Court Opinion

ID: 4696082
Source: CourtListenerOpinion
Date Created: 2021-06-16 17:00:31.669382+00
Date Added: 2024-06-11T09:02:23.020159
License: Public Domain

PRECEDENTIAL

     UNITED STATES COURT OF APPEALS
          FOR THE THIRD CIRCUIT
               _____________

                    No. 19-3326
                   _____________

 BAHAA ALY; TINA DAVIS; PHILLIP GARLAND;
             ERINCH OZADA,
                               Appellants,
                   v.

VALEANT PHARMACEUTICALS INTERNATIONAL
                        INC,
         n/k/a Bausch Health Companies Inc.;
 J. MICHAEL PEARSON; ROBERT L. ROSIELLO;
                 DEBORAH JORN;
  ARI S. KELLEN; TANYA CARRO; HOWARD B.
                     SCHILLER
                  ______________

          On Appeal from the United States
     District Court for the District of New Jersey
                    3:18-cv-17393
       District Judge: Hon. Michael A. Shipp
                   _____________

              Argued October 20, 2020
                 ______________
   Before: GREENAWAY, JR., COWEN, and FUENTES,
                  Circuit Judges.

               (Opinion Filed: June 16, 2021)

Hung G. Ta [ARGUED]
JooYun Kim
Hung G. Ta, Esq. PLLC
250 Park Avenue, 7th Floor
New York, NY 10177

Peter Safirstein
Elizabeth Metcalf
Safirstein Metcalf LLP
14 Penn Plaza, 9th Floor
New York, NY 10122

Counsel for Appellants

Paul C. Curnin
Craig S. Waldman [ARGUED]
Simpson Thacher & Bartlett LLP
425 Lexington Ave.
New York, NY 10017-3954

Richard Hernandez
McCarter & English, LLP
Four Gateway Center
100 Mulberry Street
Newark, NJ 07102

Benjamin Sokoly
Winston & Strawn LLP

                             2
200 Park Avenue
New York, NY 10166-4193

Joseph L. Motto
Winston & Strawn, LLP
35 W. Wacker Drive
Chicago, IL 60601

Matthew Petrozziello
Elliot Greenfield
Debevoise & Plimpton LLP
919 Third Avenue
New York, NY 10022

Barry A. Bohrer
Schulte Roth & Zabel LLP
919 Third Avenue
New York, NY 10022

Counsel for Appellees

Michael J. Hampson [ARGUED]
Mark B. Kramer
Lawrence M. Rolnick
Shelia A. Sadighi
Rolnick Kramer Sadighi
1251 Avenue of the Americas
18th Floor
New York, NY 10020

Counsel of Amicus Appellant

                    ______________

                              3
                          OPINION
                       ______________

FUENTES, Circuit Judge.

        This is an appeal from the District Court’s order
dismissing the complaint filed by individual shareholders of
Valeant Pharmaceuticals Inc. (“Valeant” or the “Company”) as
untimely. A class action (the “Class Action”) was filed against
Valeant on behalf of investors who purchased its stock between
February 23 and October 20, 2015 (the “Relevant Period”).1
Appellants were putative members of that class, but by
December 2018, the District Court had still not ruled on class
certification. Rather than wait for a decision, Appellants filed
the present “opt-out” complaint bringing the same claims in
their individual capacities (the “Individual Complaint”). The
District Court dismissed the Individual Complaint as untimely
under the applicable two-year limitations period, concluding
that the tolling doctrine established in American Pipe &
Construction Company v. Utah did not apply.2 That doctrine
is central to this appeal.

       Putative class members may recover as part of the class

       1
               The Class Action, In re Valeant Pharms. Int’l
Inc. Sec. Litig., No. 15-cv-7658, was filed in the District Court
of New Jersey.
       2
              414 U.S. 538 (1974).

                               4
or seek individual recourse, but they generally cannot do both.3
Complications tend to arise, however, around the class-
certification stage. Members may initially intend to proceed as
part of a class, but certification may be denied months or years
later for reasons outside their control.4 Alternatively, during
the pendency of a class action, members may discover that
their individual claims are more valuable than those of the class
and decide to pursue them in an opt-out complaint even if
certification is likely. In either case, members are generally
allowed to initiate an individual action, but may run into
limitations issues given the delay. This is where American
Pipe comes in.

        When a class complaint is filed, American Pipe tolls the
limitations period governing the individual claims of putative
members. In the absence of such a rule, members may feel
compelled to file duplicative individual suits bringing the same
claims to protect their rights in the event certification is later
denied. Otherwise, members would risk allowing their
individual limitations periods to expire, potentially leaving
them with no recourse in the long run. The doctrine is therefore
intended to protect the rights of putative members while
simultaneously avoiding needless identical lawsuits.

       On appeal, the parties dispute whether American Pipe

       3
              See Fed. R. Civ. P. 23(c)(2)(B) (noting the
binding effect of a class judgment unless a member requests to
be excluded).
       4
                See Fed. R. Civ. P. 23(b)(3) (setting forth
certification criteria).

