Cowles v. Bank West

Michigan Supreme Court
Lansing, Michigan
Chief Justice: Justices:

Opinion Clifford W. Taylor Michael F. Cavanagh
Elizabeth A. Weaver
Marilyn Kelly
Maura D. Corrigan
Robert P. Young, Jr.
Stephen J. Markman

FILED JULY 27, 2006

KRISTINE COWLES,

Plaintiff-Appellee,

and

KAREN B. PAXSON,

Intervening Plaintiff-Appellee,

v No. 127564

BANK WEST, f/k/a BANK WEST FSB,

Defendant-Appellant.

BEFORE THE ENTIRE BENCH

CAVANAGH, J.

The trial court in this class action dismissed intervening plaintiff Karen

Paxson’s claim against defendant Bank West under the Truth in Lending Act

(TILA), 15 USC 1601 et seq., on the basis that it was barred by the statute of

limitations. The Court of Appeals reversed, holding, among other things, that the

period of limitations applicable to Paxson’s claim was tolled under MCR 3.501(F)

and that the claim was subject to the rule of relation back of amendments under
MCR 2.118(D). Having concluded that Paxson’s claim was not time-barred, the

Court of Appeals then held that summary disposition on the merits of Paxson’s

TILA claim was improper because a question of fact exists concerning whether

defendant’s document preparation fee was “bona fide” under applicable federal

law.

In this matter of first impression, we must first decide whether the filing of

a class-action complaint tolls the period of limitations under MCR 3.501(F) for a

putative class member’s claim when that claim was not pleaded in the initial class-

action complaint but arose out of the same factual and legal nexus. We hold that

the filing of such a complaint is sufficient to toll the period of limitations as long

as the defendant has notice of both the claim being brought and the number and

generic identities of the potential plaintiffs. Accordingly, we affirm the Court of

Appeals decision that, in this particular case, the intervening plaintiff’s claim was

not time-barred and, therefore, was improperly dismissed on statute of limitations

grounds.

Because the claim was not time-barred in this particular case, we need not

decide whether the amendment to the class-action complaint adding this claim

related back to the date of the initial filing. Thus, we vacate that portion of the

opinion of the Court of Appeals.

Finally, in light of our conclusion that Paxson’s claim was not time-barred,

we must also address whether summary disposition was nonetheless warranted

under MCR 2.116(C)(10) on the merits of Paxson’s claim. We agree with the

2

Court of Appeals that summary disposition would be improper because a question

of fact exists over whether the document preparation fee was “bona fide.”

Therefore, we affirm in part, vacate in part, and remand for further proceedings in

the trial court consistent with this opinion.

I. FACTS AND PROCEDURAL HISTORY

On February 7, 1997, plaintiff Kristine Cowles obtained a residential real

estate mortgage loan from defendant Bank West. In connection with this loan,

defendant charged Cowles a $250 document preparation fee. The fee was reported

on line 1105 of Cowles’s United States Department of Housing and Urban

Development statement, also known as a HUD-1 settlement statement.

On February 9, 1998, intervening plaintiff Karen Paxson obtained a

residential refinancing loan from defendant. Defendant similarly charged Paxson

a $250 document preparation fee.

On July 1, 1998, Cowles filed a class-action complaint against defendant,

alleging several claims concerning the document preparation fee. The class was

defined to include all consumers who obtained real estate loans in Michigan from

defendant and who were charged and paid or financed the document preparation

fee in the six-year period before the filing of Cowles’s class-action complaint. In

the complaint, Cowles claimed that defendant’s charging of a document

preparation fee in connection with the services defendant provided constituted the

unauthorized practice of law. Further, the complaint alleged that the document

preparation fee violated certain provisions of the Michigan Consumer Protection

3

Act (MCPA), MCL 445.901 et seq. Additionally, the class-action complaint

asserted claims of replevin, unjust enrichment, innocent misrepresentation, and

negligent misrepresentation.

On August 20, 1998, Cowles amended her complaint to add a claim that the

document preparation fee also violated § 1638 of TILA, 15 USC 1638, because

the fee was improperly identified on the TILA disclosure form. Cowles alleged

that the document preparation fee was identified on the TILA disclosure form as a

fee “paid to others on your behalf.” But Cowles claimed that defendant retained

the fee and did not actually pay it to others. Further, the amended complaint

claimed that the document preparation fee exceeded the cost associated with the

actual preparation of the final papers. The trial court granted defendant’s motion

for summary disposition on this TILA claim. Plaintiffs did not appeal that ruling

in the Court of Appeals, and they have not appealed that ruling in this Court.

Subsequently, on February 16, 1999, Cowles filed a second amended

complaint, adding a claim that defendant’s failure to disclose the document

preparation fee resulted in a different TILA violation under 15 USC 1605(a)1 and

1
15 USC 1605(a) provides:

Determination of finance charge.

(a) “Finance charge” defined. Except as otherwise provided
in this section, the amount of the finance charge in connection with
any consumer credit transaction shall be determined as the sum of all
charges, payable directly or indirectly by the person to whom the
credit is extended, and imposed directly or indirectly by the creditor
as an incident to the extension of credit. The finance charge does
(continued…)

4

Regulation Z, 12 CFR 226.4(c)(7).2 Cowles claimed that defendant violated §

1605 and Regulation Z because the document preparation fee, as a finance charge,

(…continued)
not include charges of a type payable in a comparable cash
transaction. The finance charge shall not include fees and amounts
imposed by third party closing agents (including settlement agents,
attorneys, and escrow and title companies) if the creditor does not
require the imposition of the charges or the services provided and
does not retain the charges. Examples of charges which are included
in the finance charge include any of the following types of charges
which are applicable:

(1) Interest, time price differential, and any amount payable
under a point, discount, or other system of additional charges.

(2) Service or carrying charge.

(3) Loan fee, finder’s fee, or similar charge.

(4) Fee for an investigation or credit report.

(5) Premium or other charge for any guarantee or insurance
protecting the creditor against the obligor’s default or other credit
loss.

(6) Borrower-paid mortgage broker fees, including fees paid
directly to the broker or the lender (for delivery to the broker)
whether such fees are paid in cash or financed.
2
12 CFR 226.4 provides in relevant part:
(c) Charges excluded from the finance charge. The following
charges are not finance charges:

* * *

(7) Real-estate related fees. The following fees in a
transaction secured by real property or in a residential mortgage
transaction, if the fees are bona fide and reasonable in amount:

(continued…)

5

was not included in the loan’s annual percentage rate (APR). Further, Cowles

alleged that the document preparation fee did not relate to document preparation.

The trial court then certified the class as described in Cowles’s second amended

complaint, and Cowles acted as the class representative.3 Notice was subsequently

sent to the class members, and a list of all class members who opted out of the

class was then filed in the trial court. Notably, Paxson did not opt out of the class.

(…continued)
(i) Fees for title examination, abstract of title, title insurance,
property survey, and similar purposes.

(ii) Fees for preparing loan-related documents, such as deeds,
mortgages, and reconveyance or settlement documents.

(iii) Notary and credit report fees.

(iv) Property appraisal fees or fees for inspections to assess
the value or condition of the property if the service is performed
prior to closing, including fees related to pest infestation or flood
hazard determinations.

(v) Amounts required to be paid into escrow or trustee
accounts if the amounts would not otherwise be included in the
finance charge.
3
The order initially granting class certification defined the class as follows:
All persons who obtained a real estate loan [secured by a first
mortgage] from Bank West covering real property located within the
State of Michigan; who were charged and who paid and/or financed
a “document preparation” fee in connection with the transaction;
which fee was imposed by Bank West or its agents and was
disclosed on Line 1105 of the HUD-1 (including HUD-1A)
Settlement Statement; and which fee was paid to or otherwise inured
to the benefit of Bank West; and/or which fee was not disclosed as a
part of the Finance Charge in the Federal Truth-In-Lending
Disclosures.

6

 Defendant moved in the trial court for reconsideration of the court’s

decision to certify the class as described in Cowles’s second amended complaint.

Defendant asserted that Cowles’s individual TILA claim under § 1605 was time-

barred by the applicable statute of limitations, 15 USC 1640(e),4 because the §

1605 claim was pleaded more than one year after Cowles closed on her loan.

Accordingly, defendant maintained that Cowles could not represent the class with

respect to the § 1605 claim. Moreover, defendant moved for summary disposition

of the § 1605 claim, as well as the other claims contained in the second amended

complaint.

After defendant filed its motion for reconsideration, Paxson moved to

intervene and serve as the class representative for the § 1605 claim. Paxson’s

motion to intervene was granted, and she filed a complaint as an intervening

plaintiff. The trial court granted defendant’s motion for summary disposition on

Cowles’s § 1605 claim, reasoning that Cowles’s § 1605 claim was time-barred.

Further, the trial court granted defendant summary disposition of all claims

contained in the second amended complaint, except Paxson’s § 1605 claim.

Paxson and defendant then filed cross-motions for summary disposition on

the § 1605 TILA claim. The trial court opined that Paxson’s § 1605 claim was

4
15 USC 1640(e) provides in relevant part: “Any action under this section
may be brought in any United States district court, or in any other court of
competent jurisdiction, within one year from the date of the occurrence of the
violation.”

7

meritorious. But the trial court ultimately ruled that the claim was time-barred

under § 1640(e) because it was pleaded in the second amended complaint more

than one year after Paxson’s claim accrued—the date she closed on her loan. The

trial court concluded that Paxson’s claim was not tolled from the time Cowles

filed the initial class-action complaint and that the second amended complaint did

not relate back to the date of the initial complaint. Thus, the trial court revoked

class certification with respect to the TILA claim brought under § 1605. Paxson

appealed.

In a split, published decision, the Court of Appeals affirmed in part,

reversed in part, and remanded the matter to the trial court. Cowles v Bank West,

263 Mich App 213; 687 NW2d 603 (2004). Relying on Newton v Bank West, 262

Mich App 434; 686 NW2d 491 (2004), the Court of Appeals affirmed the trial

court’s grant of summary disposition on the MCPA claims because defendant’s

residential mortgage loan transactions were exempt from the MCPA by virtue of

MCL 445.904(1)(a).5 But the Court of Appeals held that the trial court improperly

dismissed Paxson’s TILA claim under § 1605 on statute of limitations grounds.

The Court of Appeals observed that whether the amendment of a class-action

5
The Court of Appeals also dismissed plaintiffs’ unauthorized practice of
law claim. The Court of Appeals held this issue in abeyance pending this Court’s
decision in Dressel v Ameribank, 468 Mich 557; 664 NW2d 151 (2003). In
Dressel, we held that a bank does not engage in the unauthorized practice of law
when it completes standard mortgage forms and charges a fee for this service.
Thus, in light of Dressel, the Court of Appeals dismissed the unauthorized practice
of law claim by an order.

