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Supreme Court Rules on Timeliness of State Law Claims When Dismissed From Federal Court and Refiled in State Court

In Artis v. District of Columbia, 138 S. Ct. 594 (2018), the United States Supreme Court held in a five to four decision that the statute of limitations for a state law claim is tolled while it is pending in federal court if the claim was filed in federal court based on supplemental jurisdiction and subsequently dismissed for lack of jurisdiction after the federal claim was dismissed.

In Artis, the Supreme Court examined the supplemental jurisdiction statute, 28 U.S.C. § 1367, which enables federal district courts to exercise jurisdiction over state law claims when those claims “are so related to claims . . . [subject to original jurisdiction of the federal court] that they form part of the same case or controversy.” When district courts dismiss all claims in an action that independently qualify for federal jurisdiction, they typically dismiss the related state law claims as well. Section 1367 provides that “[t]he period of limitations for any [state] claim [joined with a claim within federal-court competence] shall be tolled while the claim is pending [in federal court] and for a period of 30 days after it is dismissed unless State law provides for a longer tolling period.” The issue presented to the Court in this case was what the word “tolled” mean in the context of § 1367. The Supreme Court posed two possible interpretations of what the word “tolled” meant in the § 1367: (1) the statute of limitations is suspended during the pendency of the federal suit; or (2) although the state limitations period continues to run, a plaintiff is given a grace period of 30 days to refile in state court after the federal case is dismissed. The Court held that the former meaning applies, meaning the statute of limitations is held in abeyance (i.e., the clock is stopped) while the state law claims are pending in federal court.

The controversy arose because the plaintiff in this case, Stephanie C. Artis, refiled her state law claims (which arose under the District of Columbia Code and common law) in state court 59 days after her federal lawsuit was dismissed. When Artis first filed her claim in federal court, nearly two years remained on the applicable three year statute of limitations for her state law claims, but the federal court took nearly two and one-half years before it dismissed her claims (the state law claims being dismissed for lack of federal jurisdiction). The District of Columbia Superior Court held that the supplemental jurisdiction statute did not apply a “stop the clock” meaning to the term “tolled” and, thus, it dismissed Artis’ state law claims as untimely. The District of Columbia Court of Appeals affirmed.

The Supreme Court commenced its analysis by identifying a number of examples where the statute of limitations is “tolled” while the claim is pending elsewhere. The Court commented that the term “tolled” in this context typically means that “the limitations period is suspended (stops running) while the claim is . . . elsewhere [and] then starts running again when the tolling period ends, picking up where it left off.” The Court cited to Black’s Law Dictionary to support this interpretation, and some cases where this interpretation was applied. The Court, however, acknowledged that some legislative acts instead apply a simple “grace period” to the term “toll.” And, when a “grace period” is applied, the statute of limitations continues to run while the claim is pending in another forum. While the majority identified one federal statute as an example of a “grace period” (28 U.S.C. § 2415), the majority noted that neither the District of Columbia nor the dissent identified an example of this kind of statute in their analyses. The majority further noted that it could identify only one prior case where it had applied a “grace period” to the term tolled. The Court commented, however, that this lone decision was “atypical” and that it constituted “a feather on the scale against the weight of decisions in which ‘tolling’ a statute of limitations signal[ed] stopping the clock.”

The Court then applied the rule of construction that requires courts to give words their ordinary meaning. According to the text of § 1367(d), the statute of limitations is tolled at “two adjacent time periods” – once while the claim is pending in federal court and the other for 30 days after the claim was dismissed from federal court. In both instances, the Court found that the plain meaning requires the clock to be stopped. Furthermore, the Court concluded the approach that it adopted would promote judicial economy, which would not be the case if the dissent’s approach were adopted. In this regard, the Court concluded that if the “grace period” interpretation were applied, claimants would be incentivized to file lawsuits simultaneously in federal and state court and ask the state court to hold its action until there is a resolution by the federal court. The majority explained that its approach averts the need for such dual filings. The Court proceeded to explain why it rejected various other arguments advanced by the District of Columbia and the dissent.

The Supreme Court’s decision in Artis is significant because it “expands” the period of time a claimant has to refile claims in state court if those claims were dismissed in a federal court action for lack of jurisdiction. While this may appear to be a burden on defendants, the definition of “tolled” that the Court applied is not very controversial (although it did result in a 5-4 decision), in that the definition it applied is how the term has typically been applied in other contexts (which the Court noted in its decision). And this ruling does not benefit only individuals, as businesses may benefit from this ruling as well if they need to pursue state law claims against individuals or other businesses that were once pending in federal court but were dismissed for lack of jurisdiction.

If you have any questions regarding this post, please contact Stephen B. Stern at sstern@hwlaw.com or (410) 260-6585 or Amitis Darabnia at adarabnia@hwlaw.com or (410) 260-6592.

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