295 F.3d 380 | 3rd Cir. | 2002
SLOVITER, Circuit Judge:(cid:13) This interlocutory appeal of the District Court’s order(cid:13) denying class certification is before us on this court’s grant(cid:13) of a petition for review pursuant to Rule 23(f) of the Federal(cid:13) Rules of Civil Procedure. The issue framed by the petition(cid:13) is(cid:13) [w]hether the commencement of a class action tolls the(cid:13) limitations period for intervening class members to(cid:13) bring claims on behalf of a class where a determination(cid:13) has not been made whether those claims are(cid:13) appropriate for class certification?(cid:13) App. at 75.(cid:13) Plaintiff-appellant Bernard Cutler appeals from the(cid:13) District Court’s order granting summary judgment against(cid:13) 4(cid:13) Cutler’s class claims alleging violations of Section 11 of the(cid:13) Securities Act of 1933, 15 U.S.C. S 77k (2002), which(cid:13) creates a private right of action for claims of material(cid:13) misrepresentation or omission in a registration statement.(cid:13) The District Court concluded that although the statute of(cid:13) limitations was tolled for Cutler’s individual claims, his(cid:13) claims on behalf of the class were time-barred.(cid:13) Under the Supreme Court’s decision in American Pipe &(cid:13) Construction Co. v. Utah, 414 U.S. 538 (1974), the filing of(cid:13) a class action complaint tolls the statute of limitations for(cid:13) all members of the putative class who, following the denial(cid:13) of certification, intervene or file an independent action. See(cid:13) also Crown, Cork & Seal Co. v. Parker, 462 U.S. 345, 350(cid:13) (1983). It is therefore established that American Pipe tolling(cid:13) applies to intervenors who assert claims in their individual(cid:13) capacity, but this court has not yet decided whether(cid:13) American Pipe tolling applies to an intervenor as a proposed(cid:13) class representative where the class has neither been(cid:13) certified nor definitively rejected.(cid:13) I.(cid:13) BACKGROUND(cid:13) In December 1993, Jasmine, Ltd., a shoe importer(cid:13) headquartered in New Jersey, completed an initial public(cid:13) offering (IPO) of common stock. In November 1995, Harry(cid:13) Berger, a shareholder, filed suit in federal court on behalf(cid:13) of himself and a class of similarly situated purchasers(cid:13) alleging violations of federal and state securities laws in(cid:13) connection with the IPO.1 According to Berger, Jasmine and(cid:13) members of its management, Irving Mangel, Samuel(cid:13) Mangel, Melvin Twersky, Edward Maskaly and Thomas(cid:13) Ciocco, Jasmine’s auditors, Arthur Andersen LLP and(cid:13) Fishbein & Co, P.C., the IPO underwriter, Sands Brothers(cid:13) & Co., Ltd. and two of its principals, Jasmine’s buying(cid:13) agent in Hong Kong, McKowan Lowe & Co., Ltd, and two of(cid:13) _________________________________________________________________(cid:13) 1. Suit was originally filed in the United States District Court for the(cid:13) Northern District of Illinois and then transferred at Berger’s motion to(cid:13) the District of New Jersey.(cid:13) 5(cid:13) its officers, Evelyn Wong and Tony Ngai, and a corporation(cid:13) controlled by the Mangels, Lujaco, Ltd., all participated in(cid:13) a scheme to misstate Jasmine’s financial statements to(cid:13) conceal Jasmine’s substantial debt to McKowan Lowe.(cid:13) Based on similar charges, in 1997 the SEC had obtained(cid:13) consent judgments against members of Jasmine’s former(cid:13) management, under which they agreed to pay fines ranging(cid:13) from $100,000 to $7,293. Securities & Exchange(cid:13) Commission v. Irving M. Mangel, No. 97-1977 (D.D.C.),(cid:13) Litigation Release No. 15465, 65 S.E.C. Docket 645 (Aug.(cid:13) 28, 1997), available at http://www.sec.gov/litigation/(cid:13) litreleases/lr15465.txt. Tony Ngai and Evelyn Wong of(cid:13) McKowan Lowe also settled with the SEC. Ngai King Tak,(cid:13) Securities Act of 1933 Release No. 7443, 65 S.E.C. Docket(cid:13) 540 (Aug. 28, 1997), available at http://www.sec.gov/(cid:13) litigation/admin/3438988.txt. Jasmine itself is currently in(cid:13) Chapter 7 liquidation proceedings.