Amicus Curiae Brief — China Agritech, Inc., Petitioner v. Michael H. Resh, et al.

No. 17-432

In the

Supreme Court of the United States

----------------------CHINA AGRITECH, INC.,

Petitioner,

v.

MICHAEL RESH, ET AL.,

Respondents.

----------------------On Writ of Certiorari

to the United States Court of Appeals

for the Ninth Circuit

----------------------BRIEF OF DRI – THE VOICE OF THE DEFENSE

BAR AS AMICUS CURIAE SUPPORTING

PETITIONER

-----------------------

JOHN F. KUPPENS

President,

DRI–THE VOICE OF

THE DEFENSE BAR

55 West Monroe St.

Chicago, IL 60603

(312) 795-1101

ROBERT L. WISE

Counsel of Record

Robert.Wise@bowmanandbrooke.com

BOWMAN AND BROOKE LLP

901 East Byrd Street, Suite 1650

Richmond, VA 23219

(804) 649-8200

SUSAN E. BURNETT

BOWMAN AND BROOKE LLP

2901 Via Fortuna Drive, Suite 500

Austin, TX 78746

Counsel for Amicus Curiae

i

TABLE OF CONTENTS

Page

TABLE OF CONTENTS .............................................. i

TABLE OF AUTHORITIES .......................................iii

STATEMENT OF INTEREST .................................... 1

SUMMARY OF ARGUMENT ..................................... 3

ARGUMENT ................................................................ 6

I. THE NINTH CIRCUIT’S EXPANSION OF

AMERICAN PIPE DOES NOT

INDEPENDENTLY PASS EQUITABLE

MUSTER. .......................................................... 6

A. Stacked class action tolling creates

significant new policy concerns. .................. 6

B. Rule 23 does not displace equitable

principles. .................................................. 11

II. STACKED CLASS ACTION TOLLING IS

INEQUITABLE............................................... 14

A. Tardy prospective class members do not

meet threshold prerequisites. ................... 15

B. Stacked class actions harm businesses,

including by significantly eroding the

finality and certainty that statutes of

limitation provide. ..................................... 18

ii

TABLE OF CONTENTS

Page

C. Stacked class action tolling increases the

abusive potential inherent in the class

action device and promotes inefficiency. .. 25

CONCLUSION .......................................................... 28

iii

TABLE OF AUTHORITIES

Page

Cases

Am. Pipe & Const. Co. v. Utah,

414 U.S. 538 (1974) ........................................ passim

Artis v. D.C.,

No. 16-460 (U.S. Jan. 22, 2018) ..................... 7, 8, 19

B & B Hardware, Inc. v. Hargis Indus., Inc., 135 S.

Ct. 1293 (2015) ....................................................... 23

Baker v. Microsoft Corp.,

797 F.3d 607 (9th Cir. 2015) .................................. 24

Baker v. Microsoft Corp.,

851 F. Supp. 2d 1274 (W.D. Wash. 2012) ............. 24

Basch v. Ground Round, Inc.,

139 F.3d 6, 11 (1st Cir. 1998) .................................. 4

Bd. of Regents of Univ. of State of N.Y. v. Tomanio,

446 U.S. 478 (1980) .................................................. 7

Burnett v. N.Y. Cent. R.R. Co.,

380 U.S. 424 (1965) ............................................ 8, 27

Cal. Pub. Emps.’ Ret. Sys. (CalPERS) v. ANZ Secs.,

Inc.,

137 S. Ct. 2042 (2017) ............................ 7, 14, 17, 19

iv

TABLE OF AUTHORITIES

Page

Califano v. Yamasaki,

442 U.S. 682 (1979) ................................................ 15

Credit Suisse Sec. (USA) LLC v. Simmonds,

566 U.S. 221 (2012) .......................................... 18, 19

Crown, Cork, & Seal Co. v. Parker,

462 U.S. 345 (1983) ........................................ passim

CTS Corp. v. Waldburger,

134 S. Ct. 2175 (2014) ............................................ 16

Edwards v. Zenimax Media Inc.,

2012 WL 4378219 (D. Colo. 2012) ......................... 24

Ford v. Ford Motor Co.,

2014 WL 12570925 (C.D. Cal. 2014) ..................... 24

Griffin v. Singletary,

17 F.3d 356 (11th Cir. 1994) .................................... 4

Hawkins v. Barney’s Lessee,

5 Pet. 457 (1831) .................................................... 19

Hazel-Atlas Glass Co. v. Hartford-Empire Co.,

322 U.S. 238 (1944) ................................................ 11

Heibel v. U.S. Bank Nat. Ass’n,

2012 WL 4463771 (S.D. 2012) ............................... 24

v

TABLE OF AUTHORITIES

Page

Holland v. Fla.,

560 U.S. 631 (2010) .................................... 11, 14, 15

In re Brand Name Prescription Drugs Antitrust

Litig.,

115 F.3d 456 (7th Cir. 1997) .................................. 26

In re Cendant Corp. Sec. Litig.,

404 F.3d 173 (3d Cir. 2005) ................................... 26

In re St. Jude Med., Inc.,

522 F.3d 836 (8th Cir. 2008) .................................. 21

In re Wells Fargo Wage & Hour Emp’t Practices Litig.

