Statutes of limitations, one might say, “introduce law to the fourth dimension.”1 But courts have long recognized that time is not a constant: it can expand or contract, depending upon a litigant’s frame of reference.2 Consider the members of a class. In its seminal 1974 decision in American Pipe & Construction Co. v. Utah,3 the Supreme Court held that the commencement of a class action tolls (or pauses) the applicable statute of limitations as to all putative class members, allowing them to later file individual actions that might otherwise be time-barred.4 This American Pipe doctrine — deceptively straightforward on its face — has proven remarkably intricate in practice,5 and two questions have recurred with some frequency.6 First, is there a “forfeiture rule,” such that a plaintiff who sues independently before a ruling on class certification thereby “forfeits” the benefit of American Pipe tolling?7 Second, does American Pipe tolling apply to statutes of repose, which begin running when a defendant acts, rather than when a plaintiff’s claim accrues?8
Recently, in Stein v. Regions Morgan Keegan Select High Income Fund, Inc.,9 a Sixth Circuit panel affirmed that the forfeiture rule remains binding law in that circuit and refused to extend American Pipe tolling to statutes of repose.10 As the panel recognized, these twin holdings may require that “a concerned potential plaintiff . . . file within the limitations period or be out of luck”: no action can be filed beyond the repose period, yet any action filed between the end of the limitations period and the repose period is barred by the forfeiture rule if the court has not yet ruled on class certification.11 This is a curious requirement, given that American Pipe itself might fairly be described as standing for the exact opposite proposition.12 By emphasizing formal, categorical — and ultimately indeterminate — distinctions, Stein reached a rule out of step with American Pipe, a decision principally concerned with the practical necessity of class action tolling.
Regions Financial managed some mutual funds that invested heavily in mortgage-backed securities. This proved unwise. The funds lost nearly all of their value;13 inevitably, litigation ensued. In December 2007, a securities class action was filed against several Regions entities in Tennessee federal court.14 In October 2013 — while class certification was still pending, nearly six years later — Andrew M. Stein and other putative class members filed individual actions.15
Regions moved to dismiss the individual suits as untimely. Claims made under the Securities Exchange Act of 193416 are subject to a two-year statute of limitations and a five-year statute of repose,17 and Regions argued that those periods had long since lapsed. At first, the district court denied the motion, concluding that American Pipe tolled the applicable statutes of repose and that the forfeiture rule did not apply.18 But on reconsideration, the district court reversed course: the forfeiture rule was mandated by circuit precedent, and thus the individual actions, which had been filed before a ruling on class certification, were time-barred.19 The Stein plaintiffs appealed.
The Sixth Circuit affirmed on different grounds. Writing for a unanimous panel, Judge Clay20 held that most of the plaintiffs’ claims were rendered untimely by the forfeiture rule and, regardless, all were barred by the applicable statutes of repose.21 The panel acknowledged that the forfeiture rule remained binding precedent in the Sixth Circuit, though it harbored “doubts” about that rule, which had become the minority approach.22 By lodging the instant action before a certification ruling in the December 2007–filed class action, the Stein plaintiffs had forfeited the benefit of American Pipe tolling as to most (if not all23) of their claims.24
And “absent tolling of some kind,” Judge Clay noted, the five-year statute of repose surely doomed the plaintiffs’ claims: the defendants took no relevant action after July 2008, and the plaintiffs filed suit in October 2013.25 Seeking guidance on this American Pipe repose question, a matter of first impression in the Sixth Circuit,26 the panel turned first to a plaintiff-friendly source. In an early discussion of the issue, the Tenth Circuit had held that because American Pipe is a doctrine of legal (or “statutory”) tolling, rather than equitable (or “judicially created”) tolling,27 it applies to both statutes of limitations and statutes of repose.28 Designating American Pipe tolling as legal allowed the Tenth Circuit to sidestep a Supreme Court decision commonly read to bar the equitable tolling of statutes of repose.29
But the Second Circuit had taken a different tack, Judge Clay explained, and held that the answer to the legal/equitable question is immaterial: either way, statutes of repose are immune to American Pipe tolling.30 On the Second Circuit’s logic, if American Pipe tolling is equitable, precedent forbids its application to a statute of repose.31 And if American Pipe tolling derives from the Federal Rules of Civil Procedure and is thus legal, applying it to a statute of repose would violate the Rules Enabling Act32 (REA). The REA “forbids interpreting [the Rules] to ‘abridge, enlarge or modify any substantive right’”;33 a statute of repose creates a substantive right freeing defendants from liability; ergo, the Rules cannot toll a statute of repose.34
Stein adopted the Second Circuit’s holding and rationale in toto.35 The panel observed that the Second Circuit’s repose rule found support in a subsequent Supreme Court decision that both “discussed at length the incompatibility of equitable tolling and statutes of repose”36 and suggested, by analogy, that statutes of repose create a substantive right in defendants.37 In closing, the panel briefly hinted at another potential difficulty: that in certain cases, Stein’s twin holdings would force “a concerned potential plaintiff [to] file within the limitations period or be out of luck.”38 Still, this complication mattered little for the Stein plaintiffs. For them, forfeiture rule or not, the untolled statute of repose disposed of their claims.
