2002 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

7-17-2002

Island Insteel Sys v. Waters

Precedential or Non-Precedential: Precedential

Docket No. 00-2713

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PRECEDENTIAL 

 Filed July 17, 2002 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

No. 00-2713 

ISLAND INSTEEL SYSTEMS, INC.; 

ISLAND INSTEEL CONSTRUCTION, INC.; 

PETER W. CLARK; THE PETER W. CLARK FAMILY 

TRUST; ALAN R. FEUERSTEIN, Appellants 

v. 

DARRIN WATERS; TAMMY WATERS; TAMMY MOST; 

PANELS, INC.; CONCRETE PANELS CONSTRUCTION, 

INC.; POOL VILLAS CONDOMINIUM ASSOCIATION, 

AN UNINCORPORATED ASSOCIATION UNDER THE LAWS 

OF THE UNITED STATES VIRGIN ISLANDS; UNKNOWN 

DEFENDANTS A THROUGH Z 

On Appeal From the District Court of the Virgin Islands 

(D.C. Civ. No. 99-cv-00017) 

District Judge: Honorable Raymond L. Finch, Chief Judge 

Argued December 3, 2001 

Before: BECKER, Chief Judge, NYGAARD and 

COWEN, Circuit Judges. 

(Filed July 17, 2002) 

 

 ALAN R. FEUERSTEIN, ESQUIRE 

 (ARGUED) 

 Feuerstein & Smith, LLP 

 17 St. Louis Place 

 Buffalo, NY 14202-1502 

 Counsel for Appellants 

 JAMES M. DERR, ESQUIRE 

 (ARGUED) 

 28-29 Norre Gade 

 P.O. Box 664 

 St. Thomas, VI 00804 

 DANIELLE C. COMEAUX, ESQUIRE 

 Hodge & Francois 

 1340 Taarnederg Road 

 Charlotte Amalie, St. Thomas 

 United States Virgin Islands 00802 

 Counsel for Appellees 

OPINION OF THE COURT 
BECKER, Chief Judge. 

In this Lanham Act trademark infringement action, 

plaintiffs appeal from an order of the District Court of the 

Virgin Islands granting defendants’ motion to dismiss under 

Federal Rule of Civil Procedure 12(b)(6). Plaintiffs allege 

that defendants’ unauthorized use of their "Insteel" trade 

name, which refers to a panel system of building 

construction, violates S 43(a) of the Lanham Act, 15 U.S.C. 

S 1125(a). The District Court held that it was clear from the 

complaint that plaintiffs’ claims are subject to the two-year 

statute of limitations governing actions for fraud under 

Virgin Islands law and that their filing of an earlier identical 

action in the United States District Court for the District of 

Puerto Rico, which was dismissed for lack of personal 

jurisdiction, did not equitably toll the statute of limitations. 

Since the complaint in this case was not filed within the 

two-year limitations period, the District Court dismissed 

plaintiffs’ claims as time-barred. 

 2 

 

This appeal presents two main questions. First, we must 

determine the appropriate limitations period for these 

trademark infringement claims under S 43(a) of the Lanham 

Act. Second, we must determine whether filing suit in a 

court that lacks personal jurisdiction may equitably toll the 

statute of limitations if plaintiffs refile the lawsuit in a court 

that has jurisdiction. Both parties agree that because the 

Lanham Act lacks a statute of limitations, we must borrow 

a statute of limitations from Virgin Islands law. Plaintiffs 

submit that the most appropriate statute of limitations 

under Virgin Islands law is the catch-all six-year statute of 

limitations for "[a]n action upon a liability created by 

statute" that does not fall within any of the specifically 

enumerated limitations periods. 5 V.I.C. S 31(3)(B). 

Defendants respond that the cause of action under Virgin 

Islands law most analogous to plaintiffs’ trademark 

infringement claims is either an action for common law 

fraud or an action for deceptive trade practices in violation 

of 12A V.I.C. S 101, both of which are subject to a two-year 

limitations period. 

Because plaintiffs have failed to identify a specific 

statutory cause of action under Virgin Islands law that is 

analogous to their Lanham Act claim and is subject to the 

catch-all six-year limitations period for actions upon a 

liability created by a statute that lacks a statute of 

limitations, we decline to apply the six-year statute of 

limitations. That conclusion relegates us to a choice 

between an action for fraud and an action for deceptive 

trade practices, both subject to a two-year statute of 

limitations under Virgin Islands law. But we still must 

decide which cause of action more closely resembles 

plaintiffs’ claims since the statute of limitations for fraud 

begins running on the date plaintiffs discovered the fraud, 

whereas the statute of limitations for deceptive trade 

practices begins running on the date the actionable 
conduct occurred. 

We hold that the cause of action under Virgin Islands law 

most analogous to a claim for trademark infringement 

under S 43(a) of the Lanham Act is the cause of action for 

deceptive trade practices in violation of 12A V.I.C.S 101. 

Like a trademark infringement action under S 43(a), but 

 3 

 

unlike an action for common law fraud, an action for 

deceptive trade practices does not require proof of scienter. 

Moreover, while a common law fraud claim requires a 

plaintiff to prove actual reliance, an action for deceptive 

trade practices simply requires proof that the practice at 

issue has the "tendency or effect of deceiving or misleading 

consumers," which more closely resembles the"likelihood of 

confusion" element that is the touchstone of aS 43(a) claim. 

Accordingly, plaintiffs’ claims in this case are subject to a 

two-year statute of limitations, which began running on the 

occurrence of the actionable conduct. 

While plaintiffs concede that the allegedly unlawful 

conduct occurred more than two years before the date they 

filed this suit, invoking the doctrine of equitable tolling, 

they submit that even under this statute of limitations their 

suit is not time-barred since they filed an identical action in 

the District of Puerto Rico within the two-year limitations 

period. That suit was dismissed for lack of personal 

jurisdiction. Defendants respond that because the first 

action was dismissed for lack of personal jurisdiction, the 

District Court properly held that the filing of that action did 

not equitably toll the statute of limitations. Whether filing 

suit in a court that lacks personal jurisdiction over a 

defendant may equitably toll the statute of limitations 

presents us with a question of first impression under Virgin 

Islands law. Because: (1) there is no statute on point; (2) 

the American Law Institute Restatements of the Law are 

silent on the issue, see 1 V.I.C. S 4; and (3) there is a split 

of authority among those courts that have addressed the 

question under the common law of other states, we must 

select the rule that we believe to be better and more 

consistent with Virgin Islands jurisprudence and policy. See 

Polius v. Clark Equip. Co., 802 F.2d 75, 77 (3d Cir. 1986). 

We hold that under Virgin Islands law, the statute of 

limitations for a second action may be equitably tolled by 

the filing of an earlier action dismissed for lack of personal 

jurisdiction if: (1) the first action gave the defendant timely 

notice of plaintiff ’s claim; (2) the lapse of time between the 

first and second actions will not prejudice the defendant; 

and (3) the plaintiff prosecuted the first action in good faith 

and diligently filed the second action. This doctrine of 

 4 

 

equitable tolling preserves the protections that statutes of 

limitations are intended to afford to defendants. At the 
same time, it avoids the unfairness to plaintiffs that would 

occur if plaintiffs who diligently but mistakenly prosecute 

their claims in a court that lacks personal jurisdiction find 

their claims time-barred when they refile in a proper 

jurisdiction. 

