Legal Alert

Supreme Court Limits American Pipe Class Action Tolling

June 12, 2018

Resolving a conflict in the courts of appeals, the U.S. Supreme Court unanimously ruled yesterday that after a denial of class certification, a putative class member may not file a successive class action beyond the applicable statute of limitations.

In China Agritech, Inc. v. Resh, the Court held that its American Pipe tolling rule tolls the statute of limitations during the pendency of a putative class action only to allow unnamed class members to join the action or file an individual action after denial of class certification. However, "American Pipe does not permit the maintenance of a follow-on class action past expiration of the statute of limitations."

The Court reversed the U.S. Court of Appeals for the Ninth Circuit, which held that applying American Pipe tolling to permit successive class actions would not cause unfair surprise to defendants and would promote judicial economy by reducing incentives for filing protective class actions during the pendency of an initial class certification motion.

The Ninth Circuit's view that American Pipe tolling permitted successive class actions was shared by the U.S. Court of Appeals for the Sixth Circuit, but the Courts of Appeals for several other circuits (First, Second, Fifth, and 11th) rejected that position.

The opinion for the Supreme Court, written by Justice Ruth Bader Ginsburg, declared that "American Pipe does not permit a plaintiff who waits out the statute of limitations to piggyback on an earlier, timely filed class action. The 'efficiency and economy of litigation' that supports tolling of individual claims do not support maintenance of untimely successive class actions; any additional class filings should be made early on, soon after the commencement of the first action seeking class certification."

The approach advocated by plaintiffs and adopted by the Ninth Circuit was impermissible because it "would allow the statute of limitations to be extended time and again; as each class is denied certification, a new named plaintiff could file a class complaint that resuscitates the litigation." The Supreme Court stressed that "[e]ndless tolling of a statute of limitations is not a result envisioned by American Pipe."

Ballard Spahr's Consumer Financial Services Group advises on regulatory matters, assists in the design and documentation of credit products, and represents clients in class actions, regulatory enforcement proceedings, and other lawsuits nationwide.

Copyright © 2018 by Ballard Spahr LLP.
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