From the Desk of Partner Gordon C. Klug: Statutes of limitation protect defendants from claims brought outside of a certain time limit. But equitable tolling is a way that a plaintiff can get around that time limit if certain standards are met. Recently, the Washington Supreme Court was asked to confirm which standard should be used to decide when equitable tolling is appropriate in civil cases.
Claims Pointer: The Washington Supreme Court recently reaffirmed that a long-established standard for equitable tolling was still good law. Under this standard, the Court held that for a plaintiff to equitably toll their claim, they must establish that they acted diligently to bring their claim and that the defendant’s actions delayed the claim.
Fowler v. Guerin, 515 P.3d 502, 100069-3, certified C15-5367 BHS (Wash. Aug. 18, 2022)
This case began in 2005 as a state class action. Plaintiff, “Teachers,” was a class that consisted of more than 25,000 public school teachers who participated in Washington’s Teachers’ Retirement System (“TRS”). TRS is a public retirement system managed by the Department of Retirement Services (“DRS”). In the TRS, contributions from each of the Teachers’ paychecks accumulated interest for their retirement funds. The Teachers originally enrolled in one TRS plan, Plan 2. In the 90s, Plan 2 changed to Plan 3, and the Teachers thought that they should be given more interest on their contributions under the new plan. In 2005, to recover the interest earnings allegedly lost in the transfer from Plan 2 to Plan 3, the Teachers filed a class action in state superior court.
In 2008, the Court approved a partial settlement from a subgroup of the class members who had transferred from Plan 2 to Plan 3 after January 20, 2002. However, the Teachers who had transferred plans before that date were unhappy being excluded from the settlement agreement, and thus became a new subclass of plaintiffs in February 2009.
In the early 2010s, the Washington Court of Appeals held in favor of the new Teachers’ class, ruling that DRS’s original rule governing TRS interest calculations was arbitrary and capricious. The Court then instructed Defendant, DRS Director Tracy Guerin, to make a new rule to calculate the interest. The new rule would eventually be issued by Defendant, in April 2018.
In June 2015, while DRS was still drafting the new rule, the Teachers filed a separate suit in federal court asserting that DRS’s withholding of the interest on the Teachers’ accounts constituted a “per se taking” in violation of the Fifth Amendment. Defendant argued that the Teachers’ takings claim was not ripe because DRS was still in the process of making the new rule. The federal district court agreed with Defendant and dismissed the Teachers’ claim on a motion for summary judgement. The Teachers’ appealed, and the Ninth Circuit Court reserved the dismissal, ruling that the federal ripeness test did not apply and that the Teachers’ claim should be allowed to continue.
On remand, Defendant renewed her statute of limitations defense, and the Teachers responded that the doctrine of equitable tolling applied to defeat the defense. To this, the federal district court concluded that equitable tolling in civil cases “beyond traditional predicates” was undefined, and the Washington Supreme Court was in the best position to determine what standard a plaintiff in a civil action must meet to equitably toll the statute of limitations period.
Equitable tolling is a standard of tort law that pauses the statute of limitations. For the past 20 years, Washington has allowed equitable tolling when the following conditions were met: 1) when justice requires; 2) when the defendant has demonstrated bad faith, deception, or false assurances; 3) when the plaintiff has exercised due diligence in trying to bring a timely claim; and 4) when equitable tolling remains consistent with the purpose of the statute providing the cause of action and the purpose of the statute of limitations. Millay v. Can, 135 Wn.2d 193, 206, 955 P.2d 791 (1998); Hahn v. Waddington, 694 F. App’x 494, 495 (9th Cir. 2017)
Although both parties agreed that equitable tolling was allowed “when justice requires,” they disagreed on whether a Court must consider both the plaintiff’s diligence and the defendant’s bad faith, false assurances, or deception when deciding whether equitable tolling is appropriate.
The Defendant argued that the standard established in a case called Millay v. Can was appropriate because it had been used by Washington Courts to decide similar questions for the past 20 years. The Millay standard provided that equitable tolling was allowed “when justice requires” and when the predicates of “bad faith, deception, or false assurance by the defendant and the exercise of diligence by the plaintiff” were met.
On the other hand, the Teachers relied on a case named Douchette v. Bethel School District to argue that Washington Courts had not adopted Millay as the standard for equitable tolling cases, but instead had applied a general common law standard. The Douchette standard, the Teachers argued, decided the questions of equitable tolling on a “flexible, case-by-case approach.” The Teachers continued that the Douchette decision separated the equitable tolling standard into two categories: one category where the plaintiff was not diligent, but equitable tolling applied because of a substantial delay caused by another party, and a second category where the plaintiff was diligent and equitable tolling applied where consistent with the purpose of the statute of limitations.
The Court disagreed with the Teachers understanding of Douchette and ultimately held that Millay was the appropriate standard for deciding equitable tolling cases. The Court explained that the Douchette decision actually supported the Millay standard instead of contradicting it. This was because, in Douchette, the plaintiff had not been entitled to equitable tolling because she failed to act diligently and because she failed to show bad faith, deception or false assurance on the part of the defendant. Douchette therefore, did not establish two separate categories of cases for equitable tolling like the Teachers argued. Based on this, the Court held that the Teachers had misread the Douchette ruling as establishing a new standard for equitable tolling cases, and that the Millay 4-part test remained the appropriate standard for deciding questions of equitable tolling in civil cases.
This case preserved a long-established standard in Washington law: that in order to equitably toll a claim the plaintiff must prove 4 criteria: 1) justice requires tolling of the statute, 2) tolling would be consistent with the purpose of the statute of limitations, 3) plaintiff was diligent in trying to bring their claim and 4) that the defendant’s bad faith interfered with the plaintiff’s timely filing.