For decades, federal courts have slowly freed class-action plaintiffs from the burdens of statutes of limitations, which bar the filing of lawsuits after a specified period of time. A recent decision from a federal appellate court shows that we have likely reached the logical conclusion of those efforts, one in which related class actions can be filed one after another, with no real time limit.
The decision at issue, Resh v. China Agritech, Inc., involved a series of securities class actions against a publicly-traded company that was supposedly a sham. Two earlier versions of the case had been dismissed, but then a third was filed. China Agritech argued that, by the time of the third lawsuit, the statute of limitations had lapsed and the lawsuit was untimely. The plaintiffs claimed that the statute of limitations had been tolled (or halted) during the earlier two class actions. But if that theory were correct, China Agritech noted, plaintiffs could string together a nearly infinite series of class actions against a single defendant, refilling again and again after each loss.
The presiding court, the United States Court of Appeals for the Ninth Circuit, agreed with the plaintiffs. Federal law has long allowed individual plaintiffs to sue after a class action was attempted but failed, the Ninth Circuit observed. The only open question is whether individual plaintiffs can band together in successive class actions. According to the Ninth Circuit, they can. Because nothing in Civil Rule 23 (which controls class-action procedure) prohibits piggy-backed classes, those filings are permissible, the Ninth Circuit ruled.
The problem with the court’s reasoning is that nothing in Civil Rule 23 mentions allowing plaintiffs to evade statutes of limitations. Yet the U.S. Supreme Court decided that to be the case years ago. So if the Supreme Court’s original justification for altering the rules of statutes of limitations was not grounded in the text of Civil Rule 23, then later decisions like Resh should not be either. When one steps away from the text of Civil Rule 23, it becomes clear how unfair it is to permit class-action plaintiffs to continue hounding a defendant until they win–or decide to stop.