                        RECOMMENDED FOR FULL-TEXT PUBLICATION
                            Pursuant to Sixth Circuit I.O.P. 32.1(b)
                                   File Name: 16a0123p.06

                  UNITED STATES COURT OF APPEALS
                                FOR THE SIXTH CIRCUIT
                                  _________________


 ANDREW M. STEIN, et al. (15-5903); CANALE ┐
 FUNERAL DIRECTORS, INC., et al. (15-5905),          │
                              Plaintiffs-Appellants, │
                                                     │
                                                     │
        v.                                           >        Nos. 15-5903/5905
                                                     │
                                                     │
 REGIONS MORGAN KEEGAN SELECT HIGH INCOME │
 FUND, INC., et al.,                                 │
                             Defendants-Appellees. │
                                                     ┘
                        Appeal from the United States District Court
                     for the Western District of Tennessee at Memphis.
          Nos. 2:13-cv-02841; 2:13-cv-02839—Samuel H. Mays, Jr., District Judge.

                                 Argued: April 19, 2016

                            Decided and Filed: May 19, 2016

             Before: COLE, Chief Judge; CLAY and GIBBONS, Circuit Judges.
                                  _________________

                                       COUNSEL

ARGUED: H. Naill Falls, Jr., FALLS & VEACH, Nashville, Tennessee, for Appellants. Peter
Sean Fruin, MAYNARD, COOPER & GALE, P.C., Birmingham, Alabama, for Appellees. ON
BRIEF: H. Naill Falls, Jr., FALLS & VEACH, Nashville, Tennessee, for Appellants. Peter
Sean Fruin, Kathryn Roe Eldridge, MAYNARD, COOPER & GALE, P.C., Birmingham,
Alabama, Kevin C. Logue, Kevin P. Broughel, PAUL HASTINGS LLP, New York, New York,
Britt K. Latham, Joseph B. Crace, Jr., BASS, BERRY & SIMS PLC, Nashville, Tennessee, for
Appellees.




                                             1
Nos. 15-5903/5905        Stein, et al. v. Regions Morgan Keegan Select, et al.        Page 2


                                       _________________

                                               OPINION
                                       _________________

       CLAY, Circuit Judge. Plaintiffs, investors seeking recovery for substantial investment
losses, appeal the district court’s dismissal of their actions filed pursuant to the Securities Act of
1933, 15 U.S.C. §§ 77k, 77l, and 77o, the Securities Exchange Act of 1934, 15 U.S.C. §§ 78j(b)
and 78t(a), and SEC Rule 10b-5, 17 C.F.R. § 240.10b-5, as barred by the applicable statutes of
limitations. We agree that these actions were untimely, and AFFIRM, but hold that they were
barred by the applicable statutes of repose.

                                         BACKGROUND

                                       Factual Background

       The remaining Plaintiffs on appeal, Andrew M. Stein, Stein Holdings, Inc., Stein
Investments, LLC, (collectively, the “Stein Plaintiffs”), Warren Canale, and Canale Funeral
Directors, Inc., (collectively, the “Canale Plaintiffs”), invested and lost significant amounts
money in five investment funds: the Regions Morgan Keegan Select High Income Fund, Inc., the
RMK High Income Fund, the RMK Advantage Income Fund, the RMK Strategic Income Fund,
and the RMK Multi-Sector High Income Fund, all of which are named as Defendants in this
action (the “Funds”). The Select Fund is an open-end fund, while the rest are closed-end funds.
After the Funds lost nearly 90% of their value in 2007 and 2008, management of the four closed-
end funds was turned over to a different investment advisor in July 2008. The remaining funds
were deemed “unsalvageable” at an indeterminate date. Some regulatory activity ensued in
subsequent years, but Plaintiffs allege no further misconduct by any Defendant after the transfer
of the closed-end funds. When Plaintiffs filed this action in 2013, they also named as Defendants
the Funds’ investment advisor, Regions Investment Management, Inc., and Regions Investment
Management’s two corporate parents, RFC Financial Holding, LLC and Regions Financial
Corporation.

       Plaintiffs allege that these catastrophic losses occurred because the Funds were
overvalued and heavily concentrated in certain types of risky securities. According to Plaintiffs,
Nos. 15-5903/5905          Stein, et al. v. Regions Morgan Keegan Select, et al.     Page 3


Defendants unlawfully concealed the Funds’ risks, overvaluation, and lack of diversification
from investors and the SEC, and Plaintiffs relied on these material misrepresentations of fact in
deciding to invest in the Funds. All Plaintiffs have previously sought recourse for their losses—
either in arbitration, in court, or both.

Canale Funeral Arbitration

        Plaintiffs’ contracts with Morgan Keegan & Co., Inc.—which underwrote and provided
services to the Funds but is not a defendant in this case—contained an arbitration clause covering
“all controversies between you and Morgan Keegan (or any of Morgan Keegan’s present or
former officers, directors, agents or employees) which may arise from any account or for any
cause whatsoever.” (Stein R. 13–2 at Page ID 500; Canale R. 15–1, Client Agreement at Page
ID 581.) In early 2008, Canale Funeral filed a statement of claim before the Financial Industry
Regulatory Authority (“FINRA”) alleging common law negligence and unsuitability, breach of
fiduciary duty and breach of loyalty, breach of contract, common law fraud and
misrepresentation, and violations of the Tennessee Blue Sky Laws and the Tennessee Consumer
Protection Act. Canale Funeral’s factual allegations were largely the same as in this action: the
Funds made misrepresentations about the Funds’ diversification, valuation, and degree of risk,
on which Canale Funeral relied in deciding to invest in the Funds. These claims were denied
with prejudice on July 10, 2009.

