ASARCO Incorporated v. J.P. Morgan & Co

In the
United States Court of Appeals
For the Seventh Circuit
____________
Nos. 04-1713, 04-1714, 04-1715, 04-1716, 04-1717, 04-1719
IN RE
COPPER ANTITRUST LITIGATION
____________
Appeals from the United States District Court
for the Western District of Wisconsin.
Nos. 02-C-0707-C, 03-C-0314-C, 03-C-0316-C,
03-C-0317-C, 03-C-0318-C, 03-C-0368-C,
MDL Docket No. 1303—Barbara B. Crabb, Chief Judge.
____________
ARGUED NOVEMBER 1, 2004—DECIDED FEBRUARY 6, 2006
____________
Before CUDAHY, ROVNER, and WOOD, Circuit Judges.
WOOD, Circuit Judge. Although this appeal arises out
of the extensive alleged conspiracy to fix prices in various
copper markets that this court addressed in Loeb Indus.,
Inc. v. Sumitomo Corp., 306 F.3d 469, 477 (7th Cir. 2002)
(Loeb I), the issues that concern us here would find a more
comfortable home in a civil procedure class than an anti-
trust class. We must decide whether, on the basis of any of
the theories the plaintiffs have presented to us, some or all
of their claims are entitled to go forward. The district court
found that the plaintiffs filed their suit too late, based on an
accrual date that it thought could not be disputed. It also
rejected plaintiff Southwire’s argument that the earlier
litigation that reached this court in Loeb I tolled its claims
against two of the defendants long enough to make them
2 Nos. 04-1713, et al.
timely in this case. Finally, it concluded that the federal
statute of limitations applicable to the plaintiffs’ claims was
not tolled during the pendency of certain state class actions
in the California courts, which were necessarily based on
state rather than federal antitrust law.
We conclude that the district court erred in its conclusion
that the undisputed facts demonstrate that the plaintiffs’
right to sue J.P. Morgan has to be measured from July 23,
1996. Whether viewed as a question of the time when the
plaintiffs reasonably could have discovered that Morgan
had anything to do with their injuries or viewed as a
question of equitable estoppel and fraudulent concealment,
the facts taken in the light most favorable to the plaintiffs
could support a finding that their suit was timely. We find,
however, that the plaintiffs’ claims against Sumitomo and
Global were correctly dismissed, as that set of claims does
not benefit from any form of tolling. We therefore affirm in
part and reverse and remand in part for further proceedings
consistent with this opinion.
I
Loeb I describes the allegations about the extensive
manipulations of the copper market that gave rise to
these suits. We therefore limit our discussion of the facts
(taken for present purposes in the light most favorable to
plaintiffs) to those that are of particular relevance. See
generally 306 F.3d at 474-78. Briefly, in the underlying
actions that were consolidated under the multidistrict
litigation (MDL) statute, 28 U.S.C. § 1407, a group of
purchasers of copper rod and cathode sued J.P. Morgan
Chase & Company, and Morgan Guaranty Trust Company
of New York (collectively referred to as Morgan) for their
participation in the copper price-fixing scandal of the 1990s,
claiming that the defendants had violated the Sherman Act,
15 U.S.C. § 1, et seq., and the Clayton Act, 15 U.S.C. § 15,
Nos. 04-1713, et al. 3
et seq. In a separate action, plaintiffs Southwire Company
and Gaston Copper Recycling Corporation, a wholly owned
subsidiary of Southwire (collectively referred to as
Southwire), sued Sumitomo Corporation and Global
Minerals & Metals Corporation (Global), claiming that the
latter two companies had combined to manipulate the price
of copper by artificially restricting the physical supply of
copper and creating a false demand for it. These manipula-
tions allegedly “caused the price of primary copper to rise
more than 50% over a two-year period.” Loeb I, 306 F.3d at
477. In June 1996, when Sumitomo announced that it had
lost over $1.8 billion as a result of the supply restriction
scheme perpetrated in large part by its employee Yasuo
Hamanaka, “the trading price for copper dropped by a third
almost overnight. The prices of physical copper cathode,
rod, and scrap crashed comparably.” Id.In Loeb I, we upheld the district court’s dismissal of
a putative class that included purchasers of only copper
scrap, because their injuries were indirect. 306 F.3d at 475.
In the same decision, we held that the purchasers of copper
rod and cathode could go forward with their antitrust
claims against Morgan because they had suffered “direct
and independent” injuries. Id. This case raises the question
whether the next chapter of the litigation can proceed.
A. The Parties
The majority of plaintiffs now before us are purchasers of
copper cathode and copper rod. This group includes the
following companies: Asarco Inc., American Insulated
Wire Corp., Essex Electric Inc., Kennecott Utah Copper
Corp., Leviton Manufacturing Company, Inc., Mueller
Copper Tube Company, Inc., Mueller Copper Tube Prod-
ucts, Inc., and Superior TeleCom, Inc. (now known as
Superior Essex, Inc.). We collectively refer to this entire
group of plaintiffs as the Asarco Group. Plaintiff South-
4 Nos. 04-1713, et al.
wire Company manufactures and distributes electrical
quality copper rod, wire and cable.
Defendant Sumitomo is a Japanese trading corporation
that allegedly engaged in various trades and transactions
to fix the price of copper from September 1993 to June 1996.
Global is a copper merchant that allegedly engaged in
transactions with Sumitomo to restrict the physical supply
of copper. Morgan provided loans to Sumitomo during the
relevant time period.
B. The District Court Proceedings
Our decision in Loeb I allowing the claims of purchasers
of cathode and rod to go forward gave rise to a new round of
litigation. The dates when these suits were commenced are
important to the central statute of limitations issue.
Southwire filed its complaint against defendants Morgan,
Sumitomo, and Global on December 30, 2002. On June 13,
2003, the Asarco Group filed their actions against Morgan,
except for plaintiff Superior TeleCom, Inc., which filed its
action on July 11, 2003. On September 4, 2003, the dis-
trict court consolidated the actions with the rest of the
copper antitrust litigation for pretrial purposes.
On March 3, 2004, the district court granted Morgan’s
motion for summary judgment against the Asarco Group
and converted Morgan’s motion to dismiss against
Southwire into a motion for summary judgment. The
court granted these motions, finding that all of the plain-
tiffs’ claims against Morgan were filed after the expira-
tion of the applicable four-year limitations period. See 15
U.S.C. § 15b. It came to the same conclusion for Southwire’s
claims against Sumitomo and Global.
The first issue that the court addressed was when the
plaintiffs’ claims accrued. In one order, it confirmed that
Southwire’s claims against Sumitomo and Global accrued
on June 14, 1996, as Southwire had admitted in its com-
Nos. 04-1713, et al. 5
plaint. In another order, it selected the date July 23, 1996,
as the point when all claims against Morgan had accrued,
placing conclusive weight on the fact that by this time, the
general press had reported that Sumitomo had financed its
transactions through Morgan. For example, an article
published in The New York Times on June 17, 1996,
reported that the Commodity Futures Trading Commission
was investigating ties between Sumitomo and Global. This
article also reported that Morgan and Bankers Trust had
taken “an active part” in the hedging transactions of the
copper market. The court also referenced an Associated
Press release dated July 23, 1996, stating that “[l]oan
agreements between Sumitomo and Chase Manhattan Corp.
and J.P. Morgan & Co. are under scrutiny because they may
have played a role in [Yasuo] Hamanaka’s attempt to buy
large supplies of copper and artificially boost copper prices.”
Finally, the court relied on a Wall Street Journal article
published the same day discussing loans that were made in
the form of derivative contracts from Chase to Sumitomo in
the amount of $500 million and from Morgan to Sumitomo
in the amount of $400 million. The article described the
loans as being “unusually structured.” Based on these
reports and articles that appeared later in 1996 and 1997,
the district court reasoned that:
[p]laintiffs do not argue that as of July 23, 1996, they
did not know that they had been injured or that
Sumitomo was potentially responsible for the injuries.
They argue only that despite the newspaper reports,
they did not know and could not have known as of this
date that the J.P. Morgan defendants had played a part
in producing their injuries. They are correct, but the
point is not whether they would have known that
defendants played a part; it is whether they knew
enough to suspect a violation that they could have
detected with due diligence or whether they had knowl-
edge of facts that would have led to actual knowledge in
6 Nos. 04-1713, et al.
the exercise of reasonable diligence. It is clear that they
did. The articles did not say simply that Sumitomo
Corporation did its banking with defendants and that
defendants might suffer losses as a result of their
banking role; they said that the Commodities Futures
Trading Commission was investigating who might have
helped Yasuo Hamanaka arrange fictitious trades and
that defendants were among the institutions that took
an active part in those transactions. One does not have
to be a sophisticated corporation to infer a possible
connection between “who helped” and “the institutions
that took an active part in those transactions.”