                                5
tolling applies to individual claims that are filed before a
certification decision is made. Appellants argue that the
limitations period is tolled regardless of the point at which
individual claims are filed. Appellees respond, and the District
Court agreed, that members who wish to benefit from
American Pipe must wait to file individual claims until after
the court rules on certification, which Appellants did not do.
For the reasons that follow, we conclude that American Pipe
tolled the limitations period for the claims raised in the
Individual Complaint. We will vacate and remand for further
proceedings.
                               I.5

                               A.

       The issue before us relates solely to the timeliness of the
Individual Complaint, but we will provide a brief recitation of
the facts for context. Valeant develops and manufactures

       5
               The District Court had jurisdiction under Section
27 of the Exchange Act (15 U.S.C. § 78aa) and 28 U.S.C. §
1331. We have jurisdiction under 28 U.S.C. § 1291. Our
review is de novo. Pension Tr. Fund for Operating Eng’rs v.
Mortg. Asset Sec. Trans., Inc., 730 F.3d 263, 268 (3d Cir.
2013). Because this is an appeal from a dismissal pursuant to
Federal Rule of Civil Procedure 12(b)(6), the facts in this
section are as alleged by Appellants. Foglia v. Renal Ventures
Mgmt., LLC, 754 F.3d 153, 154 n.1 (3d Cir. 2014) (“We are
required to accept as true all allegations in the complaint and
all reasonable inferences that can be drawn from them after
construing them in the light most favorable to the
nonmovant.”) (internal quotation marks omitted).

                                6
generic pharmaceuticals. Appellants purchased stock in
Valeant during the Relevant Period. Prior to their purchase,
the Company changed its business model to focus more on
acquiring new drugs from other companies rather than
developing its own.        This approach was intended to
significantly cut research-and-development costs and allow
Valeant to market its drugs “more efficiently.”6 In the years
that followed, Valeant made promising representations about
the Company’s financial performance based on its new
business model and approach. For instance, investors were
assured that Valeant’s superior marketing and leadership
resulted in a sales volume that was “greater than price in terms
of [Valeant’s] growth,” and that the Company was maintaining
“extremely high ethical standard[s]” in the process.7

       As a result of this and other factors, the price of Valeant
stock skyrocketed nearly 350% by the end of the Relevant
Period. Appellants argue that this value was artificially
inflated, however, and did not accurately represent the
Company’s financial health. Specifically, they argue that the
new business model “relied on a secret, Valeant-controlled
pharmacy network” and “deceptive practices that exposed the
Company to enormous risks.”8 This network purportedly
allowed Valeant to charge third-party purchasers and patients
much higher prices for its drugs than they were worth.
Following a government investigation and private litigation
against Valeant, the Company began disclosing its allegedly

       6
              App. 49 ¶ 5.
       7
              App. 49-50 ¶ 6 (emphasis omitted).
       8
              Appellants’ Br. at 6.

                                7
fraudulent practices in late 2015. A number of Valeant
executives were fired, and the value of its stock plummeted
almost 90% by August 2016. The Company’s shareholders
claim to have suffered over $76 billion in market capitalization
losses as a result, which prompted the filing of numerous class
and individual complaints, including the ones relevant to this
action.9
                              B.

        The first complaint in the Class Action was filed in
October 2015. Several other class complaints alleging the
same or similar violations were also filed around this time.
Those actions were consolidated, and the operative
consolidated complaint was filed on June 24, 2016 (the “Class
Complaint”). The Class Complaint alleged violations of
Sections 10(b) and 20(a) of the Exchange Act10 and Rule 10b-
5.11 Those claims were governed by a two-year statute of
limitations or a five-year repose period, whichever came first.12

       9
               In December 2019, Valeant announced that the
Class Action had been settled with respect to certain
defendants, excluding the ones named in the present action, for
$1.2 billion subject to court approval.
       10
              15 U.S.C. §§ 78j(b), 78t(a).
       11
              17 C.F.R. § 240.10b-5.
       12
              See 28 U.S.C. § 1658(b) (Section 10(b) claims
must be brought within “2 years after the discovery of the facts
constituting the violation” but, in any event, no later than “5
years after such violation.”). A defendant can only be liable
under Section 20(a) if there is first a finding of liability under
another chapter, such as Section 10(b). See 15 U.S.C. § 78t(a)

                                8
Valeant moved to dismiss the Class Complaint for failure to
state a claim, which the District Court denied.
        Prior to a certification decision, on December 19, 2018,
Appellants filed the Individual Complaint that is the subject of
this appeal, bringing the same claims under Section 10(b), Rule
10b-5, and Section 20(a), subject to the same two-year
limitations and five-year repose periods. Appellees moved to
dismiss the Individual Complaint as untimely, arguing that the
limitations period began to run in June 2016 when the Class
Complaint was filed and had therefore already expired.13 They
argued that American Pipe could not save the Individual
Complaint because it was filed before a certification decision
was made, and the doctrine was only intended to apply to post-
certification individual claims.

