Commercial Litigation and Arbitration

American Pipe and Successive Class Actions — A Plaintiff who has Benefitted from American Pipe Tolling May Commence a Second Class Action when Class Issues Not Definitively Ruled on in First Action

From In re Vertrue Mktg. & Sales Pracs. Litig., 2010 U.S. Dist. LEXIS 38582 (N.D. Ohio April 16, 2010):

Subsequent to American Pipe and Crown, Cork & Seal, the Sixth Circuit addressed whether an unnamed plaintiff who benefits from American Pipe tolling may assert claims on behalf of a class. See, Andrews v. Orr, 851 F.2d 146 (6th Cir. 1988). The Sixth Circuit rejected the concept***.

Upon review, the Court agrees with plaintiffs that Andrews cannot be read as broadly as defendants urge. There is a clear distinction between the subsequent filing of an otherwise stale class action where a prior court has already ruled that class certification is improper and one where no court has spoken on the class certification issue. Notably, in reaching its conclusion, Andrews cited the reasoning of the court in Korwek v. Hunt, 827 F.2d 874, 879 (2d Cir. 1987) wherein the court explained that "the Supreme Court...certainly did not intend to afford plaintiffs the opportunity to argue and reargue the question of class certification by filing new but repetitive complaints." In both of the other cases relied on in Andrews, the courts were faced with subsequent class actions wherein a previous court had denied class certification. See, Salazar-Calderon v. Presidio Valley Farmers Ass'n, 765 F.2d 1334 (5th Cir. 1989); Robbin v. Flour Corp., 835 F.2d 213 (9th Cir. 1987).

More recent caselaw demonstrates a trend towards allowing the use of the class vehicle, at least in certain circumstances, where a previous court has not made a "definitive" determination regarding the propriety of class certification. For example, in Yang v. Odom, 392 F.3d 97 (3d Cir. 2004), the Third Circuit analyzed whether class claims are tolled if a previous court denied class certification based on the inadequacy of the lead plaintiff, as opposed to the "validity of the class itself." The court first noted its agreement with cases such as Salazar-Calderon, wherein otherwise time-barred sequential class actions are not permitted if a previous court definitely determined that class treatment is inappropriate. Yang, however, reasoned that a "bright line" approach is not appropriate. ***

Similarly, the Ninth Circuit initially appeared to create a "bright line" rule prohibiting American Pipe tolling for sequential class actions. See, Robbin v. Fluor Corp., 835 F.2d 213 (9th Cir. 1987). Subsequently, however, the holding in Robbin was narrowed such that tolling for class actions is now permitted in at least some circumstances. In Catholic Social Services, Inc. v. Immigration and Naturalization Service, 232 F.3d 1139 (9th Cir. 2000), the district court certified a class of individuals, but Congress later stripped federal courts of jurisdiction over the named plaintiffs. See also, Yang, 392 F.3d at 107 (discussing Catholic Social Services). The Ninth Circuit refused to allow the plaintiffs to amend their complaint and instructed the district court to dismiss the lawsuit. Immediately following dismissal, plaintiffs filed a second class action lawsuit. In the second lawsuit, the named plaintiffs satisfied the new jurisdictional requirement. In distinguishing Robbin, the Ninth Circuit held,

...Plaintiffs in the class action now before us thus do not seek to cure any procedural deficiencies in the classes under Rule 23 certified in the first action because there were none.

Plaintiffs in this case are thus in a fundamentally different posture from plaintiffs in cases in which subsequent class actions were not allowed.

Catholic Social Services, 232 F.3d at 1149.

Thus, while the Ninth Circuit may not necessarily adopt the Third Circuit's approach, both opinions conclude that a bright line approach is not appropriate. Upon careful review of the reasoning from the opinions in these Circuits, the Court finds further support for its conclusion that Andrews does not create a bright line rule prohibiting class action tolling in all circumstances. At its broadest, Andrews says that where a previous court denies class certification, American Pipe tolling is unavailable for subsequently filed class actions. Andrews does not speak, however, to a situation in which no court has ever denied class certification, or the situation in Catholic Social Services, in which a previous court actually granted class certification. ***

Based on the facts of this case, the Court finds that Andrews does not preclude class action treatment. One of the rationales supporting the Andrews decision is that it would be improper and a waste of judicial resources to allow parties to relitigate the issue of class certification and indefinitely extend the statue of limitations for class actions. Here, however, the issue of class certification was never really litigated in Sanford. Thus, the concerns espoused in Andrews and the early cases involving the anti-stacking rule are not present here. Moreover, this situation is not akin to Yang, wherein the Third Circuit permitted American Pipe tolling in subsequent class actions where the named plaintiff was deemed inadequate. Courts disagreeing with Yang seem concerned with the ability of plaintiffs' attorneys to continue to substitute new named plaintiffs until they "get it right." Here, however, no such issue arises. This Court concludes that, where there has been no determination at all regarding the appropriateness of class certification, and a court of appeals has "reinstated" the class allegations, subsequent class treatment is not precluded. In the same vein, the Court's holding does not raise issues of "indefinite" stacking. Where no prior ruling exists (definitive or otherwise), indefinite stacking is highly unlikely to arise. It would only occur in the event a number of courts continue to avoid the issue of class certification. The Court finds that its holding here appropriately balances the competing interests faced in American Pipe. The interests in preventing stale claims must be balanced with the benefits afforded under Rule 23. In this case, the defendants are well aware of the nature of the claims and the evidence related to those claims and, accordingly, allowing the claims to proceed as a class does not unfairly prejudice their rights. At the same time, plaintiffs, who may not otherwise file costly individual claims, do not lose the protections afforded under Rule 23 simply because a court never reaches the issue of class certification. Judicial economy is also not hindered. To hold otherwise may encourage litigants to file duplicative lawsuits out of concerns that certain courts may never reach the issue of class certification. Nor is it likely that a large number of "stacked" class action lawsuits will be filed in this situation. Rule 23 mandates that courts address issues of class certification "as soon as practicable." Thus, courts should address class certification in most instances, obviating the need for subsequently filed class actions.

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