Next, the court considered the plaintiffs’ argument that,
at least with respect to Morgan, the statute of limitations
was tolled on grounds of equitable estoppel or fraudulent
concealment. To support this point, plaintiffs alleged that
Morgan had concealed its involvement in the conspiracy in
several ways: by entering into confidentiality agreements in
the lawsuits and investigations with which it was involved;
by giving untruthful statements to the New York State
Banking Department and the New York Federal Reserve
Bank during their investigation; by allowing its head of
media relations in London to destroy a notebook containing
his notes of conversations with media contacts; and by
declining to give information to the London Metals Ex-
change about a customer of Morgan Guaranty Trust
Company. The court was unpersuaded. It found instead that
each one of these actions could be characterized only as a
denial of liability.
Even if that were not the case, the court found, the
plaintiffs acted too slowly in bringing their suit. It ex-
plained that by August 13, 1999, the date on which
Sumitomo’s complaint against Morgan was unsealed, the
plaintiffs “had the requisite factual support to sue defen-
dants for violation of the antitrust laws,” a claim the court
Nos. 04-1713, et al. 7
noted that plaintiffs conceded. Relying on its previous
holding that the claim accrued on July 23, 1996, this meant
that plaintiffs still had eleven months after Sumitomo
revealed its complaint to file suit before the four-year
statute of limitations expired on July 23, 2000. Plaintiffs
filed this case on December 30, 2002, more than six and a
half years after the accrual—too late, in the district court’s
view.
Finally, the court concluded that the statute of limitations
was not tolled during the pendency of certain state antitrust
class actions that had been filed against Sumitomo and
Morgan. In order to benefit from the tolling rule for plain-
tiffs covered by a class action announced in the Supreme
Court’s decision in American Pipe & Constr. Co. v. Utah,
414 U.S. 538 (1974), the court ruled, identical legal theories
must be involved in both cases. Both the Asarco Group and
Southwire were unnamed class members in a class action
that had been filed in California state court on July 8, 1996,
Heliotrope General, Inc. v. Sumitomo Corp., No. 701679
(Cal. Super. Ct. 1996) (Heliotrope I). The class in Heliotrope
I was defined as businesses that “purchased copper-based
products and paid prices for such copper-based products
that were inflated due to the defendants’ manipulative and
unlawful actions.” On February 14, 2000, Morgan was
added as a defendant to the Heliotrope I litigation action. In
June 2000, the Heliotrope I litigation was abandoned, but
on June 5, 2000, a group of plaintiffs filed a new action,
Heliotrope General, Inc. v. Credit Lyonnais Rouse, Ltd., No.
749280 (Cal. Super. Ct. 2000) (Heliotrope II), that in-
cluded Morgan as a defendant. The California Superior
Court granted class certification in Heliotrope II on January
22, 2003. All of the plaintiffs except for Southwire opted out
of the Heliotrope litigation on March 21, 2003. (Although
the court initially rejected plaintiff Asarco’s request for
exclusion, the court granted it on June 20, 2003.) Plaintiff
8 Nos. 04-1713, et al.
Southwire filed its opt-out request for Heliotrope II on
March 22, 2003.
If the time between the commencement of Heliotrope II
and the date when the various plaintiffs opted out of the
state class did not count against the four-year limitations
period, then the suit against Morgan filed at the end of
2002 was easily brought in time. The district court con-
cluded that this time is excludable only if the American Pipe
rule makes it so. It then found that American Pipe did not
save the plaintiffs’ actions “[b]ecause the Heliotrope actions
did not involve the same causes of action as those in plain-
tiffs’ present case against defendants, plaintiffs may not
claim any tolling benefit from the Heliotrope class actions.”
Although the court also found that the plaintiffs could
benefit from tolling under American Pipe and Crown, Cork
& Seal Co. v. Parker, 462 U.S. 345 (1983), for the federal
antitrust class action filed against Morgan in Loeb Indus.,
Inc. v. J.P. Morgan & Co., No. 00-C-274-C (W.D. Wis. 2000)
(Loeb II), this time period was not great enough to make a
difference. The court calculated that Loeb II’s tolling benefit
ran from the day the complaint was filed on May 8, 2000,
until January 2, 2001, the day the district court dismissed
the action, for a total of seven months and 25 days. The
court rejected the plaintiffs’ contention that the period
lasted during the pendency of the earlier appeal to this
court that culminated in Loeb I.
Finally, the court declined to answer the question
whether the tolling agreements entered into by the defen-
dants in the In re Sumitomo Copper Litigation, No. 96 Civ.
4584 (MP) (S.D.N.Y.), tolled the statute of limitations in
this case. Even if the agreements had that effect, they
would not have sufficed to save the plaintiffs’ claims from
dismissal, assuming the accuracy of the court’s choice of the
date of accrual and the unavailability of any other ground
for tolling.
Nos. 04-1713, et al. 9
II
We review a district court’s grant of summary judgment
de novo, taking all facts in the light most favorable to the
non-moving party. See, e.g., Moser v. Ind. Dep’t of Corr., 406
F.3d 895, 900 (7th Cir. 2005). An award of summary
judgment is proper when “there is no genuine issue as to
any material fact and that the moving party is entitled to a
judgment as a matter of law.” FED. R. CIV. P. 56(c); Celotex
Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). Here, plain-
tiffs present three arguments for reversing the district
court: (1) material issues of fact exist on the question
whether their claims against Morgan accrued on July 23,
1996; (2) material issues of fact exist on the question
whether the statute was tolled by the doctrine of fraudulent
concealment; (3) even if their claims accrued on June 14,
1996 (for Southwire’s claims against Sumitomo and Global),
and July 23, 1996 (for all claims against Morgan), as the
district court held, the cases are timely because the statute
of limitations was tolled as a matter of law during the
pendency of the state court class actions. This opinion
addresses only the first two of these points in detail. Judges
Cudahy and Rovner have rejected the third argument, for
the reasons explained in Judge Cudahy’s separate opinion.
A. The Accrual Date of Plaintiffs’ Antitrust Injuries
The plaintiffs argue that the district court improperly
selected July 23, 1996, as the date on which their claims
accrued and contend instead that August 13, 1999, the date
on which Sumitomo’s complaint against Morgan
was unsealed, is the proper date. Plaintiffs further argue
that even if their actions accrued as early as 1996, they
should benefit from tolling under the doctrine of fraudulent
concealment because of Morgan’s efforts to hide its involve-
ment with Sumitomo’s price-fixing. We first address the
question of accrual. Whether the district court selected the
10 Nos. 04-1713, et al.
proper accrual date depends on the application of the
discovery rule to these facts.
As an initial matter, plaintiffs’ antitrust claims are
subject to a four-year statute of limitations. 15 U.S.C. § 15b;
see also Zenith Radio Corp. v. Hazeltine Research, Inc., 401
U.S. 321, 338 (1971) (“The basic rule is that damages are
recoverable under the federal antitrust acts only if suit
therefor is ‘commenced within four years after the cause of
action accrued’. . . .” (quoting 15 U.S.C. § 15b)). Generally,
an antitrust “cause of action accrues and the statute begins
to run when a defendant commits an act that injures a
plaintiff’s business.” Zenith, 401 U.S. at 338. As in other
areas of the law, however, in the absence of a contrary
directive from Congress this rule is qualified by the discov-
ery rule, which “postpones the beginning of the limitations
period from the date when the plaintiff is wronged to the
date when he discovers he has been injured.” See Cada v.
Baxter Healthcare Corp., 920 F.2d 446, 450 (7th Cir. 1990).
“This principle is based on the general rule that accrual
occurs when the plaintiff discovers that ‘he has been injured
and who caused the injury.’ ” Barry Aviation, Inc. v. Land
O’Lakes Mun. Airport Comm’n, 377 F.3d 682, 688 (7th Cir.
2004) (quoting United States v. Duke, 229 F.3d 627, 630 (7th
Cir. 2000) (emphasis in original)).
Plaintiffs discovered that they had suffered some kind
of injury on June 13, 1996, when Sumitomo announced that
it had incurred almost $1.8 billion in losses from its illegal
activities. At this point, the plaintiffs knew that their
businesses had been injured by Sumitomo’s actions, but
they did not know that Morgan might also be liable. As the
district court noted, however, several articles indicated that
Morgan had financed Sumitomo’s copper transactions. The
district court thought that the plaintiffs should have
suspected Morgan’s possible culpability by July 23, the date
when the Associated Press reported that Morgan and other
banks were under investigation by the Commodities
Nos. 04-1713, et al. 11
Futures Trading Commission (CFTC), because by this date,
“plaintiffs had enough information to trigger their obliga-
tion to make further inquiry.” The court concluded that
whether it applied the discovery rule to when the claim
accrued or the fraudulent concealment doctrine to toll the
statute of limitations, by July 23 the plaintiffs “knew
enough to suspect a violation that they could have detected
with due diligence.” Absent any alleged wrongdoing on
Morgan’s part, the court thought that the plaintiffs should
have known of Morgan’s liability too.
