Supreme Court Analysis: Preventing ‘Infinite’ Statute of Limitations in Class Actions by Jeremy Robinson
Originally Published in Daily Journal: June 13, 2018
Introduction to Class Action Tolling
Jeremy Robinson, a legal innovator reshaping consumer protection law at Savin Hennessey & Kim LLP, examines the Supreme Court’s significant ruling on the “American Pipe tolling” rule and its implications for class action litigation. This analysis explores how the Court’s decision prevents a potentially infinite statute of limitations in class action cases.
Historical Context and Evolution
More than 40 years ago, in American Pipe & Construction Co. v. Utah, the Supreme Court established that when class certification is denied, the statute of limitations is tolled for any member of the class who wants to intervene in the foundered class case. This principle was further developed in Crown, Cork & Seal v. Parker, where the high court clarified that this tolling also applied to any class member who wanted to file a separate individual case following an unsuccessful bid for class certification.
The China Agritech Case
The recent case of China Agritech involved a third attempt by purchasers of China Agritech’s common stock to pursue a securities class action. The case’s history demonstrates the complexity of class certification issues:
- The first class suit failed certification due to inability to prove the stock traded on an efficient market
- The second attempt failed due to “typicality and adequacy” concerns
- Both cases settled after denial of class certification and were dismissed
- Resh, not involved in earlier cases, filed a new case after the limitations period expired
The Circuit Split and Supreme Court’s Resolution
The district court initially dismissed Resh’s complaint as untimely, but the 9th U.S. Circuit Court of Appeals reversed, relying on American Pipe. The appeals court reasoned that allowing successive class actions would:
- Be consistent with the policies behind American Pipe tolling
- Promote economy of litigation
- Reduce incentives to file multiple redundant class actions before certification decisions
The Supreme Court’s Analysis
The Supreme Court disagreed with the 9th Circuit’s interpretation. The Court drew important distinctions between individual claims and class claims:
- For individual claims, delaying until
after class certification makes sense because:
- If certification is granted, the individual claim becomes unnecessary
- If certification is denied, individual claims can proceed without limitation issues
- For class claims, however, the Court
identified significant problems with extending tolling:
- Risk of infinite statute of limitations as each denied certification could spawn new class actions
- Potential for repeated litigation of the same issues
- Inefficient use of judicial resources
Justice Sotomayor’s Concurrence
Justice Sotomayor offered important additional insights, particularly regarding cases not subject to the Private Securities Litigation Reform Act. She noted that:
- Rule 23 lacks similar pre-suit notice provisions
- Absent class members may be unaware of pending suits
- Different considerations might apply when certification is denied for different reasons
Practical Implications
The Court’s decision promotes several important objectives:
- Encourages early filing of all potential class actions
- Facilitates consolidation of related cases
- Enables courts to select the most appropriate class representatives
- Promotes efficiency in complex litigation management
Looking Forward
This ruling provides clear guidance for practitioners: the time to file a class action falls outside the bounds of American Pipe tolling. The decision reinforces the importance of timely filing and proper case management in class action litigation.
Read the full analysis in the Daily Journal
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