Great Plains Trust v. Union Pacific RR ( 2007 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 06-3440
___________
Great Plains Trust Company, *
*
Appellant, *
* Appeal from the United States
v. * District Court for the
* Western District of Missouri.
Union Pacific Railroad Company, *
*
Appellee. *
___________
Submitted: March 15, 2007
Filed: June 29, 2007
___________
Before RILEY, BOWMAN, and ARNOLD, Circuit Judges.
___________
BOWMAN, Circuit Judge.
Great Plains Trust Company, which is chartered and based in Kansas, filed this
class action against Union Pacific Railroad Company, which is doing business in
Missouri, alleging breach of contract, fraud, and unjust enrichment. Diversity
jurisdiction is proper in this case under 28 U.S.C. § 1332 (2000). The District Court1
granted Union Pacific's motion to dismiss, and Great Plains appeals. We affirm the
judgment of the District Court.
1
The Honorable Scott O. Wright, United States District Judge for the Western
District of Missouri.
I.
"We recite the facts as alleged in the complaint, viewing them in the light most
favorable to the plaintiff[]." Davenport v. Farmers Ins. Group, 378 F.3d 839, 841 (8th
Cir. 2004). In 1955, Union Pacific's predecessor company issued debentures
accompanied by an indenture setting forth the company's payment obligations. In
1997, Union Pacific assumed these obligations. According to the indenture, interest
on the debentures is payable annually on April 1 at a rate of five percent of the
principal amount of the outstanding debentures. This interest is payable from Union
Pacific's available net income (ANI), which is computed on a calendar-year basis
according to the accounting rules of the Surface Transportation Board (STB). The
interest payment due on April 1, 1999, totaled $5 million. On March 12, 1999, Union
Pacific sent a letter and a computation of its ANI to the debenture trustee indicating
that it lacked sufficient funds to make the payment. The computation stated that
Union Pacific had $580 million in income available to pay fixed charges for 1998.
Union Pacific's Annual Report to the STB, however, indicated that Union Pacific had
$628 million in income available for that period. The STB calculation left Union
Pacific with a net after-tax income of $27 million for 1998. Union Pacific did not
make the interest payment due April 1, 1999.
On January 10, 2006, Great Plains, the holder of $500,000 of debentures, filed
this class-action complaint alleging that Union Pacific is liable for breach of contract,
fraud, and unjust enrichment on account of its failure to make the 1999 interest
payment. The District Court dismissed all claims against Union Pacific, concluding
that each claim was barred by the applicable statute of limitations and, alternatively,
that Great Plains had failed to comply with certain prerequisites set forth in the
indenture before filing suit.
We review a district court's grant of a motion to dismiss de novo, taking the
well-pleaded material factual allegations in the complaint as true. Katun Corp. v.
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Clarke, 484 F.3d 972, 975 (8th Cir. 2007). In so doing, we may consider documents
attached to the complaint and matters of public and administrative record referenced
in the complaint. Id.; Deerbrook Pavilion, LLC v. Shalala, 235 F.3d 1100, 1102 (8th
Cir. 2000), cert. denied, 534 U.S. 992 (2001).
II.
We first consider whether Great Plains was required to comply with the
procedures set forth in the indenture before filing suit. The indenture contains a no-
action clause providing that "[n]o holder of any debenture . . . shall have any right by
virtue or by availing of any provision of this indenture to institute any suit, action or
proceeding . . . for the collection of any sum due from the Company hereunder on
account of principal or interest" without first requesting action by the debenture
trustee. Indenture at 34. Great Plains does not contend that it complied with this
clause before filing suit. The indenture also contains a clause that provides:
Nothing contained in this indenture or in the debentures shall affect or
impair the obligation of the Company, which is unconditional and
absolute, to pay the principal of and interest on the debentures . . . or
affect or impair the right, which is also unconditional and absolute, of the
holders of the debentures to receive payment thereof on or after the
respective due dates thereof or to institute suit for the enforcement of any
such payment on or after such respective due dates by virtue of said
debentures.
Id. at 34–35. This provision implements Section 316(b) of the Trust Indenture Act of
1939 (15 U.S.C. § 77ppp(b)), which prohibits the purported restriction by an indenture
of certain rights of security holders, including the right to sue for unpaid interest. See
Cruden v. Bank of N.Y., 957 F.2d 961, 968 (2d Cir. 1992). The District Court held
that the no-action clause was controlling and therefore Great Plains's action was
barred, reasoning that the Section 316 clause would apply only when the principal
amount of the debentures was due.
