14‐3201 Thea v. Kleinhandler

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

August Term 2014

(Argued: March 26, 2014 Decided: November 3, 2015)

Docket No. 14‐3201

DONALD M. THEA, DEBORAH L. THEA,

Plaintiffs‐Appellants,

v.

NEIL C. KLEINHANDLER, As Trustee of the Frederica Fisher Thea Revocable Trust, NEW SCHOOL UNIVERSITY, ERIC T. SCHNEIDERMAN, Attorney General of the State of New York,

Defendants‐Appellees.

ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK

Before: JACOBS and CHIN, Circuit Judges, and WOLFORD, District Judge.*

* The Honorable Elizabeth A. Wolford, of the Western District of New York, sitting by designation.

Appeal from a judgment of the United States District Court for the

Southern District of New York (Castel, J.), denying plaintiffsʹ motion for leave to

file a second amended complaint. The district court concluded that allowing

plaintiffs to amend their complaint would be futile, because they lacked standing

to sue in their individual capacities and their claims on behalf of the estate were

time‐barred under Californiaʹs one‐year statute of limitations. We affirm on the

grounds that all the claims are time‐barred.

AFFIRMED.

ANTHONY J. VIOLA (Zachary W. Silverman, on the brief), Edwards Wildman Palmer LLP, New York, New York, for Plaintiffs‐Appellants.

BRUCE J. TURKLE (Perry S. Galler, on the brief), Phillips Nizer LLP, New York, New York, for Defendant‐ Appellee Neil C. Kleinhandler, Individually and as Trustee of the Frederica Fisher Thea Revocable Trust.

MARCY RESSLER HARRIS, Schulte Roth & Zabel LLP, New York, New York, for Defendant‐Appellee New School University.

JASON HARROW, Assistant Solicitor General (Barbara D. Underwood, Solicitor General, and Claude S. Platton, Assistant Solicitor General, on the brief), for Eric T. Schneiderman, Attorney General of the State of New York, New York, New York, for Defendant‐Appellee Attorney General of the State of New York.

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CHIN, Circuit Judge:

In this case, Stanley Thea (ʺStanleyʺ) and Frederica Thea

(ʺFredericaʺ) agreed to and did execute mutual wills providing for each otherʹs

assets to pass to the survivor and, upon the death of the survivor, to Stanleyʹs

children from a prior marriage, Donald Thea and Deborah Thea (the ʺTheasʺ).

After Stanley died, however, Frederica transferred substantially all of her assets

to a trust (the ʺTrustʺ), leaving the remainder interest not to the Theas but to

defendant‐appellee New School University (the ʺNew Schoolʺ).

The Theas commenced this action against the New School as well as

defendants‐appellees Neil Kleinhandler, as trustee of the Trust, and Eric

Schneiderman, as Attorney General of New York, contending that they were

entitled to the Trustʹs assets and seeking, inter alia, declaratory and equitable

relief. On May 12, 2014, the district court dismissed the Theasʹ claims without

prejudice, on the grounds that it was unable to adjudicate the claims because no

representative of Fredericaʹs estate (the ʺEstateʺ) was a party to the action. After

being appointed special administrators of the Estate, the Theas sought leave to

file a second amended complaint. On August 1, 2014, the district court denied

the Theasʹ motion on grounds of futility, concluding that the claims alleged in the

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proposed second amended complaint would not withstand a motion to dismiss.

The Theas appeal. We affirm.