(“Every person who . . . controls any person liable under any
provision of this chapter . . . shall also be liable jointly and
severally with and to the same extent as such controlled
person.”) (emphasis added). The viability of the Section 20(a)
claims therefore depends on the viability of the Section 10(b)
claims. If the Section 10(b) claims are untimely, the Section
20(a) claims must be dismissed as well.
       13
               We do not reach this issue today, but the parties
dispute whether the Individual Complaint would have been
timely even if we were to conclude that tolling does not apply.
The District Court concluded that the limitations period began
to run when the Class Complaint was filed in June 2016
because at that point, Appellants had sufficient knowledge to
file their individual claims with sufficient detail and
particularity.

                               9
        The District Court agreed, adopting its reasoning in a
related case, and granted Valeant’s motion.14 The District
Court explained that judicial efficiency—a primary purpose of
American Pipe—“favors delaying individual claims until after
a class-certification denial”15 so that identical class and
individual suits are not unnecessarily proceeding at the same
time. It feared that extending American Pipe to individual
claims filed before a certification ruling would encourage
copy-cat suits, forcing the courts to deal with “dispositive
[individual] motions rehashing legal and factual issues” that
were already resolved in the class context.16 The District Court
also believed its decision did not prejudice Appellants’
individual rights because they could have taken several other
steps to protect them. For instance, they could have simply
filed the Individual Complaint within the initial two-year
period to be safe, or “waited until [after] the Court’s decision
on class certification” to take advantage of American Pipe
tolling.17 This appeal followed.

       14
              See App. 10-11 (“In Northwestern Mutual, the
Court concluded that American Pipe tolling did not apply to
the plaintiffs’ claims. The Court adopts the rationale
articulated in Northwestern Mutual and reaches the same
conclusion here.”) (citing Nw. Mut. Life Ins. Co. v. Valeant
Pharms. Int’l, Inc., No. 18-15286, 2019 WL 4278929 (D.N.J.
Sept. 10, 2019)).
       15
             Nw. Mut., 2019 WL 4278929, at *10 (quoting
China Agritech, Inc. v. Resh, 138 S. Ct. 1800, 1802 (2018)).
       16
              Id.
       17
              Id.

                              10
                                II.

                                A.

        Our analysis begins with the history of the American
Pipe doctrine. In that case, new parties filed an untimely
motion to intervene as plaintiffs in a class action after
certification was denied.18 The lower court denied the
intervention motion as untimely.19 In reversing that decision,
the Supreme Court explained that “the commencement of a
class action suspends the applicable statute of limitations as to
all asserted members of the class who would have been parties
had the suit been permitted to continue as a class action.”20 It
believed that a contrary rule “would deprive . . . class actions
of the efficiency and economy of litigation which is a principal
purpose of [Federal Rule of Civil Procedure 23]” because
“[p]otential class members would be induced to file protective
motions to intervene or to join in the event that a class was later
found unsuitable.”21 The Court further explained that this rule
was consistent with the function of limitations periods
generally, which is to prevent surprise through the revival of
old claims.22 But surprise is not an issue here, because the
filing of a class complaint notifies the defendant of the
substantive claims against it as well as the “number and generic

       18
              414 U.S. at 544.
       19
              See id.
       20
              Id. at 554.
       21
              Id. at 553.
       22
              Id. at 554.

                                11
identities of the potential plaintiffs who may participate in the
judgment.”23
        The Supreme Court extended the doctrine beyond the
intervention context in Crown, Cork & Seal Company v.
Parker, holding that it also tolled the limitations periods
governing the individual claims of class members.24 In doing
so, the Court explained that “[o]nce the statute of limitations
has been tolled, it remains tolled for all members of the putative
class until class certification is denied. At that point, class
members may choose to file their own suits.”25 The Court
recognized that extending American Pipe in this way could
lead to an increase in litigation, but while “a defendant may
prefer not to defend against multiple [individual] actions in

       23
                Id. at 555; see also Crown, Cork & Seal Co., Inc.
v. Parker, 462 U.S. 345, 353 (1983) (“Tolling the statute of
limitations . . . creates no potential for unfair surprise [in class
actions], regardless of the method class members choose to
enforce their rights upon denial of class certification.”). The
Court also considered the issue briefly in Eisen v. Carlisle &
Jacquelin, confirming that American Pipe applied to individual
opt-out actions. 417 U.S. 156, 176 n.13 (1974).
       24
              462 U.S. at 350 (“There are many reasons why a
class member, after the denial of class certification, might
prefer to bring an individual suit rather than intervene. The
forum in which the class action is pending might be an
inconvenient one, for example, or the class member might not
wish to share control over the litigation with other plaintiffs
once the economies of a class action were no longer
available.”).
       25
               Id. at 354.