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Great Plains argues that the District Court erred in this regard. The question is
whether the no-action clause or the Section 316 clause is controlling with respect to
the annual interest owed on the debentures. We hold that Section 316 grants Great
Plains the absolute right to sue for unpaid interest without having to first comply with
the no-action clause. We find persuasive the conclusion reached by other courts that
a no-action clause may not override a debenture holder's absolute right guaranteed by
Section 316 to seek payment of overdue interest. See Cruden, 957 F.2d at 968; UPIC
& Co. v. Kinder-Care Learning Ctrs., Inc., 793 F. Supp. 448, 454–55 & n.8 (S.D.N.Y.
1992); In re Envirodyne Indus., Inc., 174 B.R. 986, 992–93 (Bankr. N.D. Ill. 1994).
Courts have reached this conclusion because Section 316 "is mandatory in order to
assure the negotiability of the debentures by making certain that the promise to pay
contained therein was unconditional." Envirodyne, 174 B.R. at 993; see also Watts
v. Missouri-Kansas-Texas R.R. Co., 383 F.2d 571, 578 (5th Cir. 1967)
("[N]egotiability . . . is reduced when no-action clauses are construed to limit suits
upon interest obligations.").
Union Pacific contends that Quirke v. St. Louis-San Francisco Railway Co.,
277 F.2d 705 (8th Cir.), cert. denied, 363 U.S. 845 (1960), requires a different result.
In Quirke, this Court held that a bondholder was required to comply with a no-action
clause before bringing suit to challenge the company's purchase of stock. Id. at 709.
Quirke did not, however, involve a claim for unpaid interest on debentures and did not
implicate Section 316. Quirke therefore has no bearing on the interplay between
Section 316 and a no-action clause in a suit for unpaid interest on debentures.
Accordingly, Great Plains was not required to exhaust the procedure of the no-
action clause before filing this suit, and the District Court was incorrect in holding to
the contrary.
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III.
We next consider whether Great Plains's claims are barred by the applicable
statutes of limitation. The parties dispute whether the Kansas or Missouri statutes of
limitation apply to this case. Great Plains argues for application of Missouri law, as
it contends that each relevant Missouri statute of limitation is longer than its Kansas
counterpart. Compare Mo. Rev. Stat. §§ 516.110(1) (2000) (written contracts to pay
money: ten years), 516.120(1) (unjust enrichment: five years), 516.120(5) (fraud: five
years) with Kan. Stat. Ann. §§ 60-511(1) (2005) (contracts: five years), 60-512(1)
(unjust enrichment: three years), 60-513(a)(3) (fraud: two years). The District Court
held that the Kansas statutes of limitation applied to Great Plains's claims and that the
claims were barred under these statutes.
A federal court sitting in diversity applies the statute-of-limitations rules of the
forum. Nettles v. Am. Tel. & Tel. Co., 55 F.3d 1358, 1362 (8th Cir. 1995) (citing
Guaranty Trust Co. v. York, 326 U.S. 99, 108–09 (1945)). Missouri has a borrowing
statute that provides, "Whenever a cause of action has been fully barred by the laws
of the state . . . in which it originated, said bar shall be a complete defense to any
action thereon . . . ." Mo. Rev. Stat. § 516.190. The "critical issue" in applying this
statute is "determining where a cause of action originated." Nettles, 55 F.3d at 1362.
Under the statute, "originated" means "accrued." Thompson v. Crawford, 833 S.W.2d
868, 871 (Mo. 1992) (en banc).
A.
