China Agritech and Tolling in CAFA Cases

Updated 6-11-18: The Supreme Court’s decision earlier today in China Agritech confirms the validity of the observations in the original blog post below.  The Court held that American Pipe tolling does not apply to successive class actions.

In American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974), and Crown Cork & Seal v. Parker, 462 U.S. 345 (1983), the U.S. Supreme Court held that the pendency of a class action will toll limitations periods for absent class members until class certification is denied.

Much recent attention has been focused on China Agritech Inc. v. Resh, argued in the Supreme Court on March 26, 2018. In that case, the Supreme Court will presumably decide whether, under American Pipe and Crown Cork & Seal, the limitations period will be tolled for subsequent class action claims. Although many commentators have written about China Agritech, few if any have focused on the potential interplay between the case and the jurisdictional provisions in the Class Action Fairness Act, 28 USC §1332(d). CAFA relaxes diversity requirements and permits federal jurisdiction over putative class actions in instances when individual claimants would be relegated to state court.

So here’s the rub. Some state courts do not recognize American Pipe tolling on a cross-jurisdictional basis. See generally Moore’s Federal Practice §23.65[3]. And some federal courts do not recognize cross jurisdictional tolling if the state court in which a putative class action was originally filed has rejected, or not adopted, American Pipe. Id. As we noted in 2014, Fourth Circuit precedent suggests that, where state law is silent, cross-jurisdictional tolling is unavailable. To further complicate the analysis, in Vaught v. Showa Denko K.K., 107 F.3d 1137 (5th Cir. 1997), the Court held that federal courts must apply state tolling rules in diversity actions. To be sure, there is no consistency in the state court precedent, and not all federal courts have followed or adopted Vaught.

Where does that leave us? If the Court rejects tolling for subsequent class action claims in China Agritech, in some instances American Pipe tolling may not be available for individual claims either. In cases where only CAFA provided federal jurisdiction, the plaintiffs will presumably be relegated to state court. And, as noted above, some state courts have not adopted American Pipe and/or refuse to recognize cross jurisdictional tolling.

SCOTUS blog doesn’t indicate that this issue got much if any attention at oral argument. It will be interesting to see if it becomes a real concern for plaintiffs – and a possible defense for defendants – after we learn how the Court rules in China Agritech.