(No. III),

2012 WL 3308880 (S.D. Tex. 2012) ....................... 24

Irwin v. Dep’t of Veterans Affairs,

498 U.S. 89 (1990) .............................................. 4, 16

Korwek v. Hunt,

827 F.2d 874 (2d Cir. 1987) ..................................... 4

Lozano v. Montoya Alvarez,

134 S. Ct. 1224 (2014) ............................................ 19

McCann v. Hy-See, Inc.,

663 F.3d 926 (7th Cir. 2011) ............................ 11, 19

vi

TABLE OF AUTHORITIES

Page

Menominee Indian Tribe of Wisc. v. United States,

136 S. Ct. 750 (2016) .................................. 15, 16, 17

Microsoft Corp. v. Baker,

137 S. Ct. 1702 (2017) ............................................ 24

Murray v. Sears, Roebuck, & Co.,

2014 WL 563264 (N.D. Cal. 2014) ......................... 24

Nat’l Ass’n of Reg’l Med. Programs v. Mathews,

551 F.2d 340 (D.C. Cir. 1976) ................................ 16

Newton v. Merrill Lynch Pierce Fenner & Smith,

259 F.3d 154 (7th Cir. 2001) ...................... 10, 20, 25

Ott v. Mortg. Inv’r Corp. of Ohio,

65 F. Supp. 3d 1046 (D. Or. 2014) ......................... 24

Pace v. DiGuglielmo,

544 U.S. 408 (2005) ................................................ 16

Phipps v. Wal-Mart Stores, Inc.,

792 F.3d 637 (6th Cir. 2015) .................. 8, 12, 13, 22

R.R. Tele. v. Ry. Express Agency, Inc.,

321 U.S. 342 (1944) ...................................... 8, 21, 27

Salazar-Calderon v. Presidio Valley Farmers Ass’n,

765 F.2d 1334 (5th Cir. 1985) .................................. 4

vii

TABLE OF AUTHORITIES

Page

Shady Grove Ortho. Assocs. v. Allstate Ins. Co.,

559 U.S. 393 (2010) ........................................ passim

Smentek v. Dart,

683 F.3d 373 (7th Cir. 2012) .................................. 24

Smith v. Bayer Corp.,

564 U.S. 299 (2011) ................................ 6, 22, 23, 24

Taylor v. Sturgell,

553 U.S. 880 (2008) ................................................ 24

Tyson Foods, Inc. v. Bouaphakeo,

136 S. Ct. 1036 (2016) .................................. 5, 11, 13

U.S. v. Kubrick,

444 U.S. 111 (1979) ................................................ 21

Wallace v. Kato,

549 U.S. 384 (2007) ................................................ 11

Wal-Mart Stores, Inc. v. Dukes,

564 U.S. 338 (2011) ................................................ 14

Williams v. Foods,

2013 WL 4067594 (N.D. Cal. 2013) ....................... 24

Statutes

15 U.S.C. § 78u .......................................................... 26

viii

TABLE OF AUTHORITIES

Page

28 U.S.C. § 2072(b) .................................................... 13

Rules

Fed. R. Civ. P. 23 ............................................... passim

Other Authorities

2017 CARLTON FIELDS CLASS ACTION SURVEY,

www.classactionsurvey.com/pdf/2017-class-actionsurvey.pdf ....................................................... 2, 9, 20

Edward Soto and Erica Rutner, Ascertainability

Requirement Leads to Inconsistency and

Uncertainty in Class Actions,

apps.americanbar.org/litigation/committees/produc

ts/

articles/summer2016-0816-ascertainabilityrequirement-leads-to-inconsistency-undertaintyclass-actions.html .................................................. 10

James D. Cox et al., Does the Plaintiff Matter? An

Empirical Analysis of Lead Plaintiffs in Securities

Class Actions, 106 Colum. L. Rev. 1587 (2006) .... 26

Joanna Shepherd, An Empirical Survey of No-Injury

Class Actions, Legal Studies Research Paper

Series, available at

http://ssrn.com/abstract=2726905 (2016) .............. 10

ix

TABLE OF AUTHORITIES

Page

Mayer Brown LLP, Do Class Actions Benefit Class

Members? An Empirical Analysis of Class Actions,

http://mayerbrown.com/files/uploads/Documents/P

DFs/2013/December/DoClassActionsBenefitClassM

embers.pdf ........................................................ 10, 20

Transfer Order, In re Volkswagen “Clean Diesel”

Mktg. Sales Practices & Prod. Liab. Litig.,

MDL No. 2672, (J.P.M.L. Dec. 8, 2015)................. 27

1

STATEMENT OF INTEREST1

Amicus curiae DRI – The Voice of the Defense

Bar (www.dri.org) is an international organization

composed of more than 22,000 attorneys who defend

the interests of industries, businesses, and individuals

in civil litigation. DRI’s mission includes enhancing

the skills, effectiveness, and professionalism of the

civil defense bar; promoting appreciation of the role of

defense lawyers in the civil justice system;

anticipating and addressing substantive and

procedural issues germane to defense lawyers and

fairness in the civil justice system; and preserving the

civil jury. To help foster these objectives, DRI

participates as amicus curiae in carefully selected

cases in which this Court is presented with questions

that are exceptionally important to civil defense

Pursuant to Supreme Court Rule 37(a) Petitioner and

Respondents Schoenke, Heroca Holding B.V., and Ninella

Beheer, B.V.—the only respondents to have entered an

appearance in this Court—have submitted letters granting

blanket consent to amicus curiae briefs. As the district court’s

docket reflects (No. 2:14-cv-05083, ECF No. 110 (C.D.C.A. Dec.

13, 2017), Charles Law’s claims were dismissed with prejudice

on entirely different grounds, which are not at issue in this

appeal, and he waived any right to respond to the petition for

certiorari. In accordance with Rule 37.6, amicus curiae states

that no counsel for any party authored this brief in whole or in

part and that no entity or person, aside from amicus curiae, its

members, and its counsel, made a monetary contribution

intended to fund the preparation or submission of this brief.

1

2

attorneys, their clients, and the conduct of civil

litigation.

The businesses that DRI’s members represent

are regular targets of class action litigation. Across

industries within the United States, businesses spent

$2.7 billion on class action litigation in 2016.2

Managing the litigation risk of class action lawsuits is

among the chief concerns of businesses represented by

DRI members. Class actions create unpredictable

risks and complicate exposure estimates that are

critical to business and litigation planning. They also

have the well-recognized abusive potential to put

businesses to a Hobson’s choice—take the risk of

potentially ruinous liability, or capitulate and buy

peace.

DRI’s members regularly litigate the defense of

complex class action issues, and counsel businesses

about their legal exposure in class action litigation.

Their collective experience offers an informed

perspective on the negative policy implications of

indefinite class action tolling that the Ninth Circuit

should have thoroughly analyzed, but did not.

The Ninth Circuit here followed the Sixth

Circuit’s drastic expansion of an equitable tolling rule

applicable to class actions that this Court created

decades ago, before class actions became an

unfortunate cost of doing business in this country. See

2017 CARLTON FIELDS CLASS ACTION SURVEY,

www.classactionsurvey.com/pdf/2017-class-action-survey.pdf at

2.