The problem is that in making its determination, the
court never explained what facts the plaintiffs’ diligent
inquiries would have revealed. (Sumitomo, it should go
without saying, was in a different position; as a party to the
deals with Morgan, it had access to information that was
not accessible to outsiders.) The court cites several articles
that mentioned Morgan and its loans to Sumitomo in June
and July 1996, none of which indicated that Morgan’s
actions were unlawful or even that Morgan knew about
Sumitomo’s fraudulent transactions. Even the articles
published in the spring of 1997 reporting the federal
investigation of Morgan did not state that Morgan had been
charged with violating the law. For example, on April 3,
1997, The Wall Street Journal reported that state and
federal authorities reprimanded Morgan after their investi-
gation of Morgan’s financing the trades of Yasuo
Hamanaka, Sumitomo’s key copper trader. The article
suggested that Morgan may have had knowledge of
Hamanaka’s purposes behind the loans and it referred to a
six-month federal investigation, but it stopped short
of saying that Morgan had been charged with violating
any laws.
Perhaps most significantly, as the district court noted in
its opinion, Morgan was not named in any copper litiga-
tion until February 2000, six months after Sumitomo
12 Nos. 04-1713, et al.
unsealed its complaint against Morgan. See R.W. Strang
Mechanical v. Sumitomo Corp., No. 701680 (Cal. Super. Ct.
1996) (complaint amended to add defendant Morgan on
February 14, 2000); Heliotrope I, No. 701679 (Cal. Super.
Ct. 1996) (complaint amended to add defendant Morgan on
February 14, 2000); Nat’l Metals, Inc. v. Sumitomo Corp.,
No. 734001 (Cal. Super. Ct. 1999) (complaint amended to
add defendant Morgan on February 14, 2000); Heliotrope II,
No. 749280 (Cal. Super. Ct. 2000) (complaint filed against
defendant Morgan on June 5, 2000); Loeb Indus., Inc. v. J.P.
Morgan & Co., No. 00-C-0274-C (W.D. Wis. 2000) (com-
plaint filed on May 8, 2000); Ocean View Capital, Inc. v.
J.P. Morgan & Co., No. 00-CV-3756 (S.D.N.Y. 2000) (filed
May 17, 2000). The district court cited these cases in
support of its belief that plaintiffs could have filed their
cases before July 23, 2000, four years after the accrual date
the court selected. But if the soonest that the plaintiffs were
put even on inquiry notice about Morgan’s role was late
1999, that was when the four-year period began to run;
plaintiffs were not left facing only an equitable extension of
time dating from some earlier point.
Under these circumstances, we conclude that a dispute of
material fact exists regarding when a diligent inquiry
on the part of the plaintiffs would have revealed Morgan’s
involvement. The only information available in the pub-
lic domain was insufficient to suggest activities on Morgan’s
part that went beyond the normal role of a financial
institution. The press had reported that Morgan was
financing some of Sumitomo’s trades; that it was engaged
in hedging deals in the copper market; that it may have
participated in loan agreements supporting the Hamanaka
trades; that it was trading in derivative contracts; and that
the CFTC was investigating someone. We do not see how
this amounts to indisputable evidence of inquiry notice that
Morgan had stepped over any legal lines.
Nos. 04-1713, et al. 13
B. Equitable Estoppel and Fraudulent Concealment
The facts taken in the light most favorable to the plain-
tiffs also support a finding that equitable estoppel should be
invoked to toll the statute of limitations. In their appeal,
plaintiffs allege that Morgan affirmatively acted to conceal
its involvement using a variety of mechanisms: confidential-
ity agreements; its separation agreement with Keith
Murphy, Morgan’s former head of its base metals desk,
prohibiting him from disclosing confidential business
information in exchange for $225,000; its media strategy;
the destruction of evidence; and the withholding of informa-
tion or giving of false information to regulatory investiga-
tions.
“Equitable estoppel [in the statute of limitations con-
text] suspends the running of the statute of limitations
during any period in which the defendant took active steps
to prevent the plaintiff from suing.” Barry Aviation, 377
F.3d at 689 (internal citation omitted). The typical example
of equitable estoppel is when a defendant “promis[es] the
plaintiff not to plead the statute of limitations pending
settlement talks.” Singletary v. Continental Ill. Nat’l Bank
and Trust Co. of Chicago, 9 F.3d 1236, 1241 (7th Cir. 1993).
Fraudulent concealment is a type of tolling within the
doctrine of equitable estoppel. Fraudulent concealment
“presupposes that the plaintiff has discovered, or, as
required by the discovery rule, should have discovered, that
the defendant injured him, and denotes efforts by
the defendant—above and beyond the wrongdoing upon
which the plaintiff’s claim is founded—to prevent the
plaintiff from suing in time.” Cada, 920 F.2d at 451. In
order for a plaintiff to benefit from tolling for fraudulent
concealment, he must show “that he neither knew nor, in
the exercise of due diligence, could reasonably have known
of the offense.” Klehr v. A.O. Smith Corp., 521 U.S. 179,
194-95 (1997) (holding that “reasonable diligence” was
14 Nos. 04-1713, et al.
required to invoke the doctrine of fraudulent concealment in
the context of civil RICO by analogy to antitrust cases).
The district court found that the plaintiffs could not
benefit from tolling on the ground of fraudulent conceal-
ment because “[t]o sustain such a claim at trial, plaintiffs
would have to prove that defendants took active steps to
prevent plaintiffs from suing before the statutory deadline.”
After reviewing considerable quantities of discovery
materials, plaintiffs have unearthed three incidents
that they contend add up to obstructionism sufficient to
entitle plaintiffs to claim equitable estoppel. Defen-
dants’ managing director of global commodities made
an allegedly untruthful statement to examiners of the
Federal Reserve Bank and New York State Banking
Department that defendants had had no suspicion
about Hamanaka’s dealings and no concern that a
March 1996 trade with Sumitomo was unauthorized;
defendants’ London head of media relations destroyed
a notebook containing his notes of conversations with
media representatives; and J.P. Morgan Securities Ltd.,
an entity related to defendant J.P. Morgan Chase,
declined to give information to the London Metals
Exchange about a customer of defendant Morgan
Guaranty Trust Company. These three incidents add up
to nothing of significance.
In our view, this does not do justice to the facts the
plaintiffs have presented for purposes of the summary
judgment motion. Plaintiffs began by pointing out that
Morgan was not contesting the fact that it had engaged
in fraudulent concealment prior to June 17, 1996. Other
representative facts plaintiffs proffered included the
following: (1) Morgan provided false information to au-
thorities, by telling them that Hamanaka’s trades were fully
authorized by Sumitomo’s top management when it knew
that they were not; (2) Morgan publicly offered innocent
Nos. 04-1713, et al. 15
alternative explanations to explain away events related to
the price-fixing conspiracy, knowing that they were mis-
leading; (3) Morgan affirmatively instructed
other conspirators not to divulge the existence of the
conspiracy; and (4) in violation of Morgan’s record retention
policy, its Head of Media Relations in London destroyed the
notebooks in which he recorded information about his
contacts with the press. Most suspiciously, almost two years
after it fired Murphy, who had headed Morgan’s base
metals business for a time and who was at the heart of the
arrangements with Sumitomo, Morgan entered into an
agreement with him requiring that he not disclose any
information relating to the business and that he give
Morgan notice of and an opportunity to resist any subpoe-
nas. Notably, the silence was not simply vis à vis the press;
it was directed toward official inquiries. In exchange for
these promises, Morgan made a generous special payment
of $225,000 to Murphy and “reinstated” options for approxi-
mately 7,000 shares of Morgan stock, which Murphy had
forfeited at the time of his forced resignation.
We certainly do not rule out the possibility that Morgan
may have explanations for its actions. That is not the point.
