### IN THE SUPREME COURT OF TENNESSEE AT NASHVILLE February 6, 2

001 Session

ANDREW FAHRNER v. SW MANUFACTURING, INC.

Appeal by permission from the Court of Ap peals, Middle Section Circuit Court for Dekalb County No. 7620 John A.

Turnbull, Jud

ge

No. M1999-00021-SC -R11-CV - Fil ed May 16, 2001

The plaintiff filed suit against the defend ant for retaliatory discharge and e mployment discrimination. The defendant moved to dismiss the plaintiff’s claim on the ground that the one-year stat ut e of limitations had expired. The trial court denied the defendant’s motion, holding that there were g enuine issu es of material fa ct as to whether th

e “discovery

rule” applied. T

he Court of Appea

ls reversed, holding that the discov ery rule do es not apply –

and should not be exte nded – to employment-type

cases like the pla

intiff’s. We affirm, though under a different rationale, the Court of Appeals’ holding

that the trial cour

t erred in conclu

ding that the disc

overy rule prevents dismissal. However, we reverse and remand to the trial court to consider whether the statute of limitations is tolled by the doctrine of equitable estoppel.

Tenn. R. App. P. 11 Application for Permission to Appeal; Judgment of the Court of Appeals Affirmed in Part; Reversed in Part; and Case Remanded to the Circuit Court for Dekalb County

F RANK F. D ROWOTA , III, J., delivered the opinion of the court, in which , E. R ILEY A NDERSON , C.J., A DOLPHO A. B IRCH , J R ., and W ILLI AM M. B ARKER , JJ. joined. J ANICE M. H OLDER , J. filed a concurring and dissenting opinion.

Sue N. Puckett-Jerni gan and Tecia Puckett Pry or, Smithville, Tenn

essee, and Jon E. Jone

s, Cookeville, Tennessee, for the appellant, Andrew Fahrner.

David B. Kesler and Stacie L. Caraway , Chattanooga, Tennessee, for the appellee, SW Manufacturing, Inc.-2- OPINION Andrew Fahrner

(“Fahrner”), the appellant, began working for SW Manufacturing, Inc ., the appellee, in February of 1995 at its Smithville plant. In the fall of 1997, while on the job, Fahrner sustained an injury to h

is right shoulder

for which he req

uired me d ical treatment. SW Manufacturing paid for these medical expenses, which were covered under the Workers’ Compensation L aw.

On November 21, 1997 , SW Ma nufacturing notified Fahrner in writing that he was being terminated. This separation notice stated that his termination was the result of a “reduction in work force due to decreas e in sales.” Unlike some other employees who were fired at the sa me time, Fahrner did not receive severan ce pay. As a result, Fahrner went to see an a ttorney in January of 1998. The attorney researc hed the matter and concluded that Fahrner did not have a valid legal claim.

But

Fahrner’s law

yer continu

ed to investigate . According to th e complaint,on Marc h 3, 1998, he interviewed a witness who stated that SW Manufacturi ng had de liberately terminated employees because they

had filed workers’ compensation claims. This witness further stated that the company

had fired a

few non-injured

employees t

o disguise its illeg

al conduct. Base

d on this information, Fahrner filed a lawsuit against SW Manufacturing for retaliatory discharge. See Anderson v. Standard Register Co. , 857 S.W.2d 555 (Tenn. 1993) (discussing the “retali atory discharge” cause of action). He also alleged that his discharge was in violation of the Tennessee Human Rights Act (THRA), Tenn. Code Ann. § 8-50-103. Fahr ner’s THRA

claim is closely related
to his retaliatory

discharge cla

im in that both are ba

sed on SW

Manufacturing’s allegedly unlawful

res pon se t o hi s wo rk- rel ate d in jur y.

SW Manufacturing moved to dismiss the lawsuit

on the ground that the applicable one-year
statute of limitations had expired. See Weber v. Moses , 938 S.W.2d 387, 393 (Tenn. 1996) (discussing Tenn. Code. Ann. § 28-3-104, the statute of limitations for retaliatory

discharge); id. at 389-90 (discussing Ten n. Co de Ann. § 4-21-311, the statute of limitations for employment discrimination under the THRA). The complaint was filed on December 1, 1998 because Fahrner told his lawyer that Fahrner had b een fired on December 18, 1997. In fac

t, Fahrner rec

eived his separation notice on November 21, 1997. Therefore, Fahrner missed the one-year deadline by

ten days.

