China Agritech, Inc. v. Resh
138 S. Ct. 1800
| SCOTUS | 2018Background
- Three successive class actions were filed alleging the same securities fraud by China Agritech; the first (Dean) filed Feb 11, 2011, and a second (Smyth) followed within the limitations period; both were denied class certification and later settled/dismissed.
- The Securities Exchange Act imposes a two-year statute of limitations (accrual Feb 3, 2011) and a five-year statute of repose (Nov 12, 2009); Resh filed a third class action on June 30, 2014, after the limitations period expired.
- Resh and co-respondents did not seek lead-plaintiff status in the earlier timely suits; they filed the new class action instead and moved to intervene as lead plaintiffs in Resh.
- The district court dismissed Resh’s class complaint as untimely; the Ninth Circuit reversed, holding American Pipe tolling extends to successive class actions.
- The Supreme Court granted certiorari to resolve a circuit split on whether American Pipe tolling allows a follow-on class action filed after the limitations period.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does American Pipe tolling permit a successive class action filed after the statute of limitations expires? | Resh: American Pipe’s tolling of individual claims should also allow untimely successive class actions so absent members can revive class claims. | China Agritech: American Pipe tolls only individual claims; successive class suits filed after limitations are not tolled. | No. American Pipe does not permit maintenance of successive class actions filed after the limitations period. |
| Does Rule 23 or Shady Grove support treating a late class claim as timely if Rule 23 elements are met? | Resh: If Rule 23(a) and (b) are satisfied, Rule 23 should allow the class action to proceed irrespective of tolling issues. | China Agritech: Rule 23 governs class procedure but does not address timeliness; it does not authorize revival of untimely class claims. | Rule 23 does not revive untimely class claims; Shady Grove is distinguishable because it addressed a different conflict between Rule 23 and state law. |
| Do PSLRA notice and lead-plaintiff procedures affect the tolling analysis? | Resh: N/A (respondents argued generally for tolling) | China Agritech: PSLRA’s early-notice and lead-plaintiff scheme supports requiring putative class representatives to come forward early. | The Court emphasized PSLRA’s preference for early consolidation of lead-plaintiff candidates; failing to participate earlier undermines diligence. |
| Would extending tolling to successive class suits cause unacceptable indefinite tolling or inefficiency? | Resh: Allowing tolling prevents ‘protective’ filings and furthers efficiency. | China Agritech: Successive-class tolling could permit endless relitigation and undermine statutes of limitations. | Extending tolling risks indefinite tolling and inefficiency; individual-claim tolling (American Pipe) is distinguishable. |
Key Cases Cited
- American Pipe & Constr. Co. v. Utah, 414 U.S. 538 (1974) (timely filing of class action tolls statute of limitations for class members and allows later individual suits/intervention)
- Crown, Cork & Seal Co. v. Parker, 462 U.S. 345 (1983) (American Pipe tolling extends to putative class members who file separate individual actions)
- Shady Grove Orthopedic Associates, P.A. v. Allstate Ins. Co., 559 U.S. 393 (2010) (Rule 23 applies where its requirements are met; addressed federal rule vs. state-law conflict)
- Smith v. Bayer Corp., 564 U.S. 299 (2011) (preclusion principles and limits on effect of class-certification rulings in subsequent suits)
- McQuiggin v. Perkins, 569 U.S. 383 (2013) (equitable tolling requires diligence; exhaustion of rights tied to diligence determination)