                                12
multiple forums once a class has been decertified, this is not an
interest that statutes of limitations are designed to protect.”26
And in any event, “avenues exist by which the burdens of
multiple lawsuits may be avoided,” such as consolidation and
multidistrict proceedings.27
       The Supreme Court has since declined to apply the
doctrine in other contexts. In CalPERS v. ANZ Securities,28 the
Court held that American Pipe does not toll statutes of repose.
Unlike limitations periods, which generally begin to run when
the plaintiff has sufficient knowledge to file a complaint,
repose periods begin to run when the wrongdoing occurs,
regardless of the plaintiff’s knowledge.29 While limitations
periods discourage plaintiffs from sleeping on their rights,
repose periods reflect a policy determination that defendants
“should be free from liability after the legislatively determined
period of time.”30 Repose periods are therefore not generally

       26
                Id. at 353.
       27
              Id.; see also McKowan Lowe & Co. v. Jasmine,
Ltd., 295 F.3d 380, 389 (3d Cir. 2002) (noting that the Court
was “confident of the capacity of district courts to control
abuse or ineptitude” that may result as an extension of
American Pipe to certain class claims).
       28
                137 S. Ct. 2042 (2017).
       29
                Id. at 2049.
       30
                Id. (quoting CTS Corp. v. Waldburger, 573 U.S.
1, 9 (2014)).

                               13
subject to equitable tolling, and the Court saw no reason to
make an exception under American Pipe.31
        Later, in China Agritech, Inc. v. Resh, the Supreme
Court added that American Pipe does not permit “follow-on
class action[s]” to be filed “past expiration of the statute of
limitations.”32 There, the plaintiffs sought to file a new
untimely class complaint after certification was denied in the
previous attempt. They argued that American Pipe applies
equally to class complaints as it does to individual claims. In
rejecting this theory, the Court reasoned that “American Pipe
tolls the limitation period for individual claims because
economy of litigation favors delaying those claims until after a
class-certification denial. . . . With class claims, on the other

       31
                See id. at 2051 (“The purpose and effect of a
statute of repose . . . is to override customary tolling rules
arising from the equitable powers of courts. . . . [T]he Court
repeatedly has stated in broad terms that statutes of repose are
not subject to equitable tolling.”). The Court in ANZ also
rejected the plaintiffs’ constructive-filing argument—i.e., that
the timely filing of a class complaint actually “brings” a
plaintiff’s individual suit for purposes of statutory deadlines.
Id. at 2054-55. While the filing of a class complaint may put a
defendant on notice as to the substance of the claims against it,
it does not actually commence or “bring” the individual action.
If it did, there would be no need for a “tolling” rule at all, as
the individual complaint would have been deemed filed on the
same date the class action was commenced. Id. at 2055. To
the extent Appellants raise a constructive-filing argument here,
see Appellants’ Br. at 14, we find it unavailing under ANZ.
       32
              138 S. Ct. 1800, 1804 (2018).

                               14
hand, efficiency favors early assertion” so that the appropriate
representatives can be named.33 It continued that “[t]he time
to file individual actions once a class action ends is finite,” but
“the time for filing successive class suits, if tolling were
allowed, could be limitless.”34 The plaintiffs’ view would have
“allow[ed] the statute of limitations to be extended time and
again; as each class [was] denied certification, a new named
plaintiff could file a class complaint [to] resuscitate[] the
litigation.”35 The Court declined to construe the doctrine in
this way, which would certainly not promote the efficiency of
litigation contemplated by American Pipe.36

                                 B.

       Though the Supreme Court has not yet done so, several
other Courts of Appeals have considered the question before
us. Appellants ask us to join the view of the Second, Ninth,
and Tenth Circuits, which have held that American Pipe tolls
the limitations period for individual claims filed both before
and after the certification stage. As the Second Circuit
explained:
              American Pipe rests [on] the
              notion that class members are
              treated as parties to the class action
              “until and unless they received
              notice thereof and chose not to

       33
              Id. at 1806-07 (emphasis added).
       34
              Id. at 1809.
       35
              Id. at 1808.
       36
              Id. at 1811.

                                15
              continue.” Because members of
              the asserted class are treated for
              limitations purposes as having
              instituted their own actions, at
              least so long as they continue to be
              members of the class, the
              limitations period does not run
              against them during that time.
              Once they cease to be members of
              the class—for instance, when they
              opt out or when the certification
              decision excludes them—the
              limitation period begins to run
              again on their claims. Nothing in
              the Supreme Court decisions . . .
              suggests that the rule should be
              otherwise for a plaintiff who files
              an individual action before
              certification is resolved.37

The Second Circuit further reasoned that though American
Pipe was concerned with judicial economy, the doctrine was
primarily “created to protect class members from being forced
to file individual suits in order to preserve their claims.”38 The

       37
             In re Worldcom Sec. Litig., 496 F.3d 245, 255
(2d Cir. 2007) (quoting American Pipe, 414 U.S. at 551)
(emphasis added and internal citations omitted).
       38
              Id. at 256.

