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U.S. Supreme Court Limits Potential for Repeat Class Actions

In a unanimous opinion handed down this week, the U.S. Supreme Court provided needed protection against the specter of successive class action lawsuits. In China Agritech v. Resh, the court held that the mere filing of a case labeled as a class action does not “toll” or pause the statute of limitations for future class actions addressing the same claims. The court’s opinion holds that if the statute of limitations expires while a class action case is pending, a member of the class may not assert a second class action of the time-barred claim even if the court in the first case denies class action status.

The court had previously held that the filing of a class action lawsuit tolls the statute of limitations period for claims brought by individuals in the event the court denies a motion to certify a class action. This holding protected individuals from the statute of limitations in the event an attempt at a class action ultimately failed. It allowed individuals to hold off suing on their own claims until it the courts could determine whether there was going to be a class action

Writing for a unanimous Supreme Court, Justice Ginsburg refused to extend that logic to future class actions (as opposed individual claims.) The opinion concluded that “the ‘efficiency and economy of litigation’ that support tolling of individual claims . . . do not support maintenance of untimely successive class actions.” As the court explained, “there is little reason to allow plaintiffs who passed up opportunities to participate in the first (and second) round of class litigation to enter the fray several years after class proceedings first commenced.”

Under this holding, if the limitations period for a claim expires while a case remains pending, the class members cannot bring a second class action lawsuit asserting the claim even if the first court refused to certify the case as a class action. Instead, the limitations period forever bars hearing the claim as a class action.

The facts of the China Agritech opinion illustrate the danger a contrary result would pose. The lawsuit is the third separate class action asserting the same allegation that a company’s misfeasance had injured its stock price. A federal court refused to grant class certification after a group of plaintiffs sued in 2011. A second lawsuit followed in 2012, but the courts again denied class certification. The same lawyers then filed a third class action complaint in 2014. The Supreme Court held that enough was enough and barred further class litigation of the claim.

Justice Sotomayor wrote separately to suggest that the court’s holding should be limited to actions under federal securities law. No other justice joined her opinion.

© 2018 BARNES & THORNBURG LLP

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About this Author

Brian Casey, Litigation Attorney, Barnes Thornburg, Law firm
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Brian Casey is a partner in the Litigation Department of Barnes & Thornburg LLP'sSouth Bend, Indiana office. He concentrates his practice in business litigation, particularly securities and ERISA litigation, as well as appellate practice. Mr. Casey has represented issuers, and their directors and officers in private securities fraud class actions, SEC and Department of Labor investigations and enforcement actions, as well as investigations by the Department of Justice and the Internal Revenue Service.  He has represented...

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Mark J Crandley, Litigation, Attorney, Barnes Thornburg, law firm
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Mark Crandley is a partner in the Litigation Department of Barnes & Thornburg LLP’s Indianapolis, Indiana office. Mr. Crandley has a diverse practice that concentrates on appeals, municipal and constitutional law, employee benefits, probate and guardianship matters as well as general commercial litigation.

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L Rachel Lerman, Financial Attorney, Barnes & Thornburg Law Firm
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L. Rachel Lerman is a partner in Barnes & Thornburg LLP’s Los Angeles office and a member of the firm’s Litigation Department. Formerly a partner at Akin Gump Strauss Hauer & Feld LLP, she focuses on appellate practice and trial strategy in complex civil cases. She has handled writs and appeals in commercial, bankruptcy, patent, trade mark, trade secret, labor, insurance defense, white collar, and family law cases in state and federal courts nationwide. She works regularly with trial counsel on law and motion and trial strategy.

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Peter J. Rusthoven, Corporate Governance Attorney, Barnes Thornburg Law Firm
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Peter J. Rusthoven, a partner in the Indianapolis, Indiana office, has a multi-dimensional practice. His business experience includes transactional and corporate governance work, in areas ranging from manufacturing to publishing to healthcare. He was active in drafting Indiana's corporation statute and official comments and has frequently written and spoken on corporate change-of-control issues. In the governmental services area, he is experienced in gaming and alcoholic beverage licensing and other regulatory and legislative services matters.

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