Unused and Probably Unusable

Class action tolling is a doctrine applicable when a complaint is filed by an individual plaintiff alleging class action status (that is, the complaint should apply to me, and to others similarly situated, in a manner I define thusly), but the court either denies certification of the class or grants it but later decertifies. At that point, individual absent class members might be out of luck as far as filing their own individual complaints, because deciding class certification often takes a court a while.

Worse, if they knew about this problem, the rational response would be for them to flood the court with individual lawsuits, despite the pendency of a proposed class action to which they would belong if it were certified.

It looks messy. Wasteful. Better to give them a shot to wait it out, and file only if it turns out to be necessary.

Thus, class action tolling.

The Effect of Tolling

A medical malpractice article misleadingly suggests (The Class Stops the Clock) that the effect of tolling is to "suspend" the running of the clock. Perhaps it is to be forgiven (and it's a really good article, most ways, detailing the origin of the doctrine in the 1973 Supreme Court case American Pipe v. Utah; see especially its nice discussion of the trap for the unwary in the majority rule that an absent class member who files her complaint before the class certification is decided does not benefit from tolling).

But the rule is not at all that time stops for purpose of the statute of limitations when the complaint is filed, and starts running again when certification is denied or the class is decertified.

No, Chardon v Fumero Soto (1983) establishes that a court must consult the substantive law's tolling provision, if there is one, and that under certain circumstances an entirely new statutory period may run. It depends if, as in American Pipe or Crown Cork & Seal v. Parker (1983) the statute indicates "suspend" (see section 5 of the Clayton Act for antitrust, for example) or if the statute, like the Puerto Rican savings provision in Chardon grants a new statutory period for the re-filing.

(A savings provision will allow a plaintiff, kicked out of court for a non-merits based reason [like jurisdiction, or the class action which included them failing on the basis of numerosity, typicality, or adequacy of representation] to refile within a certain length of time, despite the running of the statute of limitations between the time of filing and the dismissal of the claim.)

That is, one could be gravely incorrect if one assumed that the only possible result of application of tolling to an absent class member's individual claim would be that they would have the time they had remaining left in the statute of limitations when the complaint is filed "tacked on" to the moment of denial or decert.

Other reading

Evan previously blogged about Class Action Tolling at the Illinois Trial Practice Weblog.

Prof. Rhonda Wasserman of University of Pittsburgh School of Law has written about tolling in successive class actions, or what I believe is called the "anti-stacking" rule.

Norm (not McDonald; I like this one a lot better) Pattis complains in Class Action Reform about fee awards, which in his view are run amok.

Norm complains about unfettered greed, notes that the freedom of lawyers to contract is not supposed to be unlimited (they must be reasonable, goes the touchstone), and otherwise knocks class actioneers. Some of us, anyway.

"The savvy lawyer seeks a case involving small harm to a large number of people." Actually, a really savvy lawyer seeks a case with a LARGE harm to a large number of people, ideally with treble damages as well as attorney's fees provided by statute. If by savvy one means greedy, anyway. Assuming there's no competition for that same juicy prize.

In fact, some class action plaintiffs' lawyers probably are greedy. Unlike, say, some criminal defense or civil defense lawyers, I'm sure.

Norm complains about an 800k fee result in a $2.5 million class action involving prisoner strip searches. That works out to a roughly 33% fee, within the bounds of typical contingent fees in individual cases. Now, I would be willing to stipulate that on a $4.5 billion recovery, the correct measure of fees might well be lower than a third - that the pool (usually it's not only not just one lawyer, nor even one firm, but many firms) share from a slightly smaller portion of that gigantic whole. Say, a quarter, or even 20% - it depends.

But the fact that Norm has kept his fees low in 1988 actions doesn't prove that all contingent fees are outrageous. Plaintiffs lawyers working on contingency are taking a risk - the horrible, horrible risk that there won't be a recovery, despite the lawyer time, energy, work, expert fees, and blood, sweat, and tears invested. It's not just disappointing - the way a defense firm feels disappointed when its client, or often its client's insurance carrier winds up having to pay as part of a settlement or for a judgent - it means that the plaintiffs lawyers may lose. Lose big. It's a gamble, it's a risk, it means that you can't take frivolous cases, can't waste time on claims where there's no chance of a sufficient recovery to make it worth it.

There's a reason why class actions are allowed. If they weren't, or if a rule like Norm's proposed rule maxing out the lawyer's fee at "some reasonable muliple of the harm caused to a representative plaintiff," which would make it uneconomical to bring a claim on behalf of 10,000 people who all lost $500, then the Defendants of the world would have an incentive. A bad incentive.

Bad actors would be incentivized to calculate the likely recovery yield (what percentage of injured parties actually sue, what percentage of cases result in some recovery), the likely damage from other related factors (harm to reputation or stock price from being a bad actor), and then deliberately harm thousands of people at a low level. It would be an economically efficient transaction - and thus, practically required. Why, it might justify a shareholder lawsuit if you failed to screw the victims.

To sum up: I'm outraged, but Norm may be right about some outlying fees, but that doesn't mean his rule is sane, but some limitations are a good idea, but we have some in the form of judicial review and approval before accepting attorney's fees, but that doesn't stop Reformers (read: pro-defense lobbyists, all too often) from urging more "Improvement" of the law.