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​US Supreme Court in China Agritech v. Resh Declines to Extend American Pipe Tolling Rule for Class Actions

July 16, 2018

The US Supreme Court ruled on June 11, 2018 in China Agritech v. Resh that its earlier judicially-created tolling rule for class actions does not allow new class actions beyond the time allowed by the applicable statute of limitations.

In a 1974 case called American Pipe, the US Supreme Court held that the filing of a class action lawsuit will toll the statute of limitations for all purported members of the class who make timely motions to intervene after the court has denied class certification.

The purpose of this rule is to protect the efficiencies of the class-action process by allowing prospective class members to not have to go through the trouble of filing a lawsuit while the class action is pending—at least until and if the judge denies class certification.

If the court denies class certification, then class treatment isn’t appropriate and anyone that seeks relief must file their own lawsuit. But American Pipe tolls the statute of limitations for the period between when the first purported class action is filed and the court’s class certification denial. With tolling, you essentially add the tolled period to the end of the statute-of-limitations period.

After class-certification denial, individual members can file individual lawsuits if they want to seek relief.

The issue in China Agritech v. Resh is whether a putative class member may not only file an individual lawsuit during the extra tolled period following denial of class certification, but may also file a new class action.

The answer is no.

You might wonder why a plaintiff would want to file a class action after the court has already denied class certification. The reason is that sometimes a court will deny class certification because of reasons specific to the lead class members or their attorneys. For example, under Federal Rule of Civil Procedure 23(a), to achieve class certification, a named class member must show that the claims of the named class members are “typical” of the claims of the class and that the named class members will “fairly and adequately protect the interests of the class.”

Despite this possibility, the Supreme Court held in China Agritech v. Resh that class members that want to take advantage of American Pipe tolling can only file individual actions during the extra time, not class actions.

The Supreme Court explained that the “time to file individual actions once a class action ends is finite, extended only by the time the class suit was pending; the time for filing successive class suits, if tolling were allowed, could be limitless.” (p. 10). And “[e]ndless tolling of a statute of limitations is not a result envisioned by American Pipe.” (p. 11).

Justice Sotomayor concurred in the judgment, stating that the Court’s rule should apply to cases—like the present one—that are governed by the Private Securities Litigation Reform Act (PSLRA) of 1995. But she argued that the Court should not have come to the same conclusion outside of the PSLRA. The primary reason for the difference is that the PSLRA imposes “significant procedural requirements” that are more likely to put prospective class members on notice of the lawsuit than in a typical class-action case.

Bona Law attorneys represent defendants in antitrust class actions. If your company faces or anticipates one or more class action lawsuits (sometimes they come in bunches—read more about that here), please feel free to contact us at +1 858-964-4589 (in California) or +1 212-634-6861 (in New York).