Wasco Products, Inc. v. Southwall Tech ( 2006 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
WASCO PRODUCTS, INC., 
Plaintiff-Appellant, No. 04-15171
v.
 D.C. No.
CV-02-02926-SBA
SOUTHWALL TECHNOLOGIES, INC.;
BOSTIK, INC., OPINION
Defendants-Appellees.

Appeal from the United States District Court
for the Northern District of California
Saundra B. Armstrong, District Judge, Presiding
Argued and Submitted
October 18, 2005—San Francisco, California
Filed January 13, 2006
Before: J. Clifford Wallace, Stephen S. Trott, and
Pamela Ann Rymer, Circuit Judges.
Opinion by Judge Wallace
723
WASCO PRODUCTS v. SOUTHWALL TECHNOLOGIES 725
COUNSEL
T. Scott Tate, Law Offices of T. Scott Tate, San Francisco,
California, for plaintiff-appellant Wasco Products, Inc.
Mark S. Freeman, Choate, Hall & Stewart, Boston, Massa-
chusetts, for defendant-appellee Southwall Technologies, Inc.
David R. Scheidemantle, Proskauer Rose LLP, Los Angeles,
California, for defendant-appellee Bostik, Inc.
726 WASCO PRODUCTS v. SOUTHWALL TECHNOLOGIES
OPINION
WALLACE, Senior Circuit Judge:
Wasco Products, Inc. (Wasco) appeals from the summary
judgment granted to the appellees. Wasco sought to toll the
applicable statutes of limitations because of an alleged civil
conspiracy. We decide here the narrow question of whether
Wasco was required to plead a civil conspiracy in order to
raise the issue. We have jurisdiction pursuant to 28 U.S.C.
§ 1291. We affirm.1
I.
This action arises out of a dispute over insulated glass units
(IGUs). Both appellees, Bostik, Inc. (Bostik) and Southwall
Technologies, Inc. (Southwall), were involved in the manu-
facture of “Heat Mirror” IGUs that Wasco purchased.
A Heat Mirror IGU consists of Southwall’s “Heat Mirror
Film” suspended between two panes of glass. The film is
designed to block ultraviolet and infrared radiation, while
allowing the transmission of visible light. Southwall manufac-
tured the film and provided manufacturers with guidelines for
constructing Heat Mirror IGUs using the film. Bostik manu-
factured three types of sealants that were used to seal the Heat
Mirror IGUs.
Wasco manufactures and assembles skylight systems.
Wasco purchased Heat Mirror IGUs from third party manu-
facturers and incorporated them into its skylights. The Heat
Mirror IGUs in dispute contained Southwall’s film and Bos-
tik’s sealants. Wasco alleges it experienced an elevated failure
rate in these Heat Mirror IGUs beginning in 1995.
1
Wasco made several other arguments which are addressed by an
accompanying memorandum disposition.
WASCO PRODUCTS v. SOUTHWALL TECHNOLOGIES 727
Wasco has alleged that both Southwall and Bostik knew
that Heat Mirror IGUs would be no more durable than normal
IGUs and that many would fail prematurely. Despite this
knowledge, Wasco alleges that Southwall and Bostik repre-
sented to the public and Wasco that their Heat Mirror IGUs
were more durable than standard IGUs and would not experi-
ence elevated failure rates.
In its opposition to summary judgment, Wasco alleged for
the first time that Bostik and Southwall were engaged in a
civil conspiracy to misrepresent the quality of the Heat Mirror
IGUs in an attempt to toll the statutes of limitations. No alle-
gation of conspiracy or agreement between the companies
appears in Wasco’s complaint.
II.
[1] Both Southwall and Bostik contend that because Wasco
failed to set forth the alleged conspiracy in its complaint, it
may not raise the issue to toll the statutes of limitations. As
this is a diversity action, we must determine whether federal
or California procedural law applies to this question. Where
there is no apparent conflict between federal and state law, we
apply federal procedural law. See Hanna v. Plumer, 380 U.S.
460, 465 (1965) (if there is “no conflicting state procedure . . .
[federal procedural law] would clearly control”).