At the summary judgment stage, this evidence is enough to
show that material facts are in dispute as to whether
plaintiffs can benefit from tolling under fraudulent conceal-
ment. See, e.g., Morton’s Market, Inc. v. Gustafson’s Dairy,
Inc., 198 F.3d 823, 832-33 (11th Cir. 1999) (reversing a
district court’s grant of summary judgment for defendants
because material facts existed on plaintiffs’ claim regarding
fraudulent concealment). In Morton’s, the Eleventh Circuit
noted the “stringent” standard of review at summary
judgment for determining whether the defendants’ conduct
“prevented the plaintiff from discovering his claim prior to
the expiration of the limitations period.” Id. at 832. The
court stated that, “[i]t is not enough for summary judgment
to point to facts which might have caused a plaintiff to
16 Nos. 04-1713, et al.
inquire, or could have led to evidence supporting his claim.
A defendant who does this has succeeded in demonstrating
only that there is a jury question regarding the tolling of
the statute of limitations by fraudulent concealment. To
award summary judgment on such a showing is error.” Id.
at 832-33 (emphasis in original).
Similarly here, defendants answer the plaintiffs’ evidence
only with references to articles that reveal information
about Morgan’s loans to Sumitomo that, it contends, should
have prompted further inquiry. But this evidence does not,
by itself, erase the contrary evidence that the plaintiffs
have proffered. The doctrine of fraudulent concealment
protects “both the diligent and the non-diligent plaintiff . .
. from the expiration of claims the factual basis for which
was shrouded by the veil of fraudulent concealment.” Id. at
836. While denying liability or failure to cooperate is not
enough to invoke the doctrine of fraudulent concealment,
see Singletary, 9 F.3d at 1241, plaintiffs went far beyond
simple denials. We conclude that there are facts in dispute
regarding Morgan’s fraudulent concealment and on that
basis we reverse the district court’s summary judgment
decision in favor of Morgan.
C. Timeliness After Discovery
As we noted earlier, the district court found in the
alternative that the plaintiffs acted too slowly in bringing
their suit, regardless of questions of discovery or fraudulent
concealment. It was on August 13, 1999, that Sumitomo’s
complaint against Morgan was unsealed, and it cannot be
disputed that the revelation of the information in that
complaint gave the plaintiffs the requisite factual support
for an antitrust suit against Morgan. In fact, plaintiffs did
not file their action until December 30, 2002, more than
three years later.
Because the district court’s view of the equities may
have been affected by its conclusion that the correct accrual
date was really July 23, 1996, we would reverse and
Nos. 04-1713, et al. 17
remand for further consideration of this point even if our
only ground of disagreement related to the equitable
estoppel or fraudulent concealment ground. Here, in
addition, our holding (based of course on the summary
judgment record) that the plaintiffs could not reasonably
have discovered Morgan’s role as early as the district
court thought means that the court was not free to shorten
the four-year limitations period in this way. Under the
discovery rule, the statute does not begin running until
the plaintiff discovers that he has been injured and
who caused the injury. Here, the statute did not begin
running until August 13, 1999, and thus the plaintiffs
had until August 13, 2003, to file their action. That was
a deadline they easily met.
D. Tolling Based on Loeb I: Sumitomo, Global
Southwire hopes to save its claims against Sumitomo and
Global through the argument that the statute of limitations
was tolled during the pendency of the federal class action
filed in Loeb Indus., Inc. v. Sumitomo Corp., No. 99-C-377-C
(W.D. Wis. 1999). The defendants respond that Loeb I tolled
the statute of limitations only from the date when the
action was filed on June 8, 1999, until the district court
dismissed the action with prejudice on August 24, 2000. If
they are correct, then Southwire is out of luck. If, on the
other hand, the statute was tolled until September 20, 2002,
when this court handed down its Loeb decision, then
Southwire’s case can go forward.
The general rule is that the judgment of a district
court becomes effective and enforceable as soon as it is
entered; there is no suspended effect pending appeal unless
a stay is entered. There is no reason why the
class certification question should somehow be exempt from
this rule. Culver v. City of Milwaukee, 277 F.3d 908 (7th
Cir. 2002), holds that the statute of limitations be-
18 Nos. 04-1713, et al.
gins running again as soon as class certification is denied
or, as we added, as soon as a party opts out of a class. Id. at
914. At that point, the parties are on notice that they must
take steps to protect their rights or suffer the consequences.
This is particularly true now that FED. R. CIV. P. 23(f)
makes it possible for parties to seek an interlocutory appeal
of a class certification decision, but it was true as well
before the advent of Rule 23(f). Furthermore, this rule is
clear and easy to enforce. Southwire is therefore not
entitled to take advantage of tolling from Loeb I beyond the
date when the district court dismissed the case in its suit
against Sumitomo and Global.
III
In summary, we conclude that Morgan was not entitled to
summary judgment with respect to the claims filed by
plaintiffs Southwire and Asarco Group, because issues of
fact pertinent to the date by which the plaintiffs should
have discovered their claims and to the related questions of
equitable estoppel and fraudulent concealment remain. We
also conclude that the district court correctly granted
summary judgment in favor of defendants Sumitomo
and Global, because plaintiffs filed those claims too late.
Judges Cudahy and Rovner also reject plaintiffs’ contention
that the statute of limitations was tolled as a matter of law
during the pendency of the Heliotrope class actions, for
reasons explained in Judge Cudahy’s separate opinion.
Judge Wood dissents on this point alone. The judgment of
the district court is therefore AFFIRMED in part and RE-
VERSED in part, and the case is REMANDED for further
proceedings consistent with this opinion. Costs are to be
taxed equally between Morgan, on the one hand, and the
appellants, on the other.
Nos. 04-1713, et al. 19
CUDAHY, Circuit Judge, for the panel and concurring
in Part II. The plaintiffs argue with respect to the Helio-
trope California class action that membership in the
Heliotrope class should not only toll the statute of limi-
tations with respect to individual state antitrust claims
but also the federal statute of limitations governing
claims under the Clayton Act. Not only is there no sug-
gestion in American Pipe, 414 U.S. 538, or in Crown, Cork
& Seal, 462 U.S. 345, that these decisions construing
Federal Rule of Civil Procedure 23 have any direct ap-
plication to parallel state procedures, but the policies
underlying American Pipe and like precedents simply do not
apply in the cross-jurisdictional context.
The essential rationale of American Pipe is that members
of a class whose claims are embodied in a class ac-
tion should not be required by the exigencies of the stat-
ute of limitations to clutter the courts with duplicative
lawsuits as long as their claims are encompassed by the
class action. In other words, as long as they are in effect
passively tendering their claims through inclusion in the
class action, they should not be forced to proceed individu-
ally, whether by intervention or otherwise.
The situation contemplated by the plaintiffs here is,
however, quite different. Here plaintiffs have become
members of a class in a state class action but want the
federal statute of limitations governing a factually similar
federal claim to be tolled. But, in this situation the state
claimants are not being forced by the federal statute of
limitations to file duplicative claims since, in any event, it is
necessary at some point to file suit in federal court if the
plaintiff desires to invoke federal antitrust protection. This
procedural requirement is unaffected by the status of an
ongoing state class action.
Since filing in federal court is a prerequisite to pursuing a
federal remedy regardless of the state class action, there
20 Nos. 04-1713, et al.
will be no efficiency gain whether the federal filing is made
while the claimant is part of the state class action or later
(or never). However similar or dissimilar the function of
federal antitrust law may be with respect to state law, the
federal claim is part of a distinct body of law that must be
pursued in a wholly different court system. This fact cuts
decisively against the application of the policies of American
Pipe across jurisdictional lines to respond to state class
actions, even if some federal interest in such an application
could be divined.
Another way of approaching this problem is to recognize
that Rule 23 allows litigants to protect their rights
passively—to “sit on the sidelines,” so to speak—without
individually asserting their own claims in accordance
with the theory that someone else is making identical
claims on behalf of silent and absent class members. The
key difference between an ordinary Rule 23 situation
and the present case is that no one here is asserting a
federal claim for those sitting on the sidelines. No one
has filed a federal antitrust claim at all, and no one may
ever file a federal antitrust claim. Hence, tolling the federal
statute of limitations may be a futile gesture of benefit to no
one.
Judge Wood in dissent asserts that “different tribunals
that entertain fundamentally the same case should not
be hermetically sealed off one from the other.” Dissent
of Wood, J., at 31. But this rhetorical conclusion overlooks
the fact that, however similar the purposes of federal
and state litigation, they must still be maintained by fil-
ing complaints and pursuing remedies in different courts.
This fact may be decisive for procedural issues like the
one here. The issue before us is a federal issue to be decided
under federal law. If it were a state issue, there is no reason
to believe that California would purport to toll the limita-
tion contained in the Clayton Act, no matter how similar a
Clayton Act claim might be to the claim under a California
Nos. 04-1713, et al. 21
antitrust statute that was the subject of a state class action
(like Heliotrope). This conclusion is particularly inescapable
in light of California’s analogous refusal even to apply its
law of claim preclusion (res judicata) to federal antitrust
claims that are factually similar to state claims.
