In In re Refrigerant Compressors Antitrust Litigation, E.D. Mich. No. 2:09–md–02042, 2015 WL 1181168 (Mar. 13, 2015), the court ruled, in one of several issues before it, that the individual claims of the plaintiff, GE, were not entitled to tolling under the American Pipe tolling doctrine. The court quoted a leading treatise on class actions:
In American Pipe and Crown, Cork, the Supreme Court addressed the statute of limitations as it applied to putative class members who pressed their claims after the district court ruled on class certification. However, the Supreme Court has never addressed the question of whether the American Pipe doctrine inures to the benefit of plaintiffs who choose to bring individual actions in the time period that begins at the filing of the class action complaint and ends when the trial court denies class certification.
The lower courts conventionally held that, given the policy rationales that underlie it, American Pipe does not apply to putative class members who commence individual actions before the district court rules on class certification. This approach is known as the “forfeiture rule” as these courts hold that the plaintiff who files in this precertification decision period has “forfeited” her opportunity to rely on American Pipe. Why? First, when a plaintiff files his own lawsuit, he “affirmatively demonstrate[s] his choice not to rely on the class action mechanism.” Second, the early-filing plaintiff “create[s] the very inefficiency that American Pipe sought to prevent—he generate[s] more litigation and expense concerning the same issues that were litigated by a class of which he was a member.
Id. at *5, quoting Newberg on Class Actions § 9:63 (5th Ed.) (emphasis in original) (citations omitted).
The court also recognized, however, that many courts have adopted the non-forfeiture rule.
The In re Refrigerant Compressors court noted that plaintiff GE filed its action on February 15, 2013. The first putative class action was filed on February 25, 2009. GE's action was filed after the putative class actions were filed and transferred to the district court, but before the motion seeking approval of the Direct Purchase class action settlement had been filed or granted.
The court stated that a Sixth Circuit case "shed light" on how the Sixth Circuit "might" rule on this issue: Wyser–Pratte Mgmt. Co. v. Telxon Corp., 413 F.3d 553 (6th Cir.2005).
In Wyser-Pratte, after the court had already decided that the applicable two year statute of limitations expired before the class action was filed, the court continued to find in the alternative that the 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. It explained:
While our research reveals no circuit court decisions addressing this “forfeiture” argument, a number of district courts have held 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. The reasoning rests in part on the holding in Crown that “[o]nce the statute of limitations has been tolled, it remains tolled for all members of the putative class until class certification is denied. At that point, class members may choose to file their own suits or to intervene as plaintiffs in the pending action.” 462 U.S. at 354, 103 S.Ct. 2392, 76 L.Ed.2d 628. The purposes ofAmerican 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. One district court explained:
Many good purposes are served by such forbearance, as American Pipe andCrown, Cork themselves spell out. 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 a 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.
Wyser–Pratte Mgmt. Co., 413 F.3d at 568–69.
Based upon its review of Wyser–Pratte Mgmt. Co., the In re Refrigerant Compressors court held that GE was not entitled to tolling under the American Pipe tolling doctrine because GE filed its own action after the putative class actions were filed but before there was any determination as to the class action.
Although In re Refrigerant Compressors explained that Wyser-Pratte "shed light" on how the Sixth Circuit "might" rule, other recent district court decisions have viewed it as binding precedent.
For instance, in Molesky v. State Collection & Recovery, S.D. Ohio No. 3: 12 cv 2639, 2014 WL 4794455, *7 (September 25, 2014) the court explained that "the Sixth Circuit has adopted the 'forfeiture rule,'” quoting the rationale provided inWyser-Pratte. The Molesky court concluded its decision was based upon the precedent of Wyser-Pratte.
In W. & Southern Life Ins. Co. v. JPMorgan Chase Bank, N.A., S.D.Ohio No. 1:11-CV-495, 2014 WL 5308422 (Oct. 16, 2014) the plaintiff sought to distinguish its facts from the holding in Wyser-Pratte, because class certification was not adjudicated in the class action in which plaintiff was a purported member. Instead, the class action was dismissed for lack of standing. The court and all parties apparently agreed that Wyser-Pratte had adopted the forfeiture rule. The court "extended" the forfeiture rule to the plaintiffs because they filed their case without waiting for the determination of the court as to the dismissal motions.
Counsel for plaintiffs and defendants alike should take note of this continuing trend to apply the forfeiture rule in the Sixth Circuit.