Credite Suisse Securities v. Simmonds

Because the usual rules of equitable tolling apply to §16 of the Securities Exchange Act of 1934, the 2-year limitation for actions to recover for profit due to unfair use of information starts from the date the profit was realized and is not tolled until the filing of a §16(a) statement.

Section 16(b) of the Securities Exchange Act of 1934 provides that securities holders of a corporation may sue officers, directors or certain beneficial owners of a corporation if these individuals buy and sell, or sell and buy, the corporation's securities within six months. Section 16(b) also contains a two-year statute of limitations from the date the profit from these sales was realized. Respondent filed numerous complaints under §16(b) based on transactions in the late 1990s and early 2000s. The district court dismissed these claims, and the Court of Appeals for the Ninth Circuit reversed holding that the statute of limitations could be tolled until the corporate insider disclosed the transactions in a § 16(a) filing.

The Supreme Court held that the statute of limitations does not toll until the corporate insider makes a § 16(a) filing. The Court held that neither the text of § 16(b) nor the principles of equitable tolling support the Ninth Circuit’s decision. Tolling is only equitable until the plaintiff should have been aware of the facts underlying the claim. The Court further reasoned that the § 16(b) liability for underwriters theory is so new that such defendants may not have been aware of an obligation to file a 16(a) statement. Remanded to the District Court to determine if other equitable tolling principles may apply.