(cid:13) The statute of limitations for liability created under(cid:13) Section 11, the only claim implicated in this appeal, is "one(cid:13) year after the discovery of the untrue statement or the(cid:13) omission, or after such discovery should have been made(cid:13) by the exercise of reasonable diligence." 15 U.S.C. S 77m.(cid:13) The District Court found that "Berger was first given(cid:13) inquiry notice [by Jasmine’s] May 19, 1995 form 8-K which(cid:13) disclosed irregularities discovered by BDO Seidman, and(cid:13) that warnings in the prospectus by themselves did not(cid:13) create notice." App. at 31. Berger’s complaint was filed in(cid:13) November, 1995 and was thus within the applicable statute(cid:13) of limitations. The District Court found a class would(cid:13) present common questions of law and fact, and would be(cid:13) sufficiently numerous, but it rejected Berger’s motion for(cid:13) class certification in August of 1998 based on its(cid:13) determination that Berger’s claims failed to meet Rule 23’s(cid:13) typicality requirement and because Berger would not(cid:13) provide adequate representation of the class. App. at 15.(cid:13) On September 9, 1998, promptly after the District(cid:13) Court’s opinion was filed, Bernard Cutler successfully(cid:13) moved to intervene. Absent tolling, Cutler’s claims would be(cid:13) time-barred, as he did not intervene until well over the(cid:13) expiration of the one-year statute of limitations. The(cid:13) District Court determined that Cutler could maintain his(cid:13) 6(cid:13) individual claims because "from November 17, 1995[when(cid:13) Berger filed his complaint,] until August 6, 1998 when(cid:13) [Berger’s motion for] class certification was denied, the(cid:13) statute of limitations was tolled" under American Pipe. App.(cid:13) at 31. The District Court declined to evaluate Cutler’s(cid:13) qualifications to represent a subclass of the original Berger(cid:13) class, as it rejected Cutler’s proposed Section 11 class(cid:13) claim only on the ground that it was barred by the statute(cid:13) of limitations.(cid:13) II.(cid:13) JURISDICTION AND STANDARD OF REVIEW(cid:13) The District Court had jurisdiction pursuant to 15 U.S.C.(cid:13) S 77v. On November 27, 2000, this court granted Cutler’s(cid:13) Rule 23(f) petition. Rule 23(f) was "adopted under the power(cid:13) conferred by 28 U.S.C. S 1292(e)." Fed. R. Civ. P. 23(f)(cid:13) advisory committee’s notes. The parties agree that this(cid:13) court reviews de novo the District Court’s summary(cid:13) judgment dismissal of Cutler’s class claims for failure to(cid:13) comply with the statute of limitations. See, e.g., Lusardi v.(cid:13) Xerox Corp., 975 F.2d 964, 974 (3d Cir. 1992); Davis v.(cid:13) Thornburgh, 903 F.2d 212, 213 n.2 (3d Cir. 1990).(cid:13) III.(cid:13) DISCUSSION(cid:13) On appeal, Cutler asserts that the District Court erred in(cid:13) refusing to toll the statute of limitations for his class(cid:13) claims. He contends that tolling his class claims is most(cid:13) consistent with the policies undergirding American Pipe,(cid:13) and is supported by the authority of the majority of the(cid:13) courts to consider the issue. Cutler concedes that his case(cid:13) would be considerably more problematic if the District(cid:13) Court had conclusively determined that this case were(cid:13) inappropriate for resolution via class action. To distinguish(cid:13) his own circumstances from that situation he points out(cid:13) that the District Court rejected Berger’s prior motions to(cid:13) certify a class based entirely on its perception of Berger’s(cid:13) 7(cid:13) inadequacies as the proffered representative. He suggests(cid:13) that this case, like many securities actions, presents a(cid:13) paradigmatic example of the sort of claims the class device(cid:13) was designed to help vindicate--those claims too numerous(cid:13) and small to warrant individual action but conjoined(cid:13) representing a substantial case. See, e.g., Eisenberg v.(cid:13) Gagnon, 766 F.2d 770, 785 (3d Cir. 1985) (observing(cid:13) "[c]lass actions are a particularly appropriate and desirable(cid:13) means to resolve claims based on the securities laws, ‘since(cid:13) the effectiveness of the securities laws may depend in large(cid:13) measure on the application of the class action device’ ")(cid:13) (quoting Kahan v. Rosenstiel, 424 F.2d 161, 169 (3d Cir.