Recently, the Court of Appeals of New York answered the questions certified to it by the Second Circuit in the affirmative that New York recognizes “American Pipe” (American Pipe v. Constr. Co v. Utah, 414 U.S. 538 (1974)) tolling of the statute of limitations for absent class members of putative class actions filed in other jurisdictions. Chavez v. Occidental Chem. Corp., 2020 NY Slip Op 05839 (2020). The court also answered in the affirmative that a “non-merits dismissal of class certification” can terminate cross-jurisdictional tolling because, “under New York law, tolling ends as a matter of law when there is a clear dismissal of a putative class action, including a dismissal for forum non conveniens or denial of class certification . . .” Id. at *7. As such, tolling in this action was terminated by the United States District Court for the Southern District of Texas forum non conveniens dismissal of the putative class action premised on the same claims as the subject action.
Procedural History
The plaintiffs took a zigzagged path to the Court of Appeals as their 2012 Delaware federal action intertwined with a 1993 Texas putative class action asserting identical claims of injuries due to exposure to dibromochloropropane (DBCP) distributed by Occidental. See Delgado v. Shell Oil Co., 890 F. Supp. 1324 (S.D. Tex. 1995). In 1995, prior to deciding class certification in Delgado, the Texas court conditionally dismissed the putative class action on forum non conveniens grounds and included a return jurisdiction clause. A Final Judgment was entered and affirmed by the Fifth Circuit. See Rodriguez Delgado v. Shell Oil Co., 231 F.3d 165 (5th Cir. 2000). Plaintiffs, who were absent Delgado class members, argued that despite the 1995 non-merits dismissal the return jurisdiction clause rendered the case pending in the Southern District of Texas. Id. at 5.
The Delaware court consolidated the suits and in 2017 transferred the action to the Southern District of New York where Occidental is incorporated. Occidental then moved for judgment on the pleadings on statute of limitation grounds arguing that New York does not recognize cross-jurisdictional tolling. Occidental alternatively argued that plaintiffs were still time-barred by the Texas District Court’s 1995 order conditionally dismissing the Delgado action on forum non conveniens grounds. Plaintiffs argued that 1993-2010 Delgado action tolled New York’s three-year statute of limitations. In 2018, the District Court denied Occidental’s motion, anticipating that the Court of Appeals would conclude that New York recognizes cross-jurisdictional tolling and that Delgado tolled the statute of limitations period despite the 1995 non-merits dismissal. Given the split in authority in the Southern District of New York as to whether New York recognizes cross-jurisdictional tolling, the District Court certified an interlocutory appeal to the United State Court of Appeals for the Second Circuit, which in turn certified questions to the Court of Appeals.
First Question: Applying American Pipe to New York law
American Pipe established that the filing of a “class suit tolls the running of statute [of limitations] for all purported members of the class who make timely motions to intervene after the court has found the suit inappropriate for class action status.” American Pipe, 414 U.S. at 553. Later, the Supreme Court clarified that tolling is not limited to intervenors but rather applies to all asserted members of the class. Chavez, at *4-5 citing Crown, Cork & Seal Co., Inc. v. Parker, 462 U.S. 345, 350 (1983). As such, “tolling applies to both putative class members who, following a denial of class certification, wish to intervene and those who prefer to commence individual actions. Id.
In deeming American Pipe tolling as consistent with New York law, the Court of Appeals concluded that “a determination that tolling is not available cross-jurisdictionally would subvert article 9 …” Chavez, at *14. New York’s class action process is codified in article 9 of the Civil Practice Law and Rules and is modeled after Federal Rules of Civil Procedure R. 23. The rationale underlying article 9, like rule 23, is to allow plaintiffs to “allow named plaintiffs to bring truly representative lawsuits without necessitating a multiplicity of litigation that squanders resources and undermines judicial economy, while still ensuring that defendants receive fair notice of the specific claims advanced against them”. Id. Both rule 23 and article 9 were intended to allow the named plaintiff in the putative class action to act as a placeholder and represent the absent class members and in turn provide notice to defendants of named and potential absent class members. Id. at *6. As such, if class certification is denied or the action is terminated, treating putative class members as though no action occurred would subvert article 9. Id.
Occidental argued that CPLR 201 which provides that “. . . [n]o court shall extend the time limited by law for the commencement of an action” prevents the recognition of cross jurisdictional tolling. Id. at *6. The Court of Appeals rejected Occidental’s argument because “tolling provisions to the Statute of Limitations are largely, if not exclusively the product of legislative design”. Id. citing McCarthy v. Volkswagen of Am., 55 N.Y.2d 543, 547 (1982). Therefore, American Pipe does not violate CPLR 201 because it is predicated on the express legislative design of article 9. Id. at *6. This is consistent because CPLR 201 confirms that courts do not have the discretion to excuse late filings by plaintiffs who have slept on their rights. Id. As such, cross-jurisdiction tolling likewise does not conflict with the statute because injured individuals relying on a representative class action have not slept on their rights. Id.
The Court of Appeals emphasized that defendants must have fair notice of all claims that might arise under New York law before tolling the limitations period. Id. *6. Finally, American Pipe tolling applies not only cross-jurisdictionally but also intra-jurisdictionally.
Second Question: Determining when such tolling ends
The parties agreed that tolling terminates “when it is no longer objectively reasonable for absent class members to rely upon the putative class action to vindicate their rights . . .” The Court of Appeals answered in the affirmative the Second Circuit’s question as to whether a “non-merits dismissal of class certification” can end an absent class members’ objectively reasonable reliance, and therefore, the tolling of the statute of limitations”. As to the Orders at issue, and recognizing the difficulty applying the objectively reasonable reliance standards among courts, the Court of Appeals applied New York’s bright-line rule that “tolling ends as a matter of law when there is a clear dismissal of a putative class action, including a dismissal for forum non conveniens or denial of class certification . . .” Id. at *7. Therefore, the 1995 non-merits dismissal Texas Order dismissing the putative class action on forum non-conveniens grounds ended tolling, as a matter of law.
