November 07, 2018

U.S. Supreme Court Hears Oral Argument in <i>China Agritech</i> Tolling Case

Simon Grille – May 8, 2018

In Resh v. China Agritech, Inc., 857 F.3d 994 (9th Cir. 2017), the Ninth Circuit examined whether the statute of limitations for a class action was tolled during the pendency of two predecessor class actions. The previous class actions involved the same facts and circumstances and were brought on behalf of the same proposed class but were never certified. The court held that the claims were timely and concluded that American Pipe, 414 U.S. 538 (1974), and Crown Cork, 462 U.S. 345 (1983), permit “future class action named plaintiffs, who were unnamed class members in previously uncertified classes, to avail themselves of American Pipe tolling.” Id. at 1004. The decision deepened an existing circuit split, leading the Supreme Court to grant certiorari.

The Supreme Court held oral argument on March 26, 2018. Seth Aronson, arguing on behalf of petitioner China Agritech, contended that absent class members who fail to bring individual claims after denial of class certification should not benefit from American Pipe tolling because they have failed to demonstrate diligence in pursuing their claims. This argument did not seem to persuade Justice Kagan, who remarked that “the whole theory of American Pipe was that for any given individual, we weren’t going to make them come forward; we were going to say reliance on a class action is sufficient.” Justice Kagan was also wary of a rule that would require an individual with a small-value claim to file her own case after a certification denial. She explained that “the entire purpose of … Rule 23, is that we understand that with respect to some category of claims, we’re not going to have them individually or it will be so ridiculous if we have them individually that we would prefer the class action device.”

Justice Sotomayor added that refusing to toll class action claims would encourage “the very thing that American Pipe was trying to avoid, which is to have a multiplicity of suits being filed and encouraging every class member to come forth and file their own suit.” Both Justices Sotomayor and Gorsuch also noted that there is no precedent for allowing tolling of an individual claim while denying the holder of that claim access to a procedural mechanism, such as Rule 23.

Still, the idea that plaintiffs could bring class actions serially did not sit well with some of the justices. Justice Gorsuch asked, “can you stack them forever, so that try, try again, and the statute of limitations never really has any force in these cases[?]” Justices Alito and Kennedy, as well as Chief Justice Roberts, expressed the same concern.

David C. Frederick, arguing for the respondent, replied that there are several safeguards to prevent serial class action filings, including statutes of repose (where applicable), the economic rationality of class action lawyers (who have no incentive to file losing cases), and principles of comity favoring deference to prior class certification denials. Justice Gorsuch, however, voiced skepticism about relying on the prudence of class action attorneys, and both he and Justice Alito articulated concerns about whether comity principles have sufficient force in this context.  

The China Agritech argument highlights divisions within the Court concerning the policies underlying class actions. Justices Sotomayor and Kagan seem willing to interpret American Pipe to allow tolling of class action claims because it promotes efficient claim-aggregation and discourages excessive individual case filings that could clog up the courts. Justice Gorsuch, on the other hand, views the American Pipe ruling with skepticism and expressed concern that affirming the Ninth Circuit’s decision would allow class action claims to be brought seriatim with no effective limitations, absent a statute of repose. The Court’s decision will address a significant question that affects all forms of class actions.

 

Simon Grille is an associate with Girard Gibbs LLP in San Francisco, California.

Simon Grille – May 8, 2018