In its seminal 1974 American Pipe opinion, the Supreme Court held that the commencement of a class action tolls the applicable statutes of limitation as to all putative class members who would have been parties had the class been certified. Since then, courts have repeatedly applied American Pipe to toll statutes of limitation but disagreed as to whether the doctrine is based on legal principals under Rule 23 or the equitable power of the courts. The Eleventh Circuit recently confronted the issue of whether American Pipe tolling also applies to statutes of repose.
In March 2014, plaintiffs filed a putative class action in the Middle District of Florida against JPMorgan for securities fraud arising out of the Bernie Madoff Ponzi scheme scandal. Madoff was arrested in December 2008. The statute of repose under the Securities Exchange Act is five years. Plaintiffs contended that the pendency of a consolidated group of class actions in the Southern District of New York brought by Madoff investors against JPMorgan (Shapiro v. JPMorgan) tolled the repose period under American Pipe until the case settled in January 2014. Plaintiffs relied on a Tenth Circuit case in which the court extended American Pipe tolling to a statute of repose, finding that the statute was “a rule of legal tolling derived from Rule 23.” Joseph v. Wiles, 223 F. 3d 1155 (10th Cir. 2000). The district court disagreed and dismissed plaintiffs’ federal claims with prejudice as time barred.
On appeal, the Eleventh Circuit acknowledged the ongoing controversy over whether American Pipe was “legal” or “equitable” tolling but noted its own precedent – as well as that of subsequent Supreme Court cases – had clearly described it as equitable. The court then analyzed the different purposes and objectives of statutes of limitation compared to statutes of repose and concluded that statutes of repose are not subject to equitable tolling under the Rules Enabling Act. Disagreeing with the Tenth Circuit’s ruling in Joseph and joining the Second and Sixth Circuits, the court found that American Pipe tolling applies only to statutes of limitation and affirmed the district court’s dismissal.