[2] Our court does not appear to have addressed this issue
previously. We begin our analysis by observing that the object
of the alleged conspiracy is fraudulent: to misrepresent the
properties of the Heat Mirror IGUs. Rule 9(b) of the Federal
Rules of Civil Procedure requires plaintiffs to plead fraud
with particularity. See In re Stac Elecs. Sec. Litig., 89 F.3d
1399, 1405 (9th Cir. 1996) (as amended) (“Rule 9(b) serves
to give defendants adequate notice to allow them to defend
against the charge”).
[3] Other federal courts to consider this issue have required
the plaintiff to plead at least the basic elements of the conspir-
728 WASCO PRODUCTS v. SOUTHWALL TECHNOLOGIES
acy, especially the existence of an agreement. See Montgom-
ery v. City of Ardmore, 365 F.3d 926, 940 (10th Cir. 2004)
(requiring “alleg[ations] [of] specific facts showing an agree-
ment and concerted action” for civil conspiracy claim) (inter-
nal quotation marks and citation omitted); Crowe v. Henry, 43
F.3d 198, 206 (5th Cir. 1995) (plaintiff, “at the very least,
must allege specifically . . . an agreement” for RICO civil
conspiracy claim) (internal quotation marks and citation omit-
ted); Alfus v. Pyramid Tech. Corp., 745 F. Supp. 1511, 1521
(N.D. Cal. 1990) (“In civil conspiracy actions, courts insist
upon a higher level of specificity than is usually demanded of
other pleadings. . . . [P]laintiff’s allegations that defendants
conspired to commit fraud are insufficient both for failure to
plead conspiracy with the requisite particularity and for fail-
ure to plead an agreement to participate in an unlawful act”).
[4] Although the civil conspiracy is not an element of
Wasco’s claims, federal courts have repeatedly held that
plaintiffs seeking to toll the statute of limitations on various
grounds must have included the allegation in their pleadings;
this rule applies even where the tolling argument is raised in
opposition to summary judgment. See Guerrero v. Gates, 357
F.3d 911, 920 (9th Cir. 2004) (plaintiff’s equitable estoppel
defense to statute of limitations was barred where plaintiff
“failed to plead with particularity any . . . fraudulent behav-
ior”) (affirming dismissal under Rule 12(b)(6)); 389 Orange
St. Partners v. Arnold, 179 F.3d 656, 662-63 (9th Cir. 1999)
(“Fraudulent concealment, if affirmatively pleaded and
proved” may toll statute of limitations) (affirming summary
judgment because of plaintiff’s failure to “allege with particu-
larity any fraudulent activity”) (as amended); Grimmett v.
Brown, 75 F.3d 506, 514 (9th Cir. 1996) (“As an initial mat-
ter, [plaintiff] never pled the allegedly concealed facts in her
complaint. Failure to plead these facts waives this tolling
defense”) (treating district court ruling as summary judgment
and affirming) (citation omitted); Conerly v. Westinghouse
Elec. Corp., 623 F.2d 117, 120-21 (9th Cir. 1980) (“Under
either California or federal authority, the plaintiff must plead
WASCO PRODUCTS v. SOUTHWALL TECHNOLOGIES 729
with particularity the facts which give rise to the claim of
fraudulent concealment” in order to toll the statute of limita-
tions) (affirming dismissal under Rule 12(b)(6)); see also
Kirtdoll v. City of Topeka, 315 F.3d 1234, 1234 (10th Cir.
2003) (affirming dismissal for failure to “plead a factual pred-
icate for any tolling theory”); McCoy v. United States, 264
F.3d 792, 795 (8th Cir. 2001) (rejecting attempt to toll statute
of limitations because plaintiff “did not allege continuing neg-
ligent treatment”) (affirming summary judgment); Bull S.A. v.
