Yesterday, in China Agritech, Inc. v. Resh, the U.S. Supreme Court ruled that, under its prior decision in American Pipe & Constr. Co. v. Utah, 414 U.S. 538 (1974), the filing of a putative class action suit tolls the statutes of limitations only to allow individual, non-class suits to be filed after class certification is denied or the putative class action otherwise ends. The practice of “piggyback” class action filings, where an otherwise untimely class suit is filed on the theory that the time to sue was extended by the pendency of a prior class case, has come to an end. In a nearly unanimous opinion by Justice Ginsburg, the Court held that “American Pipe does not permit the maintenance of a follow-on class action past expiration of the statute of limitations.” (Slip opinion, at 2.) The Court reasoned that American Pipe is an equitable rule to promote efficiency in litigation, and that is not supported by allowing the filing of serial, “piggyback” class actions. Such a rule would also be contrary, the Court says, to Rule 23’s instruction that class certification should be resolved at “an early practicable time.” And equitable tolling requires diligence on the part of plaintiffs, which is not demonstrated by late piggyback filings.
Justice Ginsburg offers some advice for plaintiffs’ lawyers, suggesting that “any additional class filings should be made early on, soon after the commencement of the first action seeking class certification.” (Id. at 6.) She suggests that where there are several early filings, district courts can then select lead plaintiffs and lead counsel in non-securities cases (that is mandated by the Private Securities Litigation Reform Act (“PSLRA”) where it applies).
There has been some debate about whether this decision will cause more copycat class action suits and lead to more MDL proceedings. Perhaps, but China Agritech is not a change in the law of most circuits that had addressed the issue (see id. at 5). So we might not see much more in terms of repetitive filings.
Justice Sotomayor concurred only in the judgment. She would have ruled on narrower grounds, limiting the decision to class actions subject to the PSLRA. She expresses concern that outside of PSLRA class actions (where early notice by publication is required), class members may not learn of the pendency of class suits that are not certified. But that is true of class members who may want to file individual suits as well. She suggests that outside of the PSLRA context, it might be appropriate to allow tolling if the first case failed on a ground such as the lack of an adequate class representative. But the majority chose not to rule so narrowly.
One advantage I see for defendants here is that it is now clear that if the first class action is filed near the end of the limitations period, and the claims are not ongoing in nature, the defendant should have to litigate only one class action. If class certification is not granted, any follow-on suits could only be individual ones.
There remains a small loophole, as the Court and Justice Sotomayor note. A court in a pending class action might be persuaded to allow amendment of the complaint or a new plaintiff to intervene after the limitations period has expired, and perhaps that amendment would relate back for purposes of determining the statute of limitations. But where that comes late in the game, after extensive discovery and a denial of class certification, the defendant may have a strong argument that such an amendment or intervention should not be allowed for the purpose of a “redo.”