The legal world is abuzz with the ripples created by a recent US Supreme Court decision on the statute of limitations in class actions. A recent post in the Epstein Becker Wage & Hour Defense Blog makes some interesting observations on the case and the issue of its application to wage-hour/overtime class actions. The case is entitled China Agritech, Inc. v. Resh and issued from the US Supreme Court a few days ago.
Under the FLSA, each week in which an employee was not properly paid is a separate violation. There are situations when a plaintiff seeks to bring a class action, but loses on the class certification motion and then, lo and behold, a different plaintiff tries to assert a new class action based on the same theory.
This case followed the holding in American Pipe & Construction Co. v. Utah, where the Court held that a timely-filed complaint seeking relief for a class stayed the running of the statute of limitations for other class members and that if class certification was denied, other people could enter the case without their own statute of limitations being eroded away. As the post notes, the Court subsequently ruled that this tolling principle also applied when individual members of the class later filed their own individual actions. That left the question of whether the tolling rules enunciated in these cases applied to future class actions.
In China Agritech, the plaintiff filed a putative class action under the Securities Exchange Act of 1934, with a two-year statute of limitations. The court denied class certification in May 2012; the initial case settled in September 2012 and was dismissed. The next month, a second plaintiff filed a class action alleging the same claims and seeking the same class as in the first case. Certification was again denied and that case also settled.
Then, in June 2014, a new plaintiff filed a third class action; the district court dismissed it as untimely but the Ninth Circuit reversed. The case went to the Supreme Court where the Court decided that “American Pipe does not permit the maintenance of a follow-on class action past expiration of the statute of limitations.”
The Court distinguished individual claims from class actions. If certification was denied, only then would individual claims be allowed to proceed so there was a rationale for preserving the original statute of limitations. However, if the next case concerned class claims, the Court held that for sake of efficiency, it was important to determine the best class representative (if there were competing representatives) and then class certification, if appropriate, would be determined, essentially, once and for all in the case. The Court rejected the implicit argument of a rolling statute of limitations, as that would allow the statute “to be extended time and again; as each class is denied certification…” Thus, subsequent time-barred class actions were not permitted.
The China Agritech, holding gives employers a new and powerful weapon to defeat class actions. The American Pipe doctrine of allowing tolling for future plaintiffs in FLSA class is not viable anymore although courts will probably permit individual lawsuits seeking recovery for weeks which would have been barred under the American Pipe rationale. It is possible that subsequent class actions will be allowed if filed by people who were in a putative class that did not receive certification but there will be no tolling. As the Epstein post notes, and with which I totally agree, employers should look, first, when defending a FLSA class action, if there is a statute of limitations defense. That would get rid of the entire case!
Simply put, June 11, 2018 was a good day for us on the management side…