With regard to Great Plains's breach-of-contract claim, the Missouri borrowing
statute directs courts to Missouri Revised Statutes Section 516.100 to determine both
when and where such a claim accrues. See Ferrellgas, Inc. v. Edward A. Smith, P.C.,
190 S.W.3d 615, 623 (Mo. Ct. App. 2006) (per curiam). Section 516.100 provides
that a cause of action accrues not "when the wrong is done or the technical breach of
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contract or duty occurs, but when the damage resulting therefrom is sustained and is
capable of ascertainment." Accordingly, a cause of action accrues where damages are
capable of ascertainment. "[D]amages are 'sustained and capable of ascertainment'
when the fact of damage can be discovered or made known." Jordan v. Willens, 937
S.W.2d 291, 294 (Mo. Ct. App. 1996) (emphasis omitted). Specifically in a breach-
of-contract suit, the cause of action "accrues upon a defendant's failure to do the thing
at the time and in the manner contracted." Davis v. Laclede Gas Co., 603 S.W.2d 554,
555 (Mo. 1980) (en banc) (citation and quotations omitted). And although no
Missouri state court has directly addressed the issue, it appears that for failure-to-pay
cases, the cause of action accrues where payment was to be made. See Great Rivers
Coop. of Se. Iowa v. Farmland Indus., Inc., 934 F. Supp. 302, 305 (S.D. Iowa 1996)
(applying Missouri law and stating that Missouri case law "would suggest that a
breach of promise claim originates where the performance should have taken place,
but did not"), aff'd, 120 F.3d 893 (8th Cir. 1997); Hailey v. Yellow Freight Sys., Inc.,
599 F. Supp. 1332, 1336 (W.D. Mo. 1984) ("[I]n breach of contract actions the cause
ordinarily 'originates' or 'accrues,' for purposes of a 'borrowing' statute, where the
breach occurs, with that place being the place of performance."); In re Master
Mortgage Inv. Fund, Inc., 151 B.R. 513, 517 (Bankr. W.D. Mo. 1993) (applying the
Missouri borrowing statute and holding that in a tort action for failure to make a
payment as required by contract, the cause of action accrued at the place where
payment was to be made).
Great Plains and Union Pacific dispute where the interest payment was to be
made according to the indenture, which provides,
[D]ebentures . . . shall be payable both as to principal and interest at the
office or agency of the Company in . . . New York, or, at the option of
the registered holder thereof, at the office or agency of the Company in
St. Louis, Missouri, in such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment
of public and private debts . . . . Interest on debentures shall be paid by
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check to the order of the registered holder, mailed to the address shown
by the records of the Company.
Indenture at 10–11.
The indenture requires that the interest payment be mailed to the holder's
address, and since Great Plains is located in Kansas, payment to Great Plains can only
be mailed to its Kansas address as shown in Union Pacific's records. The plain
language of the provision providing for payment at Union Pacific's office in New
York or St. Louis refers not to a typical payment by check, but rather to an in-person
cash payment. Because the interest payment was to be mailed to Great Plains in
Kansas, and because Great Plains did not exercise its right to payment in New York
or in Missouri, Great Plain's breach-of-contract claim originated in Kansas. See
Master Mortgage, 151 B.R. at 517 (holding that a tort action originated in Kansas
where the plaintiff's alleged injury resulted from the defendant's failure to make
payment as required by contract at the plaintiff's place of business in Kansas); Nat'l
Heritage Life Ins. Co. v. Frame, 41 S.W.3d 544, 553 (Mo. Ct. App. 2001) (holding
that a cause of action originated in Texas where the defendants were required to pay
the plaintiff and the plaintiff was located in Texas).
Great Plains contends that Building Erection Services, Inc. v. JLG, Inc., 376
F.3d 800 (8th Cir. 2004) ("BES"), requires a different result. In BES, this Court held
that a tort claim originated in Missouri, which was the site of the physical injury
giving rise to the cause of action. Id. at 805. This Court rejected the defendants'
argument that "a corporation can only be injured at its corporate headquarters" and
that a claim against a corporation must originate where the corporation is located. Id.
at 804. Great Plains argues that BES stands for the proposition that a claim against
a corporation cannot originate where the corporation feels the economic effects of the
injury.
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The problem with Great Plains's contention is that unlike BES, this case
involves a purely economic injury—the non-payment of interest. This case is more
like Rajala v. Donnelly Meiners Jordan Kline, P.C., 193 F.3d 925 (8th Cir. 1999),
which involved a claim of negligent consultation against an accounting firm. Id. at
927. In Rajala, this Court held that the cause of action originated in Kansas because
the plaintiff company was located in Kansas and accordingly "felt the cash flow
crunch" there. Id. at 928. Thus, for cases involving a purely economic injury, as
opposed to a physical accident with economic consequences, a cause of action
originates where the plaintiff is financially damaged, which for a corporation is often
its place of business. See BES, 376 F.3d at 804 ("Rajala concerns a purely economic
injury to a corporation, without physical injury precipitating the economic damage.").