The trial court,

however, denied the

motion to dismiss, stating: “[E]ven though Plaintiff’s complaint was filed more than one (1) ye ar after he re ceived notice of

the termination of

his employment

by the Defe

ndant, there was a genuine issue of material fact as to when Plaintiff discovered, or in the exercise of reasonable c

are and diligen

ce should have discovered, his injury.” The trial court’s decision was therefore based on its application of the “discovery rule.” This rule provides that

a cause of action accrues and the statute of limitations begins to run “when the plaintiff knows or in the exercise of reasonable care and diligence shou ld know that an injury has been sustained as a result of wrongful or tortious conduct by the defendant.” Kohl & Co. v. Dearborn & Ewing , 977 S.W.2d 528, 532 (Tenn. 1998).1 SW Manufact uring argues th at Fahrner ha s waived any clai m for equitabl e estoppel. Al though

Fahrner first used the phrase “equita ble estoppel” b

efore this Court, a key

part of his arg

ument before

both
courts below was that the statute of limitations should be tolled because of SW Manufactur ing’s decepti ve conduct. Under this circumstance, the failur e to use the right label does not result in a waiver. The concurring and dissenting opinion argues to the contrary, maintaining that our decision today is inconsistent with the waiver approach followed in Alexander v. Armentrout , 24 S.W.3d 267 (Tenn. 2000). In that case
, however, among other differences, the party seeking relief failed to discuss the factual bas

is on which the theory of equitable estoppel could be applied. Armentrout , 24 S.W.3d at 272 (“[T]he Armentrouts did not raise the defense of equitable estoppel, despite the requirement

s in Tenn.R.C

iv.P. 8.03 that a defendan t ‘ set forthaffirmatively facts in short and plain terms relied upon to constitute . . . estoppel .

. . .’”) (emphasis added). In contrast, Fahrner discussed all the relevant facts before the trial court and the intermed

iate court. His only error was the failure to use the rig ht label, which should not be dispositive.

-3- SW Manufacturi n g sought and obtained an interlocutory appeal under Rule 9 of the Tennessee Rules of Appellate Procedure. The Court of Appeals revers e d the decision of the trial court, stating that “[t]he

piv otal point in this case is whether or not the discovery rule should be extended to retaliatory

discharge and

discrimination ca

ses. We find no support for Fahrner’s argument that th

e discovery

rule should be so e

xtended.” Fahrne

r then appealed

to this Court.

We agree with the Court of Appeals that the trial court erred in basing its decision on the discovery rule. However, neither the trial court nor the Court of Appeals consider ed whet her the related doctrine of equitable estoppe l saves this action f

rom the bar of the

statute of limitatio

ns. 1 Because equitable

estoppel may save a plaintiff’s case even when the discover y rule is inapplicable, we remand the case to the trial court for further consideration.

ANALYS IS The issue before us, presented by SW Manufacturing’s mot io n to dismiss, involves the interpretation an d appl ication of a statute of limitations. Appellate review of this question of law is de novo, without a

presumption of correctness of the Court of Appeals’ judgment. See Nelson v. Wal-Mart Stores, Inc. , 8 S.W.3d 625, 628 (T enn. 1999); Owens v. Truckstops of America , 915 S.W.2d 420, 424 (Tenn. 1996).

We must first decide whether the Court of Appeals erred i n holding that Fahrner may not

av ail himself of the disc

overy rule . SW Manufacturing argues that Fa

hrner’s claim

s accrued o n November

21, 1997, when he w

as given written

notice he was bei

ng terminated, w

hile Fahrner argues that his claims accrued in March of that year, when his attorney first discovered the unlawful ground for his termination. We have already decided this issue. In Weber , 938 S.W.2d at 391-93 , we held t hat employment

dis crimi nation and retaliatory discharge causes of ac tion accrue and the statute of l imitatio ns begins to run when the employee is given unequivocal notice of the employer’s termination decision. Accordingly, we conclude that Fahrne r’s c ause of action accrued and the
statute of limitations began to run on November 21, 1997, when he was given his separation notice.2 Equitable estoppel is differe nt from the much broader doctr ine of “equitable tolling,” whi ch allows

a court to suspend the running of the statute of limitations when the plaintiff, despite reaso nable efforts,
cannot obtain enough information to file his complaint on time, even if the defendant is not at fault. We have declined to recognize this equitable remedy, reasoning that eq uitable es toppel, with its requirement of defendant misconduct,

“more appropri

ately strikes th

e balance betw

een the need fo

r predictable

procedural rules on the one

hand and the n

eed to relieve innocent parties of the consequences of the expiration of the limitations period on the other.” Norton , 895 S.W.2d at 321.