8

complaint to add new theories of liability relates back to the filing of the initial

complaint for purposes of the period of limitations was an issue of first

impression. Nonetheless, the Court of Appeals reasoned that under MCR

3.501(F), the period of limitations for Paxson’s TILA claim was tolled by the

filing of the initial complaint. The Court of Appeals concluded that tolling was

proper because Paxson was a member of the class described in the original

complaint, the class was ultimately certified, and none of the circumstances set

forth in MCR 3.501(F)(2) occurred that could have caused the period of

limitations to resume running against Paxson or any other class member.

Next, the Court of Appeals concluded that amendments to a class-action

complaint adding claims arising out of the conduct, transaction, or occurrence

alleged in the original complaint relate back to the date of the initial filing when

the period of limitations was tolled. The Court of Appeals reasoned that nothing

in the court rules dealing with representative actions suggests that those rules are

comprehensive. Accordingly, the Court of Appeals turned to MCR 2.118(D), the

general court rule that provides that an amendment adding a claim relates back to

the date of the original pleading if the claim added in the amendment arose of the

conduct, transaction, or occurrence set forth, or attempted to be set forth, in the

original pleading. According to the Court of Appeals, because the cause of action

in this case was always to recover damages related to the document preparation

fee charged in connection with residential mortgage loans, the TILA claim brought

9

under § 1605 related to the same conduct or transaction as pleaded in Cowles’s

initial class-action complaint.

Further, the Court of Appeals opined that nothing in the United States

Supreme Court’s precedent dealing with the tolling doctrine compels the

conclusion that the relation-back rule is inapplicable in the class-action context.

See, e.g., American Pipe & Constr Co v Utah, 414 US 538; 94 S Ct 756; 38 L Ed

2d 713 (1974), and Crown, Cork & Seal Co, Inc v Parker, 462 US 345; 103 S Ct

2392; 76 L Ed 2d 628 (1983). Rather, the Court of Appeals reasoned that Paxson

and other members of the potential class were entitled to rely on the existence of

the class action and attendant tolling provisions to protect their rights with respect

to claims associated with the document preparation fee. Moreover, the Court of

Appeals concluded that if it were to hold otherwise, class members for whom the

period of limitations may expire could only protect their rights by intervening or

filing separate actions—something the class-action mechanism was intended to

avoid.

Additionally, in responding to the Court of Appeals dissent, the Court of

Appeals majority opined that its ruling would not unfairly disadvantage defendant

because the relation-back doctrine is limited in application and Paxson was not

trying to “piggyback” her claim, observing that that there were “no new, repetitive

actions filed by any of the plaintiffs in the class.” Cowles, supra at 230. Further,

the Court of Appeals observed that if Paxson had filed an individual lawsuit on

July 1, 1998—the date of Cowles’s initial complaint—alleging the unauthorized

10

practice of law, and later moved to amend to add the TILA claim, there would be

no question that the claim would relate back to the date of her original pleading,

regardless of whether the period of limitations on the TILA claim had expired.

Thus, the Court of Appeals held that MCR 2.118(D) applied in this instance and,

thus, Paxson’s TILA claim related back to the date of the initial complaint.

In light of its conclusion that Paxson’s TILA claim was improperly

dismissed, the Court of Appeals next addressed whether summary disposition was

nevertheless warranted under MCR 2.116(C)(10). Specifically, the Court of

Appeals addressed defendant’s argument that the document preparation fee was

properly disclosed under Regulation Z, 12 CFR 226.4(c)(7), because the fee was

bona fide and reasonable in amount. While the Court of Appeals agreed that there

was no question of material fact with respect to the reasonableness of the fee, the

Court of Appeals determined that there was a question of material fact whether the

fee was bona fide. Pointing to defendant’s president’s testimony, the Court of

Appeals reasoned that there was evidence presenting a material question of fact

whether the fee was for a variety of services necessary to take the loan from

application to closing or whether the fee was solely for document preparation.

Therefore, the Court of Appeals concluded that summary disposition on the merits

of the TILA claim was inappropriate.

Defendant sought leave to appeal, and this Court granted leave to appeal.

474 Mich 886 (2005).

11

 II. STANDARD OF REVIEW

The question whether the filing of a class-action complaint tolls the period

of limitations for a class member’s claim that was not pleaded in the class-action

complaint but arose out of the same factual and legal nexus is a question of law.

This Court reviews questions of law de novo. Casco Twp v Secretary of State,

472 Mich 566, 571; 701 NW2d 102 (2005). Further, this Court reviews de novo a

trial court’s decision on a motion for summary disposition. Ostroth v Warren

Regency, GP, LLC, 474 Mich 36, 40; 709 NW2d 589 (2006).

III. ANALYSIS

A. Tolling

In general, periods of limitations are tolled with regard to all class members

upon the filing of a complaint asserting a class action. MCR 3.501(F) provides:

Statutes of Limitations.

(1) The statute of limitations is tolled as to all persons within
the class described in the complaint on the commencement of an
action asserting a class action.

(2) The statute of limitations resumes running against class
members other than representative parties and intervenors:

(a) on the filing of a notice of the plaintiff’s failure to move
for class certification under subrule (B)(2);

(b) 28 days after notice has been made under subrule (C)(1)
of the entry, amendment, or revocation of an order of certification
eliminating the person from the class;

(c) on entry of an order denying certification of the action as a
class action;

(d) on submission of an election to be excluded;

12

 (e) on final disposition of the action.

(3) If the circumstance that brought about the resumption of
the running of the statute is superseded by a further order of the trial
court, by reversal on appeal, or otherwise, the statute of limitations
shall be deemed to have been tolled continuously from the
commencement of the action.

Here, the periods of limitations for Cowles’s TILA claim expired on

February 7, 1998, one year after she closed on her residential real estate mortgage

loan. 15 USC 1640(e). Cowles filed this class-action complaint on July 1, 1998;

thus, Cowles’s TILA claim was untimely. Further, Cowles did not plead a TILA

claim in her initial complaint, but she did plead a TILA claim in the second

amended complaint. Accordingly, the first issue we must decide is whether the

filing of Cowles’s initial complaint within the TILA period of limitations for

Paxson’s claim, but outside the TILA period of limitations for Cowles’s claim,

was sufficient to toll the period of limitations for Paxson’s claim on the previously

unpleaded TILA claim under MCR 3.501(F). The Court of Appeals concluded

that the period of limitations was tolled with respect to Paxson’s claim. We

agree.6

6
Remarkably, Justice Corrigan posits that “[t]he Court of Appeals opinion
addressed only whether the relation-back doctrine applied in this case.” Post at 4.
But the Court of Appeals addressed both tolling and relation back. Cowles, supra
at 219-231. Further, Justice Corrigan argues that the Court of Appeals did not
conclude that Paxson’s TILA claim was tolled. This is also incorrect because the
Court of Appeals specifically concluded that the period of limitations was tolled
with respect to Paxson’s TILA claim. After noting that plaintiffs’ unauthorized
practice of law claims were dismissed by its prior order and concluding that
(continued…)

13

(…continued)

summary disposition was proper on the MCPA claims, the Court of Appeals

focused on Paxson’s TILA claim, noting:

Plaintiff Paxson next challenges the trial court’s grant of
summary disposition to defendant on her TILA claim. Neither the
Michigan Court of Appeals nor the Michigan Supreme Court has
decided whether the amendment of a class action complaint to add
new theories of liability relates back to the filing of the initial
complaint for purposes of computing the expiration of the period of
limitations. Thus, whether Paxson’s TILA cause of action was
barred by the period of limitations involves an issue of first
impression . . . .

The TILA claim was formally pleaded in Cowles’s second
amended complaint, which was filed on February 16, 1999.
Defendant argues that the statute of limitations for Paxson and all
other class members was not tolled with respect to that claim on that
date. When the second amended complaint was filed, more than one
year had passed since Paxson’s TILA claim accrued on February 9,
1998. Therefore defendant argues that Paxson’s claim is barred by
the statute of limitations. We disagree.

MCR 3.501(F)(1) provides that the statute of limitations is
tolled with respect to all persons within the class described in the
complaint on the commencement of an action asserting a class
action. MCR 3.501(F)(2) delineates several circumstances in which
the statute of limitation resumes running against class members,
specifically, on the filing of a notice of the plaintiff’s failure to move
for class certification; twenty-eight days after notice of the entry,
amendment, or revocation of an order of certification eliminating the
person as a member of the class; entry of an order denying
certification of the action as a class action; submission of an election
to be excluded from the class; or final disposition of the action.

Paxson was a member of the original class described in the
complaint on the commencement of Cowles’s original class action.
The class was ultimately certified and none of the circumstances of
MCR 3.501(F)(2) occurred that could have caused the period of
limitations to resume running against Paxson or any other class
members. Thus, we find that the statute of limitations was tolled
with respect to Paxson. [Id. at 219-221 (emphasis added).]
(continued…)

14

(…continued)
Thus, we cannot agree with Justice Corrigan that the Court of Appeals was
“not referring to Paxson’s TILA claim” because this was the only claim that the
Court of Appeals was expressly addressing and all of the other claims were
previously addressed. Post at 4 n 3. Further, in connection with its later relation-
back analysis, the Court of Appeals again stated its conclusion that Paxson’s TILA
claim was tolled, stating, “In reaching our conclusion, we reject the argument that
the statute of limitations never tolled on the TILA claims because the period of
limitations expired before Cowles’s complaint was filed and, thus, she was never a
valid class representative for that claim.” Id. at 230. Accordingly, there is little
doubt that the Court of Appeals concluded that Paxson’s TILA claim was tolled.
Despite so concluding, the Court of Appeals nonetheless felt compelled to
address whether amendments to the complaint related back to the date of the initial
filing “when the statute of limitations was tolled.” Id. at 221 (emphasis added).
As we note later in this opinion, however, the class-action tolling doctrine and the
relation back of amendments are conceptually different. And because we
conclude that Paxson’s TILA claim was tolled, it is unnecessary in this particular
case to decide whether amendments to the complaint related back to the date of the
initial filing for purposes of Paxson’s TILA claim.
Moreover, we must note that the parties’ arguments in this case mainly
focused on tolling. In fact, after the Court of Appeals entered judgment and this
Court granted defendant’s application for leave to appeal, defendant raised the
following issues on appeal:
1. Does the filing of a class action lawsuit toll the statute of
limitations for a class member’s individual claim, where that claim
was not, and could not have been, asserted by the class
representative?

* * *

2. Should Michigan follow the Truth in Lending Act’s plain
language and purpose and use an objective test for determining
whether a loan document charge is “bona fide” for purposes of the
charge’s exclusion from a lender’s APR computation?

