Challenges to Class Certification Based Upon Statute-of-Limitations Issues

  The Third Circuit on September 22nd, issued yet another important class action decision—a hundred-page opinion that is required reading for all involved in class action litigation.  In re: Community Bank of Northern Virginia and Guarantee National Bank of Tallahassee Second Mortgage Loan Litigation, 2010 U.S. App. LEXIS 19708 (3d Cir. Sept. 22, 2010), available here (http://www.ca3.uscourts.gov/opinarch/083621p.pdf). 

Judge Ambro authored the opinion.  This post only focuses on a portion of the opinion that addresses the impact of statute-of-limitations issues on class certification.  As Judge Ambro’s opinion aptly captures the law of the Third Circuit, I quote from his opinion extensively below:

Situations abound where statute-of-limitations issues overlap with certain of the Rule 23 requirements. For example, defendants may contend that statute-of-limitations defenses preclude a finding of typicality under Rule 23(a), either because the named plaintiffs’ claims are untimely (and thus not typical of the class), see, e.g., Franze v. Equitable Assurance, 296 F.3d 1250, 1254 (11th Cir. 2002), or because the proposed class includes numerous class members with untimely claims (rendering the named plaintiffs’ timely claims atypical), see, e.g., Doe v. Chao, 306 F.3d 170, 184 (4th Cir. 2002). Relatedly, defendants may oppose class certification on the ground that class members with untimely claims must rely on equitable tolling to save their claims, which presents an individual question of law and fact that could predominate over common questions under Rule 23(b)(3), see, e.g., In re Linerboard Antitrust Litig., 305 F.3d 145, 160–62 (3d Cir. 2002), or challenge the predominance requirement in light of the “presence of idiosyncratic statute-of-limitations issues” among the laws of various states in a nationwide class action, see Waste Mgmt. Holdings, Inc. v. Mowbray, 208 F.3d 288, 295–96 (1st Cir. 2000).

Statute-of-limitations issues also touch the adequacy requirement. See, e.g., Goodman v. Lukens Steel Co., 777 F.2d 113, 124 (3d Cir. 1985) (named plaintiffs were inadequate representatives in class action challenging discriminatory practices in the initial assignment of newly hired employees, because “[a]ll of the named plaintiffs . . . were originally hired outside the [statute-of-] limitations period, and therefore, none ha[d] a viable complaint about discrimination in initial assignment”). Indeed, the merits of a statute-of-limitations defense to the named plaintiffs’ claims may be relevant to evaluating their adequacy as class representatives in the same way any type of defense may be relevant to that inquiry, i.e., named plaintiffs may be inadequate representatives if their claims are extremely weak as compared to the rest of the class. As Judge Posner explained,

if when class certification is sought it is already apparent . . . that the class representative’s claim is extremely weak, this is an independent reason to doubt the adequacy of his representation. . . . One whose own claim is a loser from the start knows that he has nothing to gain from the victory of the class, and so he has little incentive to assist or cooperate in the litigation; the case is then a pure class action lawyer’s suit.

Robinson v. Sheriff of Cook County, 167 F.3d 1155, 1157 (7th Cir. 1999) (internal citations omitted). Thus, to the extent the claims of the named plaintiffs—as compared with the rest of the class—are subject to fatal statute-of-limitations defenses, that inquiry may be relevant to whether they can adequately represent absent class members whose claims do not suffer from timeliness problems. Cf. Beck v. Maximus, Inc., 457 F.3d 291, 297 (3d Cir. 2006) (“the challenge presented by a defense unique to a class representative” is that “the representative’s interest might not be aligned with those of the class, and the representative might devote time and effort to the defense at the expense of issues that are common and controlling for the class”).

For more on this, click here for an article by Shannon P. Duffy for Law.com.

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