TRINITY LUTHERAN CHURCH OF COLUMBIA, INC. v. COMER, DIRECTOR, MISSOURI DEPARTMENT OF NATURAL RESOURCES

Certiorari To The United States Court Of Appeals For The Eighth Circuit

No. 15-577. Argued April 19, 2017--Decided June 26, 2017

The Trinity Lutheran Church Child Learning Center is a Missouri preschool and daycare center. Originally established as a nonprofit organization, the Center later merged with Trinity Lutheran Church and now operates under its auspices on church property. Among the facilities at the Center is a playground, which has a coarse pea gravel surface beneath much of the play equipment. In 2012, the Center sought to replace a large portion of the pea gravel with a pour-in-place rubber surface by participating in Missouri’s Scrap Tire Program. The program, run by the State’s Department of Natural Resources, offers reimbursement grants to qualifying nonprofit organizations that install playground surfaces made from recycled tires. The Department had a strict and express policy of denying grants to any applicant owned or controlled by a church, sect, or other religious entity. Pursuant to that policy, the Department denied the Center’s application. In a letter rejecting that application, the Department explained that under Article I, Section 7 of the Missouri Constitution, the Department could not provide financial assistance directly to a church. The Department ultimately awarded 14 grants as part of the 2012 program. Although the Center ranked fifth out of the 44 applicants, it did not receive a grant because it is a church.

Trinity Lutheran sued in Federal District Court, alleging that the Department’s failure to approve its application violated the Free Exercise Clause of the First Amendment. The District Court dismissed the suit. The Free Exercise Clause, the court stated, prohibits the government from outlawing or restricting the exercise of a religious practice, but it generally does not prohibit withholding an affirmative benefit on account of religion. The District Court likened the case before it to Locke v. Davey, 540 U. S. 712, where this Court upheld against a free exercise challenge a State’s decision not to fund degrees in devotional theology as part of a scholarship program. The District Court held that the Free Exercise Clause did not require the State to make funds available under the Scrap Tire Program to Trinity Lutheran. A divided panel of the Eighth Circuit affirmed. The fact that the State could award a scrap tire grant to Trinity Lutheran without running afoul of the Establishment Clause of the Federal Constitution, the court ruled, did not mean that the Free Exercise Clause compelled the State to disregard the broader antiestablishment principle reflected in its own Constitution.

Held: The Department’s policy violated the rights of Trinity Lutheran under the Free Exercise Clause of the First Amendment by denying the Church an otherwise available public benefit on account of its religious status. Pp. 6–15.

(a) This Court has repeatedly confirmed that denying a generally available benefit solely on account of religious identity imposes a penalty on the free exercise of religion. Thus, in McDaniel v. Paty, 435 U. S. 618, the Court struck down a Tennessee statute disqualifying ministers from serving as delegates to the State’s constitutional convention. A plurality recognized that such a law discriminated against McDaniel by denying him a benefit solely because of his “status as a ‘minister.’ ” Id., at 627. In recent years, when rejecting free exercise challenges to neutral laws of general applicability, the Court has been careful to distinguish such laws from those that single out the religious for disfavored treatment. See, e.g., Lyng v. Northwest Indian Cemetery Protective Assn., 485 U. S. 439; Employment Div., Dept. of Human Resources of Ore. v. Smith, 494 U. S. 872; and Church of Lukumi Babalu Aye, Inc. v. Hialeah, 508 U. S. 520. It has remained a fundamental principle of this Court’s free exercise jurisprudence that laws imposing “special disabilities on the basis of . . . religious status” trigger the strictest scrutiny. Id., at 533. Pp. 6–9.

(b) The Department’s policy expressly discriminates against otherwise eligible recipients by disqualifying them from a public benefit solely because of their religious character. Like the disqualification statute in McDaniel, the Department’s policy puts Trinity Lutheran to a choice: It may participate in an otherwise available benefit program or remain a religious institution. When the State conditions a benefit in this way, McDaniel says plainly that the State has imposed a penalty on the free exercise of religion that must withstand the most exacting scrutiny. 435 U. S., at 626, 628.

The Department contends that simply declining to allocate to Trinity Lutheran a subsidy the State had no obligation to provide does not meaningfully burden the Church’s free exercise rights. Absent any such burden, the argument continues, the Department is free to follow the State’s antiestablishment objection to providing funds directly to a church. But, as even the Department acknowledges, the Free Exercise Clause protects against “indirect coercion or penalties on the free exercise of religion, not just outright prohibitions.” Lyng, 485 U. S., at 450. Trinity Lutheran is not claiming any entitlement to a subsidy. It is asserting a right to participate in a government benefit program without having to disavow its religious character. The express discrimination against religious exercise here is not the denial of a grant, but rather the refusal to allow the Church—solely because it is a church—to compete with secular organizations for a grant. Pp. 9–11.