Indeed, defendant’s principal arguments focused on tolling. For example,
defendant argued that the class-action tolling doctrine should not extend to
Paxson’s claim because that claim was not and could not have been asserted by
Cowles. Defendant further argued that the class-action tolling doctrine applies
only if the class member’s own claims are identical to those of the representative.
(continued…)

15

 MCR 3.501(F) was modeled after the United States Supreme Court’s

decision in American Pipe. In American Pipe, supra at 553-555, the Court held

that the filing of a class action tolls the period of limitations for all class members

who timely intervene after a court denies class certification. This has come to be

(…continued)
Accordingly, defendant’s arguments focused mainly on tolling, and it argued
against extending the class-action tolling doctrine in this case. Only after
defendant argued that tolling did not apply in this case did defendant argue that
relation back was inapplicable. Specifically, defendant argued that the Court of
Appeals erred when it relied on the relation back of amendments because such a
rationale is inconsistent with and distinct from American Pipe. As defendant
argued in its brief, “In other words, the very case that MCR 3.501(F) codifies,
American Pipe, makes clear that the relation-back principle is inapplicable here,
because if the principle was available to class members, there would be no need
for a tolling doctrine at all.”
Justice Corrigan appears well-versed in defendant’s relation-back argument
and how it relates to defendant’s tolling argument, see post at 18, but unlike
Justice Corrigan, we need not decide this issue in this particular case because we
conclude that the class-action tolling doctrine applies. But we must observe that
we are puzzled by Justice Corrigan’s assertions that the Court of Appeals
addressed only the relation back of amendments and that we have
mischaracterized the Court of Appeals decision. Simply stated, the Court of
Appeals concluded that Paxson’s claim was not time-barred because her claim was
tolled and the amendment related back to the initial class complaint for purposes
of computing the period of limitations. Further, and as noted later in this opinion,
we acknowledge that the Court of Appeals holding that Paxson’s TILA claim was
improperly dismissed rested primarily on its conclusion that the relation-back
doctrine applied to her claim. But because Paxson’s claim was tolled and, thus,
not time-barred on the basis of tolling alone, it was unnecessary for the Court of
Appeals to decide the relation-back issue, a point with which Justice Corrigan
seemingly agrees. See post at 5 n 3 (“If the Court of Appeals had been referring to
the tolling of Paxson’s TILA claim when contending that MCR 3.501(F) applied
in Paxson, as suggested by the majority, it would not have needed to address
whether the relation-back doctrine applied.”). Merely because the Court of
Appeals unnecessarily addressed both issues does not mean that tolling was not
(continued…)

16

known as the class-action tolling doctrine. The Court reasoned that the doctrine

was necessary to balance a class member’s right to pursue his claim if the class

was not certified with a defendant’s right to be free from stale claims. Id. at 553-

554.

The policies of ensuring essential fairness to defendants and
of barring a plaintiff who has slept on his rights are satisfied when,
as here, a named plaintiff who is found to be representative of a class
commences a suit and thereby notifies 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. Within the period set by the statute of
limitations, the defendants have the essential information necessary
to determine both the subject matter and size of the prospective
litigation . . . . [Id. at 554-555 (citations and quotation marks
omitted).]

Further, the Court opined that the class-action tolling doctrine was needed

to promote the judicial economy of the class-action mechanism. According to the

Court, if the class-action tolling doctrine were not adopted, individual plaintiffs

would be forced to intervene or file duplicative protective suits just in case the

class was not certified or the action was dismissed on procedural grounds. Id. at

553. This would frustrate the purpose of the class-action mechanism, whereby

putative class members are encouraged to remain passive during the early stages

of the class action. Therefore, “[c]lass members who do not file suit while the

class action is pending cannot be accused of sleeping on their rights” because the

(…continued)

addressed at all or that this Court should overreach and analyze the relation-back

issue where tolling alone is dispositive.

17

federal class-action rule “permits and encourages class members to rely on the

named plaintiffs to press their claims.” Crown, Cork & Seal, supra at 352-353.

Accordingly, the Court in American Pipe, supra at 553, reasoned that the class-

action tolling doctrine best serves the principal purposes of the class-action

procedure—promotion of efficiency and economy of litigation. Indeed, not until

the class is certified “does a class member have any duty to take note of the suit or

to exercise any responsibility with respect to it . . . .” Id. at 552.

In Crown, Cork & Seal, the Court later extended the class-action tolling

doctrine to class members who file individual actions after class certification is

denied. Crown, Cork & Seal, supra at 353-354. Notably, Justice Powell authored

a concurrence in Crown, Cork & Seal that attempted to clarify what he posited

was the foundation for the class-action tolling doctrine. In his concurrence, Justice

Powell opined that the doctrine would not toll the period of limitations for

subsequent claims that were unrelated to the claims asserted in the initial class-

action complaint. Crown, Cork & Seal, supra at 354-355 (Powell, J., concurring).

Concerned that “different or peripheral” claims would not afford a defendant

sufficient notice and force the defendant to defend stale claims, Justice Powell

opined that American Pipe and the class-action tolling doctrine applied where the

subsequent claims “‘concern the same evidence, memories, and witnesses as the

subject matter of the original class suit . . . .’” Id. at 354-355 (citation omitted);

see also United Airlines, Inc v McDonald, 432 US 385, 393 n 14; 97 S Ct 2464; 53

L Ed 2d 423 (1977). Stated differently, Justice Powell opined that unrelated

18

claims “are not protected under American Pipe and are barred by the statute of

limitations.” Crown, Cork & Seal, supra at 355.

Some courts have relied on Justice Powell’s concurrence and concluded

that the class-action tolling doctrine only applies to claims identical to those raised

in the initial class-action complaint or claims that could have been raised in the

initial complaint. See, e.g., Weston v AmeriBank, 265 F3d 366, 367 (CA 6, 2001)

(“[T]he statute of limitations for putative class members of the original class is

tolled only for substantive claims that were raised, or could have been raised, in

the initial complaint.”); see also Raie v Cheminova, Inc, 336 F3d 1278, 1283 (CA

11, 2003) (“It is not enough for Appellants to rely on only that ambiguous class

definition to support their argument for tolling under American Pipe; they must

demonstrate that their wrongful death action was included in the Seabury class

action.”).

Other courts, however, have embraced Justice Powell’s reasoning and

instead held that subsequent individual claims filed after class certification is

denied need not be identical to the claims in the original class action for tolling to

apply. See, e.g., Tosti v City of Los Angeles, 754 F2d 1485, 1489 (CA 9, 1985);

Barnebey v E F Hutton & Co, 715 F Supp 1512, 1528-1529 (MD Fla, 1989).

Rather, the subsequent individual claims must share a common factual and legal

nexus to the extent that the defendant would likely rely on the same evidence or

witnesses in mounting a defense. See, e.g., Cullen v Margiotta, 811 F2d 698, 719

(CA 2, 1987); see also Crown, Cork & Seal, supra at 355 (Powell, J., concurring)

19

(“[W]hen a plaintiff invokes American Pipe in support of a separate lawsuit, the

district court should take care to ensure that the suit raises claims that ‘concern the

same evidence, memories, and witnesses as the subject matter of the original class

suit,’ so that ‘the defendant will not be prejudiced.’”) (citation omitted). We

believe that these latter courts have the better view and reject a rule that requires

identical claims for tolling to occur under MCR 3.501(F).7 Accordingly, under

MCR 3.501(F), a class-action complaint tolls the period of limitations for a class

member’s claim that arises out of the same factual and legal nexus as long as the

defendant has notice of the class member’s claim and the number and generic

identities of the potential plaintiffs.

Our decision underscores the inherent tension that may appear to exist

between the class-action mechanism and a statute of limitations. See, e.g.,

Lowenthal & Feder, The impropriety of class action tolling for mass tort statutes

of limitations, 64 Geo Wash L R 532 (1996). But this tension was duly considered

by this Court in adopting MCR 3.501(F), as well as by the American Pipe Court in

crafting the class-action tolling doctrine. According to the American Pipe Court,

statutes of limitations are important to the administration of justice by

7
We must note, however, that some courts have taken a broader position
than we are prepared to adopt today. See, e.g., Appleton Electric Co v Graves
Truck Line, Inc, 635 F2d 603, 609 (CA 7, 1980) (“We are persuaded that implicit
in the Supreme Court’s American Pipe decision was the Court’s determination that
‘effectuation of the purpose of litigative efficiency and economy,’ [which Rule 23
was designed to perform] transcends the policies of repose and certainty behind
statutes of limitations.”) (citation omitted).

20

“‘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.’” American Pipe, supra at 554 (citation omitted). But as later noted

by the Court, the purpose of a statute of limitations is generally satisfied when a

class action is filed.

[A] class complaint “notifies 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.” The defendant will be aware of the
need to preserve evidence and witnesses respecting the claims of all
the members of the class. Tolling the statute of limitations thus
creates no potential for unfair surprise, regardless of the method
class members choose to enforce their rights upon denial of class
certification. [Crown, Cork & Seal, supra at 353 (citations
omitted).]

In other words, crucial to whether the period of limitations is tolled under the

class-action tolling doctrine and MCR 3.501(F) is notice to the defendant of both

the claims being brought and the number and identities of the potential plaintiffs.

See, e.g., Rochford v Joyce, 755 F Supp 1423, 1428 (ND Ill, 1990) (“The statute of

limitations will not be tolled for plaintiffs having ‘different or peripheral’ claims

from those in the original class action suit. To ensure fairness, the later action

must be similar enough to the earlier action so that the defendants are notified of

the substantive claims against them, as well as the number and generic identities of

the potential plaintiffs.”) (citation omitted).

Here, we believe that the aim of the statute of limitations was met with the

filing of Cowles’s initial complaint and would not be frustrated by determining

21

that Paxson’s TILA claim was not time-barred. The factual bases for Paxson’s

TILA claim are the same as the factual bases for the claims raised in Cowles’s

initial class-action complaint. Accordingly, the initial complaint notified

defendant of “the number and generic identities of the potential plaintiffs.”

Further, Paxson’s TILA claim involves the same “evidence, memories, and

witnesses” as were involved in the putative class action. Moreover, we have a

difficult time concluding that Cowles’s initial class-action complaint concerning

the document preparation fee was insufficient to alert defendant to preserve the

evidence regarding the fee and the services provided in connection with the fee.

Simply stated, Paxson’s TILA claim is not such a “different or peripheral claim”

so that tolling is not permitted under MCR 3.501. Crown, Cork & Seal, supra at

354 (Powell, J., concurring). The allegations in the initial complaint identify this

case as a case where it can be seen from the initial complaint, the first amended

complaint, the second amended complaint, and Paxson’s complaint that the

alleged liability is based on the same acts. See, e.g., McCarthy v Kleindienst, 183

US App DC 321, 327; 562 F2d 1269 (1977). Therefore, “there can be no doubt

that [defendant] received sufficient notice of the contours of potential claims to

toll the running of the statute of limitations.” Id.

Defendant’s alleged liability has always been based on the way it reported

its document preparation fee and the propriety of the services it provided in

connection with the fee. Further, Paxson has always been a member of the

described class, and she was a member of the class that was originally certified in

22

the second amended complaint, the complaint that alleged the § 1605 claim.