2

3

Am. Pipe & Const. Co. v. Utah, 414 U.S. 538 (1974);

Crown, Cork, & Seal Co. v. Parker, 462 U.S. 345

(1983). As broadened by the Ninth and Sixth Circuits,

this tolling rule, if allowed to stand, would permit

litigants to “stack” equitable tolling periods and

thereby indefinitely toll statutes of limitation.

This rule would significantly add to the burden

of litigation uncertainty under which the businesses

served by DRI’s members operate. These companies—

who employ millions of people and are the economic

engine of the country—rely on reasonable

predictability and finality in the civil justice system to

operate efficiently. The expansion of judge-made

exceptions to statutes of limitation undermine those

interests. The decision below amplifies the abusive

potential of the class action device by hamstringing an

important statutory defense. It is critical to those

businesses that this Court correct this error.

SUMMARY OF ARGUMENT

Rule 23 provides a carefully circumscribed

exception to the rule that litigants must pursue their

claims individually. It was designed to balance the

goals of litigation efficiency with fairness to

defendants facing the prospect of aggregated claims.

Over forty years ago, the Court created a limited

equitable exception to statutes of limitation in the

context of class actions under Rule 23. Am. Pipe, 414

U.S. at 561; Crown, Cork, 462 U.S. at 354. It, too,

reflects a balancing of interests: to effectuate the

litigation-efficiency goal of Rule 23 without unduly

impairing “the functional operation” of federal

4

statutes of limitation and the protections they afford

defendants. Am. Pipe, 414 U.S. at 554. To strike that

balance, American Pipe must be read to hold that a

timely filed class action complaint pauses the

limitations clock for prospective class members, who,

if certification is denied, may pursue their claims on

an individual basis within whatever is left of the

statutory limitations period. See Irwin v. Dep’t of

Veterans Affairs, 498 U.S. 89, 96 n.3 (1990) (stating

that American Pipe tolls the “individual claims of

purported class members” (emphasis added)).

Since these decisions, the Court has never

expanded American Pipe tolling. Most lower courts

generally have declined to expand it as well,

recognizing the perils and mischief such expansion

would introduce.3 These courts forbid litigants from

3 See, e.g., Basch v. Ground Round, Inc., 139 F.3d 6, 11 (1st Cir.

1998) (“Plaintiffs may not stack one class action on top of another

and continue to toll the statute of limitations indefinitely.

Permitting such tactics would allow lawyers to file successive

putative class actions with the hope of attracting more potential

plaintiffs and perpetually tolling the statute of limitations

against all such potential litigants, regardless of how many times

a court declines to certify the class.”); Griffin v. Singletary, 17

F.3d 356, 359 (11th Cir. 1994) (same); Korwek v. Hunt, 827 F.2d

874, 870 (2d Cir. 1987) (concluding that extending American Pipe

to stacked class actions is “inimical” to statutes of limitations);

Salazar-Calderon v. Presidio Valley Farmers Ass’n, 765 F.2d

1334, 1351 (5th Cir. 1985) (holding that allowing putative class

members to “piggyback one class action onto another” would lead

to abuse).

5

“stacking” tolling periods by serially refiling new class

actions that would-be time-barred but for the

equitable exception created by American Pipe. That

limit is fully consistent with the balancing of equities

reflected in American Pipe and Crown, Cork.

The Ninth Circuit has upended that balance.

Under the rule it adopted, an individual granted a

temporary and exceptional reprieve from a statutory

deadline to preserve his own claims may employ

subsequent class actions to extend the reprieve

indefinitely—including for all other putative class

members who chose not to sue. Under this approach,

multiple tolling periods are “stacked” on those that

precede them, federal statutes of limitations are

thereby suspended indefinitely, and businesses are

unable to close their books on unpredictable liability

exposure.

The Ninth Circuit’s reasoning abandons first

principles. The class action itself is an exceptional

procedural device with well-recognized abusive

potential. American Pipe equitable tolling is further

an exceptional remedy, with its own abusive potential.

Contrary to the Ninth Circuit’s interpretation, this

Court’s decisions in Shady Grove and Tyson Foods do

not require marrying the two—extending a limited

equitable reprieve for individual litigants to would-be

class representatives under Rule 23.4 The Ninth

Circuit paid little attention to the negative policy

consequences of indefinite tolling, when that should

have been at the heart of the court’s analysis. Indeed,

4 Shady Grove Ortho. Assocs. v. Allstate Ins. Co., 559 U.S. 393

(2010); Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036 (2016).

6

Smith v. Bayer, on which the Ninth Circuit mistakenly

relied in this regard, underscores how far-reaching

those consequences are.5

The rule adopted by the Sixth and now the

Ninth Circuits will negatively impact the civil justice

system and those who rely on it to settle disputes with

fairness and finality. Permitting plaintiffs to use the

class action device to circumvent statutes of limitation

indefinitely fosters strategic delay and promotes

inefficiency. Most critically from the perspective of

amicus curiae, it also significantly and unjustifiably

burdens the businesses that are the primary targets of

class action litigation.

ARGUMENT

I.

THE NINTH CIRCUIT’S EXPANSION OF

AMERICAN

PIPE

DOES

NOT

INDEPENDENTLY PASS EQUITABLE

MUSTER.

A.

Stacked class action tolling creates

significant new policy concerns.

The rule adopted in American Pipe and Crown,

Cork allows would-be class members to “bet” on class

certification without losing their individual claims if

they lose the bet. See Am. Pipe, 414 U.S. at 561;

Crown, Cork, 462 U.S. at 354. Extending this limited

tolling period, the Court found, avoids burdening

courts with multiple protective filings that would

reduce “the efficiency and economy of litigation which

5 Smith v. Bayer Corp., 564 U.S. 299 (2011).

7

is a principal purpose of the [class action] procedure.”

Am. Pipe, 414 U.S. at 553, 554; see also Crown, Cork,

462 U.S. at 350 (noting same potential “inefficiencies”

justify tolling for individually filed claims as well as

interventions in the failed class action).

Of course, to further the efficiency goal of Rule

23, American Pipe tolling also interferes with statutes

of limitation that are “‘fundamental to a well-ordered

judicial system.’” Artis v. D.C., No. 16-460, slip. op. at

19 (U.S. Jan. 22, 2018) (quoting Bd. of Regents of Univ.

of State of N.Y. v. Tomanio, 446 U.S. 478, 487 (1980)).

