In China Agritech, Inc. v. Resh, the U.S. Supreme Court has agreed to decide an important and recurring class action issue that has divided the courts of appeals—does the tolling of the statute of limitations for class members’ claims permit the filing of a successive, otherwise time-barred, class action after the denial of class certification in a similar case?
In American Pipe & Construction Co. v. Utah, the Supreme Court held that the filing of a class action tolls the statute of limitations for all members of the putative class. If class certification is denied, the tolling stops and the statute of limitations resumes running. The American Pipe tolling rule protects class members’ reliance on the class action mechanism and discourages the filing of duplicative lawsuits. Left undecided in American Pipe was the question of whether, after denial of class certification, an absent class member is allowed to bring an otherwise time-barred similar lawsuit only on an individual basis, or whether a successive class action may also be filed.
The majority of Courts of Appeals (First, Second, Third, Fifth, Eighth, and 11th Circuits) have held that American Pipe tolling only applies to allow subsequent individual actions. As Justice Alito explained in an opinion he wrote when he was on the Third Circuit, “[w]ithout this restriction on tolling, lawyers seeking to represent a plaintiff class could extend the statute of limitations almost indefinitely until they find a district court judge who is willing to certify the class.” Similarly, an 11th Circuit opinion emphasized that extending the tolling doctrine to permit successive class actions “would allow a purported class almost limitless bites at the apple as it continuously substitutes named plaintiffs and re-litigates the class certification issue.”
However, in the China Agritech case, the Ninth Circuit agreed with earlier decisions by the Sixth and Seventh Circuits that, under the American Pipe tolling doctrine, after class certification is denied, an absent class member may file an otherwise time-barred successive class action. The Ninth Circuit held that a successive securities class action filed after the denial of class certification in two prior identical class actions was timely under American Pipe, even though it would have been time-barred by the two-year statute of limitations but for tolling.
A decision in this case is expected before the end of the Supreme Court’s term in June 2018. Based on the composition of the Court and its decision earlier this year declining to extend American Pipe tolling to statutes of repose, it is reasonable to expect a reversal of the Ninth Circuit’s decision, and a limitation of American Pipe to preclude tolling for successive class actions.
