Opinion ID: 2818826
Heading Depth: 2
Heading Rank: 1

Heading: Does State or Federal Accrual Law Apply?

Text: A threshold question, disputed by the parties, is whether we look to Puerto Rico or federal law in making that accrual determination. Federal courts sitting in diversity apply the substantive law of the state and, pursuant to statute, Puerto Rico is treated as a state for diversity purposes. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938); 28 U.S.C. § 1332(e). State law includes the applicable state statute of limitations. See Guaranty Trust Co. of N.Y. v. York, 326 U.S. 99, 110 (1945); Morel v. DaimlerChrysler AG, 565 F.3d 20, 23 (1st Cir. 2009). QCP's breach of contract action is based on Puerto Rico law and, consistent with Erie and Guaranty Trust, the parties agree that Act 75's three-year statute of limitations applies. But, pointing to cases in which we have borrowed a state's statute of limitations for purposes of federal law while noting that the date of accrual remains a federal law question, QCP urges that -- even in a diversity action -- accrual is necessarily governed by federal law. QCP's contention is mistaken. In fact, it directly conflicts with the Supreme Court's remark in Ragan v. Merchants Transfer & Warehouse Co. that a cause of action in a diversity action accrues and comes to an end when local law so declares. 337 U.S. 530, 533 (1949). Relying on this plain statement, several other circuits have held that it is long since settled that state - 5 - law governs when a state-created cause of action accrues. Walko Corp. v. Burger Chef Sys., Inc., 554 F.2d 1165, 1171 (D.C. Cir. 1977); accord Cantor Fitzgerald Inc. v. Lutnick, 313 F.3d 704, 709-10 (2d Cir. 2002); Joyce v. A.C. & S., Inc. 785 F.2d 1200, 1203 (4th Cir. 1986). We agree. Moreover, this rule makes eminent sense because a federal court sitting in diversity must apply related state-law rules that form an integral part of the several policies served by the [state's] statute of limitations. Walker v. Armco Steel Corp., 446 U.S. 740, 751 (1980) (holding that whether filing of the complaint tolls the statute of limitations is governed by state law); see also, e.g., West v. Am. Tel. & Tel. Co., 311 U.S. 223, 239 (1940) (applying Ohio law requiring a plaintiff to make a prelawsuit demand before the statute of limitations begins to run). State accrual rules fit comfortably within this category. When state law commands that the statute of limitations hourglass is to be turned is no less an integral part of a state's statute of limitations scheme than how long the state allows the sand to drain. That we frequently apply federal accrual rules in the context of § 1983 actions and other federal laws does not aid QCP. When a federal statute contains no statute of limitations, we apply the most analogous statute of limitations in the state where the action was brought. Greenwood ex rel. Estate of Greenwood v. - 6 - N.H. Pub. Utils. Comm'n, 527 F.3d 8, 13 (1st Cir. 2008); see also, e.g., Randall v. Laconia, N.H., 679 F.3d 1, 4-5 (1st Cir. 2012) (applying state statute of limitations but federal accrual rules for purposes of the Residential Lead-Based Paint Hazard Reduction Act, 42 U.S.C. § 4852d). In those circumstances, federal rules determine when the claim accrues because the cause of action is created by federal law, even if the statute of limitations is set by reference to state law. Cantor Fitzgerald, 313 F.3d at 710. But when, by contrast, federal jurisdiction is based on diversity . . . state substantive law must govern accrual and the statute of limitations alike. Id. Indeed, we have consistently adhered to this delineation in diversity cases, albeit without explicitly referencing this threshold distinction. See, e.g., Erlich, 637 F.3d at 35 (considering Maine's accrual rules); Loguidice v. Metro. Life Ins. Co., 336 F.3d 1, 6 (1st Cir. 2003) (applying Massachusetts' discovery rule). To remove all doubt, we take this opportunity to clearly hold that a federal court sitting in diversity must apply the relevant state's statute of limitations, including its accrual rules. The mere fact that a diversity-based action is brought in a federal court instead of in a State court a block away, should not lead to a substantially different result. Guaranty Trust Co., 326 U.S. at 109. Accordingly, we decline QCP's invitation to - 7 - graft a federal common law of accrual onto local statutes of limitation when sitting in diversity. B. Applying Puerto Rico's Accrual Rules to QCP's Claim We thus look to Puerto Rico law to resolve whether the continuing violation doctrine or the discovery rule applies. We discuss each doctrine in turn.
QCP first argues that the discounts SCA granted pursuant to the Bunzl agreement -- which continued at least until 2010, and perhaps extend into the present -- constitute a continuing violation of the distribution agreement. In narrow circumstances, typically including Title VII and other discrimination claims, the continuing violation doctrine permits a plaintiff to recover for injuries occurring outside of the limitations period. See PérezSánchez v. Pub. Bldg. Auth., 531 F.3d 104, 107 (1st Cir. 2008). As long as a related act falls within the limitations period, the doctrine allows a lawsuit to be delayed in cases -- such as hostile work environment claims -- in which a course of repeated conduct is necessary before a series of wrongful acts blossoms into an injury on which suit can be brought. Ayala v. Shinseki, 780 F.3d 52, 57 (1st Cir. 2015) (internal quotation marks omitted). The doctrine does not apply, however, to allow the late filing of a claim based on a discrete discriminatory act that occurs on a specific day, and thus does not permit a plaintiff to avoid filing - 8 - suit so long as some person continues to violate his rights, Pérez-Sánchez, 531 F.3d at 107; see also Nat'l R.R. Passenger Corp. v. Morgan, 536 U.S. 101, 113 (2002). In that sense, the doctrine is not truly about a continuing [violation], but about a cumulative violation. Limestone Dev. Corp. v. Village of Lemont,