TAKEAWAYS 

  • The Supreme Court’s decision in China Agritech, Inc. v. Resh cements a new limit on the filing of successive class actions.
  • Tolling provisions established in landmark American Pipe decision do not extend to individual class members wanting to file a new action on behalf of others after the statute of limitations deadline has passed.

In American Pipe & Construction Co. v. Utah, 414 U.S. 538, 554 (1974), the Supreme Court held that “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.” In Crown, Cork & Seal Co. v. Parker, 462 U.S. 345, 103 (1983), the Supreme Court clarified American Pipe’s tolling rule by holding the rule is not dependent on putative class members intervening in or joining an existing suit; it includes putative class members who, after denial of class certification, “prefer to bring an individual suit rather than intervene ... once the economies of a class action [are] no longer available.”

At issue in China Agritech, Inc. v. Resh, No. 17-432, 2018 WL 2767565, at *3 (2018) was whether the American Pipe tolling rule applies only to subsequent actions brought by a previously absent class member on an individual basis, or whether it also extends to subsequent class actions filed by previously absent class members.

On Monday, June 11, 2018, the Supreme Court unanimously refused to extend its American Pipe tolling rule to subsequent class actions, holding, “American Pipe does not permit a plaintiff who waits out the statute of limitations to piggyback on an earlier, timely filed class action.” Id. at *6. “[T]here is little reason to allow plaintiffs who passed up those opportunities to enter the fray several years after class proceedings first commenced.” Id. at *7.

The Court reasoned that “[t]he ‘efficiency and economy of litigation’ that support tolling of individual claims do not support maintenance of untimely successive class actions.” Id. at *6 (internal citations omitted). The Court fleshed out the competing efficiency arguments between successive individual claims versus successive class claims, noting:

American Pipe tolls the limitation period for individual claims because economy of litigation favors delaying those claims until after a class-certification denial. If certification is granted, the claims will proceed as a class and there would be no need for the assertion of any claim individually. If certification is denied, only then would it be necessary to pursue claims individually.

With class claims, on the other hand, efficiency favors early assertion of competing class representative claims. If class treatment is appropriate, and all would-be representatives have come forward, the district court can select the best plaintiff with knowledge of the full array of potential class representatives and class counsel. And if the class mechanism is not a viable option for the claims, the decision denying certification will be made at the outset of the case, litigated once for all would-be class representatives.

Id. The Court also noted that Federal Rule of Civil Procedure 23 “evinces a preference for preclusion of untimely successive class actions by instructing that class certification should be resolved early on.” Id. at *7 (citing Fed. R. Civ. P. 23(c)(1)(A)).

The Court found a contrary holding would allow the statute of limitations to be extended “time and again; as each class is denied certification, a new named plaintiff could file a class complaint that resuscitates the litigation.” Id. at *8. While “[t]he time to file individual actions once a class action ends is finite, extended only by the time the class suit was pending; the time for filing successive class suits, if tolling were allowed, could be limitless.” Id.

While the Court’s decision more clearly defines the limitations period for potential liability on a classwide basis, it may also lead to more protective class action filings by plaintiffs apprehensive about impending limitations deadlines.