Yarber v. Allstate Insurance , 674 F.2d 232 ( 1982 )

JAMES DICKSON PHILLIPS, Circuit Judge:

Virginia law permits a plaintiff to take one voluntary nonsuit without prejudice to recommencement of the same action and, in a saving provision, gives a six-months grace period following the nonsuit within which the action may be recommenced free of the bar of any limitation period that would otherwise have run, subject only to the condition that the action be recommenced in the same state court in which the nonsuit was taken. The issue on this appeal is whether a federal court sitting in diversity must honor Virginia’s restriction of the court within which a non-suited plaintiff may recommence in order to invoke the saving provision. Because we construe the restriction to be an integral part of the several policies served by Virginia’s statutes of limitations, we hold that it must be applied in these consolidated federal diversity actions. Accordingly, we find error in the district court’s contrary conclusion, and on that basis reverse and remand for entry of a judgment dismissing the plaintiffs’ actions as time-barred by the duly pleaded statute of limitations.

I

As a critical feature of that state’s voluntary nonsuit procedure,¹ Va.Code § 8.01-229(E)(3) (Cum.Supp.1981) provides:

If a plaintiff suffers a voluntary nonsuit as prescribed in § 8.01-380 the statute of limitation with respect to such action shall be tolled by the commencement of the nonsuited action, and the plaintiff may recommence his action within six months from the date he suffers such nonsuit, or within the original period of limitation, whichever is longer.

The operation of this basic tolling and saving provision is, however, expressly conditioned upon a special venue restriction found in the cross-referenced section, Va. Code § 8.01-380 A, which provides in pertinent part:

After a nonsuit no new proceeding on the same cause of action or against the same party shall be had in any court other than that in which the nonsuit was taken, unless that court is without jurisdiction, or not a proper venue, or other good cause be shown for proceeding in another court.

On December 6, 1979, each of the four plaintiffs in the instant actions commenced an action in the Circuit Court of Fairfax County, Virginia, against defendants Allstate Insurance Company (Allstate), Physical Measurements, Inc. (PMI), and Robert Miller, Jr. The actions arose out of physical examinations conducted by Miller on or before October 24, 1978, which were part of each plaintiff’s application for employment with Allstate. Plaintiffs later learned that Miller was not a licensed physician and they sued defendants for assault, battery, and gross negligence resulting in personal injury.

On January 30, 1981, over defendants’ objections, plaintiffs took voluntary nonsuits in the state actions. On February 11, 1981, they filed complaints, invoking diversity jurisdiction, in the U. S. District Court for the Eastern District of Virginia asserting the same causes of action alleged in the state court suits. Defendants Allstate and PMI² moved to .dismiss the federal court actions for lack of subject matter jurisdiction³ and as time-barred by the con-cededly relevant two-year statute of limitations, Va.Code § 8.01-243(A) (1977). Unless first tolled by commencement of the nonsuited actions and further saved by the grace period provided by Virginia law, the two-year statute had run between the time the state court actions were commenced and the time the present federal actions were commenced.⁴

After consolidating the actions for pretrial proceedings, the district court ruled that it had subject matter jurisdiction⁵ and that the suits were not time-barred because the six-months grace period following voluntary nonsuits that is provided by Va.Code § 8.01 229(E)(3) (Cum.Supp.1981), had not, expired when these federal actions were commenced.⁶ In the district court’s view, the special venue restriction of state law— obviously not met in the federal actions— did not govern decision in the diversity cases. On this basis, because without the restriction the federal actions were commenced within the six-months grace period, the district court denied defendants’ motion to dismiss the actions as time-barred.

From this interlocutory order rejecting their statute of limitations defense, defendants were permitted to appeal under 28 U.S.C. § 1292(b).

