Rolando Candelaria v. OrthoBiologics LLC, (1st Cir. 2011)
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United States Court of Appeals
For the First Circuit
No. 09-2305
ROLANDO ORTEGA CANDELARIA,
Plaintiff-Appellant,
v.
ORTHOBIOLOGICS LLC, et al.,
Defendants-Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. José A. Fusté, U.S. District Judge]
Before
Lipez, Leval,
[1]
and Thompson,
Circuit Judges.
Pedro J. Landrau-López for appellant.
Lourdes C. Hernández-Venegas, with whom Schuster Aguiló LLP
was on brief, for appellees.
October 25, 2011
THOMPSON, Circuit Judge. Rolando Ortega Candelaria
suffered a disability while employed by Orthobiologics, LLC, a
Puerto Rico-based subsidiary of Johnson & Johnson, Inc. He sought
payment of benefits under the company's long term disability plan
and was denied. Three years later Ortega filed suit to enforce the
benefit plan under the Employee Retirement Income Security Act of
1974 (ERISA). The district court found the suit untimely and
granted summary judgment in Orthobiologics's favor. Applying
principles of equity, we reverse and remand.BACKGROUND
The facts in this case are not materially in dispute, and
we outline them only briefly. Ortega was an employee of
Orthobiologics and a participant in the Long Term Disability Income
Plan for Employees of Johnson and Johnson and Affiliated Companies
in Puerto Rico (the Plan). In 2000, Ortega acknowledged receipt of
a copy of the then-current Plan. At that time, the Plan did not
contain any limitations period for filing suit to contest a claim
denial; however, it expressly reserved Orthobiologics's right to
make unilateral alterations to the Plan at any time.
In 2003, Ortega initiated a series of attempts to recover
disability benefits under the Plan. He had been effectively
disabled since 2002 by severe pain resulting from vertebral
herniations and osteoarthritis, among other ailments. On June 1,
2004, while Ortega was in the midst of the internal appellate
process, he requested a current copy of the Plan, which he received
three weeks later. At that point, the Plan still contained no
limit on the period for filing suit to contest a claim denial.
Only one week later, on July 1, 2004, the Plan was amended to
establish a limitations period of one year. Ortega received no
notice of this change. On January 26, 2005, Orthobiologics issued
a final written rejection of Ortega's claims. The rejection
contained no information about Ortega's judicial options or the
reduced limitations period.
On December 14, 2008, Ortega filed this action claiming
a breach of fiduciary duty
[2]
and a right to benefits
[3]
under ERISA.
Orthobiologics filed a motion to dismiss the complaint as untimely.
The district court converted the motion to dismiss into a motion
for summary judgment in order to consider copies of the Plan, which
were outside the pleadings. It then granted summary judgment in
favor of Orthobiologics. The court found that Ortega's breach of
fiduciary duty claim was untimely under ERISA's statute of
limitations for fiduciary claims
[4]
and his claim for benefits was
untimely under the one-year limitations period contractually set by
the amended Plan.
[5]
Ortega timely appealed, taking issue only with the
district court's dismissal of his claim for benefits.
[6]
Ortega
claims on appeal that it is inequitable to bind him to the one-year
limitations period because Orthobiologics did not advise him of the
shortened period or of his right to sue as it was legally required
to do.
STANDARD OF REVIEW
We review a district court's grant of summary judgement
de novo. See F.T.C. v. Direct Mkt'g Concepts, Inc., 624 F.3d 1, 7
(1st Cir. 2010). However, we review a district court's decision to
award or withhold equitable relief for an abuse of discretion. See
Vera v. McHugh, 622 F.3d 17, 30 (1st Cir. 2010); Mr. I ex rel. L.I.
v. Me. Sch. Admin. Dist. No. 55, 480 F.3d 1, 23 (1st Cir. 2007).
ANALYSIS Ortega's argument on appeal is one of equitable estoppel
- Orthobiologics's failure to provide the requisite notices should
estop it from relying on the one-year limitations period. Ortega
does not explicitly make an equitable tolling argument, though he
cites to at least one case involving tolling.