This case involves a purely economic injury that Great Plains could only have
ascertained at its place of business in Kansas. Therefore, the Kansas statute of
limitations applies to Great Plains's breach-of-contract claim.
Under Kansas law, a cause of action for breach of contract must be brought
within five years. Kan. Stat. Ann. § 60-511(1). A breach-of-contract claim accrues
when the contract is breached, irrespective of the plaintiff's knowledge or injury.
Pizel v. Zuspann, 795 P.2d 42, 54 (Kan. 1990). Great Plains's breach-of-contract
claim accrued on April 1, 1999, when Union Pacific did not make the interest payment
as required by the indenture. Because Great Plains did not file this suit until January
10, 2006, the breach-of-contract claim is untimely under the Kansas statute of
limitations.
B.
With regard to Great Plains's unjust-enrichment claim, under Missouri law, such
a claim also accrues according to Section 516.100. See Estate of Cates v. Brown, 973
S.W.2d 909, 913 & n.4 (Mo. Ct. App. 1998) (per curiam). Therefore, the Kansas
statute of limitations applies to Great Plains's unjust-enrichment claim as well.
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A cause of action for unjust enrichment must be brought within three years.
Kan. Stat. Ann. § 60-512(1); Stehlik v. Weaver, 482 P.2d 21, 27 (Kan. 1971). An
unjust-enrichment claim accrues "when the elements are present and the plaintiff
could have filed and maintained a successful suit." Dodson Int'l Parts, Inc. v. Hiatt,
No. 02-4042-SAC, 2003 WL 22327176, at *7 (D. Kan. Sept. 25, 2003) (unpublished)
(citing Pancake House, Inc. v. Redmond, 716 P.2d 575, 579 (Kan. 1986)). The
elements of an unjust-enrichment claim are: (1) the plaintiff confers a benefit on the
defendant; (2) the defendant knows of the benefit; and (3) the defendant retains the
benefit inequitably. J.W. Thompson Co. v. Welles Prods. Corp., 758 P.2d 738, 745
(Kan. 1988). Great Plains's claim for unjust enrichment also accrued on April 1, 1999,
as Great Plains alleges in its complaint that Union Pacific received an improper
benefit on account of its failure to make the interest payment. Cf. Hartman v. Stumbo,
408 P.2d 693, 696 (Kan. 1965) (concluding that a cause of action for unjust
enrichment accrued when payment was made to defendant). Since Great Plains did
not file this suit until 2006, the claim is untimely under Kansas law.
C.
With regard to Great Plains's fraud claim, the Missouri borrowing statute directs
courts to Missouri Revised Statutes Section 516.120(5), rather than Section 516.100,
to determine when and where a fraud claim accrues. See Nettles, 55 F.3d at 1364–65.
Section 516.120(5) provides that a cause of action for fraud accrues upon "the
discovery by the aggrieved party . . . of the facts constituting the fraud." This statute
is intended to promote due diligence by plaintiffs in discovering fraud, as "[w]here the
means for discovery exist, a plaintiff is deemed to know of the fraud." Schwartz v.
Lawson, 797 S.W.2d 828, 832 (Mo. Ct. App. 1990). Accordingly, a cause of action
for fraud accrues in the state where the plaintiff should have discovered the facts
constituting the fraud.
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Great Plains should have discovered Union Pacific's alleged fraud at Great
Plains's office in Kansas. Each act allegedly constituting fraud was discoverable with
due diligence during the ordinary course of Great Plains's business. Specifically,
Great Plains points to Union Pacific's letter and attachments of March 12, 1999, as
causing Great Plains's detrimental reliance. Because Great Plains is only located in
Kansas, Great Plains could only have reviewed and relied upon these documents
during the course of its business in Kansas. Additionally, Great Plains claims that
Union Pacific's Annual Report to the STB shows that Union Pacific's ANI calculation
was fraudulent. Again, through the exercise of ordinary diligence, Great Plains should
have discovered this information during the course of its business in Kansas.
Accordingly, the Kansas statute of limitations applies to Great Plains's fraud claim.
