Class Action Tolling Rules Depend on Analyzing the Pleadings, Not Factual Inquiries.

Hildebrandt v. Staples the Office Superstore, LLC, 2020 WL 7090204 (Dec. 4, 2020)

Plaintiff filed the third of three wage and hour class actions against Defendant on behalf of general managers at Defendant’s California stores, alleging Defendant misclassified them as exempt. The trial court previously had denied class certification in the second action for failure to show common proof, finding too much individualized inquiry. The Second Appellate District found the trial court improperly applied the class action tolling rules stated in Jolly v. Eli Lilly & Co. (1988) 44 Cal.3d 1103 to this action and reversed summary judgment on that basis.

Plaintiff’s employment ended on June 20, 2013 but he did not filed suit until June 22, 2017, outside of the four-year period of the longest limitations’ statute. Plaintiff argued his claims were tolled by the prior two actions. Defendant argued the other actions could not have tolled Plaintiff’s claims because as to the first action Defendant contended the plaintiff there was a different type of general manager than Plaintiff here and as to the second action Defendant contended the denial of class certification on commonality grounds raised a “presumption” that Plaintiff’s claims should not be tolled, particularly since it should not have been unforeseeable that a misclassification claim would turn on individualized inquiry.[i] Plaintiff responded the tolling doctrine should be applied to protect the class action device’s efficiency and economy.[ii]

The trial court agreed the Batze presumption should apply and reasoned Defendant would be prejudiced if the tolling doctrine were applied because the claims in this action were sufficiently distinct from the claims in the prior two actions such that Defendant would not have been put on notice it needed to preserve evidence as to the general managers in all its stores. The trial court further held Plaintiff had failed to show that denial of certification was unforeseeable.

The Court of Appeal began its analysis with the Jolly case, in which the California Supreme Court adopted the holding in the United States Supreme Court’s rule articulated in Amer. Pipe & Constr. Co. v. Utah (1974) 414 U.S. 538. The Jolly court noted the two major policy considerations animating the American Pipe rule were (1) protecting the class action device, and (2) giving purpose to the statute of limitations. The first factor is often determined by whether the claims asserted in the class action were sufficiently similar to the individual claims of putative class members such that the members reasonably relied upon the class action in electing to postpone filing their own individual actions. The second factor was designed to protect defendants from plaintiffs “sleeping on their rights” and filing stale claims; the key issue in that instance is whether the defendant has received adequate notice of the substance of the claims and the number and generic identities of potential plaintiffs who might be affected by the class action. Under the American Pipe rule, trial courts must focus on the class action pleading.

By contrast, Batze focused on factual inquiries – whether the defendant could predict which absentee class members would believe they were injured to the point of wanting to file a lawsuit, or whether members had previously filed individual claims – rather than the notice requirement of the American Pipe rule. Given the class definitions of the first two actions, Defendant here could readily determine the number and generic identities of the general managers of its California stores and could do so without any individual review of damages, causation, or any of Defendant’s affirmative defenses. Moreover, both Batze and the Hildebrandt trial court improperly focused on the burden on a defendant to preserve evidence or gather witness statements relating to each managerial employee, which neither Jolly nor American Pipe held was a basis for refusing to toll the applicable statutes of limitations. Instead, the Second District held, the relevant consideration should have been the burden placed on the courts, i.e., the protection of the class action device as a means of efficient and economic disposition of potentially large numbers of claims; without a tolling rule, putative class members might feel compelled to file protective motions to intervene. Thus, the appellate court held, it was irrelevant whether Plaintiff had knowledge that the class certification had been “vigorously contested” before he filed his lawsuit – the only relevant analysis should have been the similarity between the Hildebrandt claims and those of the previous two class actions and whether Defendant had sufficient notice of who the putative class members might be in this action.

[i] Batze v. Safeway, Inc. (2017) 10 Cal.App.5th 440.

[ii] Jolly, supra, 44 Cal.3d at 1121.

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