Posted on Wednesday, December 13 2017 at 2:58 pm by Kilpatrick Townsend

The U.S. Supreme Court grants class defendants’ petition for certiorari in Ninth Circuit American Pipe tolling case (Resh v. China Agritech)

by John Neeleman

As we discussed at length last June [Ninth Circuit extends tolling doctrine to allow successive class actions, subject only to preclusion and “comity” defenses], the Ninth Circuit in Resh v. China Agritech, Inc., 857 F.3d 994, 999 (9th Cir. 2017), extended the American Pipe tolling rule (see American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974), and Crown, Cork & Seal Co. v. Parker, 462 U.S. 345 (1983)) – providing that the statute of limitations is tolled for claims of unnamed members of a putative class during the pendency of a class action – by ruling that the limitations period had been tolled for unnamed plaintiffs for a third class action after two prior class actions involving the same allegations had failed to win certification. Prior to Resh, no court, including the Ninth Circuit, had held that under this precedent the statute would be tolled for class actions as well as individual claims. Now, last Friday, the Supreme Court granted the class defendants’ petition for writ of certiorari and agreed to review the Ninth Circuit’s decision in Resh.

Given the political makeup of the Supreme Court, and its recent decision in California Public Employees’ Retirement System v. ANZ Securities, Inc., 137 S.Ct. 2042 (U.S. 2017), holding that the filing of a putative class action does not toll the statute of repose for actions brought under Section 11 of the Securities Act of 1933, which we discussed at length last July [U.S. Supreme Court rejects application of American Pipe tolling to statutes of repose], a reversal seems a good bet. But the Supreme Court will have to address the central issue that occupied the Ninth Circuit—what legal or public policy basis would support distinguishing between individual and class actions in this context.

The crux of the Ninth Circuit’s reasoning was that there is no principled legal or public policy basis for distinguishing between individual actions and class actions in this context. Rule 23 is, after all, a procedural rule that, the Supreme Court has held, authorizes a district court to certify a class in every single case that satisfies Rule 23’s criteria—by its nature Rule 23 is not supposed to impact the adjudication of a claim on the merits. Moreover, while the Ninth Circuit was sensitive to the problem of serial efforts to certify class actions that were pending or previously failed to gain certification in state or federal courts, legal mechanisms exist to prevent such abuses in the class context (as in individual litigation), including claim preclusion and comity doctrines.

Among the cases upon which the Ninth Circuit relied was Shady Grove Orthopedic Associates, P.A. v. Allstate Insurance Co., 559 U.S. 393 (2010), where the Supreme Court held that Rule 23 authorizes a district court to certify a class in every case that satisfies Rule 23’s criteria, regardless of the cause of action. In Resh, the Ninth Circuit reasoned that Shady Grove means that as a procedural rule, Rule 23 cannot abridge a claimant’s existing rights under a limitations statute. Resh, 857 F.3d at 1002 (“There is nothing in the certification criteria of Rule 23 that tells us to look to whether the statute of limitation has, or has not, been tolled.”)

The Ninth Circuit also addressed the defendants’ argument that “serial relitigation of class certification” was unfair to defendants, and that defendants “would be forced in effect to buy litigation peace by settling.” Id. at 1003. The quotations are from Smith v. Bayer Corp., 564 U.S. 299 (2011), wherein the Supreme Court refused to allow a federal district court to enjoin a state court from certifying a class after the federal court had denied class certification of a class involving the same transaction or occurrence. The Ninth Circuit relied on Smith v. Bayer’s reasoning that “there was no basis to apply formal preclusion principles against them, and thus no basis to enjoin the state court from certifying the class action.” Id. The Ninth Circuit followed Bayer’s holding that “traditional principles of stare decisis and comity, combined with the possibility of removal under the Class Action Fairness Act or consolidation by the Panel on Multidistrict Litigation, [are] adequate to the task of protecting defendants.” Id. (citing Smith v. Bayer, 564 U.S. at 316–18).

If it desires to reverse Resh, the Supreme Court will have to find that the legal and public policy issues identified and addressed by the Ninth Circuit compel an opposite result.




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