A cause of action for fraud must be brought within two years. Kan. Sat. Ann.
§ 60-513(a)(3). A cause of action for fraud accrues when the fraud could have been
discovered with reasonable diligence. Waite v. Adler, 716 P.2d 524, 527 (Kan. 1986).
Great Plains could have discovered the alleged fraud: when Union Pacific sent its
letter and attachments on March 12, 1999; when Union Pacific filed its report with the
STB on March 31, 1999; or, at the latest, when Union Pacific failed to make the
interest payment on April 1, 1999. The indenture specifically provides that Great
Plains could have inspected Union Pacific's ANI computation after it was sent to the
trustee on March 12, 1999. Moreover, Union Pacific's Annual Report to the STB,
which Great Plains alleges is indicative of fraud, is a publicly available document that
Great Plains could have examined beginning March 31, 1999. See United States v.
Eagleboy, 200 F.3d 1137, 1140 (8th Cir. 1999) (a court may take judicial notice of
agency documents). Because Great Plains had constructive notice of the alleged fraud
in 1999 and did not file this suit until 2006, Great Plains's fraud claim is untimely
under Kansas law.
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IV.
Great Plains contends that the statutes of limitation should be tolled for two
separate reasons. First, Great Plains states that Union Pacific fraudulently concealed
the correct ANI for 1998 and that Great Plains "was unable to discover Union Pacific's
fraudulent actions and concealment until shortly before filing this lawsuit." Am.
Compl. at ¶ 40. Second, Great Plains argues that the filing of previous class actions
tolled the statutes of limitation.
Because this case arises under our diversity jurisdiction, we apply state tolling
law but also apply federal procedural law. See Erie R.R. v. Tompkins, 304 U.S. 64,
78 (1938); Carter v. Washington Metro. Area Transit Auth., 764 F.2d 854, 855 (D.C.
Cir. 1985). Under Missouri law, "It is a generally accepted rule that when borrowing
the statute of limitations of a foreign state, the applicable tolling provision of that state
is borrowed as well." Thompson, 833 S.W.2d at 872 (citing Devine v. Rook, 314
S.W.2d 932, 935 (Mo. Ct. App. 1958)); see Davis v. Liberty Mut. Ins. Co., 55 F.3d
1365, 1367 (8th Cir. 1995). Because the Missouri borrowing statute directs that the
Kansas statutes of limitation applies to these claims, we apply the tolling rules of
Kansas.
A.
Under Kansas law, in order to toll a statute of limitations on account of
fraudulent concealment, the defendant must have affirmatively prevented discovery
of the cause of action. Baker v. Bd. of Regents, 991 F.2d 628, 633 (10th Cir. 1993)
(citing Friends Univ. v. W.R. Grace & Co., 608 P.2d 936, 941 (Kan. 1980)). Kansas
law requires a plaintiff seeking to toll a statute for fraudulent concealment to "'explain
why due diligence did not lead or could not have led to discovery of the facts and the
cause of action.'" Friends, 608 P.2d at 941 (quoting 51 Am. Jur. 2d, Limitation of
Actions § 148 (1970)). In other words, Kansas law will not toll a statute of limitations
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where the plaintiff could have discovered the claim. See Miller v. Foulston, Siefkin,
Powers & Eberhardt, 790 P.2d 404, 417 (Kan. 1990).
Additionally, federal procedural law requires that allegations of fraud, including
fraudulent concealment for tolling purposes, be pleaded with particularity. See Fed.
R. Civ. P. 9(b); Conerly v. Westinghouse Elec. Corp., 623 F.2d 117, 120 (9th Cir.
1980); Evans v. Rudy-Luther Toyota, Inc., 39 F. Supp. 2d 1177, 1185 n.5 (D. Minn.
1999) (collecting cases). "This means the who, what, when, where, and how: the first
paragraph of any newspaper story." DiLeo v. Ernst & Young, 901 F.2d 624, 627 (7th
Cir.), cert. denied, 498 U.S. 941 (1990). And although we must take all factual
allegations as true when considering a motion to dismiss, we need not accept
conclusory legal allegations as true. Papasan v. Allain, 478 U.S. 265, 286 (1986).
