Commercial Litigation and Arbitration

Statute of Limitations Unaffected by Dismissal without Prejudice — Class Action

"The Seventh Circuit has squarely held that 'a suit dismissed without prejudice is treated for statute of limitations purposes as if it had never been filed.... [T]he statute of limitations is deemed unaffected by the filing of the suit, so that if the statute of limitations has run the dismissal is effectively with prejudice.'" In re NeoPharm Secs. Litig., 2007 U.S. Dist. LEXIS 12584 (N.D. Ill. Feb. 23, 2007) (a securities class action; applying this doctrine to the benefit of an individual defendant). This precept would appear to be on a collision course with the American Pipe doctrine. Under the Supreme Court’s opinion in American Pipe v. Utah, 414 U.S. 538 (1974), the pendency of a class action tolls the applicable statute of limitations for class members. This doctrine has already taken a hit from the 2003 amendment to Fed.R.Civ.P. 23(e)(1)(A), under which no judicial approval is needed for the settlement or voluntary dismissal of any class action prior to class certification. That amendment has given rise to the question whether the American Pipe Doctrine should be reevaluated in light of the risk that absent class members could now lose their right to sue if they sit on the sidelines and await the Court’s class certification decision, only to learn after the fact that there has been a secret settlement and the statute has run. (See Joseph, New Class Action Rules, National Law Journal, Sept. 15, 2003 at 21 or the New Class Action Rules article on the Recent Articles page.) Some attention has to be paid to reconciling these disparate lines of decision.

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