                                                                                                                           Opinions of the United
2002 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


7-17-2002

McKowan Lowe Co v. Jasmine Ltd
Precedential or Non-Precedential: Precedential

Docket No. 00-3728




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PRECEDENTIAL

       Filed June 26, 2002

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 00-3728

MCKOWAN LOWE & CO., LTD.

v.

JASMINE, LTD., IRVING MANGEL, JAMES STEWART,
JACK AEZEN, LUJACO, LTD., FISHBEIN & COMPANY,
P.C., SAMUEL J. MANGEL, UNITED JERSEY BANK,
MARVIN WEISS, ARTHUR ANDERSEN, L.L.P.

(D.N.J. No. 94-cv-05522)

HARRY BERGER, individually and on behalf of a class
similarly situated; BERNARD L. CUTLER, individually and
on behalf of a class similarly situated

v.

JASMINE LTD., IRVING M. MANGEL, MELVIN TWERSKY,
EDWARD W. MASKALY, SAMUEL J. MANGEL, STEVEN B.
SANDS, MARTIN SANDS, THOMAS CIOCCO, SANDS
BROTHERS & CO., MCKOWAN LOWE & COMPANY, LTD.,
EVELYN WONG, TONY NGAI, LUJACO, LTD.

(D.N.J. No. 96-cv-02318)

HARRY BERGER and BERNARD CUTLER,
individually and on behalf of a class similarly situated,
       Appellants




On Appeal from the United States District Court
for the District of New Jersey
(D.C. Civil Nos. 94-cv-05522 & 96-cv-02318)
District Judge: Hon. Joseph H. Rodriguez

Argued October 29, 2001

Before: SLOVITER, NYGAARD and AMBRO, Circuit    Judges

(Filed June 26, 2002)

       Lowell E. Sachnoff (Argued)
       M. Marshall Seeder
       John W. Moynihan
       Sachnoff & Weaver, Ltd.
       Chicago, IL 60606

       Bryan L. Clobes
       Miller, Faucher Cafferty and
 Wexler LLP
Philadelphia, PA 19102

Michael I. Behn
Futterman & Howard, Chtd.
Chicago, IL 60603

 Attorneys for Appellants

Stephen L. Dreyfuss
Hellring, Lindeman, Goldstein
 & Siegal
Newark, NJ 07102

 Attorney for Appellee Jasmine Ltd.
and Irving Mangel, Samuel J.
Mangel, United Jersey Bank,
Marvin Weiss, Melvin Twersky,
Edward W. Maskaly

                         2


Richard G. Placey
Montgomery, McCracken, Walker
 & Rhoads, LLP
Cherry Hill, NJ 08002

 Attorney for Appellees
James Stewart, Jack Aezen,
Lujaco Ltd., Fishbein & Company,
P.C.

Richard A. Roth
Littman, Krooks, Roth & Ball
New York, NY 10017

 Attorney for Appellees
Steven B. Sands, Martin Sands,
Sands Brothers & Co., Evelyn
Wong, Tony Ngai

Joseph M. Feeney
Cherry Hill, NJ 08002

 Attorney for Appellee
Thomas Ciocco

John M. George, Jr. (Argued)
Lisa M. Cipriano
John H. Mulhern
Sidley, Austin, Brown & Wood
Chicago, IL 60603

Nicholas M. Kouletsis
Ralph R. Smith III
Pepper Hamilton LLP
Cherry Hill, NJ 08002

                         3
       Of Counsel:
       Barbara A. Mather
       Pepper Hamilton LLP
       Philadelphia, PA 19103

        Attorneys for Appellee
       Arthur Andersen LLP

       Of Counsel:
       Meyer Eisenberg
        Deputy General Counsel
       Mark R. Pennington
        Assistant General Counsel
       David M. Becker
        General Counsel
       Jacob H. Stillman
        Solicitor
       Securities & Exchange Commission
       Washington, D.C. 20549

        Attorneys for Securities and
       Exchange Commission Appellants
       Amicus-Curiae

OPINION OF THE COURT

SLOVITER, Circuit Judge:

This interlocutory appeal of the District Court’s order
denying class certification is before us on this court’s grant
of a petition for review pursuant to Rule 23(f) of the Federal
Rules of Civil Procedure. The issue framed by the petition
is

       [w]hether the commencement of a class action tolls the
       limitations period for intervening class members to
       bring claims on behalf of a class where a determination
       has not been made whether those claims are
       appropriate for class certification?

