Suit tolls statute of limitation period

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Longstanding precedent provides that statutes of limitation are tolled during the pendency of a lawsuit over the same matter.

But other precedent provides that this rule does not apply if the first suit is voluntarily dismissed by the plaintiff.

On May 26, the 7th Circuit reconciled the two rules to hold that, even though a proposed class action is voluntarily dismissed, the limitations period is nevertheless tolled with respect to other members of the class.

On May 18, 2009, Park Bank alleged in Wisconsin state court that on Dec. 9, 2005, Atlas Heating and Sheet Metal Works Inc. violated the Telephone Consumer Protection Act by sending unsolicited faxes to it and many other persons (the statute of limitations is four years).

On Mar. 16, 2010 (more than four years after the fax), prior to the state court decision whether to certify a class, Park Bank voluntarily dismissed its complaint.

Three days later, Isaac Sawyer, another recipient, filed his own complaint, also in state court, seeking class certification.

Atlas Heating removed the case to federal court, and moved to dismiss the complaint as barred by the statute of limitations.

The district court denied the motion, and Atlas Heating sought interlocutory review. The 7th Circuit granted review, but affirmed, in an opinion by Judge Frank Easterbrook.

The court was faced with seemingly conflicting precedents.

American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974), holds that commencement of a class action tolls the statute of limitations as to all members of the purported class who would have been parties, had the suit been allowed to proceed as a class action.

However, Lee v. Cook County, 635 F.3d 969 (7th Cir. 2011) holds that, when a suit is voluntarily dismissed, the statute of limitations is treated as running continually, and is not tolled.

The 7th Circuit distinguished Lee, because it and other cases reaching the same result all involved sequential suits filed by the same person.

The court noted that Sawyer had no means to protect his interest — he could not prevent Park Bank from dismissing the suit, and Wisconsin law does not provide for judicial review of voluntary dismissals.

Furthermore, while Sawyer could have moved to intervene in Park Bank’s suit, the Supreme Court’s motivating rationale in American Pipe was to eliminate the need for members of a putative class to intervene in order to protect their interests.

The court concluded this rationale would be thwarted if the statute of limitations were not tolled as to Sawyer.

Atlas Heating tried to distinguish American Pipe by arguing that it only applies when both suits were filed in federal court. But the court concluded that the public policy is the same, regardless of the jurisdiction: “Sawyer’s reliance interests were the same as if the first suit had been filed in federal court.”

Atlas Heating further tried to distinguish American Pipe based on In re Copper Antitrust Litigation, 436 F.3d 782 (7th Cir. 2006), in which the court held that a class action filed in state court did not toll the time to file suit in federal court.

In Copper Antitrust, however, the claims were not the same. The state court action alleged violations of state antitrust law, and the federal suit alleged violations of federal antitrust law.

The court explained, “The point of that decision, however, was not that a change of forum was dispositive; it was that state and federal antitrust laws differ. They create different legal claims.”

Finally, the court found that it would be bad public policy not to toll the statute of limitations, lest the defendant “buys off the original plaintiff as soon as the statute of limitations runs, hoping to extinguish the class members’ claims.”

David Ziemer can be reached at [email protected].

What the court held

Case: Sawyer v. Atlas Heating and Sheet Metal Works Inc., No. 10-3672

Issues: When a proposed class representative voluntarily dismisses a class action, is the statute of limitations tolled as to other class members, while the lawsuit was pending?

Holdings: Yes. The remaining members are entitled to the opportunity to litigate the action.