Opinion ID: 177521
Heading Depth: 4
Heading Rank: 1

Heading: The District Court's Relation-Back Analysis

Text: Though the District Court purported to approach this question using a Rule 12(b)(6) standard, its analysis actually dealt with Rule 15(c), which governs the circumstances where an amended pleading relates back to the date of the original pleading. Fed.R.Civ.P. 15(c). The Court focused on Rule 15(c)(1)(C), which governs the circumstances in which an amended pleading that changes the party or the naming of the party against whom a claim is asserted relates back to the date of the initial pleading. Fed.R.Civ.P. 15(c)(1)(C). Such an amended pleading only relates back if (1) it asserts a claim or defense that arose out of the conduct, transaction, or occurrence set outor attempted to be set outin the original pleading; and (2) the party to be brought in by amendment... knew or should have known that the action would have been brought against it, but for a mistake concerning the proper party's identity. Id. The Court approached the relation-back question i.e., whether an amended pleading asserting TILA/HOEPA claims could relate back to any earlier complaintnot by reference to a hypothetical amended complaint that the existing named plaintiffs could file, but by reference to an amended complaint filed by absent members of the class. In particular, the Court focused on the complaint (and the proposed second amended consolidated complaint) filed by Counsel for the Objectors in the Hobson action. The Court concluded that those complaints could not possibly relate back to any complaint in the consolidated Kessler action for several reasons, [14] including that: (1) they named new defendants in addition to CNBV, GNBT, and RFC, and thus could not relate back under Rule 15(c)(1)(C) (because the named plaintiffs had not failed to sue those defendants as a result of any mistake); and (2) no complaint in the Hobson action could relate back to the Davis or Ulrich complaints in any event because Rule 15(c), by its terms, only applies to amended pleadings in the same action as the original, timely pleading, Bailey v. N. Ind. Public Serv. Co., 910 F.2d 406, 413 (7th Cir.1990). This approach appears to assume that the reasons why the existing class members chose not to plead TILA/HOEPA claims in their initial complaints, and later refused to amend their complaints to assert those claims, were irrelevant. The Court approached the adequacy question from a perspective that in effect asked whether, assuming the existing named plaintiffs were inadequate representatives for failing to bring those claims, that failure could be remedied by any other member of the class. Answering that question in the negative, the Court's analysis comes to the conclusion that the existing named plaintiffs are made adequate because there is no remedy for their inadequate representation. The Settling Parties advance a similar argument before us on appeal: they contend that the only way TILA/HOEPA claims could be asserted in this litigation is if Class Counsel or the Objectors ... s[ought] leave from the district court to add a new named plaintiff whose TILA/HOEPA claims had not expired. (Settling Parties' Br. at 79 (emphasis in original).) Moreover, because the existing named plaintiffs obviously did not fail to name any other class member as a named plaintiff as the result of a mistake concerning the proper party's identity, Fed. R.Civ.P. 15(c)(1)(C), the Settling Parties contend that an amended pleading adding a new named plaintiff to assert TILA/HOEPA claims could not possibly relate back to any complaint in the consolidated Kessler action. In sum, the Settling Parties contend that every class member's potential TILA/HOEPA claim is fatally time-barred. We need not definitively resolve here this Rule 15(c) question. As we explain further below, see infra Part III.A.4, the District Courtby approaching the adequacy requirements from this perspectivedid not consider the serious remaining questions regarding whether (a) the named plaintiffs' interests are aligned with those of the absent class members, and (b) class counsel has vigorously prosecuted the action on behalf of the class. General Motors, 55 F.3d at 801. However, because the Parties have devoted so much of their arguments to the Rule 15(c) issue (both before us and before the District Court), we think it appropriate to take a detour to explain our serious doubts regarding the Settling Parties' argument. Rule 15(c)(1)(C) does not expressly refer to the addition of a new plaintiff; it facially applies only to an amendment that changes the party or the naming of the party against whom a claim is asserted.  