CHINA AGRITECH, INC. v. MICHAEL H. RESH, ET AL.
No. 17-432
SUPREME COURT OF THE UNITED STATES
June 11, 2018
584 U.S. ___ (2018)
GINSBURG, J.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT; Argued March 26, 2018
(Slip Opinion)
OCTOBER TERM, 2017
Syllabus
NOTE: Where it is feasible, a syllabus (headnote) will be released, as is being done in connection with this case, at the time the opinion is issued. The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader. See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.
Syllabus
CHINA AGRITECH, INC. v. RESH ET AL.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT
No. 17-432. Argued March 26, 2018—Decided June 11, 2018
American Pipe & Constr. Co. v. Utah, 414 U. S. 538, established that the timely filing of a class action tolls the applicable statute of limitations for all persons encompassed by the class complaint and that members of a class that fails to gain certification can timely intervene as individual plaintiffs in the still-pending action, shorn of its class character. American Pipe‘s tolling rule also applies to putative class members who, after denial of class certification, “prefer to bring an individual suit rather than intervene.” Crown, Cork & Seal Co. v. Parker, 462 U. S. 345, 350. The question presented in this case is whether American Pipe tolling applies not only to individual claims, but to successive class actions as well.
This suit is the third class action brought on behalf of purchasers of petitioner China Agritech‘s common stock, alleging
Respondent Michael Resh, who did not seek lead-plaintiff status in the earlier actions, filed the present class action in 2014, a year and a half after the statute of limitations expired. The other respondents moved to intervene in the suit commenced by Resh, seeking lead-plaintiff status. The District Court dismissed the class complaint as untimely, holding that the Dean and Smyth actions did not toll the time to initiate class claims. The Ninth Circuit reversed, holding that the reasoning of American Pipe extends to successive class claims.
Held: Upon denial of class certification, a putative class member may not, in lieu of promptly joining an existing suit or promptly filing an individual action, commence a class action anew beyond the time allowed by the applicable statute of limitations. Pp. 5-15.
(a) American Pipe and Crown, Cork addressed only putative class members who wish to sue individually after a class-certification denial. The “efficiency and economy of litigation” that support tolling of individual claims, American Pipe, 414 U. S., at 553, do not support maintenance of untimely successive class actions such as the one brought by Resh. Economy of litigation favors delaying individual claims until after a class-certification denial. With class claims, on the other hand, efficiency favors early assertion of competing class representative claims. If class treatment is appropriate, and all would-be representatives have come forward, the district court can select the best plaintiff with knowledge of the full array of potential class representatives and class counsel. And if the class mechanism is not a viable option, the decision denying certification will be made at the outset of the case, litigated once for all would-be class representatives.
Class representatives who commence suit after expiration of the limitation period are unlikely to qualify as diligent in asserting claims and pursuing relief. See, e.g., McQuiggin v. Perkins, 569 U. S. 383, 391.
(b) If Resh‘s suit meets the requirements of
The clarification of American Pipe‘s reach does not run afoul of the
857 F. 3d 994, reversed and remanded.
GINSBURG, J., delivered the opinion of the Court, in which ROBERTS, C. J., and KENNEDY, THOMAS, BREYER, ALITO, KAGAN, and GORSUCH, JJ., joined. SOTOMAYOR, J., filed an opinion concurring in the judgment.
Opinion of the Court
NOTICE: This opinion is subject to formal revision before publication in the preliminary print of the United States Reports. Readers are requested to notify the Reporter of Decisions, Supreme Court of the United States, Washington, D. C. 20543, of any typographical or other formal errors, in order that corrections may be made before the preliminary print goes to press.
SUPREME COURT OF THE UNITED STATES
No. 17-432
CHINA AGRITECH, INC., PETITIONER v. MICHAEL H. RESH, ET AL.
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT
[June 11, 2018]
JUSTICE GINSBURG delivered the opinion of the Court.
This case concerns the tolling rule first stated in American Pipe & Constr. Co. v. Utah, 414 U. S. 538 (1974). The Court
The question presented in the case now before us: Upon denial of class certification, may a putative class member, in lieu of promptly joining an existing suit or promptly filing an individual action, commence a class action anew beyond the time allowed by the applicable statute of limitations? Our answer is no. American Pipe tolls the statute of limitations during the pendency of a putative class action, allowing unnamed class members to join the action individually or file individual claims if the class fails. But American Pipe does not permit the maintenance of a follow-on class action past expiration of the statute of limitations.
I
The instant suit is the third class action brought on behalf of purchasers of petitioner China Agritech‘s common stock, alleging violations of the
parties agree that the accrual date for purposes of the two-year limitation period is February 3, 2011, and for the five-year repose period, November 12, 2009. Brief for Respondents 8, n. 3.
