Yesterday the Supreme Court issued its opinion (.pdf download) in Credit Suisse Securities v. Simmonds, once again rendering a decision that limits the ability of plaintiffs to hold corporate wrongdoers accountable.
The case arises out of a series of Initial Public Offerings (IPOs) during the tech bubble of the late 1990s. The plaintiff, Vanessa Simmonds, was an investor who owned tech stocks underwritten by Credit Suisse and other investment banks. Simmonds alleges that underwriters for these IPOs manipulated stock prices using short-swing transactions in violation of the insider trading laws.
The main issue before the Supreme Court was whether the insider trading law's two-year time limit to bring suits begins to run when the profit is realized by insiders or when the required public disclosures are filed. Credit Suisse argued that actions must be brought within two years of the profits being realized and therefore Simmonds’ suit was time-barred. Simmonds argued that because insiders never filed the required disclosures when the profit was realized, the two-year limitations period never began to run. The district court dismissed the complaint on the grounds that the two-year limit had expired, but the Ninth Circuit agreed with Simmonds and reversed.
Yesterday, the Supreme Court, reversing the Ninth Circuit, held that the two-year statute of limitations continues to run, even when corporate insiders have failed to make the public disclosures that would give notice of the insider trading. While leaving open the possibility that traditional equitable tolling principles could apply in a case like this, the Court has nonetheless made it easier for corporate insiders to avoid liability for their illegal insider trading activity by simply violating the disclosure requirement.