(c) The Department tries to sidestep this Court’s precedents by arguing that this case is instead controlled by Locke v. Davey. It is not. In Locke, the State of Washington created a scholarship program to assist high-achieving students with the costs of postsecondary education. Scholarship recipients were free to use state funds at accredited religious and non-religious schools alike, but they could not use the funds to pursue a devotional theology degree. At the outset, the Court made clear that Locke was not like the cases in which the Court struck down laws requiring individuals to “choose between their religious beliefs and receiving a government benefit.” 540 U. S., at 720–721. Davey was not denied a scholarship because of who he was; he was denied a scholarship because of what he proposed to do. Here there is no question that Trinity Lutheran was denied a grant simply because of what it is—a church.

The Court in Locke also stated that Washington’s restriction on the use of its funds was in keeping with the State’s antiestablishment interest in not using taxpayer funds to pay for the training of clergy, an “essentially religious endeavor,” id., at 721. Here, nothing of the sort can be said about a program to use recycled tires to resurface playgrounds. At any rate, the Court took account of Washington’s antiestablishment interest only after determining that the scholarship program did not “require students to choose between their religious beliefs and receiving a government benefit.” Id., at 720–721. There is no dispute that Trinity Lutheran is put to the choice between being a church and receiving a government benefit. Pp. 11–14.

(d) The Department’s discriminatory policy does not survive the “most rigorous” scrutiny that this Court applies to laws imposing special disabilities on account of religious status. Lukumi, 508 U. S., at 546. That standard demands a state interest “of the highest order” to justify the policy at issue. McDaniel, 435 U. S., at 628 (internal quotation marks omitted). Yet the Department offers nothing more than Missouri’s preference for skating as far as possible from religious establishment concerns. In the face of the clear infringement on free exercise before the Court, that interest cannot qualify as compelling. Pp. 14–15.

788 F. 3d 779, reversed and remanded.

Roberts, C. J., delivered the opinion of the Court, except as to footnote 3. Kennedy, Alito, and Kagan, JJ., joined that opinion in full, and Thomas and Gorsuch, JJ., joined except as to footnote 3. Thomas, J., filed an opinion concurring in part, in which Gorsuch, J., joined. Gorsuch, J., filed an opinion concurring in part, in which Thomas, J., joined. Breyer, J., filed an opinion concurring in the judgment. Sotomayor, J., filed a dissenting opinion, in which Ginsburg, J., joined.


CALIFORNIA PUBLIC EMPLOYEES’ RETIREMENT SYSTEM v. ANZ SECURITIES, INC., et al.

Certiorari To The United States Court Of Appeals For The Second Circuit

No. 16-373. Argued April 17, 2017--Decided June 26, 2017

Section 11 of the Securities Act of 1933 gives purchasers of securities “a right of action against an issuer or designated individuals,” including securities underwriters, for any material misstatements or omissions in a registration statement. Omnicare, Inc. v. Laborers Dist. Council Constr. Industry Pension Fund, 575 U. S. ___, ___; see 15 U. S. C. 77k(a). Section 13 provides two time limits for 11 suits. The first sentence states that an action “must be 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 . . . .” The second sentence provides that “[i]n no event shall any such action be brought . . . more than three years after the security was bona fide offered to the public . . . .” 77m.

In 2007 and 2008, Lehman Brothers Holdings Inc. raised capital through several public securities offerings. Petitioner, the largest public pension fund in the country, purchased some of those securities; and it is alleged that respondents, various financial firms, are liable under the Act for their participation as underwriters in the transactions. In 2008, a putative class action was filed against respondents in the Southern District of New York. The complaint raised 11 claims, alleging that the registration statements for certain of Lehman’s 2007 and 2008 securities offerings included material misstatements or omissions. Because the complaint was filed on behalf of all persons who purchased the identified securities, petitioner was a member of the putative class.

In February 2011, more than three years after the relevant securities offerings, petitioner filed a separate complaint against respondents in the Northern District of California, alleging violations identical to those in the class action on petitioner’s own behalf. Soon thereafter, a proposed settlement was reached in the putative class action, but petitioner opted out of the class. Respondents then moved to dismiss petitioner’s individual suit, alleging that the 11 violations were untimely under the 3-year bar in the second sentence of 13. Petitioner countered that the 3-year period was tolled during the pendency of the class-action filing, relying on American Pipe & Construction Co. v. Utah, 414 U. S. 538. The trial court disagreed, and the Second Circuit affirmed, holding that American Pipe’s tolling principle is inapplicable to the 3-year bar. It also rejected petitioner’s alternative argument that the timely filing of the class action made petitioner’s individual claims timely as well.

Held: Petitioner’s untimely filing of its individual complaint more than three years after the relevant securities offering is ground for dismissal. Pp. 4–17.

(a) Section 13’s 3-year time limit is a statute of repose not subject to equitable tolling. Pp. 4–14.

(1) The two categories of statutory time bars—statutes of limitations and statutes of repose—each have “a distinct purpose.” CTS Corp. v. Waldburger, 573 U. S. ___, ___. Statutes of limitations are designed to encourage plaintiffs “ ‘to pursue diligent prosecution of known claims,’ ” id., at ___, while statutes of repose “effect a legislative judgment that a defendant should ‘be free from liability after the legislatively determined period of time,’ ” id., at ___. For this reason, statutes of limitations begin to run “when the cause of action accrues,” while statutes of repose begin to run on “the date of the last culpable act or omission of the defendant.” Id., at ___.