Great Plains's conclusory allegation that it "was unable to discover Union
Pacific's fraudulent actions and concealment until shortly before filing this lawsuit"
fails to meet the particularity requirements of Rule 9(b). Great Plains did not state
what actions Union Pacific took to fraudulently conceal the cause of action. Nor did
Great Plains state when or how Union Pacific perpetrated its alleged concealment.
Great Plains's other conclusory allegation—that Union Pacific fraudulently concealed
its correct ANI for 1998—also fails to allege how or when this concealment occurred.
Moreover, Great Plains's fraudulent-concealment allegation falls short of the tolling
requirements of Kansas law. Great Plains has not explained in its complaint or in its
briefs why it could not have discovered its claims within the statutory period. Without
more, even at this stage of litigation, Great Plains's first tolling argument fails.
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B.
Turning to Great Plains's class-action tolling argument, on March 28, 2002, a
case captioned Ernest W. Carlson v. Union Pacific Railroad Co., was filed in the
Superior Court of the District of Columbia. In that case, the plaintiff on behalf of a
purported class of debenture holders asserted a claim for breach of contract against
Union Pacific for the missed 1999 interest payment. The case was removed to the
United States District Court for the District of Columbia. On August 22, 2003, the
case was dismissed without prejudice because the court lacked personal jurisdiction
over Union Pacific. No class-certification hearing was held before the case was
dismissed.
On September 23, 2003, a case captioned Ernest W. Carlson v. Union Pacific
Railroad Co., was filed in the United States District Court for the District of Nebraska.
The plaintiff again asserted the breach-of-contract claim based on the 1999 interest
payment against Union Pacific on behalf of the purported class of debenture holders.
On January 26, 2004, the plaintiff voluntarily dismissed the complaint. No class-
certification hearing was held in that case either. Great Plains contends that the
pendency of these cases tolled the statutes of limitation in this case.2
2
We note at the outset of our discussion of class-action tolling that even if Great
Plains's argument that the applicable statutes of limitation were suspended during the
pendency of the previous class actions (approximately 22 months) was successful,
Great Plains's fraud and unjust-enrichment claims would still be untimely. These
claims accrued at the latest on April 1, 1999, while the instant suit was not filed until
January 10, 2006. Because the applicable statutes of limitation are two years (fraud)
and three years (unjust enrichment), these claims would still be untimely despite the
pendency of the class actions. Accordingly, our analysis of the tolling effect, if any,
of the previous class actions on this suit is limited to Great Plains's breach-of-contract
claim.
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Before proceeding further, we must consider whether we can adequately
address Great Plains's argument at this stage of litigation. Great Plains asserts that In
re General American Life Insurance Co. Sales Practices Litigation, 391 F.3d 907 (8th
Cir. 2004), requires us to remand this case to the District Court to consider whether
class-action tolling is warranted. In that case, this Court remanded for consideration
of whether cross-jurisdictional tolling was appropriate. Id. at 915. In this case,
however, the circumstances presented allow us to determine whether the previous
class actions tolled the statutes of limitation and if so, the effect of this tolling. This
question can be answered by reference to the records of the previous class actions, and
we may take judicial notice of proceedings in other courts that relate directly to
matters at issue. Conforti v. United States, 74 F.3d 838, 840 (8th Cir.), cert. denied,
519 U.S. 807 (1996). Accordingly, we will proceed with our analysis.
In American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974), the
Supreme Court held that an applicable statute of limitations is tolled during the
pendency of a class action for putative class members who intervene after the denial
of class certification—at least where certification is denied for failure to meet the
numerosity requirement of Rule 23 of the Federal Rules of Civil Procedure. Id. at
552–53. The American Pipe rule is designed to protect the federal procedural interest
by preventing duplicative litigation from purported class members during the period
that certification is pending. Id. at 553. The American Pipe rule has been extended
to purported members of the class who later file individual suits rather than intervene.
