U.S. Supreme Court Holds That Denial of Class Certification Does Not Toll Statute of Limitations For Successive Class Actions
June 11, 2018
China Agritech, Inc. v. Resh
(No. 17-432, June 11, 2018)
In American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974), and Crown, Cork & Seal Co. v. Parker, 462 U.S. 345 (1983), the United States Supreme Court held that the denial of class certification in a pending class action tolls the statute of limitations applicable to the underlying claims, allowing unnamed members of the putative class to intervene in the action or to file their own separate actions to pursue individual relief after certification is denied.
In this securities fraud case, after two successive class actions were timely filed in which class certification was denied, an unnamed class member filed a third successive class action outside the limitations period, asserting the same underlying claims and seeking the benefit of American Pipe tolling. The district court dismissed the suit as untimely, but the Ninth Circuit reversed.
The Supreme Court held the class action was untimely because American Pipe tolling “does not permit the maintenance of a follow-on class action past expiration of the statute of limitations.” The Court explained that the purpose of American Pipe tolling is to further efficiency and economy of litigation, and that this purpose is advanced by denying tolling to successive class actions filed outside the limitations period. The Court also explained that the opposite rule would lead to endless tolling of limitations periods, which American Pipe did not envision.