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December 28, 2017 Practice Points

Does American Pipe Tolling Extend to Putative Class Claims?

By Erica W. Rutner

Under existing U.S. Supreme Court precedent in American Pipe & Construction Co. v. Utah, 414 U.S. 539 (1974) and Crown, Cork & Seal Co. v. Parker, 462 U.S. 345 (1983), the commencement of a class action tolls the statute of limitations for individual claims later brought by putative class members. However, the Supreme Court did not specify in either of these cases whether the filing of a putative class action tolls the statutory period for claims later brought as a new class action. As a result of this ambiguity, a sharp circuit split has developed amongst the appellate courts. The Ninth Circuit was the most recent appellate court to weigh in on this issue, concluding that a putative class action does toll the statute of limitations for additional class claims. See Resh v. China Agritech, Inc., 857 F. 3d 994 (9th. Cir. 2017). On December 8, 2017, the Supreme Court granted China Agritech’s certiorari petition and is now set to review this divisive class issue.  

Like many appellate courts, the district court in Resh concluded that a class action did not toll the statute of limitations for additional class claims and that the class claims brought by the named plaintiffs were therefore time-barred. The district court reasoned that a contrary ruling “would allow tolling to extend indefinitely as class action plaintiffs repeatedly attempt to demonstrate suitability for class certification on the basis of different expert testimony and/or other evidence.”

On appeal, the Ninth Circuit overturned the district court and concluded that American Pipe tolls the statute of limitations for both individual claims and putative class claims. In so concluding, the Ninth Circuit reasoned that “the current legal system” adequately responds to concerns regarding the abusive filing of repeated class actions since potential future plaintiffs will have little to gain from repeatedly filing new suits and would be unwilling to assume the financial risk in doing so. It further articulated that “ordinary principles of preclusion and comity will further reduce incentives to relitigate frivolous or already dismissed class claims.”

The Ninth Circuit’s decision in Resh is in accord with decisions reached by the Sixth and Seventh Circuit. However, it stands in direct conflict with the decisions of several other appellate courts, including the First, Second, Fifth and Eleventh Circuits. These appellate courts have all concluded that American Pipe does not toll the statutory period for putative class claims. The Third and the Eighth Circuits have reached a similar conclusion, although limited to cases in which class certification is denied based on deficiencies in the putative class itself. In reaching this conclusion, these appellate courts have all cited to the same or similar reasoning—that plaintiffs would otherwise be allowed to toll the statutory period indefinitely by filing piggyback class actions regardless of how many times class certification is denied.

Now that the Supreme Court has accepted certiorari on this divisive issue, there is little doubt that at least some circuits across the country will see new law regarding class action tolling. It is important for young lawyers to be aware of this anticipated decision and the impact it may have on pending or future class actions. In fact, for putative class actions that potentially rise or fall on a class tolling issue, it may be worth seeking a stay of the action pending the outcome of the Supreme Court’s decision. Moreover, beyond the tolling issue itself, Resh implicates the comity principles discussed by the Supreme Court in Smith v. Bayer Corp., 564 U.S. 299 (2011). In Smith, the Court held that the denial of class certification is not binding on unnamed members of the putative class and that principles of comity could address the issue of serial class litigation. The Ninth Circuit in Resh cited to the comity principles discussed in Smith in justifying its conclusion, and the defendant in Resh repeatedly criticized the efficacy of these principles in its certiorari petition. Given the importance of these comity principles to the Resh decision, and given that other courts have expressed uncertainty about what exactly the Smith Court intended, it is possible that the Supreme Court may use the Resh case to revisit its discussion of comity in Smith and to provide more specific guidance on the issue. In any event, it is safe to conclude that the Supreme Court’s decision is likely to have a fundamental impact on class jurisprudence for years to come.

Erica W. Rutner is a partner at Lash & Goldberg LLP in Miami, Florida.

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