2002 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

7-17-2002

McKowan Lowe Co v. Jasmine Ltd

Precedential or Non-Precedential: Precedential

Docket No. 00-3728

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PRECEDENTIAL 

 Filed June 26, 2002 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

No. 00-3728 

MCKOWAN LOWE & CO., LTD. 

v. 

JASMINE, LTD., IRVING MANGEL, JAMES STEWART, 

JACK AEZEN, LUJACO, LTD., FISHBEIN & COMPANY, 

P.C., SAMUEL J. MANGEL, UNITED JERSEY BANK, 

MARVIN WEISS, ARTHUR ANDERSEN, L.L.P. 

(D.N.J. No. 94-cv-05522) 

HARRY BERGER, individually and on behalf of a class 

similarly situated; BERNARD L. CUTLER, individually and 

on behalf of a class similarly situated 

v. 

JASMINE LTD., IRVING M. MANGEL, MELVIN TWERSKY, 

EDWARD W. MASKALY, SAMUEL J. MANGEL, STEVEN B. 

SANDS, MARTIN SANDS, THOMAS CIOCCO, SANDS 

BROTHERS & CO., MCKOWAN LOWE & COMPANY, LTD., 

EVELYN WONG, TONY NGAI, LUJACO, LTD. 

(D.N.J. No. 96-cv-02318) 

HARRY BERGER and BERNARD CUTLER, 

individually and on behalf of a class similarly situated, 

 Appellants 

 

On Appeal from the United States District Court 

for the District of New Jersey 

(D.C. Civil Nos. 94-cv-05522 & 96-cv-02318) 

District Judge: Hon. Joseph H. Rodriguez 

Argued October 29, 2001 

Before: SLOVITER, NYGAARD and AMBRO, Circuit Judges 

(Filed June 26, 2002) 

 Lowell E. Sachnoff (Argued) 

 M. Marshall Seeder 

 John W. Moynihan 

 Sachnoff & Weaver, Ltd. 

 Chicago, IL 60606 

 Bryan L. Clobes 

 Miller, Faucher Cafferty and 
 Wexler LLP 

 Philadelphia, PA 19102 

 Michael I. Behn 

 Futterman & Howard, Chtd. 

 Chicago, IL 60603 

 Attorneys for Appellants 

 Stephen L. Dreyfuss 

 Hellring, Lindeman, Goldstein 

 & Siegal 

 Newark, NJ 07102 

 Attorney for Appellee Jasmine Ltd. 

 and Irving Mangel, Samuel J. 

 Mangel, United Jersey Bank, 

 Marvin Weiss, Melvin Twersky, 

 Edward W. Maskaly 

 2 

 

 Richard G. Placey 

 Montgomery, McCracken, Walker 

 & Rhoads, LLP 

 Cherry Hill, NJ 08002 

 Attorney for Appellees 

 James Stewart, Jack Aezen, 

 Lujaco Ltd., Fishbein & Company, 

 P.C. 

 Richard A. Roth 

 Littman, Krooks, Roth & Ball 

 New York, NY 10017 

 Attorney for Appellees 

 Steven B. Sands, Martin Sands, 

 Sands Brothers & Co., Evelyn 

 Wong, Tony Ngai 

 Joseph M. Feeney 

 Cherry Hill, NJ 08002 

 Attorney for Appellee 

 Thomas Ciocco 

 John M. George, Jr. (Argued) 

 Lisa M. Cipriano 

 John H. Mulhern 

 Sidley, Austin, Brown & Wood 

 Chicago, IL 60603 

 Nicholas M. Kouletsis 

 Ralph R. Smith III 

 Pepper Hamilton LLP 

 Cherry Hill, NJ 08002 

 3 
 

 Of Counsel: 

 Barbara A. Mather 

 Pepper Hamilton LLP 

 Philadelphia, PA 19103 

 Attorneys for Appellee 

 Arthur Andersen LLP 

 Of Counsel: 

