In China Agritech, Justice Ginsburg, writing for the unanimous Court, put this question to bed. The Court held that American Pipe tolling does not extend to “a putative class representative, like Resh, who brings his claims as a new class action after the statute of limitations has expired.” China Agritech, slip op. at 6. As Justice Ginsburg explained, neither American Pipe nor Crown, Cork “so much as hints that tolling extends to otherwise time-barred class claims.” Id. The Court reasoned that “[t]he ‘efficiency and economy of litigation’ that support tolling of individual claims do not support maintenance of untimely successive class actions [and that] any additional class filings should be made early on, soon after the commencement of the first action seeking class certification.” Id.

The breadth of the Court’s decision in China Agritech is perhaps most noteworthy—the Court set forth a uniform rule applicable to all class actions arising under Rule 23. Id. at 11 n.5 (“Rule 23 and putative class members’ own interests in adequate representation, and the efficient adjudication thereof, weigh heavily against tolling for successive class actions.”). By contrast, Justice Sotomayor, who concurred in the judgment, would have limited the Court’s ruling to the specific context of the case, where the Plaintiff’s claims arose under the Private Securities Litigation Reform Act of 1995 (PSLRA), a statute which imposes “significant procedural requirements on securities class actions” including a special “lead-plaintiff selection procedure” not present in Rule 23 class actions generally. Id. at 2-4 (Sotomayor, J. concurring) (“Given these important differences between Rule 23’s general class procedures and the specific procedures imposed by the PSLRA, the majority’s conclusion that absent class members were not diligent because they failed to ask to be the class representative in a prior suit makes sense only in the PSLRA context.”). The majority likewise rejected Justice Sotomayor’s suggestion that the Court might ideally craft a more limited rule “under which tolling ‘becomes unavailable for future class claims where class certification is denied for a reason that bears on the suitability of the claims for class treatment,’ but not where ‘class certification is denied because of the deficiencies of the lead plaintiff as class representative.’” Id. at 11 n.5 (majority opinion).

In sum, the China Agritech decision indicates that class claims have a finite lifespan in federal court that ends with the expiration of the applicable statute of limitations. Would-be class representatives are now unable to extend limitations periods in a limitless manner by waiting out a class certification decision in a first-filed action before asserting their own class claims.  Instead, the Court has given Plaintiffs who seek “to preserve the ability to lead the class . . . every reason to file a class action early, and little reason to wait in the wings, giving another plaintiff first shot at representation.” China Agritech, slip op. at 14. The decision also serves to further ensconce the critical importance of prevailing at the class certification stage. Indeed, where putative class representatives sit on their rights during the pendency of a first-filed class action, it will often mean that the availability of class-wide relief will hinge entirely on the class certification decision in the first-filed action. Even though plaintiffs can still proceed with individual claims after class certification is denied under American Pipe, individual damages claims are often too small to make an individual suit worthwhile for Plaintiffs.

Client Alert 2018-139