Class Actions. Clemens v. DaimlerChrysler The Ninth Circuit Addresses A New Twist In The Law Of Cross-Jurisdictional Tolling

Transcription

1 MEALEY S LITIGATION REPORT Class Actions Clemens v. DaimlerChrysler The Ninth Circuit Addresses A New Twist In The Law Of Cross-Jurisdictional Tolling by John P. Phillips and Sean D. Unger Paul, Hastings, Janofsky & Walker LLP San Francisco, California A commentary article reprinted from the August 7, 2008 issue of Mealey s Litigation Report: Class Actions

2 MEALEY S LITIGATION REPORT: Class Actions Vol. 8, #11 August 7, 2008 Commentary Clemens v. DaimlerChrysler The Ninth Circuit Addresses A New Twist In The Law Of Cross-Jurisdictional Tolling By John P. Phillips and Sean D. Unger [Editor s Note: John P. Phillips is a partner at Paul, Hastings, Janofsky & Walker LLP in San Francisco and is cochair of the litigation department s Product Liability and Toxic Tort Group. Sean D. Unger is an associate in the litigation department in the San Francisco office. Replies to this commentary are welcome.] Since its recognition thirty years ago, the class-action tolling doctrine has been contentious and highly debated. At its core, the doctrine is easy to state: The filing of a class-action tolls the statute of limitations for all unnamed class members until such time as either certification is denied (expressly or implicitly), the original case is dismissed, or the rights of the unnamed class members are no longer pursued whichever comes first. In operation, however, the doctrine is complicated and raises numerous issues, triggered, in certain instances, by attempts to stack class actions (adding two or more putative class actions together to extend the statute of limitations indefinitely) or to file successive class actions (where an unnamed class member relies on tolling but subsequently files a class action of his own). The majority of courts have rejected these strategies. 1 But a new question has emerged recently: Does the class-action tolling doctrine apply across jurisdictions? Does, for example, the filing of a nationwide class action filed in federal court in Maine toll the statute of limitations for unnamed class members in state court in Alaska? The Ninth Circuit tackled this important question and answered: No. In doing so, the Court in Clemens v. DaimlerChrysler Corporation 2 joined a number of other recent courts that have rejected class-action tolling in the cross-jurisdictional setting 3 and along the way provided some helpful guideposts for clients and courts faced with cross-jurisdictional tolling questions. In Clemens, a California action, the named plaintiff brought a putative class action against Daimler- Chrysler Corporation alleging breaches of express and implied warranties stemming from the sale of Dodge Neon cars from 1995 to The district court below granted summary judgment on statuteof-limitations grounds. On appeal, Clemens argued that the district court erred because a previously filed nationwide class action in Illinois tolled the statute of limitations on his claims. The Ninth Circuit rejected the argument, concluding that California would not embrace cross-jurisdictional tolling to permit a class action filed in a non-california forum to toll the statute of limitations under California law. The Court outlined an analytical framework that every class action litigator should consider when faced with efforts to apply the doctrine. First, the Ninth Circuit decided the cross-jurisdictional tolling question as a matter of state law, mirroring the law of the underlying claims. 4 This is important. Cross-jurisdictional tolling raises two imbedded class-action tolling questions: (1) will class-action tolling apply across forums (i.e., federal court to state court), and (2) will class-action tolling apply across claims (i.e., where the first action raises 1

3 Vol. 8, #11 August 7, 2008 MEALEY S LITIGATION REPORT: Class Actions claims under law A but the second action raises claims under law B)? 5 Both may need to be satisfied, but the law governing the questions comes from the law governing the suit. In diversity cases, the Erie analysis compels the application of state, not federal, tolling law. 6 If the underlying claim is federal, federal tolling law will apply. 7 Second, the Ninth Circuit noted that several federal courts have declined to import the doctrine [of cross-jurisdictional tolling] into state law where it did not previously exist. 8 The Court s approach was consistent with other federal courts faced with an open question of state class-action tolling law. 9 The Clemens holding suggests a default presumption: If the underlying law is state law, and the issue of cross-jurisdictional tolling has not been fully embraced by the State at issue, a federal court should not embrace cross-jurisdictional tolling onbehalf of the State. There are sound policy grounds for the presumption. States that have rejected cross-jurisdictional tolling have done so in part on the desire to control their own law and their own court systems. 10 A default rule of imposition would run afoul of federalism and a State s right to create its own law. A default rule of rejection permits the ultimate decision on cross-jurisdictional tolling to start and stop with the State and respects the right of state courts to set their own procedural rules. Third, the Ninth Circuit held that [t]he rule of American Pipe which allows tolling within the federal court system in federal question class actions does not mandate cross-jurisdictional tolling as a matter of state procedure. 11 The Court s acknowledgment that tolling is a question of procedure is itself instructive of where to look within state law to determine if that State has or would adopt cross-jurisdictional tolling. The genesis of class-action tolling in the federal courts, American Pipe & Construction Co. v. Utah, held that class-action tolling for federal claims was a function of class-action procedure under Federal Rule of Civil Procedure The rule derives from procedural and judicial-economy concerns. Those state courts that follow American Pipe often do so because the State s class-action process is analogous to Rule Thus, by parallel reasoning, States that embrace Federal Rule 23 authority as their own will be more apt to follow the growing federal-court rejection of cross-jurisdictional tolling. Combined, the Ninth Circuit s analysis in Clemens provides helpful instructions to litigants faced with cross-jurisdictional tolling questions. The analysis confirms that cross-jurisdictional tolling is a creature of the underlying substantive law, but, is a question of procedure within that law. The analysis similarly confirms the default presumption, at least in federal courts sitting in diversity, that the underlying state law would not embrace cross-jurisdictional tolling unless the State at issue had made its embrace of the doctrine plain. Finally, the Ninth Circuit s outcome in Clemens mirrors the emerging trend across the Country rejecting cross-jurisdictional tolling. Cross-jurisdictional tolling, like all questions in classaction tolling, is not simple. But, the Ninth Circuit s recent opinion in Clemens provides some important guideposts about how to deal with the question a question that should always be considered when initially assessing a class action against parties who have already been sued on similar theories or in related class actions around the country. Endnotes 1. See, e.g., Basch v. Ground Round, Inc., 139 F.3d 6, 11 (1st Cir. 1998), cert. denied, 525 U.S. 870 (1998) ( Plaintiffs may not stack one class action on top of another and continue to toll the statute of limitations indefinitely. ); Robbin v. Fluor Corp., 835 F.2d 213, 214 (9th Cir. 1987) (rejecting successive class actions where tolling is necessary to save a claim). 2. Clemens v. DaimlerChrysler Corp., --- F.3d ---, 2008 WL (9th Cir. July 24, 2008). 3. See, e.g., One Star v. Sisters of St. Francis, Denver, Colorado, --- N.W. 2d ---; 2008 WL , *10 (S.D. June 25, 2008) ( Because Plaintiffs have failed to cite any authority supporting class action tolling in cases involving different defendants, different claims, in different jurisdictions, this Court declines to adopt Plaintiff s theory of cross-jurisdictional tolling during the Zephier class action litigation. ); Sacred Heart Health Sys., Inc. v. Humana Military Healthcare Serv., Inc., 2008 WL , *3 n.9 (N.D. Fla. June 9, 2008) ( Cases involving cross-jurisdictional tolling provide less jus- 2

