Earlier this month, in China Agritech, Inc. v. Resh et al, the Supreme Court handed corporate defendants another victory over class action plaintiffs when it held that its earlier American Pipe decision will only tolls statute of limitations for individual claims and not late filed class actions.  In other words, plaintiffs seeking class-wide relief do not get the benefit of extra time from earlier class filings as those pursuing individual claims do.

We don’t expect this decision to have much impact on the ability of institutions to obtain redress for securities fraud and antitrust violations affecting their investments.  The ability to file out-of-time class actions principally matters if prior efforts to certify classes have failed for reasons including:

1. certification failed for issues particular to the class plaintiff rather than those common to all class members;
2. later filing class members were in a better position to argue for and obtain certification; and/or
3. later filing class members lacked an earlier opportunity to weigh into the litigation because, for example, they were unaware of it.

Securities class actions: Existing laws prevent these three failures from happening. The plaintiff securities class action bar has deep financial resources and experience to maximize the chances for successful class certification.  The PSLRA ensures all investors have ample notice and opportunity to weigh into class proceedings early on by requiring the plaintiffs filing securities class actions to publish a notice giving others the time and opportunity to apply for leadership.  Other federal statutes consolidate most securities claims against the same defendants for the same conduct in the same federal court.  If there’s a certification problem related to the class plaintiff, as opposed to common issues, the plaintiff bar is savvy enough to correct things by means other than filing out-of-time class actions, like intervening or joining additional class representatives.

Antitrust class actions: While antitrust cases are not subject to PSLRA notice requirements, the plaintiff antitrust bar is equally knowledgeable about filings made by other law firms and there’s typically stiff competition for leadership at the front end of these cases. The bar has a depth of resources and sophistication comparable to the securities class action bar.  In fact, many firms prosecute both types of matters.  Cases are likely to be prosecuted in the same court and plaintiff counsel are more than equipped solve certification issues through means other than filing untimely class actions.

Other class actions: The decision is more likely to affect class actions outside of these areas, where the plaintiff bar tends to be more fragmented and dispersed, can be less experienced in prosecuting matters and have fewer litigation resources. There is often less public awareness of these actions and less opportunity for affected persons to join efforts earlier.  Despite all this, the plaintiff bar can still make protective class action filings shortly before statute of limitations deadlines, and courts still have many tools for handling certification issues specific to representatives.  So even in these other areas, the consequences will likely be limited.

In short, this latest Supreme Court decision should not change much if anything for institutional investors.