China Agritech, Inc. v. Resh

Background

A group of investors sued China Agritech, alleging fraud that caused the company’s stock to fall. Two earlier class actions were filed in 2011 and 2012; notices were published under the Private Securities Litigation Reform Act and class certification was denied in both cases. The present suit was filed in 2014 as a new class action after the statute of limitations had run. The district court dismissed it as untimely; the Ninth Circuit allowed it, and the Supreme Court took the case for review.

Reasoning

The Court asked whether American Pipe’s tolling of individual claims also allows a later class action filed after certification is denied and the limitations period expires. The majority held that tolling applies to individual suits but does not permit successive class actions filed beyond the statute of limitations. The Court relied on Rule 23’s preference for early certification, the PSLRA lead-plaintiff notice and selection process, and concerns that allowing late class filings would enable endless tolling and inefficiency. The Supreme Court reversed the Ninth Circuit.

Real world impact

This ruling means potential class representatives must file class claims early or promptly bring individual suits; they cannot revive a claim later by starting a new class action after the time limit. In PSLRA-governed securities cases, the decision gives force to the statute’s notice and lead-plaintiff procedures that centralize candidates early. The decision may reduce late, duplicative class filings but will increase pressure to file fast and to participate in early lead-plaintiff contests.

Dissents or concurrances

Justice Sotomayor concurred in the judgment but would limit the rule to cases governed by the PSLRA, warning that the Court should not adopt a broad bar on tolling successive class suits outside that statute and suggesting narrower equitable exceptions in appropriate cases.