App. at 75.

Plaintiff-appellant Bernard Cutler appeals from the
District Court’s order granting summary judgment against

                                 4


Cutler’s class claims alleging violations of Section 11 of the
Securities Act of 1933, 15 U.S.C. S 77k (2002), which
creates a private right of action for claims of material
misrepresentation or omission in a registration statement.
The District Court concluded that although the statute of
limitations was tolled for Cutler’s individual claims, his
claims on behalf of the class were time-barred.

Under the Supreme Court’s decision in American Pipe &
Construction Co. v. Utah, 414 U.S. 538 (1974), the filing of
a class action complaint tolls the statute of limitations for
all members of the putative class who, following the denial
of certification, intervene or file an independent action. See
also Crown, Cork & Seal Co. v. Parker, 462 U.S. 345, 350
(1983). It is therefore established that American Pipe tolling
applies to intervenors who assert claims in their individual
capacity, but this court has not yet decided whether
American Pipe tolling applies to an intervenor as a proposed
class representative where the class has neither been
certified nor definitively rejected.

I.

BACKGROUND

In December 1993, Jasmine, Ltd., a shoe importer
headquartered in New Jersey, completed an initial public
offering (IPO) of common stock. In November 1995, Harry
Berger, a shareholder, filed suit in federal court on behalf
of himself and a class of similarly situated purchasers
alleging violations of federal and state securities laws in
connection with the IPO.1 According to Berger, Jasmine and
members of its management, Irving Mangel, Samuel
Mangel, Melvin Twersky, Edward Maskaly and Thomas
Ciocco, Jasmine’s auditors, Arthur Andersen LLP and
Fishbein & Co, P.C., the IPO underwriter, Sands Brothers
& Co., Ltd. and two of its principals, Jasmine’s buying
agent in Hong Kong, McKowan Lowe & Co., Ltd, and two of
_________________________________________________________________

1. Suit was originally filed in the United States District Court for the
Northern District of Illinois and then transferred at Berger’s motion to
the District of New Jersey.

                                5


its officers, Evelyn Wong and Tony Ngai, and a corporation
controlled by the Mangels, Lujaco, Ltd., all participated in
a scheme to misstate Jasmine’s financial statements to
conceal Jasmine’s substantial debt to McKowan Lowe.
Based on similar charges, in 1997 the SEC had obtained
consent judgments against members of Jasmine’s former
management, under which they agreed to pay fines ranging
from $100,000 to $7,293. Securities & Exchange
Commission v. Irving M. Mangel, No. 97-1977 (D.D.C.),
Litigation Release No. 15465, 65 S.E.C. Docket 645 (Aug.
28, 1997), available at http://www.sec.gov/litigation/
litreleases/lr15465.txt. Tony Ngai and Evelyn Wong of
McKowan Lowe also settled with the SEC. Ngai King Tak,
Securities Act of 1933 Release No. 7443, 65 S.E.C. Docket
540 (Aug. 28, 1997), available at http://www.sec.gov/
litigation/admin/3438988.txt. Jasmine itself is currently in
Chapter 7 liquidation proceedings.

The statute of limitations for liability created under
Section 11, the only claim implicated in this appeal, is "one
year after the discovery of the untrue statement or the
omission, or after such discovery should have been made
by the exercise of reasonable diligence." 15 U.S.C. S 77m.
The District Court found that "Berger was first given
inquiry notice [by Jasmine’s] May 19, 1995 form 8-K which
disclosed irregularities discovered by BDO Seidman, and
that warnings in the prospectus by themselves did not
create notice." App. at 31. Berger’s complaint was filed in
November, 1995 and was thus within the applicable statute
of limitations. The District Court found a class would
present common questions of law and fact, and would be
sufficiently numerous, but it rejected Berger’s motion for
class certification in August of 1998 based on its
determination that Berger’s claims failed to meet Rule 23’s
typicality requirement and because Berger would not
provide adequate representation of the class. App. at 15.

On September 9, 1998, promptly after the District
Court’s opinion was filed, Bernard Cutler successfully
moved to intervene. Absent tolling, Cutler’s claims would be
time-barred, as he did not intervene until well over the
expiration of the one-year statute of limitations. The
District Court determined that Cutler could maintain his

                                6


individual claims because "from November 17, 1995[when
Berger filed his complaint,] until August 6, 1998 when
[Berger’s motion for] class certification was denied, the
statute of limitations was tolled" under American Pipe. App.
at 31. The District Court declined to evaluate Cutler’s
qualifications to represent a subclass of the original Berger
class, as it rejected Cutler’s proposed Section 11 class
claim only on the ground that it was barred by the statute
of limitations.