(cid:13) 1970)); John C. Coffee, Jr., Understanding the Plaintiff ’s(cid:13) Attorney: The Implications of Economic Theory for Private(cid:13) Enforcement of Law Through Class and Derivative Actions,(cid:13) 86 Colum. L. Rev. 669, 681-83 (1986) (applying economic(cid:13) theory to explain frequent use of class procedure in(cid:13) securities litigation).(cid:13) The Supreme Court has enunciated two rationales for the(cid:13) American Pipe rule, which tolls the statute of limitations for(cid:13) putative members of a class pending denial of class(cid:13) certification. First, class actions are "designed to avoid,(cid:13) rather than encourage, unnecessary filing of repetitious(cid:13) papers and motions." American Pipe, 414 U.S. at 550. If the(cid:13) claims of unnamed plaintiffs were not tolled, claimants(cid:13) would have an incentive to file claims themselves to protect(cid:13) their causes of action, "precisely the multiplicity of activity(cid:13) which Rule 23 was designed to avoid." Id. at 551; see also(cid:13) Crown Cork & Seal Co., 462 U.S. at 350-51.(cid:13) The American Pipe rule encourages unnamed plaintiffs to(cid:13) rely on the class action already filed on their behalf. The(cid:13) class action procedure is protective of passive, even(cid:13) unwitting, members of the class. As the Court observed,(cid:13) "[n]ot until the existence and limits of the class have been(cid:13) established and notice of membership has been sent does(cid:13) a class member have any duty to take note of the suit or to(cid:13) exercise any responsibility with respect to it in order to(cid:13) profit from the eventual outcome of the case." American(cid:13) Pipe, 414 U.S. at 552.(cid:13) Second, the Court in American Pipe held that the tolling(cid:13) rule is consistent with the twin functions of statutes of(cid:13) 8(cid:13) limitations--providing defendants with timely notice and(cid:13) avoiding stale claims--because the action is tolled only by(cid:13) timely service of the class complaint on the defendants by(cid:13) the named plaintiffs. Id. at 554-55; see also Crown Cork &(cid:13) Seal Co., 462 U.S. at 352 (noting "[l]imitations periods are(cid:13) intended to put defendants on notice of adverse claims and(cid:13) to prevent plaintiffs from sleeping on their rights").(cid:13) Cutler argues that the same rationales are equally(cid:13) applicable to tolling his class claims. He finds support in(cid:13) two decisions of this court. In Haas v. Pittsburgh National(cid:13) Bank, 526 F.2d 1083 (3d Cir. 1975), we approved American(cid:13) Pipe tolling for a later class representative on a claim that(cid:13) the original representative was without standing to pursue.(cid:13) In 1972, Mary Haas had filed a class complaint against(cid:13) three banks, one of which was Equibank, claiming they had(cid:13) charged usurious interest rates. Although she had accounts(cid:13) at the two other banks, she had never had an account at(cid:13) Equibank. Nonetheless, in a 1973 order the district court(cid:13) granted Haas class representative status as to all three(cid:13) banks. Later, on January 21, 1974, in light of decisions by(cid:13) the Supreme Court and Ninth Circuit, the district court(cid:13) determined it had improperly certified Haas as to(cid:13) Equibank. In the same order the court permitted the(cid:13) amendment of the complaint to add a new class(cid:13) representative who had had an account with Equibank.(cid:13) That named plaintiff, John Mitchell, was added shortly(cid:13) thereafter.(cid:13) The district court which had permitted Mitchell’s addition(cid:13) subsequently ruled his claims were time-barred. The(cid:13) relevant statute of limitations was two years. Equibank had(cid:13) discontinued the practice that was the subject of the(cid:13) complaint more than two years prior to January 21, 1974,(cid:13) the date the district court had first permitted substitution(cid:13) of a new class representative.(cid:13) On appeal, this court agreed with the district court that(cid:13) Haas was not a proper plaintiff as to Equibank. However,(cid:13) we reversed and remanded the dismissal of the class claim.