Stein Plaintiffs’ Arbitration

        On August 29, 2008, the Stein Plaintiffs filed a statement of claim against Morgan
Keegan & Co., Inc. before FINRA alleging that the Funds’ illiquidity, risk, and valuation had
been misrepresented. Unlike Canale Funeral, the Stein Plaintiffs alleged violations of federal
securities laws, including various sections of the Securities Act of 1933, the Securities Exchange
Act of 1934, and SEC Rule 10b-5, nearly all of which they invoke again in this action. In their
statement of claim, the Stein Plaintiffs also asserted violations of the Tennessee Securities Act,
National Association of Securities Dealers (NASD) conduct rules, unsuitability, breach of
fiduciary duty, negligence, failure to supervise, breach of contract, fraud, vicarious liability, and
civil conspiracy. FINRA granted $2,500,000 in damages for unsuitability, negligence, and
Nos. 15-5903/5905        Stein, et al. v. Regions Morgan Keegan Select, et al.      Page 4


failure to supervise but denied all other claims, including the federal law claims, on February 19,
2010.

Stein Plaintiffs’ 2008 Lawsuit

        On August 29, 2008—the same day that they filed their FINRA claim—the Stein
Plaintiffs filed a complaint in Tennessee state court, which did not name any Defendant in the
present action, making largely the same factual claims and alleging violation of federal securities
laws and the Tennessee Securities Act, civil conspiracy, and professional negligence. After the
case was removed to the United States District Court for the Western District of Tennessee, but
before the defendants had answered or filed a motion to dismiss, the Stein Plaintiffs voluntarily
dismissed the case. On December 31, 2008, the district court entered an order and judgment
dismissing the case without prejudice.

The Rice Action

        On February 25, 2009, some nineteen investors filed suit in Alabama state court over
their losses from the Funds in a case called Grantland Rice II, et al. v. Regions Financial
Corporation, et al. An amendment to the amended complaint filed on January 5, 2010 added the
Stein Plaintiffs and Warren Canale (but not Canale Funeral) as plaintiffs. The second amended
Rice complaint, which named only Regions Financial Corporation and Regions Investment
Management of the current Defendants, described the collapse of the Funds, and alleged the
same misrepresentations with respect to risk, liquidity, and diversification.1 The Rice plaintiffs
framed their claims solely in terms of state law, claiming common-law misrepresentation and
fraudulent concealment, violation of several states’ securities laws, negligent supervision, and
conspiracy.   After the trial court denied a motion to dismiss, the Rice defendants sought
mandamus relief, which the Alabama Supreme Court granted in Ex parte Regions Fin. Corp.,
67 So. 3d 45 (Ala. 2010). The Alabama Supreme Court, applying Maryland law, held that the
Rice plaintiffs’ claims were derivative and directed the trial court to dismiss the suit because the
plaintiffs had not complied with Alabama procedural requirements for initiating a derivative


        1
       The Rice plaintiffs sued Regions Investment Management under its former name, Morgan Asset
Management.
Nos. 15-5903/5905        Stein, et al. v. Regions Morgan Keegan Select, et al.      Page 5


action. Id. at 55–56. The trial court entered an order dismissing the action with prejudice on
January 17, 2011.

Actions by other plaintiffs

       Plaintiffs in this action were hardly the only RMK investors to seek recourse in the
courts. Two class actions, In re: Morgan Keegan Open-End Mutual Fund Litig., No. 2:07-cv-
2784, and Willis, et al. v. Morgan Keegan & Company, Inc. et al., No. 2:07-cv-2830, were filed
in the United States District Court for the Western District of Tennessee in December 2007.
After numerous suits were filed in various fora, the Judicial Panel on Multidistrict Litigation
transferred the remaining lawsuits to the United States District Court for the Western District of
Tennessee in February 2009. The district court provisionally certified a class for settlement
purposes in In re: Morgan Keegan on November 30, 2015. The district court approved the
settlement in Willis and certified the class action on August 5, 2013.

                                       Procedural History

       On October 25, 2013, the Stein Plaintiffs and the Canale Plaintiffs each filed nearly
identical six-count complaints in the United States District Court for the Western District of
Tennessee alleging violation of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933, 15
U.S.C. §§ 77k, 77l(a)(2), and 77o; Sections 10(b) and 20(a) of the Securities Exchange Act of
1934, 15 U.S.C. §§ 78j(b) and 78t(a); and SEC Rule 10b-5, 17 C.F.R. § 240.10b-5, as well as
common-law vicarious liability for violations of all these statutes and regulations. The Stein
Plaintiffs amended their complaint once and the Canale Plaintiffs amended their complaint twice.
In September 2014, after Defendants moved to dismiss both actions on a variety of grounds, the
district court granted in part and denied in part Defendants’ motions to dismiss in nearly identical
orders, in which it held that Plaintiffs’ claims were not untimely under the applicable statutes of
limitations and repose, and were not barred by res judicata. The district court also declined to
dismiss them as derivative. Defendants moved for reconsideration in both cases, arguing that the
district court had improperly held that Wyser-Pratte Mgmt. Co. v. Telxon Corp., 413 F.3d 553
(6th Cir. 2005), was no longer binding precedent, and Wyser-Pratte obligated the district court to
find that Plaintiffs’ claims were barred by the relevant statutes of limitations. Applying Wyser-
Nos. 15-5903/5905          Stein, et al. v. Regions Morgan Keegan Select, et al.      Page 6


Pratte, the district court granted the motions for reconsideration in both cases and dismissed
Plaintiffs’ claims in full on July 31, 2015 on the grounds that Plaintiffs’ claims were barred by
the statute of limitations. After Plaintiffs appealed, the two cases were consolidated for briefing
and argument.

