In Re: Methyl Tertiary Butyl Ether ("MTBE") Products Liability Litigation

Filing 4277

LETTER addressed to Judge Shira A. Scheindlin from Richard E. Wallace dated 10/23/15 re: Puerto Rico Limitations. Document filed by Shell International Petroleum Company, Limited, Shell Western Supply and Trading, Limited.Filed In Associated Cases: 1:00-cv-01898-SAS-DCF, 1:07-cv-10470-SAS, 1:14-cv-01014-SAS(Wallace, Richard)

Sedgwick

Richard E. Wallace, Jr.
LLP

2900 K Street, NW 
Washington, DC 2007 
[e-mail] 
202.204.1000

October 23, 2015
BY ELECTRONIC MAIL
The Honorable Shira A. Scheindlin
United States District Judge
Southern District of New York
Daniel Patrick Moynihan Courthouse
500 Pearl Street, Room 1620
New York, NY 10007-1312
Re:

Master File C.A. No. 1:00-1898 (SAS), M21-88, MDL No. 1358
Commonwealth of Puerto Rico, et al. v. Shell Oil Co., et al., No. 07-cv-10470
Commonwealth of Puerto Rico, et al. v. Shell Oil Co., et al., No. 14-cv-01014

Dear Judge Scheindlin:
We submit this letter on behalf of defendants Shell Western Supply and Trading Ltd. and
Shell International Petroleum Company Ltd. (the “Shell Defendants”) in accordance with the
discussion at the October 15, 2015 conference. Respectfully, we urge that the Court grant the
Shell Defendants summary judgment on prescription pursuant to Fraguada Bonilla v. Hospital
Auxilio Mutuo, 186 D.P.R. 365 (2012). We address here the Court’s thoughtful proposal that
plaintiff should be permitted a new one-year limitations period beginning as of the date of the
Fraguada decision. While that proposal would confer something of a benefit on Plaintiff, it
would extend inequitable treatment of defendants, contrary to the ruling in Fraguada. We have
not found any applicable authority in Puerto Rico law, or in the class action context, that would
warrant, or even support, such a result.
As the Court knows well, the Puerto Rico Supreme Court in Fraguada abrogated the
judicially created tolling rule set out in Arroyo v. Hospital La Concepcion, 130 D.P.R. 596
(1992). As the Fraguada court explained, the Arroyo tolling rule appears nowhere in Puerto
Rico’s Civil Code. (Fraguada Translation at 9.) The Fraguada court determined that the
Arroyo rule is no longer, and never should have been, the law in Puerto Rico. The court held that
the Arroyo rule was not “in harmony with the rest of the law” because it conferred on one party
“the eternal right to file a torts claim against the other,” and “had the unfortunate effect of
rewarding inertia in the vindication of a right and promoting the strategic use of inaction.” (Id.)
And in determining that its decision should apply “prospectively,” the court in Fraguada

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LLP

The Honorable Shira A. Scheindlin
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discussed only the alleged “unfairness” to the respondents in that case, with no indication that it
intended its ruling to extend the abrogated Arroyo ruling to future amended complaints that
added new parties to other cases. To the contrary, the Fraguada court was clear that the Arroyo
rule should not be applied in any other case. “Subsequently, all causes of action filed according
to Art. 1802 of the Civil Code … shall be adjudicated in accordance with the rules established
herein.” (Fraguada Translation at 12.) And it concluded: “we hereby … revoke the rule in
Arroyo ….” (Id.) There is no suggestion in Fraguada that the Puerto Rico Supreme Court
intended the old Arroyo rule to have continuing application beyond Fraguada itself, or that the
court intended that a new tolling period should run from the date of its Fraguada decision.
Thus, this Court was correct when it previously applied Fraguada and dismissed claims
against other late-added defendants, and when it denied the Commonwealth’s motion to
reconsider precisely the dismissal of defendants Peerless and Trammo. There, this Court wrote:
Following traditional practice when a more restrictive tolling rule is announced, the
Puerto Rico Supreme Court in Fraguada did not apply its new rule retroactively to the
plaintiffs in that case. Nowhere does Fraguada indicate that the narrow retroactivity
exception should apply to cases filed after the date of the court's opinion, nor is there any
indication that its new tolling rule should not apply to parties sued after its decision was
announced. … [T]his would be a marked departure from the usual practice in
announcing a new tolling rule….
In re MTBE, slip op. at 6-7 (Aug. 2, 2013) (emphasis in original; footnotes omitted).
Likewise, there is no support for a new one-year tolling period running from the date of
the Fraguada decision in any of the subsequent decisions which Plaintiffs provided to the Court.
To the contrary, the Commonwealth itself successfully argued in one of those cases, Cubero
Aponte v. Autoridad de Acueductos y Alcantarillados de P.R., 2014 WL 7474663 (T.C.A. Oct.
10, 2014), that Fraguada applied even to bar an amended complaint filed pre-Fraguada against
the Comonwealth itself.
We appreciate, of course, the Court’s desire to treat the Commonwealth equitably. But
creating a new tolling period – after the Commonwealth already had years to sue the Shell
Defendants before Fraguada – would have the effect of extending the old Arroyo rule and
inflicting on defendants the very inequity that Fraguada is supposed to eliminate.
The balance of equities favors this Court’s prior decision to apply Fraguada to newly
added defendants. The old Arroyo rule did not require plaintiffs to forego suing the Shell
Defendants or others added late. Had it done so, then a sudden change in the rule which bars
their claims would be inequitable. Rather, the old rule merely allowed plaintiffs to sue or not as
they chose. There is no evidence in the record that plaintiffs relied on the old rule in delaying
their claims. Quite the contrary, plaintiffs contend that they had no reason to know the identities