BACKGROUND

A. The Facts

For the purposes of this appeal, the facts alleged in the proposed

second amended complaint are assumed to be true. They may be summarized as

follows:

The Theas are the only children of Stanley and his first wife. In 1985,

Stanley married his third wife, Frederica. Stanley and Frederica had no children

together. On April 13, 1995, Stanley and Frederica entered into an agreement

(the ʺAgreementʺ) to execute mutual wills providing that the surviving spouse

would receive the deceased spouseʹs property and, upon the surviving spouseʹs

death, the surviving spouseʹs property would pass to the Theas.1 Stanley and

1 Fredericaʹs will provided in pertinent part that: ʺI give and bequeath all the household and personal effects, including jewelry, clothing, pictures, objects of art, and automobiles belonging to me at my death, together with all insurance policies relating thereto, to my husband, STANLEY THEA, if he survives me. If my husband, STANLEY THEA, shall predecease me then I give and bequeath such household and personal effects in equal shares to his son DONALD MARK THEA and his daughter DEBORAH LOUISE THEA, or to the survivor of them. . . . I give, devise, and bequeath all the residue and remainder of my estate of whatsoever kind and wheresoever situate to my husband, STANLEY THEA, if he survives me, but if he predeceases me, in equal shares to his issue [] surviving [me], per stirpes.ʺ

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Frederica executed wills in accordance with the Agreement. Fredericaʹs will

provides that when Stanley died, the Theas would be the sole executors.

Stanley predeceased Frederica in 1998. Thus, in accordance with

Stanleyʹs will and the Agreement, Frederica inherited Stanleyʹs assets, including

two apartments in New York City ‐‐ one in Manhattan and one in Astoria. Neil

Kleinhandler and his firm represented Frederica in connection with the probate

of Stanleyʹs estate.

In December 2002, Frederica created the Trust, which was governed

by New York law and was revocable. Frederica and Kleinhandler were

designated as co‐trustees. The New School, a university based in New York City,

was designated as the sole remainder beneficiary of the Trust. On or about

December 17, 2002, Frederica transferred the New York City apartments and

substantially all of her other property and assets into the Trust. For the

remainder of Fredericaʹs life, the Trust managed the assets for her benefit.

In 2007, the Trust sold the Manhattan apartment for approximately

$1.65 million. The Astoria apartment was also sold for an undisclosed amount.

The proceeds of both apartments remained in the Trust. On or about June 15,

2011, the Trust purchased a residence in Carmel, California for approximately

$1.9 million. Frederica moved into the Carmel residence and resided there for

‐5‐

the remainder of her life. The Trust also owns securities and capital, located in

various bank and brokerage accounts in New York, valued at approximately

$500,000.

On February 4, 2012, Frederica died of an apparent suicide. Law

enforcement officials discovered a suicide note with instructions to contact

Kleinhandler, her real estate agent, and her accountant. After Kleinhandler was

notified of Fredericaʹs death, he represented to law enforcement officials that he

was authorized to act on behalf of the Estate.

Kleinhandler did not inform the Theas of their stepmotherʹs death,

nor did he publish an obituary or otherwise publicize her passing. 2 Within a

week of Fredericaʹs death, the Carmel residence was listed for sale with a real

estate broker, but it has not been sold. The Theas have not received any Trust

assets.

B. Proceedings Below

On July 15, 2013, the Theas, in their individual capacities,

commenced this action against Kleinhandler, as the sole trustee of the Trust.3

2 The proposed second amended complaint is silent as to when the Theas learned of Fredericaʹs death. They represent in their brief on appeal that they did not learn of her death until more than a year later, in May 2013. 3 The Theas invoked the district courtʹs diversity jurisdiction, alleging that Donald Thea was a citizen of Massachusetts, Deborah Thea a citizen of California, and

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The Theas alleged that Frederica had defeated the intent of the Agreement by

transferring her assets to the Trust.

On August 27, 2013, after limited discovery, the Theas served an

amended complaint, naming two new defendants: the New School, as the Trustʹs

remainder beneficiary, and the Office of the New York State Attorney General.4

The amended complaint also included a claim for breach of fiduciary duty

against Kleinhandler, both individually and as trustee of the Trust.

