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New York Court of Appeals Says “Yes” to Cross-Jurisdictional Tolling in Class Actions

Class actions are unique in that they generally bind all individuals who do not opt out of the class. As a result, putative class members who do not directly participate in any particular class action suit are still, in a sense, acting on their claims merely by relying on the class action to vindicate their rights. This raises the question of what effect a class action has on the tolling of the putative member’s claims, and whether an individual who wants to bring suit after the relevant statute of limitations has expired can claim that the statute was tolled simply because he or she was a putative class member. An added wrinkle develops when one considers that class actions often pull in state- or federal-law claims from outside the presiding court’s seat: does a class action filed in one jurisdiction toll the statute of limitations on a putative class member’s claims in a second jurisdiction, including claims pursued under the laws of that second jurisdiction?

The answer has long been settled under federal law. In American Pipe & Construction Co. v. Utah, the U.S. Supreme Court held that such cross-jurisdictional tolling applies to federal claims, 414 U.S. 538 (1974), and in Crown, Cork & Seal Co., Inc. v Parker, the court held that “all asserted members of the class” benefit from the tolling announced in American Pipe, 462 U.S. 345, 350 (1983). The Supreme Court reasoned that class actions are designed to efficiently consolidate claims, and requiring claimants to file individual actions or intervene in the class action to prevent the statute of limitations from running would “frustrate the principal function of a class suit.” Id. This doctrine—as used in federal law—has become known as “American Pipe tolling,” but its application to state-law claims remains unsettled.

On October 20, 2020, in Chavez v. Occidental Chemical Corp., the New York Court of Appeals, New York’s highest court, answered that question under New York law. It affirmed decades of lower-court case law holding that American Pipe tolling applies under New York law, and clarified that it applies to state-law claims asserted in putative class actions in New York State court (intra-jurisdictional tolling) as well as to claims asserted in putative class actions in other state and federal courts (cross-jurisdictional tolling). In so holding, the court articulated a bright-line rule that ends the tolling when a putative class action is dismissed or class certification is denied—for any reason. This decision will have important implications for plaintiffs, who are now on notice that a dismissal or denial of certification will immediately resume the clock on any New York–law claims they wish to assert. 

Key Takeaways

  • The statute of limitations for claims under New York law will be tolled during the pendency of any related putative class action filed in another U.S. jurisdiction. For this cross-jurisdictional tolling to apply, the putative class action does not need to involve claims under New York law, but must put the defendant on “fair notice” by involving the same substantive claims and subject matter.  
  • This cross-jurisdictional tolling will end upon the dismissal of the putative class action suit for any reason—including non-merits dismissals, such as a dismissal for forum non conveniens—or upon the denial of class certification.
  • As the dissent pointed out, even though class actions are intended to promote efficiency, this ruling may cause plaintiffs with New York law claims to file placeholder actions that may not ultimately be necessary. Such actions would be filed to avoid running the statute of limitations after an adverse—but not completely determinative—ruling in a class action in another jurisdiction.
  • Other states that have evaluated cross-jurisdictional tolling have reached varying results, with some holding that cross-jurisdictional tolling exists, but that the tolling only ends when there is a merits dismissal.

Background

In 1993, several individuals filed a nation-wide class action against Occidental Chemical Corporation in Texas state court, claiming that Occidental distributed dangerous chemicals to banana plantations in Latin America despite knowing that the chemicals caused serious health problems. The purported class action asserted state-law claims, primarily under Texas law. Occidental removed the case to the U.S. District Court for the Southern District of Texas under the Foreign Sovereign Immunities Act, because several Occidental subsidiaries were owned by Israel. Occidental then moved to dismiss for forum non conveniens, arguing that the claims should be heard in the courts of the plaintiffs’ respective home countries, including Costa Rica, Ecuador, and Panama. In 1995, the district court granted the motion and dismissed the claims, but allowed the plaintiffs to return to federal court if their home countries declined to exercise personal jurisdiction over Occidental.