Fed.R.Civ.P. 15(c)(1)(C) (emphasis added). However, our Court (and other courts) have also applied its requirements to the addition of new plaintiffs. See Nelson v. Allegheny County, 60 F.3d 1010, 1014 n. 7 (3d Cir. 1995); see also Advisory Committee Notes on the 1996 Amendments to Fed.R.Civ.P. 15 (The relation back of amendments changing plaintiffs is not expressly treated in revised rule 15(c) since the problem is generally easier [than that of amendments changing defendants]. Again the chief consideration of policy is that of the statute of limitations, and the attitude taken in ... Rule 15(c) toward change of defendants extends by analogy to amendments changing plaintiffs.). The Settling Parties contend that Nelson is dispositive here, and would bar any new-named plaintiff in these actions from filing an amended pleading that could relate back to an earlier-filed complaint. We disagree. In Nelson, anti-abortion protestors filed a class action against the City of Pittsburgh after they were arrested for protesting on the grounds of a private clinic. Id. at 1011. After the District Court denied class certification, the named plaintiffs filed an amended complaint asserting individual claims. Id. After two more years passed, the plaintiffs filed a fourth amended complaint adding two new plaintiffs. Id. at 1011-12. We affirmed the District Court's dismissal of these new plaintiffs' claims as time-barred: though it was undisputed that the statute of limitations was tolled for these individuals (as well as the entire class) until the District Court denied class certification, they had waited an additional two years to add themselves as named plaintiffs in the remaining individual action, and could not satisfy Rule 15(a)(1)(C)'s requirements. Id. at 1013-15. The two plaintiffs whose claims were dismissed in Nelson were new parties because, after class certification had been denied, they waited too long to seek to join the action through filing an amended complaint. By contrast, it is not at all clear that an absent class member in our case assuming he or she were added as a named plaintiff to file an amended pleading asserting TILA/HOEPA claims would constitute a new party for purposes of Rule 15(c). [15] As the Supreme Court has explained, absent members of a classat least in relation to an applicable statute-of-limitations periodare essentially parties to the class action while a certification decision is pending. See Am. Pipe & Constr. Co. v. Utah, 414 U.S. 538, 550, 94 S.Ct. 756, 38 L.Ed.2d 713 (1974) (when a putative class action is filed, the claimed members of the class st[and] as parties to the suit until and unless they receive[ ] notice thereof and cho[o]se not to continue (emphasis added)). However, under the Settling Parties' theory, an amended class complaint that adds a new named plaintiff could never relate back to the initial complainteven where the substitution was necessary because the existing named plaintiff had died or no longer had standing to pursue claims on behalf of the classbecause the failure to name that party as a plaintiff in the initial complaint was not the result of a mistake concerning the proper party's identity. Fed. R.Civ.P. 15(c)(1)(C). As our Seventh Circuit colleagues have explained, such a result fails the purpose of the class action device: Relation back to add named plaintiffs in a class action suit is of particular importance because of the interests of the unnamed class members. Suppose Mr. X files a class action and after the statute of limitations has run the defendant settles with X. If a named plaintiff cannot be substituted for X with relation back to the date of the filing of the original complaint, the class will be barred from relief. Phillips v. Ford Motor Co., 435 F.3d 785, 788 (7th Cir.2006). In this context, the better conclusion may be that an amended complaint adding a class member as a new named plaintiff need only satisfy Rule 15(c)(1)(B) to relate back to an earlier complaint. Under that subsection, the plaintiff must demonstrate only that his or her TILA/HOEPA claims arose out of the conduct, transaction, or occurrence set out ... in the original pleading. Fed.R.Civ.P. 15(c)(1)(B). Moreover, it strikes us as straightforward that the hypothetical TILA/HOEPA claims asserted by the Objectors arose out of the same transaction i.e., the allegedly fraudulent disclosures (and the omitted material disclosures) made in connection with the closing of the class members' loansas the named plaintiffs' RESPA claims. [16] Finally, even assuming an amended pleading adding a class member as a new named plaintiff could not relate back under Rule 15(c), the class action tolling doctrineover which the Objectors have spilled a considerable amount of ink before our Court and the District Courtmay come into play. In American Pipe & Construction Co., the Supreme Court held that where class certification has been denied because of the failure to demonstrate that the class was sufficiently numerous, the commencement of the original class suit tolls the running of the statute [of limitations] for all purported members of the class who make timely motions to intervene after the court has found the suit inappropriate for class action status. 414 U.S. at 553, 94 S.Ct. 756. The Court explained that refusing tolling in such a circumstance would frustrate the principal function of a class suit, because then the sole means by which members of the class could assure their participation in the judgment if notice of the class suit did not reach them until after the running of the limitation period would be to file earlier individual motions to join or intervene as partiesprecisely the multiplicity of activity which Rule 23 was designed to avoid in those cases where a class action is found superior to other available methods for the fair and efficient adjudication of the controversy. Id. at 551, 94 S.Ct. 756 (quoting Fed. R.Civ.P. 23(b)(3)). The Court later extended its holding in American Pipe to all asserted members of the class, not just as to interveners. Crown, Cork & Seal Co. v. Parker, 462 U.S. 345, 350, 103 S.Ct. 2392, 76 L.Ed.2d 628 (1983) (internal quotation marks and citation omitted). Our Court has applied American Pipe tolling in other circumstances. In Haas v. Pittsburgh National Bank, 