                                            DISCUSSION

                                         Standard of Review

          This Court reviews de novo the grant of a motion to dismiss pursuant to Rule 12(b)(6) for
failure to state a claim upon which relief may be granted. Cataldo v. U.S. Steel Corp., 676 F.3d
542, 547 (6th Cir. 2012). In reviewing the grant of a motion to dismiss, this Court “construe[s]
the complaint in the light most favorable to the plaintiff and accept[s] all factual allegations as
true.” Laborers’ Local 265 Pension Fund v. iShares Tr., 769 F.3d 399, 403 (6th Cir. 2014). To
survive a motion to dismiss under Rule 12(b)(6), a plaintiff must allege facts in the complaint
that “‘state a claim to relief that is plausible on its face’ and that, if accepted as true, are
sufficient to ‘raise a right to relief above the speculative level.’” Wesley v. Campbell, 779 F.3d
421, 427 (6th Cir. 2015) (quoting Handy-Clay v. City of Memphis, 695 F.3d 531, 538 (6th Cir.
2012)).

          The district court’s determination that a complaint was barred by the statute of limitations
is a conclusion of law that this Court reviews de novo. Kelly v. Burks, 415 F.3d 558, 560 (6th
Cir. 2005). While a complaint need not plead the absence of an affirmative defense such as the
statute of limitations, when “the allegations in the complaint affirmatively show that the claim is
time-barred . . . dismissing the claim under Rule 12(b)(6) is appropriate.” Cataldo, 676 F.3d at
547 (citing Jones v. Bock, 549 U.S. 199, 215 (2007)). This Court may affirm a decision of the
district court for any reason supported by the record, including on grounds different from those
on which the district court relied. U.S. Postal Serv. v. Nat’l Ass’n of Letter Carriers, AFL-CIO,
330 F.3d 747, 750 (6th Cir. 2003).
Nos. 15-5903/5905         Stein, et al. v. Regions Morgan Keegan Select, et al.         Page 7


       A.       Overview of statutes of limitation and statutes of repose

       Defendants provide two alternative arguments that Plaintiffs’ claims are untimely: both
the applicable statutes of limitations and statutes of repose bar Plaintiffs’ claims in their entirety.
The Supreme Court recently clarified the distinctions between these related concepts, each of
which may make a plaintiff’s action untimely, in CTS Corp. v. Waldburger, 134 S. Ct. 2175
(2014). CTS concerned whether 42 U.S.C. § 9658, which preempts state statutes of limitations
for certain environmental tort actions, also preempted a North Carolina statute of repose for a
particular tort. In deciding that the state statute of repose was not preempted, the Supreme Court
stressed the differences between statutes of limitation and of repose, despite their “considerable
common ground.” Id. at 2182. “In the ordinary course,” the Supreme Court explained, “a statute
of limitations creates ‘a time limit for suing in a civil case, based on the date when the claim
accrued.’” Id. (quoting Black’s Law Dictionary 1546 (9th ed. 2009)). However, a statute of
repose “puts an outer limit on the right to bring a civil action,” which is “measured not from the
date on which the claim accrues but instead from the date of the last culpable act or omission of
the defendant.” Id. The two doctrines reflect slightly different purposes:

       Statutes of limitations require plaintiffs to pursue diligent prosecution of known
       claims. Statutes of limitations promote justice by preventing surprises through
       plaintiffs’ revival of claims that have been allowed to slumber until evidence has
       been lost, memories have faded, and witnesses have disappeared. Statutes of
       repose also encourage plaintiffs to bring actions in a timely manner, and for many
       of the same reasons. But the rationale has a different emphasis. Statutes of
       repose effect a legislative judgment that a defendant should be free from liability
       after the legislatively determined period of time. Like a discharge in bankruptcy,
       a statute of repose can be said to provide a fresh start or freedom from liability.
       Indeed, the Double Jeopardy Clause has been described as a statute of repose
       because it in part embodies the idea that at some point a defendant should be able
       to put past events behind him.

Id. at 2183 (internal alterations and citations omitted). Another “central distinction” between
statutes of limitation and statutes of repose relates to the doctrine of equitable tolling:

       Statutes of limitations, but not statutes of repose, are subject to equitable tolling, a
       doctrine that pauses the running of, or “tolls,” a statute of limitations when a
       litigant has pursued his rights diligently but some extraordinary circumstance
       prevents him from bringing a timely action. Statutes of repose, on the other hand,
       generally may not be tolled, even in cases of extraordinary circumstances beyond
Nos. 15-5903/5905           Stein, et al. v. Regions Morgan Keegan Select, et al.                Page 8


        a plaintiff’s control. . . . [A] statute of repose is a judgment that defendants should
        be free from liability after the legislatively determined period of time, beyond
        which the liability will no longer exist and will not be tolled for any reason.

Id. (internal quotations and citations omitted).

        The statutes pursuant to which Plaintiffs seek to bring their claims impose time limits on
bringing an action. Section 13 of the Securities Act of 1933, 15 U.S.C. § 77m, states as follows:

        No action shall be maintained to enforce any liability created under section 77k or
        77l(a)(2) of this title unless brought within one year after the discovery of the
        untrue statement or the omission, or after such discovery should have been made
        by the exercise of reasonable diligence . . . . In no event shall any such action be
        brought to enforce a liability created under section 77k or 77l(a)(1) of this title
        more than three years after the security was bona fide offered to the public, or
        under section 77l(a)(2) of this title more than three years after the sale.