Comer, 55 F.3d 678, 681-83 (D.C. Cir. 1995) (plaintiff has
“burden of pleading and providing equitable reasons for non-
compliance” with statute of limitations in order to seek toll-
ing) (concluding plaintiff had properly established equitable
tolling applied and reversing summary judgment based on
statute of limitations) (internal quotation marks, citation, and
punctuation omitted) (emphasis added); Larson v. Northrop
Corp., 21 F.3d 1164, 1173 (D.C. Cir. 1994) (holding “allega-
tions of fraudulent concealment, which toll the statute of limi-
tations, must meet the [particularity] requirements of” Rule
9(b) and affirming summary judgment because “Larson failed
to plead fraud or concealment . . . and raised the issue for the
first time in his opposition to Northrop’s cross-motion for
summary judgment”) (citations omitted).
[5] We do not see any principled basis for distinguishing
civil conspiracy from these other grounds for tolling the stat-
ute of limitations. Based on these precedents and the plain
language of Rule 9(b), we hold that under federal law a plain-
tiff must plead, at a minimum, the basic elements of a civil
conspiracy if the object of the conspiracy is fraudulent. Cf.
Stac Elecs. Sec. Litig., 89 F.3d at 1405 (holding securities sec-
tion 11 claims sounding in fraud are subject to Rule 9(b) par-
ticularity requirements). This requirement applies even if the
civil conspiracy allegations are asserted only to toll the statute
of limitations and even if they are raised only in opposition
to summary judgment. See Varner v. Peterson Farms, 371
F.3d 1011, 1019-20 (8th Cir. 2004) (rejecting tolling argu-
ment based on “continuing conspiracy or continuing viola-
730 WASCO PRODUCTS v. SOUTHWALL TECHNOLOGIES
tion” because plaintiffs had failed to “plead sufficient facts
. . . to establish an exception to toll the statutes of limita-
tions”) (affirming dismissal with prejudice). We need not
decide if any additional pleading requirements apply. We also
express no opinion as to pleading requirements if the object
of the conspiracy is non-fraudulent.
[6] California law does not appear to differ from federal
law on this issue. In Wyatt v. Union Mortgage Co., the Cali-
fornia Supreme Court held that “when a civil conspiracy is
properly alleged and proved, the statute of limitations does
not begin to run . . . until the ‘last overt act’ pursuant to the
conspiracy has been completed.” 598 P.2d 45, 53 (Cal. 1979)
(citation omitted) (emphasis added). Under California law,
“[t]o state a cause of action for conspiracy, the complaint
must allege (1) the formation and operation of the conspiracy,
(2) the wrongful act or acts done pursuant thereto, and (3) the
damage resulting from such act or acts.” Cellular Plus, Inc.
v. Superior Court, 18 Cal. Rptr. 2d 308, 314 (Ct. App. 1993)
(internal quotations and citations omitted) (emphasis added)
(stating these elements of civil conspiracy had also been
extended to antitrust conspiracies); see also Gen. Am. Life Ins.
Co. v. Rana, 769 F. Supp. 1121, 1125 (N.D. Cal. 1991)
(“[T]he complaint must allege . . . the formation and operation
of a conspiracy”) (considering civil conspiracy allegations
under California law). Therefore, under both federal law and
California law, Wasco was required to plead the basic ele-
ments of civil conspiracy in order to toll the statute of limita-
tions. Because both federal and California law require Wasco
to plead the basic elements of civil conspiracy, we apply fed-
eral procedural law. See Hanna, 380 U.S. at 465.
III.
[7] Wasco has failed to allege that Southwall and Bostik
ever formed an agreement to misrepresent the properties of
the sealant. Without any allegation that Bostik and Southwall
agreed to commit wrongful acts, Wasco has failed under fed-
WASCO PRODUCTS v. SOUTHWALL TECHNOLOGIES 731
eral law to allege the most basic and fundamental element of
a civil conspiracy.
[8] Wasco therefore may not toll the statute of limitations
based on its allegations of civil conspiracy, which appear for
the first time in its response to the summary judgment motion.
“[T]he necessary factual averments are required with respect
to each material element of the underlying legal theory. . . .
Simply put, summary judgment is not a procedural second
chance to flesh out inadequate pleadings.” Fleming v. Lind-
Waldock & Co., 922 F.2d 20, 24 (1st Cir. 1990).
AFFIRMED.