                               16
doctrine was not intended to prioritize convenience over its
core equitable purpose.39

        The Ninth and Tenth Circuits have followed the Second
Circuit’s lead. In In re Hanford Nuclear Reservation
Litigation, the Ninth Circuit held that pre-certification
individual claims were subject to tolling, noting that class
members “have a right to file at the time of their choosing[,]
and denying tolling would diminish that right.”40 The Tenth
Circuit also saw no reason to deny tolling, as doing so would
essentially “lock[] putative members into the class” until
certification in some cases, which makes particularly little
sense in light of how long it can take to reach that stage.41 In
fact, the Tenth Circuit believed that restricting American Pipe
in this way “ha[d] the potential to backfire” and could “compel
individual class members to make a choice as the limitations
period for their individual claim approaches: file an individual
action now or sit tight for a class certification decision, no
matter how long it might take.”42 The court anticipated that
“[l]itigants in this bind might file placeholder suits rather than

       39
              Id. (explaining that the doctrine was “not meant
to induce class members to forgo their right to sue
individually”).
       40
              534 F.3d 986, 1009 (9th Cir. 2008).
       41
               State Farm Mut. Auto. Ins. Co. v. Boellstorff, 540
F.3d 1223, 1233-34 (10th Cir. 2008) (noting the seven-year
period between the filing of the class complaint and
certification, and the potential costs associated with further
delay).
       42
              Id. at 1234.

                               17
risk placing their individual actions on ice during a potentially
prolonged class certification process.”43

       We are aware of only one federal appellate court that
has held otherwise.44 In Wyser-Pratte Management Company
v. Telxon Corporation, the Sixth Circuit held that the plaintiffs
had forfeited the benefit of American Pipe by filing individual
claims before a certification decision had been made.45 The

       43
               Id.
       44
               The parties appear to disagree as to whether the
First Circuit has squarely reached this issue. Glater v. Eli Lilly
& Company involved a personal-jurisdiction issue where the
plaintiff was party to a class action and related individual suit.
712 F.2d 735 (1st Cir. 1983). The plaintiff commenced her
individual action before certification was resolved. She argued
that her citizenship in the individual case should have been
determined as of the date the class action was filed and, in
doing so, attempted to invoke American Pipe principles. Id. at
739. In rejecting this theory, the First Circuit noted that
“[e]ven assuming that American Pipe may have some
relevance [in this context, it] . . . says nothing about [plaintiff’s]
ability to maintain a separate action while class certification is
still pending. The policies behind . . . American Pipe . . . would
be disserved[] by guaranteeing a separate suit at the same time
that a class action is ongoing.” Id. Though the First Circuit
invoked American Pipe principles in dicta, its holding was
confined to the personal-jurisdiction question before that court,
and we find its reasoning unpersuasive in any event for the
reasons described below.
       45
               413 F.3d 553, 569 (6th Cir. 2005).

                                 18
court believed its conclusion was consistent with cases like
Crown, which described American Pipe as tolling the
limitations period “until class certification is denied.”46 This
characterization arguably supports the conclusion that
American Pipe tolling is contingent on a certification denial.
The Sixth Circuit, which was the first to decide this issue, has
since called its conclusion into question, noting that Wyser-
Pratte “represents the minority rule” and that the court “ha[s]
doubts about its holding.”47

       With this in mind, we now turn to the merits.

                              III.

                              A.

       Appellants argue that the District Court misapplied
American Pipe, and that class members should not be forced to
wait until after a certification decision to benefit from the
doctrine. We agree, and adopt the reasoning of the Second,
Ninth, and Tenth Circuits. American Pipe makes clear that the

       46
              Id. (quoting Crown, 462 U.S. at 354).
       47
              Stein v. Regions Morgan Keegan Select High
Income Fund, Inc., 821 F.3d 780, 789 (6th Cir. 2016). Wyser-
Pratte also relied somewhat heavily on the district court’s
reasoning in In re Worldcom, which the Second Circuit later
reversed.    See supra (discussing the Second Circuit’s
approach); Wyser-Pratte, 413 F.3d at 569 (citing In re
Worldcom, Inc. Sec. Litig., 294 F. Supp. 2d 431, 452 (S.D.N.Y.
2003), rev’d, 496 F.3d 245 (2d Cir. 2007)).

                              19
filing of a class action is the operative event that tolls the
limitations period, and that once the period is tolled, it remains
tolled for all putative members until they are no longer part of
the class.48 The Court has not held that anything further, such
as a certification denial, is required to benefit from tolling.
Like the majority of our sister circuits, we see no reason not to
take the Supreme Court’s words at face value.49

       Tolling was primarily intended to benefit putative or
unidentified members of the class, who are considered “mere
passive beneficiaries of the action brought [on] their behalf.”50
Our conclusion that American Pipe is triggered automatically
upon the filing of a class complaint is consistent with the well-
founded principle that members need not actively monitor case

       48
              American Pipe, 414 U.S. at 553.
       49
               See In re Worldcom, 496 F.3d at 255 (“[T]he
Supreme Court has repeatedly stated that ‘the commencement
of a class action suspends the applicable statute of limitations
as to all asserted members of the class who would have been
parties had the suit been permitted to continue as a class
action.’ We see no reason not to take this statement at face
value.”) (quoting Crown, 462 U.S. at 353-54); see also
Weitzner v. Sanofi Pasteur Inc., 909 F.3d 604, 611 (3d Cir.
2018) (noting that American Pipe “included no express
restrictions in the broad language it used to describe the claims
to which tolling would apply”).
       50
              American Pipe, 414 U.S. at 552.

