Rader v. Greenberg Traurig, LLP – 6/23/2015

July 6, 2015

Arizona Court of Appeals Division One declines to adopt cross-jurisdictional tolling in a class action in light of Arizona’s savings statute, A.R.S. § 12-504.

In 2006, Mortgages Ltd., a now-bankrupt entity, retained Greenberg Traurig, LLP (the “Firm”) to review and draft private offering memoranda to solicit investors.  The plaintiffs in this matter (“Plaintiffs”) claimed that they relied on these offering memoranda to invest in securities offered by Mortgages Ltd. between 2006 and June 2008.   

On May 11, 2010, Mortgages Ltd. investors filed a putative class action against the Firm in the United States District Court for the District of Arizona.  The class was later certified, a settlement agreement was preliminarily approved, and Plaintiffs were notified that they could opt-out of the settlement.  On August 31, 2012, the date that the district court confirmed that Plaintiffs had excluded themselves from the class and the settlement, they filed suit against the Firm.  The Firm moved to dismiss the action as barred under the statute of limitations.  Plaintiffs agreed that if no tolling applied their claims were untimely but argued that the limitations period was tolled during the entire time they were members of the class.  The superior court granted the Firm’s motion and dismissed the action.  Plaintiffs timely appealed.

The Arizona Appeals Court affirmed, declining to adopt cross-jurisdictional tolling whereby the filing of a class action in one jurisdiction (federal court in this case) would toll the limitations period for claims by class members in a different jurisdiction during the pendency of the class action.  In American Pipe and Construction Company v. Utah, the Supreme Court adopted intra-jurisdictional tolling and held 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.”  414 U.S. 538, 554 (1974).  Different state courts, however, have taken different positions on American Pipe tolling and related tolling doctrines, and the Arizona Supreme Court has not resolved these questions.  See Albano v. Shea Homes Ltd. P’ship, 227 Ariz. 121 (2011).

In this case the Court held that cross-jurisdictional tolling was inappropriate because class certification was not denied in the federal court action, and courts in other jurisdictions have been reluctant to extend American Pipe tolling under such circumstances.  Furthermore, although there are federal cases that allow American Pipe tolling even where a class has been certified, those cases are distinguishable because, unlike Arizona, there is no federal savings statute.  Arizona’s savings statute, A.R.S. § 12-504, specifically provides a scheme for a limited form of cross-jurisdictional tolling.  The Court declined to adopt a tolling doctrine broader than that enacted by the legislature in the savings statute.  Because the savings statute did not apply under its plain language, Plaintiffs’ claims were time-barred.

Presiding Judge Thumma authored the opinion; Judges Orozco and Brown concurred.