United States: Why Cross-Jurisdictional Class Action Tolling Is Such A Bad Idea

Last Updated: April 5 2018
Article by James Beck

We've always been against the concept of class action tolling: that merely by filing a class action – the class action does not have to have any merit – a class action lawyer magically stops the running of the statute of limitations for everybody in the class. To us, this gives Fed. R. Civ. P. 23 a substantive effect, which violates the Rules Enabling Act (you can read more about that, here, and here, in other contexts). It also confers an automatic one-way benefit on putative class members, although in other circumstances the class action lawyers perpetrating this sleight of hand will cheerfully tell courts that "no class exists before certification."

The Supreme Court first allowed class action tolling in American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974), an antitrust case, ostensibly to "further[] the purposes of litigative efficiency and economy," so that no "protective litigation" (by plaintiffs fearing their own claims would be time barred) would clog up the federal courts. Id. at 553-54. The impact on defendants would be minimal, suggested the majority, because "[d]uring the pendency of the [certification] determination . . ., which is to be made 'as soon as practicable after the commencement of an action,' potential class members are mere passive beneficiaries." Id. at 552 (quoting former Rule 23(c)(1)).

We had hopes that this rule, being "specifically grounded in policies of judicial administration," Smith v. Bayer Corp., 564 U.S. 299, 314 n.10 (2011), would be abolished after its encouragement of inequitable gamesmanship became clear, and once other, less prejudicial methods of judicial administration to address protective filings – such as the inactive dockets widely used in asbestos litigation – were invented. However, the Court dodged abolition in California Public Employees' Retirement System v. ANZ Securities, Inc., 137 S. Ct. 2042 (2017), holding only that American Pipe did not apply to statutes of repose . Id. at 2052-53. The Court did, however, point out that concern about protective filings was much "overstated." Id. at 2054 ("courts, furthermore, have ample means and methods to administer their dockets and to ensure that any additional filings proceed in an orderly fashion").

In any event, all of the Supreme Court's class action tolling cases, American Pipe, supra, Crown, Cork & Seal Co. v. Parker, 462 U.S. 345 (1983), and Chardon v. Soto, 462 U.S. 650 (1983), involved successive suits in the same jurisdiction – federal-question cases brought in federal court. So-called "cross-jurisdictional" class action tolling, is much worse, and has intruded at times directly into our sandbox (although thankfully, class action have largely gone extinct in personal injury cases). As we said in an earlier post:

"Cross-jurisdictional" tolling, on the other hand, refers to allowing a failed class action filed in jurisdiction "A" to toll the statute of limitations on an individual action later filed by a putative class member in jurisdiction "B." In a lot of cases that means a state court action filed after a failed federal court class action. In other cases it means filing an individual action in one state after class certification is denied in a different state. In either case, the policy of avoidance of protective filings doesn't work. In fact, the opposite is true. A liberal tolling rule only invites more suits to be filed in the jurisdiction that has it. Thus, even on its own terms, cross-jurisdictional tolling based upon meritless class actions doesn't make sense.

Thus, going back to the Bone Screw litigation, we have vehemently criticized cross-jurisdictional class action tolling. Back then plaintiffs asserted that statutes of limitations all over the country were tolled by a baseless class action, In re Orthopedic Bone Screw Products Liability Litigation, 1995 WL 273597 (E.D. Pa. Feb. 22, 1995), in which certification was denied and no appeal even attempted. Even this relatively quick adjudication took almost 14 months (from 12/30/93, when the class action was filed until denial of certification on 2/22/95). We litigated cross-jurisdictional tolling to favorable results in Maestas v. Sofamor Danek Group, 33 S.W.3d 805, 808-09 (Tenn. 2000), and Wade v. Danek Medical, Inc., 182 F.3d 281, 287-88 (4th Cir. 1999), while also appearing as amicus curiae in Portwood v. Ford Motor Co., 701 N.E.2d 1102, 1104 (Ill. 1998). Given that cross-jurisdictional class action tolling inherently involves litigation in one state attempting to toll the statute of limitations in another state, this issue can also be framed as one implicating states-rights, and where one of the courts is federal, federalism.

Over time most states have recoiled from cross-jurisdictional class action tolling. Largely because of our Bone Screw experience, we maintain a scorecard on the issue. According to our list, 35 jurisdictions (Alabama, Alaska, Arizona, Arkansas, California, Colorado, DC, Florida, Idaho, Illinois, Iowa, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Minnesota, Mississippi, Missouri, Montana, Nebraska, New Mexico, New York, North Carolina, Oklahoma, Oregon, Pennsylvania, Puerto Rico, South Dakota, Tennessee, Texas, Utah, Virginia, Washington, Wyoming) reject cross-jurisdictional class action tolling; one state (Michigan) allows it where the original class was certified; and six or seven states (Delaware, Hawaii, Montana, New Jersey, Ohio, West Virginia, and maybe Connecticut) allow tolling even for meritless, out-of-state class actions. We do not credit a couple of LIBOR decisions in which that court blatantly ignored state law.