                               20
developments to benefit from Rule 23 protection.51 The
approach we adopt today is also consistent with the function of
limitations periods generally. As the Supreme Court affirmed
in both American Pipe and Crown, statutes of limitations are
intended to prevent the “surprise” revival of old claims that
plaintiffs failed to diligently pursue.52 But surprise is not an
issue in this context.53 This is particularly so under the facts
before us, where the Appellees were undisputedly aware of the
substantive claims at issue for more than two years before the
Individual Complaint was filed. Appellees will not be
prejudiced if they are required to defend themselves against
claims they have known about since 2016.54

        We also conclude that denying tolling in this context,
i.e., where members filed individual claims after the initial
limitations period expired but before a certification decision,
would serve no compelling purpose. In this posture, the
District Court’s rule would essentially “lock” putative

       51
              See id. (“Rule 23 is not designed to afford class
action representation only to those who are active participants
in or even aware of the proceedings.”).
       52
              See id. at 554; Crown, 462 U.S. at 353.
       53
              Crown, 462 U.S. at 353.
       54
              As Crown makes clear, a defendant’s desire not
to defend against similar claims in multiple proceedings is not
one that statutes of limitations are designed to protect. Id.
Appellees’ potential need to do so here does not constitute
prejudice.

                              21
members into the class until after certification.55 Class
members, even those intent on proceeding individually, would
be forced to delay filing their claims indefinitely just to take
advantage of American Pipe. Such a requirement is potentially
costly, and certainly inefficient.56 It can take years for a class
action to reach the certification stage, and, in the meantime,
members may “deem their own claims valuable enough” to
pursue in an opt-out complaint, or otherwise decide that “class
certification is doubtful.”57 The approach we adopt today will
allow members in either situation to promptly file their
individual actions, rather than indefinitely delay the resolution
of those claims for no good reason.

        We disagree with the District Court that Appellants
would not be prejudiced if their Individual Complaint is
dismissed as untimely because there were technically other
options available to them.58 Appellees do not dispute that
American Pipe applies to individual claims filed after
certification, and they suggest that Appellants could have

       55
               State Farm, 540 F.3d at 1233 (“[L]ocking
putative class members into the class until the class
certification decision makes little sense and could adversely
affect certain individuals.”).
       56
              See id.
       57
              Id.
       58
               See Nw. Mut., 2019 WL 4278929, at *10 (“Given
that Northwestern Mutual’s claims would be timely if [it] had
pursued a different course of action, the Court cannot conclude
that failing to expand American Pipe in this instance would
result in an injustice.”).

                               22
simply waited until that point if they wanted to avoid any
tolling and timeliness issues. But this approach makes little
sense for the reasons we have already articulated—it would
leave members who decide to proceed individually after the
limitations period would have normally run but before
certification in limbo for an indefinite period of time.59
Appellees also suggest that Appellants could have assumed
tolling did not apply and brought the Individual Complaint
within the initial two-year period to be safe. But the doctrine
would serve no purpose if members were expected to file their
individual claims within the first two years regardless. In fact,
suggesting that members should do so—just to avoid
timeliness problems—tends to encourage the duplicative “just
in case” litigation that American Pipe seeks to prevent.

                                B.

        Appellees respond that we should not be swayed by the
Second, Ninth, and Tenth Circuits’ approach because those
decisions pre-date ANZ and China Agritech. We recognize that
the Supreme Court’s recent jurisprudence tends to underscore
the importance of judicial economy, but we cannot construe the
doctrine in a way that would undermine its primary purpose—
to protect the individual rights of putative members. While
American Pipe was established in part to avoid duplicative
filings, it is, at its core, an equitable doctrine.60 That doctrine

       59
             This approach is especially untenable because of
the competing repose period in this case, as discussed infra.
       60
               See ANZ, 137 S. Ct. at 2052 (“The balance of the
Court’s reasoning [in American Pipe] . . . reveals a rule based
on traditional equitable powers, designed to modify a statutory

                                23
was “created to protect class members from being forced to file
individual suits in order to preserve their claims.”61 The
District Court’s view would surely cause at least certain
members to forfeit their individual rights, simply (and
ironically) because they filed too early.62

      We have previously recognized that while this Court
remains “concerned with judicial economy . . . it need not be

time bar where its rigid application would create injustice”);
see also In re Worldcom, 496 F.3d at 256 (“The district court
may be correct that its conception of the American Pipe rule
would reduce the number of individual suits filed by class
members. But this is beside the point. While reduction in the
number of suits may be an incidental benefit of the American
Pipe doctrine, it was not the purpose of American Pipe either
to reduce the number of suits filed, or to force individual
plaintiffs to make an early decision whether to proceed by
individual suit or rely on a class representative.”).
       61
              In re Worldcom, 496 F.3d at 256 (emphasis in
original).
       62
               See id. at 255 (“As the Supreme Court has
repeatedly emphasized, the initiation of a class action puts the
defendants on notice of the claims against them. A defendant
is no less on notice when putative class members file individual
suits before certification. . . . [T]he same is certainly true of
class members who file individual suits before the court
decides certification”) (internal citation omitted); see also In re
Hanford, 534 F.3d at 1009 (explaining that plaintiffs “have a
right to file at the time of their choosing and denying tolling
would diminish that right”).

