Delaware Supreme Court Expands Class Action Tolling
In a decision that expands the ability of plaintiffs to bring class actions in Delaware, the Delaware Supreme Court in Dow Chemical Corp. & Dole Food Company, Inc. v. Blanco adopted so-called cross-jurisdictional tolling, holding that the statute of limitations as to the claims of individual members of a putative class is tolled while a putative class action on their behalf is pending, regardless of “whether the class action is brought in Delaware or in a foreign court.”
The plaintiff had been an absent member of a class action commenced in 1993 in Texas. Following a series of delays, class certification was denied, and in 2011, Blanco filed an individual action in the Superior Court of Delaware, alleging the same injury that had been alleged in the Texas action. The Superior Court rejected defendants’ motion to dismiss on statute of limitations grounds, instead holding that cross-jurisdictional tolling applied. The Superior Court then granted defendants’ application for interlocutory appeal, and the Delaware Supreme Court accepted the appeal.
In affirming, the Supreme Court highlighted the two policies underlying the seminal cases of American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974), and Crown, Cork & Seal Co. v. Parker, 462 U.S. 345 (1983), which spawned the class action tolling doctrine: (1) class actions promote judicial economy; and (2) statutes of limitations protect defendants from being surprised by the revival of stale claims. The Court then determined that these policies are served by permitting cross-jurisdictional tolling in appropriate cases. First, it found that barring cross-jurisdictional tolling would cause members of a putative class to clog the Delaware courts with “placeholder” lawsuits, thus defeating the goal of judicial economy. Second, where a timely class action filed outside of Delaware places a defendant on notice of the claims against it, the defendant will not be prejudiced if the plaintiff is permitted to file a subsequent action in Delaware. The Court discounted defendants’ concerns that allowing cross-jurisdictional tolling would draw opportunistic plaintiffs to Delaware like moths to a flame, observing that Delaware is a popular forum regardless of cross-jurisdictional tolling.
Litigants facing class tolling issues should take note that the Delaware Supreme Court indicated that whether tolling applies depends on the facts of the case. Tolling may not apply if the defendant was not on notice of the original suit, if the plaintiff did not rely on the pendency of the original class action, or if the plaintiff engaged in dilatory tactics or failed to continuously pursue its claims. Also, note that class action tolling — cross-jurisdictional or otherwise — will not save an untimely follow-on class action if certification in the earlier action was denied based on a Rule 23 defect in the class (as opposed to a defect unique to the class representative). In this latter situation, tolling may apply to the plaintiff’s individual claims, but defendants will be spared the expense of litigating on a class wide basis.