The Supreme Court has described this framework as a “1–year period after discovery combined
with a 3–year period of repose.” Lampf, Pleva, Lipkind, Prupis & Petigrow v. Gilbertson,
501 U.S. 350, 360 (1991). The Second Circuit has clarified that the one-year period is a statute
of limitations, a characterization we adopt. Police & Fire Ret. Sys. of City of Detroit v. IndyMac
MBS, Inc., 721 F.3d 95, 107 (2d Cir. 2013).

        The Securities Exchange Act of 1934, 15 U.S.C. § 78a, et seq., likewise imposes separate
time limits for filing an action based on discovery of the violation and when the violation itself
occurred:

        [A] private right of action that involves a claim of fraud, deceit, manipulation, or
        contrivance in contravention of a regulatory requirement concerning the securities
        laws, as defined in section 3(a)(47) of the Securities Exchange Act of 1934 (15
        U.S.C. 78c(a)(47)), may be brought not later than the earlier of—

                 (1) 2 years after the discovery of the facts constituting the violation; or
                 (2) 5 years after such violation.2

28 U.S.C. § 1658(b); see also Wike v. Vertrue, Inc., 566 F.3d 590, 595–96 (6th Cir. 2009)
(applying § 1658(b) to Securities Exchange Act claims, which the opinion contrasted to the time
        2
          The two- and five-year limits were enacted as part of the Sarbanes-Oxley Act in 2002. See Merck & Co.
v. Reynolds, 559 U.S. 633, 647 (2010). Thus Lampf, which concerned Securities Exchange Act claims but predated
the Sarbanes-Oxley Act, discussed the one- and three-year periods contained in the Securities Act, 15 U.S.C. § 77m.
See 501 U.S. 350.
Nos. 15-5903/5905             Stein, et al. v. Regions Morgan Keegan Select, et al.                  Page 9


limits for Securities Act claims). The Supreme Court has held the two-year period to be a statute
of limitations, and described the five-year period as an “unqualified bar on actions instituted
‘5 years after such violation,’ § 1658(b)(2), giving defendants total repose after five years.”
Merck & Co. v. Reynolds, 559 U.S. 633, 650 (2010). We read this language as interpreting §
1658(b)(2) as a statute of repose. If primary liability is time-barred, courts dismiss claims based
on the liability of a party who controlled the primarily liable defendant. ATSI Commc’ns, Inc. v.
Shaar Fund, Ltd., 493 F.3d 87, 108 (2d Cir. 2007) (dismissing claim under 15 U.S.C. § 78t(a));
IndyMac, 721 F.3d at 113 (dismissing claim under 15 U.S.C. § 77o).3

         B.       Tolling principles in class actions

         Plaintiffs seek to apply the doctrine of American Pipe & Construction Co. v. Utah,
414 U.S. 538 (1974), to argue that the relevant statutes of limitation and of repose were tolled.
In that case, eleven days short of a year after the defendant corporations signed a consent decree
with the federal government in an antitrust case, the state of Utah filed an antitrust action of its
own against the defendants, which it purported to maintain as a class action under Rule 23. Id. at
540–41. Class certification was denied slightly less than seven months after filing; eight days
after the entry of the order denying class certification, over sixty towns, municipalities, and water
districts in Utah sought to intervene. Id. at 543–44. Although more than one year had elapsed
since the signing of the consent decree, the Supreme Court held that the motion to intervene was
timely because “the commencement of the original class suit tolls the running of the statute [of
limitations] for all purported members of the class who make timely motions to intervene after
the court has found the suit inappropriate for class action status,” and the intervenors had brought
their motion with three days to spare. Id. at 553.

         The Supreme Court extended American Pipe tolling to class members who opt out in
Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 176 n.13 (1974), and to plaintiffs who file separate
actions after the denial of class certification in Crown, Cork & Seal Co. v. Parker, 462 U.S. 345

         3
           Common law vicarious liability principles, asserted in Count VI, offer an avenue to recovery distinct from
the control liability provisions of the federal securities statutes asserted in Counts III and V. Holloway v. Howerdd,
536 F.2d 690, 694 (6th Cir. 1976). When plaintiffs assert vicarious liability theories for violations of federal
statutes, courts look to the statute giving rise to the cause of action to determine whether they are timely. See, e.g.,
Benfield v. Mocatta Metals Corp., 26 F.3d 19, 23 (2d Cir. 1994).
Nos. 15-5903/5905        Stein, et al. v. Regions Morgan Keegan Select, et al.       Page 10


(1983). In Crown, Cork & Seal, two former employees of the defendant corporation had brought
a putative class action alleging employment discrimination two months before the plaintiff
received a right-to-sue letter from the EEOC. Id. at 347. Nearly two years after the plaintiff
received the letter from the EEOC, the district court finally denied class certification, and the
plaintiff filed a lawsuit of his own less than ninety days later. Id. at 348. The Supreme Court
held that his complaint was timely because

       the commencement of a class action suspends the applicable statute of limitations
       as to all asserted members of the class who would have been parties had the suit
       been permitted to continue as a class action. Once the statute of limitations has
       been tolled, it remains tolled for all members of the putative class until class
       certification is denied.

Id. at 353–54 (internal quotations and citations omitted).

       Thus, American Pipe and Crown, Cork & Seal govern situations where a plaintiff files an
action after the district court resolves the issue of class certification. However, this Court
declined to extend American Pipe tolling to plaintiffs who file individual actions before the
district court rules on class certification in Wyser-Pratte Mgmt. Co. v. Telxon Corp., 413 F.3d
553 (6th Cir. 2005). Wyser-Pratte concerned whether Ohio state-law fraud claims had been
brought in a timely manner after other plaintiffs had sought to recover under federal securities
laws. Wyser-Pratte held, as an alternative basis for its dismissal of the plaintiff’s action, that “a
plaintiff who chooses to file an independent action without waiting for a determination on the
class certification issue may not rely on the American Pipe tolling doctrine.” Id. at 568. Wyser-
Pratte invoked judicial economy as the basis for its rule, stating that “[t]he purposes of American
Pipe tolling are not furthered when plaintiffs file independent actions before decision on the
issue of class certification, but are when plaintiffs delay until the certification issue has been
decided.” Id. at 569. It further explained:

       The parties and courts will not be burdened by separate lawsuits which, in any
       event, may evaporate once a class has been certified. At the point in [] litigation
       when a decision on class certification is made, investors usually are in a far better
       position to evaluate whether they wish to proceed with their own lawsuit, or to
       join a class, if one has been certified.