II

We have here yet another twist on the recurring and peculiarly difficult choice-of-law problem historically posed for federal courts required for any reason to apply state statutes of limitation. See Walker v. Armco Steel Corp., 446 U.S. 740, 744, 100 S.Ct. 1978, 1981, 64 L.Ed.2d 659 (1980). Whether encountered, as here, in a diversity case in which, under Erie’s command, the state statute is being applied qua state law, or in a federal claim case where it is being “borrowed” in the absence of a federal statute, see, e.g., Johnson v. Railway Express Agency, Inc., 421 U.S. 454, 95 S.Ct. 1716, 44 L.Ed.2d 295 (1975), the difficult question has always been how much of state law governing limitation of actions is to be applied. Obviously, if any part is to be applied, the aspect of chronological length of the limitation period must be, and at least since Guaranty Trust Co. v. York, 326 U.S. 99, 65 S.Ct. 1464, 89 L.Ed. 2079 (1945), this much has been settled in diversity cases. The rub has come generally, as it does here, in deciding whether other, related aspects of the whole body of state limitation doctrine — tolling, saving, estoppel, etc. — shall also be applied.

That of course is the specific question here. No one doubts, indeed there is no dispute, that the two-year period of Va. Code § 8.01-243(A) controls. The question is whether the venue restriction, which in the Virginia statutory scheme operates as a condition to invocation of the six-months saving provision for timely commenced non-suited actions, is also to apply. If it does, the actions here are time-barred, because the special condition for invocation has obviously not been met. If it does not, the actions are not time-barred because the federal actions were commenced, though not in the restricted venue, within the grace period of the saving provision.

Though the general problem, as indicated, has long been a troublesome one, we think that recent Supreme Court decisions now give a plain guide to decision here and specifically to decision that the venue restriction must be applied as a critical element of Virginia’s policies respecting the time-barring of actions voluntarily nonsuit-ed in its courts.

A

The critical principle now established in the diversity context is that, except as a valid federal procedural rule might be in direct conflict, see Hanna v. Plumer, 380 U.S. 460, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965), or possibly as there might be a sufficiently powerful countervailing federal interest not embodied in a specific procedural rule, see Byrd v. Blue Ridge Rural Electric Cooperative, 356 U.S. 525, 78 S.Ct. 893, 2 L.Ed.2d 953 (1958), every aspect of state law that can properly be considered “an integral part of the several policies served by [a] state statute of limitations,” Walker v. Armco Steel Corp., 446 U.S. at 751, 100 S.Ct. at 1985, is to be applied by a federal court in the course of applying the state limitation period. Cf. Board of Regents v. Tomanio, 446 U.S. 478, 100 S.Ct. 1790, 64 L.Ed.2d 440 (1980) (federal claim; state statute borrowed). The proper inquiry therefore in this and related cases is a two-step one: first, whether application of the state rule is precluded in any event by the existence of a directly conflicting federal rule of procedure or a sufficiently powerful countervailing federal interest otherwise grounded; and second, if not, whether the state rule is “an integral part of the several policies served by the state statute of limitations.”

There is no federal rule of civil procedure in direct conflict either with the Virginia venue restriction itself or with the tolling and savings provisions whose operation it conditions. Only Fed.R.Civ.P. 3 — in specifying the manner and time for commencing a federal action — might be thought to constitute even in diversity cases a generally preemptive federal tolling rule. As to this possibility the Supreme Court has recently held in this very context, reaffirming Ra-gan v. Merchants Transfer & Warehouse Co., 337 U.S. 530, 69 S.Ct. 1233, 93 L.Ed. 1520 (1949), that Rule 3 was not intended “to displace state tolling rules for purposes of state statutes of limitations.” Walker v. Armco Steel Corp., 446 U.S. at 750-51, 100 S.Ct. at 1985. In consequence the Hanna v. Plumer displacement principle has no application here.