-4- The Court of Appeals followed the holding of Weber , butcouched its decision in terms of rejecting Fahrner’s bid to extend the discovery rule to his case. Weber , however, makes clear that the discovery r

ule applies to retaliatory discharge cases. I n its discussion of retaliatory discharge the Courtclearly stated and then applied the discovery rule. Id. at 393 (cit ing Wyatt v. A-Best Co. , 910 S.W.2d 851, 854-55 (Tenn. 1995)). The rationale of Weber is simply that an employ

ee “discovers” that an i nju ry has been sustained for purposes of the statute of limitations when the employer provides unequivocal notice of the adverse employment action –in this case, termi

nation. At this point, of course, the employee may not know the true reason for the employer’s adverse employ ment decision, or other facts that would tend to show the em ployer has behaved unlawfully. “ We have stressed, however, that there is no requirement that the plaintiff actually know the specific type of legal claim he or she has, or that the injury constituted a bre

ach of the appro

priate legal standard.” Kohl & Co. , 977 S.W.2d at 532-33 (citing Shadrick v. Coker , 963 S.W.2d 726, 733 (Tenn. 1998)). Rather, the employee, through his lawye r, must inves tigate the circumstances surrounding the employer’s decision, and he has the time given t o him by the le gislature to com

plete this investigation and

then file a compla

int – in this case, one year. As another court has put it, “when

an employee knows that he has been hur t an d al so k now s th at h is e mpl oyer h as i nfl ict ed t he i nju ry, it is fair to begin

the countdown toward repose.” Morris v. Gov. Dev. Bank of Puerto Rico , 27 F.3d 746, 750 (1st Cir. 1994).

While we therefore agree with the Court of Appeals

that Fahrner’s claim cannot succeed by virtue of the discovery rule, this conclusion does not resolve this case. Fahrner ha s also alleged

that SW Manufacturing prevented him from discovering the facts necessary to file his complaint.

These allegations, if

proven true, esta

blish the doctrine

of “equitable es

toppel,” which tol

ls the running of the sta

tute of limitations w

here the defen

dant has “misled th

e plaintiff into

failing to file [his] action within the statutory period of limitations.” Norton v. Everhart , 895 S.W.2d 317, 321 (Tenn. 1995); see also Lusk v. Consol. Aluminum Corp. , 655 S.W.2d 917, 920 (Tenn. 198 3). A clear example, and the one most prominent in the case law, is a defendant’s promise not to plead the statute of limitations, which he breaks oncethe plaintiff has w aited for the stat

ute to expire before filing his complaint. See American Mutual Liab. Ins. Co. v. Baxter , 210 Tenn. 242, 247-48, 357 S.W.2d 825, 827 (1962); B ernard v. Houston Ezell Corp. , 968 S.W.2d 855, 862 (Tenn. Ct. App. 1997); Sparks v. Metro. Go v. of Nashville , 771 S.W.2d 430, 433 (Tenn. Ct. App. 1989). 2 Where equitable estoppel has been raised, therefore, a court must determine whether the defendant engaged in conduct specifically designed to prevent the plaintiff from suing in time.-5-

In the interest of cl

arity, it is worth emphasizing the crucial difference between the discovery ruleand equitable estoppel. They are similar in certain respects and therefore potential ly confusing,

as is eviden t from the judgments below. Both doctrines may be invoked where the def endant allegedly misled the plaintiff. In a dis covery rule case, the plaintiff may claim that the defendant intentionally

prevented him fr

om discovering h

is injury. Whe

re that claim

is prove d true, the doctrine of “fr

audulent concea

lment” applies.

