Supreme Court Says Plaintiffs Can't Stack Class Actions

The U.S. Supreme Court ruled on June 11 that plaintiffs can't bring successive class-action lawsuits once the relevant statute of limitations has expired. This means that employees will have to litigate their claims as individuals if a court denies class certification and there's no time left under the statute to file a new claim.

Although China Agritech Inc. v. Resh was a securities case, the court's decision will have an impact on all class actions, said Michelle Grant, an attorney with Dorsey & Whitney in Minneapolis.

The ruling is good news for employers. Class actions can cost employers millions, particularly when it comes to state-law wage and hour claims.

Employers aren't as likely now to face "stacked" class actions, explained Kyle Wallace, an attorney with Alston & Bird in Atlanta. Class actions are incredibly expensive to defend, and employers want finality when the statute of limitations has run out, he noted.

Under existing Supreme Court precedent, members of a proposed class have an opportunity to bring individual claims if a court declines to certify, or approve, the class. This is because the clock stops ticking―it tolls―on the statute of limitations for the individual's claim while the class action is pending.  

But the high court clarified that its prior ruling "does not permit the maintenance of a follow-on class action past expiration of the statute of limitations."

Class-Action Procedures

There are a lot of steps involved in class-action litigation. Initially, the lawsuit may be called a putative class action, meaning that the court hasn't decided whether the plaintiffs can proceed as a class, or if it is more appropriate for the claims to be heard individually.

The named plaintiffs—the ones who brought the action on behalf of the class—have to show that numerous class members all suffered a similar injury because of the defendant's alleged wrongdoing.

For example, three workers might file a lawsuit claiming that their former employer failed to pay them overtime wages in accordance with state law. Those three workers would be the named, or lead, plaintiffs in the case. They may assert that the employer had a companywide practice of requiring employees to work off-the-clock time at the end of their shifts. If the plaintiffs seek to represent all other similarly situated employees in a class action, those other employees would be the unnamed class members.

[SHRM members-only toolkit: Determining Overtime Eligibility in the United States]

Once a class is certified, the named plaintiffs need to take reasonable steps to identify and notify the unnamed class members about the lawsuit, as a judgment or settlement in the case would apply to them.

The unnamed plaintiffs can choose to opt out of a lawsuit and either bring their own action or elect not to sue at all. If they opt out, they are not legally bound by a judgment or settlement in the case and would not receive any portion of a monetary award.

Employers should note that opt-in or collective actions under the Fair Labor Standards Act work a little differently than class actions do under Rule 23 of the Federal Rules of Civil Procedure.

The Ruling

If a court doesn't certify the class action, unnamed members can intervene in the existing case and become a named plaintiff—the suit just wouldn't be a class action and therefore wouldn't apply to anyone who is not a named party. They may also elect to file separate individual lawsuits.

Under Supreme Court precedent, the unnamed members of the proposed class don't have to worry about the limitations period running out while they are waiting to see if the class will be certified, Wallace said. "If you are a member of the class, you are going to get tolling."

Without tolling, potential class members would have to file protective motions to intervene in the event that a class was later found unsuitable, or they would have to file separate actions, which would result in "a needless multiplicity of actions" filed by class members preserving their individual claims, the high court reasoned.

But there was disagreement among the federal appeals courts as to whether the statutory period for filing additional putative class claims was also tolled, Grant said. 

In China Agritech, the Supreme Court said it was not.  Neither of the court's prior rulings on individual actions "so much as hints that tolling extends to otherwise time-barred class claims," Justice Ruth Bader Ginsburg wrote. A plaintiff who waits out the statute of limitations can't "piggyback" on an earlier, timely filed class action, she added. "The 'efficiency and economy of litigation' that support tolling of individual claims ... do not support maintenance of untimely successive class actions."