Application of this equitable tolling doctrine, like most 

equitable doctrines, is committed to the discretion of the 

district court in the first instance. Moreover, how the issue 

should be resolved in this case is far from clear. Therefore, 

we will vacate the order of the District Court and remand 

the case to the District Court to determine whether the 

plaintiffs satisfy the elements of this equitable tolling 

doctrine. 

I. 

Plaintiffs are Island Insteel Systems, Inc., Island Insteel 

Construction, Inc., and individual shareholders of those 

corporations, who allege that defendants unlawfully used 

the "Insteel" trade name. The defendants are Panels, Inc., 

Concrete Panels Construction, Inc., and their individual 

officers and shareholders, who were also officers and 

shareholders of the plaintiff corporations. In May 1994, the 

individual plaintiffs and individual defendants, then in 

business together, formed the plaintiff corporations to 

market in the U.S. Virgin Islands and the Caribbean the 

"Insteel" panel system of building construction distributed 

by Insteel Construction Systems, Inc., of Brunswick, 

Georgia ("Insteel Georgia"), which is not a party to this suit. 

In September of 1995, Hurricane Marilyn devastated the 

Virgin Islands, causing severe property destruction. Homes 

constructed using the "Insteel" panel system, however, 

withstood the hurricane with little damage. Due to the 

"Insteel" buildings’ survival of the hurricane, the plaintiff 

corporations were able to secure more than $500,000 worth 

of building contracts in St. Thomas and elsewhere. 

Plaintiffs were unable to begin work on these contracts 

until they obtained approval of their construction system 

under the new building code adopted by the U.S. Virgin 

 5 

 

Islands in response to the severity of damage caused by the 

hurricane. The delay in plaintiffs’ construction pending 

their approval caused a backlog of construction work, so 

that by early 1996, the plaintiff corporations’ work 

calendars were completely full. 

Plaintiffs allege that in January 1996, the individual 

defendants formed the defendant corporations, and, 

unbeknownst to plaintiffs, began to use the Insteel trade 

name to promote the business of the defendant 

corporations. On November 17, 1997, having learned of this 

usage, plaintiffs filed a complaint against defendants in the 

District Court for the District of Puerto Rico alleging that 

defendants’ unauthorized use of the Insteel trade name 

violated S 43(a) of the Lanham Act. In an order docketed on 
October 30, 1998, that court dismissed the complaint for 

lack of personal jurisdiction. On January 28, 1999, 

plaintiffs refiled their action in the District Court of the 

Virgin Islands. 

The District Court granted defendants’ 12(b)(6) motion to 

dismiss plaintiffs’ claims as time-barred under the two-year 

statute of limitations governing actions for fraud under 

Virgin Islands law. Although plaintiffs had filed suit in the 

District of Puerto Rico within the two-year limitations 

period, the District Court held that the filing of that action 

did not equitably toll the statute of limitations, since the 

action was dismissed for lack of personal jurisdiction. 

Plaintiffs appeal from the District Court’s order granting 

defendants’ motion to dismiss. The District Court had 

jurisdiction over this matter pursuant to 28 U.S.C.S 1331. 

We have appellate jurisdiction pursuant to 28 U.S.C. 

S 1291. We review de novo the District Court’s order 

dismissing plaintiffs’ claims under Rule 12(b)(6). See A.D. 

Bedell Wholesale Co. v. Philip Morris Inc., 263 F.3d 239, 249 

n.25 (3d Cir. 2001). 

II. 

We must first determine the statute of limitations for 

trademark infringement claims under S 43(a) of the Lanham 

Act, 15 U.S.C. S 1125(a). Plaintiffs’ claims are predicated on 

defendants’ allegedly unlawful use of the "Insteel" trade 

 6 

 

name, a "trade name" being "any name used by a person to 

identify his or her business or vocation." Lanham Act S 45, 

15 U.S.C. S 1127. In referring to plaintiffs’ claims as claims 

for "trademark" infringement, we adopt the common usage 

of the term "trademark" to refer generically to "the entire 

field of trademarks, service marks, trade names, and trade 

dress," Platinum Home Mortgage Corp. v. Platinum Fin. 

Group, Inc., 149 F.3d 722, 726 n.1 (7th Cir. 1998), all of 

which a business may appropriate to its exclusive use 

under S 43(a). 

Under the trademark infringement prong of S 43(a): 

 Any person who, on or in connection with any goods or 

 services, or any container for goods, uses in commerce 

 any word, term, name, symbol, or device, or any 

 combination thereof, or any false designation of origin, 

 false or misleading description of fact, or false or 

 misleading representation of fact, which . . . is likely to 

 cause confusion, or to cause mistake, or to deceive as 

 to the affiliation, connection, or association of such 

 person with another person, or as to the origin, 

 sponsorship, or approval of his or her goods, services, 

 or commercial activities by another person . . . shall be 

 liable in a civil action by any person who believes that 

 he or she is or is likely to be damaged by such act. 

15 U.S.C. S 1125(a)(1)(A).1 
A. 

Because the Lanham Act does not contain an express 

statute of limitations, we follow the traditional practice of 

borrowing the most analogous statute of limitations from 

state law. See Beauty Time, Inc. v. VU Skin Sys., Inc., 118 

F.3d 140, 143 (3d Cir. 1997) ("The Lanham Act contains no 

express statute of limitations and the general rule is that 

when a federal statute provides no limitations for suits, the 

_________________________________________________________________ 

1. The law governing trademark infringement underS 43(a), which 

protects trademarks that are not federally registered, generally follows 

the law governing infringement of registered trademarks, which are 

protected under S 32 of the Lanham Act, 15 U.S.C. S 1114. See A.J. 

Canfield Co. v. Honickman, 808 F.2d 291, 296, 299 n.9 (3d Cir. 1986). 

 7 

 

court must look to the state statute of limitations for 

analogous types of actions."). See generally Wilson v. 

Garcia, 471 U.S. 261, 266-67 (1985) ("When Congress has 

not established a time limitation for a federal cause of 

action, the settled practice has been to adopt a local time 

limitation as federal law if it is not inconsistent with federal 

law or policy to do so."). 

This "implied absorption of State statutes of limitation 

within the interstices of . . . federal enactments is a phase 

of fashioning remedial details where Congress has not 

spoken but left matters for judicial determination .. . ." 

Holmberg v. Armbrecht, 327 U.S. 392, 395 (1946)."By 

adopting the statute governing an analogous cause of 

action under state law, federal law incorporates the State’s 

judgment on the proper balance between the policies of 

repose and the substantive policies of enforcement 

embodied in the state cause of action." Wilson, 471 U.S. at 

271. 

To be sure, it is inappropriate to "mechanically appl[y] a 

state statute of limitations simply because a limitations 

period is absent from the federal statute." Occidental Life 

Ins. Co. v. EEOC, 432 U.S. 355, 367 (1977). In rare cases, 

the Supreme Court has held that the absence of an express 

limitations period may indicate a Congressional intent to 

impose no time limitation at all upon a federal cause of 

action. See id. at 366 (holding that there is no statute of 

limitations applicable to the EEOC’s ability to bring Title VII 

enforcement proceedings in federal district court). 

