Candelaria v. Orthobiologics LLC

Decision Date25 October 2011
Docket NumberNo. 09–2305.,09–2305.
Citation51 Employee Benefits Cas. 2249,661 F.3d 675
PartiesRolando ORTEGA CANDELARIA, Plaintiff–Appellant, v. ORTHOBIOLOGICS LLC, et al., Defendants–Appellees.
CourtU.S. Court of Appeals — First Circuit

OPINION TEXT STARTS HERE

Pedro J. Landrau–López, for appellant.

Lourdes C. Hernández–Venegas, with whom Schuster Aguiló LLP was on brief, for appellees.

Before LIPEZ, LEVAL,* and THOMPSON, Circuit Judges.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 1 and a right to benefits 2 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 3 and his claim for benefits was untimely under the one-year limitations period contractually set by the amended Plan.4

Ortega timely appealed, taking issue only with the district court's dismissal of his claim for benefits.5 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, 87 S.Ct. 1188, 18 L.Ed.2d 244 (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, ––– U.S. ––––, 130 S.Ct. 2549, 2563, 177 L.Ed.2d 130 (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. 6 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].”).7 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, 104 S.Ct. 1723, 80 L.Ed.2d 196 (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...

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