Many thanks to the blog reader who pointed out that in December of last year, the U.S. Supreme Court granted cert. in China Agritech, Inc. v. Resh, No. 17-432, a securities class action involving American Pipe tolling. Reuters had an interesting article about the case shortly after the grant. SCOTUSblog's case page has links to all the briefs, including numerous amicus briefs.
In May 2017, the Ninth Circuit handed down its opinion in Resh v. China Agritech, Inc., 857 F.3d 994 (9th Cir. 2017). The parties did not dispute that the American Pipe rule tolled the running of the statute of limitations for all unnamed plaintiffs in two prior class actions, or that after class certification was denied in those earlier cases, the unnamed plaintiffs could file new individual lawsuits. The question was whether they could commence new putative class actions. See id. at 1000. The Ninth Circuit held that while principles of comity or issue preclusion might apply in such a subsequent case, the proposed class claims were not time-barred. Id. at 1004.
The following passage explains the panel's reasoning:
We conclude, based on American Pipe and Crown, Cork & Seal, read in the light of Shady Grove, Smith and Tyson Foods, that permitting future class action named plaintiffs, who were unnamed class members in previously uncertified classes, to avail themselves of American Pipe tolling would advance the policy objectives that led the Supreme Court to permit tolling in the first place. The rule creates no unfair surprise to defendants because the pendency of a prior class suit has already alerted them "not only [to] the substantive claims being brought against them, but also [to] the number and generic identities of the potential plaintiffs who may participate in the judgment." American Pipe, 414 U.S. at 554-55. The rule also promotes economy of litigation by reducing incentives for filing duplicative, protective class actions because "[a] putative class member who fears that class certification may be denied would have every incentive to file a separate action prior to the expiration of his own period of limitations." Crown, Cork & Seal, 462 U.S. at 350-51.
We further conclude, based on Smith, that to the degree that our conclusion may be thought likely to lead to abusive filing of repetitive class actions, the current legal system is adequate to respond to such a concern. First, if it is clear that a proposed class is not viable under Rule 23, as evidenced by an earlier federal court decision, potential future plaintiffs (or, more precisely, their attorneys) will have little to gain from repeatedly filing new suits. Attorneys who are going to be paid on a contingency fee basis, or in some cases based on a fee-shifting statute, at some point will be unwilling to assume the financial risk in bringing successive suits. Second, ordinary principles of preclusion and comity will further reduce incentives to relitigate frivolous or already dismissed class claims, and will provide a ready basis for successor federal district courts to deny class action certification.
Id. at 1004-05 (hyperlinks added).