Several foreign courts then declined to exercise jurisdiction over Occidental, and the plaintiffs renewed their suit before the federal district court in Texas. Because of an intervening Supreme Court decision clarifying the scope of the Foreign Sovereign Immunities Act, the district court concluded that it no longer had subject-matter jurisdiction, and so remanded the case to Texas state court. The Texas state court denied the plaintiffs’ motion for class certification and dismissed the suit in 2010. 

The plaintiffs tried again, this time filing individual suits in various federal courts, making similar allegations against Occidental, including for negligence, strict product liability, and breach of implied warranty. The cases were consolidated and transferred to the U.S. District Court for the Southern District of New York where Occidental moved for judgment on the pleadings, arguing that the claims were time-barred under New York law. The plaintiffs countered that the statute of limitations for their claims was tolled by the putative class action filed in Texas state court in 1993, and that this tolling continued until the final denial of class certification by the Texas state court in 2010. Occidental argued in turn that New York law does not recognize tolling from a class action filed in a different jurisdiction—so-called “cross-jurisdictional tolling”—and that even if such tolling was available, it ended in 1995, when the Texas district court dismissed the 1993 suit for forum non conveniens.

The district court ruled for the plaintiffs on both issues, finding that the case was timely filed and the statute of limitations had been tolled. Occidental appealed. The Second Circuit, in turn, certified two questions to the New York Court of Appeals: (1) does New York law recognize cross-jurisdictional class action tolling; and (2) can a non-merits dismissal of class certification terminate class action tolling, and if so, did the forum non conveniens order by the Texas District Court do so here?

The Decision by the New York Court of Appeals

The New York Court of Appeals (Stein, joined by DiFiore, Garcia and Feinman, JJ.) held that New York law recognizes cross-jurisdictional class action tolling, but that such tolling ends when there is a clear dismissal of a putative class action or a denial of class certification, whether on procedural or substantive grounds—such as here, when the Texas district court dismissed the 1993 suit for forum non conveniens.

In its analysis, the Court of Appeals pointed to the decision on the same issue by the U.S. Supreme Court in American Pipe, where the Court found that cross-jurisdictional tolling applies to claims under federal law. There, the Supreme Court noted that Federal Rule of Civil Procedure 23, which governs class actions, is designed so that the named plaintiffs represent the fully absent class members and their claims. A class action thus puts the defendants on notice of the claims against them, including claims by unnamed class members. This avoids the risk of defendants being surprised by claims from the distant past, a key policy aim of statutes of limitations. A contrary rule, the American Pipe Court recognized, would require putative class members—potentially hundreds of thousands of people or entities—to file placeholder suits to ensure that their claims were timely. Such a requirement would undermine the efficiencies that Rule 23 seeks to achieve.

The Court of Appeals drew parallels between Rule 23 and Article 9 of the New York Civil Practice Law and Rules, which governs New York’s class action mechanism. The Court observed that the two regimes share the same purpose. For that reason, the New York Court of Appeals effectively adopted the U.S. Supreme Court’s reasoning in American Pipe in holding that American Pipe tolling applies to claims under New York law that are encompassed in a class action, wherever in the United States that class action may be brought. The Court limited the application of cross-jurisdictional tolling, however, to instances where a defendant receives fair notice of all claims that might arise under New York law—presumably through the class action process.[1] The New York Court of Appeals did not describe what it meant by “fair notice,” but the U.S. Supreme Court has interpreted this to include the commencement of a suit that involves the same “substantive claims” and “subject matter,” American Pipe, 414 U.S. at 555, meaning that the other action would not necessarily need to include claims specifically asserted under New York law.

The Court of Appeals then turned to the second question—whether the dismissal of the class action in 1995 ended this cross-jurisdictional tolling. The Court and the parties all agreed, in line with recent rulings of the U.S. Supreme Court, that tolling ends when “it is no longer objectively reasonable for absent class members to rely upon the putative class action to vindicate their rights.” But the parties disagreed on whether the dismissal in 1995 met this standard—that is, whether it was objectively reasonable to rely on the Texas class action after the Texas district court dismissed the action on forum non conveniens grounds, but retained jurisdiction in case the foreign courts would not take jurisdiction over Occidental. The Court of Appeals noted that it believed that this dismissal—even though it was not merits-related—was enough to put the plaintiffs on notice that they needed to act to preserve their rights. The Court of Appeals further reasoned that it is necessary to create a “bright-line” rule that puts plaintiffs and defendants on clear notice of whether a claim was tolled. To facilitate this goal, the Court held that tolling ends when “there is a clear dismissal of a putative class action, including a dismissal for forum non conveniens, or denial of class certification for any reason.” As applied to the case before it, this ruling likely extinguishes the plaintiffs’ claims by running the statute of limitations after the forum non conveniens dismissal in 1995.