A tolling rule that stops the limitations clock—as in

American Pipe—has the potential to extend the life of

otherwise time-barred claims “not only by weeks or

months but by many years.” Artis, (Gorsuch, J.,

dissenting), slip op. at 1.

American Pipe tolling also creates the potential

for abuse, including an incentive for lawyers “to frame

their pleadings as a class action, intentionally, to

attract and save members of the purported class who

have slept on their rights.” Am. Pipe, 414 U.S. at 561

(Blackmun, J., concurring). And as reflected in Justice

Blackmun’s comment, it not only protects those who

were aware of their claims and chose to bet on class

certification, but those who were ignorant through

lack of diligence and do not merit equitable relief. Just

last Term, the Court remarked on American Pipe’s

failure to consider the plaintiffs’ diligence or “whether

some extraordinary circumstance prevented them

from intervening earlier[.]” Cal. Pub. Emps.’ Ret. Sys.

(CalPERS) v. ANZ Secs., Inc., 137 S. Ct. 2042, 2052

(2017).

8

But whatever its analytic shortcomings,

American Pipe created an equitable exception with a

fixed duration. Tolling pauses the limitations clock

“only during the pendency of the motion to strip the

suit of its class action character.” Am. Pipe, 414 U.S.

at 561. If certification is denied, the equitable reprieve

lasts only until the residuum of the statutory

limitations period runs out—a mere 11 days in

American Pipe. 414 U.S. at 561. This limited equitable

exception balances efficiency under Rule 23 with the

important goal statutes of limitation serve—to

“‘promote justice by preventing surprises through the

revival of claims that have been allowed to slumber

until evidence has been lost, memories have faded,

and witnesses have disappeared.’” Burnett v. N.Y.

Cent. R.R. Co., 380 U.S. 424, 428 (1965) (quoting R.R.

Tele. v. Ry. Express Agency, Inc., 321 U.S. 342, 348

(1944); see also Artis, slip op. at 19 (observing that

primary purposes of statutes of limitation include to

prevent surprise to defendants and bar those who

have slept on their rights) (citing Am. Pipe, 414 U.S.

at 554)). It reduces only temporarily the ability of

businesses facing class actions to estimate exposure

and predict and manage litigation risk.

The Ninth Circuit upended this balance by

jettisoning the requirement that a class action

complaint be timely-filed to have tolling “power.” Pet.

App. 22a; see also Phipps v. Wal-Mart Stores, Inc., 792

F.3d 637, 652 (6th Cir. 2015) (extending equitable

tolling to class actions filed after the statutory

deadline to the same extent as individual actions).

9

It is self-evident that the policy concerns raised

by temporarily tolling a statute of limitations pale in

comparison to those raised by tolling it indefinitely.

Yet, the Ninth Circuit did not examine the effects of

the rule it created through the lens of equity.

Consequently, it paid little attention to the negative

implications of drastically curtailing a statutory

defense on which businesses rely to provide

predictability, certainty, and finality in class action

litigation.

Equity demands a thorough policy analysis of

stacked class action tolling that takes account of the

practical realities of modern class action litigation.

Since the Court adopted American Pipe tolling over

forty years ago, the “exceptional” class action device

has become an unfortunately routine cost of doing

business in the United States, and that cost trends

upward. Of the 70 percent of surveyed businesses

managing at least one class action in 2016, 17.6

percent reported facing class claims “every year or

two” (up from 11.9 percent in 2015), and the

percentage reporting class actions to be “rare” fell by

six points, to 13.2 percent. CARLTON SURVEY, supra

n. 2 at 11. As compared with 2015, according to the

survey authors, “twice as many companies are facing

bet-the-company class actions in which the exposure

is deemed potentially devastating to the company.” Id.

at 14.

The decades since American Pipe also have seen

the proliferation of class actions based on technical

statutory violations—frequently involving federal

statutes—in which putative class members suffered

10

little or no economic harm. See Joanna Shepherd, An

Empirical Survey of No-Injury Class Actions, Legal

Studies Research Paper Series, available at

http://ssrn.com/abstract=2726905 (2016). In 432 such

actions pending during 2000 to 2015, the aggregate

monetary value of settlements and awards was

estimated to be approximately $4 billon. Id. at 2.

It is far from clear, however, that the increase

in class action litigation has benefitted consumers.

See, e.g., Shepherd at 2; Mayer Brown LLP, Do Class

Actions Benefit Class Members? An Empirical

Analysis of Class Actions.6 What is clear is that class

actions, whether meritorious or not, impose

significant costs on businesses. One aspect of that cost

is the unpredictability stemming from the complexity

and variable application of class action law. See, e.g.,

Edward Soto and Erica Rutner, Ascertainability

Requirement Leads to Inconsistency and Uncertainty

in Class Actions.7 Another is the potential for huge

losses when aggregated claims are tried. Indeed,

courts have recognized that “however small” the risks

may be “of potentially ruinous liability,” the risks

inherent in class actions can put “hydraulic pressure

on defendants to settle, avoiding the risk . . . .” E.g.,

Newton v. Merrill Lynch Pierce Fenner & Smith, 259

F.3d 154, 163 (7th Cir. 2001).

6 http://mayerbrown.com/files/uploads/Documents/PDFs/2013/D

ecember/DoClassActionsBenefitClassMembers.pdf.

7 apps.americanbar.org/litigation/committees/products/

articles/summer2016-0816-ascertainability-requirement-leadsto-inconsistency-undertainty-class-actions.html.

11

Stacked class action tolling has the potential to

exponentially increase this unpredictability and

uncertainty in class action litigation by removing a

deadline by which to calculate risk. See McCann v. HySee, Inc., 663 F.3d 926, 930 (7th Cir. 2011) (“[B]usiness

planning is impeded by contingent liabilities that

linger indefinitely.”). Consumers as well as business

are harmed by the resulting inefficiency.

By extending American Pipe tolling without

meaningfully analyzing the consequences, the Ninth

Circuit disregarded the rule’s roots in equity.

Equitable tolling is a “rare remedy to be applied in

unusual circumstances[.]” Wallace v. Kato, 549 U.S.