Theodore Dean, a China Agritech shareholder, filed the first class-action complaint on February 11, 2011, at the start of the two-year limitation period. As required
On October 4, 2012—within the two-year statute of limitations—Dean‘s counsel filed a new complaint (Smyth) with a new set of plaintiffs and new efficient-market evidence. Eight shareholders responded to the PSLRA notice, seeking lead-plaintiff appointment. The District Court again denied class certification, this time on typicality and adequacy grounds. See App. 254. Thereafter, the Smyth plaintiffs settled their individual claims with the defendants and voluntarily dismissed their suit. Because the Smyth litigation was timely commenced, putative class members who promptly initiated individual suits in the wake of the class-action denial would have encountered no statute of limitations bar.
Respondent Michael Resh, who had not sought lead-plaintiff status in either the Dean or Smyth proceedings and was represented by counsel who had not appeared in the earlier actions, filed the present suit on June 30, 2014, styling it a class action—a year and a half after the statute of limitations expired. The other respondents moved to intervene, seeking designation as lead plaintiffs; together with Resh, they filed an amended complaint. The District Court dismissed the class complaint as untimely, holding that the Dean and Smyth actions did not toll the time to initiate class claims. App. to Pet. for Cert. 36a.
The Court of Appeals for the Ninth Circuit reversed: “[P]ermitting future class action named plaintiffs, who were unnamed class members in previously uncertified classes, to avail themselves of American Pipe tolling,” the court reasoned, “would advance the policy objectives that led the Supreme Court to permit tolling in the first place.” 857 F. 3d, at 1004. Applying American Pipe tolling to successive class actions, the Ninth Circuit added, would cause no unfair surprise to defendants and would promote economy of litigation by reducing incentives for filing protective class suits during the pendency of an initial certification motion. 857 F. 3d, at 1004.
We granted certiorari, 583 U. S. ___ (2017), in view of a division of authority among the Courts of Appeals over whether otherwise-untimely successive class claims may be salvaged by American Pipe tolling. Compare the instant case and Phipps v. Wal-Mart Stores, Inc., 792 F. 3d 637, 652-653 (CA6 2015) (applying American Pipe tolling to successive class action), with, e.g., Basch v. Ground Round, Inc., 139 F. 3d 6, 11 (CA1 1998) (“Plaintiffs may not stack one class action on top of another and continue to toll the statute of limitations indefinitely.“); Griffin v. Singletary, 17 F. 3d 356, 359 (CA11 1994) (similar); Korwek v. Hunt, 827 F. 2d 874, 879 (CA2 1987) (American Pipe does not apply to successive class suits); Salazar-Calderon v. Presidio Valley Farmers Assn., 765 F. 2d 1334, 1351 (CA5 1985) (“Plaintiffs have no authority for their contention that putative class members may piggyback one class action onto another and thus toll the statute of limitations indefinitely, nor have we found any.“). See also Yang v. Odom, 392 F. 3d 97, 112 (CA3 2004) (American Pipe tolling does not apply to successive class actions where certification was previously denied due to a class defect, but does apply when certification was denied based on the putative representative‘s deficiencies).
II
A
American Pipe established that “the commencement of the original class suit tolls the running of the statute [of limitations] for all purported members of the class who make timely motions to intervene after the court has found the suit inappropriate for class action status.” 414 U. S., at 553. “A contrary rule,” the Court reasoned in American Pipe, “would deprive [
American Pipe and Crown, Cork addressed only putative class members who wish to sue individually after a class-certification denial. See, e.g., American Pipe, 414 U. S., at 552 (addressing “privilege of intervening in an individual suit“); Crown, Cork, 462 U. S., at 349 (applying American Pipe to those who “file individual actions“); id., at 352 (tolling benefits “class members who choose to file separate suits“).
What about a putative class representative, like Resh, who brings his claims as a new class action after the statute of limitations has expired? Neither decision so much as hints that tolling extends to otherwise time-barred class claims. We hold that American Pipe does not permit a plaintiff who waits out the statute of limitations to piggyback on an earlier, timely filed class action. The “efficiency and economy of litigation” that support tolling of individual claims, American Pipe, 414 U. S., at 553, do not support maintenance of untimely successive class actions; any additional class filings should be made early on, soon after the commencement of the first action seeking class certification.
American Pipe tolls the limitation period for individual claims because economy of litigation favors delaying those claims until after a class-certification denial. If certification is granted, the claims will proceed as a class and there would be no need for the assertion of any claim individually.