Moreover, Cowles was deemed an inappropriate representative on procedural

grounds. Accordingly, we are simply hard-pressed to conclude that defendant was

not put on notice of the TILA claim asserted under § 1605 as well as of the

number and generic identities of the potential plaintiffs.8 Thus, our conclusion

that the period of limitations applicable to Paxson’s TILA claim was tolled by

Cowles’s initial complaint is consistent with the functional goal of a statute of

limitations and does not unduly prejudice defendant.9

8
We disagree with Justice Corrigan’s characterization of our interpretation
of MCR 3.501(F) to bolster her argument that our interpretation would frustrate
the purpose of statutes of limitation. First, we do not conclude that every unnamed
class member may move to intervene at any time and add any different or
peripheral claim. Rather, we conclude that tolling is permitted where the claim
arises out of the same factual and legal nexus and the defendant has notice of both
the claim being brought and the number and generic identities of the potential
plaintiffs. Further, as explained earlier, the aim of statutes of limitations are not
frustrated under such an interpretation or in this very case because the claim here
is not so different or peripheral that tolling is not permitted and defendant had
notice of it. In other words, in this particular case, Paxson’s TILA claim involves
the “same evidence, memories, and witnesses as the subject matter” of the original
class action and defendant had notice of “the number and generic identities of the
potential plaintiffs.” Again, we believe that the aim of statutes of limitations is
satisfied in this particular case. Additionally, we observe that the interpretation set
forth today must be applied on a case-by-case basis because the relevant inquiry
will almost always depend on the facts presented in a given case.
9
Additionally, the United States Supreme Court noted in Johnson v
Railway Express Agency, Inc, 421 US 454, 467 & n 14; 95 S Ct 1716; 44 L Ed 2d
295 (1975), that the identicalness of claims played a part in its decision in
American Pipe. Accordingly, it could be argued that the Court may appear
reluctant to extend the class-action tolling doctrine to litigation involving anything
other than identical claims. But Johnson did not turn on the absence or presence
of identical claims. See, e.g., Mt Hood Stages, Inc v Greyhound Corp, 616 F2d
(continued…)

23

 Importantly, a contrary conclusion—limiting tolling under MCR 3.501(F)

to claims identical to those that were asserted or may have been asserted in an

initial complaint—would frustrate the very purpose of MCR 3.501. Specifically,

the more rigid rule advanced by Justice Corrigan “would encourage and require

absent class members to file protective motions to intervene and assert their new

legal theories prior to class certification, thereby producing the very results . . .

courts seek to prevent by such tolling, i.e., ‘court congestion, wasted paperwork

and expense.’” Cullen, supra at 721 (citation omitted).10 Moreover, and contrary

to Justice Corrigan’s assertions, Paxson did exactly what was encouraged of her

under our court rules—she waited until the dust arguably settled before seeking to

(…continued)
394, 403 (CA 9, 1980) (“Johnson did not hold that an identical cause of action in
both proceedings is prerequisite to tolling.”). Rather, Johnson shows that notice to
the defendant is the central concern with regard to whether tolling occurs, not
simply whether an identical claim is subsequently made. Thus, Johnson does not
preclude tolling here because defendant had sufficient notice of Paxson’s TILA
claim for purposes of MCR 3.501(F).
10
Further, MCR 3.501(F) only requires the “assert[ion]” of a class action to
trigger tolling. It provides that “[t]he statute of limitations is tolled as to all
persons within the class described in the complaint on the commencement of an
action asserting a class action.” (Emphasis added.) One “asserts” a class action
by claiming the right to a class action. If, in the end, it turns out that one does not,
in fact, have such a right, this does not mean that the class action was not
“asserted.” Because a person only has to “assert” a class action to toll the period
of limitations as to all class members, class members are not obligated to
investigate whether the person “asserting” it actually has the right to do so. That
is, the class members should be able to fully rely on the “asserting” of the class
action, without having to independently determine whether the person “asserting”
it possesses standing, whether he has brought claims that are not time-barred, or
(continued…)

24

intervene. Accordingly, it cannot be fairly said that Paxson slept on her rights,

because her claims were ostensibly being pursued by Cowles. Cowles filed a class

action against defendant, and Paxson was included in the class. Further, Cowles

then asserted a TILA violation under § 1638 before the period of limitations on

Paxson’s individual TILA claim would have expired.11 Cowles then amended her

complaint to include a § 1605 claim after Paxson’s individual claim would have

expired, and the trial court certified that class. But when it later appeared that the

trial court was going to reconsider its certification ruling, Paxson then promptly

sought to intervene. Accordingly, Paxson reasonably relied on the class-action

mechanism and its corresponding tolling provision. If we were to hold otherwise,

as Justice Corrigan suggests, countless potential class members like Paxson would

be forced to file protective suits and, thus, circumvent the whole purpose behind

MCR 3.501. “[U]nless the statute of limitations was tolled by the filing of the

class action, class members would not be able to rely on the existence of the suit to

protect their rights. . . . A putative class member who fears that class certification

may be denied would have every incentive to file a separate action prior to the

expiration of his own period of limitations. The result would be a needless

(…continued)

whether he has set forth every single legal argument that could conceivably have

been made.

11
Notably, even though the claim in the first amended complaint was based
on § 1638, Cowles stated in the amended complaint that “[t]he ‘Document
(continued…)

25

multiplicity of actions . . . .” Crown, Cork & Seal, supra at 350-351. See also

Devlin v Scardelletti, 536 US 1, 10; 122 S Ct 2005; 153 L Ed 2d 27 (2002)

(“Nonnamed class members are, for instance, parties in the sense that the filing of

an action on behalf of the class tolls a statute of limitations against them. See

American Pipe[, supra]. Otherwise, all class members would be forced to

intervene to preserve their claims, and one of the major goals of class action

litigation—to simplify litigation involving a large number of class members with

similar claims—would be defeated.”). As aptly noted by the United States Court

of Appeals for the Third Circuit:

The [American Pipe] Court was concerned that, if the
statute of limitations is not tolled in situations where the district
court’s ruling on maintenance of a class action is difficult to predict,
members of a purported class might be induced to intervene as a
matter of self-protection. Such protective intervention by class
members might be compelled because those class members who
have not intervened by the time the untolled statute of limitations
runs would be unable to seek relief individually. The Court
therefore reasoned that a rule which would result in the individual
intervention of class members and which would “breed” needless
duplicative motions was not in keeping with the objectives of the
federal class action procedures. [Haas v Pittsburgh Nat’l Bank, 526
F2d 1083, 1097 (CA 3, 1975).] [12]

(…continued)

Preparation’ fee assessed Plaintiff by Bank West exceeded the costs of preparing

the ‘final legal papers’ . . . .”

12
The Court of Appeals majority in this case similarly observed:
In the conclusion of his dissent, Judge O’Connell indicates
that he “would also hold that certification of a class only tolls the
statute of limitations for claims that originally and properly received
(continued…)

26

Therefore, the view advanced by Justice Corrigan—limiting MCR 3.501(F) tolling

to identical claims that were asserted or may have been asserted in an initial

complaint—would frustrate the very purpose of MCR 3.501.

Further, we perceive no sound reason for the limitation that Justice

Corrigan would place on MCR 3.501(F). For example, just as the filing of a class

action that does not meet the requirements for class certification generally tolls the

period of limitations with respect to all persons within the class described in the

complaint, American Pipe, supra, the filing of a class action by a person who does

not meet the requirements to serve as the class representative also tolls the period

of limitations. See, e.g., Birmingham Steel Corp v Tennessee Valley Auth, 353

F3d 1331, 1333 (CA 11, 2003) (holding that “the district court abused its

discretion by decertifying the class without permitting class counsel reasonable

time to determine whether a new class representative could be substituted”); Lynch

v Baxley, 651 F2d 387 (CA 5, 1981) (holding that when the district court

determined that the class representative did not have standing it should have

allowed a class member with standing to become the new class representative);

(…continued)
certification.” This proposition is not supported by citation to
authority or by analogy to any authority, and it ignores the purposes
of class litigation. If class members cannot rely on the named
plaintiff to toll the period of limitations on their claims, each class
member will be required to separately bring all claims in his own
name on the chance that the representative plaintiff will later be
found to have an invalid claim and that the benefit of tolling will not
apply. [Cowles, supra at 228 (citation omitted).]

27

Haas, supra (holding that the filing of a class action by a class representative

without standing tolls the period of limitations with regard to all asserted members

of the class and that the amendment of the complaint by the addition of a class

member with standing relates back to the original complaint). Simply stated, the

American Pipe rule has been applied in cases involving almost every conceivable

basis on which class action status might be denied or terminated. Haas, supra

(class representative had no standing); Lynch, supra (class representative had no

standing); In re Crazy Eddie Securities Litigation, 747 F Supp 850 (ED NY, 1990)

(named plaintiffs did not have standing); American Pipe, supra (lack of numerous

class members); McCarthy, supra (lack of typicality); Green v United States Steel

Corp, 481 F Supp 295 (ED Pa, 1979) (lack of typicality and commonality of class

members); Gramby v Westinghouse Electric Corp, 84 FRD 655 (ED Pa, 1979)

(lack of adequate representation); Bantolina v Aloha Motors, Inc, 75 FRD 26 (D,

Hawaii, 1977) (withdrawal of class representative); Goodman v Lukens Steel Co,

777 F2d 113 (CA 3, 1985) (lack of adequate representation); Hemenway v

Peabody Coal Co, 159 F3d 255 (CA 7, 1998) (lack of subject-matter jurisdiction);

Tosti, supra (tolling permitted in separate suit where claim was not identical to

class action); Barnebey, supra (tolling permitted for claims not asserted in class

action); In re Linerboard Antitrust Litigation, 223 FRD 335 (ED Pa, 2004) (tolling

permitted in separate class action brought by members who opted out of initial

class action and who also brought new state law claims). In this regard, Justice

Corrigan’s attempt to distinguish these cases is unpersuasive, and her dissent does

28

not adequately explain why a contrary result should be reached in this case in light

of those cases.