Id. (quoting In re WorldCom, Inc. Sec. Litig., 294 F. Supp. 2d 431, 452 (S.D.N.Y. 2003)).
Nos. 15-5903/5905            Stein, et al. v. Regions Morgan Keegan Select, et al.                  Page 11


         Plaintiffs argue vehemently that Wyser-Pratte is not binding on this Court because it
constitutes an improper limitation of Supreme Court doctrine, represents the minority rule, and
was wrongly decided.           We recognize that Wyser-Pratte now represents the minority rule.
Compare Glater v. Eli Lilly & Co., 712 F.2d 735, 739 (1st Cir. 1983) (approving in dicta of
forfeiture rule), with State Farm Mut. Auto. Ins. Co. v. Boellstorff, 540 F.3d 1223, 1230 (10th
Cir. 2008); In re Hanford Nuclear Reservation Litig., 534 F.3d 986, 1009 (9th Cir. 2008); In re
WorldCom Sec. Litig., 496 F.3d 245, 254–56 (2d Cir. 2007) (holding that American Pipe tolling
applies to plaintiffs who file actions while class certification is pending). That several of our
fellow Circuits chose not to follow our reasoning does not make Wyser-Pratte any less binding,
however; “a published prior panel decision ‘remains controlling authority unless an inconsistent
decision of the United States Supreme Court requires modification of the decision or this Court
sitting en banc overrules the prior decision.’” United States v. Elbe, 774 F.3d 885, 891 (6th Cir.
2014) (quoting Salmi v. Sec’y of Health & Human Servs., 774 F.2d 685, 689 (6th Cir. 1985)).4
However fervently Plaintiffs might wish, and even though we may have doubts about its holding,
we cannot today overrule Wyser-Pratte.                 Indeed, subsequent cases have recognized that it
remains controlling law. See Phipps v. Wal-Mart Stores, Inc., 792 F.3d 637, 653 (6th Cir. 2015);
In re Vertrue Inc. Mktg. & Sales Practices Litig., 719 F.3d 474, 480 (6th Cir. 2013).

         C.       Application of Wyser-Pratte to Plaintiffs’ Actions

         The Stein and Canale Plaintiffs each filed their initial federal court complaints on
October 25, 2013. Because each Plaintiff sought recourse in arbitration or in court by early 2010
at the latest, Plaintiffs had clearly discovered the facts constituting the violation several years
prior to bringing this action, potentially barring claims under 15 U.S.C. §§ 77k, 77l(a)(2), and
77o (one-year statute of limitations) or 15 U.S.C. §§ 78j(b) and 78t(a) (two-year statute of
limitations). Plaintiffs’ claims can, however, be saved, if the applicable statute of limitations was
tolled, as Plaintiffs argue it was, pursuant to American Pipe. See 414 U.S. 538.


         4
          Before it granted reconsideration, the district court noted that the decision of the Southern District of New
York in WorldCom, which Wyser-Pratte followed, was reversed on appeal, and chose to apply the rule of the
Second Circuit that Plaintiffs were entitled to the benefit of American Pipe tolling, “independent actions”
notwithstanding. Although the district court seemingly realized its mistake by granting reconsideration, we take this
opportunity to remind the district court that this was error.
Nos. 15-5903/5905        Stein, et al. v. Regions Morgan Keegan Select, et al.      Page 12


       Before proceeding to Plaintiffs’ arguments about why Wyser-Pratte is inapplicable, we
must first examine the class actions on which they rely. Plaintiffs argue that the statute of
limitations was tolled under American Pipe by the In re: Morgan Keegan and Willis class
actions, which were filed in the United States District Court for the Western District of
Tennessee on December 6, 2007 and December 21, 2007, respectively. Defendants Regions
Financial Corporation, RFC Holding and Regions Investment Management were named in both
actions (albeit, in the case of the latter two, under their former names); the closed-end funds were
named in Willis; and the Select Fund was named in In re Morgan Keegan. Both actions asserted
violations of Sections 11, 12(a)(2), and 15 of the Securities Act, Sections 10(b) and 20 of the
Securities Exchange Act, and SEC Rule 10b-5, as the complaints in this consolidated case do.
The district court provisionally certified a class for settlement purposes in In re: Morgan Keegan
on November 30, 2015. The district court approved the settlement in Willis and certified the
class action on August 5, 2013, some two and a half months before Plaintiffs filed their
complaints. Because the order in Willis exempted parties who had filed FINRA arbitrations that
were not dismissed to participate in the class actions or state court actions filed during the
pendency of litigation that were dismissed with prejudice, Plaintiffs appear not to be class
members. Thus, the Rice action, the FINRA arbitrations, and the Stein state court action were
filed during the pendency of the class proceedings in Willis; all of these and this instant action
were filed during the pendency of the In re Morgan Keegan class proceedings.