Neither are there discernible to us any countervailing federal interests deriving from other sources than the federal rules of civil procedure which, under Erie and its progeny, might require displacement of the state rule in question. To the extent federal/state forum shopping concerns are at all a factor, they militate against rather than for displacement of the state rule. . ⁷ Neither do we see how any other federal interest would be affected by strictly applying the state rule in accordance with Erie’s basic command.⁸

B

This leaves only the question whether the rule in question is so integral a part of Virginia’s statute of limitations policies that it must be considered for Erie purposes part and parcel of the statute here pleaded in defense. That it is can be seen by analyzing the close interrelatedness and interdependence — reflected in the critical statutory cross-referencing — of the policies underlying Virginia’s voluntary nonsuit procedure and the special tolling and saving provisions tied to it. The policies are thereby revealed to be so integrated in purpose and function that the venue restriction can only be seen as part and parcel of any statute of limitations pleaded in bar of a voluntarily non-suited state action. Cf. Walker v. Armco Steel Corp., 446 U.S. at 751-52 & nn. 12, 13, 100 S.Ct. at 1985-1986 & nn. 12, 13 (interrelation of state service rule and statute of limitations).

The policies underlying Virginia’s voluntary nonsuit procedure are manifestly those that traditionally have underlain this ancient procedure in its common law and statutory forms: to protect claimants having the laboring oar of proof from the common mischances of litigation, while at the same time protecting the courts and opposing parties from abuses of the nonsuit privilege.⁹ After recognizing the basic privilege, see Va.Code § 8.01 -380 A (1977), Virginia law then rigorously conditions its exercise with threshold limitations: it can only be exercised once without prejudice, id. § 8.01-380 B; it must be exercised in timely fashion, before the claimant’s proof has been put to test, id. § 8.01-380 A; it may not be exercised when related counter-, cross-, and third party claims are pending, id. § 8.01 -380 C. Aside from these internal conditions, statutes of limitations inevitably stand in the wings as collateral barriers to free exercise of the nonsuit privilege since, in the nature of things, they frequently have run (or are about to run) when the need for nonsuit first occurs. The tolling and saving provision is the traditional — and Virginia’s — accommodation to this extrinsic barrier. It serves that accommodating .purpose, but inevitably in the process increases the risk of abuse. The venue restriction in turn responds to this. Its purpose is to minimize the risks of abuse by minimizing the potential benefits of being able once to recommence without prejudice and free of any limitations bar. In particular it scotches any opportunity to engage in secondary forum shopping with benefit of a trial run in a court of first choice. By this means claimants are encouraged to get it right the first time while a limited safety valve is yet preserved. The risk of wasted effort by the court of original venue choice is minimized, both by the in terrorem discouragement of nonsuits taken for forum shopping purposes, and, when nonsuit is taken, by the possibility that the earlier investment of judicial resources may be of value on retrial in the same court.

As is plain from this, both the tolling/saving provisions and the venue restriction are integral parts of the policies served by any Virginia statute of limitations which, but for the saving provision, would stand as a bar to a previously nonsuited action. The venue restriction is a “statement of a substantive decision” by Virginia, see Walker v. Armco Steel Corp., 446 U.S. at 751, 100 S.Ct. at 1985, that nonsuiting plaintiffs may only be saved from the running of applicable statutes of limitations by recommencing their actions within the grace period and in the same court whose processes were originally invoked. To fail to apply this critical restriction in a federal diversity case would be to fail to apply Virginia’s limitation policies entire, a result forbidden by Erie and its progeny. See Walker v. Armco Steel Corp., 446 U.S. at 753, 100 S.Ct. at 1986.

Ill

The order of the district court is reversed and the action remanded for entry of judgment dismissing all claims as time-barred in the federal actions under Va.Code § 8.01-243(A).

REVERSED AND REMANDED WITH DIRECTIONS.

1 . The basic procedure is spelled out in Va.Code § 8.01-380 (1977). Other aspects of its operation relevant to decision here are developed in later parts of this opinion.

2 . Miller had not been served at the time the district court entered its order.

3 . The jurisdictional challenge was based on the proposition that the venue restriction operated independently of the statute of limitations defense to deprive the federal courts of jurisdiction of any previously nonsuited Virginia claim. The district court rightly rejected this challenge on the basis of this court’s 1953 holding in Popp v. Archbell, 203 F.2d 287 (4th Cir. 1953), that the state venue restriction could not operate to deprive the federal diversity courts of subject matter jurisdiction over otherwise cognizable state claims, id at 288-89.