From the structure of 13, and the language of its second sentence, it is evident that the 3-year bar is a statute of repose. The instruction that “[i]n no event” shall an action be brought more than three years after the relevant securities offering admits of no exception. The statute also runs from the defendant’s last culpable act (the securities offering), not from the accrual of the claim (the plaintiff’s discovery of the defect).

This view is confirmed by 13’s two-sentence structure. The pairing of a shorter statute of limitations and a longer statute of repose is a common feature of statutory time limits. See, e.g., Gabelli v. SEC, 568 U. S. 442. Section 13’s history also supports the classification. The 1933 Securities Act’s original 2-year discovery period and 10-year outside limit were shortened a year later. The evident design of the shortened period was to protect defendants’ financial security by reducing the open period for potential liability. Pp. 4–7.

(2) The determination that the 3-year period is a statute of repose is critical here, for the question whether a tolling rule applies to a given statutory time bar is one “of statutory intent.” Lozano v. Montoya Alvarez, 572 U. S. 1, ___. In light of the purpose of a statute of repose, the provision is in general not subject to tolling. Tolling is permissible only where there is a particular indication that the legislature did not intend the statute to provide complete repose but instead anticipated the extension of the statutory period under certain circumstances. A statute of repose implements a “ ‘legislative decisio[n] that . . . there should be a specific time beyond which a defendant should no longer be subjected to protracted liability.’ ” CTS, 573 U. S., at ___. The unqualified nature of that determination supersedes the courts’ residual authority and forecloses the extension of the statutory period based on equitable principles. Thus, the Court repeatedly has stated that statutes of repose are not subject to equitable tolling. See, e.g., id., at ___–___. Pp. 7–8.

(3) The tolling decision in American Pipe derived from equity principles and therefore cannot alter the unconditional language and purpose of the 3-year statute of repose. The source of the tolling rule applied in American Pipe is the judicial power to promote equity, not the power to interpret and enforce statutory provisions. Nothing in the decision suggests that its tolling rule was mandated by a statute or federal rule. Moreover, the Court relied on cases that are paradigm applications of equitable tolling principles, see 414 U. S., at 559. Thus, the Court has previously referred to American Pipe as “equitable tolling.” See, e.g., Irwin v. Department of Veterans Affairs, 498 U. S. 89, and n. 3. Pp. 8–11.

(4) Petitioner’s counterarguments are unpersuasive. First, petitioner contends that this case is indistinguishable from American Pipe, but the statute there was one of limitations, which may be tolled by equitable considerations even where a statute of repose may not. Second, petitioner argues that the timely filing of a class-action complaint fulfills the purposes of a statutory time limit with regard to later filed suits by individual members of the class. But by permitting a class action to splinter into individual suits, the application of American Pipe tolling here would threaten to alter and expand a defendant’s accountability, contradicting the substance of a statute of repose. Third, petitioner contends that dismissal of its individual suit as untimely would eviscerate its ability to opt out, but it does not follow from any privilege to opt out that an ensuing suit can be filed without regard to mandatory time limits. Fourth, petitioner argues that declining to apply American Pipe tolling to statutes of repose will create inefficiencies, but this Court “lack[s] the authority to rewrite” the statute of repose or to ignore its plain import. Baker Botts L. L. P. v. ASARCO LLC, 576 U. S. ___, ___. And petitioner’s practical concerns likely are overstated. Pp. 11–14.

(b) Also unpersuasive is petitioner’s alternative argument: that 13’s requirement that an “action” be “brought” within three years of the relevant securities offering is met here because the filing of the class-action complaint “brought” petitioner’s individual “action” within the statutory time period. This argument presumes that an “action” is “brought” when substantive claims are presented to any court, rather than when a particular complaint is filed in a particular court. The term “action,” however, refers to a judicial “proceeding,” or perhaps a “suit”—not to the general content of claims. Taken to its logical limit, petitioner’s argument would make an individual action timely even if it were filed decades after the original securities offering—provided a class-action complaint had been filed within the initial 3-year period. Congress would not have intended this result. This argument is also inconsistent with the reasoning in American Pipe itself. If the filing of a class action made all subsequent actions by putative class members timely, there would be no need for tolling at all. Pp. 14–15.

(c) The final analysis is straightforward. Because 13’s 3-year time bar is a statute of repose, it displaces the traditional power of courts to modify statutory time limits in the name of equity. And because the American Pipe tolling rule is rooted in those equitable powers, it cannot extend the 3-year period. Petitioner’s untimely filing of its individual action is thus ground for dismissal. Pp. 16–17.

655 Fed. Appx. 13, affirmed.

Kennedy, J., delivered the opinion of the Court, in which Roberts, C. J., and Thomas, Alito, and Gorsuch, JJ., joined. Ginsburg, J., filed a dissenting opinion, in which Breyer, Sotomayor, and Kagan, JJ., joined.