Clifford Chance

So far, this limitation mini-series has explored how limitation periods can be postponed, extended or interrupted in group claims in England and the Netherlands. This issue focuses on the United States.

I.  Introduction

Federal and state causes of action must generally be brought within a certain number of years of becoming known to the aggrieved party (or, to a reasonable person in those circumstances). The law in the United States thus prevents a legal claim from lasting forever. Statutes of limitation typically begin to run the day that the injury occurred or, in many cases, when the injury could have been discovered with reasonable effort. While there is no uniform statute of limitations in the United States, four to six year limitations are common. Legislatively and judicially imposed time limits prevent plaintiffs from unduly delaying and promote the efficient resolution of legal claims.

The applicable statute of limitations depends on the cause(s) of action and the jurisdiction where the case is filed. If the time specified by the statute of limitations runs out before a complaint is filed, recovery is placed at-risk. In most jurisdictions, including federal court, the case can still be filed, but it will be subject to dismissal if the defendant raises the statute of limitations as an affirmative defense in their initial response. An affirmative defense is a legal defense that, if proven, can defeat the claim regardless of whether the allegations in the complaint are true. Fortunately, there are several ways for plaintiffs to get around the statute of limitations issue. Some examples include:

• A plaintiff might not realize their injury or its cause until years later. The delayed-discovery rule can preserve such cases.
• A plaintiff may be able to use fraudulent concealment to extend the deadline, if the defendant concealed misconduct through false statements. However, like all fraud claims, fraudulent concealment must be plead with particularity.
• A plaintiff can sometimes use the "continuous wrong doctrine" to extend the statute of limitations, allowing them to sue for the latest occurrence in a series of distinct wrongful acts.

If the defendant does not claim that the issue is time-barred (the statute of limitations has run) in their initial response, they waive this defense and cannot raise it later.

II.  Class Actions – Timing is Everything

To preserve a legal action, a complaint should be filed in the proper jurisdiction before the end of the limitations period. This is particularly necessary in the context of class actions, where timing is crucial. Even if the statute of limitations is not specified when a complaint is filed, it will still impact whether the plaintiffs can: (1) certify as a class (a group of individuals with similar injuries) and (2) recover if the defendants are found liable. In fact, the statute of limitations is often expressly integrated into the definition of the "class" in the complaint allegations.

When individuals commence a class action, that pauses or stops the clock on the statute of limitations for all members of the class, including those who are not present. This pause occurs only if the class action is filed on time and lasts until the court determines whether to certify or deny the class. This legal principle is referred to as class action tolling, or "American Pipe tolling," named after its initial application by the U.S. Supreme Court in American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974). Although the principle has been the subject of considerable debate since its introduction, it continues to be significant. Tolling allows all those similarly affected to recover through one case rather than through hundreds; without tolling, all the absent class members would need to intervene in the pending class action or file individual claims before the class action was approved to protect their legal claims. In short, tolling makes life easier for the courts.

Tolling takes different forms. For federal claims, if the court denies class certification, then individual actions—not subsequent class actions—can be filed but only within the time remaining on the statute of limitations. If the court grants class certification, tolling continues to prevent absent class members from needing to file individual lawsuits. However, in actions based on diversity or where the federal statute does not prescribe a limitations period, the tolling effect must be interpreted under the relevant state law. State statutes of limitations may extend or restart once a class is certified or denied, unlike federal law which only accounts for the remaining time on the limitations period when tolling started.

Under federal law, if a class is certified, all class members must receive notice of the lawsuit, their right to opt out, and the deadline for doing so. This period makes it clear that the door remains open for an absent class member to file their own separate individual legal action. Class members need to be mindful of the timing for filing their individual legal actions, as submitting too early or too late may result in their claims expiring. Some district courts have ruled that individuals who file separate lawsuits before the court renders its decision on class certification are not eligible for tolling, reasoning that the statute of limitations for individuals who file early continues to run while the class action is pending. As a result, they may lose their opportunity to recover if the deadline expires before they file their individual lawsuits. Had they waited for the court's decision, tolling might have preserved their claim. Conversely, if an absent class member waits until the class certification is denied and misses the deadline before filing their subsequent action, then they too have missed their chance. Always keep an eye on the clock.

III.  Tolling Agreements as Litigation Tools

To facilitate timely resolutions, prospective parties may sign a tolling agreement to temporarily suspend the statute of limitations for a specified period. This tool takes the pressure off the prospective plaintiff and encourages the prospective defendant to settle the dispute amicably, potentially avoiding litigation altogether. If a tolling agreement is not signed or expires, then both parties must avoid letting their eyes stray from the clock because the statute of limitations could mean an end to the legal claim.

Next up (and finally), Australia.