On October 7, 2013, Kleinhandler and the New School moved to

dismiss the amended complaint pursuant to Fed. R. Civ. P. 12(b)(6). On May 13,

2014, the district court granted, without prejudice, the motions on the grounds

that it was unable to fully adjudicate the Theasʹ claims until a representative of

the Estate was appointed and joined as a necessary party. The district court held

that an administrator or executor of the Estate could seek leave to amend within

21 days of the May 13 order.

Kleinhandler a citizen of New York. See

(a). The parties do not contest jurisdiction. 4 The Attorney General appears in his capacity as statutory representative of the beneficiaries of ʺdispositions for religious, charitable, educational or benevolent purposes and it shall be his duty to enforce the rights of such beneficiaries by appropriate proceedings in the courts.ʺ N.Y. Est. Powers & Trusts Law § 8‐1.1(f) (McKinney 2010).

‐7‐

The Theas immediately initiated probate proceedings in the

Superior Court of California, County of Monterey, seeking to be appointed

representatives of the Estate. The Theas filed an expedited petition for ʺLetters of

Special Administrationʺ so that their application could be heard prior to the 21‐

day deadline imposed by the district court in this case. On May 28 and May 30,

2014, the California court granted the Theasʹ request, issuing Letters of Special

Administration to both of them. The California court also admitted Fredericaʹs

will to probate.

On June 2, 2014, the Theas sought leave to file a second amended

complaint, in their individual capacities, as creditors of the Estate, and as special

administrators of the Estate. The Theas asserted claims in: (1) their individual

capacity; (2) their capacity as creditors of the Estate; and (3) their capacity as

special administrators of the Estate.

On August 1, 2014, the district court denied the Theasʹ motion for

leave to amend on grounds of futility, concluding that the claims alleged in the

proposed second amended complaint would not withstand a motion to dismiss.

First, the district court rejected the Theasʹ individual claims for lack of standing.

Second, the district court applied New Yorkʹs borrowing statute, N.Y. C.P.L.R.

202, to the Theasʹ claims as special administrators. It concluded that California

‐8‐

law applied to these claims, and then held that all of the Theasʹ claims on behalf

of the Estate were time‐barred because they were governed by a one‐year statute

of limitations pursuant to § 366.3 of the California Code of Civil Procedure. The

district court also held that the Theas did not allege sufficient facts to conclude

that equitable estoppel could toll their time to file. Last, the district court held

that because the underlying claims against Kleinhandler and the Trust were

untimely, the Theas remaining claims would not withstand a motion to dismiss.

Thus, the district court held that allowing the Theas to amend to add these

remaining claims would also be futile. Judgment was entered in favor of

defendants on August 4, 2014.

This appeal followed.

DISCUSSION

I. Standard of Review

We generally review a district courtʹs denial of leave to amend for

abuse of discretion, ʺkeeping in mind that leave to amend should be freely

granted when ʹjustice so requires.ʹʺ Sista v. CDC Ixis N. Am., Inc.,

,

177 (2d Cir. 2006) (quoting Pangburn v. Culbertson,

(2d Cir. 1999)).

A district court abuses its discretion if it bases its ruling on ʺan erroneous view

of the law, a clearly erroneous assessment of the facts, or a decision that cannot

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be located within the range of permissible decisions.ʺ Anderson News, L.L.C. v.

Am. Media, Inc.,

(2d Cir. 2012). Where the denial of leave to

amend is based on the resolution of legal questions, however, ʺa reviewing court

conducts a de novo review.ʺ Hutchison v. Deutsche Bank Sec. Inc.,

(2d Cir. 2011).

The district court denied leave to the Theas to file the proposed

second amended complaint on grounds of futility, concluding that it would not

withstand a motion to dismiss. Thea v. Kleinhandler, No. 13‐CV‐4895 (PKC),

, at *6, *9 (S.D.N.Y. Aug. 1, 2014); see also Ashcroft v. Iqbal,

(2009) (to survive motion to dismiss, ʺa complaint must contain

sufficient factual matter, accepted as true, to ʹstate a claim to relief that is

plausible on its faceʹʺ (quoting Bell Atl. Corp. v. Twombly,

(2007)). ʺProposed amendments are futile if they ʹwould fail to cure prior

deficiencies or to state a claim under Rule 12(b)(6) of the Federal Rules of Civil

Procedure.ʹʺ IBEW Local Union No. 58 Pension Trust Fund & Annuity Fund v.

