Court Opinion

ID: 2968275
Source: CourtListenerOpinion
Date Created: 2015-09-22 04:41:23.782149+00
Date Added: 2024-06-11T09:32:52.943651
License: Public Domain

PUBLISHED

UNITED STATES COURT OF APPEALS
                FOR THE FOURTH CIRCUIT

ERILINE COMPANY S.A.; EDGARDO          
BAKCHELLIAN,
              Plaintiffs-Appellants,
                 v.
JAMES P. JOHNSON; UNIVERSAL
MARKETING GROUP, INCORPORATED;
PRIME SOURCE TRADING, LLC;
STEVEN CLOUDTREE; MICHAEL
KOUCKY, a/k/a Michael Loucky,
              Defendants-Appellees,              No. 03-1613

                and
RAYMOND E. MOORE; LEE ALAN
MOORE,
                     Defendants.

JUSTIN ANTONIPILLAI,
       Amicus Supporting Appellees.
                                       
           Appeal from the United States District Court
     for the Western District of North Carolina, at Asheville.
               Lacy H. Thornburg, District Judge.
                           (CA-01-215)

                      Argued: November 29, 2005

                       Decided: March 17, 2006

   Before WILLIAMS, KING, and GREGORY, Circuit Judges.
2                        ERILINE CO. v. JOHNSON
Vacated and remanded by published opinion. Judge King wrote the
opinion, in which Judge Williams and Judge Gregory joined.

                              COUNSEL

ARGUED: Don Rodney Kight, Jr., Asheville, North Carolina, for
Appellants. Justin Sanjeeve Antonipillai, ARNOLD & PORTER,
L.L.P., Washington, D.C., for Amicus Supporting Appellees. ON
BRIEF: Elizabeth A. High, ARNOLD & PORTER, L.L.P., Washing-
ton, D.C., for Amicus Supporting Appellees.

                               OPINION

KING, Circuit Judge:

   Appellants Eriline Company S.A. and Edgardo Bakchellian seek
relief from the dismissal of their state law claims, arising out of an
alleged fraud scheme, against various defendants who were in default.
They contend on appeal that the district court erred in raising a statute
of limitations defense sua sponte and dismissing their state law claims
on that basis. See Eriline Co. S.A. v. Johnson, No. CA-01-215
(W.D.N.C. Oct. 16, 2002). As explained below, in the circumstances
of this case the district court erred, and we vacate and remand.

                                    I.

  On November 20, 1997, Eriline entered into an investment agree-
ment (the "Investment Agreement") with Universal Marketing Group,
Inc.1 The Investment Agreement was signed by Eriline’s president,
    1
   According to the Complaint, to which the Investment Agreement was
not attached, Eriline and Universal entered into the Agreement in 1998.
As explained below, however, the Investment Agreement itself, first pre-
sented to the district court in connection with the Plaintiff’s second set
of motions for default judgment, indicates that it was executed on
November 20, 1997. Eriline and Universal apparently also executed a
second agreement, which was identical to the Investment Agreement
except that it is dated September 21, 1998.
                        ERILINE CO. v. JOHNSON                         3
Bakchellian, as well as Universal’s president, James P. Johnson.
Under the Agreement, Eriline was to provide Universal with the sum
of $450,000 that Universal was to combine with other funds in order
to lease $100 million from Capital Assets Holding Corporation. The
$100 million was then to be used to purchase a "prime bank" guaran-
tee or letter of credit which would generate enormous profits for Eri-
line and others. Prior to the Agreement’s execution, Eriline, on
September 21, 1997, deposited the sum of $450,000 into an escrow
account controlled by brothers Raymond E. Moore and Lee Allen
Moore. Eriline was to direct the release of those funds to Universal
upon confirmation by Capital’s bank that it held $100 million of Cap-
ital’s money in Universal’s name. Approximately fifteen banking
days thereafter, Universal was to facilitate the first payment of profits
to Eriline in the sum of $450,000, with additional payments of
$450,000 to follow once a month for the next nine months, for a total
of $4.5 million. Unfortunately for Eriline, it never saw a dime of its
expected profits or its original investment.