For example, Justice Corrigan does not adequately explain how, if the filing

of a class action that does not meet the requirements for class certification

nonetheless ordinarily tolls the period of limitations with respect to all persons

within the class described in the complaint, American Pipe, supra, the filing of a

class action by a person who does not meet the requirements to serve as the class

representative somehow does not also toll the period of limitations. Similarly,

Justice Corrigan does not adequately explain how, if the filing of a class action by

a class representative by someone without standing tolls the period of limitation

with respect to all persons within the class described in the complaint, Lynch,

supra; Hass, supra, the filing of a class action by a class representative whose own

claim is time-barred would not also toll the period of limitations with respect to all

persons within the class described in the complaint. Accordingly, rather than

adopting Justice Corrigan’s questionable limitation, we again observe that the

proper focus under MCR 3.501(F), as well as American Pipe and its progeny, is on

the extent to which the claim arose out of the same factual and legal nexus and

whether the defendant had notice of both the claim and the number and generic

identities of the potential plaintiffs.13

13
Additionally, we must observe that we are puzzled by Justice Corrigan’s
assertion that “there is nothing to toll” in this case. Justice Corrigan maintains that
Paxson’s TILA could not be tolled because Cowles’s TILA claim expired “before
(continued…)

29

 Nor are we persuaded by Justice Corrigan’s additional argument that

allowing “Paxson to now assert a TILA claim on behalf of the class would allow

piggybacking of one class action onto another and, thus, tolling of the period of

limitations indefinitely.” Post at 18.14 Where class certification is denied or

terminated on the basis that the class representative was inappropriate—i.e., not

on the appropriateness of class treatment for the underlying claims—tolling is

permitted. McKowan Lowe & Co, Ltd v Jasmine, Ltd, 295 F3d 380, 389 (CA 3,

2002). Thus, where class certification is denied solely on the basis of the

appropriateness on the class representative, “a second class would not be an

attempt to relitigate the question of class certification” and, thus, judicial economy

and the class mechanism will be furthered. In re Crazy Eddie Securities

Litigation, 802 F Supp 804, 813 (ED NY, 1992); see also Catholic Social Services,

Inc v Immigration & Naturalization Service, 232 F3d 1139 (CA 9, 2000); Yang v

Odom, 392 F3d 97, 105-107 (CA 3, 2004). Such a rule is consistent with

(…continued)
[Cowles] filed her complaint.” Post at 11. But such an assertion ignores the
language of MCR 3.501(F)(1) and the fact that the initial class action complaint
was filed before the period of limitations had expired on Paxson’s TILA claim and
that Paxson was a person within the class described in the complaint.
Accordingly, we believe that Justice Corrigan's rationale concerning tolling starts
from a faulty premise.
14
Although Justice Corrigan makes this argument in connection with her
analysis on the relation back of amendments, we will address her argument
because it also pertains to tolling.

30

American Pipe and its progeny,15 and it will also prevent the improper

piggybacking of class-action claims.

Here, because the initial class action was decertified on grounds other than

the appropriateness of the substantive claims for class treatment, Paxson’s TILA

claim was tolled. Paxson was not “attempting to resuscitate a class that a court

[had] held to be inappropriate as a class action.” McKowan, supra at 386.

Accordingly, we believe that claims of improper “piggybacking” and “abuse” are

unwarranted in this particular case.

Therefore, we hold that under MCR 3.501(F), Cowles’s initial class-action

complaint tolled the period of limitations for Paxson’s TILA claim because her

claim arose out of the same factual and legal nexus and defendant had notice of

Paxson’s TILA claim. We are not prepared to conclude that only identical claims

are sufficient for tolling purposes, because such a rule would be at odds with MCR

3.501 itself. Nor are we prepared to hold that class-action tolling may never apply

to subsequent class claims, because such a rule would unduly burden the goal of

15
The filing of a class-action complaint puts a defendant on notice “of the
need to preserve evidence and witnesses respecting the claims of all the members
of the class. Tolling the statute of limitations thus creates no potential for unfair
surprise, regardless of the method the class members choose to enforce their rights
upon denial of class certification.” Crown, Cork & Seal, supra at 353 (emphasis
added).

31

judicial economy and, thus, circumvent the class-action mechanism. Accordingly,

we affirm that portion of the decision of the Court of Appeals.16

B. Relation Back

Even though the Court of Appeals concluded that the period of limitations

was tolled with respect to Paxson’s TILA claim, the Court of Appeals addressed

the issue whether the amendment to a class-action complaint adding claims arising

out of the conduct, transaction, or occurrence alleged in the original class-action

complaint relates back to the date of the initial filing. Moreover, the Court of

Appeals holding that Paxson’s TILA claim was improperly dismissed rested

primarily on its conclusion that the relation-back doctrine applied to her claim.

Tolling under MCR 3.501(F), however, is conceptually distinct from relation back

under MCR 2.118(D). Therefore, in light of our conclusion that Paxson’s TILA

claim was not time-barred, whether the second amended complaint relates back to

Cowles’s initial complaint is not dispositive, and, thus, we need not address this

16
It should not be obscured by our invocation in this opinion of various
federal and state court precedents that, if we were to look at nothing else but MCR
3.501, we would reach the same conclusion. MCR 3.501(F) provides that “[t]he
statute of limitations is tolled as to all persons within the class described in the
complaint on the commencement of an action asserting a class action.” (Emphasis
added.) The manifest purpose of this provision is to avoid the situation in which
each class member must initiate his or her own individual lawsuit to preserve a
cause of action. Thus, class members must be allowed to rely upon the “assertion”
of a class action without having to independently determine that the person
asserting it has a right to do so. Moreover, it can be logically concluded, as we do
in this opinion, that neither a too-broad nor a too-narrow identity of claims can be
required under this rule.

32

issue in this particular case. Accordingly, we vacate that portion of the decision of

the Court of Appeals.

C. “Bona Fide” and “Reasonable”

Because we agree with the Court of Appeals ultimate conclusion that

Paxson’s TILA claim was improperly dismissed, we must likewise address

whether summary disposition was warranted under MCR 2.116(C)(10). Summary

disposition under MCR 2.116(C)(10) is proper where there is no genuine issue of

material fact and the moving party is entitled to judgment as a matter of law. The

court must consider the affidavits, pleadings, depositions, admissions, and

documentary evidence submitted in the light most favorable to the opposing party.

Skinner v Square D Co, 445 Mich 153, 161-162; 516 NW2d 475 (1994). “A

genuine issue of material fact exists when the record, giving the benefit of

reasonable doubt to the opposing party, leaves open an issue upon which

reasonable minds might differ.” West v Gen Motors Corp, 469 Mich 177, 183;

665 NW2d 468 (2003).

The purpose of TILA is to “assure a meaningful disclosure of credit terms

so that the consumer will be able to compare more readily the various credit terms

available to him . . . .” 15 USC 1601(a). Accordingly, TILA requires lenders, like

defendant, to provide a written statement summarizing the loan transaction,

including all related finance charges. 15 USC 1605(a). Under TILA, “the amount

of the finance charge in connection with any consumer credit transaction shall be

determined as the sum of all charges, payable directly or indirectly by the person

33

to whom the credit is extended, and imposed directly or indirectly by the creditor

as an incident to the extension of credit.” Id. Section 1605(a) sets forth a list of

examples of fees and charges that are properly included in the finance charge.

Significantly, 15 USC 1605(e) sets forth a list of certain items that are not properly

included in the finance charge, and one of those items is “[f]ees for preparation of

loan-related documents.” 15 USC 1605(e)(2). Further, Regulation Z, 12 CFR

226.4(c)(7)(ii), provides that fees for preparing loan-related documents are not

finance charges and, thus, need not be included in the finance charge “if the fees

are bona fide and reasonable in amount[.]”

Here, Paxson claims that defendant violated § 1605 and Regulation Z

because defendant’s document preparation fee, as a finance charge, was not

included in the loan’s APR. Specifically, Paxson claims that defendant’s

document preparation fee was not “bona fide and reasonable in amount” because

the fee did not actually relate to document preparation. The Court of Appeals

concluded that summary disposition under MCR 2.116(C)(10) was inappropriate

because, while there is no question of material fact with respect to the

reasonableness of the document preparation fee, a question of fact exists whether

defendant’s fee was bona fide within the meaning of applicable federal law. We

agree and adopt the Court of Appeals following rationale as our own.

A resolution of the issue involves interpretation of federal
law. When construing federal statutes and regulations, we are
governed by authoritative decisions of the federal courts. Bement v
Grand Rapids & I R Co, 194 Mich 64, 65-66; 160 NW 424 (1916).
Where no decision on a particular issue has been rendered by the

34

United States Supreme Court, we are free to adopt decisions of the
lower federal courts if we find their analysis and conclusions
persuasive and appropriate for our jurisprudence. Abela v Gen
Motors Corp, 469 Mich 603, 606-607; 677 NW2d 325 (2004).

In Brannam v Huntington Mortgage Co, 287 F3d 601 (CA 6,
2002), the plaintiffs argued that the $ 250 document preparation fee
was not bona fide and reasonable such that it could be excluded from
the finance charge. The court acknowledged that the TILA exempts
fees for preparation of loan-related documents from the computation
of the finance charge. Id. at 603. The Sixth Circuit Court of Appeals
considered whether the $ 250 fee was bona fide and reasonable. Id.
at 603-604. The evidence did not support that the fee covered
anything more than document preparation costs. Thus, there was no
evidence to support that the fee was not “bona fide” under
Regulation Z. Id. at 606. With respect to the reasonableness of the
$ 250 charge, the court determined that a fee is reasonable if it is for
a service actually performed and reasonable in comparison to
prevailing practices of the industry in the relevant market. Id. The
evidence supported that $ 250 was a reasonable document
preparation fee for western Michigan. Id

In this case, unlike in Brannam, there is a question of material
fact with respect to whether the fee was “bona fide.” The term
“bona fide,” as used in Regulation Z, is not defined. 12 CFR
226.2(b)(3) provides that, unless a term is specifically defined in
Regulation Z, “the words used have the meanings given to them by
state law or contract.” We construe undefined words used in statutes
according to their plain and ordinary meanings. Cox v Flint Bd of
Hosp Managers, 467 Mich 1, 18; 651 NW2d 356 (2002). Resort to
dictionary definitions is acceptable and useful in determining
ordinary meaning. Id. The term “bona fide” means made or done in
good faith, without deception or fraud, authentic, genuine, real.
Random House Webster's College Dictionary (1997). The purpose
of TILA is to assure a meaningful disclosure of credit terms so
consumers may compare various credit terms to allow them to avoid
uninformed uses of credit. 15 USC 1601(a); Inge v Rock Financial
Corp, 281 F3d 613, 619 (CA 6, 2002). With that purpose in mind,
and using the ordinary definition of “bona fide,” a document
preparation fee is not bona fide, authentic, or genuine, if it includes
charges for items other than document preparation.

35

 There was evidence in this case to support that the document
preparation charge was not “bona fide.” Paul Sydloski, defendant’s
president, testified that he believed that the document preparation fee
was charged to cover or defray defendant’s expenses, specifically
the costs associated “with taking a loan through the entire sequence
from the application through the closing” and subsequently selling it
to the secondary market or keeping it. Sydloski believed that
defendant’s senior management employees held the same view. He
was unsure whether there was any difference between a document
preparation fee and a loan processing fee. James Koessel, the bank’s
chief lending officer, testified that the document preparation fee was
initially instituted at $ 100 to “defray some of the costs” incurred in
preparing documents. Koessel admitted, however, that the document
preparation fee was eventually replaced by a “loan-processing fee,”
which is properly disclosed as part of the finance charge. We
believe the evidence presents a question of material fact with respect
to whether the fee was for a variety of services necessary to take the
loan from application through closing and beyond. Because a
genuine issue of material fact exists with respect to whether the fee
was bona fide, summary disposition on the merits of the TILA claim
is inappropriate.