                                24
achieved at the expense of litigants for whom the American
Pipe tolling rule was designed.”63 This observation rings
equally true here, and we are not convinced that efficiency
concerns should trump the doctrine’s core equitable purpose.64

       63
               McKowan, 295 F.3d at 389.
       64
                In theory, extending American Pipe to pre-
certification individual claims may lead to an increase in
litigation. See Crown, 462 U.S. at 353 (recognizing the risk of
increased litigation but noting that this was not an interest
limitations periods are designed to protect); see also ANZ, 137
S. Ct. at 2054 (“District Courts, furthermore, have ample
means and methods to administer their dockets and to ensure
that any additional filings proceed in an orderly fashion.”). But
this risk may not be as high as Appellees suggest. Common
sense tells us that when a member determines his or her claims
are substantially more valuable than those of the class, he or
she is likely to pursue an individual complaint no matter what.
See State Farm, 540 F.3d at 1233 (members may decide to
proceed individually because they “deem their own claims
valuable enough”). Members who file individual claims before
certification are likely the same members who—if forced to
wait until after certification—would have opted out regardless.
See id. (“[M]ost litigants with claims valuable enough to
pursue separately will likely have filed their individual claims
before the end of their own limitations period. As such, the
group that would file individual suits during the window at
issue here is likely to approximate in number the group that
would later opt-out if a class is certified or file individual suits
if not.”). Our decision will not prompt an influx of additional

                                25
And though China Agritech describes “efficiency and
economy of litigation” as the “watchwords of American
Pipe,”65 that decision does not cast any doubt on the approach
we adopt today. There, the Supreme Court declined to extend
American Pipe in a way that would have allowed for the
constant revival of otherwise untimely class claims.66 Our
conclusion that American Pipe tolls the limitations period
governing pre-certification individual claims does not pose the
risk of endless tolling.67

       Appellees also suggest that this Court’s decision in
Weitzner is inconsistent with the Second Circuit’s approach.
Weitzner did not involve the issue that is before us, but we
observed in passing that “American Pipe is designed to protect
individual claims filed after the denial of class certification.”68
We recognize that American Pipe tolling may have been
anticipated to apply most commonly in the post-certification

suits so much as it will simply avoid an unnecessarily delayed
filing of opt-out claims.
       65
              138 S. Ct. at 1811.
       66
              Id. at 1808.
       67
               See id. at 1809. Nor does the Court’s decision in
ANZ compel a different result. In ANZ, the Court declined to
extend American Pipe to statutes of repose. 137 S. Ct. at 2051.
Repose periods are fundamentally different from statutes of
limitation like the one before us. Id. The ANZ decision also
rejected a “constructive filing” theory that is not dispositive in
this case. Id. at 2054-55.
       68
              Weitzner, 909 F.3d at 610.

                                26
context, and that this idea is accordingly reflected in the
relevant case law.69 But nothing in our precedent suggests that
American Pipe applies exclusively to post-certification claims.
What we can discern from the existing jurisprudence, however,
is that American Pipe tolling begins, for all putative members,
when the class action is commenced. Our decision reflects a
straightforward application of this principle.
                              C.

       Finally, we also find the District Court’s holding
untenable because it would lead to counterintuitive results.
Should we affirm that decision, individual claims filed well
before certification could be dismissed as untimely, while other
claims filed at a much later date would be allowed to proceed.
Class members who were “contemplating opting out and filing
their own lawsuits would be penalized for giving the
defendants and the Court earlier notice.”70 We have sought to
avoid similar outcomes in other contexts and see no compelling
reason not to do so here.71

       69
               See, e.g., China Agritech, 138 S. Ct. at 1804.
       70
             Winn-Dixie Stores, Inc. v. E. Mushroom Mktg.
Coop., No. 15-6480, 2019 WL 130535, at *8 (E.D. Pa. Jan. 8,
2019).
       71
               See Wallach v. Eaton Corp., 837 F.3d 356, 374
(3d Cir. 2016) (explaining, in the presumption-of-timeliness
context, that “if the presumption of timeliness applied only to
certified classes, . . . motions to intervene brought prior to class
certification might be deemed untimely, even though those
same motions would be timely if brought years later, after a
class was certified. The illogic of such result and the goals of

