Hibu, Inc. v. Plotkin Financial, Inc. ( 2018 )

FILED
NOT FOR PUBLICATION
JAN 12 2018
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
HIBU INC., f/k/a YELLOWBOOK INC. No. 16-55482
and YELLOW BOOK SALES AND
DISTRIBUTION COMPANY, INC., D.C. No.
8:14-cv-01543-CJC-JCG
Plaintiff-Appellant,
v. MEMORANDUM*
PLOTKIN FINANCIAL, INC. d/b/a
PLOTKIN BAIL BONDS, A DORRY
PLOTKIN BAIL BONDS COMPANY
AND BAIL-BONDS.COM,
Defendant-Appellee.
Appeal from the United States District Court
for the Central District of California
Cormac J. Carney, District Judge, Presiding
Argued and Submitted December 4, 2017
Pasadena, California
Before: D.W. NELSON and REINHARDT, Circuit Judges, and STEEH,** District
Judge.
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The Honorable George Caram Steeh III, United States District Judge
for the Eastern District of Michigan, sitting by designation.
Plaintiff hibu Inc. (“hibu”) appeals the district court’s order granting
defendant Plotkin Financial, Inc.’s (“Plotkin”) motion for judgment on the
pleadings under Federal Rule of Civil Procedure 12(c). We have jurisdiction under
28 U.S.C. § 1291. We review “de novo” whether the district court erred when it
granted judgment on the pleadings. Lyon v. Chase Bank USA, N.A., 656 F.3d 877,
883 (9th Cir. 2011). Also, “[w]hen a motion to dismiss is based on the running of
the statute of limitations, it can be granted only if the assertions of the complaint,
read with the required liberality, would not permit the plaintiff to prove that the
statute was tolled.” Cervantes v. City of San Diego, 5 F.3d 1273, 1275 (9th Cir.
1993) (citation and internal quotation marks omitted). We find that the allegations
of the complaint are sufficient to invoke the doctrine of equitable tolling, and
REVERSE and REMAND for the district court to consider California’s three-
pronged test.
The question of whether the statute of limitations period has been equitably
tolled under California law generally requires consideration of matters outside the
pleadings. Daviton v. Columbia/HCA Healthcare Corp., 241 F.3d 1131, 1140 (9th
Cir. 2001) (en banc) (citing Cervantes, 5 F.3d at 1276). “[O]nly in the rare case
could the inquiry proceed at the pleading stage.” Id. As we have noted,
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“California’s fact-intensive test for equitable tolling is more appropriately applied
at the summary judgment or trial stage of litigation.” Cervantes, 5 F.3d at 1276.
“Equitable tolling is a judge-made doctrine” under California law, which
operates “to suspend or extend a statute of limitations as necessary to ensure
fundamental practicality and fairness.” Lantzy v. Centex Homes, 31 Cal. 4th 363,
370, 2 Cal. Rptr. 3d 655, 661, 73 P.3d 517, 523 (2003), as modified (Aug. 27,
2003). California law “favors avoiding forfeitures and allowing good faith
litigants their day in court.” Addison v. State of California, 21 Cal. 3d 313, 320-21,
146 Cal. Rptr. 224, 578 P.2d 941 (1978). The purpose of a statute of limitations is
to prevent the litigation of stale claims by providing defendants with notice in time
to prepare a fair defense on the merits, and to require plaintiffs to diligently pursue
their claims. See Daviton, 241 F.3d at 1137; Downs v. Dep’t of Water & Power,
58 Cal. App. 4th 1093, 1099, 68 Cal. Rptr. 2d 590 (1997). But the equitable tolling
doctrine has been developed to “ensure that a limitations period is not used to bar a
claim unfairly.” Hatfield v. Halifax PLC, 564 F.3d 1177, 1185 (9th Cir. 2009).
The purpose of the doctrine is “to soften the harsh impact of technical rules which
might otherwise prevent a good faith litigant from having a day in court.”
Addison, 21 Cal. 3d at 316, 146 Cal. Rptr. 224, 578 P.2d 941.
