After years of uncertainty, the United States Supreme Court has revisited one of its most important class action opinions, and in doing so, set limits on the filing of successive class actions. In China Agritech, Inc. v. Resh, No. 17-432, 584 U.S. __ (June 11, 2018), the Supreme Court held that plaintiffs cannot indefinitely toll claims on behalf of entire putative classes. Under longstanding precedent, if the statute of limitations runs on a class member’s claim during the pendency of a class action of which it is a part, the class member can bring an individual claim if the class action is not certified. But, according to the Supreme Court’s new decision, the class member cannot institute a new class action if the statute of limitations has expired. China Agritech is the latest in the American Pipe line of Supreme Court decisions to deal with tolling of claims during pending class actions, and it comes as welcome news to defendants in all kinds of class action litigation.
As discussed in a prior Eversheds Sutherland legal alert and article, the beginning of this particular issue dates back several decades. In 1974, the United States Supreme Court issued its landmark ruling in American Pipe v. Utah, 414 U.S. 538 (1974), holding that the filing of a class action tolls the limitations period for members of the proposed class. Subsequently, in 1983, the Supreme Court decided Crown, Cork & Seal v. Parker, 462 U.S. 345 (1983), which clarified that the statute of limitations period begins to run for potential plaintiffs with individual claims upon a denial of class certification. Several ambiguities in the Crown, Cork decision caused circuit courts to issue conflicting decisions on the tolling issue, ultimately compelling the Supreme Court to grant certiorari in China Agritech.
In the decision below, the US Court of Appeals for the Ninth Circuit held that the statute of limitations for the claims of a putative class was tolled while the proposed class representative in one action was an unnamed putative class member in two prior lawsuits based on the same allegations against the same defendants. Unlike in Crown, Cork, which only applied to individual claims, the Ninth Circuit held that this tolling applied to any potential putative class action claims the plaintiff wanted to later assert. The consequences of the circuit court’s holding were dire: it effectively allowed plaintiffs’ attorneys to prosecute the same class action with different plaintiffs and under different theories until a court certified the class.
In a unanimous 9-0 opinion, however, the Court reversed the Ninth Circuit, holding that after class certification is denied, a putative class member may not commence a new class action beyond the time allowed by the statute of limitations.
In the China Agritech opinion, the Supreme Court explained that American Pipe tolled the applicable statute of limitations only with respect to a putative class member who wants to file an individual suit following the denial of class certification. In American Pipe, the Supreme Court found that tolling the limitations period for individual claims of putative class members until after class certification was denied promoted “efficiency and economy of litigation.” If a class was certified, a class member’s claim would be adjudicated along with the rest of the class without overlapping and duplicative litigation. If a court denied certification, the individual former putative class member was free to pursue his or her individual claim. Tolling potential future class claims, on the other hand, did not promote “efficiency and economy of litigation.” Quite the contrary. Further, the Court in China Agritech found that a plaintiff who opts out of one class should not be permitted to participate in a subsequent but identical class action by arguing that the class claims had been tolled. Such plaintiffs are not likely to qualify as diligent in asserting claims and seeking relief, which is typically required for equitable tolling.
Eversheds Sutherland Observation
China Agritech will impact parties involved in all kinds of class action litigation. Most importantly, defendants no longer have to view class action litigation as a potentially endless endeavor, and it will affect negotiating strategy, litigation planning, and budgeting during what is already highly expensive litigation. While it remains to be seen how the lower courts will interpret and apply China Agritech, this opinion should prove to be a useful tool for defendants engaged in class action litigation.