We note, however, that there is no question of material fact
with respect to reasonableness. We agree with the Brannam Court
that reasonableness is measured by looking at the marketplace, and
we note that the market comparison approach is compatible with
ordinary dictionary definitions of the term “reasonable,” which
include logical, not exceeding the limit prescribed by reason, not
excessive, moderate. Random House Webster's College Dictionary
(1997). The Brannam Court determined that $ 250 was a reasonable
document preparation fee in west Michigan. Id. Paxson has failed
to offer evidence to dispute that $ 250 is reasonable in west
Michigan for document preparation. [Cowles, supra at 233-235.][17]

17
While not necessary to its ruling, the trial court similarly observed:
The fee seemingly is to defray overhead and costs associated
with the entire underwriting process probably the small part of
which is actually preparing the documents which are disclosed on
1105 of the—of the form used at closing. Again 1105, as indicated
by [plaintiff’s counsel], is a title line and the document or the fees
are those associated with title and title documents.
(continued…)

36

 Nonetheless, defendant urges this Court to adopt the view apparently

espoused by the United States Court of Appeals for the Seventh Circuit in Guise v

BWM Mortgage, LLC, 377 F3d 795, 800 (CA 7, 2004). According to defendant,

Guise sets forth an “objective” test under which a fee is bona fide as long as the

services for which the fees are imposed are performed, period. We decline

defendant’s invitation to adopt its reading of Guise because it is inconsistent with

the meaning of “bona fide.” For example, if defendant charges $250 for its

(…continued)
So it seems manifest, therefore, that whatever else it is, the
fee is a lot more than a document preparation fee based on the
testimony of the Bank officials and based on the Koessel
memorandum and the history of the fee and how it works its way
into Bank West doing a business.

Does that mean that the fee is not bona fide? Well, that’s the
trick. It seems to me that the mere fact that documents are prepared
as part of the process is not sufficient of and by itself to make the fee
bona fide and bona fide, as [plaintiff’s counsel] points out, under
Michigan law means that it is exactly what is claimed.

It seems here that whatever else we can say about it—the fee
in this case—is not exactly what it claimed. It is a document
preparation fee plus an overhead and underwriting fee and a
processing and application fee.

Under these circumstances, it seems to me, that standard
assessment of what we’re looking at leads to the inevitable
conclusion that the fee is not exactly what is claimed, it is more than
that and, therefore, doesn’t pass muster under Michigan law as being
bona fide.

To that extent, it seems to me, the plaintiffs have made out a
case and established that the fee does not fulfill the requirements of
the Truth-In-Lending Act because it doesn’t meet the bona fide test.

37

document preparation fee, but only $10 of that total fee represents actual

document preparation services and the remainder represents, for example,

overhead charges, the fee would not be “bona fide” within the meaning of the

TILA. In other words, the fee would not be what it is claimed to be, so the fee

would not be “bona fide,” authentic, or genuine. Accordingly, we reject

defendant’s argument and affirm the Court of Appeals decision that summary

disposition under MCR 2.116(C)(10) would be inappropriate.

IV. CONCLUSION

We hold that Cowles’s initial class-action complaint tolled the period of

limitations under MCR 3.501(F) for Paxson’s TILA claim because Paxson’s claim

arose out of the same factual and legal nexus as Cowles’s claim and defendant had

notice of both the TILA claim and the number and generic identities of the

potential plaintiffs. In light of this conclusion, we need not decide whether the

amendment to the class-action complaint adding this claim related back to the date

of the initial filing. Moreover, summary disposition under MCR 2.116(C)(10)

would be improper because a material question of fact exists concerning whether

the document preparation fee was “bona fide.” Therefore, we affirm in part,

vacate in part, and remand for further proceedings in the trial court consistent with

this opinion.

Michael F. Cavanagh
Elizabeth A. Weaver
Marilyn Kelly
Stephen J. Markman

38

 STATE OF MICHIGAN

SUPREME COURT

KRISTINE COWLES,

Plaintiff-Appellee,

and

KAREN B. PAXSON,

Intervening Plaintiff-Appellee,

v No. 127564

BANK WEST, f/k/a BANK WEST FSB,

Defendant-Appellant.

CORRIGAN, J. (dissenting).

I dissent from the majority’s conclusion that the filing of a class-action

complaint tolls the period of limitations for all claims arising out of the same

factual and legal nexus. Cowles’s filing of the original class action, alleging

solely state law claims, did not toll the one-year period of limitations for Paxson’s

claim under the Truth in Lending Act. Moreover, Paxson’s claim under the act,

which Cowles could not have brought, does not relate back to the filing of the

original complaint. Accordingly, I would reverse the judgment of the Court of

Appeals and reinstate the trial court’s grant of summary disposition to defendant.
 I. FACTUAL BACKGROUND AND PROCEDURAL POSTURE

Defendant charged a $250 document preparation fee for its residential real

estate mortgage transactions. In early 1997, plaintiff Kristine Cowles obtained a

mortgage from defendant and was charged the $250 document preparation fee. On

July 1, 1998, Cowles filed several state law claims regarding the fee on her own

behalf and on behalf of a class of consumers, alleging, among other claims, that

defendant’s document preparation constituted the unauthorized practice of law.

On August 20, 1998, Cowles amended her complaint to allege that the fee

violated the federal Truth in Lending Act (TILA)1 because the fee was improperly

designated as a fee “paid to others on your behalf” when defendant, in reality,

retained the fee. The trial court granted summary disposition to defendant because

the form for Cowles’s transaction explicitly stated that the fee was paid to the

bank. Plaintiffs have not appealed that ruling.

On February 16, 1999, Cowles filed a second amended complaint, alleging

another TILA violation because defendant allegedly had failed to disclose the

document preparation fee as required by 15 USC 1605(a) and Regulation Z, 12

CFR 226.4. The trial court certified the class described in Cowles’s second

amended complaint. Defendant then moved for summary disposition, alleging that

Cowles could not serve as the class representative because her claim was time-

1
15 USC 1601 et seq.

2

barred.2 Plaintiff Karen Paxson, who had obtained a loan from defendant on

February 9, 1998, and was charged the same $250 fee, then moved to intervene

and serve as the class representative. Paxson’s motion to intervene was granted,

but the trial court later granted summary disposition to defendant on all the claims,

with the exception of Paxson’s TILA, claim because the period of limitations had

run before Cowles had filed her initial complaint.

Defendant and Paxson filed cross-motions for summary disposition. The

trial court ruled that Paxson’s claim was time-barred. It had accrued more than

one year before the TILA claim was pleaded in the second amended complaint.

Thus, the trial court did not relate the second amended complaint back to the filing

of the initial complaint.

The Court of Appeals thereafter granted plaintiffs’ application for leave to

appeal and held the case in abeyance for Dressel v Ameribank, 468 Mich 557; 664

NW2d 151 (2003), which held that the preparation of standard mortgage forms by

a bank did not amount to the unauthorized practice of law. The Court of Appeals

then considered the case in light of the Dressel decision and dismissed the

unauthorized practice of law claim. In a published, split opinion, the Court of

Appeals reversed in part. It held that the amendment of the class action complaint

2
15 USC 1640(e) states that “[a]ny action under this section may be
brought in any United States district court, or in any other court of competent
jurisdiction, within one year from the date of the occurrence of the violation.”

3

by an intervening plaintiff related back to the initial complaint. 263 Mich App

213, 230-231; 687 NW2d 603 (2004). Judge O’Connell dissented, arguing against

the application of the relation-back doctrine. Id. at 236-238.

Defendant sought leave to appeal in this Court. We granted defendant’s

application for leave to appeal. 474 Mich 886 (2005).

II. CLASS ACTION TOLLING DOCTRINE

The Court of Appeals opinion addressed only whether the relation-back

doctrine applied to this case.3 The majority opinion, however, relies solely on the

3
The majority mischaracterizes the Court of Appeals majority opinion in
concluding that it addressed the class-action tolling doctrine. The majority
extensively cites the Court of Appeals opinion for the proposition that the Court of
Appeals addressed both the class-action tolling and the relation-back doctrines.
The majority, however, fails to recognize that, read in context with the remainder
of the opinion, the Court of Appeals applied only the relation-back doctrine. The
Court of Appeals majority stated:
Plaintiff Paxson next challenges the trial court’s grant of
summary disposition to defendant on her TILA claim. Neither the
Michigan Court of Appeals nor the Michigan Supreme Court has
decided whether the amendment of a class action complaint to add
new theories of liability relates back to the filing of the initial
complaint for purposes of computing the expiration of the period of
limitations. Thus, whether Paxson’s TILA cause of action was
barred by the period of limitations involves an issue of first
impression and an issue of law, which is reviewed de novo. [263
Mich App at 219-220 (emphasis added).]
The Court of Appeals majority further noted that since Paxson was a
member of the original class, and since the class was ultimately certified, MCR
3.501(F)(2) applied to toll the period of limitations with respect to Paxson. Id. at
220-221. In making this specific contention, the Court of Appeals majority,
however, was not referring to Paxson’s TILA claim when stating that MCR
3.501(F)(2) applied to Paxson. This is clear when read in context with the next
sentence, which states, “The question then arises whether amendments to the
(continued…)

4

(…continued)
complaint, adding claims arising out of the conduct, transaction, or occurrence
alleged in the original complaint, relate back to the date of the initial filing when
the statute of limitations was tolled.” Id. at 221 (emphasis added). If the Court of
Appeals had been referring to the tolling of Paxson’s TILA claim when
contending that MCR 3.501(F) applied to Paxson, as suggested by the majority, it
would not have needed to address whether the relation-back doctrine applied.
Additionally, the Court of Appeals demonstrated that it applied the relation-
back doctrine only when it stated:
Both defendant and the trial court interpret the ruling in
American Pipe [& Constr Co v Utah, 414 US 538; 94 S Ct 756; 38 L
Ed 2d 713 (1974)] to require notification of specific causes of action
before the period of limitations on those claims expires. Given that
the American Pipe Court was not addressing the relation back of
amendments, we decline to interpret the language in that
manner. . . .
* * *

In Crown, Cork & Seal Co v Parker, 462 US 345; 103 S Ct
2392; 76 L Ed 2d 628 (1983), the Court revisited its ruling in
American Pipe. Again, however, the Court was not called on to
address the relation back of amendments in class action litigation.
[Id. at 225-226 (emphasis added).]

Finally, the Court of Appeals majority clearly demonstrated that it was
applying the relation-back doctrine only when it stated, “In sum, we conclude that
the relation-back doctrine applies to Paxson’s TILA claim and the claim was
improperly dismissed on motion for summary disposition.” Id. at 231.