       Plaintiffs also offer three reasons why they have not forfeited their claims under Wyser-
Pratte: the Alabama state court action in Rice was significantly different from the 2007 class
action complaints because the Rice plaintiffs asserted only state-law claims; not all of the current
Defendants were named as defendants in Rice; and Canale Funeral’s FINRA arbitration against
Morgan Keegan & Co.—a non-party to this case—did not force Canale Funeral to forfeit its
claims against Defendants. Wyser-Pratte itself dispenses with the first of these contentions. In
Wyser-Pratte, the plaintiff filed its lawsuit after unrelated plaintiffs filed separate lawsuits
against the two corporate defendants; “[a]ll three actions . . . alleged the same scheme to falsely
inflate Telxon’s financial results.” 413 F.3d at 558. Although the previous plaintiffs asserted
federal securities fraud claims against one defendant while the later plaintiff relied only on Ohio
state law to support its fraud allegation, we held that the later plaintiff had forfeited its Ohio
Nos. 15-5903/5905        Stein, et al. v. Regions Morgan Keegan Select, et al.      Page 13


fraud claim. Id. at 569. The 2007 class action complaints in Willis and In re Morgan Keegan
complaint alleged the same misrepresentations with respect to risk, liquidity, and diversification
as the second amended Rice complaint did (and the instant complaints continue to do), and
framed their claims in terms of federal securities law; that the Rice plaintiffs proceeded purely on
state law securities fraud theories does not allow the Stein Plaintiffs and Warren Canale, who
were plaintiffs in Rice, to evade Wyser-Pratte.

       The district court evidently considered the Rice action, to which the Funds were not
parties, sufficient to dismiss all of the Stein Plaintiffs’ and Warren Canale’s claims as to all
Defendants. Yet Wyser-Pratte did not address what to do when a plaintiff files an independent
action after a class action has been filed where the subsequent lawsuit names some, but not all, of
the defendants in the class action, as Rice did. Reasoning that a “class action must afford the
defendant with adequate notice,” Wyser-Pratte held that “class action tolling does not apply to a
defendant not named in the class action complaint.” 413 F.3d at 567. By the same token, its
forfeiture rule might well not apply to any defendant not named in the subsequent action, and we
decline to extend the forfeiture rule to defendants not subsequently named.

       Plaintiffs’ final argument—that Canale Funeral’s FINRA arbitration against non-party
Morgan Keegan & Co. should not trigger Wyser-Pratte’s forfeiture rule against Defendants—
reveals still more subtleties that the district court glossed over. In granting reconsideration, the
district court held that the Canale Funeral arbitration was an “independent action” sufficient to
trigger Wyser-Pratte:

       Under Vertrue and Wyser-Pratte, a plaintiff who chooses to file an independent
       action without waiting for a determination on the class certification issue may not
       rely on the American Pipe tolling doctrine. . . . Canale and Canale Funeral chose
       to pursue independent actions: Canale joined the Rice Case on January 5, 2010,
       and Canale Funeral filed a Statement of Claim with FINRA against Morgan
       Keegan on January 22, 2008. Canale and Canale Funeral chose not to wait for a
       decision on the class certification issues in Willis and the Open-End Fund
       Litigation. Once Canale joined the Rice action and Canale Funeral filed its
       Statement of Claim, they forfeited their opportunity to invoke the American Pipe
       tolling doctrine.

(Canale R. 36, Order Granting Reconsideration at Page ID 880.) Wyser-Pratte indeed applied its
forfeiture doctrine to those plaintiffs who file “independent actions” prior to resolution of class
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certification in the initial class action. See 413 F.3d at 568–69. It did not, however, have
occasion to delineate fully what types of independent actions would trigger its forfeiture rule, or
under what circumstances; all three “actions” were federal court lawsuits before the same district
judge, and the only remaining defendant on appeal had been named in one of the prior lawsuits.
Id. at 558.

        Canale Funeral proceeded in arbitration against Morgan Keegan & Co., which, although
not a party to this case, was named as a defendant in Willis and In re Morgan Keegan. In
essence, the district court ruled that Canale Funeral’s arbitration against Morgan Keegan & Co.,
whose statement of claim described the same course of conduct as in the 2007 class action
complaints, was sufficient to forfeit claims against parties not present at the arbitration (or bound
by the arbitration clause), and dismissed its claims as to all Defendants in this action. If Wyser-
Pratte does not necessarily cause plaintiffs to forfeit claims against parties not named in a
subsequent action, it certainly does not compel this result, which would deprive Canale Funeral
the opportunity to proceed against any other entity—and of any day in court whatsoever.

        Because Plaintiffs filed this action during the pendency of the class certification
proceedings in In re Morgan Keegan, they have forfeited American Pipe tolling with respect to
the defendants named in that case: RFC Financial Holding, Regions Financial Corporation,
Regions Investment Management, and the Select Fund. Their claims are untimely as to these
parties, proving fatal to Counts III and V, which assert violation of the very federal securities
laws asserted in the prior class actions and name no other Defendants. Count II likewise cannot
be sustained, because it is asserted against only the Select Fund, several non-parties to the
litigation dismissed by the district court, and the RMK Multi-Sector High Income Fund, which
was dismissed from this count, a ruling Plaintiffs do not contest on appeal. With respect to the
closed-end funds, Plaintiffs waited for resolution of the class issue in Willis and only thereafter
filed suit. We need not remand for determination of whether any portion of the remaining counts
may survive, however, because the applicable statutes of repose are dispositive as to all claims.
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       D.      Statutes of Repose

       Defendants argue that Plaintiffs’ claims are barred by the relevant statutes of repose, and
that American Pipe tolling applies only to statutes of limitations. Plaintiffs counter that the
Willis and In re Morgan Keegan litigation tolled the statute of repose pursuant to American Pipe,
making their claims timely.

