Indeed.
Who says persistence doesn’t pay off?
Ask the 1,200 or so Enron investors who two days ago won reprieve from a death sentence on their claims for fraud. Going on seven years after they tried to sue, the Fifth Circuit allowed them to try again in state court. Newby v. Enron Corp., No. 07-20043 (5th Cir. Sept. 9, 2008).
The decision turned on whether Texas state law stops the running of limitations periods under several tolling doctrines. The district court rejected all of the clock-stopping theories, but the Fifth Circuit held that the state courts ought to say whether one of them saved the fraud claims, to which a four-year statute of limitations applies.
The first of the pair concerned the effect of the plaintiffs’ filing of a motion in the district court, fewer than 20 days before expiration of the four-year period, for leave to bring state court cases (the court previously having enjoined plaintiffs from suing without its permission). The district court held the motion untimely because, under the court’s local rules, it couldn’t (or at least normally wouldn’t) grant leave until 20 days after the filing. The Fifth Circuit concluded that the state courts probably wouldn’t agree with that analysis and so directed the district court to grant the motion for leave as to the fraud claims.
The court also discussed a second doctrine in which the filing of a putative class action suspends the running of limitations. Under American Pipe & Construction v. Utah, 414 U.S. 538 (1974), and progeny, members of the inchoate class may wait to file individual lawsuits without risking the bar of limitations. The Fifth Circuit doubted that Texas law recognizes American Pipe tolling in favor of people who opt out of a federal class action. But it said that "the Financal Institutions are free to pursue this argument with the Texas courts, so the state courts can clarify the reach of Texas’s tolling rules." Newby, slip op. at 12.
Blawgletter confesses to confusion over the court’s statement that the "Financial Institutions" — the defendants — could raise American Pipe with the Texas courts. Why would they want to? They already won on that point! And presumably the court believed that, because of its affirmance as to claims involving two and three year limitations periods, the plaintiffs can’t reargue to a state court that American Pipe saves those claims, too. So we don’t understand the court’s invitation to state courts to "clarify the reach of Texas’s tolling rules."
The court could’ve, of course, certified the American Pipe question to the Supreme Court of Texas. We hope it does.
