Cross-Jurisdictional Tolling in Class Actions: Chavez v. Occidental Chemical

It has been fairly quiet in the realm of interesting civil caselaw out of the Seventh Circuit and Indiana appellate courts. As a result, this week, we cast our net a bit broader to snag a recent decision from New York’s highest court, which answered a question certified to it by the Second Circuit, that provides an opportunity to discuss a complicated, but important issue of class action procedure: cross-jurisdictional tolling.

Ladies and gentlemen, before we delve into this one, a warning is in order. While most of our posts, here, on the Hoosier Litigation Blog are intended for a general audience, this one is sufficiently esoteric that you may want to skip on by and join us again next time unless you are looking for an advanced discussion in class action procedure. For those who have chosen to sally forth, let us start with a quick look at what is commonly called American Pipe tolling.

We have briefly touched on American Pipe tolling in the past. The concept stems from the Supreme Court of the United States’ ruling in American Pipe & Construction Co. v. Utah. The case solves the problem of what happens to the claims of absent class members while a putative class action proceeds in court. Generally speaking, statutes of limitations require claims to be brought in a specific period of time or the person who had the right to bring the claim is prevented from doing so because it has become untimely. Once a person timely files a claim in court, then the statute of limitations generally ceases to be a concern. (It remains a potential issue for altering claims, adding new parties, and if the case is found to have been filed in the wrong court, so it’s not completely removed from the calculus.) But what happens when someone files a putative class action?

If the case is certified as a class action, so long as the claim of the absent class member was timely as of the date of the filing of the case, then the claim will have been timely. (There can be an exception when the class definition is later expanded to reach persons not initially covered by the definition contained in the original complaint.) The absent class members, however, do not know whether any given class action will end up being certified. So the absent class members are ostensibly left between Scylla and Charybdis: file an individual claim at increased costs or sit back and hope the class action is ultimately certified, risking later being prohibited from bringing a claim at all. That is where American Pipe tolling comes in.

Under American Pipe, the filing of a putative class action tolls—i.e. pauses—the statute of limitations for the absent class members until there has been a ruling on class certification. Mind you, dismissal of class allegations is one way of having such a ruling, as is an order denying class certification. American Pipe tolling is also generally thought to extend to toll statutes of limitations for persons who exercise opt-out rights under procedures mirroring those of Federal Rule of Civil Procedure 23(b)(3), at least up to the point that they opt out. The purpose of the rule is sound. It prevents what would otherwise be a necessary onslaught of cases filed to preserve statutes of limitation. Although American Pipeis a case dictating federal court procedures, as one source accurately observed, “most states have adopted American Pipe-like class action tolling rules.” Indiana is among the states to have adopted class-action tolling procedures. Those procedures are important even in federal court because cases subject to diversity jurisdiction will be subject to the state procedures governing statutes of limitations.

While all of that may seem simple enough, there remains a hugely complicating question: Does tolling apply even if the case was filed in a different state or in a federal court instead? That is the fundamental question of cross-jurisdictional tolling. As one author explains, “Cross-jurisdictional tolling has been defined as ‘a rule whereby a court in one jurisdiction tolls the applicable statute of limitations based on the filing of a class action in another jurisdiction.’” Despite the critical importance of knowing whether cross-jurisdictional tolling applies, astonishingly few state courts have addressed the issue. That silence is particularly problematic because many federal courts have arguably dodged their obligation to project how the state’s highest court may rule. When a federal court sits in diversity, it must predict how the corresponding state’s highest court would rule.

Two federal district courts have specifically declined to apply cross-jurisdictional tolling under Indiana law simply because Indiana appellate courts have not addressed the issue. The first of the two courts was the Eastern District of Louisiana, which wrote:

Lastly, the Court finds that the plaintiffs claims are not saved by American Pipe tolling under Indiana law. Although Indiana does recognize class action tolling, Indiana has not explicitly adopted cross-jurisdictional tolling. In his case-specific opposition, the plaintiff argues that a Vioxx class action filed in Indiana federal court operates to toll the statute of limitations in his case. Absent clear guidance, however, the Court will not expand Indiana’s class action tolling doctrine. Because there have been no Vioxx personal injury class actions filed in the Indiana state courts, the plaintiff cannot rely on Indiana’s limited class action tolling doctrine.

