554 F.2d 1165 (D.C. Cir. 1977), 75-1135, Walko Corp. v. Burger Chef Systems, Inc.

Docket Nº:75-1135.
Citation:554 F.2d 1165
Party Name:WALKO CORPORATION, Appellant, v. BURGER CHEF SYSTEMS, INC., an Indiana Corporation, et al.
Case Date:March 02, 1977
Court:United States Courts of Appeals, Court of Appeals for the District of Columbia Circuit
 
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554 F.2d 1165 (D.C. Cir. 1977)

WALKO CORPORATION, Appellant,

v.

BURGER CHEF SYSTEMS, INC., an Indiana Corporation, et al.

No. 75-1135.

United States Court of Appeals, District of Columbia Circuit

March 2, 1977

Argued Dec. 12, 1975.

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Elbert R. Shore, Jr., Rockville, Md., with whom John T. Bell, Rockville, Md., was on the brief, for appellant.

Peter D. Bewley, Washington, D. C., with whom Max O. Truitt, Jr., and Robert Morris, Washington, D. C., were on the brief, for Burger Chef Systems, Inc.

Harry W. Goldberg, was on the brief for Holtzman and Platt.

Before Mr. Justice TOM CLARK, [*] Retired Associate Justice of the Supreme Court of the United States, and ROBINSON and MacKINNON, Circuit Judges.

Opinion for the Court filed by SPOTTSWOOD W. ROBINSON, III, Circuit Judge.

SPOTTSWOOD W. ROBINSON, III, Circuit Judge:

In June, 1968, appellees Burger Chef Systems, Inc., Robert Holtzman and William Platt entered into negotiations with appellant Walko Corporation with a view to leasing a plot on which to build a restaurant. Burger Chef ultimately decided against the venture and communicated its decision to Walko on January 26, 1971. 1 Walko protested, but sought no legal recourse until November, 1973, when it moved to intervene in a suit 2 then pending in the District Court for the District of Columbia between Burger Chef and the individual appellees. 3 That court found Walko's allegations of breach of contract and misrepresentation to be "entirely unrelated" either in law or fact to the litigation before it, and denied Walko's motion on January 15, 1974. 4

Six weeks later, on February 28, 1974, Walko instituted the present diversity 5 suit in the District Court for the District of Maryland by filing a complaint virtually identical to that proffered in its prior attempt at intervention. 6 The Maryland action was transferred to the District Court here, 7 where summary judgment was granted to appellees on grounds that Walko's claims were barred by a Maryland statute of limitations. 8

The District Court properly found that Walko's action is governed by the three-year period established by the Maryland statute. 9 The court apparently also

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found that Walko's cause of action accrued on or about January 26, 1971, 10 three years and one month before the filing of its complaint. Unless Walko's motion to intervene arrested the running of the limitation period for the seventy days it lay before the District Court, the present action indeed is time-barred. We hold that this is a question of Maryland law, and certify that question to the Maryland Court of Appeals for determination. 11

I

Shortly after Erie Railroad Company v. Tompkins 12 reinterpreted the Rules of Decision Act 13 to hold that state substantive law is to govern diversity actions in the federal courts, the Supreme Court held in Guaranty Trust Company v. York 14 that limitation periods for such actions whether nominally "substantive" or "procedural" are to be determined by reference to state law. Central to this holding was the concept that "the outcome of the litigation in the federal court should be substantially the same, so far as legal rules determine the outcome of a litigation, as it would be if tried in a State court." 15

The York "outcome" test was later found in Ragan v. Merchants Transfer & Warehouse Company 16 also to require federal courts to look to state law to ascertain when the applicable statute of limitations is tolled. Kansas by statute had defined the "commencement" of an action once for general purposes and a second time with specific reference to its statutes of limitations. 17 The latter definition provided that only service of process tolled the statute, 18 not, as Rule 3 of the Federal Rules of Civil Procedure implies, 19 the mere filing of a complaint. This tolling provision was held controlling in the diversity action before the Court, notwithstanding Rule 3. 20 The reason was simple:

Since (the) cause of action is created by local law, the measure of it is to be found only in local law. . . . It accrues and comes to an end when local law so declares. . . . Where local law qualifies or abridges it, the federal court must follow suit. Otherwise there is a

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different measure of the cause of action in one court than in the other, and the principle of Erie . . . is transgressed. 21

In the case at bar, however, all parties argue from Rule 3 which Ragan held inapplicable to measure state-created causes of action on the premise that Ragan has been overruled sub silentio by Hanna v. Plumer. 22 At issue in Hanna was whether in a diversity case service of process must be made in the manner prescribed by state law or that of the Federal Rules. 23 Hanna's holding for application of the Federal Rule 24 is perceived by many 25 to at least question Ragan's choice of state tolling rules over those implicit in Rule 3.