Although estoppel and tolling are distinct, they are
"closely related." Ramírez-Carlo v. United States, 496 F.3d 41, 48
(1st Cir. 2007). We have therefore declined to foreclose the
application of these doctrines based on a plaintiff's failure to
adhere to a rigid distinction between them. See id. The Supreme
Court has done the same, see Honda v. Clark, 386 U.S. 484, 494-95
(1967), and other courts have frequently applied tests that appear
to be hybrids of the two doctrines, see Socop-González v. INS, 272
F.3d 1176, 1185-86 (9th Cir. 2001) (en banc) (explaining and
collecting cases). Indeed, rigidity frustrates the very purposes
underlying these doctrines, which include, after all, the
circumvention of unbending rules when strict fidelity to them would
work an injustice. See Holland v. Florida, 130 S. Ct. 2549, 2563
(2010). Recognizing the drawbacks of an inflexible approach to
equitable adjudication, we will analyze Ortega's claim under both
estoppel and tolling theories.A. Equitable Estoppel
Equitable estoppel "applies when a plaintiff who knows of
his cause of action reasonably relies on the defendant's conduct or
statements in failing to bring suit." Ramírez-Carlo, 496 F.3d at
48. In order to demonstrate entitlement to equitable estoppel, a
plaintiff must show evidence of the defendant's "'improper purpose
or his constructive knowledge of the deceptive nature of his
conduct' . . . in the form of some 'definite, unequivocal behavior
. . . fairly calculated to mask the truth or to lull an
unsuspecting person into a false sense of security.'" Vera, 622
F.3d at 30.
The problem with Ortega's equitable estoppel argument, as
found by the district court, is that there is simply no evidence of
unequivocal, intentionally deceptive conduct on the part of
Orthobiologics. To be sure, Orthobiologics's amendment of the Plan
mere weeks after Ortega requested a copy is troublesome. This is
particularly so when coupled with the fact that Orthobiologics did
not inform Ortega of the change, or of his right to sue when it
rejected his claim (discussed more fully below). Nonetheless, we
cannot say that such behavior constituted "active steps" to
sabotage Ortega's suit. Singletary v. Cont'l Ill. Nat'l Bank and
Trust Co. of Chicago, 9 F.3d 1236, 1241 (7th Cir. 1993). Indeed,
the lack of notice could just as easily have been an honest
oversight, and Ortega makes no creditable allegation to the
contrary.
[7]
Therefore, the district court did not abuse its
discretion in declining to apply equitable estoppel.
B. Equitable Tolling
We now turn to equitable tolling. Our review is de novo
as equitable tolling was not raised before, nor addressed by, the
district court. See F.T.C. 624 F.3d at 7.
Equitable tolling "casts a wider net" than equitable
estoppel. See Kale v. Combined Ins. Co. of Am., 861 F.2d 746, 752
(1st Cir. 1988). It is a "sparingly invoked doctrine" that is
"used to excuse a party's failure to take an action in a timely
manner, where such failure was caused by circumstances that are out
of his hands." Dawoud v. Holder, 561 F.3d 31, 36 (1st Cir. 2009).
The grounds for tolling limitations periods are more
expansive in suits against private entities like Orthobiologics
than against the government. See Benítez-Pons v. Puerto Rico, 136
F.3d 54, 61 (1st Cir. 1998). Equitable tolling suspends the
running of the limitations period "if the plaintiff, in the
exercise of reasonable diligence, could not have discovered
information essential to [his claim]." Barreto-Barreto v. United
States, 551 F.3d 95, 100 (1st Cir. 2008). The tolling proponent
must establish that extraordinary circumstances beyond his control
prevented a timely filing or that he was materially misled into
missing the deadline. See id. at 101; Trenkler v. United States,
268 F.3d 16, 25 (1st Cir. 2001); Fradella v. Petricca, 183 F.3d 17,
21 (1st Cir. 1999). We apply equitable tolling on a case-by-case
basis, avoiding mechanical rules and favoring flexibility. See
Holland, 130 S.Ct. at 2563.
In doing so here, we find that Ortega missed the critical
one-year deadline because he was "materially misled" into doing so
by Orthobiologics. Barreto-Barreto, 551 F.3d at 100. Let us be
clear that we do not see any intentionally deceptive conduct on
Orthobiologics's part; however, we do see misleading conduct.
Orthobiologics was required by federal regulation to provide Ortega
with notice of his right to bring suit under ERISA, and the time
frame for doing so, when it denied his request for benefits. See
29 C.F.R. § 2560.503-1(g)(1)(iv) ("[T]he plan administrator shall
provide a claimant with written or electronic notification of any
adverse benefit determination . . . [which] shall set forth . . .
[a] description of the plan's review procedures and the time limits
applicable to such procedures, including a statement of the
claimant's right to bring a civil action under [ERISA].").