Under California preclusion law, in order for res judi-
cata to apply to claims not raised in previous proceed-
ings, the court rendering the prior judgment must have
jurisdiction to hear such claims. . . . Because federal
antitrust claims are within the exclusive jurisdiction of
the federal courts . . . [a] California court . . . would
have had no jurisdiction over . . . federal antitrust
claims. Therefore, applying California res judicata
principles, [a] prior California suit cannot preclude [the
similar] federal action.
Eichman v. Fotomat Corp., 759 F.2d 1434, 1437 (9th Cir.
1985) (citations omitted).
The reference by Judge Wood to issue preclusion as
somehow relevant to the tolling of the statute of limitations
is wide of the mark. Here, the state claims have never been
fully litigated, and the issues eligible to be precluded are
therefore unknown. The fact that some issues in the federal
courts may someday be precluded by state decisions is not
a good reason to delay the corresponding federal actions by
tolling the statute of limitations (thereby arguably increas-
ing the chance of preclusion).1 Judge Wood also argues that
1
If we understand Judge Wood’s invocation of Marrese v. Am.
Acad. of Ortho. Surgeons, 470 U.S. 373 (1985) and the point that
a state judgment might “in some circumstances have a preclu-
sive effect” on a subsequent federal action, as to claim preclu-
sion (as we note above), this is certainly not the case in California.
On the other hand, preclusion of federal issues by a prior state
judgment will certainly not be avoided by tolling the fed-
(continued...)
22 Nos. 04-1713, et al.
somehow fairness, efficiency and like values will be ad-
vanced if a state antitrust class action can effect a tolling of
the federal statute of limitations applicable to the Clayton
Act. As we have pointed out, this is simply not the case. If
an unnamed member of the state class wishes also to sue
under the Clayton Act, the member must at some point
bring a suit in federal court. If the requirements of the
statute of limitations result in the federal suit’s being
brought while the state class action is pending, there is
no inefficiency or unfairness. The plaintiff has simply
invoked an additional statutory right at an appropriate
time.
It merely confuses the issue to suggest that the Class
Action Fairness Act (CAFA), Pub. L. 109-2, 119 Stat. 4(2005), has anything to do with the issue. If a state class
action is removed to federal court—diversity having been
found—the substantive law involved is still state law.
Claims under an analogous federal statute have not
been invoked, and they are not implicated. Similarly,
Johnson v. Railway Express, Inc., 421 U.S. 454 (1975),
relied on by the district court, has been properly invoked
because it illustrates the principle that there must be
identity of claims for tolling to be operative. It would appear
a fortiori that, if the second claim is not only under a
different statute but under a statute in another jurisdiction
(...continued)
eral statute of limitations and delaying the federal lawsuit. As
to the possibility that a federal suit will never be brought, the
statute of limitations applicable to such a suit is, of course,
irrelevant in the circumstances. But if the problem is that
preclusion principles may ultimately provide an affirmative
defense to a federal suit, this is certainly not a reason to toll the
federal statute of limitations and delay the filing of a federal
action.
Nos. 04-1713, et al. 23
(federal) and invokable only in a different court system
(federal), tolling would not be appropriate.
Cullen v. Margiotta, 811 F.2d 698 (2d Cir. 1987), cited by
Judge Wood, contains dicta that are clearly distinguishable
and, in addition, have provoked a telling dissent. First, in
Cullen, the claims under RICO and 42 U.S.C. § 1983 were
subject to the three-year limitations period imposed by state
law. The court noted that when a federal court looks to
state law to determine the most appropriate statute
of limitations, it must also, so long as federal policy is not
offended, apply the state’s rules as to the tolling of the
statute. This situation, then, contemplates the involvement
of state law in a way that the Clayton Act—with its own
statute of limitations and exclusive federal jurisdic-
tion—does not. State courts have the power to adjudicate
both RICO and § 1983 cases along with federal courts; only
federal courts are competent to hear Clayton Act cases.
Thus, it is more palatable to permit state litigation to
toll state-based statutes of limitation with respect to claims
that could actually be adjudicated in state courts.2 Here,
however, Judge Wood would allow an action in a jurisdic-
tionally incompetent tribunal to toll the limitation for a
lawsuit that it could never hear.
Further, Judge Meskill’s partial dissent points out the
pitfalls in pushing American Pipe beyond its own rationale.
He argued that the majority had broadened the American
Pipe rule to an unwise extent, quoting Justice Powell’s
2
This, of course, is not to say that a state statute of limita-
tions implicated by a federal class action might not be tolled under
American Pipe. See, e.g., May v. AC&S, 812 F. Supp. 934, 938
(E.D. Mo. 1993). That, of course, is not the issue here. The
question here is claimed to be whether the limitations attaching to
a federal statute may be tolled to improve the efficiency of a state
class action. As we have noted, there is no efficiency gain here and
no federal interest in tolling.
24 Nos. 04-1713, et al.
concurrence in Crown, Cork & Seal that “[t]he tolling rule
of American Pipe is a generous one, inviting abuse.” Cullen,
811 F.2d at 736 (Meskill, J., dissenting) (quoting Crown,
Cork & Seal, 462 U.S. at 354 (Powell, J., concurring)). While
California’s antitrust statute might be “similar” to the
Clayton Act, mere similarity is a murky standard for a
matter as needful of certainty as the statute of limitations.
Nor are our conclusions undermined by the repeated
assertion by Judge Wood that a major purpose of a stat-
ute of limitations is “to promote justice by preventing
surprises through the revival of claims that have been
allowed to slumber until evidence has been lost, memories
have faded, and witnesses have disappeared.” Order of R.R.
Tel. v. Ry. Express Agency, Inc., 321 U.S. 342, 348-49 (1944).
Judge Wood claims the bringing of a state class action
asserting a state claim that is similar to a federal claim
puts defendants on notice that they might be sued federally
and leads to the preservation of evidence and memories.
This might well be substantially correct, but notice alone is
certainly not enough to toll the statute of limitations. A
mere announcement of an intention to sue puts defendants
on notice. No one contends, however, that this simple notice
is sufficient to toll the statute. If notice were enough, there
would be no reason to resume the running of the statute
when a plaintiff opts out of the class or is otherwise re-
moved from it. After all, opting out of the class does not
withdraw the notice that has been given by filing the class
action. American Pipe may claim the additional benefit from
bringing a class action of notice to the defendant, but the
driving force in that opinion is the gain to an efficient Rule
23 procedure of tolling the statute.
Functional equivalence, like simple notice, is not enough
to trigger tolling. If functional equivalence were enough,
then it ought to apply to individual claims as well, which
certainly is not the law. For example, if multiple plain-
tiffs filed a joint suit against a defendant in state court and
Nos. 04-1713, et al. 25
one of those plaintiffs immediately dropped out, Judge
Wood’s functional equivalence rationale would seemingly
toll the statute of limitations and permit that plaintiff
to file her own “similar” lawsuit in federal court well beyond
the normal statute of limitations. Since that plaintiff was
originally part of the state lawsuit, the defendant plainly
had notice of that plaintiff’s “similar” claim. But notice is
not enough; that plaintiff needs Rule 23 to protect her
rights as a passive participant. We find the proposition that
a defendant in state court can be on adequate notice that
someday—two, five, ten or even more years down the
road—a plaintiff might bring a functionally equivalent but
not identical claim in federal court difficult to accept.
It should finally be noted that our conclusion supports one
of the main purposes of the statute of limitations that Judge
Wood identifies—to allow a defendant to be free of stale
claims in due time. For all these reasons, the plaintiffs’
participation in Heliotrope should have no effect on tolling
the statute of limitations applicable to the Clayton Act.
On the other issue of when the plaintiffs’ claims accrued,
I concur, although I have some reservations, with the
majority. The majority concedes that, by July 23, 1996, the
plaintiffs knew, among other things, that Morgan and other
banks were under investigation by the Commodities
Futures Trading Commission. The district court be-
lieved that the plaintiffs at that time “knew enough to
suspect a violation that they could have detected with due
diligence.” The majority, however, is doubtful that plaintiffs’
diligent inquiries would have uncovered enough information
to support a suit. Considering plaintiffs’ highly expert,
knowledgeable and well-compensated attorneys, I have
somewhat less difficulty in postulating their capacity to
uncover enough incriminating facts. There may be enough
doubt here, however, to support the majority’s conclusion.
26 Nos. 04-1713, et al.
On the issue of equitable estoppel and fraudulent conceal-
ment, I have similar reservations, but, again, there may be
a sufficient question to deny summary judgment. Hence, I
concur in the opinion authored by Judge Wood to the extent
that it speaks for a majority and in the judgment which it
supports but rely on my own opinion joined by Judge
Rovner with respect to the Heliotrope issue.
