Earlier this
month, the U.S. Supreme Court addressed whether, after denial of class
certification, a putative class member can file a new class action after the applicable
statute of limitations has expired, as opposed to joining an existing case or
pursuing an individual lawsuit. The Court held, in China Agritech, that this is not
allowed, creating potentially significant ramifications for employers. Had the
Court ruled the other way, claimants who were unsuccessful in obtaining class
certification might have had the ability to perpetually file new class actions,
one after the other, in a never ending effort to obtain class certification.
Prior to its
China Agritech ruling, the Supreme
Court held in 1974 that the filing of a putative class action tolls the statute
of limitations for all members of the putative class on class claims currently
pending in the proposed class action case. See
American Pipe & Constr. Co. v. Utah, 414 U.S. 538 (1974). The purpose
of the Court’s American Pipe rule was
to promote efficiency in the class action context. If the statute of
limitations on claims continued to run while the putative class action
proceeded, putative class members would be put in a bind. On the one hand, they
could move to join in the case before the trial court’s class certification
decision, but this would flood the court with motions that might prove unnecessary
if the court ultimately certified the class. On the other hand, if putative
class members waited to try to join the case and a class was not certified, the
potential claimants could risk missing their chance to pursue their claims due
to the expiration of the statute of limitations before a certification ruling. Hitting
pause on the statute of limitations pending the outcome of a class
certification motion allowed this dilemma to be averted.
In 1983, the
Supreme Court expanded the American Pipe tolling
rule to putative class members who wanted to file their own individual lawsuits
after denial of class certification in the first‑filed case. See Crown, Cork & Seal Co. v. Parker,
462 U.S. 345 (1983). Against this backdrop, the China Agritech case posed a new question—namely, did the American Pipe tolling rule allow a
plaintiff to file a new class action after denial of class certification in an
earlier‑filed case and the expiration of the statute of limitations? The
Supreme Court ruled in the negative.
The Supreme
Court’s Holding
In its majority
opinion, which was authored by Justice Ginsburg, the Court held that American Pipe does not permit a
plaintiff who waits out the statute of limitations to piggyback onto an
earlier, timely filed class action. Instead, individuals who want to pursue
class actions for the same claims against the same defendant(s) must do so
early on, soon after the commencement of the first action seeking class
certification. The Supreme Court based its holding on several key points:
- In the class action context, efficiency favors early assertion of competing class representative claims.
- To get the benefit of the American Pipe tolling rule, a plaintiff must demonstrate he or she acted diligently and did not sit on his or her laurels. A potential class representative who waits to file a putative class action until after the expiration of the limitations period has not acted diligently.
- Finally, applying the tolling rule to subsequent putative class actions filed after the statute of limitations has expired could result in a never-ending succession of class suits aimed at getting multiple bites at the class certification apple.
Good News
and Bad News for Employers
No doubt, China Agritech is a victory for
employers. There is now a definitive rule from the highest court of the United
States that prohibits putative class members from relying on the American Pipe tolling rule to permit an
otherwise untimely class action lawsuit. This means that once the applicable statute
of limitations expires, employers who prevail on a class certification motion can
rest easy, knowing putative class members cannot start a new class or
individual action based on the time-barred claims.
However, what
about all of the potential plaintiffs who previously chose not to file a
copycat class action against an employer, believing they could wait for the
outcome of a class certification motion in a pending case? As Justice Ginsburg
wrote, those potential claimants now must file their cases “early on, soon
after the commencement of the first action seeking class certification.” China Agritech, Inc. v. Resh, et al.,
No. 14-432 at *6 (June 11, 2018). The result could be more putative class
actions filed in close proximity, each jockeying to be the lead case so that would-be
class action claimants do not risk losing the right to their day in court. This,
of course, would not be good news for employers given the considerable expense
and time associated with class actions. This potential outcome may be one more
reason for employers to consider implementing arbitration agreements with
employees that include class action waivers.
While arbitration agreements have pros and cons, class action waivers
are a big “pro” and recently were upheld as valid by the Supreme Court in its May
2018 Epic Systems ruling.
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