W. EUGENE DAVIS, Circuit Judge.
Plaintiffs-Appellants John and Brenda Hall ("the Halls") were members of a certified class of securities fraud plaintiffs
The facts relevant to the instant case begin with an identical lawsuit brought against the Variable Annuity Life Insurance Company ("VALIC") by another set of plaintiffs. In April 2001, James Drnek and Maureen Tiernan filed a class action complaint ("the Drnek action") against VALIC alleging that VALIC had committed securities fraud by misrepresenting the prospective tax benefits of its annuities. In January 2004, the Drnek court certified a nationwide class of purchasers of VALIC deferred annuities. The plaintiffs in the instant case, the Halls, had purchased a VALIC deferred variable annuity in 2000 and were members of the Drnek class.
Following class certification, class counsel allowed the district court's expert and fact witness disclosure deadline to expire without identifying any expert witnesses or producing any expert reports. When class counsel finally filed an expert and fact witness list nearly six months after the disclosure deadline, VALIC immediately moved to strike the plaintiffs' witness list and exclude the witnesses' testimony. The district court agreed that class counsel's lapse was inexcusable and granted the motion on August 17, 2004. Without any expert or witness testimony, the court reasoned, the Drnek plaintiffs would not be able to prove a class-wide measure of damages, so the district court vacated its prior order granting class certification.
On December 21, 2009, the Halls filed the instant class action against VALIC in the Southern District of Texas reciting the same claims previously outlined in the Drnek action.
"We review a district court's grant of a motion to dismiss de novo." Bowlby v.
On appeal, the Halls first contend that the district court erred in its conclusion that their claim has been extinguished by the applicable statute of repose.
Class action lawsuits, like any other lawsuit, are subject to statutes of limitation and repose that limit the time within which a suit must be brought.
However, this tolling does not continue indefinitely. Under American Pipe, the statute of limitations for the putative class members resumes running when class certification is denied or when a certified class is decertified. See id. at 354, 103 S.Ct. 2392.
In the instant case, the district court found that the Drnek court's vacatur of certification was the functional equivalent of a denial of certification. As the district court pointed out, "While the Drnek court used the label `vacated,' the court also made it clear that the case would not proceed as a class action." Because the Drnek court's vacatur order "un-certified" the class and left no room for the action to proceed as a class, it had effectively denied certification.
The Halls assert that the district court erred by determining that a vacatur of certification is equivalent to a denial of certification. As the Halls emphasize, the requirements for certifying a class action are set forth in Federal Rule of Civil Procedure 23(a-b). But in this case, the Halls argue, the Drnek court vacated certification not because the class failed to meet the Rule 23 requirements, but to prevent the class members from being handicapped by the witness exclusion caused by class counsel. Because the court vacated certification without finding that the class should not be certified, the Halls contend that the court never addressed certification. As a result, the Halls argue, the Drnek class's original motion for certification was effectively reinstated and remained pending, entitling the putative class members to American Pipe tolling.
While the Halls' argument does have some theoretical appeal, it is ultimately unpersuasive for several reasons. First, although the Halls are correct that the vacatur of a certification order has the effect of nullifying that order, it is not necessarily true that a vacatur completely reinstates the parties' pre-existing procedural and temporal statuses. As many of our own supervisory instructions recognize, the vacatur of a judgment and the reinstatement of a pre-existing judgment are conceptually distinct actions.
Second, the Halls have offered us no real reason to distinguish between a decertification order and a vacatur of certification. Although the Halls insist that the vacatur of certification is different from de certification because vacatur does not involve a consideration of Rule 23's requirements, the Halls ignore the fact that the basis of the Drnek court's vacatur was fundamentally a Rule 23 class certification issue. The record verifies that the Drnek court vacated its class certification order because the plaintiffs could not "prove a class-wide measure of damages," a classic issue of common question predominance under Rule 23(b)(3).
Recognizing that a vacatur of class certification causes tolling to cease is also most consistent with our reasoning in similar cases. In Taylor v. UPS, we considered how long the statute of limitations remained tolled for an employment discrimination plaintiff who had been a member of a certified class of similarly situated plaintiffs. 554 F.3d at 513. Although the class's claims were dismissed on the merits in 2000, the dismissal was not affirmed on appeal until 2004. Id. After delving into American Pipe, its Supreme Court progeny, and finally its Fifth Circuit progeny, we found that "it is clear from the[] cases that if the district court denies class certification under Rule 23, tolling of the statute of limitations ends." Id. at 519. We reasoned.
Id. at 520.
Id. at 520-21 (quoting Crown, Cork & Seal, 462 U.S. at 351, 103 S.Ct. 2392). Because the Taylor plaintiff was still a member of a certified class even after a merits dismissal, we determined that he retained the right to rely on the class representatives to protect his interest — and American Pipe tolling — until 2004 when the dismissal was finally affirmed. Id. at 521. Such a conclusion honors both Rule 23's purpose as a vehicle of efficient group representation and limitation statutes' role in providing timely notice of adverse claims and preventing harmful delay. See id.; Crown, Cork & Seal, 462 U.S. at 352, 103 S.Ct. 2392.
The principles enunciated in Taylor weigh in favor of finding that American Pipe tolling ceases when a certification order is vacated. In the words of the Taylor court, the Drnek court's decision to vacate certification was "tantamount to a declaration that only the named plaintiffs were parties to the suit." 554 F.3d at 520. Through this lens, a vacatur of certification is no different than a decertification or a denial of certification. Plaintiffs whose class certification has been vacated simply have no reason to think that the ex-class representative will continue to protect their interests. While a putative class representative might later succeed in overturning the vacatur of certification, we have consistently deemed reliance upon the possibility of reversal as irrelevant for purposes of tolling.
As evidenced by the instant case, a contrary rule would allow non-class members to sit on their rights indefinitely while awaiting full appellate review of a decision that does not legally apply to them. In contrast, the resumption of a statute of repose after a vacatur of certification puts the onus of filing individual claims only on those putative class members who have officially lost their status as a class. Accordingly, we hold that the Drnek court's vacatur of certification caused American Pipe tolling to cease and the statute of repose to resume running. Because the Halls brought this action after the statute of repose expired, their claim has been extinguished.
For the reasons stated above, the judgment of the district court is AFFIRMED.