II.

JURISDICTION AND STANDARD OF REVIEW

The District Court had jurisdiction pursuant to 15 U.S.C.
S 77v. On November 27, 2000, this court granted Cutler’s
Rule 23(f) petition. Rule 23(f) was "adopted under the power
conferred by 28 U.S.C. S 1292(e)." Fed. R. Civ. P. 23(f)
advisory committee’s notes. The parties agree that this
court reviews de novo the District Court’s summary
judgment dismissal of Cutler’s class claims for failure to
comply with the statute of limitations. See, e.g., Lusardi v.
Xerox Corp., 975 F.2d 964, 974 (3d Cir. 1992); Davis v.
Thornburgh, 903 F.2d 212, 213 n.2 (3d Cir. 1990).

III.

DISCUSSION

On appeal, Cutler asserts that the District Court erred in
refusing to toll the statute of limitations for his class
claims. He contends that tolling his class claims is most
consistent with the policies undergirding American Pipe,
and is supported by the authority of the majority of the
courts to consider the issue. Cutler concedes that his case
would be considerably more problematic if the District
Court had conclusively determined that this case were
inappropriate for resolution via class action. To distinguish
his own circumstances from that situation he points out
that the District Court rejected Berger’s prior motions to
certify a class based entirely on its perception of Berger’s

                                7


inadequacies as the proffered representative. He suggests
that this case, like many securities actions, presents a
paradigmatic example of the sort of claims the class device
was designed to help vindicate--those claims too numerous
and small to warrant individual action but conjoined
representing a substantial case. See, e.g., Eisenberg v.
Gagnon, 766 F.2d 770, 785 (3d Cir. 1985) (observing
"[c]lass actions are a particularly appropriate and desirable
means to resolve claims based on the securities laws, ‘since
the effectiveness of the securities laws may depend in large
measure on the application of the class action device’ ")
(quoting Kahan v. Rosenstiel, 424 F.2d 161, 169 (3d Cir.
1970)); John C. Coffee, Jr., Understanding the Plaintiff ’s
Attorney: The Implications of Economic Theory for Private
Enforcement of Law Through Class and Derivative Actions,
86 Colum. L. Rev. 669, 681-83 (1986) (applying economic
theory to explain frequent use of class procedure in
securities litigation).

The Supreme Court has enunciated two rationales for the
American Pipe rule, which tolls the statute of limitations for
putative members of a class pending denial of class
certification. First, class actions are "designed to avoid,
rather than encourage, unnecessary filing of repetitious
papers and motions." American Pipe, 414 U.S. at 550. If the
claims of unnamed plaintiffs were not tolled, claimants
would have an incentive to file claims themselves to protect
their causes of action, "precisely the multiplicity of activity
which Rule 23 was designed to avoid." Id. at 551; see also
Crown Cork & Seal Co., 462 U.S. at 350-51.

The American Pipe rule encourages unnamed plaintiffs to
rely on the class action already filed on their behalf. The
class action procedure is protective of passive, even
unwitting, members of the class. As the Court observed,
"[n]ot until the existence and limits of the class have been
established and notice of membership has been sent does
a class member have any duty to take note of the suit or to
exercise any responsibility with respect to it in order to
profit from the eventual outcome of the case." American
Pipe, 414 U.S. at 552.

Second, the Court in American Pipe held that the tolling
rule is consistent with the twin functions of statutes of

                                8


limitations--providing defendants with timely notice and
avoiding stale claims--because the action is tolled only by
timely service of the class complaint on the defendants by
the named plaintiffs. Id. at 554-55; see also Crown Cork &
Seal Co., 462 U.S. at 352 (noting "[l]imitations periods are
intended to put defendants on notice of adverse claims and
to prevent plaintiffs from sleeping on their rights").