 Meyer Eisenberg 

 Deputy General Counsel 

 Mark R. Pennington 

 Assistant General Counsel 

 David M. Becker 

 General Counsel 

 Jacob H. Stillman 

 Solicitor 

 Securities & Exchange Commission 

 Washington, D.C. 20549 

 Attorneys for Securities and 

 Exchange Commission Appellants 

 Amicus-Curiae 

OPINION OF THE COURT 

SLOVITER, Circuit Judge: 

This interlocutory appeal of the District Court’s order 

denying class certification is before us on this court’s grant 

of a petition for review pursuant to Rule 23(f) of the Federal 

Rules of Civil Procedure. The issue framed by the petition 

is 

 [w]hether the commencement of a class action tolls the 

 limitations period for intervening class members to 

 bring claims on behalf of a class where a determination 

 has not been made whether those claims are 

 appropriate for class certification? 

App. at 75. 

Plaintiff-appellant Bernard Cutler appeals from the 

District Court’s order granting summary judgment against 

 4 

 

Cutler’s class claims alleging violations of Section 11 of the 

Securities Act of 1933, 15 U.S.C. S 77k (2002), which 

creates a private right of action for claims of material 

misrepresentation or omission in a registration statement. 

The District Court concluded that although the statute of 

limitations was tolled for Cutler’s individual claims, his 

claims on behalf of the class were time-barred. 

Under the Supreme Court’s decision in American Pipe & 

Construction Co. v. Utah, 414 U.S. 538 (1974), the filing of 
a class action complaint tolls the statute of limitations for 

all members of the putative class who, following the denial 

of certification, intervene or file an independent action. See 

also Crown, Cork & Seal Co. v. Parker, 462 U.S. 345, 350 

(1983). It is therefore established that American Pipe tolling 

applies to intervenors who assert claims in their individual 

capacity, but this court has not yet decided whether 

American Pipe tolling applies to an intervenor as a proposed 

class representative where the class has neither been 

certified nor definitively rejected. 

I. 

BACKGROUND 

In December 1993, Jasmine, Ltd., a shoe importer 

headquartered in New Jersey, completed an initial public 

offering (IPO) of common stock. In November 1995, Harry 

Berger, a shareholder, filed suit in federal court on behalf 

of himself and a class of similarly situated purchasers 

alleging violations of federal and state securities laws in 

connection with the IPO.1 According to Berger, Jasmine and 

members of its management, Irving Mangel, Samuel 

Mangel, Melvin Twersky, Edward Maskaly and Thomas 

Ciocco, Jasmine’s auditors, Arthur Andersen LLP and 

Fishbein & Co, P.C., the IPO underwriter, Sands Brothers 

& Co., Ltd. and two of its principals, Jasmine’s buying 

agent in Hong Kong, McKowan Lowe & Co., Ltd, and two of 

_________________________________________________________________ 

1. Suit was originally filed in the United States District Court for the 

Northern District of Illinois and then transferred at Berger’s motion to 

the District of New Jersey. 

 5 

 

its officers, Evelyn Wong and Tony Ngai, and a corporation 

controlled by the Mangels, Lujaco, Ltd., all participated in 

a scheme to misstate Jasmine’s financial statements to 

conceal Jasmine’s substantial debt to McKowan Lowe. 

Based on similar charges, in 1997 the SEC had obtained 

consent judgments against members of Jasmine’s former 

management, under which they agreed to pay fines ranging 

from $100,000 to $7,293. Securities & Exchange 

Commission v. Irving M. Mangel, No. 97-1977 (D.D.C.), 

Litigation Release No. 15465, 65 S.E.C. Docket 645 (Aug. 

28, 1997), available at http://www.sec.gov/litigation/ 

litreleases/lr15465.txt. Tony Ngai and Evelyn Wong of 

McKowan Lowe also settled with the SEC. Ngai King Tak, 

Securities Act of 1933 Release No. 7443, 65 S.E.C. Docket 

540 (Aug. 28, 1997), available at http://www.sec.gov/ 

litigation/admin/3438988.txt. Jasmine itself is currently in 

Chapter 7 liquidation proceedings. 