[8]
Despite this fact, and in direct violation of its regulatory duty,
Orthobiologics did not include notice of either the right to sue or
the one-year time frame in its written rejection of Ortega's claim.
Inadequate notice has been cited by the Supreme Court and
this court as a ground for invoking equitable tolling. See Baldwin
Cty. Welcome Ctr. v. Brown, 466 U.S. 147, 151 (1984); Kale, 861
F.2d at 752 (finding that there may be a valid claim for equitable
tolling when an employer breaches its legal obligation to provide
notice crucial to an employee's timely filing of a suit); Mercado
v. Ritz-Carlton San Juan Hotel, Spa & Casino, 410 F.3d 41, 47-48
(1st Cir. 2005) (listing examples of the "[m]any other courts" that
view lack of notice as adequate justification for equitable
tolling). We have also recognized the "implication . . . that it
would be inequitable to apply [a] Plan's internal limitations
period" to a beneficiary who had no notice of the existence of that
period. I.V. Servs. of Am., Inc. v. Inn Dev. & Mgmt., Inc., 182
F.3d 51, 54 (1st Cir. 1999).
In addition, the Second Circuit decided in a case similar
to this that "tolling [is] appropriate where defendants fail to
comply with the regulatory requirement that they provide notice to
beneficiaries of the right to bring an action in court challenging
a denial of benefits." Veltri v. Bldg. Serv. 32-B-J Pension Fund,
393 F.3d 318, 325 (2d Cir. 2004). The court held that the non-disclosure should be viewed "in light of the regulatory notice
requirement and of Congress's policy of protecting the interests of
[benefit] plan participants by ensuring 'disclosure and reporting
to participants' and 'ready access to the Federal courts.'" Id. at
324 (quoting 29 U.S.C. § 1001(b)). It further noted that
"congressional policy favors placing a burden of disclosure on
[benefit] plans and adopting an approach of caution before closing
the courthouse door." Id. This reasoning is persuasive. In
appropriate circumstances, lack of notice can give rise to
equitable tolling.
Nonetheless, Orthobiologics urges us to look past its
failure to provide notice because it had previously advised Ortega
of his right to sue in past summary Plan descriptions. This logic
is flawed. The regulatory requirement is that Orthobiologics
provide notice of Ortega's right to sue in the benefit
determination notification. That the information may have appeared
elsewhere is irrelevant and does not cure the notice deficiency.
Moreover, Orthobiologics's argument ignores the fact that the
regulation requires that it advise Ortega not only of his right to
sue but also the time frame for doing so. It is uncontested that
Orthobiologics never informed Ortega of the one-year limitation -
in the benefit determination notification or elsewhere.
Without notice of the drastically reduced limitations
period, Ortega was under the reasonable impression that he had
fifteen years to file suit. Ortega's misimpression was not the
result of any lack of diligence on his part.
[9]
"The diligence
required for equitable tolling purposes is reasonable diligence,
not maximum feasible diligence." Holland, 130 S. Ct. at 2565
(internal quotation marks and citations omitted). Ortega's actions
fall squarely within the parameters of this rule. He requested a
copy of the most current version of the Plan toward the end of his
internal appeal and before he sought recourse in federal court.
Ortega then filed suit well within the fifteen-year period that he
believed applied.
[10]
Ortega's diligence was sufficient.
We conclude that Ortega, though reasonably diligent, was
materially misled by Orthobiologics's actions, which prevented his
timely filing of suit. Ortega is entitled to equitable tolling.
[11]
CONCLUSION
For the reasons set forth above, the limitations period
that applies to Ortega's action should have been tolled to permit
its consideration on the merits. We reverse the district court's
grant of summary judgment and remand for proceedings consistent
with this opinion. SO ORDERED.
Footnotes
[1] '* Of the Second Circuit, sitting by designation.
[2] ' See 29 U.S.C. § 1109(a) ("Any person who is a fiduciary with
respect to a plan who breaches any of the responsibilities,
obligations, or duties imposed upon fiduciaries by this sub-chapter
shall be personally liable.").
[3] ' See 29 U.S.C. § 1132(a)(1)(B) ("A civil action may be
brought . . . by a participant or beneficiary . . . to recover
benefits due to him under the terms of his plan [or] to enforce his
rights under the terms of the plan.").
[4] ' See 29 U.S.C. § 1113(2) (providing for a three-year statute
of limitations for fiduciary claims).
[5] ' In its decision, the district court considered Ortega's
argument that equitable estoppel should apply to relieve him of the
one-year limitations period. In its discussion, the court cited to
a Puerto Rico civil law doctrine called caducity, which precludes
judicial tolling. See Ortega-Candelaria v. Johnson & Johnson, No.