Royal Bank of Scotland Grp., PLC,

(2d Cir. 2015) (quoting Panther

Partners Inc. v. Ikanos Commcʹns, Inc.,

(2d Cir. 2012)). Here, the

district courtʹs conclusion that the proposed amended pleading failed to state a

claim, and thus would not survive a motion to dismiss, was a legal

‐10‐

determination. See Panther Partners Inc.,

(ʺFutility is a

determination, as a matter of law, that proposed amendments would fail . . . to

state a claim.ʺ). Thus, the applicable standard of review here is de novo. See, e.g.,

Adelson v. Harris,

(2d Cir. 2014) (reviewing de novo district

courtʹs dismissal under Rule 12(b)(6)); Gorman v. Consol. Edison Corp.,

, 591‐592 (2d Cir. 2007) (reviewing de novo district courtʹs denial of motions

for leave to amend as futile).

II. Timeliness

The district court held that a California one‐year statute of

limitations governs this case and dismissed the Theasʹ claims on behalf of the

Estate as time‐barred. The Theas argue that this was error, and that a New York

six‐year statute of limitations applies.5 We conclude that the one‐year California

statute of limitations applies to all the claims in this action and that the Theasʹ

claims are time‐barred. We reject the Theasʹ contention that their claims are

saved by the doctrine of equitable estoppel.

5 The district court also held that the Theas lacked standing to assert claims individually. The Theas contend that the district court erred in this respect. We do not reach this issue, in light of our ruling below on the timeliness of their claims.

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A. Choice‐of‐Law Rules

Where jurisdiction is predicated on diversity of citizenship, a federal

court must apply the choice‐of‐law rules of the forum state. Forest Park Pictures v.

Universal Television Network, Inc.,

(2d Cir. 2012); see also Klaxon

Co. v. Stentor Elec. Mfg. Co.,

(1941). Under New York law, we

apply the rules of decision that are considered ʺsubstantive,ʺ see Erie R. Co. v.

Tompkins,

(1938),6 including statutes of limitation. See Cantor

Fitzgerald Inc. v. Lutnick,

(2d Cir. 2002) (ʺA stateʹs rules

providing for the start and length of the statute of limitations is substantive

law.ʺ); accord Stuart v. Am. Cyanamid Co.,

, 626 (2d Cir. 1998) (ʺWhere

jurisdiction rests upon diversity of citizenship, a federal court sitting in New

York must apply the New York choice‐of‐law rules and statutes of limitations.ʺ).

New Yorkʹs borrowing statute, N.Y. C.P.L.R. 202, provides that

ʺwhen a nonresident plaintiff sues upon a cause of action that arose outside of

New York, the court must apply the shorter limitations period, including all

relevant tolling provisions, of either: (1) New York; or (2) the state where the

cause of action accrued.ʺ Stuart, 158 F.3d at 627; see Glob. Fin. Corp. v. Triarc Corp.,

6 Whether a particular state rule of decision is ʺsubstantiveʺ is a question of federal law. See Hanna v. Plumer,

, 465‐66 (1965).