The statute of limitations for liability created under 

Section 11, the only claim implicated in this appeal, is "one 

year after the discovery of the untrue statement or the 

omission, or after such discovery should have been made 

by the exercise of reasonable diligence." 15 U.S.C. S 77m. 
The District Court found that "Berger was first given 

inquiry notice [by Jasmine’s] May 19, 1995 form 8-K which 

disclosed irregularities discovered by BDO Seidman, and 

that warnings in the prospectus by themselves did not 

create notice." App. at 31. Berger’s complaint was filed in 

November, 1995 and was thus within the applicable statute 

of limitations. The District Court found a class would 

present common questions of law and fact, and would be 

sufficiently numerous, but it rejected Berger’s motion for 

class certification in August of 1998 based on its 

determination that Berger’s claims failed to meet Rule 23’s 

typicality requirement and because Berger would not 

provide adequate representation of the class. App. at 15. 

On September 9, 1998, promptly after the District 

Court’s opinion was filed, Bernard Cutler successfully 

moved to intervene. Absent tolling, Cutler’s claims would be 

time-barred, as he did not intervene until well over the 

expiration of the one-year statute of limitations. The 

District Court determined that Cutler could maintain his 

 6 

 

individual claims because "from November 17, 1995[when 

Berger filed his complaint,] until August 6, 1998 when 

[Berger’s motion for] class certification was denied, the 

statute of limitations was tolled" under American Pipe. App. 

at 31. The District Court declined to evaluate Cutler’s 

qualifications to represent a subclass of the original Berger 

class, as it rejected Cutler’s proposed Section 11 class 

claim only on the ground that it was barred by the statute 

of limitations. 

II. 

JURISDICTION AND STANDARD OF REVIEW 

The District Court had jurisdiction pursuant to 15 U.S.C. 

S 77v. On November 27, 2000, this court granted Cutler’s 

Rule 23(f) petition. Rule 23(f) was "adopted under the power 

conferred by 28 U.S.C. S 1292(e)." Fed. R. Civ. P. 23(f) 

advisory committee’s notes. The parties agree that this 

court reviews de novo the District Court’s summary 

judgment dismissal of Cutler’s class claims for failure to 

comply with the statute of limitations. See, e.g., Lusardi v. 

Xerox Corp., 975 F.2d 964, 974 (3d Cir. 1992); Davis v. 

Thornburgh, 903 F.2d 212, 213 n.2 (3d Cir. 1990). 

III. 

DISCUSSION 

On appeal, Cutler asserts that the District Court erred in 

refusing to toll the statute of limitations for his class 

claims. He contends that tolling his class claims is most 

consistent with the policies undergirding American Pipe, 

and is supported by the authority of the majority of the 

courts to consider the issue. Cutler concedes that his case 

would be considerably more problematic if the District 
Court had conclusively determined that this case were 

inappropriate for resolution via class action. To distinguish 

his own circumstances from that situation he points out 

that the District Court rejected Berger’s prior motions to 

certify a class based entirely on its perception of Berger’s 

 7 

 

inadequacies as the proffered representative. He suggests 

that this case, like many securities actions, presents a 

paradigmatic example of the sort of claims the class device 

was designed to help vindicate--those claims too numerous 

and small to warrant individual action but conjoined 

representing a substantial case. See, e.g., Eisenberg v. 

Gagnon, 766 F.2d 770, 785 (3d Cir. 1985) (observing 

"[c]lass actions are a particularly appropriate and desirable 

means to resolve claims based on the securities laws, ‘since 

the effectiveness of the securities laws may depend in large 

measure on the application of the class action device’ ") 

(quoting Kahan v. Rosenstiel, 424 F.2d 161, 169 (3d Cir. 

1970)); John C. Coffee, Jr., Understanding the Plaintiff ’s 

Attorney: The Implications of Economic Theory for Private 

Enforcement of Law Through Class and Derivative Actions, 

86 Colum. L. Rev. 669, 681-83 (1986) (applying economic 

theory to explain frequent use of class procedure in 

securities litigation). 

