In a recent case addressing the novel issue of whether foreign law trumped United States law for purposes of class action tolling, the U.S. Court of Appeals for the Eleventh Circuit concluded that Colombian law on equitable tolling applied, even though the defendant was based in New Jersey.

The case has its origins in the mid-2000s, when Chiquita pleaded guilty in federal court to engaging in transactions with a terrorist group in Colombia.  In 2007, following Chiquita’s guilty plea, family members (the putative class) of banana workers who had been targeted by the terrorist group filed a putative class action against Chiquita in a New Jersey federal court.  The putative class plaintiffs brought their claims under the Alien Tort Statute, the Torture Victim Protection Act, and New Jersey and Colombia law.  The litigation was centralized in the Southern District of Florida.

After the district court mostly denied Chiquita’s motion to dismiss, the Eleventh Circuit, on interlocutory appeal, dismissed the ATS and TVPA claims.

The putative class plaintiffs had filed a second amended complaint in November 2012, naming Chiquita and several of its executives and employees as defendants.  The putative class plaintiffs then moved to file a third amended complaint in March 2017 to add several hundred additional plaintiffs.  The district court denied that motion and, in 2019, denied class certification.

The plaintiffs to the immediate matter, no longer members of the putative class, then filed a new complaint against Chiquita in New Jersey federal court, alleging claims under New Jersey law and violations of Colombian civil and criminal law.  The case was once again transferred to the Southern District of Florida..

The question then became whether the new matter—which was not a class action—was timely.  That determination rested on whether federal or state tolling principles applied.

Under American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974) (“American Pipe”), the Supreme Court held that a timely filed complaint under Rule 23 tolled the limitations period for potential class members and that if class certification were denied, the unsuccessful class could intervene in the original case without risking an untimely filing.

However, the district court in this case, like most other federal courts, rejected that American Pipe tolling applied to a diversity action, which under the Erie doctrine, is governed by state law.  The district court then looked to New Jersey’s choice of law principles and ultimately determined that Colombia had a greater interest in the matter and, therefore, Colombia’s 10-year limitations period applied.  The district court then dismissed the case, holding that it was untimely under Colombian law and that the putative class proceedings did not toll the limitations period for the new complaint.

On appeal, the plaintiffs argued that New Jersey law should apply.  The application of New Jersey law would have recognized that the plaintiffs’ claims had been tolled at the outset of the litigation in 2007.  However, the court could not simply just apply New Jersey law, which required—under choice-of-law principles—to determine which jurisdiction (New Jersey or Colombia) had the greater connection to the matter.  The court noted that the plaintiffs’ connection to New Jersey was weak because the substantive claims underlying their lawsuit were all governed by Colombian law.  The only connection the lawsuit had with New Jersey was that Chiquita was incorporated there, and, as such, the court concluded that Colombia had a more “significant relationship” with the case.

The plaintiffs maintained that Colombian law still permitted tolling and that because the difference in tolling regimes presented a procedural question, the court could still look to New Jersey law on tolling.  However, the Eleventh Circuit rejected this argument, specifically noting that because Colombia employs a civil law system that imposes “strict limits” on judges, it does not have the flexibility to “delegate equitable power to judges,” as do civil systems of law.  Rather, as the court explained, “their legislatures make the deliberate choice to delegate power in limited, carefully defined circumstances.”

To that end, the court noted that the Colombian legislature had not codified any rules regarding class action tolling nor any indication that its judges could create a doctrine similar to that of American Pipe.  The court explained that because the difference in tolling principles between New Jersey and Colombia was “outcome-determinative.” As such, Colombia law’s governing equitable tolling prevailed.  However, the court concluded that the district court should have permitted the plaintiffs to amend their complaint for other reasons.

Even though the court rejected the plaintiffs’ argument that Colombia law applied, it also concluded that the district court had erred in not permitting the plaintiffs to amend their complaint to provide allegations which would support minority tolling, under which certain plaintiffs could argue that their claims were tolled until they reached the age of majority.  For that reason, the court remanded the case for further consideration on that issue.

The variety of equitable tolling regimes is ever-growing, and this case illustrates the complexities of deciding which jurisdiction’s equitable tolling rules apply in a diversity case in federal class actions.  Although it is rare that foreign law will govern these matters, this case provides a strong blueprint as to how federal courts will assess that law’s applicability as to equitable tolling.

McGuireWoods offers an interdisciplinary team of attorneys who focus on class action litigation and business and securities law.  For any questions concerning this alert, please contact any of its authors.