                                27
        Appellees respond that “the potential for [anomalous]
results exists under any equitable tolling doctrine,” and so we
need not worry much about it in this scenario.72 Even if that
were true, the issue is compounded by the competing statute of
repose in this case. As evidenced by the timeline before us,
putative members may not become aware of any wrongdoing
until after a class complaint is filed or the fraud is otherwise
made public.73 But by that point, the repose period is likely to
have been already running in the background for some time.74
In the event a certification ruling is made more than five years
after the wrongdoing took place, some members would be
forced to file individually before certification regardless. If
they did, however, the District Court’s rule would likely
require dismissal of those claims under the limitations period
because they would have been filed before certification. But if

efficiency . . . emphasized . . . in American Pipe militate that
we extend the presumption of timeliness . . . to the pre-
certification context.”) (emphasis added); McKowan, 295 F.3d
at 389 (explaining that there was “no good reason” why the
class claims of intervening members “should not be tolled
where the district court had not yet reached the issue of the
validity of the class”).
       72
              Appellees’ Br. at 7.
       73
               See ANZ, 137 S. Ct. at 2049 (noting that repose
periods begin to run when the wrongdoing occurs); see also Br.
of Amicus Curiae Fir Tree Capital Management LP in Support
of Plaintiffs-Appellants at 9 (“Amicus Br.”).
       74
             For example, in this case, the first fraudulent
misrepresentation is alleged to have been made in 2013, but the
Class Complaint was not filed until 2016.

                              28
those members waited until after certification to take
advantage of American Pipe, their claims could be barred by
the repose period. We cannot imagine that American Pipe was
intended to force plaintiffs into this sort of bind.75
        This issue is perhaps best illustrated by example.
Imagine that a company makes a fraudulent statement in 2020.
The fraud is not uncovered until 2022, and a class complaint is
filed the same year.76 As here, the class claims (and
corresponding individual claims) are governed by a two-year
limitations period and a five-year repose period, whichever
comes first. By 2024, the class action is progressing, but there
has been no certification ruling. Class members are comforted
by the fact that their individual claims are covered by American
Pipe and see no reason to file individually at that time. But by
early 2025, there is still no certification ruling, and anxious
members cognizant of the repose period decide to file their own
complaints and proceed individually instead. A class is finally
certified in 2026. In this scenario, the District Court’s rule
would require us to find the individual complaints untimely
under the limitations period because they would have been

       75
               Nothing in ANZ suggests otherwise. Though the
Supreme Court declined to extend tolling to statutes of repose,
it did not consider the interplay of repose and limitations
periods in this context or the problems likely to arise. See ANZ,
137 S. Ct. at 2049-54.
       76
               For purposes of this illustration, we assume the
statute of limitations would have, in the absence of tolling,
started to run upon the filing of the class complaint. Appellees
argue that this is the case here, though we need not decide that
issue today.

                               29
filed pre-certification and therefore not subject to tolling. But
if those members waited to file until after certification to take
advantage of American Pipe, the repose period would have
already expired. Members in this position would be without
any individual recourse, which is precisely the result American
Pipe seeks to avoid.
        Appellees downplay the repose issue by pointing out
that it will not be a universal problem. Not every case involves
a competing repose period, but that does not change the fact
that the one before us does, as will any class action bringing
similar securities fraud claims. We also find the analysis of the
amicus, which points to 92 recent class actions where
certification was not resolved within five years of the
beginning class period, persuasive on this point.77 Under the
District Court’s rule, any member whose claims are subject to
a repose period may very well have no choice but to file within
the initial two years to avoid forfeiting their individual rights.
The tolling doctrine would serve no purpose in this context,

       77
                The issue of whether the repose period has
expired is not before us today. But the timing in this case
illustrates the problems that may arise in similar scenarios.
Here, the first misrepresentation alleged in the Class Complaint
was made in January 2013, but a class was not certified until
May 2020. If Appellants had waited until after certification to
file their Individual Complaint with the hopes of benefitting
from American Pipe tolling, their claims could have been
barred by the repose period, and they would have been “forced
to participate in the class.” Amicus Br. at 10.

                               30
and we are not convinced that the Supreme Court intended or
envisioned such a result.78
                            IV.

        For these reasons, we conclude that the statutes of
limitations governing the claims raised in the Individual
Complaint are subject to American Pipe tolling. Because we
hold that the limitations period has been tolled, we need not
decide whether the Individual Complaint was timely in the
absence of tolling.

       We will vacate the District Court’s order and remand
the case for further proceedings consistent with this opinion.

       78
               Even where there is a competing repose period at
issue, members will generally always have the option to
proceed as part of the class or file their individual claims within
the initial limitations period without relying on tolling. But
American Pipe was intended to protect the individual rights of
members while encouraging, but not forcing, class
participation. See American Pipe, 414 U.S. at 551-53; Crown,
462 U.S. at 351-53 (noting that Rule 23 encourages class
participation but that members must still have a “meaningful”
right to opt out and pursue individual claims, which justifies
the tolling rule) (citing Eisen, 417 U.S. at 176 n.13). And for
the same reasons we have already expressed, it makes little
sense to establish a tolling rule if members are encouraged to
file their individual claims within the initial two-year period
regardless, under the assumption that tolling may not apply.

                                31