The Supreme Court has enunciated two rationales for the 

American Pipe rule, which tolls the statute of limitations for 

putative members of a class pending denial of class 

certification. First, class actions are "designed to avoid, 

rather than encourage, unnecessary filing of repetitious 

papers and motions." American Pipe, 414 U.S. at 550. If the 

claims of unnamed plaintiffs were not tolled, claimants 

would have an incentive to file claims themselves to protect 

their causes of action, "precisely the multiplicity of activity 

which Rule 23 was designed to avoid." Id. at 551; see also 

Crown Cork & Seal Co., 462 U.S. at 350-51. 

The American Pipe rule encourages unnamed plaintiffs to 

rely on the class action already filed on their behalf. The 

class action procedure is protective of passive, even 

unwitting, members of the class. As the Court observed, 

"[n]ot until the existence and limits of the class have been 

established and notice of membership has been sent does 

a class member have any duty to take note of the suit or to 

exercise any responsibility with respect to it in order to 

profit from the eventual outcome of the case." American 

Pipe, 414 U.S. at 552. 

Second, the Court in American Pipe held that the tolling 

rule is consistent with the twin functions of statutes of 

 8 

 

limitations--providing defendants with timely notice and 

avoiding stale claims--because the action is tolled only by 

timely service of the class complaint on the defendants by 
the named plaintiffs. Id. at 554-55; see also Crown Cork & 

Seal Co., 462 U.S. at 352 (noting "[l]imitations periods are 

intended to put defendants on notice of adverse claims and 

to prevent plaintiffs from sleeping on their rights"). 

Cutler argues that the same rationales are equally 

applicable to tolling his class claims. He finds support in 

two decisions of this court. In Haas v. Pittsburgh National 

Bank, 526 F.2d 1083 (3d Cir. 1975), we approved American 

Pipe tolling for a later class representative on a claim that 

the original representative was without standing to pursue. 

In 1972, Mary Haas had filed a class complaint against 

three banks, one of which was Equibank, claiming they had 

charged usurious interest rates. Although she had accounts 

at the two other banks, she had never had an account at 

Equibank. Nonetheless, in a 1973 order the district court 

granted Haas class representative status as to all three 

banks. Later, on January 21, 1974, in light of decisions by 

the Supreme Court and Ninth Circuit, the district court 

determined it had improperly certified Haas as to 

Equibank. In the same order the court permitted the 

amendment of the complaint to add a new class 

representative who had had an account with Equibank. 

That named plaintiff, John Mitchell, was added shortly 

thereafter. 

The district court which had permitted Mitchell’s addition 

subsequently ruled his claims were time-barred. The 

relevant statute of limitations was two years. Equibank had 

discontinued the practice that was the subject of the 

complaint more than two years prior to January 21, 1974, 

the date the district court had first permitted substitution 

of a new class representative. 

On appeal, this court agreed with the district court that 

Haas was not a proper plaintiff as to Equibank. However, 

we reversed and remanded the dismissal of the class claim. 

We held, based on American Pipe, that the statute of 

limitations for Mitchell was tolled from November 13, 1972, 

the date Haas had filed her original complaint. Looking to 

American Pipe, we noted that Haas’s complaint provided 

 9 

 

Equibank with notice of "the claims against which[it] 

would be required to defend and also ‘the number and 

generic identities of the potential plaintiffs.’ " Id. at 1097. 

We concluded by observing "[t]hese plaintiffs were in 

existence at the time the action was originally brought and 

were described as claimants in the complaint. The only 

change effectuated by the district court’s [January 21, 

1974] order was the prompt addition of a nominal plaintiff 

who held an Equibank card." Id. Even were Haas not 

controlling, it certainly suggests that American Pipe tolling 

applies to class claims. 

In the other case Cutler cites, Goodman v. Lukens Steel 

Co., 777 F.2d 113 (3d Cir. 1985), this court reviewed the 

district court’s grant of injunctive relief on behalf of a class 
in a Title VII case. We determined as to one claim on which 

the plaintiffs had prevailed that none of the named 

representatives were adequate to represent the class. Based 

on the lack of a qualified class representative, we vacated 

the underlying findings on that claim. Id. at 124. However, 

in the interest of judicial economy, we directed that the 

district court "explore the possibility of intervention by 

qualified class representatives" on remand, id., concluding 

that "[s]uch a suit would be timely since the 

commencement of the class action tolled the statute of 

limitations as to members of the class" under American 

Pipe, id. at 124 n.8. 