384, 396 (2007). Before expanding a “rare remedy,”

courts must address whether the result would be

equitable. The very purpose of equity is to provide

courts with the flexibility “‘to meet new situations”

and determine on a case-by-case basis whether

extraordinary circumstances justify relief from legal

requirements. Holland v. Fla., 560 U.S. 631, 650

(2010) (quoting Hazel-Atlas Glass Co. v. HartfordEmpire Co., 322 U.S. 238, 248 (1944)).

B.

Rule 23 does not displace equitable

principles.

In large part, the Ninth Circuit treated policy

concerns dismissively based on its misinterpretation

of two of this Court’s opinions. Pet. App. 20a (citing

Shady Grove v. Allstate Ins. Co., 559 U.S. 393 (2010),

& Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036

(2016)). In effect, it read these cases to create a

presumptive right to invoke Rule 23 that trumps

12

equitable principles. See Pet. App. 22a (unless court

applies comity or preclusion principles, plaintiffs who

satisfy Rule 23 “are entitled to bring their timely

individual claims as named plaintiffs in a would-be

class action”); see also Phipps, 792 F.3d at 653

(plaintiffs who benefitted from American Pipe tolling

are “entitled to seek class certification under Rule 23”)

(citing Shady Grove, 559 U.S. at 398)). It is important

that the Court correct this error, and reaffirm that

Rule 23 does not immunize class actions from precepts

of equity.

Shady Grove did not address equitable

principles; it resolved a conflict between Rule 23 and

a New York state law that prohibited class actions in

certain types of cases. The Court held that because

Rule 23 was applicable and valid, it controlled. 559

U.S. at 398. It rejected the defendant’s attempt to

avoid the conflict by distinguishing “eligibility” for

class treatment under New York law from

certifiability under Rule 23. The Court explained that

Rule 23 is not limited to claims “made eligible for class

treatment by some other law.” Id. at 399 (emphasis in

original). Rather, it “permits all class actions that

meet its requirements[.]” Id. at 401.

It was in the context of illustrating the conflict

between Rule 23 and state law that the Court referred

to “a categorical rule” entitling a plaintiff to invoke

Rule 23 regardless of “some other law.” Id. at 399

(emphasis in original). Disregarding context, the

Ninth Circuit interpreted “other law” to include

federal statutes of limitation Pet. App. 17a (the

“statute of limitations is not part of Rule 23, but is,

13

instead, ‘some other law’”); see also Phipps, 792 F.3d

at 652 (citing Shady Grove’s reference to a “categorical

rule” to support extension of equitable tolling to class

actions). Under this reasoning, statutes of limitation

would never apply to class actions because limitations

are “other law” not referenced in the text of Rule 23.

This would be an absurd result, not to mention at odds

with American Pipe itself. This Court should set the

record straight to prevent other courts from similarly

misconstruing the relationship between Rule 23 and

statutes of limitation.

The Ninth Circuit similarly misread Tyson

Foods, where the Court held that it would be

inconsistent with the Rules Enabling Act to bar

statistical evidence relevant to an individual claim

simply because it is offered on behalf of a class. Tyson

Foods, 136 S. Ct. at 1046–48 (citing 28 U.S.C.

§ 2072(b)). Though Tyson Foods had nothing do with

equitable exceptions, the Ninth Circuit read this

discussion to support, if not mandate, extending

equitable tolling to class actions to the same extent as

individual actions. Pet. App. 21a.

But if the Rules Enabling Act constrains courts’

equitable power to treat class and individual actions

differently when justice requires, then American Pipe

itself was wrongly decided. If the Court has the

inherent equitable power to create a class actionspecific tolling rule, it has equal power to limit the

scope of that rule.

The Ninth Circuit’s error stems from an implicit

assumption that Rule 23, not equitable principles,

informed the analysis in American Pipe. But recently

14

in CalPERS, the Court put to rest the notion that Rule

23 requires equitable tolling in class actions,

explaining:

Nothing in the American Pipe opinion

suggests that the tolling rule it created

was mandated by the text of a statute or

federal rule. Nor could it have. The

central text at issue in American Pipe

was Rule 23, and Rule 23 does not so

much as mention the extension or

suspension of statutory time bars.

CalPERS, 137 S. Ct. at 2051–52; cf. Holland, 560 U.S.

at 632–33 (explaining in federal habeas case, “[n]o preexisting rule of law or precedent demands a rule”

prohibiting equitable tolling based on attorney

misconduct).

In sum, neither Rule 23, the Rules Enabling

Act, nor this Court’s precedents require expanding

American Pipe tolling to class actions. To the contrary,

this Court’s relevant opinions—those addressing the

rare remedy of equitable tolling—preclude this

expansion.

II.

STACKED CLASS ACTION TOLLING IS

INEQUITABLE.

The Ninth Circuit went astray by not returning

to first principles before undertaking its analysis. The

class action device is “‘an exception to the usual rule

that litigation is conducted by and on behalf of the

individual named parties only.’” Wal-Mart Stores, Inc.

v. Dukes, 564 U.S. 338, 348 (2011) (quoting Califano v.

15

Yamasaki, 442 U.S. 682, 700–01 (1979)). Equitable

tolling is further an exceptional remedy, available

only in extraordinary circumstances. See Menominee

Indian Tribe of Wisc. v. United States, 136 S. Ct. 750,

756 (2016). In other words, American Pipe applied an

exceptional remedy to already exceptional procedural

device. The result was to give that exceptional device

an exceptional power—to toll limitations for

individuals with otherwise untimely claims. But to

have that power, the class action itself had to be

timely.

The policy concerns raised by giving this

“exceptional” tolling power to an indefinite series of

untimely class actions overwhelmingly counsel

against doing so. Most critically for the businesses

that amicus curiae’s members represent, handing

operational control of statutes of limitations to the

lawyers who file class actions vastly increases the

uncertainty and unpredictability already inherent in

class action litigation. And the mere status of “wouldbe class representative” does not mean an individual

meets the threshold requirements to merit equitable

relief in the first place.

A.

Tardy prospective class members do

not meet threshold prerequisites.

A litigant seeking equitable tolling must show:

“(1) that he has been pursuing his rights diligently,

and (2) that some extraordinary circumstance stood in

his way and prevented timely filing.” Holland, 560

U.S. at 649. These two components are “‘elements,’ not

merely factors of indeterminate or commensurable

16

weight.” Menominee, 136 S. Ct. at 756 (citing Pace v.