Crown, Cork & Seal Co. v. Parker, 462 U.S. 345, 350 (1983). Whether the American
Pipe rule applies to subsequent class actions, however, depends on the reasons for the
denial of certification of the predecessor action. See Yang v. Odom, 392 F.3d 97, 111
(3d Cir. 2004) ("[W]here class certification has been denied solely on the basis of the
lead plaintiffs' deficiencies . . . not because of the suitability of the claims for class
treatment, American Pipe tolling applies to subsequent class actions."), cert. denied,
544 U.S. 1048 (2005); Catholic Soc. Servs., Inc. v. INS, 232 F.3d 1139, 1149 (9th Cir.
2000) (en banc) (holding that the filing of a previous class action tolled the applicable
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statute for a later class action where the later action was not an attempt to relitigate the
denial of certification or correct a procedural deficiency in the purported class).3
Kansas class-action law is modeled after federal law, and Kansas has
accordingly adopted the American Pipe rule. See Waltrip v. Sidwell Corp., 678 P.2d
128, 131–32 (Kan. 1984); see also Steele v. Sec. Benefit Life Ins. Co., 602 P.2d 1305,
1309 (Kan. 1979). Therefore, we may decide whether application of the American
Pipe rule is appropriate in this case by reference to both Kansas and federal law, and
it is not necessary for us to balance the interests of federal procedural law and state
substantive law. See Adams Pub. Sch. Dist. v. Asbestos Corp., 7 F.3d 717, 719 (8th
Cir. 1993).
In Waltrip, the plaintiffs filed suit in Kansas and argued that the statute of
limitations was tolled on account of a previously filed class action in which
certification of the class was denied. 678 P.2d at 131. The Supreme Court of Kansas
applied the American Pipe rule and held that the pendency of the first class action
preserved the rights of the potential class members under the Kansas statutes of
limitation. Id. at 133. The court then held that the effect of the American Pipe rule
under Kansas law was to preserve the class members' right to file suit after the
dismissal of the first class action within the time allowed by the Kansas savings
statute, Kan. Stat. Ann. § 60-518. Id.; see Chardon v. Fumero Soto, 462 U.S. 650, 652
n.1 (1983) (explaining that when a statute of limitations is tolled, the "tolling effect"
may suspend the statute of limitations during the relevant time period, renew the
3
We note that there was no certification hearing—much less a denial of
certification—in either of the previous class actions, but rather a dismissal without
prejudice and a voluntary dismissal. This case therefore does not include the typical
circumstances that trigger the American Pipe rule. We decline to determine whether
this fact is material, however, in light of the application of the Kansas savings statute,
discussed infra. That is, we will assume, for the sake of discussion, that the previous
class actions warrant application of the American Pipe rule in this case, despite the
fact that no certification denial is involved.
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statute when tolling ceases, or trigger a savings statute without regard to the original
limitations period). In Adams this Court considered "the novel question of how the
American Pipe doctrine applies in diversity cases when the applicable state law does
not provide for tolling," and concluded:
When the federal courts look to state law for the statute of limitations,
the federal interest in procedural efficiency: 'is vindicated as long as each
unnamed plaintiff is given as much time to intervene or file a separate
action as he would have under a state savings statute applicable to a party
whose action has been dismissed for reasons unrelated to the merits, or,
in the absence of a statute, the time provided under the most closely
analogous state tolling statute.'
7 F.3d at 718–19 (quoting Chardon, 462 U.S. at 661). In Chardon, the Supreme Court
held that where the federal court looked to Puerto Rican statute-of-limitations law, the
application of a Puerto Rican tolling provision that renewed the limitations period
after the denial of class-action certification sufficiently protected the federal
procedural interest. 462 U.S. at 661.
These cases indicate that we must determine whether Great Plains was given
enough time to refile this action after the previous class actions were dismissed
according to the Kansas savings statute. If Great Plains was afforded this opportunity,
then the federal interest underlying the American Pipe rule has been sufficiently
protected.
Under the Kansas savings statute, a plaintiff has six months to re-file following
a dismissal of a class action that is not on the merits. Kan. Stat. Ann. § 60-518; see
Waltrip, 678 P.2d at 133. Here, the first class action was dismissed on August 22,
2003, and the second class action was dismissed on January 26, 2004, but Great Plains
did not file this class action until January 10, 2006. Therefore, this suit would not
have been timely under the Kansas savings statute. Because Great Plains waited
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nearly two years after the dismissal of the second class action to file this suit, Great
Plains cannot claim that it was unfairly deprived of the ability to sue on account of the
previous class actions. The federal procedural interest has been adequately protected
in this case by application of the Kansas savings statute; therefore, Great Plains's
breach-of-contract claim remains untimely.
V.
For the stated reasons, the judgment of the District Court is affirmed.
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