Moreover, if borrowing an analogous statute of limitations 

from state law would "frustrate or interfere with the 

implementation of national policies," courts must look to 

federal law for an analogous limitations period. DelCostello 

v. Int’l Bhd. of Teamsters, 462 U.S. 151, 161, 163 (1983) 

(applying the NLRA statute of limitations to suits under 

S 301 of the LMRA for breach of a collective bargaining 

agreement); see also Agency Holding Corp. v. Malley-Duff & 

Assocs., 483 U.S. 143, 156 (1987) (applying the Clayton Act 
statute of limitations to civil RICO actions). See generally 

Occidental Life Ins. Co., 432 U.S. at 367 ("State legislatures 

do not devise their limitations periods with national 

interests in mind, and it is the duty of the federal courts to 

 8 

 

assure that the importation of state law will not frustrate or 

interfere with the implementation of national policies."). 

In this case, however, neither party argues that 

borrowing the most analogous statute of limitations from 

state law would frustrate the achievement of federal 

policies, and we can see no reason for departing from the 

traditional practice of turning to state law as the"primary 

guide" in this area. See Agency Holding Corp. , 483 U.S. at 

147 ("Given our longstanding practice of borrowing state 

law, and the congressional awareness of this practice, we 

can generally assume that Congress intends by its silence 

that we borrow state law."). We must therefore determine 

which cause of action under Virgin Islands law is most 

analogous to a trademark infringement action underS 43(a) 

of the Lanham Act, and borrow the corresponding statute of 

limitations. 

B. 

Plaintiffs argue that the most analogous statute of 

limitations under Virgin Islands law is the catch-all six-year 

period for "[a]n action upon a liability created by statute" 

that does not fall within any of the specifically enumerated 

limitations periods. 5 V.I.C. S 31(3)(B). Defendants respond 

that the most analogous statute of limitations is the twoyear limitations period for fraud claims, which the District 

Court applied in granting defendants’ motion to dismiss. 

See 5 V.I.C. S 31(5)(A) (establishing a two-year statute of 

limitations period for "[a]n action for . . . any injury to the 

person or rights of another not arising on contract and not 

herein especially enumerated"); Lawaetz v. Bank of Nova 

Scotia, 653 F. Supp. 1278, 1282 (D.V.I. 1987) ("Under 

Virgin Islands law, fraud is governed by a two-year 

limitations period . . . .") (citing 5 V.I.C.S 31(5)(a)). 

Alternatively, defendants submit that we should borrow the 

two-year limitations period applicable to actions under 12A 

V.I.C. S 108 for deceptive trade practices in violation of 12A 

V.I.C. S 101. See 12A V.I.C. S 108(j) ("An action under this 

section must be brought within two years after the 

occurrence of a violation of this chapter . . . ."). 

In defendants’ view, this question is controlled by our 

 9 

 

decision in Beauty Time, Inc. v. VU Skin Sys., Inc., 118 F.3d 

140 (3d Cir. 1997), which applied Pennsylvania’s two-year 

statute of limitations for fraud to plaintiff ’s claim under 

S 38 of the Lanham Act, 15 U.S.C. S 1120, for fraudulent 

procurement of a trademark registration.2 The Court 
explained that "[o]n this claim, it is undisputed that 

Pennsylvania’s two-year statute of limitations for fraud 

actions would apply." 118 F.3d at 143. Because plaintiffs 

allege trademark infringement in violation of S 43(a) of the 

Lanham Act, however, our holding in Beauty Time as to the 

appropriate statute of limitations to apply to claims for 

fraudulent procurement of a trademark registration in 

violation of S 38 of the Lanham Act is not controlling. Cf. 

Marshak v. Treadwell, 240 F.3d 184, 194-95 (3d Cir. 2001) 

(holding that Beauty Time does not govern the statute of 

limitations applicable to claims under S 14 of the Lanham 

Act, 15 U.S.C. S 1064, for cancellation of a trademark 

registration). 

We believe that the Virgin Islands statute of limitations 

for fraud and the Virgin Islands statute of limitations for 

deceptive trade practices govern actions that are more 

analogous to plaintiffs’ claims than the Virgin Islands 

catch-all statute of limitations for "a liability created by 

statute." The problem that we see with plaintiffs’ argument 

in favor of applying the limitations period for"liabilit[ies] 

created by statute" is that it focuses on the source of law 

to the exclusion of the substance of the cause of action. 

That is, the statute of limitations period that plaintiffs urge 

on us would apply in this case because the source of 

plaintiffs’ cause of action is a statute (the Lanham Act), but 

would not apply if plaintiffs brought a common law cause 

of action whose elements were identical to the elements of 

their Lanham Act cause of action. We conclude that it is 

_________________________________________________________________ 

2. Section 38 provides: 

 Any person who shall procure registration in the Patent and 

 Trademark Office of a mark by a false or fraudulent declaration or 

 representation, oral or in writing, or by any false means, shall be 

 liable in a civil action by any person injured thereby for any 

 damages sustained in consequence thereof. 

5 U.S.C. S 1120. 

 10 

 

more appropriate to borrow a limitations period under state 

law on the basis of the substantive elements of the 

analogous state cause of action, rather than on whether the 

cause of action is created by common law or statute. 3 

The six-year statute of limitations could apply if plaintiffs 

identified a particular cause of action under Virgin Islands 

law governed by that limitations period. Plaintiffs, however, 

have failed to identify with particularity an analogous 

"liability created by statute" under Virgin Islands law that 

would justify applying the six-year residual statute of 

limitations. To be sure, neither a cause of action for fraud 

nor a cause of action for deceptive trade practices supplies 

a perfect analogue to S 43(a). For example, under both 

common law fraud and the Virgin Islands deceptive trade 

practices statute, a seller who misrepresents the source of 
_________________________________________________________________ 

3. We do not gainsay that plaintiffs’ Lanham Act claims fall within the 

plain language of the residual six-year statute of limitations under Virgin 

Islands law. Plaintiffs’ claims would therefore be subject to this six-year 

limitations period if state statutes of limitations applied of their own 

force as a matter of state law to federal causes of action that lack an 

express statute of limitations provision, as is the case when federal 

courts apply state law under the Rules of Decision Act, 28 U.S.C. S 1652, 

and Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938). See Agency Holding 

Corp. v. Malley-Duff & Assocs., 483 U.S. 143, 158 (1987) (Scalia, J., 

concurring in the judgment) ("In its original form, during what I term the 

‘first phase’ of the borrowing doctrine, our practice of applying state law 

in reality involved no borrowing at all; rather, we applied state 

limitations periods to federal causes of action because we believed that 

those state statutes applied of their own force, unless pre-empted by 

federal law."). The Supreme Court has made clear, however, that state 

statutes of limitations do not apply of their own force to federal causes 

of action that lack an express limitations period; rather, the 

characterization of the appropriate statute of limitations is a matter of 

federal, not state law. See Wilson v. Garcia, 471 U.S. 261, 269-70 (1985) 

("In borrowing statutes of limitations for . . . federal claims, this Court 

has generally recognized that the problem of characterization is 

ultimately a question of federal law."); Holmberg v. Armbrecht, 327 U.S. 