       The statute of repose applicable to Plaintiffs’ claims arising under Sections 11 and
12(a)(2) of the Securities Act, 15 U.S.C. §§ 77k and 77l(a)(2)—which establish civil liability for
false or misleading registration statements and investment prospectuses or communications,
respectively—can be found in 15 U.S.C. § 77m, which requires that

       [i]n no event shall any . . . action be brought to enforce a liability created under
       section 77k . . . of this title more than three years after the security was bona fide
       offered to the public, or under section 77l(a)(2) of this title more than three years
       after the sale.

       Although Plaintiffs’ complaints identify the dates that numerous allegedly false
registration statements were made in violation of Section 11 of the Securities Act, 15 U.S.C.
§ 77k, they fail to specify in all cases when the securities were actually offered to the public,
which triggered the three-year statute of repose for § 77k violations, or when those securities
were actually sold, which triggered the statute of repose for § 77l(a)(2). Plaintiffs also do not
make clear when the violations of Section 10(b) and 20(a) of Securities Exchange Act, 15 U.S.C.
§§ 78j(b) and 78t(a), occurred, or when they believe the five-year repose period to have started
running. See 28 U.S.C. § 1658(b)(2). In any event, Defendants cannot have offered securities to
the public, sold them, or engaged in any of the other misconduct alleged in the complaints after
July 2008, when management of the four closed-end funds was turned over to a different
investment advisor, and after which the allegations of misconduct by Defendants cease.

       Because Plaintiffs filed their respective complaints on October 25, 2013—more than five
years later—all of their claims are barred by the relevant three- or five-year statutes of repose,
absent tolling of some kind. Plaintiffs argue that American Pipe applies to statutes of repose and
served to toll the repose period while class certification was pending in Willis and In re Morgan
Keegan. Notwithstanding the issues that Plaintiffs’ tolling claims might encounter under Wyser-
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Pratte, Plaintiffs must first convince this Court to extend American Pipe tolling to statutes of
repose, an issue our Circuit has not yet had opportunity to resolve.

        Our fellow Circuits are split. The Tenth Circuit held that American Pipe tolled statutes of
repose pending class certification in Joseph v. Wiles, 223 F.3d 1155 (10th Cir. 2000), while the
Second Circuit came to the opposite conclusion in Police & Fire Ret. Sys. of City of Detroit v.
IndyMac MBS, Inc., 721 F.3d 95 (2d Cir. 2013). Joseph held that American Pipe was a form of
“legal tolling” distinct from equitable tolling and applicable to statutes of repose.5 223 F.3d at
1166–67. Joseph described its reasoning as follows:

        Statutes of repose are intended to demarcate a period of time within which a
        plaintiff must bring claims or else the defendant’s liability is extinguished. Here,
        the claim was brought within this period on behalf of a class of which Mr. Joseph
        was a member. Indeed, in a sense, application of the American Pipe tolling
        doctrine to cases such as this one does not involve “tolling” at all. Rather, Mr.
        Joseph has effectively been a party to an action against these defendants since a
        class action covering him was requested but never denied. Defendants’ potential
        liability should not be extinguished simply because the district court left the class
        certification issue unresolved. Consequently, we conclude that American Pipe
        tolling applies to the statute of repose governing Mr. Joseph’s action.

Id. at 1168 (internal citations omitted).

        IndyMac held that, regardless of whether American Pipe tolling were equitable or derived
from a statutory source, it could not apply to statutes of repose. 721 F.3d 95. It noted that that
the Supreme Court had previously held that the “three-year limitation” of Section 13 of the
Securities Act “is a period of repose inconsistent with tolling,” whose “purpose” was “‘clearly to
serve as a cutoff,’ to which ‘tolling principles’ do not apply.” Id. at 107 (quoting Lampf, Pleva,
Lipkind, Prupis & Petigrow v. Gilbertson, 501 U.S. 350, 363 (1991)). IndyMac therefore held
that Lampf had foreclosed equitable tolling of Section 13’s three-year repose period. Id. at 109.
If, however, American Pipe were instead a form of legal or class-action tolling derived from

        5
          Joseph did not define the term “legal tolling,” but the Supreme Court recently explained that “some
federal courts have used that term to describe our holding [in American Pipe] on the ground that the rule ‘is derived
from a statutory source,’ whereas equitable tolling is ‘judicially created.’” Credit Suisse Sec. (USA) LLC v.
Simmonds, 132 S. Ct. 1414, 1419 n.6 (2012) (quoting Arivella v. Lucent Technologies, Inc., 623 F. Supp. 2d 164,
176 (D. Mass. 2009)). Earlier this year, the Supreme Court referred to American Pipe tolling in passing as “class-
action tolling,” a theory the petitioner presented separately from its arguments regarding equitable tolling.
Menominee Indian Tribe of Wis. v. United States, 136 S. Ct. 750, 755 (2016).
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Rule 23, its application to statutes of repose would likewise violate the Rules Enabling Act. Id.
The Rules Enabling Act, 28 U.S.C. § 2072, which allows the Supreme Court to promulgate
“rules of practice and procedure,” including the Federal Rules of Civil Procedure, but mandates
that “[s]uch rules shall not abridge, enlarge or modify any substantive right.” Id. (citing
28 U.S.C. § 2072(b)).        Thus, allowing American Pipe to toll statutes of repose would
impermissibly affect the rights of defendants to be free of liability after three years. Id.