DiGuglielmo, 544 U.S. 408, 418 (2005)). The

justifications offered in defense of stacked class action

tolling satisfy neither requirement.

First, no obstacle prevents would-be class

representatives from timely filing their own class

actions.

Id.

(explaining

that

extraordinary

circumstances means something outside the litigant’s

control). Betting mistakenly that a timely filed class

will be certified is not even ‘“a garden variety claim of

excusable neglect,”’ much less an extraordinary

circumstance excusing delay. Id. at 757 (quoting

Irwin, 498 U.S. at 96); see also id. at 756 (holding that

individual litigant’s mistaken belief that it fell within

a putative class and would benefit from American Pipe

tolling insufficient).

Second, those who wish to serve as

representative plaintiffs (and their lawyers) face

elevated responsibilities. See Nat’l Ass’n of Reg’l Med.

Programs v. Mathews, 551 F.2d 340, 346 (D.C. Cir.

1976) (“Class actions involve the delegation of

authority to a named representative to pursue a

common goal.”). Would-be class representatives

hardly exhibit diligence by waiting to see what

happens before throwing their hats in the ring. See

CTS Corp. v. Waldburger, 134 S. Ct. 2175, 2183 (2014)

(noting that statutes of limitation encourage “diligent

prosecution of known claims”).

Unnamed class members who would benefit

from stacked tolling likewise face no impediment to

seeking relief individually after certification is

17

denied—thanks to American Pipe. The burden of doing

so is low, not an obstacle. See Menominee, 136 S. Ct.

at 757 (supporting that risk and expense of filing

timely claim “is far from extraordinary”).

As the Court recognized in CalPERS, American

Pipe did not expressly consider the obstacle and

diligence prongs of equitable tolling. 137 S. Ct. at

2052. Those two elements are threshold requirements

under the Court’s more recent opinions. One might

argue they were not met in American Pipe and Crown,

Cork. But if American Pipe is susceptible to this

criticism, it is even more important that any proposed

expansion of its holding face a more rigorous

examination.

In any event, stacked class action tolling fails

even under the relaxed standards of diligence and

extraordinary circumstances the Court applied in

American Pipe and Crown, Cork. Individuals who rely

on a timely filed class action to vindicate their rights,

the Court found, are acting rationally, not exhibiting

a lack of diligence. See Crown, Cork, 462 U.S. at 352

(explaining that because Rule 23 “permits and

encourages” reliance on class representatives to

prosecute claims, unnamed class members who rely on

them are not “sleeping on their rights”). It is fair to

allow such individuals to “bet on” the class action

achieving certification and vindicating their claims

without risking loss of those claims. See Am. Pipe, 414

U.S. at 553. That unnamed class members ignorant of

their claims also benefit from American Pipe tolling

has only limited inequitable effect because the

incidental benefit is of limited duration. Id. at 561.

18

By contrast, the negative policy implications of

indefinite tolling are myriad. Stacked tolling rewards

foot-dragging by would-be class representatives. It

takes the pressure off their lawyers to swiftly marshal

and preserve evidence. It rewards unnamed class

members who forgo the effort and cost of pursuing

individual claims to prolong their risk-free ride on the

class action train. Cf. Credit Suisse Sec. (USA) LLC v.

Simmonds, 566 U.S. 221, 227 (2012) (“Allowing tolling

to continue beyond the point at which the § 16(b)

plaintiff is aware, or should have been aware, of the

facts underlying the claim would quite certainly be

inequitable[.]” (emphasis in original)). And it gifts nondiligent class members with the opportunity to

belatedly discover and pursue stale claims or receive

an unexpected windfall recovery if a class ever makes

it to the finish line. A rule that incidentally and

temporarily rewards those who failed to discover their

claims within limitations may be compatible with

equity, as the American Pipe Court found. A rule that

lets them sit on their rights indefinitely, however, is

not.

B.

Stacked

class

actions

harm

businesses,

including

by

significantly eroding the finality

and certainty that statutes of

limitation provide.

The Ninth Circuit’s rule empowers class action

lawyers to relitigate serially the class certification

question regardless of statutory deadlines. One can

hardly imagine a rule more “inconsistent with the

19

functional operation of a statute of limitations.” Am.

Pipe, 414 U.S. at 554; see Credit Suisse, 566 U.S. at

227–28 (“The potential for . . . endless tolling in cases

in which a reasonably diligent plaintiff would know of

the facts underlying the action is out of step with the

purposes of limitations periods in general.”);

CalPERS, 137 S.Ct. at 2054 (rejecting proffered

interpretation of statute of repose to create limitless

causes of action “reveals its implausibility,” because

“[t]aken to its logical limit, an individual action would

be timely even if it were filed decades after the

original” conduct underlying the claim). Extending

American Pipe equitable tolling to indefinitely

suspend a statute of limitations flouts “statutory

intent” as much as extending it to statutes of repose,

which the Court refused to do. Id. at 2050 (observing

that statutes of repose reflect “statutory intent” to

create an absolute time bar) (citing Lozano v. Montoya

Alvarez, 134 S. Ct. 1224, 1232 (2014); cf. Artis,

(Gorsuch, J., dissenting) (explaining that creating

time bars is “‘one of the most sacred and important of

sovereign rights and duties.’”) (quoting Hawkins v.

Barney’s Lessee, 5 Pet. 457, 466 (1831)).

Statutes of limitation are a critical protection

for businesses subject to class action lawsuits.

Interfering with their operation does not just

prejudice defendants by requiring them to defend

against stale claims. It forces business defendants—

i.e., the typical target of class actions—to keep

contingent liabilities on their books without the ability

to predict reliably when the risk may end. Cf. McCann

v. Hy-See, Inc., 663 F.3d 926, 930 (7th Cir. 2011)

20

(“[B]usiness planning is impeded by contingent

liabilities that linger indefinitely.”).

In a litigation environment where facing class

actions is now the price of doing business, this

uncertainty is a huge burden on companies and the

economy. In the Mayer Brown study, of 148 class

actions filed in or removed to federal court in 2009, 14

percent (21 cases) had not been resolved by early

September 2013, leaving the defendants with

unknown contingent liability for over three years.

Mayer Brown at 5. This statistic is concerning enough

to businesses managing litigation risk. But if winning

a years-long battle on class certification merely paves

the way for others to spring up in its place, the

incentive to fight is reduced and the “hydraulic

pressure” to settle increased. Newton, 259 F.3d at 163.

