American Pipe and its progeny expressly hold that absent class members are entitled to rely upon the pendency of a class action to protect class members by preserving their claims. Am. Pipe & Const. v. Utah, 414 U.S. 538, 554 (1974) (“[T]he 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”) (emphasis supplied). The Supreme Court explained that Rule 23 was designed to permit and encourage class members to rely on the named plaintiffs to press their claims. Under this precedent, class members who do not file suit while the class action is pending cannot be accused of sleeping on their rights. Crown, Cork & Seal v. Parker, 462 U.S. 345, 352-53 (1983).
These are foundational Supreme Court class action rulings, pivotal to implementing the core efficiencies of the class action procedure. Yet, recently several district courts found them to be inapplicable in the context of the mortgage-backed securities class litigation (MBS litigation). High-stakes litigation is underway regarding allegations of misrepresentations in MBS offerings due to the national failure by mortgage loan originators to maintain any standards in underwriting or diligence.
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