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China Agritech, Inc. v. Resh

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Supreme Court of the United States
China Agritech, Inc. v. Resh
Term: 2017
Important Dates
Argument: March 26, 2018
Decided: June 11, 2018
Outcome
Ninth Circuit reversed
Vote
9 - 0
Majority
Chief Justice John G. Roberts • Anthony Kennedy • Clarence Thomas • Ruth Bader Ginsburg • Stephen Breyer • Samuel Alito • Sonia Sotomayor • Elena Kagan • Neil Gorsuch
Concurring
Sonia Sotomayor


China Agritech, Inc. v. Resh is a case argued during the October 2017 term of the U.S. Supreme Court. Argument in the case was held on March 26, 2018. The case came on a writ of certiorari to the United States Court of Appeals for the 9th Circuit.

HIGHLIGHTS
  • The case: Under a case called American Pipe, individual plaintiffs may file claims for the first time after class certification has been denied, even if the statute of limitations has expired, because the pending class action tolls the statute of limitations. In this case, plaintiffs sought to file a new class action after class certification had been denied in a different suit. The district court dismissed their claims, concluding that the new class action was untimely. On appeal, the United States Court of Appeals for the 9th Circuit reversed, holding that the tolling rule from American Pipe applied to new class actions to the same extent as it applied to individual plaintiffs' claims.[1]
  • The issue: "Whether the American Pipe rule tolls statutes of limitations to permit a previously absent class member to bring a subsequent class action outside the applicable limitations period."[2]
  • The outcome: On a vote of 9 - 0, the Supreme Court reversed the Ninth Circuit, ruling that American Pipe does not permit a class action filed outside of the limitations period.[3]


    • You can review the lower court's opinion here.[1]

    Background

    Legal question

    This was a case about the time limits for filing class action lawsuits. A class action is a lawsuit in which a large group, or class, of plaintiffs sue together. The class is identified by characteristics rather than by name--there are usually some named plaintiffs, and then the class encompasses all others who are similarly situated. Not all of the unnamed plaintiffs may be aware of the case. Class actions allow courts to manage cases in which there are a large number of plaintiffs with similar claims or injuries, and they allow groups of plaintiffs to band together in one lawsuit where their individual claims are too small or too expensive to pursue one by one. In order for a class action to proceed, a court must certify the class. For the class to be certified, the plaintiffs must show that the class meets certain legal requirements outlined in Rule 23 of the Federal Rules of Civil Procedure. If a class is not certified, individual named plaintiffs may proceed on their own, but they may not proceed on behalf of other similarly situated plaintiffs.

    A plaintiff who wishes to file a lawsuit must file the suit within a specified time frame after an injury or claim arises. That specified time frame is called the statute of limitations. In certain circumstances, the law allows statutes of limitation to be tolled. To toll a statute means to stop the clock. For example, imagine that the statute of limitations for a claim of landlord fraud is three years and that the law allows the limitations period to be tolled until the tenant discovers the fraud. If the landlord committed fraud in 1990, but the tenant wasn't aware of the fraud until 1993, the clock is tolled until 1993, and the statute of limitations would expire in 1996.

    In American Pipe and Construction Co. v. Utah, the United States Supreme Court considered the tolling effect of a class action on individual plaintiffs' claims. The Ninth Circuit summarized:

    “ In American Pipe &Construction Co. v. Utah, 414 U.S. 538 (1974), the Court held that unnamed members of an uncertified class could intervene as individual plaintiffs in the individual suit that remained even if the statutory limitations period had passed. According to the Court, 'the commencement of the original class suit tolls the running of the statute [of limitations] for all purported members of the class who make timely motions to intervene after the court has found the suit inappropriate for class action status.'[1][4] ”


    In other words, the filing of a class action stops the statute of limitations clock for all members of the class, even if the class is ultimately not certified. Even if a particular plaintiff was not a named plaintiff in the class action--perhaps even did not know about the class action at the time it was filed--he or she can still file a claim as an individual plaintiff at the time the court denies class certification, as long as the attempted class action was filed within the statutory period. The issue in this case was whether that tolling rule also applies to plaintiffs who file a new class action suit (as opposed to an individual suit) after certification is denied in the original lawsuit.[1]

    Case background

    The Ninth Circuit summarized the case:

    “ Plaintiffs bring a would-be class action alleging that China Agritech, Inc. (“China Agritech”) and its managers and directors violated the Securities Exchange Act of 1934 (“Exchange Act”). Plaintiffs were unnamed plaintiffs in two

    earlier would-be class actions against many of the same defendants based on the same underlying events. Class action certification was denied in both cases. Under American Pipe &Construction Co v. Utah..., the statute of limitations was tolled during the pendency of these two suits for plaintiffs’ individual claims. There is thus no time bar preventing plaintiffs from bringing the present suit as joined individual claims rather than as a class action. The question before us is whether plaintiffs are time-barred from pursuing their suit as a class action.[1][4]

    		”


    The district court ruled that the plaintiffs' suit was time-barred. It held that under American Pipe, "the statute of limitations was tolled for the individual claims of the named plaintiffs...but was not tolled for plaintiffs’ would-be class action." The plaintiffs then appealed to the United States Court of Appeals for the 9th Circuit.[1]