Cutler argues that the same rationales are equally
applicable to tolling his class claims. He finds support in
two decisions of this court. In Haas v. Pittsburgh National
Bank, 526 F.2d 1083 (3d Cir. 1975), we approved American
Pipe tolling for a later class representative on a claim that
the original representative was without standing to pursue.
In 1972, Mary Haas had filed a class complaint against
three banks, one of which was Equibank, claiming they had
charged usurious interest rates. Although she had accounts
at the two other banks, she had never had an account at
Equibank. Nonetheless, in a 1973 order the district court
granted Haas class representative status as to all three
banks. Later, on January 21, 1974, in light of decisions by
the Supreme Court and Ninth Circuit, the district court
determined it had improperly certified Haas as to
Equibank. In the same order the court permitted the
amendment of the complaint to add a new class
representative who had had an account with Equibank.
That named plaintiff, John Mitchell, was added shortly
thereafter.

The district court which had permitted Mitchell’s addition
subsequently ruled his claims were time-barred. The
relevant statute of limitations was two years. Equibank had
discontinued the practice that was the subject of the
complaint more than two years prior to January 21, 1974,
the date the district court had first permitted substitution
of a new class representative.

On appeal, this court agreed with the district court that
Haas was not a proper plaintiff as to Equibank. However,
we reversed and remanded the dismissal of the class claim.
We held, based on American Pipe, that the statute of
limitations for Mitchell was tolled from November 13, 1972,
the date Haas had filed her original complaint. Looking to
American Pipe, we noted that Haas’s complaint provided

                                9


Equibank with notice of "the claims against which[it]
would be required to defend and also ‘the number and
generic identities of the potential plaintiffs.’ " Id. at 1097.
We concluded by observing "[t]hese plaintiffs were in
existence at the time the action was originally brought and
were described as claimants in the complaint. The only
change effectuated by the district court’s [January 21,
1974] order was the prompt addition of a nominal plaintiff
who held an Equibank card." Id. Even were Haas not
controlling, it certainly suggests that American Pipe tolling
applies to class claims.

In the other case Cutler cites, Goodman v. Lukens Steel
Co., 777 F.2d 113 (3d Cir. 1985), this court reviewed the
district court’s grant of injunctive relief on behalf of a class
in a Title VII case. We determined as to one claim on which
the plaintiffs had prevailed that none of the named
representatives were adequate to represent the class. Based
on the lack of a qualified class representative, we vacated
the underlying findings on that claim. Id. at 124. However,
in the interest of judicial economy, we directed that the
district court "explore the possibility of intervention by
qualified class representatives" on remand, id., concluding
that "[s]uch a suit would be timely since the
commencement of the class action tolled the statute of
limitations as to members of the class" under American
Pipe, id. at 124 n.8.

Defendant Arthur Andersen seeks to distinguish Haas
based on our emphasis in that case on the district court’s
certification of a class, and characterizes our observation in
Goodman as dictum, pointing out that there too the district
court had certified a class. Andersen also argues that in
both Haas and Goodman a change in the law caused the
class representatives to become unfit after the district
courts’ certifications. Andersen points out that no class has
been certified in this case, and thus no change in the law
could prejudice potential class members nor could absent
class members have relied on a prior certification.

Andersen, joined by Sands Brothers, cites as authority
for its position a number of courts of appeals’ decisions
which treat a related, although Cutler argues
distinguishable, situation. In those cases the issue was the

                                10


application of American Pipe tolling to subsequent
intervenors or sequential class actions after there had been
definitive denials of class certification in the original action.
For example, in Korwek v. Hunt, 827 F.2d 874 (2d Cir.
1987), an early case in this line, the plaintiffs-appellants
had

       filed a complaint alleging class claims identical
       theoretically and temporally to those raised in a
       previously filed class action suit which was denied
       class certification mainly because of overwhelming
       manageability difficulties. Appellants ignored the
       district court’s express finding that the original action
       was unwieldy, first when attempting to intervene and
       expand the limited Gordon class, and again when filing,
       what was essentially a duplicate of the original
       complaint.

Id. at 879. The Second Circuit refused to extend tolling
under those circumstances, concluding, "The Supreme
Court in American Pipe and Crown, Cork certainly did not
intend to afford plaintiffs the opportunity to argue and
reargue the question of class certification by filing new but
repetitive complaints." Id.

