Dela, Inc. v. CNA Insurance Co.

Opinion

USCA1 Opinion

March 14, 1995
                                [NOT FOR PUBLICATION]
                            UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT

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No. 94-1577

                                     DELA, INC.,

                                Plaintiff, Appellant,

                                          v.

                                CNA INSURANCE COMPANY,

                                 Defendant, Appellee.

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                     APPEAL FROM THE UNITED STATES DISTRICT COURT

                          FOR THE DISTRICT OF MASSACHUSETTS

                   [Hon. Edward F. Harrington, U.S. District Judge]
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                                 ____________________

                                        Before

                                Cyr, Boudin and Stahl,
                                   Circuit Judges.
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            Stuart  M. Holber,  Russell  S. Channen  and Phillips,  Gerstein &
            _________________   ___________________      _____________________
        Holber on brief for appellant.
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            Thomas M. Elcock, James T. Hargrove,  Debra A. Joyce and Morrison,
            ________________  _________________   ______________     _________
        Mahoney & Miller on brief for appellee.
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                                 ____________________

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Per  Curiam.    Plaintiff  Dela, Inc.,  a  Massachusetts
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            company  engaged  in  the  business  of  laminating  fabrics,

            suffered  nearly $80,000  in  damages when  its building  was

            flooded  on  March 17,  1990.   When  its  insurance carrier,

            defendant  CNA Insurance  Co., disclaimed  coverage  for such

            losses,  plaintiff brought  the instant  declaratory judgment

            action.  That suit  was filed on April 17,  1992, twenty-nine

            days  after  the  expiration  of the  applicable  limitations

            period  on March 19, 1992.   The district  court proceeded to

            award summary judgment for  defendant on the ground  that the

            action  was time-barred.   The  sole issue  now on  appeal is

            whether defendant should be  equitably estopped from  relying

            on the limitations defense.

                 Under  Massachusetts   law,  which  we  apply   in  this

            diversity action, the doctrine  of equitable estoppel is well

            established.  Inasmuch as the doctrine is designed to prevent

            results  "contrary  to  good  conscience  and  fair dealing,"

            McLearn v. Hill,  276 Mass.  519, 524 (1931),  there are  "no
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            rigid   criteria"  governing   its  application,   Libman  v.
                                                               ______

            Zuckerman,  33  Mass. App.  Ct.  341,  346  (1992).   Broadly
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            stated, estoppel seeks to prevent  a person "from denying the

            consequences of his conduct where that conduct has been  such

            as to induce another to change his position in  good faith or

            such   that   a   reasonable   man  would   rely   upon   the

            representations made."   Bergeron v. Mansour, 152 F.2d 27, 30
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(1st Cir. 1945) (applying Massachusetts law).  In the statute

            of limitations context, the doctrine requires proof "that the

            defendants  made representations  they  knew or  should  have

            known  would induce the plaintiffs to put off bringing a suit

            and that the  plaintiffs did in fact delay in reliance on the

            representations."   White v.  Peabody Constr. Co.,  386 Mass.
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            121, 134 (1982);  accord, e.g., Whitcomb v. Pension Dev. Co.,
                              ______  ____  ________    ________________

            808  F.2d 167,  172 (1st  Cir. 1986)  (applying Massachusetts

            law).  It is unnecessary that defendant intentionally mislead

            or deceive  the plaintiff,  see, e.g., MacKeen  v. Kasinskas,
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            333 Mass. 695, 698  (1956), or even that defendant  intend by

            its  conduct to induce delay, see,  e.g., LaBonte v. NY, NH &
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            Hart. R.R., 341  Mass. 127, 131  (1960) ("one is  responsible
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            for the word or act which he knows, or ought to know, will be
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            acted  upon  by  another")  (emphasis added);  accord,  e.g.,
                                                           ______   ____

            Clauson v. Smith, 823 F.2d 660, 663 n.3 (1st Cir.  1987).  It
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            is  necessary, however,  that  "[t]he reliance  of the  party

            seeking   the  benefit  of  estoppel  [be]  ...  reasonable."

            O'Blenes  v.  Zoning Board  of  Appeals, 397  Mass.  555, 558
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            (1986).

