Chimicles Firm Wins Third Circuit Appeal Allowing Amendment of Securities Laws Claims
September 3, 2021 – In a unanimous, precedential opinion, the United States Court of Appeals for the Third Circuit held that the statutes of repose for securities law claims do not bar a shareholder from filing an amended complaint to reassert claims that had previously been dismissed.
The Chimicles firm filed the initial complaint in 2012 against Orrstown Bank and the bank’s parent company, officers and directors, auditor, and underwriters of a $40 million stock offering. The complaint alleged that bank made misrepresentations concerning its commercial loan portfolio in the wake of the 2008 financial crisis and, based on these misrepresentations, raised new capital from investors in a its 2010 stock offering. Soon after the offering, the bank began reporting massive losses to its commercial loan portfolio. Its share price crashed and has never recovered.
Claims under the Securities Act of 1933 were dismissed in 2016, but other claims under the Exchange Act of 1934 went forward against certain of the defendants. After discovery revealed additional facts to support the dismissed claims, the Chimicles firm sought to amend the complaint to reassert the dismissed claims in 2019. The defendants argued that the dismissed claims had ended by virtue of the dismissal, could not be reasserted outside of the 5-year statute of repose. The district court allowed the amendment but certified the issue for interlocutory appeal, finding that there were substantial grounds for difference of opinion.
The Third Circuit affirmed. The Court held that under the doctrine of “relation back” set forth in Federal Rule of Civil Procedure 15(c) an amendment that restates previously dismissed claims with greater factual detail “relates back” to the original complaint. Further, since the prior order dismissing the claims in 2016 dismissed fewer than all claims and parties, under Rule 54(b) it was not a final order and could be revised at any time. Therefore, no right to repose vested by virtue of the dismissal order.
Chimicles partners Nick Chimicles, Kimberly Donaldson-Smith, and Timothy Mathews represent the plaintiff. Timothy Mathews argued the appeal. The case is SEPTA v. Orrstown Financial Services Inc. et al., case number 20-2829, in the United States Court of Appeals for the Third Circuit
Attorneys for this case:
Nicholas E. Chimicles
Timothy N. Mathews