WOOD, Circuit Judge, dissenting in part. Unlike my
colleagues, who conclude that a state-court class action like
Heliotrope cannot, as a matter of law, have an effect on the
statute of limitations applicable to the federal antitrust
class action here, I conclude that a federal court is both
entitled and obliged to take into account related activities
in a state court when it decides whether a federal class
action can go forward. My principal disagreement with the
majority’s tolling analysis is that it reads as if Marrese v.
Am. Acad. of Ortho. Surgeons, 470 U.S. 373, 380 (1985), in
which the Supreme Court stated that “a state court judg-
ment may in some circumstances have preclusive effect in
a subsequent action within the exclusive jurisdiction of the
federal courts,” were never decided. Because of Marrese,
there will be a significant number of cases in which a state
antitrust claimant will not have the option, as the majority
puts it, of “at some point [ ] fil[ing] suit in federal court . . .
to invoke federal antitrust protection.” Opinion of Cudahy,
J., at 20. Instead, because of the operation of 28 U.S.C.
§ 1738, the claimant will have to be content with the way
that the state courts protected the interests embodied in the
federal antitrust laws. It is not open to this court to second-
guess the wisdom of the holding of Marrese; instead, we
must base our interpretation of other parts of federal law,
Nos. 04-1713, et al. 27
including the class action rules and tolling principles,
on a realistic appreciation of the degree of interdepen-
dence between state and federal antitrust claims that
Marrese decreed.
The degree of weight any particular state court action
must be given in a later federal case will vary, of course,
depending on how related it is factually and legally to
the federal litigation—there will be a potential range
spanning from no weight at all, for wholly unrelated suits,
to full-blown claim preclusion, under the principles articu-
lated in Marrese. In the present case, the close identity
between the facts and legal principles governing the state
and federal cases are enough to require tolling the statute
of limitations for the persons who were unnamed class
members in the California suit. An examination of the
pleadings in the Heliotrope litigation reveals that it covers
exactly the same matters that the present suit involves. As
unnamed members of the Heliotrope class, the plaintiffs
here had no ability to control the course of that litigation.
Moreover, had plaintiffs stayed in the Heliotrope litigation
and the court had finally resolved such critical questions as
relevant market and effect on competition, they would
probably have faced issue preclusion in any subsequent
effort to invoke the federal antitrust laws. Under those
circumstances, I would find that the American Pipe tolling
rule applies and I would thus conclude that the plaintiffs’
claims against Morgan are entitled to go forward without
further fact-finding. Even with the benefit of class action
tolling, however, I would find that Southwire’s claims
against Sumitomo and Global were time-barred.
I
I believe that it is common ground that if the plain-
tiffs are entitled to benefit from tolling during the Helio-
trope litigation and the tolling period lasted long enough,
28 Nos. 04-1713, et al.
their claims against Morgan can proceed. I begin, therefore,
with a discussion of the legal principles that govern and
then turn to the application of those principles to the
plaintiffs’ case.
A. American Pipe and Tolling
The question for this part of the case is whether the four-
year statute of limitations in the Clayton Act should have
been tolled during the pendency of the state antitrust
action. Although federal courts have an obligation to respect
state court proceedings—one that finds expression in
federal statutes such as the Full Faith and Credit Act, 28
U.S.C. § 1738, and the Anti-Injunction Act, 28 U.S.C. §
2283—our primary duty here is to give proper scope to both
the Clayton Act, 15 U.S.C. § 15b (four-year statute of
limitations), and FED. R. CIV. P. 23. In my view, there is no
per se rule that bars a federal court from tolling the Clayton
Act’s statute of limitations for litigants who earlier were
unnamed members in closely related state court class
litigation. Whether tolling is appropriate should depend
upon both the factual and legal overlap between the two
actions. If the earlier state court class action arises out of
the same transaction or occurrence as the later federal class
action, and the parties and claims are functionally identical,
as I believe they are here, I would find that the federal
interest in making a forum available to the unnamed
members of the earlier class who have allegedly suffered
from violations of the antitrust laws is strong enough to call
for tolling.
My conclusion is consistent with the purpose that statutes
of limitations are designed to serve. Justice Jackson
summarized this purpose with characteristic eloquence in
Order of Railroad Telegraphers v. Railway Express Agency,
Inc., 321 U.S. 342 (1944):
Nos. 04-1713, et al. 29
Statutes of limitation, like the equitable doctrine of
laches, in their conclusive effects are designed to
promote justice by preventing surprises through the
revival of claims that have been allowed to slumber
until evidence has been lost, memories have faded,
and witnesses have disappeared. The theory is that
even if one has a just claim it is unjust not to put the
adversary on notice to defend within the period of
limitation and that the right to be free of stale claims in
time comes to prevail over the right to prosecute them.
Id. at 348-49. In American Pipe & Constr. Co. v. Utah, 414
U.S. 538 (1974), the Court observed that these goals are
satisfied in the class action setting when the named
plaintiff brings a putative class action and alerts the
defendants “not only of the substantive claims being
brought against them, but also of the number and generic
identities of the potential plaintiffs who may participate in
the judgment.” Id. at 555.
The Supreme Court has held that the same law should
govern both a statute of limitations and the tolling princi-
ples that go along with it. See, e.g., Board of Regents v.
Tomanio, 446 U.S. 478, 485 (1980). Thus, in Tomanio, as
well as in Chardon v. Fumero Soto, 462 U.S. 650, 662
(1983), both cases in which the federal courts were bor-
rowing an analogous state statute of limitations for an
action under 42 U.S.C. § 1983, the Court held that the state
tolling rules had to be applied. This was so even though in
Chardon the result, consistent with governing Puerto Rican
law, was that the statute of limitations began running anew
after class certification was denied in the first suit, rather
than simply continuing after suspension. The Court ac-
knowledged that American Pipe had required only
suspensive effect, but it distinguished American Pipe on the
ground that the antitrust case there was governed by a
federal statute of limitations provided by the Clayton Act.
30 Nos. 04-1713, et al.
These cases suggest that here, where the question is
whether to toll the Clayton Act’s limitations period, the
court should apply federal law to the issue rather than
California law. (In the present case, as it happens, there
is little difference between the federal and the state
tolling rules. The California Supreme Court follows Ameri-
can Pipe when it serves the twin purposes that the court
has recognized for that case’s tolling rule—efficiency of the
litigation process and protection of the defendant through
adequate notice. Jolly v. Eli Lilly & Co., 751 P.2d 923, 934-
35 (Cal. 1988).) Federal courts have a broad interest
in litigation efficiency even when an earlier lawsuit
occurs in the courts of a state or even those of a foreign
country. Indeed, both the federal law governing recogni-
tion and enforcement of foreign judgments and the law of
many states presently take the position that foreign
judgments should be recognized and enforced even if the
issuing court would not give similar treatment to a U.S.
judgment. See, e.g., Bank of Montreal v. Kough, 612 F.2d
467 (9th Cir. 1980); Somportex Ltd. v. Philadelphia Chew-
ing Gum Corp., 453 F.2d 435 (3d Cir. 1971); Uniform
Foreign Money Judgments Recognition Act § 4 (not listing
lack of reciprocity as a permissible ground for non-recogni-
tion); RESTATEMENT (THIRD) OF FOREIGN RELATIONS LAW
OF THE UNITED STATES §§ 481-82 (1987). To the extent
that courts and legislatures have eschewed a reciprocity
rule, they are making the point that interests in both
efficiency and fairness operate across judicial systems;
different tribunals that entertain fundamentally the
same case should not be hermetically sealed off one from
the other.
A look at the Heliotrope litigation reveals that all relevant
interests would be served here by tolling: efficiency, fairness
to the unnamed plaintiff class members, and protection of
the defendant through adequate notice. The claims in
Heliotrope are functionally the same as those in the federal
case, and the defendants were fully on notice of the alleged
Nos. 04-1713, et al. 31
misconduct of which they were accused. There is a separate
question whether individuals who opt out of a certified class
ought to be able to take advantage of tolling principles, but
I am satisfied, based on the Supreme Court’s decisions in
Crown, Cork & Seal Co. v. Parker, 462 U.S. 345, 351-52
(1983), and Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 176
n.13 (1974), that this too is appropriate, on the condition
that the statute begins running again as of the date the opt-
out becomes effective. (California would do the same thing.
See San Francisco Unified Sch. Dist. v. W.R. Grace & Co.-
Connecticut, 44 Cal. Rptr.2d 305, 318 (Cal. Ct. App. 1995).)
