Last week, in a win for employers facing class action lawsuits, the Supreme Court unanimously ruled that statute of limitations tolling does not save absent class members’ untimely successive class actions. China Agritech, Inc. v. Resh. The Court limited its earlier ruling in American Pipe & Constr. Co. v. Utah, which held that the timely filing of a class action “tolls” the applicable statute of limitations for all putative class members while a certification decision is pending.
Under American Pipe, if certification of a class action was denied, a class member could still file a subsequent individual lawsuit, even if the statute of limitations had expired during the first class action. In China Agritech, the Court addressed what happens when certification is denied and an absent class member attempts to bring a “follow-on” class action presenting the same claims—essentially stacking class actions in an unending attempt to obtain certification.
China Agritech reversed a Ninth Circuit decision that revived a securities class action after two certification denials. The Supreme Court reasoned that there is no compelling reason to allow plaintiffs who passed up previous opportunities to participate in class litigation to “enter the fray several years after class proceedings first commenced.” In its decision, the Court explained that the purpose of tolling in American Pipe was to promote “efficiency” and “economy.” Without such tolling, individuals would likely file individual cases during the life of the class action to protect their interests in the event that class certification is denied. The Court distinguished successive class actions, explaining that judicial efficiency and economy are not similarly furthered by the “maintenance of untimely successive class actions.”
Although not an employment case, China Agritech is important for employers, as they are now less likely to be burdened with “stacked” class actions—which can be both lengthy and costly. As a result of the Supreme Court’s ruling, employees will be forced to litigate claims as individuals if a court denies Rule 23 class certification and the statute of limitations has expired. For example, courts should limit tolling for those plaintiffs that file class actions alleging wage and hour violations after a denial of class certification (but employers should be aware that FLSA collective actions have different tolling rules).