   On September 14, 2001, Eriline and Bakchellian (together, the
"Plaintiffs") filed their complaint (the "Complaint") in the Western
District of North Carolina against Universal, Johnson, Prime Source
Trading, LLC, Steven Cloudtree, Michael Koucky (a/k/a Michael
Loucky), and the Moore brothers.2 The Complaint alleged violations
of § 10(b) of the Securities Exchange Act of 1934 against each of the
seven defendants (the "federal securities claim"). It also alleged vari-
ous state law claims of breach of contract, negligence, breach of trust,
fraud, rescission, and conversion against the defendants in various
configurations (the "state claims"). The state claims included a claim
against Johnson for breach of an agreement by which he allegedly
promised to pay Bakchellian $4.5 million in exchange for a release
from any liability to Bakchellian and Eriline ("the "Release Agree-
ment").3

  Of the seven defendants, only the Moores answered the Complaint.
On April 1, 2002, the Plaintiffs filed a motion for entry of default
  2
     According to the Complaint, Prime Source, Cloudtree, and Koucky
induced the Plaintiffs to accede to the Agreement.
   3
     The copy of the Release Agreement included in the Joint Appendix
is undated and was not fully executed. See J.A. 181-82.
4                       ERILINE CO. v. JOHNSON
against defendants Universal, Johnson, Prime Source, and Cloudtree,
and the court clerk entered the default that same day. On June 3,
2002, the Plaintiffs filed two motions for default judgment: one
against Johnson in the sum of $4.5 million on the claim that Johnson
had breached the Release Agreement, and the other against Johnson,
Universal, Prime Source, and Cloudtree in the sum of $450,000 on the
federal securities claim as well as several of the state claims. The
clerk entered both of the default judgments later that day. Thereafter,
in August 2002, the plaintiffs voluntarily dismissed their claims
against Koucky and the Moores.4

   By order of October 16, 2002, the district court vacated both the
default judgments entered by the clerk on June 3, 2002, in part
because the Plaintiffs had failed to support their requests by filing the
Investment Agreement and the Release Agreement with either the
Complaint or their motions for default judgment. See Eriline Co. S.A.
v. Johnson, No. CA-01-215 (W.D.N.C. Oct. 16, 2002). On March 7,
2003, the Plaintiffs filed a second set of motions for default judgment,
seeking the same relief they had sought on June 3, 2002. This time,
however, the Plaintiffs supported their motions with several docu-
ments, including copies of the Investment Agreement and the Release
Agreement.

   By order of April 11, 2003, the district court, which then had the
Investment Agreement before it for the first time, raised the defense
of the statute of limitations sua sponte. It concluded that the federal
securities claim was barred by the three-year statute of limitations in
15 U.S.C. § 78i(e), and that the state claims were barred by the three-
year statute of limitations in section 1-52 of the North Carolina Gen-
eral Statutes. In so ruling, the court expressed its view that the run-
ning of a limitations period is jurisdictional in nature and thus must
be raised and considered by the court sua sponte when not affirma-
tively asserted by one of the parties. The court therefore denied the
Plaintiffs’ second set of motions for default judgment and dismissed
the Complaint in its entirety for lack of subject matter jurisdiction.
    4
  Although the Plaintiffs dismissed their claims against Koucky in
August 2002, he is designated as a defendant-appellee in this appeal.
                         ERILINE CO. v. JOHNSON                         5
  The plaintiffs have timely noted their appeal. Because the defen-
dants had defaulted and were not represented by counsel, we pro-
ceeded to appoint, on July 26, 2005, an "amicus counsel [to]
support[ ]" them in this appeal (the "amicus").

                                   II.

   As explained below, the district court erroneously determined that
the expiration of the applicable statutes of limitations deprived it of
subject matter jurisdiction. Nevertheless, there is some question
whether the district court otherwise possessed such jurisdiction over
the state claims. The Plaintiffs invoked the court’s diversity jurisdic-
tion under 28 U.S.C. § 1332. At oral argument on November 29,
2005, however, it was observed that the parties might not be com-
pletely diverse. Accordingly, by order of even date, we directed the
Plaintiffs and the amicus to file supplemental briefs addressing the
question of subject matter jurisdiction.