The underlying concern in Korwek and the articulated
basis for the result was that application of American Pipe
tolling to successive attempts to certify a previously rejected
class would sanction an endless succession of class filings.
Korwek held that American Pipe tolling does not operate to
permit plaintiffs to relitigate the propriety of a class action.
The great weight of authority has adopted similar reasoning
and has rejected the applicability of American Pipe tolling to
such successive class actions. See, e.g., Basch v. Ground
Round, Inc., 139 F.3d 6, 11-12 (1st Cir. 1998) (an action
held to be inappropriate for class treatment does not toll
statute of limitations for subsequent class actions);
Andrews v. Orr, 851 F.2d 146, 148-49 (6th Cir. 1988)
(same); Robbin v. Fluor Corp., 835 F.2d 213, 214 (9th Cir.
1987) (same); Salazar-Calderon v. Presidio Valley Farmers
Ass’n, 765 F.2d 1334, 1351 (5th Cir. 1985) (rejecting
American Pipe tolling for two subsequent actions that
depended on a first action for their timeliness).

                                11


We agree with the rationale of those cases and Cutler
does not argue that they were decided incorrectly. Instead,
Cutler insists that his situation is different. Unlike the
Korwek plaintiffs, Cutler is not attempting to resuscitate a
class that a court has held to be inappropriate as a class
action. The class certification motion of Cutler’s
predecessor, Berger (by whose complaint Cutler would have
his claims tolled), was not rejected because of any defects
in the class itself but because of Berger’s deficiencies as a
class representative. In fact, in its evaluation of Berger’s
attempt to certify, the District Court found that a class
would present common enough questions of law and fact
and be sufficiently numerous to merit class treatment.
Thus Cutler argues that although the Korwek policy against
perpetual relitigation of decided class issues is a sound
one, it does not apply to him.

Only a handful of courts have considered whether class
claims should be tolled when the class device has not been
definitively rejected, and they have generally concluded that
American Pipe tolling is permitted in that situation. Many of
those cases presented a situation, such as that here, where
the original motion for class certification was denied
because the class representative was inadequate.

For example, in In re Quarterdeck Office Systems, Inc.
Securities Litigation, CV-92-3970-DWW (GHKx), 1994 WL
374452 (C.D. Calif. Mar. 24, 1994), two investors filed a
securities fraud action against Quarterdeck, its officers and
directors, and three venture capital firms following the fall
of the company’s stock shortly after its IPO. Id. at *1. The
court rejected their motion for class certification based on
their inadequacies as class representatives. However, the
court permitted intervention by other investors after the
statute of limitations had run, holding that the intervenors’
class claims were tolled under American Pipe. Id. at *2, 5.

The court recognized there were two groups of cases
applying the American Pipe rule to subsequent class
actions. The first group, exemplified by Korwek and the
Ninth Circuit’s decision in Robbin v. Fluor,"involved either
an attempt to file an entirely separate class action lawsuit
after the dismissal of an earlier action, or an attempt to
bring a later class action after the court had determined

                                12


that proceeding as a class action was an inappropriate
method of resolving the lawsuit." Id. at *4. The district
court recognized that the courts have universally refused to
extend American Pipe tolling to the subsequent class but
stated that that group of cases differs from cases involving
a later class action that is brought "in an attempt to find a
more appropriate class representative." Id.

In reaching its conclusion in Quarterdeck, the district
court stated:

       This court has not determined that proceeding as a
       class action is inappropriate, merely that [the first
       putative class representatives] are not proper class
       representatives. . . . [I]f this court were to hold that the
       statute is not tolled for these intervening plaintiffs to
       raise class allegations, it would . . . extend[ ] the
       holdings of Korwek and Robbin to cases in which a
       proper class representative is being sought within the
       originally filed lawsuit.

Id. at *5.

Other courts faced with similar circumstances have
reached similar conclusions. See, e.g., Shields v.
Washington Bancorporation, No. 90-1101, 1992 WL 88004,
*1-3 (D.D.C. Apr. 7, 1992) (permitting tolling for intervenor
over a year after original complainant’s motion for class
certification dismissed because complainant was
inadequate representative); In re Crazy Eddie Sec. Litig.,
802 F. Supp. 804, 813 (E.D.N.Y. 1992) (observing, on
determining that named plaintiffs of certified class were
inadequate, that "a second class action would not be an
attempt to relitigate the question of class certification by
filing repetitive claims"); Trief v. Dun & Bradstreet Corp.,
144 F.R.D. 193, 202-03 (S.D.N.Y. 1992) (determining tolling
for intervenor appropriate where original named plaintiffs
were inadequate, although defendants had conceded class
action device appropriate); Shields v. Smith, No. 90-349,
1992 U.S. Dist. LEXIS 15718, *5-10 (N.D. Cal. Aug. 14,
1992) (permitting tolling to intervenor following denial of
original class for inadequate representation); see also
Alidina v. Penton Media, Inc., 143 F. Supp. 2d 363, 365-66
n.1 (S.D.N.Y. 2001) (permitting tolling where certification

