On March 26, 2012 the U.S. Supreme Court rendered a unanimous decision in favor of Kirkland & Ellis client Morgan Stanley and other major underwriters in Credit Suisse v. Simmonds. The decision marks Kirkland's third victory at the Supreme Court in the past year in high-profile matters with significant implications for the American business community.
Credit Suisse Securities (USA) LLC v. Vanessa Simmonds
The Simmonds case involved the time for filing a lawsuit to recover impermissible short-swing profits under Section 16(b) of the Securities Exchange Act of 1934. Although the statute on its face provides that such a lawsuit must be brought no later than "two years after the date such profit was realized," the lower courts had long held that this deadline did not apply if a plaintiff alleged that a defendant failed to comply with the disclosure requirements of Section 16(a) of the statute. Thus, in Simmonds, the U.S. Court of Appeals for the Ninth Circuit held that the plaintiff's 2007 Section 16(b) lawsuits against numerous underwriters was timely, even though the lawsuits challenged dozens of initial public offerings (IPOs) of equity securities that occurred more than six years earlier during the stock market boom of 1998-2000. According to the Ninth Circuit, the lawsuits were timely regardless of whether the plaintiff knew or had reason to know the facts underlying her claims because the underwriters had not filed disclosures under Section 16(a), even though the underwriters vigorously disputed their obligation to file such disclosures.
A team of law firms led by Kirkland persuaded the Supreme Court to grant review, and then unanimously reversed the Ninth Circuit. In light of the recusal of Chief Justice Roberts, the court divided equally on the threshold question of whether Section 16(b)'s two-year time limit was a statute of repose, which can never be extended under any circumstances, or a conventional statute of limitations, which courts can extend under extraordinary circumstances. In an opinion authored by Justice Scalia, however, the court explained that even assuming that courts could extend the time limit under certain circumstances, there was no basis for the Ninth Circuit's rule that courts could completely ignore the time limit until the defendant filed a Section 16(a) disclosure. Rather, the court explained, any extension of Section 16(b)'s two-year time limit is governed by ordinary rules of equitable tolling, which do not extend a filing deadline beyond the point at which shareholders knew or should have known the facts underlying their claim.
The court's ruling wipes away decades of lower court jurisprudence that had effectively negated Section 16(b)'s time limit, and prevents plaintiffs from bringing Section 16(b) claims years or even decades after the events being challenged. Although most of Ms. Simmonds' cases had already been dismissed under alternate grounds, this decision will have an important lasting effect on the ability of plaintiffs to bring claims years after the events occurred.
Partner Chris Landau argued the case for the underwriters in the Supreme Court. Partner Andrew Clubok, with assistance from partners Brant Bishop, Susan Engel and Rob Gilmore, has been leading the defense of these cases since their inception as "liaison counsel" for the 10 underwriters named in the 54 actions.
Other Recent Cases
The Simmonds case represents Kirkland's third victory in the Supreme Court over the past year.
In January 2012, the court ruled in favor of Kirkland client CompuCredit Corp., holding that the Credit Repair Organizations Act (CROA) does not bar the enforcement of an arbitration clause in the company's contracts. Kirkland of counsel and former U.S. Court of Appeals Judge Michael McConnell argued the case in the Supreme Court, with assistance from partners Mike Williams, Pat Cipollone, and John O'Quinn and associate Aaron Nielson.
In June 2011, the court ruled in favor of Kirkland client Teva Pharmaceuticals USA, holding that federal law preempts state-law failure-to-warn claims against manufacturers of generic drugs, even though federal law does not preempt similar claims against manufacturers of branded drugs. Kirkland partner Jay Lefkowitz argued the case in the Supreme Court, with assistance from partner Mike Shumsky.
Kirkland's Appellate Practice
"This recent string of victories in the Supreme Court highlight the strength of Kirkland's appellate practice," said Chris Landau, partner in the Washington, D.C., office of Kirkland & Ellis and head of the Appellate Practice Group.
That practice consists of more than 20 lawyers, drawn from the ranks of former law clerks at the Supreme Court and federal courts of appeals.
About Kirkland & Ellis LLP
Kirkland & Ellis International LLP is a 1,500-attorney law firm representing global clients in complex litigation, dispute resolution and arbitration, corporate and tax, restructuring, and intellectual property and technology matters. The Firm has offices in Washington, D.C., Chicago, Hong Kong, London, Los Angeles, Munich, New York, Palo Alto, San Francisco and Shanghai.
(Press Release by Kirkland & Ellis LLP)