   As the Plaintiffs and the amicus now agree, complete diversity is
lacking in this case because there are aliens on both sides of the dis-
pute: each of the Plaintiffs is an alien and so is defendant Cloudtree.
See Gen. Tech. Applications, Inc. v. Exro Ltda, 388 F.3d 114, 120
(4th Cir. 2004) ("[A]lien citizenship on both sides of the controversy
destroys diversity.").5 In order to remedy this jurisdictional defi-
ciency, the Plaintiffs now urge that we dismiss Cloudtree, the alien
defendant without whom complete diversity would exist. See Appel-
lant’s Supp. Br. at 3. As the Plaintiffs correctly point out, we have the
authority, under the Supreme Court’s decision in Newman-Green, Inc.
v. Alfonzo-Larrain, to dismiss dispensable defendants who spoil
diversity jurisdiction. See 490 U.S. 826, 837 (1989) (ruling that, in
interests of judicial economy, a court of appeals has "authority to dis-
miss a dispensable nondiverse party"). Nevertheless, the Supreme
Court has instructed us to exercise such authority "sparingly." Id.
Moreover, in order to dismiss Cloudtree from this case, we must first
be satisfied that he is not an indispensable party under Rule 19(b) of
the Federal Rules of Civil Procedure. See id.; Casas Office Machines,
  5
   As the parties agree, Eriline is a Uruguay corporation with its princi-
pal place of business in Argentina, Bakchellian is a citizen of Argentina,
and Cloudtree is a citizen of the Bahamas.
6                        ERILINE CO. v. JOHNSON
Inc. v. Mita Copystar Am., Inc., 42 F.3d 668, 675 (1st Cir. 1994)
(observing that appellate courts "may not, of course, dismiss indis-
pensable parties from an action in order to preserve federal jurisdic-
tion"). And the determination of whether a party is indispensable,
because of its fact-specific nature, is a matter normally committed to
the discretion of the district court. See Coastal Modular Corp. v. Lam-
inators, Inc., 635 F.2d 1102, 1108 (4th Cir. 1980) ("The inquiry con-
templated by Rule 19 . . . is addressed to the sound discretion of the
trial court.").

   In light of these principles, and because there was little factual
development below, if diversity of citizenship were the sole basis of
the district court’s jurisdiction, we would be tempted to conditionally
remand this matter for its determination of whether Cloudtree should
be dismissed (on the basis of being a dispensable defendant who
spoils jurisdiction). Such a remand, however, is unnecessary because,
as the amicus correctly observes, the district court also possessed sup-
plemental jurisdiction over the state claims, which was derived from
its federal question jurisdiction over the federal securities claim. See
28 U.S.C. §§ 1331, 1367(a).6