With class claims, on the other hand, efficiency favors early assertion of competing class representative claims. If class treatment is appropriate, and all would-be representatives have come forward, the district court can select the best plaintiff with knowledge of the full array of potential class representatives and class counsel. And if the class mechanism is not a viable option for the claims, the decision denying certification will be made at the outset of the case, litigated once for all would-be class representatives.2
[class counsel] applications rather than deny class certification,” thus “afford[ing] the best possible representation for the class.” Advisory Committee‘s 2003 Note on subds. (c)(1)(A) and (g)(2)(A) of
The PSLRA, which governs this litigation, evinces a similar preference, this time embodied in legislation, for grouping class-representative filings at the outset of litigation. See supra, at 3. When the Dean and Smyth timely commenced actions were first filed, counsel put any shareholder who might wish to serve as lead plaintiff on notice of the action. Several heeded the call—six in Dean and eight in Smyth. See 857 F. 3d, at 997-998. The PSLRA, by requiring notice of the commencement of a class action, aims to draw all potential lead plaintiffs into the suit so that the district court will have the full roster of contenders before deciding which contender to appoint.3
See Brief for Securities
Ordinarily, to benefit from equitable tolling, plaintiffs must demonstrate that they have been diligent in pursuit of their claims. See, e.g., McQuiggin v. Perkins, 569 U. S. 383, 391 (2013); Menominee Tribe of Wis. v. United States, 577 U. S. ___ (2016) (slip op., at 5). Even American Pipe, which did not analyze “criteria of the formal doctrine of equitable tolling in any direct manner,” ANZ, 582 U. S., at ___ (slip op., at 10–11), observed that tolling was permissible in the circumstances because plaintiffs who later intervened to pursue individual claims had not slept on their rights, American Pipe, 414 U. S., at 554-555. Those plaintiffs reasonably relied on the class representative, who sued timely, to protect their interests in their individual claims. See Crown, Cork, 462 U. S., at 350. A would-be class representative who commences suit after expiration of the limitation period, however, can hardly qualify as diligent in asserting claims and pursuing relief.
status, hoping to join with other shareholders to create a unit with the largest financial interest. See Choi & Thompson, Securities Litigation and Its Lawyers: Changes During the First Decade After the PSLRA, 106 Colum. L. Rev. 1489, 1507, 1521, 1530 (2006) (80% of securities class actions in post-PSLRA data sample had two or more co-lead counsel firms). Thus, it is a reasonable expectation that, in litigation governed by the PSLRA, a district court will have several competing candidates for lead plaintiff to choose among.
Her interest in representing the class as lead plaintiff, therefore, would not be preserved by the prior plaintiff‘s timely filed class suit.
Respondents’ proposed reading would allow the statute of limitations to be extended time and again; as each class is denied certification, a new named plaintiff could file a class complaint that resuscitates the litigation. See Yang, 392 F. 3d, at 113 (Alito, J., concurring in part and dissenting in part) (tolling for successive class actions could allow “lawyers seeking to represent a plaintiff class [to] extend the statute of limitations almost indefinitely until they find a district court judge who is willing to certify the class“); Ewing Industries Corp. v. Bob Wines Nursery, Inc., 795 F. 3d 1324, 1326 (CA11 2015) (tolling for successive class actions allows plaintiffs “limitless bites at the apple“).4 This prospect
Dekalb County Pension Fund v. Transocean Ltd., 817 F. 3d 393, 397 (CA2 2016). Most statutory schemes provide for a single limitation period without any outer limit to safeguard against serial relitigation. Endless tolling of a statute of limitations is not a result envisioned by American Pipe.5
B
Respondents emphasize that in Shady Grove Orthopedic Associates, P. A. v. Allstate Ins. Co., 559 U. S. 393 (2010), we said that “a class action may be maintained,” id., at 398 (internal quotation marks omitted), if the requirements of
seeking damages of the kind asserted in the Shady Grove complaint. 559 U. S., at 396, 416. Our opinion in Shady Grove addressed a case in which a Rule 23 class action could have been maintained absent a contrary state-law command. Id., at 396. Resh‘s case presents the reverse situation: The class action would be untimely unless saved by American Pipe‘s equitable-tolling exception to statutes of limitations. Rule 23 itself does not address timeliness of claims or tolling and nothing in the Rule calls for the revival of class claims if individual claims are tolled. In fact, as already explained, Rule 23 prescribes the opposite result. See supra, at 6–8.