One of the states that does recognize cross-jurisdictional class action tolling is Delaware. See Blanco v. AMVAC Chemical Corp., 67 A.3d 392, 398-398 (Del. 2013). A recent Delaware Supreme Court decision throws into sharp relief why such tolling is a bad idea, and offensive not only to the statute of limitations, but also to the very judicial efficiency considerations that such tolling purports to further. See Marquinez v. Dow Chemical Co., ___ A.3d ___, 2018 WL 1324178 (Del. March 15, 2018). Marquinez is a poster child for delay – the very sort of stale and desultory litigation that is why statutes of limitations exist in the first place. "The plaintiff-appellants ("the plaintiffs") worked on banana plantations in Costa Rica, Ecuador and Panama at various times in the 1970s and 1980s." The first purported class action wasn't filed until 1993, in Texas. Marquinez, 2018 WL 1324178, at *2. Then the following things happened:

  • Removal to federal court on the basis of the Foreign Sovereign Immunities Act (one defendant was owned by a foreign government).
  • MDL consolidation in federal court.
  • Dismissal on forum non conveniens in 1995, with a "return jurisdiction" caveat – if any foreign country ruled no jurisdiction, then plaintiffs could come back to Texas.
  • The forum non conveniens ruling denied as moot all pending motions, including class certification.

Id. at *1-2. That's two years of post-litigation delay – between 1993 and 1995 class certification was never ruled upon. Don't forget that the "1970s and 1980s" claims were already at least 13 years old before the initial suit was filed.

Plaintiffs really didn't want to be in federal court – a sure sign of substantively weak litigation. They appealed the exercise of Foreign Sovereign Immunities jurisdiction all the way to the United States Supreme Court. Id. at *2. that appeal took until 2001. Id. Then the plaintiffs, accompanied by their lawyers, reluctantly went home. "[T]hey were unable to prosecute their claims in other countries" so they returned to Texas, where they sought to resurrect their claims under the "return jurisdiction" caveat. Id. While that was going on, the Supreme Court rejected Foreign Sovereign Immunities jurisdiction in another case involving identical litigation in another state. See Dole Food Co. v. Patrickson, 538 U.S. 468 (2003).

So in 2003 – ten years after the original class action was filed, and between 23 and 33 years after the actual events claimed in the suit, the case was remanded to Texas state court. Then the following things happened:

  • Defendants sought to have the case thrown out due to plaintiffs' failure to comply with prerequisites to their exercise of "return jurisdiction" rights.
  • The "return jurisdiction" provision, along with the entire forum non conveniens ruling, was declared void for want of subject matter jurisdiction.
  • Plaintiffs again moved for class certification, this time under Texas state law.
  • Defendants removed to federal court a second time, under CAFA.
  • CAFA removal failed because the litigation pre-dated CAFA.

Marquinez, 2018 WL 1324178, at *2-3. Finally, "[o]n June 3, 2010, class certification was denied in Texas state court." Id. at *3.

At this point plaintiffs had had enough of Texas. They started creating satellite litigation. In mid 2011 one plaintiff filed an individual action in Delaware state court and others filed a class action in federal court in Louisiana. Id.

Finally, less than a week before two years elapsed after the Texas denial of class certification – on May 31, and June 2, 2012 – two new class actions were filed in Delaware federal court. Id.

But....

Plaintiffs had screwed up, or so it appeared. The identical suit being already pending for a year in Louisiana, the Delaware federal court dismissed the Delaware action under the "first filed rule." Id. That was appealed, and eventually reversed by the Third Circuit sitting en banc. See Chavez v. Dole Food Co., 836 F.3d 205 (3d Cir. 2016) (en banc).

While that was going on, the remaining plaintiffs (those not already litigating in Louisiana (after fleeing Texas)) were dismissed on the statute of limitations. The District Court in Delaware "h[e]ld[] that class action tolling stopped in July 1995 when [the original court] dismissed the case for forum non conveniens." Id. That was in 2014. Those plaintiffs appealed. The Third Circuit punted the matter, on certification, to the Delaware Supreme Court.

As in Blanco, the Delaware Supreme Court seemed unduly frightened by the prospect of "placeholder" suits:

If members of a putative class cannot rely on the class action tolling exception to toll the statute of limitations, they will be forced to file "placeholder" lawsuits to preserve their claims. This would result in wasteful and duplicative litigation.

Marquinez, 2018 WL 1324178, at *4 (quoting Blanco, 67 A.3d at 395).