As it stands, only 28% of companies have insurance

coverage for class action defense, and those that do are

covered for 30% or less. CARLTON SURVEY, supra

n. 2 at 18. The per-matter spending per year on

outside counsel ranges from $0.2 million to $1.5

million for routine matters, to $3 to 30 million for “bet

the company” litigation. Id. at 17.

Stacked tolling would make it significantly

harder for companies to assess future liabilities, plan

defense costs, and manage litigation risk, with ill

effects on the economy as a whole. Money put in

reserve in anticipation of further litigation is money

that is not spent on innovation and expansion, hiring

new employees and increasing pay, and providing

goods and services to consumers.

21

And the problem of stale claims takes on

heightened significance when tolling may continue

indefinitely. In American Pipe, the Court found that

the problems of unfair surprise and lost evidence were

minimized because, “[w]ithin the period set by the

statute of limitations, the defendant has the essential

information necessary to determine both the subject

matter and size of the prospective litigation[.]” 414

U.S. at 554–55. The Ninth Circuit addressed the

stale-claim concern in a single sentence, citing the

discussion from American Pipe. Pet. App. 21a. It

thereby disregarded the critical distinction between a

limited tolling rule—as in American Pipe—and an

indefinite one. Under the latter, the negative impact

on the defendant’s ability to vigorously defend itself

continues to grow as memories progressively fade,

witnesses move or pass away, and documents outside

the control of the parties to the original suit get lost or

destroyed. Fairness demands that ‘“the right to be free

of stale claims’” at some point outweighs ‘“the right to

prosecute them.’” U.S. v. Kubrick, 444 U.S. 111, 117

(1979) (quoting R.R. Tele., 321 U.S. at 349). Yet this

fairness analysis was ignored.

This inevitable deterioration of evidence not

only threatens the fairness of a trial on the merits, it

may also skew the certification question in plaintiffs’

favor. Evidence outside the control of the parties to the

original class action may be critical. See In re St. Jude

Med., Inc., 522 F.3d 836, 840–41 (8th Cir. 2008)

(concluding predominance factor was not met based on

individual medical histories of class plaintiffs).

Moreover, indefinite tolling itself makes it likely that

the scope and contours of subsequent class actions—

22

perhaps filed a decade or more after the original

statutory deadline—will differ, as lawyers hone their

arguments and learn from their mistakes. The

mutability of serial class claims that stacked class

tolling invites undermines any credible argument that

an initial class action puts the defendant on notice of

the claims against it, or that an earlier class

certification denial diminishes the risk of later

certification on the second, third, or even fourth bite

at that apple.

The Ninth Circuit dismissed these concerns in

reliance on Smith v. Bayer, 564 U.S. 299 (2011).

According to the Ninth Circuit, Smith establishes that

the negative policy implications of serial relitigation of

class certification are inevitable, negligible, and

curable through nebulous doctrines like comity. Pet.

App. 19a ([“W]e follow the Supreme Court’s lead and

trust that existing principles in our legal system, such

as stare decisis and comity among courts, are suited to

and capable of addressing these concerns’”) (quoting

Phipps, 792 F.3d at 653). This misreading of Smith is

of serious concern to companies who depend on

statutes of limitation in managing their businesslitigation risk. Smith had nothing to do with statutes

of limitation. The Court there declined to modify the

law of preclusion to prohibit unnamed putative class

members in a failed class action from relitigating the

certification question. It observed that the policy

concerns raised by serial relitigation of class

certification were Bayer’s “strongest argument[.]” Id.

at 316. It rejected Bayer’s policy argument not because

it was weak, but because the policy concerns in the

context of that case were insufficient grounds for

23

ignoring a central tenet of an established legal

doctrine. Id. at 313, 316 (acknowledging that rule

against nonparty preclusion “perforce leads to

relitigation of many issues” as a function of its

“fundamental nature”).

This case stands on a different footing.

Equitable tolling is an exception to rules of law;

preclusion principles are rules of law. See B & B

Hardware, Inc. v. Hargis Indus., Inc., 135 S. Ct. 1293,

1303 (2015) (explaining that issue preclusion is wellestablished in the common law). Smith’s refusal to

modify preclusion law based on policy concerns does

not bear on whether a judge-made equitable rule

should be expanded despite policy concerns. In Shady

Grove, for example, the Court treated the forumshopping its decision would cause as a necessary evil

of Congress’s decision to create “a uniform system of

federal procedure.” Shady Grove, 559 U.S. at 415–16.

But an incentive to forum-shop would be

“unacceptable when it comes as the consequence of

judge-made rules created to fill supposed ‘gaps’ in

positive federal law.” Id. (emphasis added). Forumshopping enabled by a judge-made rule of equity is

equally unacceptable.

The Court in Smith raised—briefly and without

discussion—stare decisis and comity as principles that

could “mitigate the sometimes substantial costs of

similar litigation brought by different plaintiffs.” 564

U.S. at 317. It did not suggest, however, that these

discretionary and elastic principles fully addressed

the ill effects of serial relitigation in all contexts. Stare

decisis and comity, in effect, were the best the Smith

24

Court could offer while adhering to its “‘constrained

approach to nonparty preclusion.’” Id. at 313 (quoting

Taylor v. Sturgell, 553 U.S. 880, 898 (2008)). That does

not imply that these doctrines are adequate

substitutes for statutes of limitation. And they are not.

See Smentek v. Dart, 683 F.3d 373, 375 (7th Cir. 2012)

(describing the Smith Court’s reference to comity as

“cryptic,” and refusing to revise certification decision

based on comity); see also Ford v. Ford Motor Co., 2014

WL 12570925, at *3–4 (C.D. Cal. 2014) (agreeing that

that the refence to comity in Smith is “cryptic”). The

effectiveness of such doctrines in curbing serial

relitigation is uncertain, at best.8

Far from supporting the rule adopted by the

Ninth Circuit, Smith—which removes preclusion

principles as a check on serial relitigation— illustrates

8 We are aware of only four cases since Smith in which a district

court has cited comity in denying class certification. Ott v. Mortg.