           Of these two cases, IndyMac has the more cogent and persuasive rule. Its holding is also
more consistent with the Supreme Court’s subsequent decision in CTS Corp. v. Waldburger. See
134 S. Ct. 2175. Like Lampf before it, CTS discussed at length the incompatibility of equitable
tolling and statutes of repose: “a statute of repose is a judgment that defendants should be free
from liability after the legislatively determined period of time, beyond which the liability will no
longer exist and will not be tolled for any reason.” 134 S. Ct. at 2183 (emphasis added). As
IndyMac noted, Lampf explained that the “purpose of the 3–year limitation” in Section 13 of the
Securities Act “is clearly to serve as a cutoff.” 501 U.S. at 363. The statutes of repose at issue in
this case are indeed unequivocal in extinguishing liability. Section 13 of the Securities Act states
that “[i]n no event shall any such action be brought to enforce a liability created under section
77k . . . more than three years after the security was bona fide offered to the public, or under
section 77l(a)(2) of this title more than three years after the sale.” 15 U.S.C. § 77m (emphasis
added). The statute of repose applicable to Plaintiffs’ claims under the Securities Exchange Act
likewise states, in no uncertain terms, that an action “may be brought not later than . . . 5 years
after such violation.” 28 U.S.C. § 1658(b)(2). The Supreme Court held that § 1658(b)(2) was an
“unqualified bar on actions” after the five-year period, “giving defendants total repose” after that
time. Merck, 559 U.S. at 650.

           The Supreme Court’s discussion of the purposes of statutes of repose in CTS and Lampf
is no less pertinent even assuming American Pipe tolling is a form of class-action tolling
deriving its authority from Rule 23. IndyMac rightly identified a potential issue under the Rules
Enabling Act, which “forbids interpreting Rule 23 to ‘abridge, enlarge or modify any substantive
right.’”     Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 367 (2011) (quoting 28 U.S.C.
§ 2072(b)).      In order not to overstep this limitation, “the Rule must ‘really regulat[e]
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procedure,—the judicial process for enforcing rights and duties recognized by substantive law
and for justly administering remedy and redress for disregard or infraction of them.’” Shady
Grove Orthopedic Associates, P.A. v. Allstate Ins. Co., 559 U.S. 393, 407 (2010) (quoting
Sibbach v. Wilson & Co., 312 U.S. 1, 14 (1941)). If a Rule “governs only ‘the manner and the
means’ by which the litigants’ rights are ‘enforced,’ it is valid; if it alters ‘the rules of decision
by which [the] court will adjudicate [those] rights,’ it is not.” Id. (quoting Mississippi Pub.
Corp. v. Murphree, 326 U.S. 438, 446 (1946)) (alteration in original). After reviewing cases in
which Rules Enabling Act challenges had been denied, the Supreme Court held that the Rules in
question governed procedure because they “undeniably regulated only the process for enforcing
those rights; none altered the rights themselves, the available remedies, or the rules of decision
by which the court adjudicated either.” Id. at 407–08.

         Statutes of repose arguably affect rights, remedies, and rules of decision: they confer on
defendants a right to be free of liability by imposing an absolute temporal bar on claims, prevent
recovery by plaintiffs after the repose period, and impose the additional decision rule that courts
must rule in defendants’ favor if plaintiffs delay beyond the statutory period to bring suit. That
statutes of repose vest a substantive right in defendants to be free of liability is underscored by
the Supreme Court’s analogies in CTS between statutes of repose and the ability to discharge
debts in bankruptcy or to be free of double jeopardy in criminal proceedings. See 134 S. Ct. at
2183. Because statutes of repose give priority to defendants’ right to be free of liability after a
certain absolute period of time (rather than plaintiffs’ ability to bring claims), we cannot endorse
the Tenth Circuit’s view—expressed prior to CTS—that “[d]efendants’ potential liability should
not be extinguished simply because the district court left the class certification issue unresolved.”
Joseph, 223 F.3d at 1168. We therefore join the Second Circuit in holding that, regardless of
whether American Pipe tolling is derived from courts’ equity powers or from Rule 23, it does not
apply to statutes of repose.6


         6
          We recognize that if a lawsuit asserts causes of action subject both to a statute of limitations and a statute
of repose, a putative class member in our Circuit is placed in a bind: beyond the repose period, no putative class
member may file an action, even if the district court has yet to rule on class certification. This is consistent with the
Supreme Court’s pronouncement that a statute of repose “mandates that there shall be no cause of action beyond a
certain point.” CTS, 134 S. Ct. at 2187. However, Wyser-Pratte imposes an additional hurdle: if a putative class
member files a separate action between the lapse of the limitations period and of the repose period, that action is
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        Plaintiffs filed the instant actions on October 25, 2013, asserting claims with repose
periods of three and five years. If the repose periods began to run before October 25, 2010 for
the Securities Act claims and October 25, 2008 for the Securities Exchange Act claims,
Plaintiffs’ claims are barred are in their entirety. Unquestionably, they did—the non-fund
Defendants turned over management of the closed-end funds at some point in July 2008, and the
complaints allege no misconduct whatsoever by any Defendant after that date. Plaintiffs’ claims
are thus time-barred by the statutes of repose. We decline to address Defendants’ alternative
arguments regarding res judicata and collateral estoppel.

                                               CONCLUSION

        For the reasons stated above, we AFFIRM the district court’s dismissal of Plaintiffs’
claims in full on the grounds that they are barred by the applicable statutes of repose.




barred because of Wyser-Pratte’s forfeiture rule.     Thus, a concerned potential plaintiff must file within the
limitations period or be out of luck.
         In declining to adopt a forfeiture rule, the Second Circuit read American Pipe and Crown, Cork & Seal as
principally concerned with protecting the interests of class members, particularly “from being forced to file
individual suits in order to preserve their claims,” rather than avoiding duplicative litigation. WorldCom, 496 F.3d
at 256. Thus, by adopting a forfeiture rule grounded in judicial economy, Wyser-Pratte may have misapprehended
the primary motivating concerns of American Pipe.