4 MEALEY S LITIGATION REPORT: Class Actions Vol. 8, #11 August 7, 2008 tification for tolling because the second jurisdiction likely has little interest in furthering the efficiency and economy of the class action procedures of another jurisdiction, whether those of the federal courts or those of another state[.] ) (quoting Wade v. Danek Med., Inc., 182 F.3d 281, 287 (4th Cir. 1999)); Champion v. Homa, 2008 WL , *11 (M.D. Ala. March 31, 2008) ( Another significant limitation on the American Pipe legal tolling doctrine is its inapplicability in the cross-jurisdictional context. ); In re Vioxx Products Liability Litig., 522 F. Supp. 2d 799, 811 (E.D. La. 2007) (rejecting cross-jurisdictional tolling). 4. Clemens, 2008 WL at *5. 5. See, e.g., In re Copper Antitrust Litig., 436 F.3d 782, (7th Cir. 2006) ( The plaintiffs argue with respect to the Heliotrope California class action that membership in the Heliotrope class should not only toll the statute of limitations with respect to individual state antitrust claims but also the federal statute of limitations governing claims under the Clayton Act. Not only is there no suggestion in American Pipe [& Constr. Co. v. Utah, 414 U.S. 538 (1974)] or in Crown, Cork & Seal [Co. v. Parker, 462 U.S. 345 (1983)] that these decisions construing Federal Rule of Civil Procedure 23 have any direct application to parallel state procedures, but the policies underlying American Pipe and like precedents simply do not apply in the crossjurisdictional context. ); Portwood v. Ford Motor Co., 701 N.E. 2d 1102, 1104 (Ill. 1998) ( [B]ecause state courts have no control over the work of the federal judiciary, we believe it would be unwise to adopt a policy basing the length of Illinois limitations periods on the federal courts disposition of suits seeking class certification. ); cf. Vaught v. Showa Denko, K.K., 107 F.3d 1137, 1147 (5th Cir.), cert. denied 522 U.S. 817 (1997) ( [C]onsistent with our understanding of this Texas tolling rule, it is unclear, whether under this rule a federal class action filed in Texas or in any other State would ever toll a Texas statute of limitations, regardless of the type of claims raised. ). 6. See, e.g., Wade, 182 F.3d at 290 (concluding state law applies). While most States reject cross-jurisdictional tolling, there are a few exceptions and those outliers will carry through to federal courts sitting in diversity. See, e.g., In re Enron Corp. Sec. Litig., 465 F. Supp. 2d 687, 722 (S.D. Tex. 2006) ( In contrast to Texas, Ohio has recognized cross-jurisdictional tolling by a federal class action of statute of limitations for Ohio state-law claims. ). 7. See, e.g., In re Copper, 436 F.3d at Clemens, 2008 WL at *5. 9. See, e.g., In re Vioxx, 522 F. Supp. 2d at 811 ( Absent clear guidance, the Court will not expand Puerto Rico s class action tolling doctrine. ). 10. See, e.g., Maestas v. Sofamor Danek Group, Inc., 33 S.W. 3d 805, 809 (Ten. 2000) ( [T]he practical effect of our adoption of cross-jurisdictional tolling would be to... grant federal courts the power to decide when Tennessee s statute of limitations begins to run. Such an outcome is contrary to our legislature s power to adopt statutes of limitations... and would arguably offend the doctrines of federalism and dual sovereignty. ). 11. Clemens, 2008 WL at * American Pipe, 414 U.S. at 554 (explaining that tolling doctrine is part of federal class action procedure ); see also Champion v. Homa, 2008 WL at*10 ( This doctrine is sometimes referred to as legal tolling or American Pipe tolling, and it is predicated on a different legal justification than equitable tolling. ). 13. See, e.g., First Baptist Church of Citronelle v. Citronelle- Mobile Gathering, Inc., 409 So.2d 727, 729 (Ala. 1982) (embracing American Pipe in part because Rule 23 of the Alabama Rules of Civil Procedure is identical to Rule 23 of the Federal Rules of Civil Procedure. ). n 3

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