(cid:13) We held, based on American Pipe, that the statute of(cid:13) limitations for Mitchell was tolled from November 13, 1972,(cid:13) the date Haas had filed her original complaint. Looking to(cid:13) American Pipe, we noted that Haas’s complaint provided(cid:13) 9(cid:13) Equibank with notice of "the claims against which[it](cid:13) would be required to defend and also ‘the number and(cid:13) generic identities of the potential plaintiffs.’ " Id. at 1097.(cid:13) We concluded by observing "[t]hese plaintiffs were in(cid:13) existence at the time the action was originally brought and(cid:13) were described as claimants in the complaint. The only(cid:13) change effectuated by the district court’s [January 21,(cid:13) 1974] order was the prompt addition of a nominal plaintiff(cid:13) who held an Equibank card." Id. Even were Haas not(cid:13) controlling, it certainly suggests that American Pipe tolling(cid:13) applies to class claims.(cid:13) In the other case Cutler cites, Goodman v. Lukens Steel(cid:13) Co., 777 F.2d 113 (3d Cir. 1985), this court reviewed the(cid:13) district court’s grant of injunctive relief on behalf of a class(cid:13) in a Title VII case. We determined as to one claim on which(cid:13) the plaintiffs had prevailed that none of the named(cid:13) representatives were adequate to represent the class. Based(cid:13) on the lack of a qualified class representative, we vacated(cid:13) the underlying findings on that claim. Id. at 124. However,(cid:13) in the interest of judicial economy, we directed that the(cid:13) district court "explore the possibility of intervention by(cid:13) qualified class representatives" on remand, id., concluding(cid:13) that "[s]uch a suit would be timely since the(cid:13) commencement of the class action tolled the statute of(cid:13) limitations as to members of the class" under American(cid:13) Pipe, id. at 124 n.8.(cid:13) Defendant Arthur Andersen seeks to distinguish Haas(cid:13) based on our emphasis in that case on the district court’s(cid:13) certification of a class, and characterizes our observation in(cid:13) Goodman as dictum, pointing out that there too the district(cid:13) court had certified a class. Andersen also argues that in(cid:13) both Haas and Goodman a change in the law caused the(cid:13) class representatives to become unfit after the district(cid:13) courts’ certifications. Andersen points out that no class has(cid:13) been certified in this case, and thus no change in the law(cid:13) could prejudice potential class members nor could absent(cid:13) class members have relied on a prior certification.(cid:13) Andersen, joined by Sands Brothers, cites as authority(cid:13) for its position a number of courts of appeals’ decisions(cid:13) which treat a related, although Cutler argues(cid:13) distinguishable, situation. In those cases the issue was the(cid:13) 10(cid:13) application of American Pipe tolling to subsequent(cid:13) intervenors or sequential class actions after there had been(cid:13) definitive denials of class certification in the original action.(cid:13) For example, in Korwek v. Hunt, 827 F.2d 874 (2d Cir.(cid:13) 1987), an early case in this line, the plaintiffs-appellants(cid:13) had(cid:13) filed a complaint alleging class claims identical(cid:13) theoretically and temporally to those raised in a(cid:13) previously filed class action suit which was denied(cid:13) class certification mainly because of overwhelming(cid:13) manageability difficulties. Appellants ignored the(cid:13) district court’s express finding that the original action(cid:13) was unwieldy, first when attempting to intervene and(cid:13) expand the limited Gordon class, and again when filing,(cid:13) what was essentially a duplicate of the original(cid:13) complaint.(cid:13) Id. at 879. The Second Circuit refused to extend tolling(cid:13) under those circumstances, concluding, "The Supreme(cid:13) Court in American Pipe and Crown, Cork certainly did not(cid:13) intend to afford plaintiffs the opportunity to argue and(cid:13) reargue the question of class certification by filing new but(cid:13) repetitive complaints." Id.(cid:13) The underlying concern in Korwek and the articulated(cid:13) basis for the result was that application of American Pipe(cid:13) tolling to successive attempts to certify a previously rejected(cid:13) class would sanction an endless succession of class filings.(cid:13) Korwek held that American Pipe tolling does not operate to(cid:13) permit plaintiffs to relitigate the propriety of a class action.