    Panel opinion

    On appeal, the Ninth Circuit reversed the district court, concluding that the plaintiffs' class action suit was not time-barred. The court concluded that if the plaintiffs' individual claims were not time-barred, then their class action claims were similarly not time-barred. Quoting an earlier Ninth Circuit case, the court distinguished between the issue of tolling and the prohibition against relitigating claims that have already been disposed of:

    “ There is no dispute that if members of the class...had filed individual actions after the dismissal of their class action, the statute of limitations would have been tolled for those individual actions...The only question in this case is whether those same plaintiffs should be permitted to aggregate their individual actions into a class action. Strictly speaking, this is not a statute of limitations question at all. It is, rather, a question of whether plaintiffs whose individual actions are not barred may be permitted to use a class action to litigate those actions.[1][5][4] ”


    In other words, the court wrote, the issue of whether the plaintiffs may pursue class certification was a question about class certification law, not the application of tolling laws. The court concluded, "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. That is, the statute of limitations is not part of Rule 23 but is, instead, some other law.”[1][6]

    China Agritech then appealed to the United States Supreme Court.

    Petitioner's challenge

    The petitioner, China Agritech, challenged the holding of the United States Court of Appeals for the 9th Circuit. China Agritech argued that the Ninth Circuit erred in concluding that the tolling rule outlined in American Pipe allows a previously unnamed plaintiff to bring a new class action outside of the statutory period.[1]

    Certiorari granted

    On September 21, 2017, the petitioner initiated proceedings in the Supreme Court of the United States in filing a petition for a writ of certiorari to the United States Court of Appeals for the 9th Circuit. The U.S. Supreme Court granted the petitioner's request for certiorari on December 8, 2017. Argument in the case was held on March 26, 2018.[2]

    Question presented

    Question presented:

    "Whether the American Pipe rule tolls statutes of limitations to permit a previously absent class member to bring a subsequent class action outside the applicable limitations period."[2]

    Audio

    • Audio of oral argument:[7]



    Transcript

    • Transcript of oral argument:[8]

    Outcome

    Decision

    On a vote of 9 - 0, the Supreme Court reversed the Ninth Circuit's ruling.[3]

    Opinion of the court

    Justice Ruth Bader Ginsburg authored the opinion for a unanimous court. Ginsburg ruled, "American Pipe tolls the statute of limitations during the pendency of a putative class action, allowing unnamed class members to join the action individually or file individual claims if the class fails. But American Pipe does not permit the maintenance of a follow-on class action past expiration of the statute of limitations."[9]

    Ginsburg wrote that American Pipe and other earlier Supreme Court decisions "addressed only putative class members who wish to sue individually after a class certification denial."[10] The reason for allowing later individual claims, she continued, was that "economy of litigation favors delaying [individual] claims until after a class-certification denial." Conversely, late class actions are judicially inefficient, potentially requiring a court to deal with individual claims before addressing a class action suit that could resolve the claims of an entire class:

    “ The watchwords of American Pipe are efficiency and economy of litigation, a principal purpose of Rule 23 as well. Extending American Pipe tolling to successive class actions does not serve that purpose. The contrary rule, allowing no tolling for out-of-time class actions, will propel putative class representatives to file suit well within the limitation period and seek certification promptly. For all the above-stated reasons, it is the rule we adopt today: Time to file a class action falls outside the bounds of American Pipe.[3][4] ”


    Concurrence by Justice Sotomayor

    Justice Sonia Sotomayor concurred in the court's judgment but wrote separately. Sotomayor would have limited the court's ruling to cases (like this case) that were filed under the Private Securities Litigation Reform Act of 1995 (PSLRA). In class actions not governed by PSLRA, Sotomayor wrote, the class certification process is governed by Rule 23 of the Federal Rules of Civil Procedure. But, she continued, where PSLRA imposes procedural requirements designed to notify every potential class member of the suit before certification, Rule 23 only required notice to potential class members after certification. "Given these important differences between Rule 23’s general class procedures and the specific procedures imposed by the PSLRA," she argued, "the majority’s conclusion . . . makes sense only in the PSLRA context." She concluded, "The majority's reasoning does not justify denying American Pipe tolling to other successive class actions. The majority could have avoided this error by limiting its decision to the issues presented by the facts of this case."[3]

    Text of the opinion


    See also

    Footnotes

    1. ↑ 1.0 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 United States Court of Appeals for the 9th Circuit, "China Agritech, Inc. v. Resh" Opinion, May 24, 2017
    2. ↑ 2.0 2.1 2.2 Supreme Court of the United States, "China Agritech, Inc. v. Resh" Question Presented, December 8, 2017
    3. ↑ 3.0 3.1 3.2 3.3 United States Supreme Court, "China Agritech, Inc. v. Resh Opinion," June 11, 2018
    4. ↑ 4.0 4.1 4.2 4.3 Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
    5. ↑ Emphasis added by the court.
    6. ↑ Internal quotations omitted.
    7. ↑ Supreme Court of the United States, China Agritech, Inc. v. Resh, argued March 26, 2018
    8. ↑ Supreme Court of the United States, China Agritech, Inc. v. Resh, argued March 26, 2018
    9. ↑ Cite error: Invalid <ref> tag; no text was provided for refs named SCOUTS
    10. ↑ Emphasis added.
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