While fraudulent con cealm ent usually denotes a common law tort, see Chrisman v. Hill Home Dev., Inc. , 978 S.W.2d 535, 538-39 (Tenn. 1998); Simmons v. Evans , 185 Tenn. 282, 285, 206 S.W.2d 295, 296 (1947), it also has relevance in the statute of limitations context. By definition,

a fraud entails some misrepresentation or deception that makes its victim believe he has been treated fai rly, when in fa ct he has been dece ived. If succ

essful, therefo

re, a defendan

t’s fraudulent a

ct, depending on the particular facts of the case, may pre vent a plaintiff from knowing he has been injured until well after the statute of limitations period has expired. To prevent thi s from occur ring, Tennessee law has long rec ognized th at t he statute of limitations does not begin to run until the plaintiff, exercising rea

sonable diligenc

e, discovers th

e fraud w hich the defenda nt wrongfully concealed. See, e.g.
, Vance v. Schulder , 547 S.W.2d 927, 930 (Tenn. 1977) (collecting cases).

Fraudulent

concealment often arises in fraud cases, perhaps because the de f endant having deceived the plaintiff once thinks nothing of deceiving him further, bu t it is not so c

onfined. We have also applied the doctrine in a negligen t bui lding construction case, see Soldano v. OwensCorning Fiberglass Corp.
, 696 S.W.2d 887 (Tenn. 1985), and, more recently, in medical malpractice
cases, see Shadrick , 963 S.W.2d at 735-37 (discussing Tenn. Code Ann. § 29-26-116, a statute of repose containing a fr

audulent concea

lment exception); Benton v. Snyder , 825 S.W.2d 409, 413-14 (Tenn. 1992) (same). The underly ing cause of action is not the critical issue; what matters is that the defendant has taken steps to prevent the plaintiff from discovering he was injured.

Equitable estoppel cases are

different from fraudulent concealment and other discovery rule

cases. Whereas discover y rule case

s may involve allegat

ions that the defe

ndant has mi sled the plaintiff, equitable

estoppel – as in Fa

hrner’s case

– always does. The key difference, though, is that in equitable estoppel cases the plaintiff has already discovered his injury – or should have discovered it – and, consequently, the limitations period has begun and ultimately expired. See Cada v. Baxter Healthcare

Corp. , 920 F.2d 446, 451 (7th Cir. 1990). As in Fahrner’s case, the defendant’s alleged misconduct

did not prevent the

plaintiff from l

e arning he was in

jured; it allege

dly preven

ted him from filing suit in time. The doctrines may have the same effect, in that a plaintiff who successfully invokes either one may

proceed wit

h his lawsui t, but they are theoretically distinct: a plaintiff invoking the discovery rule asks the court to p rop erl y apply the statute of limitations; a plaintiff invoking equitable estoppe l, in effect,

asks the court to waive it. In this regard, the discovery rule and the fraudule

nt concealment do

ctrine have a muc

h broader scope . The discovery rule prevents the running of the limitations period whenever, and for whatever reason, the plaintiff could not have reasonabl y

known he was injured. Equitable estoppel only applies when the defendant has tak e n steps to specifically prevent the plaintiff from timely f iling his complaint (as where he promises not to plead the statute of limitations).-6-

Having held that the discovery rule and equitable estoppe

l are differen

t, we must now decide how long the statute of limitations is tolled when a plaintiff successfully invokes the latter. The

answer is clear: the tolling period equals the amount of time the defendant misled the plaintiff. See Lusk
, 655 S.W.2d at 920-921. Equitable estoppel is premised on the defendant’s wrongdoing, and,

co nse que ntl y, the plaintiff must be given the time during which the defendant misled the plaintiff

so that plaintiff’s entitlemen t t o the full statutory time period is preserved. This is similar to the result in discover

y rule case

s, where the def

endant’s fraudu

lent concealmen

t prevents the plaintiff from discovering his cause of action. See Vance , 547 S.W.2d at 930 (“[The statute] begins to run

as of the time of the discovery of the fra ud by the plaintiff.”). Any other result would reward the defendant for

his deception. As discussed above, Fahrner claims that he missed the time deadline because SW Manufacturing misled him u ntil May 199 8. If

true – as will be determined on remand

–Fahrner would be entitled to a full year from that time, assuming he is entitled to equitable e stoppel relief. Since Fahrner filed suit in December 1998, he will have met the deadline.