(cid:13) The great weight of authority has adopted similar reasoning(cid:13) and has rejected the applicability of American Pipe tolling to(cid:13) such successive class actions. See, e.g., Basch v. Ground(cid:13) Round, Inc., 139 F.3d 6, 11-12 (1st Cir. 1998) (an action(cid:13) held to be inappropriate for class treatment does not toll(cid:13) statute of limitations for subsequent class actions);(cid:13) Andrews v. Orr, 851 F.2d 146, 148-49 (6th Cir. 1988)(cid:13) (same); Robbin v. Fluor Corp., 835 F.2d 213, 214 (9th Cir.(cid:13) 1987) (same); Salazar-Calderon v. Presidio Valley Farmers(cid:13) Ass’n, 765 F.2d 1334, 1351 (5th Cir. 1985) (rejecting(cid:13) American Pipe tolling for two subsequent actions that(cid:13) depended on a first action for their timeliness).(cid:13) 11(cid:13) We agree with the rationale of those cases and Cutler(cid:13) does not argue that they were decided incorrectly. Instead,(cid:13) Cutler insists that his situation is different. Unlike the(cid:13) Korwek plaintiffs, Cutler is not attempting to resuscitate a(cid:13) class that a court has held to be inappropriate as a class(cid:13) action. The class certification motion of Cutler’s(cid:13) predecessor, Berger (by whose complaint Cutler would have(cid:13) his claims tolled), was not rejected because of any defects(cid:13) in the class itself but because of Berger’s deficiencies as a(cid:13) class representative. In fact, in its evaluation of Berger’s(cid:13) attempt to certify, the District Court found that a class(cid:13) would present common enough questions of law and fact(cid:13) and be sufficiently numerous to merit class treatment.(cid:13) Thus Cutler argues that although the Korwek policy against(cid:13) perpetual relitigation of decided class issues is a sound(cid:13) one, it does not apply to him.(cid:13) Only a handful of courts have considered whether class(cid:13) claims should be tolled when the class device has not been(cid:13) definitively rejected, and they have generally concluded that(cid:13) American Pipe tolling is permitted in that situation. Many of(cid:13) those cases presented a situation, such as that here, where(cid:13) the original motion for class certification was denied(cid:13) because the class representative was inadequate.(cid:13) For example, in In re Quarterdeck Office Systems, Inc.(cid:13) Securities Litigation, CV-92-3970-DWW (GHKx), 1994 WL(cid:13) 374452 (C.D. Calif. Mar. 24, 1994), two investors filed a(cid:13) securities fraud action against Quarterdeck, its officers and(cid:13) directors, and three venture capital firms following the fall(cid:13) of the company’s stock shortly after its IPO. Id. at *1. The(cid:13) court rejected their motion for class certification based on(cid:13) their inadequacies as class representatives. However, the(cid:13) court permitted intervention by other investors after the(cid:13) statute of limitations had run, holding that the intervenors’(cid:13) class claims were tolled under American Pipe. Id. at *2, 5.(cid:13) The court recognized there were two groups of cases(cid:13) applying the American Pipe rule to subsequent class(cid:13) actions. The first group, exemplified by Korwek and the(cid:13) Ninth Circuit’s decision in Robbin v. Fluor,"involved either(cid:13) an attempt to file an entirely separate class action lawsuit(cid:13) after the dismissal of an earlier action, or an attempt to(cid:13) bring a later class action after the court had determined(cid:13) 12(cid:13) that proceeding as a class action was an inappropriate(cid:13) method of resolving the lawsuit." Id. at *4. The district(cid:13) court recognized that the courts have universally refused to(cid:13) extend American Pipe tolling to the subsequent class but(cid:13) stated that that group of cases differs from cases involving(cid:13) a later class action that is brought "in an attempt to find a(cid:13) more appropriate class representative." Id. (cid:13) In reaching its conclusion in Quarterdeck, the district(cid:13) court stated:(cid:13) This court has not determined that proceeding as a(cid:13) class action is inappropriate, merely that [the first(cid:13) putative class representatives] are not proper class(cid:13) representatives. . . . [I]f this court were to hold that the(cid:13) statute is not tolled for these intervening plaintiffs to(cid:13) raise class allegations, it would . . . extend[ ] the(cid:13) holdings of Korwek and Robbin to cases in which a(cid:13) proper class representative is being sought within the(cid:13) originally filed lawsuit.