Defendant Arthur Andersen seeks to distinguish Haas 

based on our emphasis in that case on the district court’s 

certification of a class, and characterizes our observation in 

Goodman as dictum, pointing out that there too the district 

court had certified a class. Andersen also argues that in 

both Haas and Goodman a change in the law caused the 

class representatives to become unfit after the district 

courts’ certifications. Andersen points out that no class has 

been certified in this case, and thus no change in the law 

could prejudice potential class members nor could absent 

class members have relied on a prior certification. 

Andersen, joined by Sands Brothers, cites as authority 

for its position a number of courts of appeals’ decisions 

which treat a related, although Cutler argues 

distinguishable, situation. In those cases the issue was the 

 10 

 

application of American Pipe tolling to subsequent 

intervenors or sequential class actions after there had been 

definitive denials of class certification in the original action. 

For example, in Korwek v. Hunt, 827 F.2d 874 (2d Cir. 

1987), an early case in this line, the plaintiffs-appellants 

had 

 filed a complaint alleging class claims identical 

 theoretically and temporally to those raised in a 

 previously filed class action suit which was denied 

 class certification mainly because of overwhelming 

 manageability difficulties. Appellants ignored the 

 district court’s express finding that the original action 

 was unwieldy, first when attempting to intervene and 

 expand the limited Gordon class, and again when filing, 

 what was essentially a duplicate of the original 

 complaint. 

Id. at 879. The Second Circuit refused to extend tolling 

under those circumstances, concluding, "The Supreme 

Court in American Pipe and Crown, Cork certainly did not 

intend to afford plaintiffs the opportunity to argue and 

reargue the question of class certification by filing new but 

repetitive complaints." Id. 

The underlying concern in Korwek and the articulated 

basis for the result was that application of American Pipe 
tolling to successive attempts to certify a previously rejected 

class would sanction an endless succession of class filings. 

Korwek held that American Pipe tolling does not operate to 

permit plaintiffs to relitigate the propriety of a class action. 

The great weight of authority has adopted similar reasoning 

and has rejected the applicability of American Pipe tolling to 

such successive class actions. See, e.g., Basch v. Ground 

Round, Inc., 139 F.3d 6, 11-12 (1st Cir. 1998) (an action 

held to be inappropriate for class treatment does not toll 

statute of limitations for subsequent class actions); 

Andrews v. Orr, 851 F.2d 146, 148-49 (6th Cir. 1988) 

(same); Robbin v. Fluor Corp., 835 F.2d 213, 214 (9th Cir. 

1987) (same); Salazar-Calderon v. Presidio Valley Farmers 

Ass’n, 765 F.2d 1334, 1351 (5th Cir. 1985) (rejecting 

American Pipe tolling for two subsequent actions that 

depended on a first action for their timeliness). 

 11 

 

We agree with the rationale of those cases and Cutler 

does not argue that they were decided incorrectly. Instead, 

Cutler insists that his situation is different. Unlike the 

Korwek plaintiffs, Cutler is not attempting to resuscitate a 

class that a court has held to be inappropriate as a class 

action. The class certification motion of Cutler’s 

predecessor, Berger (by whose complaint Cutler would have 

his claims tolled), was not rejected because of any defects 

in the class itself but because of Berger’s deficiencies as a 

class representative. In fact, in its evaluation of Berger’s 

attempt to certify, the District Court found that a class 

would present common enough questions of law and fact 

and be sufficiently numerous to merit class treatment. 

Thus Cutler argues that although the Korwek policy against 

perpetual relitigation of decided class issues is a sound 

one, it does not apply to him. 

Only a handful of courts have considered whether class 

claims should be tolled when the class device has not been 

definitively rejected, and they have generally concluded that 

American Pipe tolling is permitted in that situation. Many of 

those cases presented a situation, such as that here, where 

the original motion for class certification was denied 

because the class representative was inadequate. 