                 In  seeking  to  invoke this  doctrine  here,  plaintiff

            points  to communications  between  the  parties'  attorneys,

            particularly to  a  telephone conversation  that occurred  on

            January  27,   1992.    In  an   affidavit  submitted  below,

            plaintiff's  trial  counsel   (John  James)  described   that

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conversation  with  defendant's   counsel  (Frank  Toto)   as

            follows.    The attorneys  there  discussed  the  need for  a

            declaratory judgment action  in the event the  matter was not

            settled.  James said he had been authorized to bring suit but

            would  await  defendant's  response to  a  pending settlement

            demand.  When  asked if  defendant intended to  file suit  to

            resolve the coverage issue,  Toto "unequivocally" stated that

            "if the matter did not settle CNA would be bringing an action

            for  declaratory  judgment."   James  replied  that he  would

            accept service of process on behalf of his client and that he

            "would not  file the action in  anticipation of [defendant's]

            filing  suit."   (Attached  to  the  affidavit was  a  letter

            written by Toto  to James three  days later, which  mentioned

            that "[i]n  our last conversation,  ... you agreed  to accept

            service  of any  declaratory judgment  action CNA  might file

            over the coverage issue.")   In his affidavit, James  went on

            to explain that he had  believed, based on this  conversation

            and his amicable relationship with Toto, that defendant would

            be  filing suit; that he had relied  on this agreement in not

            bringing  suit himself;  and  that he  immediately filed  the

            action when it  became apparent that defendant  was not going

            to do so.

                 On  appeal, defendant contends  that James'  reliance on

            Toto's   promise   was   unreasonable   in   light   of   the

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"clarification"  that  appeared  in  the  latter's  follow-up

            letter.1    In   its  view,  the  reference  there   to  "any

            declaratory judgment  action that CNA  might file"  (emphasis
                                                   _____

            added) was  sufficient  to  call  into  question  defendant's

            intentions in this regard.   A more plausible interpretation,

            we think, is that Toto's choice of language  simply reflected

            the  possibility  that the  case  would  be  settled  in  the

            interim.   We find nothing in his letter that would seriously

            undercut an "unequivocal" promise voiced three days earlier.

                 We nonetheless  agree that plaintiff's  reliance on that

            representation was unreasonable as a matter of law.  From all

            that appears, Toto conveyed this pledge in a single telephone

            conversation,  at  a time  when  nearly  two months  remained

            before the limitations period  expired.  The follow-up letter

            contained no explicit  confirmation thereof,  and the  matter

            was never addressed again.  Most important, plaintiff took no

            steps thereafter  to ascertain whether defendant  had in fact

            fulfilled  its  promise.   This  last  factor proves  largely

            dispositive.   

                 The instant  case is unusual in  that the representation

            at issue--a  promise to  file suit--concerned an  action that

            was  to  be  performed  before  the  statute  of  limitations
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            expired, not afterwards.  Plaintiff was thus in a position to
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            1.  Defendant offered no response below to James' affidavit--
            perhaps because its summary judgment motion was granted eight
            days after that affidavit was filed.

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confirm, prior to the March 19, 1992 deadline, that defendant

            had followed through on its  pledge.  Yet no such  steps were

            taken.  As that date approached, with no notice of any filing

            having  been  received,  plaintiff  failed even  to  place  a

            telephone  call to ascertain the status of events.  No matter

            how "unequivocal"  Toto's statement  had been, and  no matter

            how cordial  the attorneys'  relationship was, we  think that

            such a  lack of  diligence precluded invocation  of equitable

            estoppel as a matter of law.  See,  e.g., O'Blenes, 397 Mass.
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            at 558-59 (holding that  it was unreasonable for  attorney to

            rely on statement  by zoning  board clerk as  to when  appeal

            period expired; attorney "had an obligation to determine" the

            relevant facts); cf. Irwin v. Dep't of Veterans Affairs,  498
                             ___ _____    _________________________

            U.S.  89,  96  (1990)  ("We have  generally  been  much  less

            forgiving in receiving late filings where the claimant failed

            to exercise  due diligence in preserving  his legal rights.")

            (quoted in McKinney v. Waterman S.S. Corp., 925 F.2d 1, 6 n.6
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            (1st Cir. 1991)).

                 The judgment is affirmed.  See Loc. R. 27.1.
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