Fin all y, we must respond to Fahrner’s argument that equitable es

toppel applies bec

ause SW Manufacturing’s separation notic e was misleading

in that it stated that his termination was the result of a “reductionin work force due to decrease in sales,” whereas Fahrner a sserts that it was the result of retalia ti on and employ

ment discrimination . SW Manufacturing , of course, maint

ains that its separation notice truthfully stated its reason for firing Fahrne r.

The proble m with Fahrner’ s argument is tha t it simply rest

ates the centra

l issue of his underlying

claims. Fahrner cannot argue that the statute of limitations should be tolled because his version of events is correct and SW Manufacturing’s version is a lie. Were we to accept thi s argument, we would, in effect, be holding that he should win on the merits of his retaliatory discharge and discri mination claims. As one court pu t it, in th e age discrimination context, “This [argument] merges the subst antive wrong wi

th the tolling doctrine . . . . It implies that a defendant is guilty of [concealment or other miscond uct j ustifying equitable estoppel] unless it tells the plaintiff, ‘We’r e firi ng you be cause of your age.’ It would eliminate the statut e of limita tions in age discrimination cases.” Cada , 920 F.2d at 451.

Not surprisingly, many courts have rejected Fahrner’s argument. See, e.g.
, Santa Maria v. Pacific Bell , 202 F.3d 1170, 1177 (9th Cir. 2000) (“[Equitable estoppel] necessarily requires active conduct by a defendant, above and bey ond the wrongdoing upon which the plaintiff’s claim is filed,
to prevent the plaintiff from suing in time.”); American Airlines, Inc. v. Cardoza-Rodriguez , 133 F.3d 111, 124 (1st Cir. 1998) (“[The employees] have simply parroted the same events th

at gave rise
to their underly

ing claim.”); Hill v. United States Dep’t of Labor , 65 F.3d 1331, 1335-38 (6th Cir. 1995); Thelen , 64 F.3d at 267-68 ; Dring v. McDonnell Douglas Corp. , 58 F.3d 1323, 1329 (8th Cir. 1995) (“Whether or not an employer tells its employee the true reason for the adverse employ ment decision is not the standard.”) (quoting Heideman v. PFL, Inc. , 904 F.2d 1262, 1266 (8th Cir. 1990)); Olson v. Mobil Oil Corp. , 904 F.2d 198, 203 (4th Cir. 1990) (“If equitable tolling applied every

time

an employer a

dvanced a non-d

iscriminatory

reason for its emp

loyment dec

isi ons, it would be ‘tantamount

to asserting that an employer is equitab ly estop ped whenever it does not disclose a

v iolation of the stat ute.’”) (qu oting Blumberg v. HCA Mgmt. Co. , 848 F.2d 642, 645 (5th Cir

.-7-

1988)). But see Bennett v. Coors Brewing Co. , 189 F.3d 1221, 1235-36 (10th Cir. 1999); Oshiver

v. Levin, Fishbein, Sedran & Berman
, 38 F.3d 1380, 1391-92 (3rd Cir. 1 994). As a matter o f logic and public policy, see Web er , 938 S.W .2d at 393 (discussing the important purposes statutes of limitations serve), we al so reject it . In the retali atory discharge context, acceptance of this argument would essentially

eliminate the statute of

limitations unless an employer tells an employee, “y ou are bing fired because y

ou filed a worker

s’ compensation claim.” Accordingly, Fahrner’s a ssertion that the separation notic

e is misleading because it failed to cite an illegal basis for his termination is not sufficient to invok

e the doctrine of

equitable estoppe

l.

To summarize, we hold that the discovery rule and equitable e stop pel have independent significance, meaning that Fahrner is entitled to have the trial court consider his equitable estoppel claim, despite

the fact that he cannot succeed by virtue of the discovery rule. On remand, Fahrner’ s claim must fail if he relies solely on the separation notice to meet his bu rden of showing that SW Manufacturing misled him into missing the limitations deadline.

CONCLUSION On the separate

grounds stated, we affirm the decision of the Court of Appeals holding that the statute of

limitations cannot be tolled because of the discovery

rule. We reverse

and remand to the trial court for c

onsideration of w

hether equitable

estoppel require

s tolling of th

e stat ute of limitations.

FRANK F. DROWOTA , III , JUSTICE