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Under California law, equitable tolling has been broadly applied to avoid the
injustice of dismissing what would otherwise be time-barred claims, where three
factors are met: “(1) timely notice to the defendant in the filing of the first claim;
(2) lack of prejudice to the defendant in gathering evidence to defend against the
second claim; and (3) good faith and reasonable conduct by the plaintiff in filing
the second claim.” Hatfield, 564 F.3d at 1185 (citing Collier v. City of Pasadena,
142 Cal. App. 3d 917, 924, 191 Cal. Rptr. 681, 685 (1983)). The district court
erred when it deemed the doctrine of equitable tolling inapplicable because hibu
did not have “various remedies” at the time it filed its state court lawsuit. Indeed,
the doctrine typically applies “[w]hen an injured person has several legal remedies,
and reasonably and in good faith, pursues one.” McDonald v. Antelope Valley
Cmty. Coll. Dist., 45 Cal. 4th 88, 100, 84 Cal. Rptr. 3d 734, 741, 194 P.3d 1026,
1031 (2008) (citation and internal quotation marks omitted). But the doctrine has
been more liberally construed to apply in other situations as well, such as where
the plaintiff mistakenly files in the wrong forum. Hatfield, 564 F.3d at 1184-86
(tolling claimant’s individual claims based on dismissal of claimant’s nearly
identical class action in state court for lack of personal jurisdiction); Landmark
Screens, LLC v. Morgan, Lewis & Bockius, LLP, 676 F.3d 1354, 1363 (Fed. Cir.
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2012) (tolling limitations period where prior state court suit dismissed for want of
jurisdiction and ambiguity in law as to proper forum).
The doctrine has also been applied where a plaintiff files an action in good
faith which is later deemed defective. See Nichols v. Canoga Indus., 83 Cal. App.
3d 956, 960, 963-64, 148 Cal. Rptr. 459 (1978) (earlier filed federal suit dismissed
as time-barred); Addison, 21 Cal. 3d at 317, 321, 146 Cal. Rptr. 224, 578 P.2d 941
(earlier filed federal suit dismissed for lack of jurisdiction). The limitations period
has also been equitably tolled under California law where a plaintiff voluntarily
dismissed a federal lawsuit, which had been improvidently removed from state
court, and later refiled the state court action. Appalachian Ins. Co. v. McDonnell
Douglas Corp., 214 Cal. App. 3d 1, 41-42, 262 Cal. Rptr. 716, 741 (1989).
Notably, the doctrine has also been applied where it serves the public policy of
encouraging settlements. See Prudential-LMI Com. Ins. v. Superior Court, 51 Cal.
3d 674, 693, 274 Cal. Rptr. 387, 778 P.2d 1230 (1990) (equitable tolling applies to
one-year limitations period under Insurance Code § 2071 while an insured awaits
an insurer’s decision on a claim), as modified (Dec. 13, 1990).
The policy reasons California courts have recognized in support of equitable
tolling lead to the conclusion that the doctrine may be invoked here. Collier, 142
Cal. App. 3d at 926, 191 Cal. Rptr. 681. First, recognition of the doctrine in this
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context “secures the benefits of the statutes of limitation for defendants without
imposing the costs of forfeiture on plaintiff[],” id., as Plotkin was put on notice of
the underlying claims by virtue of the state lawsuit within the limitations period.
Fundamental principles of equity and fairness suggest that Plotkin should not be
able to shield itself from liability for hibu’s claims based on untimeliness, where it
was put on notice of the claims within the limitations period, and its own breached
promises to settle the original lawsuit are the reason for the second suit. Second, a
disposition in the state forum made it likely that no subsequent lawsuit would be
filed, or that if one was later filed, the earlier investigation of the claim, discovery,
and trial preparation in the state action would probably make the subsequent
lawsuit in the federal forum easier or cheaper to resolve.
For the foregoing reasons, we remand for further proceedings. Because the
allegations of the complaint are sufficient to invoke equitable tolling, we need not
address whether the district court erred when it denied hibu’s request for leave to
amend.
REVERSED and REMANDED.
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