timely claims of the Wyoming entities. !d. at 103.
The court explained that Section 13 sets a repose period which, in contrast to a limitations
period, "create[s] a substantive right in those protected to be free from liability after a
legislatively-determined period of time." !d. at 106 (internal quotation marks omitted). The
court noted that "Section 13's three-year limitation ' is a period of repose inconsistent with
tolling,' and ... the 'purpose of the 3-year limitation is clearly to serve as a cutoff,' to which
'tolling principles' do not apply." !d. at 107 (quoting Lampf, Pleva, Lipkind, Prupis & Petigrow
v. Gilberton, 501 U.S. 350,363 (1991) (emphasis inlndyMac)). Accordingly, the court stated:
"a statute of repose begins to run without interruption once the necessary triggering event has
occurred, even if equitable considerations would warrant tolling or even if the plaintiff has not
yet, or could not have, discovered that she has a cause of action." !d. (internal quotation marks
omitted). The court held that Supreme Court case law permitting tolling of statutes of limitations
pursuant to Rule 23 could not be applied to the Section 13 repose period, because that would
violate the Rules Enabling Act, which bars interpreting a Federal Rule in a manner that
'"abridge[s], enlarge[s] or modif[ies] any substantive right."' !d. at 109 (quoting 28 U.S.C.
§ 2072(b)).

5

IndyMac clearly bars use of Rule 15 to relate back Spindel's otherwise untimely claims.

Section 13 's three-year repose period cannot be extended by legal or equitable principles. See id.
at 108-09. Just as it violates the Rules Enabling Act to extend the Section 13 repose period by
way ofRule 23, it also violates the Rules Enabling Act to extend the Section 13 repose period by
way of Rule 15. Both would violate the purpose of the three-year repose period, which " is
clearly to serve as a cutoff." Id. at 107.
This holding is supported by Police & Fire Ret. Sys. of the City ofDetroit v. Goldman,
Sachs & Co., No. 10 cv 4429 (MGC), 2014 WL 1257782 (S.D.N.Y. Mar. 27, 2014). There,

plaintiffs sought to use Rule 15 to relate back new Securities Act claims premised on different
securities offerings after the three-year repose period. Id. at *9. The court acknowledged that
IndyMac "did not address a situation, like this one, in which plaintiffs seek to use relation-back

to add new claims to their own complaint that would otherwise be barred by the statute of
repose." Id. But the court reasoned that just as IndyMac held that Rule 23 could not toll the
statute of repose due to the Rules Enabling Act, "permitting relation-back under Rule 15 would
similarly violate the Rules Enabling Act." !d. at *10.
Lead Plaintiffs' efforts to distinguish IndyMac and Goldman are unavailing. They argue
that IndyMac is distinguishable because in that case, unlike here, plaintiffs sought to apply
tolling to claims that had already been dismissed by the court for lack of jurisdiction. Pl. Mem. ,
Dkt. 114 at 7-8. But as the court held in Goldman, even if the timely claims are still pending
before the court, the Rules Enabling Act bars relation back of new claims after the repose period.
Goldman, 2014 WL 1257782, at *10. Lead Plaintiffs seek to distinguish Goldman by pointing to

the fact that the Goldman plaintiffs sought to add new claims based on different underlying
offerings, whereas Lead Plaintiffs seek to add new claims based on the same underlying offering.

6

Id. at 9. That is a distinction without a difference. Even though the underlying offering is the
same, Spindel is a nonparty prior to class certification, so adding his claims after the repose
period would require relation back and so is barred. See IndyMac, 721 F.3d at 112 n.22 ("[U]ntil
certification there is no class action but merely the prospect of one; the only action is the suit by
the named plaintiffs"). Since Lead Plaintiffs cannot relate back Spindel's untimely claims,
addition of Spindel as a named plaintiff is futile and the motion is DENIED. 4
CONCLUSION
Lead Plaintiffs' motion to add Paul Spindel as a named plaintiff is DENIED. Lead
Plaintiff Askelson may move for class certification in accordance with the procedures as set forth
in the Revised Scheduling Order. See Dkt. 126 at ,-r 8. The Clerk is directed to terminate the
motion at Docket 115.

Dated: New York, New York
November 19,2015

SO ORDERED

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CRO~TY

PAUL A.
United States District Judge

4 Beach

v. Citigroup Alternative Inc. LLC, 2014 WL 904650 (S.D.N.Y. Mar. 7, 2014) does not hold otherwise. In
that case, the court permitted relation back to add claims of a new named plaintiff after expiration of the statute of
limitations for New York fraud claims. !d. at *18-20. IndyMac specifically distinguished between statutes of
limitations, which are subject to tolling and relation back of claims, and statutes of repose (such as Section 13),
which are not. JndyMac, 721 F.3d at I 06.

7