Hanna does render the "brooding omnipresence" 26 of Erie less ubiquitous, but it does not banish altogether the "outcome" test enunciated in York, as Hanna itself indicates. 27 Rather, it holds that the applicability to diversity litigation of an otherwise controlling 28 Federal Rule is conditioned on its compliance 29 with the

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dictates 30 of the Rules Enabling Act 31 that gave it birth. When no Federal Rule is implicated, however, and the question is whether state law or judge-made federal law is controlling in an action founded on diversity jurisdiction, reference is properly made not to the Rules Enabling Act, but to the Rules of Decision Act. 32 It is the latter statute, and only that statute, to which Erie and York pertain. 33 And Hanna was careful to note that whenever the Court had found a Federal Rule inapposite because its "scope . . . was not as broad as the losing party urged," it had chosen the applicable law by virtue of the Erie-York test. 34

Were it contended, then, that this litigation "commenced" on some other day than

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February 28, 1974 the date Walko's complaint was filed 35 a reevaluation of Ragan's impact might be in order. 36 That is not our case, however. We are asked instead whether, for purposes of the Maryland statute of limitations, the clock stopped on Walko's right to sue for so long as its petition to intervene was pending. Thus phrased, the tolling problem is analogous to that presented when, between the time a cause of action accrues and litigation commences, the plaintiff is temporarily disabled from suit, 37 or the defendant has for a period absented himself from the jurisdiction, 38 or supervening circumstances have prevented suit, 39 or there has been some inducement not to sue. 40 Like those matters, the one before us is not governed by Rule 3, whatever it has to say about tolling in other respects. 41

Resultantly, we face a "relatively unguided Erie choice" 42 under the Rules of Decision Act. 43 This choice we conceive to hinge on the degree to which state policies, other than those primarily directed to administration of the state judicial system, 44 would be impeded by displacement of the state rule by federal common law. 45 We must be guided also by reference to the twin aims of Erie : the desire to forestall forum-shopping 46 and the conviction "that

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it would be unfair for the character or result of a litigation materially to differ because the suit had been brought in a federal court." 47

II

The concerns addressed by state legislators and judges with respect to suspensions of a state statute of limitations are similar to those that preoccupy them in the process of determining when a state-created cause of action accrues, or how long the applicable limitation period ought to be. That these latter questions are to be governed by state law is long since settled. 48 We would be tampering with policy choices best made in intimate relation to those determinations were we to substitute a federal judgment as to whether a particular occurrence should arrest the statute's running. Logically, those choices should be made within parameters established by those charged with formulating other state rules imposing limitations on inauguration of litigation. Not surprisingly, then, federal courts have looked to state law to determine whether a plaintiff's disability 49 or a defendant's absence 50 interrupts the running of a state statute of limitations. While the federal decisions are not unanimous in their selections of the law defining the effect of proceedings previously pending, 51 we find the issue at bar sufficiently similar to disability and absence to command deference to state law there as well.

The rectitude of recourse to state law in this circumstance is underscored by the Supreme Court's adoption for a federal cause of action in Johnson v. Railway Express Agency 52 of a state's most nearly applicable limitation period as well as the suspension, tolling and revival provisions with which the state provision was freighted. Relying on the state rule refusing to toll the time limit on civil rights actions for the period during which related proceedings were pending, the Court rested its holding on grounds that

(i)n virtually all statutes of limitations the chronological length of the limitation period is interrelated with provisions regarding tolling, revival, and questions of

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application. In borrowing a state period of limitation for application to a federal cause of action, a federal court is relying on the State's wisdom in setting a limit, and exceptions thereto, on the prosecution of a closely analogous claim. 53

Interposition of a federal rule in these premises would, moreover, be productive of the very mischief that Erie and its progeny are designed to deter. If federal courts hold time-barred cases...

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