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Article: November 2014 Class Action Litigation Update

November 20, 2014
Business Litigation Reports

Class Action Defense Menu: Statutes of Limitations Served Two Ways. The statute of limitations is an underutilized but potentially potent defense in many consumer class actions. The defense can be raised two ways. First, as in any lawsuit, defendants can argue the named plaintiff brought a stale claim. This involves a specific inquiry into the experience of the named plaintiff, whether his claim has expired, and if so, whether he reasonably and diligently sought to preserve his rights such that the so-called “discovery rule” is met. Second, defendants can argue in opposing class certification that statute of limitations issues create individualized issues that render certification inappropriate. Both tactics can be effective class killers.

Named Plaintiff-Specific Defense
Consumer class actions often relate to products that have been on the market for years but only recently become the subject of controversy. Thus, class actions routinely are brought years after the allegedly illicit activity began–for example, FDA-approved drugs accused of unlabeled side effects, natural foods that include a now out-of-vogue ingredient, and vehicles with allegedly dangerous properties, could all be in use for years before a plaintiff decides to sue. In such cases, the claim should be barred unless plaintiffs can rely on the “discovery rule,” which “postpones accrual of a claim until the plaintiff discovers, or has reason to discover, the cause of action.” Clemens v. DaimlerChrysler Corp., 534 F.3d 1017, 1024 (9th Cir. 2008) (internal quotations omitted).

Quinn Emanuel recently successfully asserted this defense on behalf of its client in Plumlee v. Pfizer, Inc., No. 13-CV-00414-LHK, 2014 WL 4275519 (N.D. Cal. Aug. 29, 2014). Judge Lucy H. Koh of the Northern District of California granted Pfizer’s motion to dismiss on statute of limitations grounds. The plaintiff claimed a medication did not work five years after she stopped taking it. The longest limitations period for her claims was four years. Judge Koh dismissed with leave to amend, giving plaintiff the opportunity to plead diligence and invoke the discovery rule. The plaintiff’s amended complaint essentially alleged she had stumbled upon the information on which she based her complaint while watching a television show but had otherwise done nothing to satisfy her duty of diligence. Because plaintiff failed to show she “acted reasonably and diligently in preserving [her] rights,” the discovery rule did not apply to toll the claims she had asserted on behalf of the class. Id. at *6-7. The case was dismissed without leave to amend. Id. at *9. 

Rule 23 Predominance Defense
Class action defendants have a second opportunity to assert a statute of limitations defense in the context of class certification with respect to the issue of predominance. Under the right circumstances, defendants can show that calculating and applying the statute of limitations-not only to the named plaintiff but also the hundreds, thousands, or millions of absent consumer class members–presents so many individualized issues that certification is inappropriate. For example, assume a product has been on the market for years with the same ingredients. From time to time, there was public discussion about whether a particular ingredient is effective, harmful to the environment, or raises some other issue of public concern. For some reason, the issue suddenly becomes more prominent and lawsuits follow. The fact that the issue was publicly addressed in news reports or other public literature in the past may create a predominance defense, because it will be necessary to explore each class member’s exposure to the prior publicity to determine if his or her claim is barred.

In Thorn v. Jefferson-Pilot Life Ins. Co., for example, the Fourth Circuit affirmed denial of class certification, finding “because [the District Court] could not resolve [the] statute of limitations defense on a class-wide basis, issues common to the class did not predominate over individual ones.” 445 F. 3d 311, 314 (4th Cir. 2006). Defendants had retained a historian to collect news reports published over the course of an entire century showing consumers might have known of their right to bring a claim, based on whether they had seen the reports. Id. at 316. Additionally, the expert showed plaintiffs could have learned of their claims through “numerous sources of information.” Id. at 316. Given this history, the Fourth Circuit affirmed a holding that determining whether any given plaintiff had advance, actual or constructive knowledge of his or her claim–which would mean the statute of limitations had run–would require, essentially, individual trials. Id. at 327. Individual issues thus predominated and precluded certification. Id.

Even where the statute of limitations argument does not carry the entire load of defeating certification, it can be the straw that breaks the back of an otherwise marginal class. For instance, in Corley v. Entergy Corp., the Eastern District of Texas criticized plaintiffs’ damages formula and causation argument before noting that assessing whether individual class members’ claims were timely, and whether tolling applied to their claims, was an analysis “not amenable to class treatment:” there were too many states at issue, each with different statutory lengths, and each depending on individualized facts for each plaintiff. 220 F.R.D. 478, 488 (E.D. Tex. 2004) aff’d sub nom. Corley v. Orangefield Indep. Sch. Dist., 152 F. App’x 350 (5th Cir. 2005). Similarly, in Doll v. Chicago Title Ins. Co., a court denying certification found that applying the discovery rule to different class members would involve “facts unique to each class member,” and that varying limitations laws among the 18 states created further individualized issues; for this reason and others, certification was inappropriate. 246 F.R.D. 683, 687-690 (D. Kan. 2007); see also Rosen v. Chrysler Corp., 97-CV-60374-AA, 2000 WL 34609135 at *12 (E.D. Mich. July 18, 2000) (denying certification and finding statute of limitations defense would involve “assessment of complex individual facts”).