(cid:13) Id. at *5.(cid:13) Other courts faced with similar circumstances have(cid:13) reached similar conclusions. See, e.g., Shields v.(cid:13) Washington Bancorporation, No. 90-1101, 1992 WL 88004,(cid:13) *1-3 (D.D.C. Apr. 7, 1992) (permitting tolling for intervenor(cid:13) over a year after original complainant’s motion for class(cid:13) certification dismissed because complainant was(cid:13) inadequate representative); In re Crazy Eddie Sec. Litig.,(cid:13) 802 F. Supp. 804, 813 (E.D.N.Y. 1992) (observing, on(cid:13) determining that named plaintiffs of certified class were(cid:13) inadequate, that "a second class action would not be an(cid:13) attempt to relitigate the question of class certification by(cid:13) filing repetitive claims"); Trief v. Dun & Bradstreet Corp.,(cid:13) 144 F.R.D. 193, 202-03 (S.D.N.Y. 1992) (determining tolling(cid:13) for intervenor appropriate where original named plaintiffs(cid:13) were inadequate, although defendants had conceded class(cid:13) action device appropriate); Shields v. Smith, No. 90-349,(cid:13) 1992 U.S. Dist. LEXIS 15718, *5-10 (N.D. Cal. Aug. 14,(cid:13) 1992) (permitting tolling to intervenor following denial of(cid:13) original class for inadequate representation); see also(cid:13) Alidina v. Penton Media, Inc., 143 F. Supp. 2d 363, 365-66(cid:13) n.1 (S.D.N.Y. 2001) (permitting tolling where certification(cid:13) 13(cid:13) conditionally denied); Fleming v. Bank of Boston Corp., 127(cid:13) F.R.D. 30, 35-37 (D. Mass. 1989) (one criteria for denying(cid:13) intervention was that intervenors could thereby avoid(cid:13) Korwek line of cases and renew certification attempts); Fred(cid:13) Meyer of Alaska, Inc. v. Adams, 963 P.2d 1025, 1029(cid:13) (Alaska 1998) (permitting tolling following conditionally(cid:13) denied certification). But see Fleck v. Cablevision VII, Inc.,(cid:13) 807 F. Supp. 824, 825-27 (D.D.C. 1992) (interpreting(cid:13) Korwek line of cases to forbid tolling to proposed new class(cid:13) representative).(cid:13) In contrast to these cases, the Eleventh Circuit in Griffin(cid:13) v. Singletary, 17 F.3d 356 (11th Cir. 1994), a Title VII(cid:13) action, followed the Korwek line of cases to reject(cid:13) intervenors’ class claims, although the original class was(cid:13) rejected solely for inadequate representation. The district(cid:13) court had initially certified a class, but on interlocutory(cid:13) appeal the court of appeals held that the named(cid:13) representatives were inadequate and vacated the(cid:13) certification order. On remand, after the statute of(cid:13) limitations had run, five individuals moved to intervene as(cid:13) class representatives and for recertification of the class. The(cid:13) district court denied their motions, and the court of appeals(cid:13) affirmed.(cid:13) The court concluded that Korwek controlled. It stated,(cid:13) "plaintiffs may not ‘piggyback one class action onto another’(cid:13) and thereby engage in endless rounds of litigation in the(cid:13) district court and in this Court over the adequacy of(cid:13) successive named plaintiffs to serve as class(cid:13) representatives." Id. at 359 (quoting Salazar-Calderon, 765(cid:13) F.2d at 1351).(cid:13) The Griffin court does not appear to have distinguished(cid:13) between the Korwek line of cases where denial of tolling(cid:13) followed a decision rejecting the class action itself and the(cid:13) situation where no court has yet determined that the class(cid:13) action is inappropriate. Indeed, in Korwek, the court itself(cid:13) distinguished the situation before it and a situation more(cid:13) similar to this one, explicitly "leav[ing] for another day the(cid:13) question of whether the filing of a potentially proper(cid:13) subclass would be entitled to tolling under American Pipe."(cid:13) Korwek, 827 F.2d at 879. Moreover, the Griffin panel’s(cid:13) reasoning is inconsistent with our precedent in Haas where(cid:13) 14(cid:13) we approved American Pipe tolling for a subsequent(cid:13) representative’s class claims after the original certified class(cid:13) representative was found wanting.2(cid:13) We return consequently to our decision in Haas .