Judge Rivera dissented in part, in an opinion joined by Judges Wilson and Fahey. The dissenting opinion agreed that cross-jurisdictional tolling is available but noted that the new rule created by the majority—while clear—would cause plaintiffs to file actions to preserve their individual claims in otherwise unnecessary situations. For example, the majority opinion could be read to require putative class members to file individual actions when the class action is dismissed without prejudice for insufficient pleading, meaning that the pleading deficiencies could still be cured and the class action preserved. The dissent pointed to the standard enunciated by the U.S. Supreme Court, which allows putative class members to rely on a class action to toll their claims so long as the class action can reasonably be “rel[ied] on . . . to protect their rights.” Crown, Cork & Seal Co., 462 U.S. at 350. Here, the dissent argued that the dismissal for forum non conveniensdid not clearly mark the end of the class action suit—as evidenced by its later continuance—and so would have permitted the statute of limitations to toll until the final dismissal in 2010.

Impact

The Court of Appeals’ affirmation of cross-jurisdictional tolling was not unexpected, but its specific ruling—a bright-line rule that ends tolling on any dismissal or denial of certification—has implications for putative class members with New York law claims. It is not uncommon for class actions in other jurisdictions to encompass state-law claims, particularly if they arise under a common factual nexus. For example, the U.S. District Court for the Northern District of Ohio recently attempted to bundle state-law claims with federal claims in a national opioid litigation. The Court of Appeals’ decision means that putative class members are on notice that they should move quickly to file their individual New York–law claims if their putative class action is dismissed or certification is denied.

The Court of Appeals’ decision also stakes out an important position on an issue that has divided state high courts. Delaware, Louisiana, and Hawaii, for example, have all concluded that cross-jurisdictional tolling is available under their own state laws, but disagree on when a non-merits dismissal ends that tolling. The Supreme Court of Delaware had held in a sister case under Delaware law that the tolling continues until the class action is “clearly, unambiguously, and finally denied”—and ruled that the 1993 suit tolled the statute of limitations until the Texas state court denied certification in 2010. Marquinez v. Dow Chem. Co., 183 A.3d 704 (Del. 2018). In contrast, the Supreme Court of Hawaii came to the opposite conclusion, holding that the dismissal for forum non conveniens in 1995 ended the tolling. Patrickson v. Dole Food Co., Inc., 368 P.3d 959 (2015), as corrected (Nov. 18, 2015). The New York Court of Appeals’ decision thus joined the Supreme Court of Hawaii in drawing a harsher line for plaintiffs—but is not specifically grounded in any particularities of New York law. Rather, the decision reflects an interpretation of the general principles underpinning class actions—an interpretation that differs from that of other state high courts and that may affect future evaluations in other states. Parties in class actions should therefore bear in mind that the law on cross-jurisdictional tolling for state-law claims differs by state, and should pay attention to that law in litigating the state-law claims after class action ends.

This ruling may have the somewhat paradoxical effect of decreasing litigation from some plaintiffs whose claims have expired under the relevant statute of limitations, but also increasing litigation from other plaintiffs (by requiring them to file “placeholder” suits to avoid the expiration of the statute of limitations while some class action proceedings are still ongoing in some matter in another jurisdiction). How the lower New York courts will handle these potential placeholder suits remains to be seen.

Finally, the Court declined to address whether cross-jurisdictional tolling applies to putative class actions in the courts of foreign countries. This is likely to be a source of future litigation, particularly as countries around the globe continue to develop their own class action regimes.


[1]  The Court also clarified that American Pipe tolling applies intra-jurisdictionally, a ruling that confirmed numerous decisions by New York’s intermediate appellate courts but which was not previously addressed by the Court of Appeals.