A luggage plant in France closes in 2007, so a class action suit for French post-termination benefits is brought against a former investor in Massachusetts in late 2011? Former Justice Souter joins the majority in the First Circuit? It’s a long story, but we’ll keep it short and there are some important class action issues along the way.
In Abdallah v. Bain Capital LLC, Case No. 13-2008 (1st Cir., June 3, 2014), the well-known Samsonite luggage brand was bought in 2003 by an investment group led by Bain Capital. Samsonite operated a plant in France. In 2005, it sold the plant to a thinly capitalized third party for exactly 1 euro. Within two years, the plant closed, and the new owner proved unable to make large severance payments required under French law to the affected workers. They brought suit in France and were successful in canceling the transaction, but for various procedural reasons did not recover any sums against Samsonite or Bain Capital, which had disposed of its interest in the intervening period.
In the meantime, the principal of the third party that had purchased the plant was convicted of fraud in France, sentenced to prison, and provided testimony in 2011 that Bain Capital had had at least some involvement with (the plaintiffs contended that it actually directed) the sale of the factory.
With this background, including the suspicious sale and actual conviction of the principal for fraud, it’s not hard to see why the plaintiffs liked the facts of their case. The problem was whether or how they could find a way to recover the amounts they claimed they were owed.
In 2011, the plaintiffs brought suit against Bain Capital in Massachusetts District Court for various tort claims, including fraud and unfair business practices. Because these claims were subject to a three-year statute of limitations, and because the plant had closed in 2007, the defendant moved to dismiss. The district court granted that motion, but left the door open to refile the complaint if the plaintiffs could allege facts to establish tolling. Abdallah v. Bain Capital LLC, 880 F. Supp. 2d 190 (D. Mass. 2012).
The plaintiffs took up this invitation a year later, asserting tolling based on the alleged concealment of details of the sale in 2005 and subsequent closure. The District Court, finding the allegations insufficient, dismissed this second action as well.
The First Circuit began with the high standards to establish fraudulent concealment or equitable tolling: “The doctrine of equitable tolling... provides no relief to a plaintiff who knows of facts sufficient to bring the cause of action.” Similarly, the court found that fraudulent concealment did not apply “if the plaintiff has actual knowledge of the facts giving rise to his cause of action.” The question, then, was whether the plaintiff “knew so little” during the limitations period “so as to justify the tolling of the statutory limitations period.”
This standard dictated the dismissal of the complaint. The plaintiff was well aware, the court concluded, of the facts she needed to support her claim due to the very public sale of the plant, its closure, and the French court proceedings in 2008 and 2009. While the plaintiff was not aware of all of the facts supporting her claim, “[i]t took no imagination” to suggest Bain Capital’s involvement in the transaction. The court rejected the plaintiffs’ arguments that many of the transaction details had been unknown to her, finding that “[t]hat is what discovery is for.”
The court, in fact, was very critical of the use of equitable tolling or fraudulent concealment under the facts of the case.
-“Equitable tolling does not apply when a plaintiff has facts essential for the commencement of a suit (nor does it always apply when a plaintiff does not have such facts).”
-“Similarly, fraudulent concealment requires, at least, concealment of facts necessary to bring a cause of action.
Finally, the court rejected the plaintiff’s argument that the statute should have been tolled because the defendant allegedly “lied” about the transaction in French courts.
The Abdallah decision is interesting because of its rejection of equitable tolling and fraudulent concealment claims in a class action in the plant closing context. In most other contexts, courts have rejected the very idea that equitable tolling would apply in class litigation at all due to the highly individual nature of the inquiry. See, e.g., Pettrey v. Enter. Title Agency, Inc., 241 F.R.D. 268 (N.D. Ohio 2006); Garrish v. UAW, 149 F. Supp. 2d 326 (E.D. Mich. 2001).
The Bottom Line: Equitable tolling and fraudulent concealment are very difficult to establish in class action litigation.