Soon after, the exact same reasoning was followed by the District of Kansas: “Indiana courts have not considered the issue of cross-jurisdictional tolling. Plaintiffs insist that the Indiana Supreme Court would adopt that doctrine in an antitrust case. Again, in the absence of Indiana authority recognizing the doctrine, the Court declines to import a new tolling rule into that state’s limitations law.” Oddly, before either of those cases were decided, the Western District of Pennsylvania ruled that Indiana would apply cross-jurisdictional tolling.

There is a further complicating issue that is even more easily overlooked than cross-jurisdictional tolling. It would seem that the simple answer is that the best way to preserve the rights of absent class members in a state that has not yet recognized cross-jurisdictional tolling is to simply file a place-holder class action in the state and have it stayed pending resolution of the out-of-state action. Whether that works, however, is an open question. In Stutz v. Minnesota Mining Manufacturing Co., then-Chief Judge of the Southern District of Indiana, Sarah Evans Barker, ruled that American Pipe tolling only applies once class certification has been denied, which meant a case filed before such a ruling was not subject to tolling; the Plaintiff had to continue to wait until class certification was in fact denied. The Federal Circuit Courts have split on the issue. The First and Sixth Circuits have ruled the same as Judge Barker. The Second, Ninth, and Tenth Circuits have rejected that view and held that American Pipe doctrine is applicable to putative class members who file individual suits prior to resolution of class certification question.

As you can tell, clarity is sorely needed on this issue. Moreover, the fact that scant few courts have addressed the issue has proven a catalyst for some courts, such as the District of Kansas, to be presume that states who have not addressed cross-jurisdictional tolling would not adopt it: “The Court further notes that only a couple of states appear to have adopted cross-jurisdictional tolling, and the Court is not persuaded that Indiana would necessarily follow such a small minority.” The need for more states to address the issue is what makes the catalyst for today’s discussion important. That catalyst is the New York Court of Appeals’ ruling in Chavez v. Occidental Chemical Corp.

Chavez presented to New York’s highest court by way of certified question from the Second Circuit. The specific question was “Does New York law recognize cross-jurisdictional class action tolling . . . ?” And the New York Court of Appeals answered in the affirmative. Importantly, the court began its analysis by looking at American Pipe and the purpose of tolling is to avoid “frustrat[ing] the principal function of a class suit, because then the sole means by which members of the class could assure their participation in the judgment if notice of the class suit did not reach them until after the running of the limitation period would be to file earlier individual motions to join or intervene as parties precisely the multiplicity of activity which Rule 23 was designed to avoid.” In making a ruling under New York’s class-action procedures, the court recognized that the purpose of New York’s procedures are the same as federal procedures:

Both rule 23 and [New York’s] article 9 were intended to permit the named plaintiffs in a putative class action to act as placeholders, fully representing absent class members who have the same claims. Additionally, rule 23 and article 9 were designed to avoid wasteful and duplicative litigation by eliminating the need” during the pendency of the class action” for putative class members to initiate individual claims to protect their rights, while simultaneously providing notice to defendants of the claims not only of the named plaintiffs, but also of potential absent class members who could advance those same claims. It would contravene article 9 to hold that, if class action status is denied or the action otherwise terminated, putative class members are treated as if no action were ever brought. Such a rule would promote putative class members to initiate parallel individual claims in New York and other jurisdictions nearing expiration of the statute of limitations in order to protect against the risk of a subsequent denial of class certification or other non-merits termination” the very result article 9 was created to avoid. For that category of putative class members, the representative role of named plaintiffs would be illusory until class certification was granted. Thus, in recognizing cross-jurisdictional tolling under New York law, and answering the first certified question in the affirmative, we give effect to the legislative policy embodied in article 9; indeed, as noted, a contrary holding would undermine the detailed class action statutory scheme crafted by the legislature.

Because the court based its ruling on the underlying logic of American Pipe and not just on New York specific procedure, the reasoning of Chavez may well help guide future federal courts tasked with determining what state courts in jurisdictions that have also followed American Pipe, like Indiana, would do. Chavez provides sound logic and reasoning for why cross-jurisdictional tolling should be as widely recognized as American Pipe tolling.

Ultimately, I expect Chavez will be viewed as a major step in shifting the perception that acceptance of cross-jurisdictional tolling should be the exception rather than the rule.

Join us again next time for further discussion of developments in the law.