‐12‐

(1999) (ʺWhen a nonresident sues on a cause of action

accruing outside New York, CPLR 202 requires the cause of action to be timely

under the limitation periods of both New York and the jurisdiction where the

cause of action accrued.ʺ).7 New York follows ʺthe traditional definition of

accrual ‐‐ a cause of action accrues at the time and in the place of the injury.ʺ

Glob. Fin. Corp.,

. Where the ʺinjury is purely economic, the place

of injury usually is where the plaintiff resides and sustains the economic impact

of the loss.ʺ

Under California law, ʺ[i]f a person has a claim that arises from a

promise or agreement with a decedent to distribution from an estate or trust or

under another instrument . . . an action to enforce the claim to distribution may

be commenced within one year after the date of death, and the limitations period

that would have been applicable does not apply.ʺ

(a);

see Allen v. Stoddard,

(Ct. App. 2013) (ʺSection 366.3 gives

persons who have claims against estates based on promises to make a

7 N.Y. C.P.L.R. 202 provides: ʺAn action based upon a cause of action accruing without the state cannot be commenced after the expiration of the time limited by the laws of either the state or the place without the state where the cause of action accrued, except that where the cause of action accrued in favor of a resident of the state the time limited by the laws of the state shall apply.ʺ See also In re Coudert Bros. LLP,

(2d Cir. 2012) (noting that N.Y. C.P.L.R. 202 ʺguards against forum shopping by out‐of‐state plaintiffs by mandating use of the shortest statute of limitations availableʺ).

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distribution after death (such as contracts to make a will) a full year from the

date of the decedentʹs death to file suit.ʺ). Moreover, § 366.3 ʺhas been construed

to ʹreach any action predicated upon the decedentʹs agreement to distribute

estate or trust property in a specified manner.ʹʺ In re Estate of Ziegler,

, 868 (Ct. App. 2010) (quoting Ferraro v. Camarlinghi,

(Ct. App. 2008)).

Under New York law, ʺ[a] disposition in trust for the use of the

creator is void as against the existing or subsequent creditors of the creator.ʺ N.Y.

Est. Powers & Trusts Law § 7‐3.1 (McKinney 2005). Claims under this statute are

likely subject to the six‐year statute of limitations in N.Y. C.P.L.R. 213. Cf. State v.

Cetero,

(N.Y. App. Div. 3d Depʹt 1996) (noting that six‐year

statute of limitations would apply where plaintiff attempted to set aside two

provisions in trust agreement). N.Y. C.P.L.R. 213 is a catch‐all provision that

ʺrequires ʹan action for which no limitations is specifically prescribed by lawʹ to

be brought within six years of a claimʹs accrual.ʺ Melcher v. Greenberg Traurig,

LLP,

(2014) (quoting N.Y. C.P.L.R. 213(1) (McKinney 2004)). As

N.Y. Est. Powers & Trusts Law § 7‐3.1 does not specifically prescribe a statute of

limitations period, New York courts have required actions commenced under

‐14‐

this statute to be brought within six years. See Christopher v. Tomeck,

(N.Y. App. Div. 3d Depʹt 2011).

B. Applicability of Californiaʹs Statute of Limitations

Here, the California statute applies to the Theasʹ claims. While the

district court did not apply the statute of limitations to the Theasʹ individual

claims (which it rejected on standing grounds), we conclude that all the Theasʹ

claims are time‐barred.

First, the Theas, as administrators of the Estate, are deemed to be

citizens of California. See

(c)(2) (ʺthe legal representative of the

estate of a decedent shall be deemed to be a citizen only of the same State as the

decedentʺ). Nor are they, in their individual capacities, citizens of New York, as

Deborah is a California resident and Donald is a resident of Massachusetts.

Second, the Theasʹ claims accrued in California. The Theas allege

that Kleinhandler and the Trust improperly exercised dominion and control over

the Estateʹs assets. Frederica was residing in California when she died. The

Estateʹs assets (consisting largely of Trust assets) were located primarily in

California. Thus, to the extent the Estate suffered economic harm, it did so in

California. To the extent the Theas suffered harm in their individual capacities

‐15‐

or as creditors, it was not in New York but in California for Deborah and in

Massachusetts for Donald.8

Third, the California statute of limitations is the shorter of the two

conflicting statutes, and New York Law requires that an action accruing outside

the state must meet the statutes of limitations of both jurisdictions. See Ins. Co. of

N. Am. v. ABB Power Generation, Inc.,

(1997) (ʺCPLR 202

requires that a court, when presented with a cause of action accruing outside

New York, should apply the limitation period of the foreign jurisdiction if it bars

the claim.ʺ).