As the Stein court implicitly recognized, there are at least two ways of approaching the American Pipe repose puzzle. The first is broad, practical, functionalist (and comes from American Pipe itself): what rule is “necessary to insure [the] . . . efficiency and economy that the [class action device] was designed to serve”?39 The second is narrow, categorical, formalist (and is a later engraftment on American Pipe40): Is class action tolling legal or equitable? And are statutes of repose substantive or procedural? Stein engaged principally with this second line of questions. But the categorical analysis is hardly as neat as the panel suggested, given the intrinsic haziness of those distinctions in the context of class action tolling. And the practical analysis militates against Stein altogether, as the decision will needlessly force litigants to file wasteful protective actions. By subordinating pressing practical concerns to an indeterminate categorical analysis, the Stein court reached a rule out of step with American Pipe.
Start where Stein ends, with substance and procedure. The panel chose not to recognize this distinction for what it really is — a conclusion in place of analysis.41 The assertion that a statute of limitations merely limits a plaintiff’s remedy (and is thus procedural), whereas a statute of repose “create[s] a substantive right in those protected to be free from liability,”42 is easily reversible. One might say instead that defendants have a substantive right to be free from liability once the limitations period has run43 — or that a statute of repose limits a plaintiff’s remedy, as it surely does.44 There’s another problem here: Stein’s implicit assumption that something substantive is entirely substantive, and that something procedural is entirely procedural.45 Let’s concede arguendo that statutes of repose confer a substantive right upon defendants. If a statute of repose can fairly be described as a more robust statute of limitations,46 then a statute of limitations might also confer a substantive right upon defendants, if in lesser degree. Thus, on Stein’s logic, American Pipe tolling of statutes of limitations could violate the REA. But that can’t be right: it threatens to swallow the American Pipe doctrine whole.
Consider next the threshold question in Stein: whether the tolling doctrine is legal or equitable. Analogy and disanalogy are time-honored tools for answering such questions. But the American Pipe repose jurisprudence seldom uses this device, likely because the analogies offer each side little succor.47 Instead, courts opt to parse vague dicta from American Pipe, always a risky strategy.48 Yet if American Pipe tolling is sui generis, perhaps the legal/equitable distinction presents a false choice.49 Maybe the better answer is that American Pipe is simply “class-action tolling,”50 something separate and apart from legal or equitable tolling, and needn’t fit into one of those two pigeonholes.51 Or maybe not. But the Stein court never considered any of these questions.52
Were this the end of the matter, one might grant Stein its “out of luck” rule: after all, the panel reached plausible (if not unassailable) answers to those nettlesome categorical questions. Yet that line of analysis fails to reach American Pipe’s true concern: the salutary practical effects of the rule the Court adopted.53 For one illustration of Stein’s practical problems, consider the calculations you’d face as a litigant under the repose rule alone. You might choose to remain a member of the putative class — then see the district court deny class certification after the repose period has run. Alas, you’re forever “out of luck.” Unwilling to risk that outcome, you might file independently — only to see the district court grant class certification and approve a settlement that excludes you.54 This dilemma forces litigants to play a needless guessing game.55 The choice between remaining a member of the putative class and filing independently was already complex, but Stein introduces a new variable: the probability that the district court will rule on class certification before the repose period has run. The speed with which a court handles its docket ought not determine the outcome of litigation. But that’s exactly what Stein requires.56
The repose rule adopted by Stein is practically problematic on its own terms,57 but the forfeiture rule significantly aggravates its effects. Forfeiture alone yields unwanted outcomes.58 Still, in isolation, it offers litigants an out: just wait for a class certification ruling. The repose rule eliminates that escape route. This is the Stein “bind”59: after the repose deadline, no putative class member can file individually, yet no member can file between the limitations and repose deadlines if the court hasn’t yet ruled on class certification.60 The practical inquiry at the core of American Pipe would recognize the undesirable consequences of combining these two rules.61 Tellingly, Stein’s examination of each in isolation does not.
“Though rarely the subject of sustained scholarly attention, the law concerning statutes of limitations fairly bristles with subtle, intricate, often misunderstood issues . . . .”62 An apt description of American Pipe, a decision often misconstrued. Stein emphasized intricate (yet indeterminate) categories of law, equity, substance, and procedure. In so doing, it misapprehended the Court’s true focus: the practical necessity of class action tolling. Stein won’t be the last word on this topic.63 When the Court takes up the question again, it should recognize that at long last, it’s time to put American Pipe back into practice.