Otherwise, parties who are swept into a class action by a
self-designated class representative and who later assert
their right to opt out will essentially be forced to remain
in the class for reasons relating to limitations periods,
rather than because they are satisfied with the represen-
tation they are receiving.
B. Heliotrope Class Actions
The district court found significance for tolling pur-
poses in the fact that the Heliotrope class action was not
based on the federal antitrust laws. Indeed it was not,
because it could not have been. The Supreme Court has long
understood the antitrust laws as conferring exclu-
sive jurisdiction on the federal courts to adjudicate fed-
eral antitrust claims. See Gen. Inv. Co. v. Lake Shore &
Mich. S. Ry. Co., 260 U.S. 261, 287 (1922). But the plain-
tiffs’ claims were brought under California’s Cartwright Act
(its state antitrust law), Cal. Bus. & Prof. Code §§ 16720-
16770, and other states’ antitrust laws. The first question
thus should be whether it is enough to show as a matter of
substance that different statutes underlay the two claims in
order to defeat tolling under American Pipe.
It is helpful in this connection to recall the background of
the American Pipe decision. There, the Supreme Court was
32 Nos. 04-1713, et al.
faced with an antitrust action initially brought by the State
of Utah as a class action. After transfer to another district
under the multidistrict litigation procedures, the transferee
judge granted the defendants’ motion to deny class certifica-
tion. Eight days later, many of the unnamed members of
the class moved to intervene. The district court denied that
motion, finding that the four-year statute of limitations had
run with respect to their claims, and that it had not been
tolled during the pendency of the requested class action.
The court of appeals reversed, and the Supreme Court
upheld its decision, stating 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. at 554.
To hold otherwise, the Court had explained earlier,
would frustrate the principal function of a class suit,
because then the sole means by which members of
the class could assure their participation in the judg-
ment if notice of the class suit did not reach them until
after the running of the limitation period would be
to file earlier individual motions to join or intervene
as parties—precisely the multiplicity of activity
which Rule 23 was designed to avoid in those cases
where a class action is found superior to other available
methods for the fair and efficient adjudication of the
controversy.
Id. at 551 (internal quotation marks omitted). The Court
noted that this rule was also consistent with the purpose of
ensuring that defendants were protected from claims
by plaintiffs who have “slept on [their] rights.” Id. at 554. In
Crown, the Supreme Court extended American Pipe’s tolling
rule to situations where the class action has been dismissed
and those who would have been class members commence
Nos. 04-1713, et al. 33
an independent action instead of intervening. 462 U.S. at
350-51.
The American Pipe rule cannot be divorced from the class
action context. In the case of ordinary litigation, in which A,
B, and C file a lawsuit against X in state court, each of
these plaintiffs is responsible—and knows that she is
responsible—for protecting her own interests. Thus, if C
immediately dropped out of the original lawsuit and failed
to file a related action in federal court until after the
expiration of the statute of limitations, she would be out of
luck. Compare Federated Dep’t Stores, Inc. v. Moitie, 452
U.S. 394 (1981) (holding that nonappealing plaintiffs could
not avoid dismissal on res judicata grounds of new lawsuits
raising essentially the same claims under federal and state
antitrust law, even though appealing co-plaintiffs won a
reversal on appeal). With either a federal or state class
action, in contrast, the unnamed class members do not
enjoy full party rights during the course of the litigation.
See, e.g., Devlin v. Scardelletti, 536 U.S. 1, 10-11 (2002)
(unnamed class members are “parties” for purposes of
tolling the statute of limitations; are not “parties” for
purposes of defeating complete diversity; are “parties” for
purposes of being bound by settlement); Earley v. Superior
Court, 95 Cal. Rptr. 2d 57, 66 (Cal. App. Ct. 2000) (“[t]he
structure of the class action does not allow absent class
members to become active parties”); Shapell Indus., Inc. v.
Superior Court, 34 Cal. Rptr. 3d 149, 155 (Cal. App. Ct.
2005) (“California courts recognize and preserve the rights
of absentee class members [ ] even before the issue of
certification has been determined.”). Because there is no
pertinent distinction between the way that California treats
class actions and the way federal Rule 23 does, the fact that
the first class action in this case happened to be in Califor-
nia is not enough to defeat tolling here.
In fact, although the Supreme Court has had no occasion
to discuss the situation presented in this case, where the
34 Nos. 04-1713, et al.
first class action is in state court and the later individual
action is in federal court, I see no principled way to distin-
guish the two scenarios. For the reasons I have already
explained, the federal courts are not indifferent to the
existence of related litigation in state courts. To the con-
trary, as the recent passage of the Class Action Fairness Act
(CAFA), Pub. L. 109-2, 119 Stat. 4 (2005), illustrates,
federal and state class actions are becoming
more intertwined by the day. CAFA is designed to facilitate
the removal of state-law based class actions filed in state
courts to federal court, by permitting such removal when-
ever minimal diversity and special amount in controversy
rules are satisfied. Once in federal court, of course, federal
procedural rules (including Rule 23) will govern. See Hanna
v. Plumer, 380 U.S. 460 (1965). As a result of CAFA, federal
courts will inevitably be called upon to interpret and apply
state antitrust laws with increased frequency. The effect of
the federal court’s judgment will be a matter of federal
common law, in accordance with the Supreme Court’s
holding in Semtek Int’l. Inc. v. Lockheed Martin Corp., 531
U.S. 497, 508 (2001). In general, the federal rule will be one
borrowed from the state in which the federal court is
sitting, unless that state law is “incompatible with federal
interests.” Id. at 509.
The key question, once we know that we are dealing
with unnamed members of an earlier putative class, ought
to be how closely the two cases are related. As a matter
of substance, it is plain in the case before us that the
California suit and the current suit cover the same ground.
The Heliotrope litigation involved the same facts, evidence,
and witnesses as the present action. The two lawsuits
also involve virtually identical legal claims, albeit with
different statutory labels. The California Supreme Court
recognized in Aguilar v. Atlantic Richfield Co., 24 P.3d 493(Cal. 2001), that “section 1 of the Cartwright Act . . . like its
Sherman Act analogue, makes a conspiracy among competi-
Nos. 04-1713, et al. 35
tors to restrict output and/or raise prices unlawful per se
without regard to any of its effects.” Id. at 511. Indeed, in
Oakland-Alameda County Builders’ Exchange v. F.P.
Lathrop Constr. Co., 482 P.2d 226 (Cal. 1971), the state
supreme court went so far as to hold that “[b]ecause the
Cartwright Act is patterned after the federal Sherman Act
and both have their roots in the common law, federal cases
interpreting the Sherman Act are applicable in construing
the Cartwright Act.” Id. at 231 n.3.
It is also worth reiterating that had these individual
plaintiffs remained members of the Heliotrope class, issue-
preclusive effect would probably have arisen from the
state litigation. Cf. U.S. Gypsum Co. v. Indiana Gas Co.,
350 F.3d 623, 628-29 (7th Cir. 2003) (explaining that
Indiana state court ruling could have issue-preclusive effect
on aspects of Sherman Act claim). Marrese instructs that
the preclusion rules of California would govern. 470 U.S. at
375, relying on 28 U.S.C. § 1738. Even though it appears
that a California court’s ruling in a Cartwright Act case will
not have claim-preclusive effects in a later Sherman Act
claim, see Freeman v. San Diego Ass’n of Realtors, 322 F.3d
1133, 1142 n.8 (9th Cir. 2003), because California does not
apply res judicata to claims that the first forum was
incompetent to hear, issue preclusion is another matter.
Key questions such as the definition of relevant market, the
competitive effect of restraints in that market, and antitrust
injury to the plaintiffs would have been resolved in the
state litigation, as long as California’s other criteria for
issue preclusion were satisfied. (California, like practically
every state, has a five-part test for issue preclusion: (1)
identity of issue, (2) actual litigation in prior proceeding, (3)
necessarily decided, (4) final and on the merits, and (5)
party against whom preclusion is sought must be same as,
or in privity with, party to former proceeding. See
Huntingdon Life Sciences, Inc. v. Stop Huntingdon Animal
Cruelty USA, Inc., 29 Cal. Rptr. 3d 521, 536 (Cal. Ct. App.
36 Nos. 04-1713, et al.
2005), quoting Lucido v. Superior Court, 795 P.2d 1223,
1225 (Cal. 1990).) Marrese is not narrowly limited to
questions of claim preclusion (nor, for that matter, is §
1738), see, e.g., Jaskolski v. Daniels, 427 F.3d 456, 460-61
(7th Cir. 2005); its underlying message is that the state and
federal antitrust laws are hardly strangers. If key findings
in a state antitrust action will have issue-preclusive effect
on a later federal antitrust claim, and those findings as a
practical matter will dispose of the federal case, then the
unnamed members of a class in the state court risk losing
exactly the same rights that unnamed members of a federal
class would stand to lose. The distinction between issue and
claim preclusion, at least in instances like this one, is more
formal than real.
