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Sixth Circuit Establishes New Precedent Sustaining Class-Action Claims Against Timeliness Defenses

April 16, 2013

The U.S. Court of Appeals for the Sixth Circuit on April 16, 2013, issued an important decision rejecting contentions that a telemarketing-fraud case was time barred. Victims of the telemarketing scheme argued that under the Supreme Court’s American Pipe & Construction Co. v. Utah, 94 S. Ct. 1477 (1974), decision, the filing of a prior class action complaint in March of 2002 operated to toll the limitations period on their federal claims, and that a federal statute, 28 U.S.C. §1367(d), tolled the limitations period on their state-law claims, permitting them to file follow-on class actions when the initial case terminated without obtaining class-wide relief.

The defendants insisted that a Sixth Circuit decision interpreting American Pipe permitted the filing of individual claims, but barred further litigation on behalf of a class. Defendants also argued that the court should hold, as a matter of first impression, that §1367(d) applies only to named parties’ claims and does not toll the time for claims of a class to be asserted. The Sixth Circuit flatly rejected both contentions in an opinion holding that American Pipe permits a follow-on class action if class certification was never definitively decided in the initial action, and that §1367(d) protects class members as well as named plaintiffs. 

The case demonstrates the plaintiffs’ lawyers’ perseverance.  In March of 2002, Robbins Geller attorneys filed a class action in the Southern District of California, asserting claims on behalf of consumers who, after calling 1-800 numbers to order products, had their credit cards and debit cards charged annually for membership service that they never agreed to. The California district court refused to consider a class certification motion, referring the class representative’s individual claims to arbitration. The firm’s lawyers proceeded to arbitration, obtaining a favorable ruling on behalf of the individual plaintiff, and then appealed on behalf of the class – persuading the Ninth Circuit in 2007 to vacate the district court’s order requiring individual arbitration in place of litigation on behalf of a class of consumers. See Sanford v. MemberWorks, Inc., 483 F.3d 956 (9th Cir. 2007).

When, on remand, the Southern California district court – without ruling on class certification – dismissed some federal claims, held that the named plaintiffs lacked standing to assert other federal claims, and refused to exercise supplemental jurisdiction over state-law claims, Robbins Geller lawyers acted swiftly to protect the class by filing additional actions in several states.

Those actions were consolidated before the United States District Court for the Northern District of Ohio, where defendants argued that the statute-of-limitations tolling principles did not permit the case to be litigated on behalf of a class. They acknowledged that the Supreme Court’s decision in American Pipe held that the filing of a class action suspends the running of the limitations period on class members’ individual claims, yet they insisted that American Pipe does not permit the filing of follow-on class actions, quoting a 1988 Sixth Circuit precedent to the effect “that the pendency of a previously filed class action does not toll the limitations period for additional class actions by putative members of the original asserted class.” Andrews v. Orr, 851 F.2d 146, 149 (6th Cir. 1988). They argued, moreover, that while 28 U.S.C. §1367(d) applies to individual litigants’ state-law claims, it cannot be used to benefit members of a class that was not certified. Rejecting both arguments, the district court certified the case for interlocutory appeal under 28 U.S.C. §1292(b).

The Sixth Circuit agreed with plaintiffs’ counsel that follow-on class actions may benefit from American Pipe tolling provided there was no definitive ruling against class certification in the original putative class action. Additionally, the court held §1367(d)’s provision tolling limitations periods for state-law claims over which a district court declines to exercise supplemental jurisdiction benefits not just the named parties, but also the members of the putative class that they sought to represent.

Recognizing the precedential significance of its April 16, 2013 ruling, the Sixth Circuit ordered the ruling published. The May 24, 2013 publication of the decision establishes it as a controlling precedent for future Sixth Circuit cases.

In re Vertrue Inc. Mktg. & Sales Practices Litig., 719 F.3d 474 (6th Cir. 2013).

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