To make it perfectly clear to the majority, I do not contend that the Court of
Appeals did not conclude that Paxson’s TILA claim was not tolled. Rather, I
contend that the Court of Appeals was not referring to the tolling of Paxson’s
TILA claim when it stated that MCR 3.501(F)(2) applied to Paxson because she
was a member of the class. Id. at 220-221. I further contend that the Court of
Appeals held, albeit erroneously, that Paxson’s TILA claim was tolled, but relied
solely on the relation-back doctrine in reaching its holding. The majority has not
rebutted this contention, ante at 13 n 6.

Evidently the majority is confused about the conclusion it reaches. It states,
“[T]he Court of Appeals concluded that Paxson’s claim was not time-barred
(continued…)

5

class action tolling doctrine. This is a different issue governed by a different court

rule. The tolling of the period of limitations in class actions is governed by MCR

3.501(F)(1). The relation back of amendments is governed by MCR 2.118(D).

The majority concludes that “[b]ecause the claim was not time-barred in this

particular case, we need not decide whether the amendment to the class-action

complaint . . . related back to the date of the initial filing.” Ante at 2.

In Michigan, class actions are governed by court rule. MCR 3.501(A)

describes the nature of a class action. It provides, in relevant part:

(1) One or more members of a class may sue or be sued as
representative parties on behalf of all members in a class action only
if:

(a) the class is so numerous that joinder of all members is
impracticable;

(…continued)
because her claim was tolled and the amendment related back to the initial class
complaint for purposes of computing the period of limitations.” Id. at 16 n 6.
The majority fails to realize that its statement is merely another way of stating my
contention that the Court of Appeals relied on the relation-back doctrine, not the
class-action tolling doctrine, in holding that Paxson’s period of limitations was
tolled. I acknowledge that the Court of Appeals holding is misleading and
confusing. If Paxson’s TILA claim related back to the filing of the original
complaint (which the Court of Appeals held that it did), then no need would exist
to hold that the period of limitations was “tolled.” Thus, the Court of Appeals
erroneously stated that Paxson’s TILA claim was “tolled” because it related back
to the original filing. Rather, it should have stated that Paxson’s TILA claim was
not barred by the statute of limitations because it related back to the filing of the
original complaint. In reading the Court of Appeals opinion, the Court of Appeals
clearly meant to state the latter, but did a poor job of communicating.

6

 (b) there are questions of law or fact common to the
members of the class that predominate over questions affecting only
individual members;

(c) the claims or defenses of the representative parties are
typical of the claims or defenses of the class[.]

MCR 3.501(F)(1) provides that “[t]he statute of limitations is tolled as to all

persons within the class described in the complaint on the commencement of an

action asserting a class action.” While this court rule tolls the period of limitations

for all persons within the class described in the complaint, it is utterly silent

regarding those claims to which the tolling provision applies. The majority holds

that MCR 3.501(F) only requires the “assert[ion]” of a class action to trigger the

tolling of the period of limitations for all claims arising out of the same factual and

legal nexus as long as the defendant has notice of the class members’ claim and

the number and generic identities of the potential plaintiffs. Ante at 24 n 10. I

disagree.

MCR 3.501(F) codifies the United States Supreme Court’s decision in

American Pipe & Constr Co v Utah, 414 US 538; 94 S Ct 756; 35 L Ed 2d 713

(1974). In American Pipe, the Supreme Court held that “the commencement of

the original class suit tolls the running of the statute for all purported members of

the class who make timely motions to intervene after the court has found the suit

inappropriate for class action status.” Id. at 553.

One year later, in Johnson v Railway Express Agency, Inc, 421 US 454; 95

S Ct 1716; 44 L Ed 2d 295 (1975), the Supreme Court held, in a non-class context,

7

that a timely filing of a charge of employment discrimination with the Equal

Employment Opportunity Commission under Title VII of the Civil Rights Act did

not toll the limitations period for an action, based on the same facts, under 42 USC

1981. The Court stated, “[t]he tolling effect given to the timely prior filings in

American Pipe and in Burnett [v New York C R Co, 380 US 424; 85 S Ct 1050; 13

L Ed 2d 941 (1965)] depended heavily on the fact that those filings involved

exactly the same cause of action subsequently asserted.” Id. at 467 (emphasis

added).

In Crown, Cork & Seal Co, Inc v Parker, 462 US 345, 350-52; 103 S Ct

2392; 76 L Ed 2d 628 (1983), the Supreme Court extended the tolling of the

period of limitations to those who bring individual actions after class certification

is denied and to those who elect to opt out of the class action to file individual

claims. Justice Powell concurred, cautioning, however, as follows:

[American Pipe] “must not be regarded as encouragement to
lawyers in a case of this kind to frame their pleadings as a class
action, intentionally, to attract and save members of the purported
class who have slept on their rights.” The tolling rule of American
Pipe is a generous one, inviting abuse. It preserves for class
members a range of options pending a decision on class certification.
The rule should not be read, however, as leaving a plaintiff free to
raise different or peripheral claims following denial of class status.

In American Pipe we noted that a class suit “notifies 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 participate in the judgment. Within the period set by
the statute of limitations, the defendants have the essential
information necessary to determine both the subject matter and size
of the prospective litigation.” When thus notified, the defendant
normally is not prejudiced by tolling of the statute of limitations. It is

8

 important to make certain, however, that American Pipe is not
abused by the assertion of claims that differ from those raised in the
original class suit. As Justice Blackmun noted, a district court
should deny intervention under Rule 24(b) to “preserve a defendant
whole against prejudice arising from claims for which he has
received no prior notice.” [Id. at 354-355 (Powell, J., concurring)
(citations omitted).]

In Dressel v Ameribank, this Court dealt with a similar issue and fact

pattern as the issue and facts in this case. In Dressel, the plaintiffs, acting on

behalf of a class of similarly situated borrowers, filed a complaint in the Kent

Circuit Court alleging that Ameribank violated Michigan law by charging them an

excessive document preparation fee. The plaintiffs claimed, among other things,

that Ameribank violated Michigan usury law and Michigan’s statutory prohibition

against the unauthorized practice of law by charging a $400 document preparation

fee on their November 17, 1997, loan. On March 22, 1999, the circuit court

certified the plaintiffs’ case as a class action. On July 2, 1999, the circuit court

dismissed the case, holding that Ameribank’s document preparation fee did not

violate Michigan’s usury law and that Ameribank did not engage in the

unauthorized practice of law. The plaintiffs moved for reconsideration and sought

leave to amend their complaint to include, among other things, a TILA claim. On

September 3, 1999, the circuit court denied their requests. The circuit court held

that the plaintiffs’ TILA claim was barred by the TILA’s one-year statute of

limitations because the plaintiffs’ complaint was filed on December 21, 1998,

9

more than 13 months after their November 17, 1997, loan.4 In Weston v

Ameribank, 265 F3d 366 (CA 6, 2001), the plaintiff obtained a loan from

Ameribank on April 1, 1998. The bank charged the plaintiff a $350 document

preparation fee. The Weston plaintiff was a member of the Dressels’ class action

in the Dressel case. On September 10, 1999, seven days after the Dressels’

request for consideration and leave to amend their complaint was denied, the

Weston plaintiff filed suit in federal district court, alleging that the $350 document

preparation fee violated TILA because it was not properly disclosed. She claimed

that the period of limitations on her TILA claim was tolled during the pendency of

the Dressels’ class action. The district court determined that the Weston plaintiff’s

claim was barred by the TILA’s one-year statute of limitations. The Court of

Appeals for the Sixth Circuit affirmed, holding that “the statute of limitations for

putative class members of the original class is tolled only for substantive claims

that were raised, or could have been raised, in the initial complaint.” Id. at 368.

The majority contends that two separate views exist regarding the class-

action tolling doctrine. It states that some courts have relied on Justice Powell’s

concurrence to conclude that the class-action tolling doctrine applies only to

4
The circuit court in this case should have similarly denied Cowles’s
motion to amend her complaint to add a stale claim. As noted by Judge
O’Connell, the trial court also erred in certifying the class on the basis of a stale
claim. 263 Mich App at 238.

10

identical claims that were raised or could have been raised in the initial class-

action complaint. The majority cites Weston in support of this proposition.

The majority further contends that other courts have held that subsequent

claims filed after class certification has been denied need not be identical to the

original class action for tolling to apply. See Tosti v City of Los Angeles, 754 F2d

1485 (CA 9, 1985); Barnebey v EF Hutton & Co, 715 F Supp 1512 (MD Fla,

1989). Rather, they need only share a “common factual and legal nexus to the

extent that the defendant would likely rely on the same evidence or witnesses in

mounting a defense.” Ante at 19, citing Cullen v Margiotta, 811 F2d 698, 719

(CA 2, 1987). The majority purportedly adopts this view, but does not recognize

that even a claim that shares a common factual and legal nexus with the initial

claim cannot be tolled if the period of limitations had already run on the

subsequent claim before the initial complaint was filed. Simply stated, there is

nothing to toll. Thus, whether the tolling doctrine applies only to substantive

claims that were raised or could have been raised or to all claims arising from a

“common factual and legal nexus,” the TILA claim in question was not, and could

not have been, brought initially by class representative Cowles because the TILA’s

one-year period of limitations had already run before she filed her complaint.

Because Paxson did not seek to intervene until after the period of limitations had

also run on her TILA claim, she too could not toll the statute of limitations.

Lastly, the majority, citing Justice Powell’s concurrence in Crown, Cork &

Seal, contends that the linchpin of whether the period of limitations is tolled under

11

the class-action tolling doctrine is notice to the defendant of both the claims and

the number and identities of the potential plaintiffs. It concludes that Paxson’s

TILA claim, which involved the same factual bases and the same evidence,

memories, and witnesses, was not such a “different or peripheral claim” so that

tolling is not permitted. The majority has misconstrued Justice Powell’s

concurrence. Justice Powell specifically noted that American Pipe must not be

used as a tool to encourage lawyers to frame pleadings to attract purported class

members who have slept on their rights. Crown, Cork & Seal, supra at 354

(Powell, J., concurring). He went on to state that “[t]he rule should not be read . . .

as leaving a plaintiff free to raise different or peripheral claims following denial of

class status.” Id. Finally, he noted that a class action notifies the defendant of the

substantive claims being brought against them and of the number and generic

identities of the people participating in the judgment. Id. Justice Powell’s

comments support neither Cowles’s attempt to add a different claim nor the

majority’s conclusion in this case. To allow Cowles to bring her TILA claim now,

after sleeping on her rights, does not promote the purpose of the statute of

limitations of eliminating stale claims. Nor does it notify defendant of the

substantive claims being brought against it. Rather, under the majority’s rule, any

unnamed class member may, at any time, seek to intervene and file an amendment

adding different or peripheral claims, long after the period of limitations has run

on such claims, as long as the claims involve the same factual and legal nexus.

