We don’t often write about statutes of limitations because the cases tend to be fact bound and not all that illuminating on larger points of law and/or practice. However, a case in California struck a chord with us recently because it highlights a point that we think every litigator should understand: Tolling agreements should not and typically do not revive already-stale claims, and they should be drafted to leave no ambiguity about that specific point. As the lawyers demonstrated in Rustico v. Intuitive Surgical, Inc., No. 18-cv-02213, 2019 WL 6912702 (N.D. Cal. Dec. 19, 2019), care in drafting can mean the difference between winning and losing.
Here is what you need to know. The plaintiff underwent a surgical procedure on January 12, 2012, and experienced a complication that one surgeon purportedly attributed to “problems” and a “malfunction” with surgical equipment. Id. at *1-*2. Notwithstanding the complication, the plaintiff was discharged days later in good condition, and although she was seemingly no worse for the wear, she contacted an attorney in September 2013 after seeing a television advertisement. Id. at *2. The timing is obviously important—the plaintiff’s outreach to counsel was just a few months short of two years after her procedure.
As it turns out, attorneys for the device manufacturer had sent plaintiffs’ counsel a tolling agreement for cases involving the device, under which the tolling period would be triggered by notice from the plaintiffs’ lawyers. Because the devil is in the drafting, we will lay out relevant terms verbatim:
[The agreement will] toll the applicable statute of limitations for a three month period starting on the date [Defendant] is provided with a claimant’s name. If necessary, this period may be extended upon agreement of the parties. . . .
. . . .
The tolling of the applicable statute of limitations is not intended to and shall not for any purposes be deemed to limit or adversely affect any defense, other than a statute-of-limitations defense, that [Defendant] has, may have, or would have had in the absence of this agreement. Nor does this agreement waive or release any statute of limitations defense that could have been asserted before the date of the tolling period. Upon completion of the tolling period, [Defendant] will have all the defenses available to it as it had on the first day of the tolling period.
Id. at *2 (emphasis added). The highlighted text at the end will become important because the plaintiffs’ attorney executed the tolling agreement on August 9, 2013, but did not send the plaintiff’s name (and thus commence the tolling) until February 3, 2014—more than two years after the plaintiff’s procedure. Id. at *2.
You are no doubt starting to see how this played out. The parties extended the tolling agreement again and again, until the plaintiff finally filed a complaint in the Northern District of California on April 13, 2018. Was the claim time barred? The answer was clearly yes, since by the time the plaintiff became a party to the tolling agreement, her claim was already untimely.
The district court’s order granting summary judgment for the defense came down to (1) choice of law, (2) the express terms of the tolling agreement, and (3) application of California’s discovery rule and doctrine of fraudulent concealment.
First, the district court determined that California’s two-year statute applied, rather than Connecticut’s three-year statute. Although the plaintiff had her procedure in Connecticut, she resided in Florida and the Defendant was headquartered in California. Id. at *1. The district court therefore applied California’s “governmental interest” framework for choice of law, and it determined that because California was the forum and because the only defendant was a California resident, California was the only state interested in applying its statute of limitations. Id. at *4-*7. The discussion is long, but that’s the gist of it, and it left the plaintiff trying to evade California’s two-year statute.
Second, Plaintiff attempted to evade the statute by invoking the tolling agreement and arguing that the defendant was equitably estopped from asserting a statute-of-limitations defense. This is where the tolling agreement spoke for itself. The agreement did not prevent the defendant from asserting the statute because the claim was already untimely when the tolling period commenced. Id. at *7-*8. Recall that counsel signed the tolling agreement in August 2013, but did not give notice to commence the tolling until months later—in February 2014, which is more than two years later than the plaintiff’s alleged complication in January 2012. The plaintiffs simply could not explain away the agreement’s express terms, under which the plaintiff became a party to the agreement on February 3, 2014, and the defendant expressly did “not waive or release any statute of limitations defense that could have been asserted before the date of the tolling period.” Id. at *8-*9. If there is one takeaway from this post, this is it. The agreement’s clear language (and counsel’s faulty calendaring) made the difference.
Third, the plaintiff argued that California’s discovery rule and doctrine of fraudulent joinder delayed the accrual of her claims. Id. at *12-*15. But California’s discovery rule requires only inquiry notice for claims to accrue, and “so long as a suspicion exists, it is clear that the plaintiff must go find the facts; she cannot wait for the facts to find her.” Id. at *12 (quoting Jolly v. Eli Lilly & Co., 44 Cal. 3d 1103, 1111 (1988)). Plaintiff’s surgeon had told her and her husband that she experienced a complication and that there had been “problems” and a “malfunction” with the surgical equipment. That was enough to find as a matter of undisputed fact that the plaintiffs knew or should have known, or at least had the suspicion, that they had a claim. Id. at *13. Finally, fraudulent concealment does not apply “if a plaintiff is on notice of a potential claim,” as the plaintiffs were here. Id. at *14.
This is a good case to put away for reference. The particular facts may not recur, and we express no opinion here on whether tolling agreements are a good idea. Sometimes they are, and sometimes they are not. If, however, you draft and execute one, be careful and be clear.