   Pursuant to § 1367(a), when a plaintiff has alleged both federal and
state claims, a district court may exercise supplemental jurisdiction
over the state claims if they form "part of the same case or contro-
versy" as the federal claim. In this case, the Plaintiffs’ state claims
plainly arise from the same "case or controversy" as the federal secur-
ities claim, for both the securities claim and the state claims arise
    6
   The Plaintiffs did not, in the Complaint, assert supplemental jurisdic-
tion as a basis for the district court’s jurisdiction. Rather, they asserted
that the district court possessed diversity jurisdiction over the state
claims and "exclusive" jurisdiction over the federal securities claim.
Nonetheless, a district court "may sustain jurisdiction when an examina-
tion of the entire complaint reveals a proper basis for assuming jurisdic-
tion other than one that has been improperly asserted." Rohler v. TRW,
Inc., 576 F.2d 1260, 1264 (7th Cir. 1978) (internal quotation marks omit-
ted); see also Pinkley, Inc. v. City of Frederick, 191 F.3d 394, 399 (4th
Cir. 1999) ("[I]n the absence of an affirmative pleading of a jurisdic-
tional basis a federal court may find that it has jurisdiction if the facts
supporting jurisdiction have been clearly pleaded.").
                          ERILINE CO. v. JOHNSON                            7
from the same set of facts: the fraud scheme allegedly orchestrated by
the defendants. See White v. County of Newberry, 985 F.2d 168, 171
(4th Cir. 1993) (observing that district court may exercise supplemen-
tal jurisdiction over claims that "the plaintiff would ordinarily be
expected to try . . . in one judicial proceeding"). The district court
therefore properly exercised supplemental jurisdiction over the state
claims. And although the Plaintiffs have only appealed the dismissal
of their state claims, the dismissal of those claims constitutes a "final
decision[ ]" under 28 U.S.C. § 1291, and we therefore possess juris-
diction to resolve this appeal. See Groce v. Eli Lilly & Co., 193 F.3d
496, 502 (7th Cir. 1999) (reviewing merits of state claims where dis-
trict court’s jurisdiction derived from § 1367 and appellant only
appealed state claims); Hamaker v. Ivy, 51 F.3d 108, 110 (8th Cir.
1995) (same).

                                     III.

   The Plaintiffs’ sole contention on appeal is that the district court
erred in raising the statute of limitations defense sua sponte, and then
dismissing their state claims on that basis.7 The amicus asserts in
response that the district court properly considered the statute of limi-
tations defense sua sponte, in the circumstances of this case. Whether
a district court has properly considered a statute of limitations defense
sua sponte is a question of law that we review de novo. See Thompson
  7
   In addition to their contention that the district court erroneously raised
the statute of limitations defense sua sponte, the argument section of the
Plaintiffs’ brief contains a single sentence asserting that the district court
"erroneously determined that the statute of limitations barred the action."
Appellant’s Br. at 12. This conclusory remark is insufficient to raise on
appeal any merits-based challenge to the district court’s ruling. See Fed.
R. App. P. 28(a)(9)(A) (requiring argument section of brief to contain
"appellant’s contentions and the reasons for them, with citations to the
authorities and parts of the record on which the appellant relies"); Igen
Int’l, Inc. v. Roche Diagnostics GMBH, 335 F.3d 303, 308 (4th Cir.
2003) ("Failure to present or argue assignments of error in opening
appellate briefs constitutes a waiver of those issues."). In any event, our
conclusion that the district court erred in raising and addressing the stat-
ute of limitations issue sua sponte renders superfluous any merits-based
challenge to the court’s ruling.
8                        ERILINE CO. v. JOHNSON
v. Greene, 427 F.3d 263, 267 (4th Cir. 2005) (observing that legal
questions are reviewed de novo).

   As the Plaintiffs correctly assert, the statute of limitations is an
affirmative defense, meaning that the defendant generally bears the
burden of affirmatively pleading its existence. See Fed. R. Civ. P.
8(c); Dean v. Pilgrim’s Pride Corp., 395 F.3d 471, 474 (4th Cir.
2005) ("The raising of the statute of limitations . . . constitutes an
affirmative defense."). Where a defendant has failed to raise a statute
of limitations defense by way of its answer, the defense is usually
waived. See Peterson v. Air Line Pilots Ass’n Int’l, 759 F.2d 1161,
1164 (4th Cir. 1985); see also Brooks v. City of Winston-Salem, 85
F.3d 178, 181 (4th Cir. 1996) (observing that an affirmative defense
may also be raised in a pre-answer motion pursuant to Rule 12(b)(6)
of the Federal Rules "when the face of the complaint clearly reveals
[its] existence").8 As a defense waivable by the inaction of a party, the
statute of limitations bears the hallmarks of our adversarial system of
justice, a system in which the parties are obliged to present facts and
legal arguments before a neutral and relatively passive decisionmaker.
See United States v. Burke, 504 U.S. 229, 246 (1992) (Scalia, J., con-
curring) ("The rule that points not argued will not be considered is
more than just a prudential rule of convenience; its observance, at
least in the vast majority of cases, distinguishes our adversary system
of justice from the inquisitorial one."). And because it "erod[es] the
principle of party presentation so basic to our system of adjudication,"
the Supreme Court has cautioned that sua sponte consideration of a
statute of limitations defense should be done sparingly by the trial
courts, even in those narrow circumstances where it is authorized.
Arizona v. California, 530 U.S. 392, 412-13 (2000).
    8
   Because the statute of limitations is a waivable defense, the district
court erroneously determined that its restrictions are jurisdictional in
nature. See Edelman v. Lynchburg Coll., 300 F.3d 400, 404 (4th Cir.
2002) (observing that statute of limitations is not jurisdictional and can
be waived); United States v. Prescott, 221 F.3d 686, 688 (4th Cir. 2000)
(distinguishing jurisdictional bars from statute of limitations); see also
United States v. Cotton, 535 U.S. 625, 630 (2002) (observing that subject
matter jurisdiction, as a limitation on the judicial power, "can never be
forfeited or waived").
                          ERILINE CO. v. JOHNSON                            9
   It is against the backdrop of these principles that we assess the
amicus’s contention that the district court properly raised and consid-
ered the statute of limitations defense sua sponte in this case. In sup-
port of that contention, the amicus first relies on decisions addressing
a district court’s "inherent power" to dismiss a case sua sponte. See
Amicus Br. at 10 (citing Link v. Wabash R.R. Co., 370 U.S. 626
(1962); United States v. Shaffer Equip. Co., 11 F.3d 450 (4th Cir.
1993)). Those decisions, however, do not address a district court’s
power to raise affirmative defenses on its own, but rather a district
court’s power to protect important institutional interests of the court.
In Link, the Supreme Court concluded that a district court possesses
the "inherent power" to dismiss a case sua sponte for failure to prose-
cute, explaining that such authority derives from "the control neces-
sarily vested in courts to manage their own affairs so as to achieve the
orderly and expeditious disposition of cases." 370 U.S. at 630-31.
And in Shaffer Equipment, we recognized that such "inherent power"
encompasses a court’s authority to dismiss an action sua sponte
"when a party deceives [the] court or abuses the process at a level that
is utterly inconsistent with the orderly administration of justice or
undermines the integrity of the process." 11 F.3d at 462. Quite aside
from the interests of the individual parties in a lawsuit, a district court
has an important interest in keeping its docket from becoming
clogged with dormant cases and in ensuring that a party does not use
the court as an instrument of fraud or deceit.9

   To be sure, certain affirmative defenses implicate important institu-
tional interests of the court, and may sometimes be properly raised
  9
    As discussed above, the Investment Agreement, which was not pre-
sented to the court until the Plaintiffs’ second round of default judgment
motions, indicates that it was consummated in 1997. The Complaint,
however, alleges that the Investment Agreement was entered into in
1998. The amicus suggests that, once the district court was made aware
of the actual date of the Agreement (from the Plaintiffs’ second round of
motions for default judgment), it felt misled and raised the statute of lim-
itations defense sua sponte for that reason. See Amicus Br. at 20.
Although the circumstances presented the district court with grounds for
being suspicious, its opinion contains no indication that it felt misled.
And we are not at liberty to speculate that unarticulated reasons drove the
court’s decision. Moreover, the district court dismissed the claims not on
the basis of abuse of process, but on the basis of the statute of limitations.
10                       ERILINE CO. v. JOHNSON
and considered sua sponte. For example, the affirmative defense of
res judicata — which serves not only "the defendant’s interest in
avoiding the burden of twice defending a suit," but also the important
judicial interest in avoiding resolution of an issue that the court has
already decided — may, in "special circumstances," be raised sua
sponte. Arizona, 530 U.S. at 412-13; see also Doe v. Pfrommer, 148
F.3d 73, 80 (2d Cir. 1998) (concluding that policy of "avoiding reliti-
gation" justified sua sponte consideration of defense of collateral
estoppel).

   A statute of limitations defense, by contrast, primarily serves only
defendants by "preventing the revival of stale claims in which the
defense is hampered by lost evidence, faded memories, and disap-
pearing witnesses, and to avoid unfair surprise." Johnson v. Ry.
Express Agency, Inc., 421 U.S. 454, 473 (1975). Any interest that a
court generally possesses in the enforcement of a statute of limitations
defense pales in significance compared to those interests implicated
by failure to prosecute, abuse of process, and res judicata. And such
an interest ordinarily falls short of that necessary to outweigh the ben-
efits derived from adhering to the adversarial process, and requiring
that a defendant either raise the defense of statute of limitations or
waive its protection.10
  10
     In addition to the decisions discussed above, the amicus relies on
numerous decisions recognizing that a district court may sua sponte dis-
miss a complaint for failure to state a claim. See Amicus Br. at 13-15 (cit-
ing, inter alia, Wachtler v. County of Herkimer, 35 F.3d 77, 82 (2d Cir.
1994); Apostol v. Landau, 957 F.2d 339, 343 (7th Cir. 1992)). The failure
of a complaint to state facts entitling the plaintiff to relief, however, is
fundamentally different from the existence of an unasserted affirmative
defense. Where the face of a complaint plainly fails to state a claim for
relief, a district court has "no discretion" but to dismiss it. 5A Charles
Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1357
(2d ed. 1990); see also Mitchell v. E-Z Way Towers, Inc., 269 F.2d 126,
130 (5th Cir. 1959) (observing that a motion to dismiss for failure to state
claim "allows of no discretion in the usual sense" because "a complaint
is either good or not good"). A district court, however, is plainly free to
render judgment to a plaintiff on a claim to which the defendant has an
affirmative defense that he has waived. The concept of waiver would
otherwise have little or no meaning in the context of affirmative
defenses.
                          ERILINE CO. v. JOHNSON                            11
   Although a court generally possesses no strong institutional interest
in the enforcement of a statute of limitations, we have recognized that
a statute of limitations defense may properly be raised sua sponte by
a district court in certain narrow circumstances. Specifically, we have
permitted sua sponte consideration of the statute of limitations when
such a defense plainly appears on the face of either a petition for
habeas corpus filed pursuant to 28 U.S.C. § 2254, see Hill v. Braxton,
277 F.3d 701, 706 (4th Cir. 2002), or a complaint filed in forma
pauperis pursuant to 28 U.S.C. § 1915, see Nasim v. Warden, Md.
House of Correction, 64 F.3d 951, 953-54 (4th Cir. 1995). As
explained in Hill and Nasim, this deviation from the general rule —
that a statute of limitations defense is waived if not timely raised by
the defendant — is justified for two reasons. First, both habeas corpus
and in forma pauperis proceedings, like failure to prosecute, abuse of
process, and res judicata, implicate important judicial and public con-
cerns not present in the circumstances of ordinary civil litigation. Sec-
ond, in both habeas corpus and in forma pauperis proceedings, the
district courts are charged with the unusual duty of independently
screening initial filings, and dismissing those actions that plainly lack
merit.

   In Hill, we concluded that a district court may raise a statute of lim-
itations defense sua sponte when the existence of the defense plainly
appears on the face of a § 2254 petition. See 277 F.3d at 706. In so
ruling, we emphasized that "[a]ctions brought pursuant to § 2254
implicate considerations of comity, federalism, and judicial efficiency
not present in ordinary civil actions." Id. at 705. We further observed
that Rule 4 of the Rules Governing § 2254 Cases (the "Habeas
Rules") imposes on a district court the duty to independently examine
the merits of a § 2254 petition, and that such a duty "differentiates
habeas cases from other civil cases with respect to sua sponte consid-
eration of affirmative defenses." Id. (internal quotation marks omit-
ted); see also Kiser v. Johnson, 163 F.3d 326, 328-29 (5th Cir. 1999)
(concluding that, although Federal Rule 8(c) does not permit court to
consider affirmative defenses sua sponte, Habeas Rule 4 permits
courts to do so in context of habeas corpus).11 These circumstances,
   11
      Habeas Rule 4 requires the district courts to examine each habeas
petition, and "if it plainly appears from the face of the petition and any
attached exhibits that the petitioner is not entitled to relief in the district
court, the judge must dismiss the petition" without requesting an answer
from the respondent. 28 U.S.C. foll. § 2254.
12                       ERILINE CO. v. JOHNSON
we concluded, justified a departure from the usual rule that the statute
of limitations, as an affirmative defense, must either be raised by the
defendant or be deemed waived. See 277 F.3d at 705-06.

   In Nasim, we concluded that, in evaluating a complaint filed in
forma pauperis pursuant to § 1915, a district court may consider a
statute of limitations defense sua sponte when the face of the com-
plaint plainly reveals the existence of such defense. See 64 F.3d at
953-54. In so ruling, we observed that, in eliminating the requirement
for paying costs, § 1915 removed "any economic incentive to refrain
from filing frivolous, malicious, or repetitive lawsuits," and thus car-
ried the potential to overburden the judicial system with patently
meritless lawsuits. Id. (internal quotation marks omitted). Further-
more, § 1915(e)(2), like Habeas Rule 4, imposes on the district courts
a duty to screen initial filings. Specifically, it requires a district court
to dismiss a complaint filed in forma pauperis "at any time if the court
determines that . . . the action or appeal . . . is frivolous or malicious
. . .[or] fails to state a claim on which relief may be granted."
§ 1915(e)(2)(B)(i)-(ii). In analyzing an earlier version of the statute,
we observed in Nasim that § 1915 permits district courts to indepen-
dently assess the merits of in forma pauperis complaints, and "to
exclude suits that have no arguable basis in law or fact." 64 F.3d at
954.12 We further explained that this screening authority differentiates
in forma pauperis suits from ordinary civil suits and justifies an
exception to the general rule that a statute of limitations defense
should not be raised and considered sua sponte. Id. at 953-94; see also
Pino v. Ryan, 49 F.3d 51, 53-54 (2d Cir. 1995) (concluding that dis-
trict court can raise statute of limitations defense sua sponte in evalu-
ating complaint filed pursuant to § 1915).

   It was therefore the important judicial and public interests impli-
cated by suits pursuant to § 2254 and § 1915, combined with the
quasi-inquisitorial role of a district court in such proceedings to
screen initial filings, that justified our departure from the general rule
  12
    When Nasim was decided in 1995, § 1915 permitted a district court
to dismiss a complaint filed in forma pauperis "if satisfied that the action
is frivolous or malicious." 28 U.S.C.A. § 1915(d) (West 1994). As
quoted above, the statute currently speaks in mandatory language and
appears to require a more wide-ranging inquiry than its predecessor.
                          ERILINE CO. v. JOHNSON                            13
that a defendant must either timely raise a statute of limitations
defense or waive its benefits. In this case, an ordinary civil case, such
circumstances are not present, and the district court should have
refrained from raising and considering the statute of limitations
defense sua sponte. Its failure to do so constitutes an error of law.13

                                     IV.

   Pursuant to the foregoing, we vacate the district court’s dismissal
of the state claims and remand for such other and further proceedings
as may be appropriate.

                                            VACATED AND REMANDED
  13
    In ruling that a statute of limitations defense cannot be considered
sua sponte in ordinary civil proceedings, we join our sister circuits to
have addressed the issue. See Haskell v. Wash. Twp., 864 F.2d 1266,
1273 (6th Cir. 1988) ("Since it is a waivable defense, it ordinarily is error
for a district court to raise the [statute of limitations] sua sponte."); Davis
v. Bryan, 810 F.2d 42, 45 (2d Cir. 1987) (concluding that sua sponte con-
sideration of statute of limitations was "error of law"); Wagner v. Faw-
cett Publ’ns, 307 F.2d 409, 412 (7th Cir. 1962) (observing that statute of
limitations is "a personal privilege of the defendant," and that district
court erred in rasing it sua sponte).