For example, in In re Quarterdeck Office Systems, Inc. 

Securities Litigation, CV-92-3970-DWW (GHKx), 1994 WL 

374452 (C.D. Calif. Mar. 24, 1994), two investors filed a 

securities fraud action against Quarterdeck, its officers and 

directors, and three venture capital firms following the fall 

of the company’s stock shortly after its IPO. Id. at *1. The 

court rejected their motion for class certification based on 

their inadequacies as class representatives. However, the 

court permitted intervention by other investors after the 

statute of limitations had run, holding that the intervenors’ 

class claims were tolled under American Pipe. Id. at *2, 5. 

The court recognized there were two groups of cases 

applying the American Pipe rule to subsequent class 

actions. The first group, exemplified by Korwek and the 
Ninth Circuit’s decision in Robbin v. Fluor,"involved either 

an attempt to file an entirely separate class action lawsuit 

after the dismissal of an earlier action, or an attempt to 

bring a later class action after the court had determined 

 12 

 

that proceeding as a class action was an inappropriate 

method of resolving the lawsuit." Id. at *4. The district 

court recognized that the courts have universally refused to 

extend American Pipe tolling to the subsequent class but 

stated that that group of cases differs from cases involving 

a later class action that is brought "in an attempt to find a 

more appropriate class representative." Id. 

In reaching its conclusion in Quarterdeck, the district 

court stated: 

 This court has not determined that proceeding as a 

 class action is inappropriate, merely that [the first 

 putative class representatives] are not proper class 

 representatives. . . . [I]f this court were to hold that the 

 statute is not tolled for these intervening plaintiffs to 

 raise class allegations, it would . . . extend[ ] the 

 holdings of Korwek and Robbin to cases in which a 

 proper class representative is being sought within the 

 originally filed lawsuit. 

Id. at *5. 

Other courts faced with similar circumstances have 

reached similar conclusions. See, e.g., Shields v. 

Washington Bancorporation, No. 90-1101, 1992 WL 88004, 

*1-3 (D.D.C. Apr. 7, 1992) (permitting tolling for intervenor 

over a year after original complainant’s motion for class 

certification dismissed because complainant was 

inadequate representative); In re Crazy Eddie Sec. Litig., 

802 F. Supp. 804, 813 (E.D.N.Y. 1992) (observing, on 

determining that named plaintiffs of certified class were 

inadequate, that "a second class action would not be an 

attempt to relitigate the question of class certification by 

filing repetitive claims"); Trief v. Dun & Bradstreet Corp., 

144 F.R.D. 193, 202-03 (S.D.N.Y. 1992) (determining tolling 

for intervenor appropriate where original named plaintiffs 

were inadequate, although defendants had conceded class 

action device appropriate); Shields v. Smith, No. 90-349, 

1992 U.S. Dist. LEXIS 15718, *5-10 (N.D. Cal. Aug. 14, 

1992) (permitting tolling to intervenor following denial of 

original class for inadequate representation); see also 

Alidina v. Penton Media, Inc., 143 F. Supp. 2d 363, 365-66 

n.1 (S.D.N.Y. 2001) (permitting tolling where certification 

 13 

 

conditionally denied); Fleming v. Bank of Boston Corp., 127 

F.R.D. 30, 35-37 (D. Mass. 1989) (one criteria for denying 

intervention was that intervenors could thereby avoid 

Korwek line of cases and renew certification attempts); Fred 
Meyer of Alaska, Inc. v. Adams, 963 P.2d 1025, 1029 

(Alaska 1998) (permitting tolling following conditionally 

denied certification). But see Fleck v. Cablevision VII, Inc., 

807 F. Supp. 824, 825-27 (D.D.C. 1992) (interpreting 

Korwek line of cases to forbid tolling to proposed new class 

representative). 