Inv’r Corp. of Ohio, 65 F. Supp. 3d 1046, 1063–64 (D. Or. 2014);

Murray v. Sears, Roebuck, & Co., 2014 WL 563264 (N.D. Cal.

2014); Williams v. Foods, 2013 WL 4067594, at *2 (N.D. Cal.

2013); Edwards v. Zenimax Media Inc., 2012 WL 4378219, at *4

(D. Colo. 2012). At least four courts have expressly declined to

follow another court’s previous class certification ruling. See

Baker v. Microsoft Corp., 851 F. Supp. 2d 1274 (W.D. Wash. 2012)

(reversed by Baker v. Microsoft Corp., 797 F.3d 607 (9th Cir.

2015) (reversed by Microsoft Corp. v. Baker, 137 S. Ct. 1702

(2017)); Ford v. Ford Motor Co., 2014 WL 12570925, at *3–4 (C.D.

Cal. 2014); Heibel v. U.S. Bank Nat. Ass’n, 2012 WL 4463771, at

*4 (S.D. 2012); In re Wells Fargo Wage & Hour Emp’t Practices

Litig. (No. III), 2012 WL 3308880, at *22 (S.D. Tex. 2012)

(granting conditional class certification).

25

why it is so important for this Court to bar indefinite

tolling of class actions.

C.

Stacked

class

action

tolling

increases the abusive potential

inherent in the class action device

and promotes inefficiency.

Stacked

class

action

tolling

virtually

guarantees increased strategic abuse of class actions.

Class actions by their nature allow weak or spurious

claims to be aggregated and “weaponized,” pressuring

defendants to buy peace rather than fight and risk

losing. E.g., Newton, 259 F.3d at 163. Justice

Blackmun cautioned that American Pipe tolling of

individual claims “must not be regarded as

encouragement to lawyers” to file placeholder class

actions “to attract and save members of the purported

class who have slept on their rights.” Am. Pipe, 414

U.S. at 561 (Blackmun, J. concurring). The Ninth

Circuit paid no heed to this warning. Yet there is no

limit to the abusive potential of which Justice

Blackmun warned if the duration of tolling rests in the

hands of the very lawyers he addressed.

The potential for abuse would be unacceptable

even if stacked tolling furthered the goals of Rule 23,

but it does not. The overriding theme of American Pipe

and Crown, Cork is that early certification decisions

streamline litigation, reduce costs, and discourage

strategic delay. See Am. Pipe, 414 U.S. at 547

(observing that 1966 amendments precluded litigants

from “await[ing] developments in the trial or even

final judgment” before joining a class). These goals are

26

reflected in the directive that courts should rule at

“[a]n early practicable time” after suit is filed. Fed. R.

Civ. P. 23(c)(1)(A). American Pipe referred to this

directive five times. See id. at 542 n.5, 547, 549, 552;

id at 562 (Blackmun, J., concurring).

Under stacked class action tolling, the denial of

class certification no longer produces certainty, even

when a statutory deadline has long passed. That

result does not effectuate economy of litigation under

Rule 23—it undermines it.

What is more, it instead promotes efficiency to

require those litigants who sincerely wish to serve as

class representatives (and their lawyers) to enter the

fray before limitations periods have run. Nothing

stands in their way. See In re Brand Name

Prescription Drugs Antitrust Litig., 115 F.3d 456, 457

(7th Cir. 1997) (noting that unnamed class members

can opt out, seek replacement, or intervene if they

wish to assert control). The benefits of promptly

determining class leadership is reflected in the “lead

plaintiff” provision of the Private Securities Litigation

Reform Act (PSLRA), 15 U.S.C. § 78u. Rather than

waiting to see how matters develop, plaintiffs who

wish to lead are encouraged to step up and assume

fiduciary responsibilities, including loyalty to the

interests of the class. See In re Cendant Corp. Sec.

Litig., 404 F.3d 173, 198 (3d Cir. 2005); see also James

D. Cox et al., Does the Plaintiff Matter? An Empirical

Analysis of Lead Plaintiffs in Securities Class Actions,

106 Colum. L. Rev. 1587, 1587 (2006) (“Congress

expected that [the lead plaintiff] would actively

monitor the conduct of a securities fraud class action

27

so as to reduce the litigation agency costs that may

arise when counsel’s interests diverge from those of

the shareholder class.”).

A fixed statutory deadline has a similar

salutary effect in a Rule 23 class action. Federal courts

are well-equipped to settle disputes among litigants

and lawyers vying for control, and can achieve

economies through coordination and consolidation

where appropriate. See, e.g., Transfer Order, In re

Volkswagen “Clean Diesel” Mktg. Sales Practices &

Prod. Liab. Litig., MDL No. 2672, (J.P.M.L. Dec. 8,

2015), ECF No. 950. Even if multiple class actions

proceed at the same time, a fixed deadline temporally

limits any inefficiency. Requiring the timely assertion

of class claims discourages shoddy lawyering by

taking away the safety net of perpetual tolling. And it

raises the likelihood that courts evaluating motions to

certify, and juries deliberating the merits in certified

class actions, will make their decisions based on the

best evidence, gathered before ‘“memories have faded,

and witnesses have disappeared.’” Burnett, 380 U.S.

at 428 (1965) (quoting R.R. Tele., 321 U.S. at 348).

***

Equitable exceptions to legal rules should

relieve injustice, not promote it. There is no injustice

in holding would-be class representatives to a

statutory deadline. Amicus curiae’s members daily

represent businesses defending against class action

litigation. From their perspective, letting tardy

litigants use the class action device to circumvent

statutes of limitation—creating risk exposure of

28

indefinite scope and duration for the business

community—works no equity.

CONCLUSION

The Court should reverse the Ninth Circuit’s

decision.

Respectfully submitted,

JOHN F. KUPPENS

President,

DRI–THE VOICE OF

THE DEFENSE BAR

55 West Monroe St.

Chicago, IL 60603

(312) 795-1101

ROBERT L. WISE

Counsel of Record

BOWMAN AND BROOKE

LLP

901 East Byrd Street

Suite 1650

Richmond, VA 23219

(804) 649-8200

Robert.Wise@bowmanand

brooke.com

SUSAN E. BURNETT

BOWMAN AND BROOKE

LLP

2901 Via Fortuna Drive

Suite 500

Austin, TX 78746

Counsel for Amicus Curiae

January 26, 2018