392 (1946) (holding that Erie does not require federal courts to apply 

state tolling doctrines to federal causes of action). Thus, when borrowing 

a statute of limitations from state law, we ask not which limitations 

period plaintiffs’ claims would fall under if state law limitations periods 

governed of their own force, but rather which state law cause of action 

is most analogous to the federal cause of action at issue. 

 11 

 

goods is liable only to consumers, not competitors. See 12A 

V.I.C. S 108 (creating a private remedy for violations of 

S 101 for consumers who are injured by deceptive trade 

practices). In contrast, S 43(a) creates a cause of action for 

competitors, not consumers. See Serbin v. Ziebart Int’l 

Corp., 11 F.3d 1163, 1164-65 (3d Cir. 1993) (holding that 

consumers who purchase goods or services in reliance on 

the vendor’s false advertising lack standing to sue under 

the false advertising prong of S 43(a)). However, even though 

consumers lack standing to sue under S 43(a), one of the 

Lanham Act’s underlying purposes, like that of the Virgin 

Islands deceptive trade practices statute and common law 

fraud, is to protect consumers from confusion as to the 

source of goods and services. See Inwood Labs., Inc. v. Ives 

Labs. Inc., 456 U.S. 844, 854 n.14 (1982) (characterizing 

the two goals of the Lanham Act as protecting the 

trademark owner’s "goodwill which he spent energy, time, 

and money to obtain" and ensuring consumers’"ability to 

distinguish among the goods of competing manufacturers"). 

Because both common law fraud and the Virgin Islands 

deceptive trade practices statute generally impose liability 

on sellers who misrepresent the source of their goods in a 

manner that misleads consumers and harms competitors, 

causes of action for fraud and violations of the deceptive 

trade practices statute bear substantial similarities, in both 
their elements and underlying purpose, to a cause of action 

for trademark infringement under S 43(a) of the Lanham 

Act. See Kason Indus., Inc. v. Component Hardware Group, 

Inc., 120 F.3d 1199, 1203 (11th Cir. 1997) ("It should be 

apparent that S 43(a) of the Lanham Act andS 10-1- 

372(a)(2) of the [Georgia Uniform Deceptive Trade Practices 

Act] provide analogous causes of action . . . ."); Conopco, 

Inc. v. Campbell Soup Co., 95 F.3d 187, 191 (2d Cir. 1996) 

("As the language of the Act makes clear, there is an 

intimate relationship between fraud and injury under the 

Lanham Act."). 

We therefore conclude that causes of action for fraud and 

deceptive trade practices are more analogous to aS 43(a) 

cause of action for trademark infringement than is"[a]n 

action upon a liability created by statute," 5 V.I.C. 

S 31(3)(B), and accordingly hold that the two-year statute of 

 12 

 

limitations is the more appropriate limitations period to 

apply to plaintiffs’ claims for trademark infringement under 

S 43(a). The weight of authority supports this view. See 

Lyons P’ship, L.P. v. Morris Costumes, Inc., 243 F.3d 789, 

796-97 (4th Cir. 2001) (applying the statute of limitations 

for the North Carolina Unfair Trade Practices Act, N.C. Gen. 

Stat. S 75-16.2, to plaintiffs’ trademark infringement claims 

under the Lanham Act); Kason Indus., Inc., 120 F.3d at 

1203-04 (holding that the Georgia Uniform Deceptive Trade 

Practices Act, O.C.G.A. S 10-1-370 et seq. , provides the 

most analogous cause of action under state law to plaintiffs’ 

trademark infringement claims under S 43(a) of the Lanham 

Act, for purposes of borrowing a statute of limitations); 

Eppendorf-Netheler-Hinz GmbH v. Enterton Co., 89 F. Supp. 

2d 483, 486 (S.D.N.Y. 2000) (borrowing the statute of 

limitations for fraud claims to create a presumption of 

laches applicable to plaintiff ’s trademark infringement 

claims); cf. Conopco, 95 F.3d at 191-92 (drawing on the 

statute of limitations for fraud to presume that plaintiffs’ 

false advertising claims under S 43(a) are barred by laches). 

C. 

Plaintiffs contend that even under a two-year statute of 

limitations period, their claims are viable because their 

discovery of defendants’ allegedly actionable conduct 

occurred within two years before the filing of this suit. 

Whether the limitations period begins running from the 

date that plaintiffs discovered the actionable conduct, as 

would be the case under a "discovery rule," or whether the 

limitations period begins running from the date the 

actionable conduct occurred, depends on the state law 

governing the most analogous cause of action. See Beauty 

Time, Inc. v. VU Skin Sys., Inc., 118 F.3d 140, 144 (3d Cir. 

1997) ("Because we look to state law for the appropriate 

statute of limitations, we also look to Pennsylvania law on 

the closely related questions of tolling and application.").4 

_________________________________________________________________ 
4. In urging us to apply the discovery rule to their claims, plaintiffs rely 

on the Supreme Court decisions in Bailey v. Glover, 88 U.S. 342 (1874), 

and Holmberg v. Armbrecht, 327 U.S. 392 (1946). Bailey held that the 

federal statute of limitations under the Bankruptcy Act was tolled where 

 13 

 

Under Virgin Islands law, the statute of limitations for 

fraud begins running at the time the plaintiff discovered the 

_________________________________________________________________ 

the defendant’s fraud concealed from plaintiffs the existence of their 

cause of action. See Bailey, 88 U.S. at 348 ("[W]here the party injured by 

the fraud remains in ignorance of it without any fault or want of 

diligence or care on his part, the bar of the statute does not begin to run 

until the fraud is discovered, though there be no special circumstances 

or efforts on the part of the party committing the fraud to conceal it from 

the knowledge of the other party."). Similarly, the Court in Holmberg held 

that state law rejecting the discovery rule did not apply to actions in 

equity to enforce a federal right that lacked a statute of limitations. See 

Holmberg, 327 U.S. at 397 ("It would be . . . incongruous to confine a 

federal right within the bare terms of a State statute of limitation 

unrelieved by the settled equitable federal doctrine as to fraud . . . ."). 

We are of course bound under our Internal Operating Procedures, see 

Third Circuit IOP 9.1, by Beauty Time. We are not uncomfortable with 

this posture, because while we acknowledge a possible tension between 

Beauty Time and these cases, we believe that they are reconcilable. In 

particular, Bailey addressed only the application of the discovery rule to 

an express federal statute of limitations, which is absent from the 

provisions of the Lanham Act at issue in this case and Beauty Time. 

Although Holmberg held that the discovery rule applied to a cause of 

action under a federal statute that, like the Lanham Act, lacked an 

express statute of limitations, Holmberg is reconcilable with Beauty Time 

on the ground that the statute at issue in Holmberg created only "a 

federal right for which the sole remedy is in equity." Holmberg, 327 U.S. 

at 395 (emphasis added). In contrast, the Lanham Act creates federal 

rights for which both legal and equitable remedies are available. See 

Dairy Queen, Inc. v. Wood, 369 U.S. 469, 477 (1962) ("[A]n action for 

damages based upon a charge of trademark infringement . . . [is] subject 

to cognizance by a court of law."). Accordingly, we comfortably follow the 

holding of Beauty Time that where a court borrows a statute of 

limitations from state law, the court must also borrow from state law the 

relevant tolling principles. See Hardin v. Straub, 490 U.S. 536, 539 

(1989) ("Limitations periods in S 1983 suits are to be determined by 

reference to the appropriate state statute of limitations and the 

coordinate tolling rules . . . ."); Bd. of Regents v. Tomanio, 446 U.S. 478, 

486 (1980) ("In virtually all statutes of limitations the chronological 

length of the limitation period is interrelated with provisions regarding 

tolling, revival, and questions of 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.") (quoting 

Johnson v. Ry. Express Agency, Inc., 421 U.S. 454, 464 (1975)). 