In contrast to these cases, the Eleventh Circuit in Griffin 

v. Singletary, 17 F.3d 356 (11th Cir. 1994), a Title VII 

action, followed the Korwek line of cases to reject 

intervenors’ class claims, although the original class was 

rejected solely for inadequate representation. The district 

court had initially certified a class, but on interlocutory 

appeal the court of appeals held that the named 

representatives were inadequate and vacated the 

certification order. On remand, after the statute of 

limitations had run, five individuals moved to intervene as 

class representatives and for recertification of the class. The 

district court denied their motions, and the court of appeals 

affirmed. 

The court concluded that Korwek controlled. It stated, 

"plaintiffs may not ‘piggyback one class action onto another’ 

and thereby engage in endless rounds of litigation in the 

district court and in this Court over the adequacy of 

successive named plaintiffs to serve as class 

representatives." Id. at 359 (quoting Salazar-Calderon, 765 

F.2d at 1351). 

The Griffin court does not appear to have distinguished 

between the Korwek line of cases where denial of tolling 

followed a decision rejecting the class action itself and the 

situation where no court has yet determined that the class 

action is inappropriate. Indeed, in Korwek, the court itself 

distinguished the situation before it and a situation more 

similar to this one, explicitly "leav[ing] for another day the 

question of whether the filing of a potentially proper 

subclass would be entitled to tolling under American Pipe." 

Korwek, 827 F.2d at 879. Moreover, the Griffin panel’s 

reasoning is inconsistent with our precedent in Haas where 

 14 

 

we approved American Pipe tolling for a subsequent 

representative’s class claims after the original certified class 

representative was found wanting.2 

We return consequently to our decision in Haas . 

Although, as Andersen points out, Haas differs from this 

case in that the Haas district court had determined that its 

initial certification of a class was erroneous, we see no good 

reason why class claims should not be tolled where the 

district court had not yet reached the issue of the validity 

of the class. Andersen has not supplied any persuasive 

reason for making such a distinction.3 

Andersen argues that judicial economy would be 

undermined if American Pipe tolling extends to class claims, 

because "class counsel would have little incentive to do any 
investigation of potential class representatives before filing 

_________________________________________________________________ 

2. Ironically, both Cutler and Andersen also cite for support Catholic 

Social Services, Inc. v. INS, 232 F.3d 1139 (9th Cir. 2000) (en banc). In 

that case, the district court had properly certified a valid class. A panel 

of the Ninth Circuit concluded in 1998 that the class subsequently had 

been rendered invalid by the enactment of section 377 of the Illegal 

Immigration Reform and Immigrant Responsibility Act of 1996 (IIRIRA). 

Id. at 1146. Rather than remanding to the district court to permit the 

plaintiffs to amend their complaint, that panel remanded for dismissal. 

Id. at 1146. After the district court had dismissed the case without 

prejudice, some plaintiffs whose claims were not affected by IIRIRA 

refiled their complaint and sought American Pipe tolling. The Ninth 

Circuit, in an en banc decision, observed that the plaintiffs had at all 

times "vigorously pursued this litigation," and distinguished both Griffin 

and the Korwek line because "[p]laintiffs in this case are not attempting 

to relitigate an earlier denial of class certification, or to correct a 

procedural deficiency in an earlier would-be class." Id. at 1149. The 

court concluded that the plaintiffs could enjoy American Pipe tolling for 

their class claims. Id. 

The result in Catholic Social Services is essentially consistent with this 

court’s decision in Haas. 

3. Because the District Court did not reach the issue of the propriety of 

a class action here, we need not consider whether American Pipe tolling 

would be available where the district courts abuse their discretion in 

denying certification of a class. See, e.g., Gagnon, 766 F.2d at 786-88 

(vacating district court’s order denying class certification for abuse of 

discretion and remanding for further proceedings). 

 15 

 

suit. If the first representative was found to be inadequate, 

counsel could find another, and then another after that, 

and so on." Br. of Appellee Andersen at 31. 

It is conceivable that if Cutler were to prove to be an 

inadequate representative, the same counsel who 

represents Berger and Cutler would seek to find another 

who is adequate. However, we are confident of the capacity 

of district courts to control abuse or ineptitude on the part 

of class counsel and to institute administrative procedures 

that would set deadlines for prospective class 

representatives while protecting the interests of unnamed 

plaintiffs. 

