Fowler v. Guerin

515 P.3d 502

Certification from the United States District Court for the Western District of Washington in Mickey FOWLER, Leisa Maurer, and a class of similarly situated individuals, Plaintiffs,

v.Tracy GUERIN, Director of the Washington State Department of Retirement Systems, Defendant.

No. 100069-3 (certified C15-5367 BHS)

Supreme Court of Washington.

Argued May 17, 2022

Filed August 18, 2022

David Frank Stobaugh, Stephen Kolden Strong, Alexander Strong, Bendich Stobaugh & Strong PC, 126 Nw. Canal St. Ste. 100, Seattle, WA, 98107-4970, for Plaintiffs.

Robert Bertelson Mitchell, Jr., Todd Lawrence Nunn, Christopher M. Wyant, K&L Gates LLP, 925 4th Ave. Ste. 2900, Seattle, WA, 98104-1158, Peter B. Gonick, Washington Attorney General's Office, P. O. Box 40100, Olympia, WA, 98504-0100, for Defendant.

STEPHENS, J.

¶1 This certified question asks us to clarify the standards for equitable tolling in civil cases under Washington law. The underlying federal case involves a long-running dispute between a certified class of more than 25,000 Washington teachers (Teachers) and the Department of Retirement Systems (DRS). The federal district court determined that while the Teachers have established a Fifth Amendment takings claim, the applicable statute of limitations on that claim lapsed several years before the Teachers filed this suit. The Teachers have asked the federal district court to apply the doctrine of equitable tolling to allow the suit to proceed despite the statute of limitations. Finding Washington law unclear, the federal district court seeks clarification from this court as to the minimum predicates a plaintiff in a civil action must establish to justify equitable tolling of the applicable statute of limitations.

¶2 We answer the certified question by reiterating the four conditions this court has previously identified as necessary to justify equitable tolling of a statute of limitations in the civil context. Washington law allows equitable tolling of a statute of limitations in a civil suit when (1) the plaintiff has exercised diligence, (2) the defendant's bad faith, false assurances, or deception has interfered with the plaintiff's diligent efforts, (3) tolling is consistent with (a) the purpose of the underlying statute and (b) the purpose of the statute of limitations, and (4) justice requires tolling the statute of limitations. See Millay v. Cam , 135 Wash.2d 193, 206, 955 P.2d 791 (1998) (citing Finkelstein v. Sec. Props., Inc. , 76 Wash. App. 733, 739-40, 888 P.2d 161 (1995) ; Douchette v. Bethel Sch. Dist. No. 403 , 117 Wash.2d 805, 812, 818 P.2d 1362 (1991) ).

BACKGROUND AND PROCEDURAL HISTORY

¶3 Plaintiff Teachers—a class comprising more than 25,000 public school teachers—participate in Washington's Teachers’ Retirement System (TRS), a public retirement system managed by DRS. The Teachers originally enrolled in TRS Plan 2 accounts, into which they contributed funds from each paycheck. Their "contributions to Plan 2 accrued interest at a rate specified by DRS—5.5%, compounded quarterly"—and "DRS used the quarter's ending balance to calculate [that] interest." Fed. Dist. Ct. Doc. (Doc.) 85, at 2 (citing Doc. 18-1, at 16, 17, 18, 20, 21, 22). "Plaintiffs transferred between TRS Plan 2 and TRS Plan 3 in the late 1990s and contend that they should have been allocated more interest upon transfer, should have gotten a higher ‘Transfer Payment’ based on the additional interest, and have been deprived of earnings on the lost funds ever since." Doc. 153, at 2.

¶4 The Teachers first pursued their claims alongside other state employees in a class action filed in state superior court in 2005. See Probst v. Dep't of Ret. Sys. , 167 Wash. App. 180, 183-84, 271 P.3d 966 (2012). In 2008, the superior court approved a partial settlement for a subgroup of class members "who had transferred from Plan 2 to Plan 3 of their respective retirement systems after January 20, 2002." Id . at 184, 271 P.3d 966. But the Teachers had transferred before that date, so Mickey Fowler and Leisa Maurer "became class plaintiffs in February 2009 when they filed an amended supplemental complaint as TRS members excluded from the settlement agreement." Id. The Teachers’ suit continued in state court.

¶5 The Teachers "had some success in the early 2010s when the Washington State Court of Appeals held that DRS's rule [governing TRS interest calculations] was arbitrary and capricious." Doc. 153, at 2. On remand, the Teachers argued judgment should be entered in their favor. Probst v. Dep't of Ret. Sys. , No. 45128-0-II, 2014 WL 7462567 (Wash. Ct. App. Dec. 30, 2014) (unpublished), https://www.courts.wa.gov/opinions/pdf/D2%2045128-0-II%20Unpublished%20Opinion.pdf. The superior court disagreed and remanded the case to DRS for new rule making, which culminated in a new rule "reaffirming [DRS's] prior interest calculation method" issued by Director Tracy Guerin (Director) in April 2018. Doc. 85, at 4 (citing WAC 415-02-150 (2018) ).