 14 

 

fraud, whereas the statute of limitations for deceptive trade 
practices begins running from the date the defendant 

committed the unlawful conduct. Compare 5 V.I.C. S 32(c) 

("In an action upon a . . . fraud, . . . the limitation shall be 

deemed to commence only from . . . the discovery of the 

fraud . . . ."), with 12A V.I.C. S 108(j) ("An action under this 

section must be brought within two years after the 

occurrence of a violation of this chapter [governing 

deceptive trade practices] . . . ."). To determine whether the 

discovery rule applies to plaintiffs’ Lanham Act claims, it is 

therefore necessary to decide whether claims for trademark 

infringement under S 43(a) of the Lanham Act are more 

analogous to common law fraud claims or claims for 

violations of the VI’s deceptive trade practices statute. 

The courts addressing the question are divided on 

whether common law fraud claims or claims under state 

unfair business practices statutes are more analogous to 

Lanham Act claims for trademark infringement. Compare 

Lyons P’ship, L.P. v. Morris Costumes, Inc., 243 F.3d 789, 

796-97 (4th Cir. 2001) (applying the statute of limitations 

for the North Carolina Unfair Trade Practices Act, N.C. Gen. 

Stat. S 75-16.2, to plaintiffs’ trademark infringement claims 

under the Lanham Act), Kason Indus., Inc. v. Component 

Hardware Group, Inc., 120 F.3d 1199, 1203-04 (11th Cir. 

1997) (holding that the Georgia Uniform Deceptive Trade 

Practices Act, O.C.G.A. S 10-1-370 et seq. , provides the 

most analogous cause of action under state law to plaintiffs’ 

trademark infringement claims under S 43(a) of the Lanham 

Act, for purposes of borrowing a statute of limitations), and 

Federal Express Corp. v. United States Postal Serv. , 75 F. 

Supp. 2d 807, 816-17 (W.D. Tenn. 1999) (applying the 

statute of limitations for the Tennessee Consumer 

Protection Act, T.C.A. S 47-18-104, to plaintiffs’ claims 

under S 43(a) of the Lanham Act), with Eppendorf-NethelerHinz GmbH v. Enterton Co., 89 F. Supp. 2d 483, 486 

(S.D.N.Y. 2000) (borrowing the statute of limitations for 

fraud claims to create a presumption of laches applicable to 

plaintiff ’s trademark infringement claims), HarleyDavidson, Inc. v. Estate of O’Connell, 13 F. Supp. 2d 271, 

279 (N.D.N.Y. 1998) (same), Derrick Mfg. Corp. v. 

Southwestern Wire Cloth, Inc., 934 F. Supp. 796, 804-05 

(S.D. Tex. 1996) (applying the fraud statute of limitations to 

 15 

 

plaintiffs’ trademark infringement claims underS 43(a)), 

and Johannsen v. Brown, 797 F. Supp. 835, 839-40 (D. Or. 

1992) (same).5 

An analysis of whether fraud claims or deceptive trade 

practices claims are more analogous to trademark 

infringement claims under S 43(a) of the Lanham Act must 

begin with a comparison of the elements of these causes of 

action. To establish trademark infringement under 

S 43(a)(1)(A) of the Lanham Act, a plaintiff must show that 

the defendant: 

 use[d] in commerce any word, term, name, symbol, or 

 device, or any combination thereof, or any false 
 designation of origin, false or misleading description of 

 fact, or false or misleading representation of fact, which 

 . . . is likely to cause confusion, or to cause mistake, 

 or to deceive as to the affiliation, connection, or 

 association of such person with another person, or as 

 to the origin, sponsorship, or approval of his or her 

 goods, services, or commercial activities by another 

 person . . . . 

15 U.S.C. S 1125(a)(1)(A). 

The Restatement (Second) of Torts defines the elements of 

common law fraudulent misrepresentation as follows: 

 One who fraudulently makes a misrepresentation of 

 fact . . . for the purpose of inducing another to act or 

 to refrain from action in reliance upon it, is subject to 

 liability to the other in deceit for pecuniary loss caused 

_________________________________________________________________ 

5. Those decisions addressing claims under the false advertising prong of 

S 43(a) have similarly divided on whether common law fraud or state 

deceptive trade practices statutes provide the appropriate limitations 

period. Compare Conopco, Inc. v. Campbell Soup Co., 95 F.3d 187, 191- 

92 (2d Cir. 1996) (drawing on the statute of limitations for fraud to 

presume that plaintiffs’ false advertising claims under S 43(a) of the 

Lanham Act are barred by laches), with Hot Wax, Inc. v. Warsaw Chem. 

Co., 45 F. Supp. 2d 635, 647 (N.D. Ill. 1999) (holding that the state law 

cause of action most analogous to plaintiffs’ false advertising claims 

under S 43(a) of the Lanham Act is the Illinois Consumer Fraud and 

Deceptive Business Practices Act, 815 ILCS 505/10a(e)), aff ’d on other 

grounds sub nom. Hot Wax, Inc. v. Turtle Wax, Inc. , 191 F.3d 813 (7th 

Cir. 1999). 

 16 

 

 to him by his justifiable reliance upon the 

 misrepresentation. 

Restatement (Second) of Torts S 525;6 see also Smith v. 

Commercial Banking Corp., 866 F.2d 576, 583 (3d Cir. 

1989) ("[T]he elements of common law fraud . . . require 

that a party make a material misrepresentation that 

another reasonably relies upon to his or her detriment."). 

Common law fraud also includes a scienter element: 

 A misrepresentation is fraudulent if the maker 

 (a) knows or believes that the matter is not as he 

 represents it to be, 

 (b) does not have the confidence in the accuracy of 

 his representation that he states or implies, or 

 (c) knows that he does not have the basis for his 

 representation that he states or implies. 

Restatement (Second) of Torts S 526. 
Under the Virgin Islands deceptive trade practices law, 

"[n]o person shall engage in any deceptive or 

unconscionable trade practice in the sale . . . of any 

consumer goods or services . . . ." 12A V.I.C.S 101. The 

statute defines a "deceptive trade practice" as "any false . . . 

or misleading oral or written statement, visual description 

or other representation of any kind made in connection 

with the sale . . . of consumer goods or services, .. . which 

has the capacity, tendency or effect of deceiving or 

misleading consumers." 12A V.I.C. S 102(a). The private 

remedy for violations of S 101 provides that"a consumer 

who suffers a loss as a result of a violation of this chapter 

may recover actual damages or $250, whichever is greater." 

12A V.I.C. S 108(b). 

