Case of the Day: China Agritech, Inc. v. Resh, 138 S. Ct. 1800 (2018)

Summary:

The case concerns a class action shareholder litigation against China Agritech, alleging securities fraud. Under the Securities Exchange Act of 1934, the statute of limitations for securities fraud is two years upon discovery of the fact constituting the violation. The statute of limitations began to run when the first class action against China Agritech was filed in 2011. In the following year, the district court denied class certification. Shortly thereafter, a new set of plaintiffs filed another round of class action suit, raising new evidence. The court denied the class certification once again. The plaintiffs in this case then filed a third round of class action in 2014, arguing the statute of limitation had been tolled while the court was considering the class certification. Noting the circuit split on this issue, the Supreme Court granted certiorari.

The Supreme Court unanimously ruled the successive class action suits do not receive the benefit of the tolling provided by Am. Pipe & Constr. Co. v. Utah, 414 U.S. 538 (1974). Justice Ruth Bader Ginsburg's opinion held that, given the "preference for preclusion of untimely successive class actions" appearing on the Federal Rules of Civil Procedure and the Private Securities Litigation Reform Act, the statute of limitations cannot be tolled practically forever as long as the plaintiffs try.

Takeaway:

Eminently sensible result that overruled the Ninth Circuit position, which was bonkers. The fact that the company at issue was a Chinese company can also serve as a broader commentary on where the U.S. economy is today.