¶6 In June 2015, while DRS was in the process of promulgating this new rule, the Teachers filed this separate lawsuit in federal court "asserting 42 U.S.C. § 1983 claims for violation of their Fifth Amendment rights" based on the same facts as their state claims. Id. (citing Doc. 1). The Director moved to dismiss the Teachers’ federal lawsuit under several theories, and the federal district court granted the Director's motion for summary judgment on the grounds that the Teachers’ takings claim was not ripe while DRS's rule making was ongoing. Id. (citing Docs. 14, 28). The Teachers appealed to the Ninth Circuit Court of Appeals, which reversed the grant of summary judgment. Fowler v. Guerin , 899 F.3d 1112, 1118 (9th Cir. 2018) ("DRS's withholding of the interest accrued on the Teachers’ accounts constitutes a per se taking to which [a federal] prudential ripeness test does not apply. The district court erred in dismissing the Teachers’ takings claim as prudentially unripe."). The Ninth Circuit also rejected the Director's remaining arguments for summary judgment. Id. at 1120 ("In sum, none of the Director's alternative arguments justifies the district court's grant of summary judgment in this case.").

¶7 On remand, the federal district court determined that the Teachers "have established a pecuniary loss and a complete per se takings claim, as a matter of law." Doc. 153, at 7. The Director moved to amend her answer to add a statute of limitations defense, which the court granted. Doc. 85, at 14. The Teachers "advance[d] a number of theories to defeat DRS's statute of limitations defense," and the court "conclude[d] that none but equitable tolling are potentially viable." Doc. 153, at 8. However, the federal district court "conclude[d] that equitable tolling in civil cases beyond the traditional predicates is undefined and best addressed by the Washington Supreme Court." Id. at 18. It therefore certified a question to this court.¹

¶8 In its certification order, the federal district court summarized its understanding of equitable tolling under Washington law:

State and federal cases applying Washington law have regularly articulated that equitable tolling cannot apply to relieve a plaintiff from the applicable limitations period unless (1) justice so requires, and (2) tolling the limitations period would be consistent with (a) the intent of the underlying substantive statute and (b) the intent of the limitations period. ... These prerequisites look to be necessary, but not sufficient, conditions for equitable tolling.

Doc. 157, at 3 (citing Hahn v. Waddington , 694 F. App'x 494, 495 (9th Cir. 2017) ; Millay , 135 Wash.2d at 206, 955 P.2d 791 ).

Washington courts have regularly held that a plaintiff must also demonstrate their own diligence in filing and that the defendant has engaged in one of the "traditional predicates" for equitable tolling: that bad faith, deception, or false assurances interfered with the plaintiff's timely filing.

Id. at 3-4 (citing Millay , 135 Wash.2d at 206, 955 P.2d 791 ; Nash v. Atkins , No. 81841-4-I, 2020 WL 6708731 (Wash. Ct. App. Nov. 16, 2020) (unpublished), https://www.courts.wa.gov/opinions/pdf/818414.pdf (no equitable tolling when traditional predicates not shown); Wolfe v. Wash. State Dep't of Transp. , No. 50894-0-II, 2019 WL 1999020 (Wash. Ct. App. May 7, 2019) (unpublished), https://www.courts.wa.gov/opinions/pdf/D2%2050894-0-II%20Unpublished%20Opinion.pdf (not necessary to assess plaintiff's diligence when plaintiff failed to establish traditional predicates)).

In contrast, federal courts appeared to have applied the third set of conditions in the disjunctive, concluding that equitable tolling may be appropriate where the plaintiff shows diligence but cannot demonstrate a defendant's bad faith, deception, or false assurances. These cases instead hold that a plaintiff seeking to equitably toll the limitations period must show only that (1) justice so requires, (2) doing so is consistent with the intent of the underlying substantive statute and limitations period, and (3) the plaintiff has been diligent.

Id. at 4 (collecting federal cases).

¶9 Finally, the federal district court addressed this court's recent decision in In re Pers. Restraint of Fowler , 197 Wash.2d 46, 479 P.3d 1164 (2021), adopting the federal habeas standard for equitable tolling in the context of personal restraint petitions. The federal district court opined that the analysis in Fowler appears to be consistent with the federal cases that treat the traditional predicates of equitable tolling as unnecessary, and therefore differs in part from prior Washington precedent.

¶10 Unsure which standard now applies to equitable tolling in the civil context, the federal district court proposed certifying a clarifying question to this court. The parties agreed that certification was appropriate and proposed their own versions of the certified question. The federal district court considered those alternatives and ultimately...