                                13


conditionally denied); Fleming v. Bank of Boston Corp., 127
F.R.D. 30, 35-37 (D. Mass. 1989) (one criteria for denying
intervention was that intervenors could thereby avoid
Korwek line of cases and renew certification attempts); Fred
Meyer of Alaska, Inc. v. Adams, 963 P.2d 1025, 1029
(Alaska 1998) (permitting tolling following conditionally
denied certification). But see Fleck v. Cablevision VII, Inc.,
807 F. Supp. 824, 825-27 (D.D.C. 1992) (interpreting
Korwek line of cases to forbid tolling to proposed new class
representative).

In contrast to these cases, the Eleventh Circuit in Griffin
v. Singletary, 17 F.3d 356 (11th Cir. 1994), a Title VII
action, followed the Korwek line of cases to reject
intervenors’ class claims, although the original class was
rejected solely for inadequate representation. The district
court had initially certified a class, but on interlocutory
appeal the court of appeals held that the named
representatives were inadequate and vacated the
certification order. On remand, after the statute of
limitations had run, five individuals moved to intervene as
class representatives and for recertification of the class. The
district court denied their motions, and the court of appeals
affirmed.

The court concluded that Korwek controlled. It stated,
"plaintiffs may not ‘piggyback one class action onto another’
and thereby engage in endless rounds of litigation in the
district court and in this Court over the adequacy of
successive named plaintiffs to serve as class
representatives." Id. at 359 (quoting Salazar-Calderon, 765
F.2d at 1351).

The Griffin court does not appear to have distinguished
between the Korwek line of cases where denial of tolling
followed a decision rejecting the class action itself and the
situation where no court has yet determined that the class
action is inappropriate. Indeed, in Korwek, the court itself
distinguished the situation before it and a situation more
similar to this one, explicitly "leav[ing] for another day the
question of whether the filing of a potentially proper
subclass would be entitled to tolling under American Pipe."
Korwek, 827 F.2d at 879. Moreover, the Griffin panel’s
reasoning is inconsistent with our precedent in Haas where

                                14


we approved American Pipe tolling for a subsequent
representative’s class claims after the original certified class
representative was found wanting.2

We return consequently to our decision in Haas .
Although, as Andersen points out, Haas differs from this
case in that the Haas district court had determined that its
initial certification of a class was erroneous, we see no good
reason why class claims should not be tolled where the
district court had not yet reached the issue of the validity
of the class. Andersen has not supplied any persuasive
reason for making such a distinction.3

Andersen argues that judicial economy would be
undermined if American Pipe tolling extends to class claims,
because "class counsel would have little incentive to do any
investigation of potential class representatives before filing
_________________________________________________________________

2. Ironically, both Cutler and Andersen also cite for support Catholic
Social Services, Inc. v. INS, 232 F.3d 1139 (9th Cir. 2000) (en banc). In
that case, the district court had properly certified a valid class. A panel
of the Ninth Circuit concluded in 1998 that the class subsequently had
been rendered invalid by the enactment of section 377 of the Illegal
Immigration Reform and Immigrant Responsibility Act of 1996 (IIRIRA).
Id. at 1146. Rather than remanding to the district court to permit the
plaintiffs to amend their complaint, that panel remanded for dismissal.
Id. at 1146. After the district court had dismissed the case without
prejudice, some plaintiffs whose claims were not affected by IIRIRA
refiled their complaint and sought American Pipe tolling. The Ninth
Circuit, in an en banc decision, observed that the plaintiffs had at all
times "vigorously pursued this litigation," and distinguished both Griffin
and the Korwek line because "[p]laintiffs in this case are not attempting
to relitigate an earlier denial of class certification, or to correct a
procedural deficiency in an earlier would-be class." Id. at 1149. The
court concluded that the plaintiffs could enjoy American Pipe tolling for
their class claims. Id.

The result in Catholic Social Services is essentially consistent with this
court’s decision in Haas.

3. Because the District Court did not reach the issue of the propriety of
a class action here, we need not consider whether American Pipe tolling
would be available where the district courts abuse their discretion in
denying certification of a class. See, e.g., Gagnon, 766 F.2d at 786-88
(vacating district court’s order denying class certification for abuse of
discretion and remanding for further proceedings).