526 F.2d 1083 (3d Cir. 1975), we held that the broad tolling principle in American Pipe applied to the claims of a named plaintiff substituted for the initial lead plaintiff (who, the District Court concluded, lacked standing after the class had been certified). Id. at 1097. In McKowan Lowe & Co., Ltd. v. Jasmine, Ltd., 295 F.3d 380 (3d Cir.2002), we held that American Pipe tolling applied to an intervener seeking to become lead plaintiff in a class action where the District Court had previously denied class certification for reasons unrelated to the appropriateness of the substantive claims for certification. Id. at 389. Finally, in Yang v. Odom, 392 F.3d 97 (3d Cir.2004), we extended our application of American Pipe tolling in McKowan to the filing of a subsequent class action where certification was denied in the prior suit based on the lead plaintiffs' deficiencies as class representatives. Id. at 99. In light of these precedents, the Objectors' argument seems to be that, if the named plaintiffs were judged inadequate based on their failure to bring TILA/HOEPA claims on behalf of the class, the class action tolling doctrine would toll the statute of limitations with respect to those claims in either (1) a subsequent action or (2) the current action (following substitution or intervention of a new named plaintiff after the class is decertified). The Settling Parties counter that class action tolling would be unavailable to the Objectorseven if class certification in the consolidated Kessler action were denied due to inadequate representationbecause no TILA/HOEPA claims have been asserted in that action. They note that some courts have suggested that class action tolling only applies to claims that are identical to those asserted in the initial class action that was decertified. See Raie v. Cheminova, Inc., 336 F.3d 1278, 1283 (11th Cir.2003); Weston v. AmeriBank, 265 F.3d 366, 368-69 (6th Cir.2001); Spann v. Community Bank of N. Va., No. 03-C-7022, 2004 WL 691785, at -7 (N.D.Ill. Mar. 30, 2004); Southwire Co. v. J.P. Morgan Chase & Co., 307 F.Supp.2d 1046, 1063 (W.D.Wis.2004); see also Johnson v. Ry. Express Agency, Inc., 421 U.S. 454, 467, 95 S.Ct. 1716, 44 L.Ed.2d 295 (1975) (noting that the tolling effect given to the timely prior filings in American Pipe ... depended heavily on the fact that those filings involved exactly the same cause of action subsequently asserted). However, there is a competing line of authority on that question. [17] See Cullen v. Margiotta, 811 F.2d 698, 720 (2d Cir.1987) (Notwithstanding the differences between the legal theories advanced by plaintiffs in the state court action and those advanced in the present action, we are persuaded that the American Pipe doctrine has applicability to the present action.), overruled on other grounds by Agency Holding Corp. v. Malley-Duff & Assocs., Inc., 483 U.S. 143, 107 S.Ct. 2759, 97 L.Ed.2d 121 (1987); Tosti v. City of L.A., 754 F.2d 1485, 1489 (9th Cir.1985) (We find no persuasive authority for a rule which would require that the individual suit must be identical in every respect to the class suit for the statute to be tolled.); accord, e.g., Arivella v. Lucent Techs., Inc., 623 F.Supp.2d 164, 180 (D.Mass.2009); In re Enron Corp. Sec. Litig., 465 F.Supp.2d 687, 717-19 (S.D.Tex.2006); Barnebey v. E.F. Hutton & Co., 715 F.Supp. 1512, 1528-29 (M.D.Fla.1989); In re Indep. Serv. Orgs. Antitrust Litig., No. MDL 1021, 1997 WL 161940, at -6 (D.Kan. Mar. 12, 1997). These Courts have reasoned that, where claims brought in a subsequent suit share a common factual and legal nexus with those brought in the prior class action, there is no persuasive reason for refusing to apply class action tolling, as the defendant will already have received adequate notice of the substantive nature of the claims against it and likely would rely on the same evidence and witnesses in mounting a defense. Cf. Crown, Cork & Seal, 462 U.S. at 355, 103 S.Ct. 2392 (Powell, J., concurring) (cautioning that class action tolling should apply only to subsequent claims that concern the same evidence, memories, and witnesses as the subject matter of the original class suit (internal quotation marks and citation omitted)). Under this theory, the Objectors have a strong argument that their TILA/HOEPA claims could qualify for class action tolling, as those claims appear to share a common factual and legal nexus with the RESPA claims the named plaintiffs have asserted; i.e., both claims are predicated on defendants' alleged predatory lending scheme and the charging of fraudulent and excessive closing fees. In the end, we need not resolve in this case the difficult questions of whether (1) a substituted named plaintiff in a class action may file an amended pleading that relates back to the initial pleading only if he or she can satisfy the requirements of Rule 15(c)(1)(C), or (2) the class action tolling doctrine would apply in a subsequent class actionor to the claims of a new, substituted named plaintiff in that same actionfollowing a determination that the named plaintiffs were inadequate for failing to plead potentially meritorious claims on behalf of the class. We simply note that the Court's apparent conclusionthat the failure to assert colorable TILA/HOEPA claims could not be remedied through any mechanism, even assuming that the class representatives were inadequate for failing to bring those claims (and despite their being released as part of the settlement)is a path we find troubling.