The most salient difference between S 101 of the Virgin 

Islands deceptive trade practices law and trademark 

_________________________________________________________________ 

6. The Virgin Islands legislature has provided that "[t]he rules of the 

common law, as expressed in the restatements of the law approved by 

the American Law Institute . . . shall be the rules of decision in the 

courts of the Virgin Islands in cases to which they apply, in the absence 

of local laws to the contrary." 1 V.I.C. S 4. 

 17 

 

infringement under S 43(a) of the Lanham Act is that 

whereas S 43(a) applies to "uses in commerce" of infringing 

marks "in connection with any goods or services," 15 

U.S.C. S 1125(a) (emphasis added), S 101 prohibits only 

deceptive trade practices "in the sale . . . of any consumer 

goods or services," (emphasis added), which are defined as 

"foods, services, credit and debts which are primarily for 

personal, household or family purposes." 12A V.I.C. 

S 102(c). Cf. Kason Indus., Inc. v. Component Hardware 

Group, Inc., 120 F.3d 1199, 1204 (11th Cir. 1997) (noting 

that the Georgia Fair Business Practices Act, O.C.G.A. S 10- 

1-390 et seq., "is significantly different from . . . the 

Lanham Act, because of the former statute’s focus on the 

consumer (as opposed to the commercial) marketplace"). 

Like the scope of the Lanham Act, the scope of common law 

fraud is not limited to transactions involving consumers, 

but rather extends to any purchase in the commercial 

marketplace, such as transactions between wholesalers and 

retailers. 

Although the scope of transactions covered by the Virgin 

Islands prohibition against deceptive trade practices is 

more limited than the scope of transactions covered by 

common law fraud and the Lanham Act, we believe that the 

differences between the elements of common law fraud and 

trademark infringement under S 43(a) are significant. In 

particular, the scienter requirement for common law fraud 

is absent from S 43(a). That is, unlike a defendant in a 

common law fraud case, a defendant may be liable for 

trademark infringement under S 43(a) even if he or she 

innocently used an infringing mark and lacked any intent 

to confuse consumers as to the source of the goods. See 
Parkway Baking Co. v. Freihofer Baking Co., 255 F.2d 641, 

648 (3d Cir. 1958) ("The fact that the [infringing mark] 

appeared on [defendant’s product] because of a mistake is 

not a defense to an action under this section for there is no 

requirement that the falsification occur wilfully and with 

intent to deceive."); see also Johnson & Johnson v. CarterWallace, Inc., 631 F.2d 186, 189 (2d Cir. 1980) (noting that 

S 43(a) "does not require proof of intent to deceive"). 

Similarly, there is nothing in S 101’s prohibition against 

deceptive trade practices or S 102’s definition of deceptive 

trade practices that requires an intent to deceive. 

 18 

 

Common law fraud further differs from trademark 

infringement under S 43(a) and the deceptive trade 

practices prohibited by Virgin Islands statute in that 

common law fraud requires actual reliance on the 

defendant’s misrepresentation, whereas S 43(a) simply 

requires a designation that is "likely to cause confusion," 

and a deceptive trade practice simply requires a 

representation that has the "tendency or effect of deceiving 

or misleading." 12A V.I.C. S 102(a); cf. Kason Indus., Inc., 

120 F.3d at 1204 ("[W]hile the standard of the [Georgia 

Uniform Deceptive Trade Practices Act] and the Lanham Act 

is ‘likelihood of confusion,’ the standards for an arguably 

analogous claim under the [Georgia Fair Business Practices 

Act] is ‘actual confusion.’ "). 

Finally, the statutory definition of "deceptive trade 

practices" specifically includes "representations . . . that the 

supplier has a sponsorship, approval, status, [or] 

affiliation," which have the "tendency . . . of misleading 

consumers." 12A V.I.C. S 102(a)(1). This prohibition against 

representations that tend to mislead consumers as to the 

source or affiliation of goods or services strongly resembles 

the prohibition under S 43(a) against any designation that 

"is likely to cause confusion . . . as to the affiliation, 

connection, or association of [defendant] with another 

person, or as to the origin, sponsorship, or approval of 

[defendant’s] goods, services, or commercial activities by 

another person." 

Thus, although the Virgin Islands deceptive trade 

practices statute applies to a narrower range of 

transactions than common law fraud, within the range of 

covered transactions the conduct that renders a seller liable 

under the Virgin Islands deceptive trade practices statute 

bears a strong resemblance to the conduct that renders a 

seller liable for trademark infringement under S 43(a). In 

contrast, the doctrine of common law fraud renders a seller 

liable for misrepresenting the source of goods only if the 

seller possessed the requisite scienter and purchasers 

actually relied to their detriment on the misrepresentation. 

Neither of these elements is required under the deceptive 

trade practices statute or S 43(a). 

 19 

 
We therefore hold that the cause of action under Virgin 

Islands law most analogous to a trademark infringement 

claim under S 43(a) of the Lanham Act, for purposes of 

borrowing a statute of limitations, is a cause of action 

under 12A V.I.C. S 108 for deceptive trade practices in 

violation of 12A V.I.C. S 101. This cause of action is subject 

to a two-year statute of limitations that begins running 

from the date the violation of the statute occurred, not the 

date the violation was discovered, as would be the case 

under the statute of limitations for fraud. 12A V.I.C. S 108(j).7 

This holding makes it unnecessary for us to resolve the 

disputed question whether plaintiffs discovered the conduct 

complained of more than two years before filing this suit. 

Because plaintiffs do not argue that they commenced this 

action within two years of the allegedly actionable conduct, 

plaintiffs’ claims were properly dismissed as time-barred 

unless the statute of limitations was equitably tolled.8 

_________________________________________________________________ 

7. Under 12A V.I.C. S 108(j), "[a]n action under this section must be 

brought within two years after the occurrence of a violation of this 

chapter, within one year after the last payment in a consumer 

transaction involved in a violation of this chapter, or within one year 

after the termination of proceedings by the Director with respect to a 

violation of this chapter, whichever is later." The extension of the twoyear limitations period to "one year after the last payment in a consumer 

transaction involved in a violation of this chapter" or "one year after the 

termination of proceedings by the Director with respect to a violation of 

this chapter" is clearly inapplicable in this case. 

8. Plaintiffs do not argue that defendants’ allegedly unlawful conduct 

continued during the two-year period prior to filing this suit and that 

their claims therefore survive the two-year statute of limitations under 

the continuing wrong doctrine. See Hot Wax, Inc. v. Turtle Wax, Inc., 191 

F.3d 813, 821 (7th Cir. 1999) ("The notion of a‘continuing wrong’ . . . 

is . . . prevalent in Lanham Act cases . . . . Under the notion of a 

continuing wrong, only the last infringing act need be within the 

statutory period."); see also Lyons P’ship, L.P. v. Morris Costumes, Inc., 

243 F.3d 789, 797 (4th Cir. 2001) ("[A]lthough the district court was 

correct to hold that [plaintiff] could not recover for claims that accrued 

outside the limitations periods, it erred to the extent that it dismissed 

[plaintiffs’ Lanham Act] claims that were premised upon acts that 

occurred within the applicable periods.") (internal quotation marks and 

citations omitted). 

 20 

 

III. 

Plaintiffs argue that their filing of a similar action in the 

District Court for the District of Puerto Rico within the twoyear limitations period equitably tolled the statute of 

limitations. Defendants respond that the doctrine of 

equitable tolling is inapplicable because plaintiffs’ Puerto 

Rico suit was dismissed for lack of personal jurisdiction. 