(cid:13) Although, as Andersen points out, Haas differs from this(cid:13) case in that the Haas district court had determined that its(cid:13) initial certification of a class was erroneous, we see no good(cid:13) reason why class claims should not be tolled where the(cid:13) district court had not yet reached the issue of the validity(cid:13) of the class. Andersen has not supplied any persuasive(cid:13) reason for making such a distinction.3 (cid:13) Andersen argues that judicial economy would be(cid:13) undermined if American Pipe tolling extends to class claims,(cid:13) because "class counsel would have little incentive to do any(cid:13) investigation of potential class representatives before filing(cid:13) _________________________________________________________________(cid:13) 2. Ironically, both Cutler and Andersen also cite for support Catholic(cid:13) Social Services, Inc. v. INS, 232 F.3d 1139 (9th Cir. 2000) (en banc). In(cid:13) that case, the district court had properly certified a valid class. A panel(cid:13) of the Ninth Circuit concluded in 1998 that the class subsequently had(cid:13) been rendered invalid by the enactment of section 377 of the Illegal(cid:13) Immigration Reform and Immigrant Responsibility Act of 1996 (IIRIRA).(cid:13) Id. at 1146. Rather than remanding to the district court to permit the(cid:13) plaintiffs to amend their complaint, that panel remanded for dismissal.(cid:13) Id. at 1146. After the district court had dismissed the case without(cid:13) prejudice, some plaintiffs whose claims were not affected by IIRIRA(cid:13) refiled their complaint and sought American Pipe tolling. The Ninth(cid:13) Circuit, in an en banc decision, observed that the plaintiffs had at all(cid:13) times "vigorously pursued this litigation," and distinguished both Griffin(cid:13) and the Korwek line because "[p]laintiffs in this case are not attempting(cid:13) to relitigate an earlier denial of class certification, or to correct a(cid:13) procedural deficiency in an earlier would-be class." Id. at 1149. The(cid:13) court concluded that the plaintiffs could enjoy American Pipe tolling for(cid:13) their class claims. Id.(cid:13) The result in Catholic Social Services is essentially consistent with this(cid:13) court’s decision in Haas.(cid:13) 3. Because the District Court did not reach the issue of the propriety of(cid:13) a class action here, we need not consider whether American Pipe tolling(cid:13) would be available where the district courts abuse their discretion in(cid:13) denying certification of a class. See, e.g., Gagnon, 766 F.2d at 786-88(cid:13) (vacating district court’s order denying class certification for abuse of(cid:13) discretion and remanding for further proceedings).(cid:13) 15(cid:13) suit. If the first representative was found to be inadequate,(cid:13) counsel could find another, and then another after that,(cid:13) and so on." Br. of Appellee Andersen at 31.(cid:13) It is conceivable that if Cutler were to prove to be an(cid:13) inadequate representative, the same counsel who(cid:13) represents Berger and Cutler would seek to find another(cid:13) who is adequate. However, we are confident of the capacity(cid:13) of district courts to control abuse or ineptitude on the part(cid:13) of class counsel and to institute administrative procedures(cid:13) that would set deadlines for prospective class(cid:13) representatives while protecting the interests of unnamed(cid:13) plaintiffs.(cid:13) We are, of course, like Andersen, concerned with judicial(cid:13) economy but we believe it need not be achieved at the(cid:13) expense of litigants for whom the American Pipe tolling rule(cid:13) was designed. As the Court stated,(cid:13) In cases such as this one, where the determination to(cid:13) disallow the class action was made upon(cid:13) considerations that may vary with such subtle factors(cid:13) as experience with prior similar litigation or the current(cid:13) status of a court’s docket, a rule requiring successful(cid:13) anticipation of the determination of the viability of the(cid:13) class would breed needless duplication of motions.(cid:13) American Pipe, 414 U.S. at 553-54.