Sources

• American Pipe & Construction Co. v. Utah, 414 U.S. 538, 94 S. Ct. 756, 38 L. Ed. 2d 713 (1974) (Stewart, J.).
• Crown, Cork & Seal Co. v. Parker, 462 U.S. 345, 103 S. Ct. 2392, 76 L. Ed. 2d 628 (1983) (Blackmun, J.).
• Santiago v. Fischer, No. 09-CV-1383 (MKB) (ST), 2017 U.S. Dist. LEXIS 160371, 2017 WL 4349378 (E.D.N.Y. Sep. 29, 2017) (Brodie, J.).
• Ling v. Webb, 834 N.E.2d 1137 (Ind. Ct. App. 2005) (Bailey, J.).
• Webber v. Butner, 923 F.3d 479, 482 (7th Cir. 2019) (Hamilton, J.) (“We must apply Indiana law by doing our best to predict how the Indiana Supreme Court would decide about the relevance of this evidence.”).
• In re Fosamax Prods. Liab. Litig., 694 F. Supp. 2d 253, 258 (S.D.N.Y. 2010) (Keenan, J.) (“Only a small fraction of states have addressed the cross-jurisdictional tolling issue, though, and there is no clear consensus among them.”).
• In re Vioxx Prods. Liab. Litig., No. 1657, 2007 U.S. Dist. LEXIS 83710, 2007 WL 3334339 (E.D. La. Nov. 8, 2007).
• In re Urethane Antitrust Litig., 663 F. Supp. 2d 1067, 1082-83 (D. Kan. 2009).
• Huber v. Taylor, 519 F. Supp. 2d 542, 572-73 (W.D. Pa. 2007) (Schwab, J.), rev’d on other grounds, 532 F.3d 237 (3d Cir. 2008) (Stafford, J., sitting by designation).
• Stutz v. Minnesota Mining Mfg. Co., 947 F. Supp. 399 (S.D. Ind. 1996) (Barker, C.J.).
• Glater v. Eli Lilly & Co., 712 F.2d 735 (1st Cir. 1983) (Bownes, J.).
• Wyser-Pratte Mgmt. Co. v. Telxon Corp., 413 F.3d 553 (6th Cir. 2005) (Guy, J.).
• In re WorldCom Sec. Litig., 496 F.3d 245 (2d Cir. 2007) (Leval, J.).
• In re Hanford Nuclear Reservation Litig., 534 F.3d 986 (9th Cir. 2008) (Schroeder, J.).
• State Farm Mut. Auto. Ins. Co. v. Boellstorff, 540 F.3d 1223 (10th Cir. 2008) (Ebel, J.).
• Chavez v. Occidental Chem. Corp., 35 N.Y.3d 492 (N.Y. 2020) (Stein, J.).
• Chavez v. Occidental Chem. Corp., 933 F.3d 186 (2d Cir. 2019) (Sack, J.).
• Colin E. Flora, Seventh Circuit Addresses Expanding Class Claims in Amended Complaint, Hoosier Litig. Blog (Sep. 7, 2018).
• Colin E. Flora, Saving a Claim After Dismissal: Indiana’s Journey’s Account Statute, Hoosier Litig. Blog (Apr. 18, 2015).
• Colin E. Flora, How Does a Class Action Case Work?, Hoosier Litig. Blog (July 6, 2012).
• Tanya Pierce, Improving Predictability and Consistency in Class Action Tolling, 23 Geo. Mason L. Rev. 339, 369-70 (2016).
• Colin E. Flora, Federal Diversity Jurisdiction and the “Gaping Hole Problem”?, Hoosier Litig. Blog (Jan. 25, 2013).
• David Borber, Cross-Jurisdictional Tolling: When and Whether a State Court Should Toll Its Statute of Limitations Based on the Filing of a Class Action in Another Jurisdiction, 32 Seton Hall L. Rev. 617, 618 n.4 (2003) (quoting Primavera Familienstifung v. Askins, 130 F. Supp. 2d 450, 515 (S.D.N.Y. 2001)).

*Disclaimer: The author is licensed to practice in the state of Indiana. The information contained above is provided for informational purposes only and should not be construed as legal advice on any subject matter. Laws vary by state and region. Furthermore, the law is constantly changing. Thus, the information above may no longer be accurate at this time. No reader of this content, clients or otherwise, should act or refrain from acting on the basis of any content included herein without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue.