Opinion ID: 501682
Heading Depth: 1
Heading Rank: 5

Heading: federal statute of limitations

Text: 106 In the district court, the defendants moved to dismiss the plaintiffs' claims insofar as they were based upon events or activities which occurred before the four-year limitations period of section 4B of the Clayton Act, 15 U.S.C. Sec. 15b. Treating these motions as motions for summary judgment under Rule 56 of the Federal Rules of Civil Procedure, the district court found that there was a genuine issue of material fact whether the defendants had fraudulently concealed plaintiffs' causes of action which may have accrued before the four-year limitations period. The district court therefore denied the motions. Pinney Dock & Transport Co. v. Penn Central Corp., 1983-2 Trade Cas. (CCH) p 65,608 (N.D. Ohio 1983). 107 Under the doctrine of fraudulent concealment, if a defendant conceals from the plaintiff the existence of a cause of action, the statute of limitations is tolled. To toll the statute, the plaintiff must allege in the complaint that: (1) the defendant concealed the conduct that constitutes the cause of action; (2) defendant's concealment prevented plaintiff from discovering the cause of action within the limitations period; and (3) until discovery plaintiff exercised due diligence in trying to find out about the cause of action. Dayco Corp. v. Goodyear Tire & Rubber Co., 523 F.2d 389, 394 (6th Cir.1975). The burden of proving the elements of fraudulent concealment is upon plaintiff. Akron Presform Mold Co. v. McNeil Corp., 496 F.2d 230, 233, 234 n. 5 (6th Cir.1974); In re Beef Industry Anti-Trust Litigation, 600 F.2d 1148, 1171 (5th Cir.1979). But see Hobson v. Wilson, 737 F.2d 1, 35 (D.C.Cir.1984), holding that the burden of showing lack of due diligence shifts to defendant. 108 In denying the defendants' motions for summary judgment the district court ruled that a genuine issue of material fact existed as to each element of Dayco. Defendants attack this ruling and also argue that the district court applied the wrong theory to the first Dayco element. 109 The equitable doctrine of fraudulent concealment represents a longstanding exception to the rule that the plaintiff must commence his action within the period provided by the relevant statute of limitations. [T]he authorities are without conflict in support of the doctrine that where the ignorance of the fraud has been produced by affirmative acts of the guilty party in concealing the facts from the other, the statute will not bar relief provided suit is brought within proper time after the discovery of the fraud. Bailey v. Glover, 88 U.S. (21 Wall.) 342, 347-48, 22 L.Ed. 636 (1874). However, because statutes of limitation are vital to the welfare of society and are favored in the law, the plaintiff who invokes the doctrine of fraudulent concealment will be held to stringent rules of pleading and evidence, 'and especially must there be distinct averments as to the time when the fraud, mistake, concealment, or misrepresentation was discovered, and what the discovery is, so that the court may clearly see whether, by ordinary diligence, the discovery might not have been before made.'  Wood v. Carpenter, 101 U.S. (11 Otto) 135, 139-40, 25 L.Ed. 807 (1879) (citation omitted). 18 110 In the context of private anti-trust actions the doctrine of fraudulent concealment is well recognized by the federal courts, including our own court. See Akron Presform Mold Co. v. McNeil Corp., 496 F.2d 230 (6th Cir.1974); Dayco Corp. v. Goodyear Tire & Rubber Co., 523 F.2d 389 (6th Cir.1975). See also Annotation, Application of Fraudulent Concealment Doctrine to Statute of Limitations in Antitrust Cases (15 U.S.C.S. Sec. 15b), 72 A.L.R. Fed. 431. As we held in Dayco: We have recognized that the statute of limitations applicable to private anti-trust actions may be tolled where a plaintiff did not file its action in time because of ignorance resulting from a defendant's fraudulent concealment. 523 F.2d at 394. 111
112 On appeal, the defendants initially contend that the district court below erred in holding that Dayco 's first element, wrongful concealment, does not require proof of affirmative acts of concealment. The district court, however, held: 113 It does not make sense to rigidly apply a statute of limitations where the defendant has carried out its illegal activities in a manner which precluded detection. As the Supreme Court stated in Bailey v. Glover, 88 U.S. [21 Wall.] 342 [22 L.Ed. 636] (1874): 114 [Statutes of Limitation] were enacted to prevent frauds; to prevent parties from asserting rights after the lapse of time had destroyed or impaired the evidence which should show that such rights never existed, or had been satisfied, transferred, or extinguished, if they ever did exist. To hold that by concealing a fraud, or by committing a fraud in a manner that it concealed itself until such time as the party committing the fraud could plead the statute of limitations to protect it, is to make the law which was designed to prevent fraud the means by which it is made successful and secure. [Emphasis added.] 115 Pinney Dock, 1983-2 Trade Cas. (CCH) p 65,608 at 69,041 n. 6. According to the defendants, the district court's reliance upon Bailey v. Glover for the proposition that wrongful concealment may also be established by conduct which causes a conspiracy to be carried out in a manner which precludes detection or self-concealing misconduct is misplaced. We agree with defendants at least to the extent that the Sixth Circuit has apparently not conclusively decided the issue of whether the element of wrongful concealment requires proof of affirmative acts. 116 In Campbell v. Upjohn Co., 676 F.2d 1122 (6th Cir.1982), the Sixth Circuit, although not actually confronted with the issue of whether fraudulent concealment required proof of affirmative acts, did recognize that there was a distinction between non-active and active concealment. Plaintiff alleged that a corporation fraudulently induced him to sign a merger agreement and then took additional steps to fraudulently conceal from him the terms of that agreement. The district court held that because the plaintiff failed to satisfy the requirement of due diligence in discovering his cause of action, he was barred by the statute of limitations. On appeal, the plaintiff argued that the due diligence requirement should not apply to cases of active fraudulent concealment where the defendant has engaged in affirmative acts of concealment beyond the original fraud itself. Our court rejected this argument, holding that alleged additional acts of concealment by the defendant beyond the original fraud did not exempt the plaintiff from the requirement of diligence in pleading the federal equitable tolling doctrine of fraudulent concealment. Id. at 1128. The court did state, however, that [a]ctive concealment by the defendant will be considered in determining the reasonableness of the behavior of the plaintiff under the circumstances in discovering his cause of action. Id. In reaching this conclusion, the court emphasized that: 117 [Plaintiff] would have the statute tolled indefinitely, while evidence stales, memories fade and courts and adversaries wait, until the plaintiff at his leisure alleges actual discovery, despite the avalanche of evidence that would put all but the most indiligent plaintiffs on notice of a cause of action. 118 Statutes of limitations are vital to the welfare of society and are favored in the law. Stale conflicts should be allowed to rest undisturbed after the passage of time has made their origins obscure and the evidence uncertain. Dayco Corp. v. Goodyear Tire & Rubber Co., supra, 523 F.2d 389 at 394 (citations omitted). 119 A plaintiff who requests the avoidance of these important objectives owes the courts, the public and his adversaries a duty of diligence in discovering and flling his lawsuit. 120 Id. In holding that affirmative acts of concealment by the defendant beyond the original fraud do not relieve the plaintiff of the requirement of due diligence, the court therefore joined those circuits which have declined to formulate a separate rule for cases involving active concealment by the defendant. Id. 121 The Supreme Court has apparently had only two occasions to discuss the doctrine of fraudulent concealment at any length, and both of these cases are quite old. In Bailey v. Glover, 88 U.S. (21 Wall.) 342, 22 L.Ed. 636 (1874), which the district court placed heavy reliance upon in the instant case, the Supreme Court held upon the facts then before it that plaintiff's action was not barred by the statute of limitations because, [t]o hold that by concealing a fraud, or by committing a fraud in a manner that it concealed itself until such time as the party committing the fraud could plead the statute of limitations to protect it, is to make the law which was designed to prevent fraud the means by which it is made successful and secure. Id. at 349. 122 In Wood v. Carpenter, 101 U.S. (11 Otto) 135, 25 L.Ed. 807 (1879), however, the Supreme Court held: 123 Concealment by mere silence is not enough. There must be some trick or contrivance intended to exclude suspicion and prevent inquiry. 124 There must be reasonable diligence; and the means of knowledge are the same thing in effect as knowledge itself. 125 The circumstances of the discovery must be fully stated and proved, and the delay which has occurred must be shown to be consistent with the requisite diligence. 126 Id. at 143. 127 Thus, while Bailey v. Glover indicates that the commission of a fraud which is of such a character as to conceal itself, may be sufficient to toll the statute of limitations under the fraudulent concealment doctrine, Wood v. Carpenter holds that concealment by mere silence is not enough. There must be some trick or contrivance intended to exclude suspicion and prevent inquiry. 128 Bailey v. Glover was subsequently followed by the Supreme Court in Exploration Co. v. United States, 247 U.S. 435, 38 S.Ct. 571, 62 L.Ed. 1200 (1918). The government argued that the principles of Bailey v. Glover were applicable to the instant action, and argued further that [t]here were affirmative acts of concealment; but it is enough that the fraud was such as to conceal itself. Id. at 445, 38 S.Ct. at 572. 129 The Supreme Court affirmed the court of appeals, holding: 130 When Congress passed the Act in question the rule of Bailey v. Glover was the established doctrine of this court. It was presumably enacted with the ruling of that case in mind. We cannot believe that Congress intended to give immunity to those who for the period named in the statute might be able to conceal their fraudulent action from the knowledge of the agents of the government. We are aware of no good reason why the rule, now almost universal, that statutes of limitations upon suits to set aside fraudulent transactions shall not begin to run until the discovery of the fraud, should not apply in favor of the government as well as a private individual. 131 Id. at 449, 38 S.Ct. at 574. See also United States v. Diamond Coal Co., 255 U.S. 323, 41 S.Ct. 335, 65 L.Ed. 660 (1921). 132 Bailey v. Glover was likewise followed in Rosenthal v. Walker, 111 U.S. 185, 4 S.Ct. 382, 28 L.Ed. 395 (1884), which also distinguished Wood v. Carpenter. In Walker, plaintiff alleged that the bankrupt transferred certain property to the defendant in order to prevent the plaintiff from claiming an interest in that property in bankruptcy proceedings. Although the action was brought after the applicable statute of limitations had expired, plaintiff alleged that the bankrupt and the defendant kept concealed from him the fact of the sale, transfer, and conveyance of the goods. 133 On appeal to the Supreme Court, the defendant argued that plaintiff's action was barred by the statute of limitations. The Supreme Court rejected this argument stating: 134 The case of Bailey v. Glover is a decision construing the statute which is relied on in this case, and unless subsequently overruled by this court is conclusive of the point under discussion. It has never been overruled. The plaintiff in error relies on the case of Wood v. Carpenter, 101 U.S. 135, and National Bank v. Carpenter, Id. [101 U.S. (11 Otto) ] 567 [25 L.Ed. 815 (1879) ]. The first was an action at law, the second a suit in equity. The court in both cases was called on to construe a statute of limitations of the State of Indiana, and it followed the adjudication of the Supreme Court of that State upon the same statute. Neither case refers to the opinion of the court in Bailey v. Glover, or can be held to overrule or modify it. The case of Bailey v. Glover has been often cited by this court, but has never been doubted or qualified. Wood v. Bailey, 21 Wall. [88 U.S.] 640 [22 L.Ed. 689]; Wiswall v. Campbell, 93 U.S. [3 Otto] 347 [23 L.Ed. 923]; Gifford v. Helms, 98 U.S. [8 Otto] 248 [25 L.Ed. 57]; Upton v. McLaughlin, 105 U.S. [15 Otto] 640 [26 L.Ed. 1197]. We are of opinion, therefore, that the assignment of error under consideration is not well founded. 135 Walker, 111 U.S. at 190-91, 4 S.Ct. at 384-85. Thus, according to Rosenthal v. Walker, Wood v. Carpenter is limited to the particular case in which the Court was construing a state statute of limitations and following the adjudications of the Supreme Court of Indiana. See also Traer v. Clews, 115 U.S. 528, 538, 6 S.Ct. 155, 159, 29 L.Ed. 467 (1885) The case of Bailey v. Glover, has never been overruled, doubted, or modified by this court. On the contrary, in Rosenthal v. Walker, it was reaffirmed, and was distinguished from the case of Wood v. Carpenter ...). See, however, Felix v. Patrick, 145 U.S. 317, 12 S.Ct. 862, 36 L.Ed. 719 (1892), which neither cites to, nor makes any attempt to reconcile, Bailey v. Glover with Wood v. Carpenter. 136 The last reference made to Wood v. Carpenter by the Supreme Court occurred in United States v. Kubrick, 444 U.S. 111, 117, 100 S.Ct. 352, 356, 62 L.Ed.2d 259 (1979), where the Supreme Court cited that case for the proposition that, [s]tatutes of limitations, ... 'are found and approved in all systems of enlightened jurisprudence,' Wood v. Carpenter, 101 U.S. (11 Otto) 135, 139, 25 L.Ed. 807 (1879).... Apart from one oblique reference in Kubrick, however, the Supreme Court has not recently had occasion to cite or otherwise discuss either Wood v. Carpenter or Bailey v. Glover. One distinguished commentator has explained the difference between active and passive fraudulent concealment as follows: 137 Where undiscovered fraud was the basis of liability, it was universally agreed that no new concealment was necessary and the wrongdoer might remain wholly passive, provided no avenues were open to the plaintiff for discovery of the fraud. But in cases that fell outside the elastic boundaries of the fraud exception new difficulties appeared. To permit suspension of the statute of limitations in all cases where the suitor was ignorant of his claim must have seemed hazardous. Behind the decisions there must have lain a conviction that for suspension of the statute outside the field of fraud there should be added to the suitor's ignorance some affirmative misconduct by the opposite party, preventing discovery and excusing delay. And when the fraudulent concealment exception had once been formulated, the language of the formula itself gave a new direction to judicial inquiries. In examining the factual cases for suspension of the statute they were led beyond a scrutiny of the original cause of action and of the plaintiff's later opportunities for discovery, to an emphasis on the means by which the defendant obstructed discovery. 138 There can be found in the cases innumerable statements that fraudulent concealment involves affirmative efforts by the defendant to prevent discovery. But qualifications are often attached. It is said that the defendant's concealment need not be subsequent to the original wrongdoing, but may proceed or accompany it, provided all his conduct taken together is calculated to mislead or allay suspicion. It is sometimes added that all requirements are satisfied if the original misconduct was of such a kind as to conceal itself. And finally, in some cases the further requirement is added that defendant's efforts must include some element of fraud or moral turpitude, though numerous decisions reject such a test. From such a welter of conflicting generalities one can only draw the conclusion that generalities are being overworked, that in each case too wide a variety of fact situations is being included in a single formula. 139 Dawson, Fraudulent Concealment and Statutes of Limitation, 31 Mich.L.Rev. 875, 880-82 (1933) (footnotes omitted). 140 Most of the appellate cases which have addressed the issue in the context of antitrust actions have required allegations or proof of affirmative concealment under the first element of the doctrine of fraudulent concealment. See, e.g., Hennegan v. Pacifico Creative Service Inc., 787 F.2d 1299 (9th Cir.1986); Berkson v. Del Monte Corp. 743 F.2d 53 (1st Cir.1984); Rutledge v. Boston Woven Hose and Rubber Co., 576 F.2d 248 (9th Cir.1978); City of Detroit v. Grinnell Corp., 495 F.2d 448, 461 (2d Cir.1974); Laundry Equipment Sales Corp. v. Borg-Warner Corp., 334 F.2d 788, 792 (7th Cir.1964). 141 The defendants rely on these and other cases to argue that proof of affirmative acts of concealment such as those involved in the cases cited ... is essential to protect the important policies underlying the statute of limitations. As defendants point out: 142 In Dayco, after noting that the statute of limitations in private antitrust cases may be tolled by fraudulent concealment, this court cautioned nonetheless that, as the Supreme Court observed in Wood v. Carpenter, 101 U.S. [at 139]: 'Statutes of limitations are vital to the welfare of society and are favored in the law.' Stale conflicts should be allowed to rest undisturbed after the passage of time has made their origins obscure and the evidence uncertain. 523 F.2d at 394. The policies of protecting defendants and courts from stale claims counsel against a broad interpretation of tolling doctrines, and the reasons for that approach are particularly persuasive when viewed against the strong congressional policy in favor of repose in antitrust suits. (citations omitted). 143 Although the district court below acknowledged the Ninth Circuit's opinion in Rutledge, Pinney Dock & Transport v. Penn Central Corp., 1983-2 Trade Cas. p 65,608 at 69,040, the court nevertheless concluded that the first Dayco element did not necessarily require proof of affirmative acts of concealment. According to the district court: 144 Thus, under Dayco 's first element, the type of actions of defendants which might wrongfully conceal a conspiracy to violate the antitrust laws can embrace, but are not limited to, fraudulent misrepresentations as articulated in the Rutledge reference, supra. The actions of defendants can also be those which cause a conspiracy to be carried out in a manner which precludes detection, e.g., self-concealing misconduct. See Gaetzi v. Carling Brewing company, 205 F.Supp. 615, 620-621 (E.D.Mich.1962). Cf. King & King Enterprises v. Champlin Petroleum Co., 657 F.2d 1147, 1154 (10th Cir.1981), cert. denied, 454 U.S. 1164 [102 S.Ct. 1038, 71 L.Ed.2d 320] (1982). Hence, the Court finds impermissible the implication of the defendants that [i]n order to make out the first element of fraudulent concealment Pinney must show affirmative acts of concealment by the defendants which constitute fraudulent misrepresentations. 145 Id. at 69,041. 146 While Judge Thomas appropriately cites Gaetzi, Judge McCree's analysis in that opinion leads us to a different result. In Gaetzi, a former distributor of Carling Beer brought an antitrust action in 1961 seeking damages for defendant's allegedly wrongful termination of his Carling distributorship. Defendant then filed a motion for summary judgment on the ground that the cause of action was barred by the four year statute of limitations applicable to private antitrust actions. Plaintiff in turn argued that the period of limitations was suspended by reason of the defendant's fraudulent concealment. 147 In addressing this issue, then District Judge Wade H. McCree, Jr., initially noted that, [t]he contours of this doctrine in relation to private antitrust actions unfortunately are by no means as precise as either of the parties insists. 205 F.Supp. at 619-20. In this regard, plaintiff argued that fraudulent concealment did not require proof of affirmative acts, while the defendant argued that the doctrine did require such proof. Judge McCree initially observed: 148 It does appear to be settled that where the gravamen of an action is fraud and the party injured by the fraud remains in ignorence 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. Bailey v. Glover, supra, 88 U.S. at 348. 149