                                15


suit. If the first representative was found to be inadequate,
counsel could find another, and then another after that,
and so on." Br. of Appellee Andersen at 31.

It is conceivable that if Cutler were to prove to be an
inadequate representative, the same counsel who
represents Berger and Cutler would seek to find another
who is adequate. However, we are confident of the capacity
of district courts to control abuse or ineptitude on the part
of class counsel and to institute administrative procedures
that would set deadlines for prospective class
representatives while protecting the interests of unnamed
plaintiffs.

We are, of course, like Andersen, concerned with judicial
economy but we believe it need not be achieved at the
expense of litigants for whom the American Pipe tolling rule
was designed. As the Court stated,

       In cases such as this one, where the determination to
       disallow the class action was made upon
       considerations that may vary with such subtle factors
       as experience with prior similar litigation or the current
       status of a court’s docket, a rule requiring successful
       anticipation of the determination of the viability of the
       class would breed needless duplication of motions.

American Pipe, 414 U.S. at 553-54.

In keeping with Supreme Court precedent and our own,
we hold that the class claims of intervening class members
are tolled if a district court declines to certify a class for
reasons unrelated to the appropriateness of the substantive
claims for certification. We will therefore remand so that the
District Court may determine Cutler’s status as a proper
representative and, if he is not barred, may decide whether
the case can be maintained as a class action.

IV.

Berger seeks to have us consider the District Court’s
dismissal of his individual Section 11 claims. He argues
first that because the District Court dismissed his claims in
the same order in which it denied class certification, we
may address the dismissal of his claim under Rule 23(f)’s

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interlocutory appeal provision. Second, he argues that the
appellees "have raised the issue in this appeal." Both
arguments are without merit.

Rule 23(f) provides that "[a] court of appeals may in its
discretion permit an appeal from an order of a district court
granting or denying class action certification under this
rule." Fed R. Civ. P. 23(f). According to the Advisory
Committee, "Appeal from an order granting or denying class
certification is permitted in the sole discretion of the court
of appeals. No other type of Rule 23 order is covered by this
provision." Fed. R. Civ. P. 23(f) advisory committee’s notes.
Berger’s argument would have us stretch the limits of Rule
23(f) beyond Rule 23 certification questions. As quoted
above, the Advisory Committee notes explicitly describe
Rule 23(f) as not extending to any other type of order, even
where that order has some impact on another portion of
Rule 23.

Decisions of other circuits have also been scrupulous
about limiting Rule 23(f) inquiries to class certification
issues. See, e.g., Bertulli v. Indep. Ass’n of Cont’l Pilots, 242
F.3d 290, 294 (5th Cir. 2001) (stating "under Rule 23(f), a
party may appeal only the issue of class certification; no
other issues may be raised," but consenting to review
standing, an "inherent prerequisite to the class certification
inquiry"); Pickett v. Iowa Beef Processors , 209 F.3d 1276,
1279 (11th Cir. 2000) ("Rule 23(f) provides for our
jurisdiction over interlocutory appeals from a district
court’s order granting class certification, and we limit our
discussion to that issue. We do not address the merits of
Plaintiffs’ claims."); see also Carter v. West Pub’g. Co., 225
F.3d 1258, 1262-63 (11th Cir. 2000). Berger attempts to
distinguish Carter by pointing out that in that case the
appeals panel looked at two orders, one of which concerned
the statute of limitations. But the statute of limitations
inquiry in Carter was, as that court observed, a threshold
inquiry into the class certification issue. That is not the
case as to Berger’s proposed class although, as this opinion
notes, it is as to Cutler’s proposed class.

We dispense quickly with Berger’s second argument, that
the appellees have somehow put Berger’s Section 11

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standing into play. It is the limitation of Rule 23(f), not any
arguments of the appellees, that determines our jurisdiction.4

V.

For the reasons heretofore   set forth, we will dismiss
Berger’s appeal and vacate   the District Court order denying
certification of the class   proposed by Cutler and remand on
that issue as set forth in   this opinion.

A True Copy:
Teste:

       Clerk of the United States Court of Appeals
       for the Third Circuit
_________________________________________________________________

4. The SEC filed an amicus curiae brief in this appeal stating its position
that Section 11 is not limited to those who purchase in the offering but
instead grants standing to all purchasers of registered securities. As we
do not address the District Court’s dismissal of Berger’s individual
Section 11 claims, we need not reach this issue.

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