Tolling of Limitations Periods for State Law Claims under 28 U.S.C. § 1367(d) — Caselaw Split — Application to Absent Class Members

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

2. Tolling under 28 U.S.C. § 1367(d) Unlike the judicial tolling doctrine espoused in American Pipe, 28 U.S.C. § 1367 provides for statutory tolling for certain claims. That provision is directed at a federal court's supplemental jurisdiction. Specifically, the statute provides in relevant part as follows,

(a) Except as provided in subsections (b) and (c) or as expressly provided otherwise by Federal statute, in any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy....***

(d) The period of limitations for any claim asserted under subsection (a), and for any other claim in the same action that is voluntarily dismissed at the same time as or after the dismissal of the claim under subsection (a), shall be tolled while the claim is pending and for a period of 30 days after it is dismissed unless State law provides for a longer tolling period.

***

As an initial matter, the Court notes that this appears to be an issue of first impression. Neither the parties nor the Court uncovered any caselaw interpreting the tolling provision set forth in Section 1367(d) with respect to unnamed class members. ***

Although the statute is silent as to whether unnamed class members may benefit from tolling, the Court finds that well-settled principles of class action law dictate that absent class members may take advantage of Section 1367 tolling. As plaintiffs point out, absent class members are considered "parties" for certain purposes. See, Devlin v. Scardelletti, 536 U.S. 1, 9-10 (2002)(unnamed class member considered "party" for purposes of filing appeal). See also Fidel v. Farley, 534 F.3d 508 (6th Cir. 2008)(unnamed class members who chose not to opt out of class still considered "parties" for purposes of appeal). Most notably, however, the Supreme Court's decision in American Pipe dictates that unnamed class members are considered "parties" for purposes of the filing of a complaint. In concluding that unnamed class members are entitled to judicial tolling, the Supreme Court necessarily concluded that claims filed by representative class members are also deemed filed by unnamed class members. American Pipe and its progeny was well-settled law at the time Section 1367(d) was enacted. Thus, had Congress intended to exclude unnamed class members from the ambit of Section 1367(d), it would have been necessary to do so expressly. Accordingly, the Court concludes that, assuming all other requirements are satisfied, unnamed class members are entitled to the tolling protections afforded by Section 1367(d).

Although a closer call, the Court also finds that Section 1367(d) does not prohibit the filing of a subsequent class action based on the facts of this case. *** In general, Section 1367 addresses a federal court's jurisdiction over related state law claims. Section 1367(c) permits a federal court to decline to exercise supplemental jurisdiction over state law claims once the federal claims are dismissed. Often, and as in this case, the federal court takes no action with respect to the state law claims. Rather, the federal court addresses only the federal claims. The very purpose of Section 1367(d) is to prevent plaintiffs who join federal and state claims in one lawsuit from losing their state claims because a federal court ultimately declines to exercise jurisdiction over them. It makes little sense, in turn, to bar these plaintiffs from proceeding as a class. In this case, not only has no ruling regarding class certification been made, but no disposition of any aspect of the claims has occurred. Any other outcome would encourage the filing of parallel state and federal actions.***

Upon review, the Court finds that only those state law claims actually asserted in Sanford are subject to statutory tolling. In other words, only the state law claims for fraud, conversion, and unjust enrichment, which were expressly alleged in Sanford, [the earlier class action that alleged both federal and state claims] may be tolled. ***

There are three possible interpretations of [28 U.S.C. § 1367(d)]. See, Turner v. Kight, 957 A.2d. 984 (Md. Ct. App. 2008); Goodman v. Best Buy, 755 N.W.2d 354 (Minn. Ct. App. 2008). As set forth in Turner and Goodman, the statute could arguably be interpreted as "annulling" the state statute of limitations. In this manner, the state statute of limitations period is completely replaced "by a fixed period: the thirty-day period after federal dismissal." This interpretation is known as the "substitution approach." The second, and related interpretation, is that Section 1367(d) only tolls the expiration of the statute of limitations,

This interpretation treats that period in the statute — the federal claim period plus thirty days — as a single span of time. If the state limitations period runs out during that span, the thirtieth day after dismissal becomes the new filing deadline. Under these circumstances, the outcome is the same as under the 'annul and replace' interpretations. If, however, the state limitations period does not run out during that span of time, the state limitations period is unaffected and terminates without regard to any federal court filings.

Goodman, 755 N.W. 2d at 357. The second interpretation is known as the "extension approach." The third possible interpretation is that Section 1367(d) suspends the running of the statute of limitations, i.e., "the clock is stopped and the time is not counted — while the federal court is considering the claim and for thirty days after the claim is dismissed." ... This is referred to as the "suspension approach."

As an initial matter, the Court rejects the substitution approach. It does not appear that any court has adopted that approach and the Court finds that the statutory language cannot fairly be read to impose such a drastic result. ***

Although no court has expressly adopted the substitution approach, courts appear evenly split on whether the statute requires the suspension or the extension approach. [Citations omitted.] Upon review, the Court finds that the fairest reading of the statute is the suspension approach. To accept the extension approach, i.e., only the expiration of the statute of limitations is tolled, would render the statute inapplicable to a number of cases. As set forth above, in the event the statute of limitations would not otherwise expire during either the pendency of the federal lawsuit, or within 30 days of the dismissal thereof, Section 1367(d) would have no effect on the claim. However, the statutory language is written such that any claim filed "shall be" tolled. In order to give effect to the plain meaning and mandatory nature of the language, this Court finds that extension approach must be rejected. On its face, Section 1367(d) must have a tolling effect on all supplemental state law claims. The suspension approach is the only approach that comports with the plain meaning of the statute. By essentially "stopping the clock" during the pendency of the federal lawsuit, all claims receive a tolling benefit and the statute can be uniformly applied. ***

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