S.D.Ind.: Failed class certification attempt tolls time limit for new class action

An Indiana federal district court held that a statute of limitations is tolled for both class and individual claims by a previous, unsuccessful class certification attempt.

In a case concerning failure to give notice of COBRA insurance benefits, court reasoned that without tolling, a misconceived suit with inappropriate named plaintiffs could defeat the legitimate rights of class members, and class members would have an incentive to file multiple suits. The district court largely sided with the Third Circuit and disagreed with several other circuits. Gomez v. St. Vincent Health Inc., 2008 WL 5247281 (S.D.Ind. Dec. 16, 2008) (No. 1:08-cv-0153).

 

      The Supreme Court has held that an unsuccessful class certification attempt tolls the time limit for individual claims. Crown, Cork & Seal Co. v. Parker, 462 U.S. 345 (1983). The Second Circuit declined to apply this holding to subsequent class claims, and other circuits have followed suit. Korwek v. Hunt, 827 F.2d 874 (2d Cir.1987); Basch v. Ground Round, Inc., 139 F.3d 6 (1st Cir.1998); Griffin v. Singletary, 17 F.3d 356 (11th Cir.1994); Andrews v. Orr, 851 F.2d 146, 149 (6th Cir.1988). These courts reasoned that applying tolling to class claims would unfairly allow class members to evade the statute of limitations by filing successive suits. More recently, the Third Circuit held that tolling does apply to class claims, “so long as the denial of certification in the earlier action was based solely on Rule 23 deficiencies of the putative representative,” rather than deficiencies in the class itself. Yang v. Odom, 392 F.3d 97 (3d Cir. 2004). The remaining circuits do not appear to have squarely taken sides. Bridges v. Dept. of Maryland State Police, 441 F.3d 197 (4th Cir. 2006) (citing Korwek favorably but deciding on other grounds); Great Plains Trust Co. v. Union Pacific R. Co., 492 F.3d 986 (8th Cir. 2007) (discussing Yang favorably but deciding on other grounds); Employers-Teamsters Local Nos. 175 & 505 Pension Trust Fund v. Anchor Capital Advisors, 498 F.3d 920 (9th Cir. 2007) (recognizing mixed circuit precedent); Salazar-Calderon v. Presidio Valley Farmers Ass'n, 765 F.2d 1334 (5th Cir.1985) (rejecting tolling following two unsuccessful class attempts).

 

          In this case, putative class plaintiffs allege that defendant failed to provide notice of COBRA benefits as required under the Employee Retirement Income Security Act (ERISA). A past certification attempt by different employees had failed, on the ground that the named plaintiffs were not adequate representatives. BrownPfifer v. St. Vincent Health, Inc., 2007 WL 2757264 (S.D.Ind. 2007). Defendant argued that the second putative class action was time-barred. The court disagreed, reasoning that if tolling did not apply in this case, “the result would be that [the] decision [in the prior case] to protect the class would instead have blocked any chance of meaningful recovery for possibly meritorious claims.” The court noted that under Crown, “it is completely proper for such a person to sit on the sidelines and allow a representative to press his claim.” And in a case like this, the court observed, the modest value of the class members’ claims means they are only viable as a class action.

         

          The court said that the “nightmare scenarios of endless litigation” cited by courts following Korwek were not likely, since the doctrine of issue preclusion and the (persuasive or binding) force of precedent will defeat many cases. More likely in the court’s view was a “multiplicity of cases” by cautious class members if they cannot rely on tolling of their claims.

 

          Though generally adopting the Third Circuit’s approach in Yang, the district court viewed the Yang opinion as “a little too narrow,” inasmuch as Yang called for tolling only where the previous dismissal was based “solely” on defects with the named plaintiffs rather than the class itself. Because the initial class may be rejected “based on a mixture of reasons,” the Third Circuit’s test might still give class members an incentive to file their own suits rather than wait and see. The district court thought it better to apply tolling to all class claims, and let issue preclusion and precedent sort out meritless repeat attempts. Indeed, the court suggested that one or the other of those factors might doom the present suit, but nevertheless held that it was improper to dismiss the suit as time-barred.

 

          Although unpublished, the district court’s opinion looks to have been written with an eye to persuading the courts of appeals; look for this issue to be raised in circuits that have not yet taken a firm position.