We are, of course, like Andersen, concerned with judicial 

economy but we believe it need not be achieved at the 

expense of litigants for whom the American Pipe tolling rule 

was designed. As the Court stated, 

 In cases such as this one, where the determination to 

 disallow the class action was made upon 

 considerations that may vary with such subtle factors 

 as experience with prior similar litigation or the current 

 status of a court’s docket, a rule requiring successful 

 anticipation of the determination of the viability of the 
 class would breed needless duplication of motions. 

American Pipe, 414 U.S. at 553-54. 

In keeping with Supreme Court precedent and our own, 

we hold that the class claims of intervening class members 

are tolled if a district court declines to certify a class for 

reasons unrelated to the appropriateness of the substantive 

claims for certification. We will therefore remand so that the 

District Court may determine Cutler’s status as a proper 

representative and, if he is not barred, may decide whether 

the case can be maintained as a class action. 

IV. 

Berger seeks to have us consider the District Court’s 

dismissal of his individual Section 11 claims. He argues 

first that because the District Court dismissed his claims in 

the same order in which it denied class certification, we 

may address the dismissal of his claim under Rule 23(f)’s 

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interlocutory appeal provision. Second, he argues that the 

appellees "have raised the issue in this appeal." Both 

arguments are without merit. 

Rule 23(f) provides that "[a] court of appeals may in its 

discretion permit an appeal from an order of a district court 

granting or denying class action certification under this 

rule." Fed R. Civ. P. 23(f). According to the Advisory 

Committee, "Appeal from an order granting or denying class 

certification is permitted in the sole discretion of the court 

of appeals. No other type of Rule 23 order is covered by this 

provision." Fed. R. Civ. P. 23(f) advisory committee’s notes. 

Berger’s argument would have us stretch the limits of Rule 

23(f) beyond Rule 23 certification questions. As quoted 

above, the Advisory Committee notes explicitly describe 

Rule 23(f) as not extending to any other type of order, even 

where that order has some impact on another portion of 

Rule 23. 

Decisions of other circuits have also been scrupulous 

about limiting Rule 23(f) inquiries to class certification 

issues. See, e.g., Bertulli v. Indep. Ass’n of Cont’l Pilots, 242 

F.3d 290, 294 (5th Cir. 2001) (stating "under Rule 23(f), a 

party may appeal only the issue of class certification; no 

other issues may be raised," but consenting to review 

standing, an "inherent prerequisite to the class certification 

inquiry"); Pickett v. Iowa Beef Processors , 209 F.3d 1276, 

1279 (11th Cir. 2000) ("Rule 23(f) provides for our 

jurisdiction over interlocutory appeals from a district 

court’s order granting class certification, and we limit our 

discussion to that issue. We do not address the merits of 

Plaintiffs’ claims."); see also Carter v. West Pub’g. Co., 225 

F.3d 1258, 1262-63 (11th Cir. 2000). Berger attempts to 

distinguish Carter by pointing out that in that case the 

appeals panel looked at two orders, one of which concerned 

the statute of limitations. But the statute of limitations 
inquiry in Carter was, as that court observed, a threshold 

inquiry into the class certification issue. That is not the 

case as to Berger’s proposed class although, as this opinion 

notes, it is as to Cutler’s proposed class. 

We dispense quickly with Berger’s second argument, that 

the appellees have somehow put Berger’s Section 11 

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standing into play. It is the limitation of Rule 23(f), not any 

arguments of the appellees, that determines our jurisdiction.4 

V. 

For the reasons heretofore set forth, we will dismiss 

Berger’s appeal and vacate the District Court order denying 

certification of the class proposed by Cutler and remand on 

that issue as set forth in this opinion. 

A True Copy: 

Teste: 

 Clerk of the United States Court of Appeals 

 for the Third Circuit 

_________________________________________________________________ 

4. The SEC filed an amicus curiae brief in this appeal stating its position 

that Section 11 is not limited to those who purchase in the offering but 

instead grants standing to all purchasers of registered securities. As we 

do not address the District Court’s dismissal of Berger’s individual 

Section 11 claims, we need not reach this issue. 

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