I recognize, of course, that the policies behind statutes of
limitations and res judicata differ in some respects. Stat-
utes of limitations are concerned with the balance between
the defendant’s interest in notice and repose and the
plaintiff’s interest in vindicating her rights. In contrast,
rules of res judicata and collateral estoppel (or if one
prefers, claim and issue preclusion) are primarily concerned
with putting an end to litigation. See, e.g., David P. Currie,
Res Judicata: The Neglected Defense, 45 U. CHI. L. REV. 317,
325 (1977) (quoting RESTATEMENT (SECOND) OF JUDGMENTS
§ 1 cmt. a (1942)). This interest in finality comes from the
need to avoid waste of judicial resources (including the
recognition that a person is entitled to only one full and fair
adjudication of a claim), respect for the judgment of the first
court, and the need to avoid harassment through repeated
lawsuits. See generally Allan D. Vestal, Rationale of
Preclusion, 9 ST. LOUIS U. L.J. 29 (1964). The common
concern with efficiency and the right to a meaningful (but
singular) opportunity to present one’s claim to a court
supports the application of the American Pipe rule.
Tolling here would recognize the near-identity of
claims and transactions and at the same time further the
Nos. 04-1713, et al. 37
goals of FED. R. CIV. P. 23 to promote the fair and efficient
adjudication of a controversy. As the Second Circuit ex-
plained, “limiting American Pipe tolling to the identical
‘causes of action’ asserted in the initial class action would
encourage and require absent class members to file protec-
tive motions to intervene and assert their new legal theories
prior to class certification, thereby producing the very
results the New York courts seek to prevent by such tolling,
[ ] court congestion, wasted paperwork and expense.” Cullen
v. Margiotta, 811 F.2d 698, 721 (2d Cir. 1987) (internal
quotation marks omitted), overruled on other grounds,
Agency Holding Corp. v. Malley-Duff & Assocs. Inc., 483
U.S. 143 (1987). Some of that protective litigation could
easily end up in federal court either as a federal claim or as
a state law claim based on diversity jurisdiction—a possibil-
ity that underscores further the federal interest in what
goes on during the state court class action.
I am not persuaded, as the district court was, that
Johnson v. Railway Express Agency, Inc., 421 U.S. 454(1975), requires a different result. Johnson involved the
question whether the filing of a charge of employment
discrimination with the EEOC for purposes of a Title VII
claim had the effect of tolling the statute of limitations for a
suit based on the same facts brought under 42 U.S.C.
§ 1981. The Supreme Court found that § 1981 and Title
VII were “separate, distinct, and independent” avenues of
relief, 421 U.S. at 461, and that the Title VII administrative
filing did not toll the relevant limitations period for a § 1981
action (at that time, a period determined by borrowing from
state law). The Court rejected the plaintiff’s effort to rely on
American Pipe to support tolling, commenting generally
that in American Pipe there was “a substantial body of
relevant federal procedural law”— presumably referring to
Rule 23—that guided the decision. 421 U.S. at 466. Thus,
both because Johnson did not involve a class action and
38 Nos. 04-1713, et al.
because it involved distinct legal claims, it does not pre-
clude tolling in this case.
II
The question remains how much time the plaintiffs have
gained as a result of Heliotrope and which defendants the
tolling affects. I address Morgan’s situation first.
A. Application of Tolling Rules to Morgan
The Asarco Group argues that it is entitled to have the
benefit of the period from the time when Morgan was added
as defendant in February 2000 until the Asarco Group
opted out of the Heliotrope II litigation on March 21, 2003.
Southwire asserts that it too should benefit from tolling
during the Heliotrope litigation against Morgan (as well as
against Sumitomo and Global, whose position I address in
a moment). Southwire filed its federal antitrust case on
December 30, 2002, and it opted out of the Heliotrope
litigation on March 22, 2003 (only one day after the Asarco
Group did).
This court previously has held that “filing of a class action
suit tolls the statute of limitations for all the members of
the class, but when the suit is dismissed without prejudice
or when class certification is denied the statute resumes
running for the class members.” Culver v. City of Milwau-
kee, 277 F.3d 908, 914 (7th Cir. 2002) (citations omitted);
see also Crown, 462 U.S. at 354. Thus, when a court denies
certification or dismisses an action, the tolling benefit
ceases. Logically, the tolling benefit must also cease when
the plaintiff opts out of the class and thereby forfeits its
class membership. In this case, the California Superior
Court ordered certification of the Heliotrope II class on
Nos. 04-1713, et al. 39
January 22, 2003, allowing the state antitrust claims
against Morgan to go forward. Both the Asarco Group and
Southwire were members of the Heliotrope II class, until
they filed their opt-out requests on March 21 and 22, 2003,
respectively. At that point, they communicated both to the
court and to the defendants that they no longer intended to
rely on the Heliotrope litigation to press their claims. As of
March 21 and 22, therefore, both sets of plaintiffs ceased to
benefit from the Heliotrope II litigation.
Although the majority has concluded that disputed
questions of fact make summary judgment inappropriate for
the claims against Morgan, the availability of class action
tolling is important for the plaintiffs’ claims against it. If
accepted, tolling would eliminate the need to resolve those
factual issues with respect to Morgan. Starting with July
23, 1996, which is the point of reference the district court
used, approximately three years and six and a half months
elapsed until Morgan was first added to Heliotrope I on
February 14, 2000. With only a couple of days’ slippage
after the early June end of Heliotrope I, Heliotrope II took
over on June 5, 2000. Even if the statute were running
between July 23, 1996, and February 14, 2000, I would find
that it was tolled during the period from February 14, 2000,
to March 21, 2003, or for three years and 35 days (for
Southwire, three years and 36 days). After March 21, 2003,
plaintiffs therefore had approximately five and a half
months left in which to file their actions against Morgan.
They in fact filed these claims on June 13, 2003, a little less
than three months after the statute of limitations restarted.
Plaintiff Superior filed its action about a month later, on
July 11, 2003. Both of these filing dates were well within
the remaining five and a half month period available to the
plaintiffs. This result would be no different if one were to
choose the earlier date of June 14, 1996, as the date when
the plaintiffs realized generically that they had been
40 Nos. 04-1713, et al.
injured, even though at that point they may not have known
about Morgan’s role in the injury.
Although Southwire is in a somewhat different position
than the Asarco Group with respect to the timing of the new
claim, nothing of consequence follows from this. Southwire
indicated that it no longer intended to rely on the
Heliotrope II class action to press its claims against Morgan
when it filed its federal action against Morgan on December
30, 2002. Nevertheless, Southwire also had the same five
and a half months from the time it was no longer involved
in the Heliotrope II proceeding, because the tolling period
began for it on February 14, 2000, even though it ended
earlier. Southwire obviously filed its suit against Morgan
within five months of December 30, 2002, because it filed on
that very day.
B. Application of Tolling Rules to Sumitomo and Global
The situation of defendants Sumitomo and Global is
different. Although Southwire also claims that the Helio-
trope litigation operated to toll its claims against these
two defendants, I conclude otherwise. The district court
held that these claims accrued on June 14, 1996. The
California Superior Court denied certification of the
proposed Heliotrope I class on October 10, 1997, thus
terminating the tolling benefit for the class action against
Sumitomo. See Culver, 277 F.3d at 914. Even though the
court’s October 10, 1997, order was without prejudice and it
later certified a class for settlement purposes, these circum-
stances do not support the conclusion that the
case remained a putative class action along the lines
envisioned by American Pipe and Crown. Clear rules are the
best ones for the litigation process. Only confusion could
result from a rule requiring every litigant to figure out
whether a denial of certification was really a denial, or just
a meaningless interim step. For these reasons, I would find
Nos. 04-1713, et al. 41
that Southwire’s claims against Sumitomo and Global were
untimely.1
For these reasons, I respectfully dissent in part from the
majority’s judgment.
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
1
A detailed breakdown of the tolling process for Southwire’s case
may help. Starting with June 14, 1996, Southwire used up 24 days
before Heliotrope I began on July 8, 1996. It then used up another
606 days between the October 10, 1997, denial of class certifica-
tion and June 8, 1999, when the Loeb I litigation against
Sumitomo and Global began. Another 858 days elapsed from
the August 24, 2000, rejection of the Loeb I class until it filed
suit on December 30, 2002. The total number of days was 1488, in
excess of the 1461 days in four years.
USCA-02-C-0072—2-6-06