Complaint, which was filed on December 17, 2002, is almost two years out of time, absent any tolling.
Plaintiffs argue that the statute of limitations has been effectively tolled by the rule articulated by the United States Supreme Court in American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974), and as enunciated by the Third Circuit's opinion in McKowan Lowe v. Jasmine Ltd., 295 F.2d 380 (3d Cir. 2002). The American Pipe rule provides that when a class action complaint is filed, the statute of limitations is tolled for all members of that putative class who then choose to intervene or file an independent action following a denial of class certification. See American Pipe, 414 U.S. at 555 ("Not until the existence and limits of the class have been established and notice of membership has been sent does a class member have any duty to take note of the suit. . . ."). See also Crown, Cork & Seal Co. v. Parker, 462 U.S. 345, 350 (1983) (extending American Pipe tolling to subsequent individual actions filed after the denial of class certification).
American Pipe has been interpreted by most courts considering the issue as holding that "stacking" one class action atop another following a denial of class certification is prohibited. See, e.g., Korwek v. Hunt, 827 F.2d 874, 879 (2d Cir. 1987) ("filing new but repetitive complaints" not intended by Supreme Court in American Pipe). See also Basch v. Ground Round, Inc., 139 F.3d 6, 11 (1st Cir. 1998); Griffin v. Singletary, 17 F.3d 356, 359 (11th Cir. 1994); Andrews v. Orr, 851 F.2d 146, 149 (6th Cir. 1988); Robbin v. Fluor Corp., 835 F.2d 213, 214 (9th Cir. 1987). This has been called the "anti-stacking" rule.
As a matter of first impression, in McKowan Lowe the Third Circuit considered the breadth of the American Pipe rule as applied to a plaintiff seeking to intervene in a securities fraud class action after the statute of limitations had expired. In that case, the plaintiff, a shareholder of Jasmine Ltd., a shoe company, filed suit against the corporation, its management, underwriter and principals, as well as other entities, all in relation to an initial public offering of Jasmine stock. See McKowan Lowe, 295 F.3d at 383. The complaint, filed by Harry Berger on his own behalf and on the behalf of all others similarly situated, alleged that defendants misstated Jasmine's financial statements to conceal debt owed to another corporation. Id. The court denied Berger's request for class certification based on its analysis that he did not meet the adequacy requirements of Fed.R.Civ.P. 23. Id. Shortly after the denial of class certification, but more than three years after the complaint was first filed, Bernard Cutler intervened as a plaintiff. But for the tolling rule enunciated in American Pipe, Cutler's claims would have been barred by the one year statute of limitations for such securities fraud actions.
The Third Circuit determined that Cutler could benefit from American Pipe tolling because the class certification motion of his predecessor, Mr. Berger, was denied not due to any defects in the class itself, but due to Berger's inadequacy as a class representative. Id. at 386. In so deciding, the court closely examined case law from the Second Circuit, see Korwek v. Hunt, 827 F.2d 874 (2d Cir. 1987), and the Eleventh Circuit, see Griffin v. Singletary, 17 F.3d 356 (11th Cir. 1994). The circuit court distinguished Korwek as applying to instances where a court has found the class itself inappropriate, not due to any perceived deficiencies in the class representative herself. The Third Circuit found that while the class in Griffin was denied due to the inadequacy of the class representative, the distinction illuminated in Korwek was ignored by that court. The court found that the reasons for the denial of class certification were significant to its decision, and keeping with Third Circuit precedent in Haas v. Pittsburgh Nat'l Bank, 526 F.2d 1083 (3d Cir. 1975) (allowing American Pipe tolling for a subsequent class representative on a claim that the initial representative lacked standing to pursue), allowed Cutler to intervene.
However, the circuit court's holding was not without limits: the court clearly stated "we hold that the class claims of intervening class members are tolled if a district court declines to certify a class for reasons unrelated to the appropriateness of the substantive claims for certification." Id. at 389 (emphasis added).
However, neither the Supreme Court nor the Third Circuit has yet addressed whether the tolling rule permits the filing of a new class action in a different district court after the statutory period has expired. Plaintiffs argue that McKowan Lowe should be read as creating a broad exception to the "anti-stacking" rule, one that allows the filing of subsequent class actions by new plaintiffs in different districts, not only claims filed by intervenors. Defendants argue that the plain language of the Third Circuit's holding limits the breadth of the American Pipe tolling exception to subsequent claims filed by intervenors, and does not toll the statute of limitations for a new action filed in a different district court, as is the case here. The Court agrees with Defendants. The American Pipe tolling rule is an exception to the statute of limitations already in operation.*fn4 McKowan Lowe provides an enunciation of that exception in the Third Circuit: claims of intervening class members are entitled to a tolling of the statute of limitations while class proceedings are ongoing.*fn5
In support of their motion, Defendants cite the Ninth Circuit's conclusion in Robbin v. Flour Corp., 835 F.2d 213 (9th Cir. 1987), where the court refused to allow a separate class action to proceed in the Central District of California after a virtually identical class had been denied certification in New York. In that case, the Ninth Circuit rejected plaintiffs' arguments that American Pipe tolling applied to subsequent class actions filed in other courts. Id. at 214.
Plaintiffs argue that Robbin is inapposite because the Ninth Circuit does not have the benefit of the McKowan Lowe decision. However, the same result is required here, and McKowan Lowe does not change the analysis markedly. In fact, as discussed supra, the holding of the Third Circuit in McKowan Lowe is clear: in this Circuit, American Pipe tolls the class claims of intervening class members. As Plaintiffs are not intervenors, and have filed a separate class action here in the District of New Jersey despite the ongoing proceedings in the Northern District of Georgia, the McKowan Lowe decision does not mandate tolling. It is not the function of this Court to unnecessarily depart from the clear holding of the Third Circuit in McKowan Lowe and extend American Pipe tolling to the instant time-barred action. Therefore, as Plaintiffs are not within the scope of the American Pipe/McKowan Lowe tolling exception, the statute of limitations bars their claims.
As this determination is dispositive of Plaintiffs' entire Class Action Complaint, the Court declines to address the other arguments for dismissal and/or transfer set forth in Defendants' motion.
An appropriate order follows.
Before the Court is the motion of Defendants Steven A. Odom, Mark Gergel, Hensley E. West, Martin D. Kidder and Stephen J. Clearman to dismiss the Class Action Complaints in the above-captioned actions under Rule 12(b)(6) of the Federal Rules of Civil Procedure. For the reasons set forth in the accompanying written opinion,
IT IS on this 3rd day of June 2003,
ORDERED that Defendants' motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure is GRANTED; and it is further,
ORDERED that the Class Action Complaints are dismissed with prejudice.
This cases bearing the Civil Action Numbers above are CLOSED.