Plaintiffs contend as appellees — and the dissent apparently accepts the proposition — that Popp establishes as well that the venue restriction must also be disregarded by federal diversity courts for its limiting effect on the statute of limitations saving provision. We reject that contention. Popp and Markham v. City of Newport News, 292 F.2d 711 (4th Cir. 1961), also relied upon by the dissent, stand only for the proposition that state statutes limiting the state courts in which particular state claims may be prosecuted cannot oust federal courts of diversity jurisdiction so long as “any state court would have jurisdiction.” Popp v. Archbell, 203 F.2d at 289. There is nothing in either Popp or Markham or in general authority to suggest — as the dissent seems to believe — that because a diversity defendant’s jurisdictional objection based upon a state forum restriction must fail, so also must any substantive defense of which that restriction is an element. The two are not linked in contemplation of Erie: one goes to jurisdiction, is absolute and nonwaivable; the other goes to the merits, and may be avoided substantively or waived procedurally in the diversity court. This was expressly recognized m Popp where Judge Parker pointed out that Erie cases such as Guaranty Trust Co. of N.Y. v. York, 326 U.S. 99, 65 S.Ct. 1464, 89 L.Ed. 2079 (1945) involving the application in diversity cases of state statute of limitation defenses were “not in point” on the issue whether a state venue restriction could oust federal diversity jurisdiction. Popp v. Archbell, 203 F.2d at 289-90. No statute of limitations or res judicata defense based upon the venue restriction was at issue in Popp. The savings provision had not been enacted, and no res judicata defense was raised, a point noted in Popp, 203 F.2d at 289, but apparently overlooked in Alderman v. Chrysler Corp., 480 F.Supp. 600 (E.D.Va.1979) (Popp relied upon as basis for rejecting res judicata defense following state court nonsuit).

4 . We were advised on oral argument that plaintiffs had also prudently recommenced the action in the state nonsuit court within the grace period.

5 . See note 3 supra.

6 . The district court, however, dismissed as time-barred a fifth companion ease in which no voluntary nonsuit had been taken

7 . Erie forum shopping concerns are properly concentrated essentially on those factors influencing primary forum choice, especially the choice of a federal over a state forum in order to avoid an unfavorable state rule. See, e.g., Hanna v. Plumer, 380 U.S. 460, 467-69, 85 S.Ct. 1136, 1141-1142, 14 L.Ed.2d 8 (1965). At the stage of original forum choice in this litigation, the venue restriction is so attenuated a factor that it simply cannot be given weight. It only becomes a live factor if the original choice is a state forum, and if a voluntary nonsuit is then taken in that forum. At this point, failing to apply the state rule in the federal courts could make the existence of different rules a forum shopping factor. To the extent it is appropriate to carry the concern this far, application of the state rule furthers the Erie aim of discouraging forum-shopping at this remote second stage. Cf. Walker v. Armco Steel Corp., 446 U.S. at 753 & n.15, 100 S.Ct. at 1986 & n.15 (no indication state service laws more burdensome than federal rules).

8 . The considerations that in Atkins v. Schmutz Mfg. Co., 435 F.2d 527 (4th Cir. 1970) (en banc) were held to require in that diversity case application of a judicially created federal tolling rule rather than a conflicting state rule are not present in the instant case. In Atkins the court was concerned with the tolling effect of a previously filed and dismissed federal action on a subsequently commenced federal action. In holding that federal rather than state law should govern that question, the court’s emphasis was upon the unitary nature of the federal system and the need for courts within that system to accommodate each other’s actions as in effect their own. In the instant case, by contrast, we are concerned with the tolling effect of an action commenced in a state system, a concern to which the Atkins considerations are not pertinent.

9 . See generally Head, The History and Development of Nonsuit, 27 W.Va.LQ. 20 (1920) (general survey); Sweeney, Nonsuit in Virginia, 52 Va.L.Rev. 751 (1966); Note, The Voluntary Nonsuit in Virginia, 7 Wm. & Mary L.Rev. 357 (1966).