12

 Michigan courts do not and should not allow tolling where the new claim

involves different legal theories than those pleaded in the first case. See Dressel,

supra; Weston, supra. I would follow the Sixth Circuit’s rule that the tolling

doctrine applies only to substantive claims that were actually raised, or could have

been raised, in the initial complaint.5 Weston, supra at 368. Cowles’s initial

complaint alleged solely state law violations. Cowles did not raise, nor could she

5
The majority cites a laundry list of cases allegedly contradicting my
position. Ante at 27-28. None of these cases, however, addresses the question at
issue here, whether the filing of a class action tolls the period of limitations for a
new class member’s individual claim when that claim could not have been
asserted by the initial class representative and when the period of limitations had
already run on the new class member’s claim before that member sought to
intervene. As such, the cases are not inconsistent with my dissenting opinion. In
any event, see Weston, to which to majority devotes one sentence in its entire
opinion. Not only is Weston more factually on point than the cases cited by the
majority, the legal issue is similar to that decided here, and the conclusion is
consistent with my dissenting opinion.

The majority also contends that my view of the class-action tolling doctrine
would frustrate the very purpose of MCR 3.501(F). I disagree. The purpose of
MCR 3.501(F) is to toll the period of limitations for putative class members in
regards to claims brought in the original class-action complaint. Thus, in the event
that class certification is denied, the putative class members would not be
punished by relying on the class action. Such a rule is necessary to prevent
individual unnamed class members from having to intervene to preserve their
claims. I do not dispute the validity of this rule. Rather, I would conclude that the
tolling doctrine applies only to claims that were raised or could have been raised in
the initial complaint. To hold otherwise would expand the purpose of MCR
3.501(F), which is to protect unnamed class members in the event that class
certification is denied. Moreover, it would completely defy the general purpose of
the statute of limitations, which is to prevent stale claims. Finally, the majority’s
interpretation of MCR 3.501(F) would allow unnamed class members to intervene
at any time during the suit and to file an amendment adding different or peripheral
claims long after the period of limitations has run on such claims. The majority’s
(continued…)

13

have raised, the TILA claim in her initial complaint because the period of

limitations had already run. Thus, Cowles’s filing of the original class action,

alleging solely state law claims, did not toll the one-year period of limitations for

Paxson’s TILA claim. Moreover, Paxson’s intervention does not alter this

conclusion because she did not seek to intervene until after the period of

limitations had run on her TILA claim.6 Accordingly, I would reverse the

judgment of the Court of Appeals and reinstate the trial court’s grant of summary

disposition to defendant.

(…continued)

conclusion essentially deems rules of procedure in class actions, especially rules

regarding statutes of limitations, unnecessary.

6
The majority claims that I fail to explain how the filing of a class action
that does not meet the requirements for class certification tolls the period of
limitations, but the filing of a class action by a person who does not meet the
requirements to serve as a class representative does not toll the period of
limitations. The majority clearly misinterprets my dissenting opinion. I do not
reach that conclusion in my dissent. Nor do I accept or reject the accuracy of the
statement. Rather, I reach the narrow conclusion that Cowles did not bring her
TILA claim in her original complaint and that she could not amend her complaint
to add the claim because the period of limitations had run on her claim before she
filed the initial complaint. Thus, MCR 3.501(F) would not apply because no claim
existed to toll. Moreover, Paxson did not seek to intervene until the period of
limitations had run on her TILA claim. Thus, when Paxson sought to intervene,
she also had no claim to toll. MCR 3.501(F) would not apply to toll Paxson’s
TILA claim because the claim was not brought in the original complaint. Nor
could it have been brought in the original complaint. MCR 3.501(F) does not toll
claims for all class members that the class representative did not and could not
bring. To allow the tolling of such claims is not only outside the purpose of MCR
3.501(F), it broadens the application of MCR 3.501(F) to every conceivable claim
that shares the same factual nexus, whether pleaded or not. Moreover, it
completely obliterates any concept of a statute of limitations.

14

 III. RELATION-BACK DOCTRINE

As stated above, the Court of Appeals applied only the relation-back

doctrine in reaching its conclusion. The majority, however, completely fails to

address whether the Court of Appeals erred in applying the relation-back doctrine

to this case. MCR 2.118(D) governs the relation-back doctrine. It provides:

An amendment that adds a claim or a defense relates back to
the date of the original pleading if the claim or defense asserted in
the amended pleading arose out of the conduct, transaction, or
occurrence set forth, or attempted to be set forth, in the original
pleading.

Although the court rules do not explicitly authorize the relation back of

amendments in class actions, the Court of Appeals majority relied solely on this

doctrine in allowing Paxson’s TILA claim to survive.

The Court of Appeals majority recognized that the relation-back doctrine

does not apply to the claims of nonparties and does not extend to new parties.

Hurt v Michael’s Food Ctr, Inc, 220 Mich App 169, 179; 559 NW2d 660 (1996).

It concluded, however, that Paxson was not a new party because she was a

member of the originally asserted class. In Devlin v Scardelletti, 536 US 1, 9-10;

122 S Ct 2005; 153 L Ed 2d 27 (2002), the United States Supreme Court noted:

Nonnamed class members . . . may be parties for some
purposes and not for others. The label “party” does not indicate an
absolute characteristic, but rather a conclusion about the
applicability of various procedural rules that may differ based on
context.

Nonnamed class members are, for instance, parties in the
sense that the filing of an action on behalf of the class tolls a statute
of limitations against them. Otherwise, all class members would be

15

 forced to intervene to preserve their claims, and one of the major
goals of class action litigation—to simplify litigation involving a
large number of class members with similar claims—would be
defeated. The rule that nonnamed class members cannot defeat
complete diversity is likewise justified by the goals of class action
litigation. Ease of administration of class actions would be
compromised by having to consider the citizenship of all class
members, many of whom may even be unknown, in determining
jurisdiction. Perhaps more importantly, considering all class
members for these purposes would destroy diversity in almost all
class actions. Nonnamed class members are, therefore, not parties in
that respect. [Citations omitted.]

As the Supreme Court observed, an unnamed class member may be

considered a party for some purposes and not for others. That an unnamed class

member is considered a party for tolling purposes does not automatically make

him or her a party for relation-back purposes. The relation-back rule is a

subsection of the rule on amendments and supplemental pleadings. As noted, only

a party may amend a pleading. As an unnamed class member, Paxson could not

amend any pleading. The earliest she could have amended anything was after she

intervened in the suit. Therefore, her status as a party for purposes of the

amendment rule did not accrue until she intervened, if at all.

Judge O’Connell, in his dissenting opinion, also concluded that unnamed

class members are not parties for relation-back purposes:

The majority opinion goes astray when it fails to
acknowledge that neither the TILA claim nor the original claim of
illegal practice of law ever had a legitimate basis in the law.
Deciding to disregard this detail, the majority allows Paxson to
litigate the stale TILA claim as though the legal fiction of class
status can somehow resurrect it. Propping up its legal reasoning on
the erroneously granted class status, the majority allows Paxson to
emerge from anonymity, replace Cowles as class representative, and

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 advance a new cause of action that Cowles could not legitimately
assert herself. The majority permits the substitution of claims and
parties by glossing over Paxson’s own failure to fit within the time
restraints of the statute of limitations. Stretching the legal fiction of
class status far beyond its rending point, the majority holds that the
previously unknown Paxson, as a silent member of the ill-founded
class, had actually asserted the new claim from the time of the
original complaint. If the majority correctly deemed Paxson a new
party, the new claim would fail for tardiness. Hurt v Michaels’ Food
Center, Inc, 220 Mich App 169, 179; 559 NW2d 660 (1996).

The majority’s contrary holding has more insidious
ramifications than hyper-extending the statute of limitations on one
claim for one group of litigants. It permits class litigants to ignore
completely statutes of limitations as long as they can continue to
muster fresh “class” plaintiffs with plausible causes of action
stemming from the same general circumstances alleged in the
complaint. If a court finds that one claim lacks legal support, the
class’s attorneys may simply conjure another legal issue, amend the
complaint to include it, and avoid the running of any period of
limitations by relating the claim back to their original, defeated
complaint. If the representative did not suffer the new harm alleged
or is legally barred from asserting it, the class may simply conjure
one of its imaginary participants and put him at the class’s helm.
This approach allows a massive suit, brimming with countless
phantom plaintiffs, to rise repeatedly from its own ashes like a
litigious Phoenix until a vexed and exhausted defendant finally pays
it enough money to haunt someone else. [263 Mich App at 238-
239.]

For the reasons well articulated in Judge O’Connell’s dissent, I would

conclude that unnamed class members such as Paxson should not be considered

“parties” for relation-back purposes. Holding to the contrary would allow for

widespread abuse of the relation-back rule, whereby intervening plaintiffs could

revive stale claims, not only for themselves, but also for all similarly situated

members of the class, even if the initial plaintiff never had such a claim.

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 Here, Paxson failed to bring her TILA claim within the one-year limitations

period. Paxson’s substitution as the class representative does not and should not

give her license to add new claims that she previously failed to bring within the

applicable limitations period. To so hold would defy the plain language of MCR

3.501(A)(1), which requires a class representative to bring the claims on behalf of

the remaining class. Moreover, to allow the application of the relation-back

doctrine would defeat the purpose of the class-action tolling doctrine. Judicial

efficiency and economy, as well as the statute of limitations, dictate that the TILA

claim be brought immediately, rather than years after the fact. Thus, a potential

class member like Paxson, who was or should have been aware that Cowles had

not pleaded a TILA claim, sleeps on her rights by failing to act immediately. To

allow Paxson to now assert a TILA claim on behalf of the class would allow

piggybacking of one class action onto another and, thus, tolling of the period of

limitations indefinitely. Moreover, Cowles’s reliance on the relation-back

principle is completely inconsistent with the holding in American Pipe. If the

relation-back principle applied in the class context to proposed interveners, the

holding in American Pipe would be superfluous. Every intervening plaintiff

seeking to pursue a new claim would simply relate his or her claim back to the

initial complaint.

For these reasons, Paxson should not be permitted to intervene to pursue a

new claim that was not and could not have been brought by the initial class

representative. A contrary holding invites gamesmanship. Moreover, such a rule

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will surely invite rampant abuse of the class-action tolling rule, as Justice Powell

warned in Crown, Cork & Seal, supra at 354 (Powell, J., concurring).

IV. CONCLUSION

Cowles’s filing of the original class action, alleging solely state law claims,

did not toll the one-year period of limitations for Paxson’s TILA claim.

Moreover, Paxson’s TILA claim, which was not and could not have been brought

by the initial class representative, does not relate back to the filing of the original

complaint. Accordingly, I would reverse the judgment of the Court of Appeals

and reinstate the trial court’s grant of summary disposition to defendant. Because

I would hold that Paxson’s TILA claim is barred by the statute of limitations, I do

not reach the issue whether a question of fact existed regarding whether the

document preparation fee was “bona fide.”

Maura D. Corrigan
Clifford W. Taylor
Robert P Young, Jr.

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