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of the Shell Defendants (or the other late-added defendants) until shortly before suing them.1
That contention is demonstrably incorrect, as the Shell Defendants have shown in the papers
supporting their motion for summary judgment (and as the Court has already found with respect
to the other dismissed defendants).
Conversely, the Shell Defendants had no timely notice or cause to believe they would be
sued during the usual limitations period. This critical lack of timely notice – which is precisely
what the statute of limitations is meant to prevent – distinguishes this case from class actions
where limitations periods are sometimes reset after denial of certification. In those cases,
defendants are on notice of the claims from the day the class actions are filed. That is
necessarily the case, as class action law provides that the initiation of a putative class action does
not toll the statute of limitations for claims against other, unnamed defendants. See, e.g., Earl v.
Novartis Consumer Health, Inc., 2008 WL 4274468 (E.D.N.Y. 2008) (class action against one
corporate entity “does not toll the statute of limitations against” a related entity); Guy v.
Lexington-Fayette Urban County Gov’t, 488 Fed. Appx. 9 (6th Cir. 2012); Barkley v. Woodbury
County, Iowa, 874 F.Supp.2d 759 (N.D. Iowa 2012).
For defendants that are named timely in a class action, there might be no prejudice when
putative class claims are replaced with individual claims, and good reason to allow putative class
members time to bring their individual cases. The leading class action decisions stress this
timely notice and lack of prejudice to defendants as a justification for allowing individual
plaintiffs more time to sue. See, e.g., Crown Cork & Seal Co. v. Parker, 462 U.S. 345, 353
(1983) (“a class complaint ‘notifies the defendants not only of the substantive claims being
brought against them, but also of the number and generic identities of the potential plaintiffs who
may participate in the judgment’”), quoting Am. Pipe & Constr. Co. v. Utah, 414 U.S. 538, 555
(1974). Courts have also found that allowing time for individuals to sue following denial of
class certification serves the interests of judicial economy because it eliminates the need for
individual plaintiffs to file their own complaints or intervene in putative class actions in order to
preserve their rights. Parker, 462 U.S. at 353. Neither of these justifications supports granting
the plaintiffs in this case a new tolling period. Indeed, the opposite is true. Giving plaintiffs a
new tolling period here would not only reward their failure to file sooner, but would prejudice
defendants and would undermine judicial economy by allowing time-barred claims.
What is more, neither the Puerto Rico Supreme Court’s decision in Fraguada nor the
post-Fraguada decisions from Puerto Rico’s courts contain any suggestion that the Puerto Rico
Supreme Court intended to adopt a new tolling doctrine such as that employed in class actions.
If the Puerto Rico Supreme Court had intended to adopt such a new rule, it presumably would
have said so. Instead, the Puerto Rico Supreme Court “revoked” the Arroyo rule and applied the
new rule to “all causes of action” filed thereafter.

1

Plaintiffs’ Opposition to Shell West and SIPC’s Motion for Summary Judgment Based on Limitations (Dkt. 622);
Plaintiffs’ Opposition to Vitol’s Motion for Summary Judgment Based on Limitations (Dkt. 337); Plaintiffs’
Opposition to Idemitsu’s Motion for Summary Judgment Based on Limitations (Dkt. 347).

Sedgwick

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The Honorable Shira A. Scheindlin
Page 4

Finally, in addressing questions of state (or in these cases, Commonwealth) law, this
Court should tread lightly and not fashion new rules that it might find just or advisable, without
support in existing Puerto Rico law. As the First Circuit put it:
[A] federal court – which has “no roving commission to superimpose federal choices
upon the framework of state law,” McInnis v. Harley-Davidson Motor Co., 625 F.Supp.
943, 956 n. 7 (D.R.I.1986) – should not play “Big Brother.” Our mission is to
“determine the rule that the [state] Supreme Court would probably follow, not fashion a
rule which ... an independent federal court might consider best. Lowe’s North
Wilkesboro Hardware, Inc. v. Fidelity Mut. Life Ins. Co., 319 F.2d 469, 472 (4th
Cir.1963).
Moores v. Greenberg, 834 F.2d 1105, 1107 n.3 (1st Cir. 1987). Thus, “a federal court must take
state law as it exists: not as it might conceivably be, some day; nor even as it should be. And,
once state law has been divined, this court must proceed to interpret and apply that law according
to its tenor. Cantwell v. University of Massachusetts, 551 F.2d 879, 880 (1st Cir.1977). If the
result is harsh, change must be wrought by either the judicial or legislative branch of state
government, so long as the Constitution and/or federal statutes are not implicated.” Plummer v.
Abbott Labs., 568 F. Supp. 920, 927 (D.R.I. 1983).
In sum, this Court’s prior decisions applying Fraguada on the Arroyo tolling rule were
correct, even if they seem somewhat inequitable to the Commonwealth (although there is no real
inequity given that the Commonwealth never relied on the Arroyo rule in this case anyway – it
just added the new defendants too late).
We appreciate the Court allowing us the opportunity to submit this letter and thank Your
Honor for your consideration.
Respectfully submitted,
Richard E. Wallace, Jr.