California law provides that any action arising ʺfrom a promise or

agreement with a decedent to distribution from an estateʺ is subject to a one‐year

statute of limitations period. See

(a) (West 2010);

Stewart v. Seward,

, 656‐59 (Ct. App. 2007) (applying § 366.3

where plaintiff sought to enforce a promise to make a testamentary disposition).

All the Theasʹ claims here arise from such a promise or agreement. Hence, it

appears that under New Yorkʹs borrowing statute, the one‐year California statute

of limitations controls this action.

8 Like California law, Massachusetts law provides that an action against a decedent must be commenced within one year of the date of death. Mass. Gen. Laws ch. 190B, § 3‐803 (West 2012).

‐16‐

The Theas argue that § 366.3 applies only to claims against an estate

and not on behalf of an estate. The plain language of § 366.3, however, does not

contemplate this distinction. In fact, California courts have repeatedly construed

§ 366.3 to ʺreach any action predicated upon the decedentʹs agreement to

distribute estate or trust property in a specified manner.ʺ In re Estate of Ziegler,

114 Cal. Rptr. 3d at 868 (quoting Ferraro,

) (emphasis

added)); McMackin v. Ehrheart,

(Ct. App. 2011)

(applying § 366.3 to individual claim against estate). Indeed, the Theasʹ claims

arise from an agreement between Stanley and Frederica to a distribution from an

estate ‐‐ the estate remaining, as it turned out, upon Fredericaʹs death.9

The Theas further argue that New Yorkʹs longer statute of

limitations applies to their claims because their claims relate to the transfer of

property in New York ‐‐ Frederica lived in New York when she transferred

substantially all of her property into the Trust. In essence, they contend that

their claims arose in New York and not California. We reject this argument.

First, even assuming Frederica transferred the assets into the Trust

when she still lived in New York, there was nothing in the Agreement to prevent

9 Moreover, § 366.3 has been applied to fraud and unjust enrichment claims and ʺto claims based on a contract to leave certain property by will, even when the claimant is seeking only damages for breach of the contract and is not seeking the property itself.ʺ In re Estate of Ziegler, 114 Cal. Rptr. 3d at 868.

‐17‐

her from doing so. The Agreement ‐‐ and the mutual wills attached thereto ‐‐

imposed no restrictions on her use of the assets during her lifetime. She could

have consumed all of the assets during her lifetime. Second, the Trust used a

substantial portion of its assets to purchase the home in Carmel, California, and

Frederica moved there from New York in 2011 and resided there, in California,

until her death on February 4, 2012. Hence, the Trustʹs assets were substantially

moved to California while Frederica was still alive. Third, the only claim the

Theas could have to the Trust assets arose only upon Fredericaʹs death, when she

was residing in California and her assets were substantially located there as well.

To the extent the Estate suffered an injury, the claim arose in California, where

Frederica was residing at the time of her death. To the extent the Theas suffered

economic injuries, they did not do so in New York, as neither was a resident of

New York.

We therefore conclude that N.Y. C.P.L.R. 202 requires the

application of Californiaʹs Code of Civil Procedure § 366.3 because it provides the

shorter limitations period. See Stuart, 158 F.3d at 627 (Under New York law, ʺthe

court must apply the shorter statute of limitations period . . . of either: (1) New

York; or (2) the state where the cause of action accrued.ʺ (citing N.Y. C.P.L.R. 202)

(McKinney 2004).

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Frederica died on February 4, 2012 and this action was commenced

on July 15, 2013, more than one year after her death. Accordingly, it appears

from the face of the proposed second amended complaint that the Theasʹ claims

are time‐barred.