According to defendants, the filing of a lawsuit in a court 

that lacks personal jurisdiction over the defendants does 

not toll the running of the limitations period. 
There appears to be no binding case law on the question 

whether, under Virgin Islands law, a lawsuit filed in a court 

that lacks personal jurisdiction over the defendants may 

equitably toll the statute of limitations. In such a case, we 

are instructed by 1 V.I.C. S 4 that: 

 The rules of the common law, as expressed in the 

 restatements of the law approved by the American Law 

 Institute, and to the extent not so expressed, as 

 generally understood and applied in the United States, 

 shall be the rules of decision in the courts of the Virgin 

 Islands in cases to which they apply, in the absence of 

 local laws to the contrary. 

But there is neither a Virgin Islands statute nor a 

Restatement rule deciding the question of equitable tolling 

in this case, and hence we must look to the common law 

"as generally understood and applied in the United States." 

See Abdallah v. Callender, 1 F.3d 141, 147 (3d Cir. 1993) 

("[T]he common law as generally understood and applied in 

the United States applies in the Virgin Islands absent a 

statute or Restatement rule to the contrary . . . ."). 

Because many states have "savings statutes," under 

which the filing of an action later dismissed for reasons 

unrelated to the merits tolls the statute of limitations, there 

are few decisions addressing this question as a matter of 

common law. See Hosogai v. Kadota, 700 P.2d 1327, 1334 

(Ariz. 1985) ("[A] clear majority of the states -- thirty-one -- 

presently have general savings statutes in civil actions."); 4 

Charles Alan Wright & Arthur R. Miller, Federal Practice 

and Procedure S 1056 at 273 n.44 (3d ed. 2002) (noting that 

over half the states have savings statutes of some kind). 

 21 

 

Among those courts that have addressed the question, 

there appears to be a split of authority. Compare Mayes v. 

Leipziger, 729 F.2d 605, 608 (9th Cir. 1984) (holding that 

under California common law, the filing of an action that is 

dismissed for lack of personal jurisdiction may equitably 

toll the statute of limitations with respect to a subsequently 

filed identical action), Hosogai v. Kadota, 700 P.2d 1327 

(Ariz. 1985) (same holding, under Arizona common law), 

and Mitzner v. W. Ridgelawn Cemetery, Inc., 709 A.2d 825, 

826 (N.J. Super. Ct. App. Div. 1998) (same holding, under 

New Jersey common law), with Young v. Clantech, Inc., 863 

F.2d 300, 300 (3d Cir. 1988) (per curiam) (holding that 

under New Jersey common law, a lawsuit filed in a court 

that lacked personal jurisdiction over the defendant cannot 

equitably toll the statute of limitations), and Johnson v. City 

of Raleigh, 389 S.E.2d 849, 850 (N.C. Ct. App. 1990) 

(holding that under North Carolina common law, "a 

voluntarily dismissed suit which is based on defective 

service does not toll the statute of limitations"). 

As there is no majority common law rule governing this 

question, we must therefore select the more appropriate 
rule as a matter of policy. See Polius v. Clark Equip. Co., 

802 F.2d 75, 77 (3d Cir. 1986) ("Where the Restatement is 

silent and a split of authority exists, courts should select 

the sounder rule" in resolving questions of Virgin Islands 

law.). In choosing the better rule, we are guided by the 

policy rationale underlying statutes of limitations generally: 

 Statutes of limitations are primarily designed to assure 

 fairness to defendants. Such statutes promote justice 

 by preventing surprises through the revival of claims 

 that have been allowed to slumber until evidence has 

 been lost, memories have faded, and witnesses have 

 disappeared. The theory is that even if one has a just 

 claim it is unjust not to put the adversary on notice to 

 defend within the period of limitation and that the right 

 to be free of stale claims in time comes to prevail over 

 the right to prosecute them. Moreover, the courts 

 ought to be relieved of the burden of trying stale claims 

 when a plaintiff has slept on his rights. 

Burnett v. N.Y. Cent. R.R. Co., 380 U.S. 424, 428 (1965) 

(internal quotation marks and citations omitted). 

 22 

 

Similarly, in Sperling v. Hoffman-La Roche, Inc. , 24 F.3d 

463 (3d Cir. 1994), we identified "three basic purposes a 

statute of limitations serves": 

 They are first a practical and pragmatic device to spare 

 the courts from litigation of stale claims, and the 

 citizen from being put to his defense after memories 

 have faded, witnesses have died or disappeared, and 

 evidence has been lost. . . . Secondly, limitations 

 periods are intended to put defendants on notice of 

 adverse claims. Finally, limitations periods prevent 

 plaintiffs from sleeping on their rights. 

Id. at 471-72 (internal quotation marks, citations, and 

alterations omitted). 

Defendants rely on our decision in Young v. Clantech, 

Inc., 863 F.2d 300 (3d Cir. 1988) (per curiam), which held 

that under New Jersey law, a lawsuit filed in a court that 

lacks personal jurisdiction over the defendant cannot 

equitably toll the statute of limitations. Young , however, is 

not controlling here, since we must look to Virgin Islands 

law, not New Jersey law, to determine whether filing suit in 

a court that lacks personal jurisdiction may equitably toll 

the statute of limitations. See Beauty Time, Inc. v. VU Skin 

Sys., Inc., 118 F.3d 140, 144 (3d Cir. 1997) ("Because we 

look to state law for the appropriate statute of limitations, 

we also look to Pennsylvania law on the closely related 

questions of tolling and application."). 

Nor do we find Young persuasive on the question whether 

the sounder rule as a matter of policy permits the filing of 

a first action in a court that lacks personal jurisdiction to 

toll the statute of limitations for purposes of a second 
action. Young gave only cursory treatment to the policy 

questions implicated by its holding, and rested its 

prediction of how the New Jersey Supreme Court would 

decide the question of New Jersey law primarily on the New 

Jersey Supreme Court’s case law in this area. See Young, 

863 F.2d at 301 ("Traditionally, the filing of a case against 

a defendant in a court which did not have jurisdiction over 

the action tolled New Jersey’s statute of limitations only if 

the court in which the case was originally filed had 

authority to transfer the case to the proper court.") (citing 

 23 

 

Kaczmarek v. N.J. Turnpike Auth., 390 A.2d 597 (N.J. 

1978)). Whereas in Young we were writing against a 

backdrop of New Jersey Supreme Court precedent, in this 

case we write on a clean slate, as there is no relevant 

binding authority on this point of Virgin Islands law. 

We also note that the New Jersey Superior Court 

Appellate Division in Mitzner v. West Ridgelawn Cemetery, 

Inc., 709 A.2d 825 (N.J. Super. Ct. App. Div. 1998), 

disapproved Young’s distinction between filing suit in a 

court that lacks subject matter jurisdiction, which tolls the 

statute of limitations under New Jersey law, see Galligan v. 

Westfield Ctr. Serv., Inc., 412 A.2d 122, 123 (N.J. 1980), 

and filing suit in a court that lacks in personam 

jurisdiction, which Young held does not toll the statute of 

limitations under New Jersey law but Mitzner held does: 

 Although the [Young] court suggested that significant 

 policy arguments support a distinction between the two 

 types of defects, it did not spell them out. We do not 

 perceive any. Indeed, if there is a distinction, the filing 

 in a court without subject matter jurisdiction would 

 seem to be the greater defect. 

