Supreme Court Restricts Class Actions by Limiting Application of Tolling Doctrine
On Monday, the U.S. Supreme Court placed an additional limitation on the ability of individuals (including employees) to bring class action lawsuits. In its unanimous opinion, the Court in China Agritech, Inc. v. Resh, 584 U.S. ___ (2018) held that the tolling doctrine established in American Pipe & Constr. Co. v. Utah, 414 U.S. 538 (1974) cannot save the late-filed claims of individuals wanting to file a new class action on behalf of others after the statutory deadline has passed.
In American Pipe, the U.S. Supreme Court established the rule that the timely filing of a class action "tolls" (or extends) the applicable statute of limitations for all persons encompassed by the class complaint (i.e., the alleged class members), and that individual members of a class that fails to gain certification in the initial lawsuit can intervene in a timely manner as individual plaintiffs in the still-pending action. The American Pipe tolling doctrine also applies to putative class members who, after denial of class certification, "prefer to bring a [separate] individual suit rather than intervene." Crown, Cork & Seal Co. v. Parker, 462 U.S. 345 (1983).
The China Agritech case was the third class action brought on behalf of purchasers of Agritech’s common stock who alleged nearly identical violations of the Securities Exchange Act of 1934. The lead plaintiff in Agritech filed his class action in 2014, a year and a half after the statute of limitations expired. The district court dismissed the class complaint as untimely, holding the prior-filed complaints did not toll the time to initiate class claims. The Ninth Circuit reversed, holding that the reasoning of American Pipe extends to successive class claims.
Delivering the majority opinion, Justice Ruth Bader Ginsburg held that after class certification is denied, a putative class member may not, in lieu of promptly joining an existing suit or promptly filing an individual action, commence a new class action beyond the time allowed by the applicable statute of limitations. Ginsburg commented that "[t]here is little reason to allow plaintiffs who passed up opportunities to participate in the first (and second) round of class litigation to enter the fray several years after the class proceedings first commenced."
Although the Agritech case did not involve employee claims against an employer, the Supreme Court’s decision has an important application to employee class actions. Employees who have been putative class members in failed class action cases may still utilize American Pipe tolling to pursue individual claims against their employer that may otherwise have been time-barred. However, the Court's analysis in Agritech will prevent those employees from filing new class actions against the employer after the applicable limitations period has expired.