C. Equitable Estoppel

The Theas contend that, even if § 366.3 applies to their claims,

Kleinhandler should be equitably estopped from asserting the statute of

limitations as a defense. When applying another stateʹs statute of limitations

pursuant to N.Y. C.P.L.R. 202, ʺ[a]ll the extensions and tolls applied in the

foreign state must be imported with the foreign statutory period, so that the

entire foreign statute of limitations . . . applie[s], and not merely its period.ʺ

Smith Barney, Harris Upham & Co. v. Luckie,

(1995) (internal

quotation marks omitted); see also Antone v. Gen. Motors Corp., Buick Motor Div.,

(1984) (ʺIt is true that in ʹborrowingʹ a Statute of Limitations of

another State, a New York court will also ʹborrowʹ the other Stateʹs rules as to

tolling.ʺ).10 Therefore, to the extent California law provides relief under an

equitable estoppel theory, we apply it accordingly.

10 We note that § 366.3 expressly circumscribes tolling and extension: ʺ[t]he limitations period provided in this section for commencement of an action shall not be tolled or extended for any reason . . . .ʺ

(b). California

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1. Applicable Law

Under California law, the doctrine of equitable estoppel may be

applied, after the limitations period has run, to preclude a defendant from

asserting the statute of limitations as a defense ʺwhere the partyʹs conduct has

induced another into forbearing to file suit.ʺ McMackin,

;

accord Doheny Park Terrace Homeowners Assʹn, Inc. v. Truck Ins. Exch.,

(Ct. App. 2005). ʺReliance by the party asserting the estoppel on the

conduct of the party to be estopped must have been reasonable under the

circumstances. ʹTo warrant reliance, a representation must be such as would

induce a reasonable man to act upon it.ʹʺ Mills v. Forestex Co.,

(Ct. App. 2003) (quoting Three Sixty Five Club v. Shostak,

(1951)).

ʺThe elements of equitable estoppel are: (1) the party to be estopped

must be apprised of the facts; (2) that party must intend that his or her conduct

be acted on, or must so act that the party asserting the estoppel had a right to

believe it was so intended; (3) the party asserting the estoppel must be ignorant

courts, however, distinguish between equitable tolling and equitable estoppel and have applied the latter under § 366.3. See Lantzy v. Centex Homes,

(Cal. 2003) (ʺ[E]quitable estoppel is available even where the limitations statute at issue expressly precludes equitable tolling.ʺ). We assume for the purposes of this appeal that Californiaʹs equitable estoppel doctrine applies under § 202.

‐20‐

of the true state of facts; and (4) the party asserting the estoppel must reasonably

rely on the conduct to his or her injury.ʺ Honig v. San Francisco Planning Depʹt,

(Ct. App. 2005) (citing Mills,

).

ʺAlthough the statute of limitations is ordinarily an affirmative

defense that must be raised in the answer, a statute of limitations defense may be

decided on a Rule 12(b)(6) motion if the defense appears on the face of the

complaint.ʺ Ellul v. Congregation of Christian Bros.,

, 798 n.12 (2d Cir.

2014) (citing Staehr v. Hartford Fin. Servs. Grp., Inc.,

(2d Cir.

2008)). When a plaintiff relies on a theory of equitable estoppel to save a claim

that otherwise appears untimely on its face, the plaintiff must specifically plead

facts that make entitlement to estoppel plausible (not merely possible). See

Ashcroft, 556 U.S. at 678‐79; Twombly, 550 U.S. at 556‐57, 570.

2. Application

The Theas argue that Kleinhandler should be estopped from

invoking Californiaʹs § 366.3 statute of limitations, alleging the following facts:

(1) Kleinhandler failed to disclose Fredericaʹs death to them, with the intent to

conceal it; (2) Kleinhandler held himself out to law enforcement officials as the

sole representative of the Estate; and (3) Kleinhandler had a duty, as trustee of

the Trust, to disclose Fredericaʹs death.