Respondents urge that American Pipe‘s logic in fact supports their position because declining to toll the limitation period for successive class suits will lead to a “needless multiplicity” of protective class-action filings. Brief for Respondents 32-34. See also post, at 6–7 (expressing concern about duplicative and dueling class actions). But there is little reason to think that protective class filings will substantially increase. Several Courts of Appeals have already declined to read American Pipe to permit a successive class action filed outside the limitation period. See supra, at 5; 3 W. Rubenstein, Newberg on Class Actions §9:64, n. 5 (5th ed. 2012). These courts include the Second and Fifth Circuits (no strangers to class-action practice); both courts declined to entertain out-of-time class actions in the 1980‘s. See Korwek, 827 F. 2d 874; Salazar-Calderon, 765 F. 2d 1334. Respondents and their amici make no showing that these Circuits have experienced a disproportionate number of duplicative, protective class-action filings.
Amicus National Conference on Public Employee Retirement Systems cites examples of protective filings responding to courts’ disallowance of American Pipe tolling for statutes of repose, but those examples in fact suggest that protective class filings are uncommon. See Brief of the National Conference on Public Employee Retirement Systems as Amicus Curiae 7–8. Between dozens and hundreds of class plaintiffs filed protective individual claims while class-certification motions were pending in securities cases and the statute of repose was about to run out, placing a permanent bar against their claims. Ibid. But none of the plaintiffs appears to have filed a protective class action—even though, if the statute of repose expired and the pending class-certification motions were denied, there would be no further opportunity to assert class claims.6
Nor do the incentives of class-action practice suggest that many more plaintiffs will file protective class claims as a result of our holding. Any plaintiff whose individual claim is worth litigating on its own rests secure in the
knowledge that she can avail herself of American Pipe tolling if certification is denied to a first putative class. The plaintiff who seeks to preserve the ability to lead the class—whether because her claim is too small to make an individual suit worthwhile or because of an
In any event, as previously explained, see supra, at 6–8, a multiplicity of class-action filings is not necessarily “needless.” Indeed, multiple filings may aid a district court in determining, early on, whether class treatment is warranted, and if so, which of the contenders would be the best representative. And sooner rather than later filings are just what
class actions by filing new, untimely class claims.
*
*
*
The watchwords of American Pipe are efficiency and economy of litigation, a principal purpose of Rule 23 as well. Extending American Pipe tolling to successive class actions does not serve that purpose. The contrary rule, allowing no tolling for out-of-time class actions, will propel putative class representatives to file suit well within the limitation period and seek certification promptly. For all the above-stated reasons, it is the rule we adopt today: Time to file a class action falls outside the bounds of American Pipe.
Accordingly, the judgment of the Court of Appeals for the Ninth Circuit is reversed, and the case is remanded for further proceedings consistent with this opinion.
It is so ordered.
SOTOMAYOR, J., concurring in judgment
SUPREME COURT OF THE UNITED STATES
No. 17-432
CHINA AGRITECH, INC., PETITIONER v. MICHAEL H. RESH, ET AL.
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT
[June 11, 2018]
JUSTICE SOTOMAYOR, concurring in the judgment.
I agree with the Court that in cases governed by the
I
A
To understand why the PSLRA is essential to the conclusion the Court reaches here, recall that this case involves a putative class-action lawsuit brought by a plaintiff with a timely individual claim, joined by coplaintiffs with timely individual claims, on behalf of a putative class of
At first blush, this result might seem surprising, for the Court has rejected the idea that class claims are categorically different from individual claims. See Shady GroveOrthopedic Associates, P. A. v. Allstate Ins. Co., 559 U. S. 393, 398 (2010). Although it did not hold that class claims may never be treated differently from individual claims, Shady Grove indicates that there must be a special reason for doing so.
Here, the PSLRA supplies that special reason. The PSLRA imposes significant procedural requirements on securities class actions that do not apply to individual or traditionally joined securities claims. See
Foremost among these requirements is a process for the “[a]ppointment of lead plaintiff.”
Respondents here bypassed that statutory process. They do not dispute that notice was published in the two earlier-filed putative class actions concerning the same securities claims as here, as required by the PSLRA. Yet they did not seek to be chosen lead plaintiffs in either of those actions. See ante, at 3-4, 8. For that reason alone, I agree with the majority that respondents “can hardly qualify as diligent in asserting [class] claims and pursuing relief.” Ante, at 9. Respondents’ failure to utilize the PSLRA‘s lead-plaintiff selection procedure distinguishes them from the American Pipe absent class members, who were subject only to the traditional
Unlike the PSLRA, Rule 23 contains no requirement of precertification notice to absent putative class members; it provides only for postcertification notice. See
by order whether to certify the action as a class action“); H. R. Conf. Rep. No. 104–369, at 33–35.
