In an appeal arising out of a securities class action, the Supreme Court announced on Friday that it will take up the question of whether class action tolling applies to subsequent class actions, or is limited to subsequent individual actions.
Under the class action tolling rule established by American Pipe and Construction Co. v. Utah, 414 U.S. 538 (1974) (“American Pipe”), the timely filing of a class action tolls the statute of limitations as to individual putative class members. Appellate courts have divided over whether and in what circumstances class actions may also benefit from American Pipe tolling. In China Agritech, the Supreme Court is poised to resolve this circuit split.
The Supreme Court’s decision to grant the China Agritech petition demonstrates its continued interest in the proper scope of class action tolling. Just last term, in California Pub. Employees’ Ret. Sys. v. ANZ Sec., Inc., 137 S. Ct. 2042 (2017) (“CalPERS”)—a case litigated by Cleary Gottlieb—the Court clarified that the American Pipe rule is a rule of equitable tolling and held that class action tolling does not apply to statutes of repose. The China Agritech case presents another opportunity for the Court to address the outer bounds of the class action tolling rule.
The issue before the Supreme Court in China Agritech is one that several circuits have recognized can invite abuse and repetitive class actions. Under the Ninth Circuit’s holding that class action tolling applies to subsequent class actions, plaintiffs can file serial class actions and re-litigate adverse decisions on a motion to dismiss or class certification motion, which would expose defendants to protracted liability and uncertainty.