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Under California law, however, equitable estoppel is only available

where a defendant induces a plaintiff to forbear from filing suit. See Prudential‐

LMI Commercial Ins. v. Superior Court,

(Cal. 1990) (ʺ[Equitable]

estoppel arises as a result of some conduct by the defendant, relied on by the

plaintiff, which induces the belated filing of the action.ʺ (internal quotation

marks omitted)).11 That is, to be equitably estopped, a defendant must have

taken affirmative steps to induce the plaintiff to refrain from filing a timely suit.

See Vaca v. Wachovia Mortg. Corp.,

(Ct. App. 2011) (ʺFor

a defendant to be equitably estopped from asserting a statute of limitations, the

plaintiff must be directly prevented . . . from filing [a] suit on time.ʺ (internal

quotation marks omitted)); Becerra v. Gonzales,

(Ct. App.

1995) (ʺGenerally, estoppel arises from a partyʹs affirmative conduct which has

led the opposing party to believe a particular fact is true, and to rely on that fact

to his or her detriment.ʺ).

11 Similarly, under New York law, equitable estoppel is available only where the plaintiff knew of the existence of the cause of action, but the defendantʹs misconduct caused the plaintiff to delay in bringing suit. See, e.g., Green v. Albert,

(N.Y. App. Div. 2d Depʹt 1993); Murphy v. Wegmanʹs Food Mkt.,

(N.Y. App. Div. 4th Depʹt 1988); Buttry v. Gen. Signal Corp.,

, 1493 (2d Cir. 1995); Netzer v. Continuity Graphic Assocs., Inc.,

(S.D.N.Y. 1997). Equitable tolling, on the other hand, is ʺavailable where the defendant has wrongfully deceived or misled the plaintiff to conceal the existence of a cause of action.ʺ Kotlyarsky v. New York Post,

(Sup. Ct. Kings Cty. 2003).

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Here, the Theas have failed to allege facts to plausibly suggest that

Kleinhandler induced them to refrain from filing their action in a timely fashion.

See Ellul,

(affirming dismissal where plaintiffs did not allege any

misrepresentations made by defendants and relied upon by plaintiffs in delaying

suit); see also Lantzy v. Centex Homes,

(rejecting equitable estoppel

argument where ʺcomplaint [was] devoid of any indication that defendantsʹ

conduct actually and reasonably induced plaintiffs to forbear suingʺ). They

simply allege that Kleinhandler failed to inform them of Fredericaʹs death when

he had a duty to do so. Simply failing to disclose the fact that Frederica died is

insufficient for relief under an equitable estoppel theory. Moreover, even if

Kleinhandler represented to law enforcement officials that he was authorized to

act on behalf of the Estate, the Theas did not ascertain this fact until after the

commencement of this action. Therefore, his representation to law enforcement

officials could not have directly and reasonably induced them to forbear from

bringing suit.

Finally, due diligence on the part of a plaintiff is a prerequisite to

equitable estoppel. See Bernson v. Browning‐Ferris Indus. Of California, Inc.,

, (1994) (ʺThe rule of equitable estoppel includes, of course, the

requirement that the plaintiff exercise reasonable diligence.ʺ). The proposed

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second amended complaint does not even assert when the Theas learned of their

stepmotherʹs death, and it does not allege any facts to show that they acted

diligently in the seventeen months between Fredericaʹs death on February 4, 2012

and their commencement of this action on July 15, 2013. Indeed, it does not

appear that they made any effort to call, write, email, visit, or otherwise contact

Frederica in that time.

We conclude that the facts alleged in the proposed second amended

complaint, even if accepted as true, are insufficient to plausibly plead equitable

estoppel. Accordingly, Kleinhandler is not precluded from invoking the statute

of limitations as a defense.

CONCLUSION

For the reasons set forth above, the order of the district court is

AFFIRMED.

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