Did the court not look at its own description of this litigation's ridiculously long procedural history? Between 1993 when the action was first filed, and denial of class certification in mid-2010 not a single "placeholder" suit was filed in Delaware state or federal court. That was despite plaintiffs' extended lack of success in advancing the litigation.

Although nowhere mentioned in Marquinez, the Delaware statute of limitations for tort cases is two years. 10 Del. C. §8119. Making a mockery of that legislative judgment, Marquinez held that the pendency of a meritless class action can toll the statute of limitations for many multiples of that two-year period – here 17 years, or 8½ times the statutory period – because a "clear and unambiguous" rule is necessary:

[A] clear and unambiguous rule avoids uncertainty over the starting and ending dates for statutes of limitation in cross-jurisdictional class action tolling cases. Thus, we adopt a rule that furthers the certainty interest − cross-jurisdictional class action tolling ends only when a sister trial court has clearly, unambiguously, and finally denied class action status.

Marquinez, 2018 WL 1324178, at *5.

The mind boggles. Seventeen years hardly corresponds to the assumption in American Pipe that class certification will be decided "as soon as practicable after the commencement of an action," and indeed those words don't even appear in Rule 23 any longer. Justice Stewart, who wrote American Pipe, would no doubt be appalled. Seventeen years is more than half the time of Justice Stewart's tenure on the Supreme Court.

The Delaware statute itself imposed a "clear and unambiguous" rule – two years. Is the Delaware Supreme Court going to abolish the discovery rule, fraudulent concealment and all the other factbound doctrines that toll the statute of limitations in certain situations, and thus have created uncertainty? Defendants argue for "clear and unambiguous" rules all the time (e.g., product identification, affirmative prescriber warning causation testimony, relative risk of two). Why here, in a situation that is certain to make Delaware the dumping ground for Latin American toxic tort litigation.

And is this rule even "clear and unambiguous"? The Texas plaintiffs never appealed the 2010 class certification denial. What if they had? Does "sister trial court" then morph into an further need for certainty, tolling the statute of limitations until the first state's denial has been "clearly, unambiguously, and finally" been affirmed on appeal?

Marquinez demonstrates why courts should never start down the slippery slope of cross-jurisdictional class action tolling. Right after proclaiming its "clear and unambiguous" rule, the decision plunges into the minutiae of the Texas litigation, spending seven paragraphs parsing through what the Texas court's "return jurisdiction" language – in an order void for lack of subject matter jurisdiction – must have meant. Marquinez, 2018 WL 1324178, at *6-7. In so doing Marquinez ended up disagreeing with two other courts also forced into that exercise by plaintiffs' satellite litigation. Id. at *8-9 ("respectfully disagree[ing] with the Fifth Circuit's and the Hawai'i Supreme Court's application of class action tolling"). If Delaware had rejected cross-jurisdictional class action tolling in the first place, none of that Talmudic exercise would have been necessary.

Judicial efficiency is hardly furthered by forcing the courts of one state to comb through the proceedings of litigation filed elsewhere in an effort to figure out when exactly plaintiffs should not be required to rely on an arguably meritless class action filing for fear that it won't be certified. As Marquinez demonstrates, that exercise itself can lead to disparate results. And now what happens? The litigants get to engage in the costly, and probably impossible, task of piecing together what happened in the forests and fields of Latin America 40-some years ago when Nixon was president and we though Watergate was as bad as things could get. There are some cases where no litigation is the correct answer. If the courts of these plaintiffs' home countries weren't willing to entertain this litigation, there is no good reason for Delaware, or any other state, to become the dumping ground for the Third World's unwanted lawsuits. Like Justice Stewart, we know a bad result when we see it.

Maybe it doesn't matter. Maybe, between Bauman and BMS, would-be non-resident class-action plaintiffs won't be able obtain personal jurisdiction to file the same lawsuit over and over again in different jurisdictions (here, at least Texas, Louisiana, and Hawai'i before Delaware). Maybe courts will resort to forum non conveniens to throw these Latin American cases out for good. See Aranada v. Philip Morris, USA, Inc., ___ A.3d ___, 2018 WL 1415215 (Del. March 22, 2018) (similar overseas chemical exposure case pitched for inconvenience, even though another forum not available). Maybe the Supreme Court will again re-examine American Pipe, and at least do away with piling meritless class actions on top of other meritless class actions.

But conversely, Bauman and BMS also mean that Delaware, as the "home" of many large corporations, will be assuming outsized importance in the litigation landscape. Delaware courts are going to have enough to do without being required to sift through the detritus of other jurisdictions' failed class action litigation.

Finally, there's a message here for any other jurisdiction considering cross-jurisdictional class action tolling – don't go there. Don't go anywhere near there.

This article is presented for informational purposes only and is not intended to constitute legal advice.

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