Mitzner, 709 A.2d at 828; cf. Burnett , 380 U.S. at 429 

(holding that an action filed in an improper venue tolled the 

FELA statute of limitations, and noting that "venue 

objections may be waived by the defendant"). We therefore 

do not believe that Young is either controlling or persuasive 

on the question whether, purely as a matter of policy, the 

sounder rule is to permit equitable tolling where a plaintiff 

files an initial action in a court that lacks in personam 

jurisdiction over the defendants. 

We believe that the rule adopted by the Arizona Supreme 

Court in Hosogai v. Kadota, 700 P.2d 1327 (Ariz. 1985), 

makes more sense than the rule of New Jersey common law 

adopted by Young. Hosogai held that a statute of limitations 

is equitably tolled for a second action by the filing of a 

procedurally defective first action if there is:"1) timely 

notice to the defendant in filing the first claim; 2) lack of 

prejudice to the defendant in gathering evidence to defend 

against the second claim; [and] 3) reasonable and good 

faith conduct by the plaintiff in prosecuting the first action 

 24 
 

and diligence in filing the second action." Hosogai, 700 P.2d 

at 1333; see also Mayes v. Leipziger, 729 F.2d 605, 608 

(9th Cir. 1984) ("California equitably tolls its statutes of 

limitation during the pendency of an earlier case provided 

there is timely notice, and lack of prejudice to the 

defendant, and reasonable and good faith conduct on the 

part of the plaintiff.") (internal quotation marks and citation 

omitted). 

In our view, the equitable tolling rule articulated in 

Hosogai avoids the unfairness that would occur if a plaintiff 

who diligently and mistakenly prosecuted his claim in a 

court that lacked personal jurisdiction were barred under 

the statute of limitations from promptly refiling in a proper 

jurisdiction. Cf. Goldlawr, Inc. v. Heiman, 369 U.S. 463, 

466 (1962) (recognizing "the injustice" that would result "in 

plaintiff ’s losing a substantial part of its cause of action 

under the statute of limitations merely because it made a 

mistake in thinking that the respondent corporations could 

be found or that they transact business" in the forum 

venue) (internal quotation marks and alterations omitted). 

At the same time that the Hosogai rule avoids unfairness 

to plaintiffs who diligently prosecute their claims, it 

preserves the policies underlying statutes of limitations 

which, as the Supreme Court explained in Burnett , "assure 

fairness to defendants . . . . by preventing surprises 

through the revival of claims that have been allowed to 

slumber until evidence has been lost, memories have faded, 

and witnesses have disappeared." 380 U.S. at 428. In 

Burnett, the Court held that an action dismissed for 

improper venue equitably tolled the FELA statute of 

limitations. The Court’s holding rested on the conclusion 

that the policies underlying statutes of limitations would 

not be served by holding plaintiffs’ claims time-barred: 

 Petitioner here did not sleep on his rights but brought 

 an action within the statutory period in a state court of 

 competent jurisdiction. Service of process was made 

 upon the respondent notifying him that petitioner was 

 asserting his cause of action. . . . Respondent could not 

 have relied upon the policy of repose embodied in the 

 limitation statute, for it was aware that petitioner was 

 actively pursuing his FELA remedy; in fact, respondent 

 25 

 

 appeared specially in the Ohio court to file a motion for 

 dismissal on grounds of improper venue. 

Burnett, 380 U.S. at 429-30. 

Similarly, the Hosogai rule protects defendants by 

permitting equitable tolling only if the filing of the first 

action put the defendant on notice within the limitations 

period, there was no prejudice to the defendant in 

defending the second action, and the plaintiff acted 
reasonably and in good faith in prosecuting the first action 

and exercised diligence in prosecuting the second action. 

To be sure, the fact-specific, multi-factored nature of this 

equitable tolling test will consume more judicial resources 

than an easily applied bright-line rule that the filing of an 

action in a court that lacks personal jurisdiction over the 

defendants does not toll the statute of limitations. 

Moreover, application of the Hosogai rule, because it is so 

fact-specific, may undermine predictability to some degree. 

These problems, however, are inherent in all equitable 

doctrines, which demand flexibility in order to avoid the 

arbitrariness of rigid rules. See Holmberg v. Armbrecht, 327 

U.S. 392, 396 (1946) ("Equity eschews mechanical rules; it 

depends on flexibility."). 

Thus, we hold that under Virgin Islands law, the statute 

of limitations for a second action may be equitably tolled by 

the filing of a first action dismissed for lack of personal 

jurisdiction if: (1) the first action gave defendant timely 

notice of plaintiff ’s claim; (2) the lapse of time between the 

first and second actions will not prejudice the defendant; 

and (3) the plaintiffs acted reasonably and in good faith in 

prosecuting the first action, and exercised diligence in filing 

the second action. Application of this test to the record 

before us does not yield a clear-cut answer. On the one 

hand, the suit filed in the District Court for the District of 

Puerto Rico within the two-year limitations period afforded 

defendants timely notice of plaintiffs’ claims. Moreover, at 

oral argument, defendants were unable to identify any 

prejudice caused by plaintiffs’ delay in bringing this suit 

following the dismissal of the first suit. On the other hand, 

plaintiffs’ failure to request the District Court for the 

District of Puerto Rico to transfer the case to the Virgin 

 26 

 

Islands, pursuant to 28 U.S.C. S 1631, if that court found 

that it lacked personal jurisdiction, may have been 

unreasonable.9 Furthermore, in waiting nearly three 

months to refile a substantially similar complaint in the 

Virgin Islands, plaintiffs may not have exercised sufficient 

diligence in prosecuting this action. 

Application of this equitable doctrine is generally 

committed to the discretion of the trial court in the first 

instance. The record is not fully developed with respect to 

these issues, and the record that has been developed does 

not, as explained above, cut clearly in favor of plaintiffs or 

defendants. Accordingly, we will vacate the District Court’s 

order dismissing plaintiffs’ claims as time-barred, and 

remand the case to the District Court further proceedings 

consistent with this opinion. 

A True Copy: 

Teste: 

Clerk of the United States Court of Appeals 

for the Third Circuit 
_________________________________________________________________ 

9. The Puerto Rico District Court had authority, if it found that it lacked 

in personam jurisdiction, to transfer plaintiffs’ first action to the District 

Court of the Virgin Islands. See 28 U.S.C.S 1631 ("Whenever a civil 

action is filed in a court . . . and that court finds that there is a want 

of jurisdiction, the court shall, if it is in the interest of justice, transfer 

such action or appeal to any other such court in which the action or 

appeal could have been brought at the time it was filed or noticed, and 

the action or appeal shall proceed as if it had been filed in or noticed for 

the court to which it was transferred on the date upon which it was 

actually filed in or noticed for the court from which it is transferred."). 

Plaintiffs, however, did not request the Puerto Rico District Court, if it 

found that it lacked personal jurisdiction over the defendants, to transfer 

the case to the District of the Virgin Islands, and the Court apparently 

did not recognize that authority sua sponte. 

 27