Argument preview: Justices to consider yet another twist on tolling statutes of limitation for class-action filers

As the melting snow reveals the first buds of spring, the justices turn again to a subject perhaps all too familiar to them – statutes of limitation in class actions. You would think that the Supreme Court had resolved every possible variation on that topic (usually in favor of the defendants, at least in recent years), but China Agritech v. Resh brings a new variation on the ability of plaintiffs to use equitable tolling to file successive actions.

Much of the litigation in this area involves American Pipe and Construction Co. v. Utah, a precedent from the Burger era, when the Supreme Court was still enamored of the potential for class actions to reduce docket pressures. American Pipe established a rule of “equitable tolling,” a judge-made doctrine that extends the deadlines that otherwise would bar an action as untimely. Specifically, American Pipe permits the individual claimants who did not participate in an unsuccessful class action to file their own separate actions after the failure of the class proceeding. Importantly, American Pipe “tolls” (or suspends) the limitations period on the actions that the individuals could bring for as long as the class action is pending. (If you think you’ve read something on the blog recently about “tolling,” you’re probably remembering the fiercely discordant understandings of that word in the opinions earlier this year in Artis v. District of Columbia.) In this context, American Pipe leaves individual claimants an opportunity to pursue their claims separately after the failure of the joint proceeding, even if their filings come after the deadline established by the relevant statute.

The question in this case is whether individuals who have claims made timely only by American Pipe can band together and file those claims as a subsequent class action. In this case, for example, a group of plaintiffs filed a 2011 class action against China Agritech, alleging violations of the Securities Exchange Act of 1934. In 2012, the district court rejected a motion for class certification, holding that the claims were not suited for joint adjudication. When the individual plaintiffs settled their claims, that case was dismissed in September 2012. A few weeks later, in October 2012, another group of plaintiffs filed a similar class action against China Agritech, raising claims under the Securities Exchange Act related to the same events as the first class action. After the district court rejected a motion for class certification, the second group of plaintiffs voluntarily dismissed their claims in January 2014.

Several months later, in June 2014, yet another group of plaintiffs filed this action, raising claims under the Securities Exchange Act based on the same events as the two previous class actions. Because the filing in this case came more than two years after the events in question, outside the applicable statute of limitations, China Agritech argued that the district court should dismiss it as untimely. The district court ruled for China Agritech, but the U.S. Court of Appeals for the 9th Circuit overturned that ruling, reinstating the class action. Presumably responding to disagreement in the lower courts about the extent to which American Pipe validates so-called “stacked” class actions, the Supreme Court agreed to review the decision.

Because the tolling doctrine is entirely a creation of case law, the arguments are straightforward, turning for the most part on questions about the social value of class actions and the potential for tolling to facilitate them. The plaintiffs offer the simplest path to a decision, emphasizing the undeniable fact that under American Pipe, all of them had a not-yet-expired right to file individual actions on the date that they commenced this case. Building from that point, they argue that the benefits of Federal Rule of Civil Procedure 23, which authorizes class actions, flow directly to them, necessarily giving them the right to take the efficient path of bringing their actions collectively as a class rather than individually in discrete pieces of litigation.

Conversely, the defendant, China Agritech, portrays the case as seeking an extension of American Pipe: The Supreme Court has never approved tolling the limitations period for follow-on class actions, as opposed to follow-on individual actions. On the question of whether an extension would be appropriate, China Agritech makes two principal points. The first is structural: The primacy of legislative authority compels a narrow application of equitable tolling. China Agritech’s second, practical, point is that the sequential burden of repeated class actions (three in this case) unduly undermines the interests of finality that statutes of limitation reflect.

It will be fascinating to observe the justices’ resolution of this problem. On the one hand, the plaintiffs may have the better of the case as a purely doctrinal matter. It is hard to believe that the unanimous court that decided American Pipe would have hesitated to permit the action in this case to proceed. But two dominant strands in the jurisprudence of the Roberts court suggest that several of the justices at least will prefer limiting American Pipe. The first is the obvious concern about class actions that has led to new limits on the types of actions that warrant class adjudication in cases like Wal-Mart v. Dukes and Comcast v. Behrend. If you think those cases aren’t on the front burner for the justices this spring, consider the last section of the blockbuster immigration opinion in Jennings v. Rodriguez, which goes out of its way to recommend that the lower courts on remand consider the implications of Wal-Mart even though none of the briefs of the parties or the amici mention it! The briefs for the defendant in this case play to that concern with repeated references to “abusive” and “lawyer-driven” class actions. However irrelevant it is to the doctrinal question presented, that concern is likely to play a role in a case like this one, which involves three successive class actions based on the same nucleus of operative facts.

The second strand is perhaps not as obvious — the steady retreat from the application of equitable doctrines to temper the effects of statutes of limitation. Here I’m referring not only to last term’s decision in CalPERS v. ANZ Securities, which held that tolling under American Pipe did not apply to statutes of repose, but also to Petrella v. Metro-Goldwyn-Mayer and SCA Hygiene Products v. First Quality Baby Products. The opinions in those cases (by Justices Anthony Kennedy, Ruth Bader Ginsburg and Samuel Alito, respectively) run the ideological gamut, reflecting an apparently growing consensus among the sitting justices that it is Congress’ role to decide when a lawsuit is stale and not the role of the justices to tinker around the edges. It won’t matter so much what a fair reading of American Pipe might suggest to justices skeptical of its central logic.

The oral argument should indicate whether the justices view this case as a narrow exercise in interpreting American Pipe or rather as an opportunity to fashion policies for governing class-based adjudication.

[Disclosure: Goldstein & Russell, P.C., whose attorneys contribute to this blog in various capacities, is among the counsel on an amicus brief in support of the respondents in this case. The author of this post is not affiliated with the firm.]