(cid:13) In keeping with Supreme Court precedent and our own,(cid:13) we hold that the class claims of intervening class members(cid:13) are tolled if a district court declines to certify a class for(cid:13) reasons unrelated to the appropriateness of the substantive(cid:13) claims for certification. We will therefore remand so that the(cid:13) District Court may determine Cutler’s status as a proper(cid:13) representative and, if he is not barred, may decide whether(cid:13) the case can be maintained as a class action.(cid:13) IV.(cid:13) Berger seeks to have us consider the District Court’s(cid:13) dismissal of his individual Section 11 claims. He argues(cid:13) first that because the District Court dismissed his claims in(cid:13) the same order in which it denied class certification, we(cid:13) may address the dismissal of his claim under Rule 23(f)’s(cid:13) 16(cid:13) interlocutory appeal provision. Second, he argues that the(cid:13) appellees "have raised the issue in this appeal." Both(cid:13) arguments are without merit.(cid:13) Rule 23(f) provides that "[a] court of appeals may in its(cid:13) discretion permit an appeal from an order of a district court(cid:13) granting or denying class action certification under this(cid:13) rule." Fed R. Civ. P. 23(f). According to the Advisory(cid:13) Committee, "Appeal from an order granting or denying class(cid:13) certification is permitted in the sole discretion of the court(cid:13) of appeals. No other type of Rule 23 order is covered by this(cid:13) provision." Fed. R. Civ. P. 23(f) advisory committee’s notes.(cid:13) Berger’s argument would have us stretch the limits of Rule(cid:13) 23(f) beyond Rule 23 certification questions. As quoted(cid:13) above, the Advisory Committee notes explicitly describe(cid:13) Rule 23(f) as not extending to any other type of order, even(cid:13) where that order has some impact on another portion of(cid:13) Rule 23.(cid:13) Decisions of other circuits have also been scrupulous(cid:13) about limiting Rule 23(f) inquiries to class certification(cid:13) issues. See, e.g., Bertulli v. Indep. Ass’n of Cont’l Pilots, 242(cid:13) F.3d 290, 294 (5th Cir. 2001) (stating "under Rule 23(f), a(cid:13) party may appeal only the issue of class certification; no(cid:13) other issues may be raised," but consenting to review(cid:13) standing, an "inherent prerequisite to the class certification(cid:13) inquiry"); Pickett v. Iowa Beef Processors , 209 F.3d 1276,(cid:13) 1279 (11th Cir. 2000) ("Rule 23(f) provides for our(cid:13) jurisdiction over interlocutory appeals from a district(cid:13) court’s order granting class certification, and we limit our(cid:13) discussion to that issue. We do not address the merits of(cid:13) Plaintiffs’ claims."); see also Carter v. West Pub’g. Co., 225(cid:13) F.3d 1258, 1262-63 (11th Cir. 2000). Berger attempts to(cid:13) distinguish Carter by pointing out that in that case the(cid:13) appeals panel looked at two orders, one of which concerned(cid:13) the statute of limitations. But the statute of limitations(cid:13) inquiry in Carter was, as that court observed, a threshold(cid:13) inquiry into the class certification issue. That is not the(cid:13) case as to Berger’s proposed class although, as this opinion(cid:13) notes, it is as to Cutler’s proposed class.(cid:13) We dispense quickly with Berger’s second argument, that(cid:13) the appellees have somehow put Berger’s Section 11(cid:13) 17(cid:13) standing into play. It is the limitation of Rule 23(f), not any(cid:13) arguments of the appellees, that determines our jurisdiction.4(cid:13) V.(cid:13) For the reasons heretofore set forth, we will dismiss(cid:13) Berger’s appeal and vacate the District Court order denying(cid:13) certification of the class proposed by Cutler and remand on(cid:13) that issue as set forth in this opinion.(cid:13) A True Copy:(cid:13) Teste:(cid:13) Clerk of the United States Court of Appeals(cid:13) for the Third Circuit(cid:13) _________________________________________________________________(cid:13) 4. The SEC filed an amicus curiae brief in this appeal stating its position(cid:13) that Section 11 is not limited to those who purchase in the offering but(cid:13) instead grants standing to all purchasers of registered securities. As we(cid:13) do not address the District Court’s dismissal of Berger’s individual(cid:13) Section 11 claims, we need not reach this issue.(cid:13) 18