The majority points to
Given these important differences between Rule 23‘s general class procedures and the specific procedures imposed by the PSLRA, the majority‘s conclusion that absent class members were not diligent because they failed to ask to be the class representative in a prior suit makes sense only in the PSLRA context. The same conclusion simply does not follow in the generic Rule 23 context, where absent class members are most likely unaware of the existence of a putative class action. Cf. American Pipe, 414 U. S., at 551-552 (explaining that even absent class members who are unaware of the putative class action are entitled to tolling).
B
In addition to its focus on plaintiff diligence, the majority offers a separate line of reasoning to support its broad holding. It explains that its limitation on American Pipe tolling is necessary to prevent a “limitless” series of class actions, each rendered timely by the tolling effect of the previous ones. Ante, at 10. As the majority acknowledges, however, there is no such risk in this case, see ibid., because the applicable statute of repose puts a 5-year “outer limit on the right to bring a civil action.” CTS Corp. v. Waldburger, 573 U. S. ___ (2014) (slip op., at 6). The majority is right, of course, that in many other types of cases, no statute of repose will apply. See ante, at 10–11. But the Court has elsewhere pointed to the power of “comity among courts to mitigate the sometimes substantial costs of similar litigation brought by different plaintiffs.” Smith v. Bayer Corp., 564 U. S. 299, 317 (2011). There is no reason to assume that this existing safeguard will prove inadequate if the Court holds that American Pipe tolling is available for successive class actions outside the PSLRA context.
Even if principles of comity prove insufficient such that some modification to the American Pipe rule is necessary to prevent indefinite tolling, a narrower form of redress is available. Instead of adopting a blanket no-tolling-of-class-claims-ever rule outside the PSLRA context, the Court might hold, as a matter of equity, that tolling only becomes unavailable for future class claims where class certification is denied for a reason that bears on the suitability of the claims for class treatment. Where, by contrast, class certification is denied because of the deficiencies of the lead plaintiff as class representative, or because of some other nonsubstantive defect, tolling would remain available.2 See Yang v. Odom, 392 F. 3d 97, 112 (CA3
2004). This approach would, for instance, ensure that in cases where the only problem with the first suit was the identity of the named plaintiff, a new and more adequate representative could file another suit to represent the class. Preserving the opportunity for such a fix may seem unimportant in a PSLRA case like this one, where the court in the first-filed case will usually have a choice among possible lead plaintiffs. See ante, at 8–9, n. 3. But, as just explained, in class actions not subject to the PSLRA, the certifying court often will have no choice as to the class representative.
Whether this or another rule ultimately is the right one, there is no need for the Court today to reach beyond the facts of this case, where the specter of indefinite tolling is merely hypothetical, and foreclose the possibility of a more tailored approach.
C
Finally, the majority suggests that its broader approach will encourage multiple potential class representatives to come forward early, which may “aid a district court” in making class certification decisions. Ante, at 14. This may well be so in the PSLRA context, given the statute‘s notice requirement and built-in mechanism for selecting the most adequate lead plaintiff. But in suits not covered by the PSLRA, absent class members may not know of the pending class action early enough to “aid” the court, and will likely have to file a completely separate lawsuit if what they seek is lead-plaintiff status.
In addition to increasing the number of unnecessary filings, a result at odds with American Pipe‘s concern with avoiding “needless duplication,” 414 U. S., at 554, the existence of multiple putative class actions covering the
much as mention the extension or suspension of statutory time bars.” California Public Employees’ Retirement System v. ANZ Securities, Inc., 582 U. S. ___ (2017) (slip op., at 10); see ante, at 11, n. 5.
same harm to the same class may lead to a “race toward judgment or settlement.” Wasserman, Dueling Class Actions, 80 B. U. L. Rev. 461, 472 (2000). Each class lawyer knows that only the lawyers in the first-resolved case will get paid, because the other suits will then be dismissed on claim-preclusion grounds. Ibid. Defense lawyers know this, too, so they are “able to engage in a ‘reverse auction,’ pitting the various class counsel against one another and agreeing
II
Although there is ample support for denying American Pipe tolling to successive class actions subject to the PSLRA, the majority‘s reasoning does not justify denying American Pipe tolling to other successive class actions. The majority could have avoided this error by limiting its decision to the issues presented by the facts of this case.
Despite the Court‘s misstep in adopting an unnecessarily broad rule, district courts can help mitigate the potential unfairness of denying American Pipe tolling to class claims not subject to the PSLRA. Where appropriate, district courts should liberally permit amendment of the pleadings or intervention of new plaintiffs and counsel.
Because I agree with the majority‘s conclusion just as applied to class actions governed by the PSLRA, like this one, I concur only in the judgment.