Federal courts generally agree that when certification of a class action is denied or the case is dismissed, the statute of limitations on the claim asserted on behalf of the would-be class is deemed to have been tolled during the pendency of the class claims for all individual members of the putative class action, at least for purposes of a subsequent individual action. The reason the federal courts agree on this much is that the United States Supreme Court so ruled in American Pipe and Construction Co. v. Utah, 414 U.S. 538 (1974), and Crown, Cork & Seal Co. v. Parker, 462 U.S. 345 (1983).
But from that single point of origin, the American Pipe tolling rule branched out into a fair amount of controversy. One of the many circuit splits was resolved a few months ago when the Supreme Court ruled that American Pipe tolling does not apply to statutes of repose (California Public Employees’ Retirement System v. ANZ Securities, Inc., et al., 137 S. Ct. 2042 (2017)). Other disagreements have festered over questions such as whether a person who opts out can assert the tolling effect in a subsequent individual action prior to denial of certification or dismissal in the first action, and how the rule applies cross-jurisdictionally to successive actions in the state and federal systems.
But yet another circuit split concerning American Pipe will not be a circuit split much longer—whether American Pipe tolling applies to save an otherwise untimely successive class action. The Supreme Court last week granted certiorari to resolve that question in China Agritech, Inc. v. Resh, Dkt. No. 17-432.
The Courts of Appeal are sharply split on the issue. The First, Second, Third, Fifth, Eighth, and Eleventh Circuits have held, more or less, that allowing so called “piggyback” class actions would undermine the very judicial efficiency goals upon which the judicially created American Pipe tolling rule is based: avoiding duplicative litigation. They also point out that allowing tolling to save successive class actions would all but eliminate the utility and purpose of statutes of limitations in the class context. But since 2011, the Sixth, Seventh and Ninth circuits—the staunchest advocates of the class action device and its expansion in recent years—have brushed those concerns aside and embraced tolling for successive class actions. They argue that if claims are already tolled individually, then Rule 23 applies as much to tolled individual claims as to claims that are timely on their own. Because the Supreme Court has already ruled that denial of certification has no preclusive effect in a subsequent class action on the same claims, Smith v. Bayer, 564 U.S. 299 (2011), piggyback class action tolling seemingly would allow unsuccessful would-be class counsel to “try, try again” with new class representatives in another court as many times as necessary until they find a court willing to certify their class.
The many circuit splits American Pipe has generated illustrate the pesky problem with judicially created rules: They almost always lead to years of uncertainty and unforeseen consequences. Rule 23 contains no tolling rule, and neither did the statute of limitations at issue in American Pipe, yet the judiciary, ultimately the Supreme Court, chose to create one. Numerous circuit splits have resulted, likely to the surprise of nobody. One day, presumably, all those circuit splits will be resolved, with the rule’s application to “piggyback class actions” being the next in line. But in the years it takes for the splits to be resolved, the rights of numerous plaintiffs or defendants will have already been permanently lost because of the mistaken views of the courts on whatever proves to be the wrong side of the split. Real dollars will have been spent in error, and real rights will have been lost.
This tolling rule would have been better left to Congress or the rulemaking process. Though often incomplete, inefficient and otherwise wanting in themselves, those processes almost always result in a more comprehensive effort to address all foreseeable ramifications of the rule being created than legislating from the bench ever can. After all, Article III ripeness, standing and justiciability considerations actually prevent federal judges from addressing issues not yet presented in the case before the court. That constitutional limitation almost guarantees that judicially created rules will produce more collateral damage to the rights of individual litigants while the uncertainties are worked out in subsequent cases in different circuits at different times. So while we wait for the Supreme Court to fix this particular glitch, the larger lesson will remain immutable: Courts should exercise restraint in creating ad hoc exceptions to timeliness or other legislatively promulgated rules, whether they be substantive or procedural.