08-2382, 2009 WL 1812423, at *3 (D.P.R. June 25, 2009) (citing
Prime Retail, L.P. v. Caribbean Airport Facilities, Inc., 975 F.
Supp. 148, 153 (D.P.R. 1997) (stating that under caducity, all
obligations are extinguished once a contractual or statutory
limitations period has expired)). Nonetheless, the court went on
to decide the merits of Ortega's equitable estoppel argument,
finding that it failed because there was no material
misrepresentation on Orthobiologics's part. The court, though it
had cited to caducity, never explicitly stated whether it was a
basis for its decision. We need not resolve this uncertainty.
Neither party has invoked, or even discussed, caducity and
therefore we need not decide whether it is applicable to the
instant action.
[6] ' As Ortega has not disputed the dismissal of his fiduciary
duty claim on appeal, we neither review nor disturb the district
court's disposition of this claim.
[7] ' Ortega does repeatedly conflate Orthobiologics's failure to
provide him notice of his right to sue with a deliberate
misrepresentation. But he provides no evidence beyond his own say-so and therefore we ignore that implication. See Vinick v. C.I.R.,
110 F.3d 168, 171 (1st Cir. 1997).
[8] ' One could arguably read this regulation as setting forth two
distinct requirements. That is, it could be argued that notice of
the right to sue under ERISA is in addition to, and divorced from,
notice of review procedures and the time frame pertaining to such
procedures. As such, there would be no regulatory requirement that
Orthobiologics advise Ortega of the one-year statute of limitations
in the benefit determination notification. Orthobiologics,
however, has made no such argument. Nor would we find such an
argument compelling. We think it clear that the term "including"
indicates that an ERISA action is considered one of the "review
procedures" and thus notice of the time limit must be provided.
[9] ' Orthobiologics disagrees with us on this point. It argues
that Ortega had adequate notice of the shortened limitations period
because the Plan contained a catchall provision that allowed for
indiscriminate, unilateral amendment. We need not tarry long on
this argument or its unworkable ramifications. Taken to its
extreme, it would require Ortega to request a new copy of the Plan
every day in order to stay abreast of any potentially relevant
changes. We decline to slide down such a slippery slope.
[10] ' Of course, the fact that Ortega filed suit within that
period may not be dispositive. We do not foreclose the possibility
that a longer delay would have been unreasonable in this context.
Such a delay might well have been unduly prejudicial to
Orthobiologics and thus fatal to Ortega's request for tolling. See
Veltri, 393 F.3d at 326 (finding that defendants may rely upon "the
equitable defenses of laches and estoppel . . . to avoid unfair
surprise from the filing of untimely claims by plaintiffs who seek
to rely on equitable tolling on the basis of defective notice").
But Orthobiologics has made no such claim before us. Accordingly,
we do not undertake the balanced assessment of the hardships the
resuscitation of this suit might impose.
[11] ' By determining that Ortega's claim is subject to tolling,
we are in effect granting him partial summary judgment on the issue
of whether he should be allowed to proceed, despite the fact that
he is the non-moving party. This is wholly proper. Even in the
absence of a cross-motion for summary judgment, we may nostra
sponte grant partial summary judgment to the non-moving party
provided that "both sides have had an opportunity to present
evidence, the facts are uncontroverted, and the proper disposition
is clear." Garner v. Memphis Police Dep't, 8 F.3d 358, 366 (6th
Cir. 1993); see also Weber v. Dell, 804 F.2d 796, 798 n.2 (2d Cir.
1986). We do recognize, however, that the district court converted
Orthobiologics's motion to dismiss to a motion for summary judgment
without first providing the parties the opportunity to conduct
discovery or present evidence. In other circumstances, this would
be adequate justification for our simply vacating the grant of
summary judgment in favor of Orthobiologics and not taking the
further step of granting summary judgment in Ortega's favor. In
this case, there is no need to be so restrained. Any documentation
that Orthobiologics could rely on to defeat the application of
equitable tolling would be in its possession (e.g. documents
showing that it gave Ortega the notice he was entitled to).
Orthobiologics has not referenced or attached any such documents in
any of its briefs to the district court or this court, despite it
referencing and attaching other relevant documents. Thus, we can
safely assume that there is no such evidence. Orthobiologics has
had a full opportunity to defend against Ortega's entitlement to
equitable tolling and therefore our holding is proper.
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