CHIN, Circuit Judge.
In this case, Stanley Thea ("Stanley") and Frederica Thea ("Frederica") agreed to and did execute mutual wills providing
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 Trust's assets and seeking, inter alia, declaratory and equitable relief. On May 12, 2014, the district court dismissed the Theas' claims without prejudice, on the grounds that it was unable to adjudicate the claims because no representative of Frederica's estate (the "Estate") 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 Theas' motion on grounds of futility, concluding that the claims alleged in the proposed second amended complaint would not withstand a motion to dismiss. The Theas appeal. We affirm.
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 "Agreement") to execute mutual wills providing that the surviving spouse would receive the deceased spouse's property and, upon the surviving spouse's death, the surviving spouse's property would pass to the Theas.
Stanley predeceased Frederica in 1998. Thus, in accordance with Stanley's will and the Agreement, Frederica inherited Stanley's 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 Stanley's 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,
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 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 Frederica's 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 stepmother's death, nor did he publish an obituary or otherwise publicize her passing.
On July 15, 2013, the Theas, in their individual capacities, commenced this action against Kleinhandler, as the sole trustee of the Trust.
On August 27, 2013, after limited discovery, the Theas served an amended complaint, naming two new defendants: the New School, as the Trust's remainder beneficiary, and the Office of the New York State Attorney General.
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 Theas' 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.
The Theas immediately initiated probate proceedings in the Superior Court of California, County of Monterey, seeking to be
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 Theas' 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 Theas' individual claims for lack of standing. Second, the district court applied New York's borrowing statute, N.Y. C.P.L.R. 202, to the Theas' claims as special administrators. It concluded that California law applied to these claims, and then held that all of the Theas' 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.
Standard of Review
We generally review a district court's denial of leave to amend for abuse of discretion, "keeping in mind that leave to amend should be freely granted when `justice so requires.'" Sista v. CDC Ixis N. Am., Inc., 445 F.3d 161, 177 (2d Cir.2006) (quoting Pangburn v. Culbertson, 200 F.3d 65, 70 (2d Cir.1999)). A district court abuses its discretion if it bases its ruling on "an erroneous view of the law, a clearly erroneous assessment of the facts, or a decision that cannot be located within the range of permissible decisions." Anderson News, L.L.C. v. Am. Media, Inc., 680 F.3d 162, 185 (2d Cir.2012). Where the denial of leave to amend is based on the resolution of legal questions, however, "a reviewing court conducts a de novo review." Hutchison v. Deutsche Bank Sec. Inc., 647 F.3d 479, 490 (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), 2014 WL 3812231, at *6, *9 (S.D.N.Y. Aug. 1, 2014); see also Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (to survive motion to dismiss, "a complaint must contain sufficient factual matter, accepted as true, to `state a claim to relief that is plausible on its face'" (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007))). "Proposed amendments are futile if they `would fail to cure prior deficiencies or to
The district court held that a California one-year statute of limitations governs this case and dismissed the Theas' 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.
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., 683 F.3d 424, 433 (2d Cir.2012); see also Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). Under New York law, we apply the rules of decision that are considered "substantive," see Erie R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938),
New York's borrowing statute, N.Y. C.P.L.R. 202, provides that "when 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." Stuart, 158 F.3d at 627; see Glob. Fin. Corp. v. Triarc Corp., 93 N.Y.2d 525, 528, 693 N.Y.S.2d 479, 715 N.E.2d 482 (1999) ("When 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
Under California law, "[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." Cal.Civ. Proc.Code § 366.3(a); see Allen v. Stoddard, 212 Cal.App.4th 807, 152 Cal.Rptr.3d 71, 74 (2013) ("Section 366.3 gives persons who have claims against estates based on promises to make a distribution after death (such as contracts to make a will) a full year from the date of the decedent's death to file suit."). Moreover, § 366.3 "has been construed to `reach any action predicated upon the decedent's agreement to distribute estate or trust property in a specified manner.'" In re Estate of Ziegler, 187 Cal.App.4th 1357, 114 Cal.Rptr.3d 863, 868 (2010) (quoting Ferraro v. Camarlinghi, 161 Cal.App.4th 509, 75 Cal.Rptr.3d 19, 57 (2008)).
Under New York law, "[a] disposition in trust for the use of the creator is void as against the existing or subsequent creditors of the creator." 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, 233 A.D.2d 580, 582, 649 N.Y.S.2d 514 (3d Dep't 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 "requires `an action for which no limitations is specifically prescribed by law' to be brought within six years of a claim's accrual." Melcher v. Greenberg Traurig, LLP, 23 N.Y.3d 10, 13, 988 N.Y.S.2d 101 (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 this statute to be brought within six years. See Christopher v. Tomeck, 82 A.D.3d 1307, 1309, 917 N.Y.S.2d 751 (3d Dep't 2011).
B. Applicability of California's Statute of Limitations
Here, the California statute applies to the Theas' claims. While the district court did not apply the statute of limitations to the Theas' individual claims (which it rejected on standing grounds), we conclude that all the Theas' claims are time-barred.
First, the Theas, as administrators of the Estate, are deemed to be citizens of California. See 28 U.S.C. § 1332(c)(2) ("the legal representative of the estate of a decedent shall be deemed to be a citizen only of the same State as the decedent").
Second, the Theas' claims accrued in California. The Theas allege that Kleinhandler and the Trust improperly exercised dominion and control over the Estate's assets. Frederica was residing in California when she died. The Estate's 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 or as creditors, it was not in New York but in California for Deborah and in Massachusetts for Donald.
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., 91 N.Y.2d 180, 187, 668 N.Y.S.2d 143, 690 N.E.2d 1249 (1997) ("CPLR 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.").
California law provides that any action arising "from a promise or agreement with a decedent to distribution from an estate" is subject to a one-year statute of limitations period. See Cal. Civ.Proc. Code § 366.3(a) (West 2010); Stewart v. Seward, 148 Cal.App.4th 1513, 56 Cal.Rptr.3d 651, 656-59 (2007) (applying § 366.3 where plaintiff sought to enforce a promise to make a testamentary disposition). All the Theas' claims here arise from such a promise or agreement. Hence, it appears that under New York's borrowing statute, the one-year California statute of limitations controls this action.
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 "reach any action predicated upon the decedent's agreement to distribute estate or trust property in a specified manner." In re Estate of Ziegler, 114 Cal.Rptr.3d at 868 (quoting Ferraro, 75 Cal.Rptr.3d at 57) (emphasis added); McMackin v. Ehrheart, 194 Cal.App.4th 128, 122 Cal.Rptr.3d 902, 909 (2011) (applying § 366.3 to individual claim against estate). Indeed, the Theas' claims arise from an agreement between Stanley and Frederica to a distribution from an estate—the estate remaining, as it turned out, upon Frederica's death.
The Theas further argue that New York's 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
We therefore conclude that N.Y. C.P.L.R. 202 requires the application of California's Code of Civil Procedure § 366.3 because it provides the shorter limitations period. See Stuart, 158 F.3d at 627 (Under New York law, "the court must apply the shorter statute of limitations period. . . of either: (1) New York; or (2) the state where the cause of action accrued." (citing N.Y. C.P.L.R. 202) (McKinney 2004)).
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 Theas' 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 state's statute of limitations pursuant to N.Y. C.P.L.R. 202, "[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." Smith Barney, Harris Upham & Co. v. Luckie, 85 N.Y.2d 193, 207, 623 N.Y.S.2d 800, 647 N.E.2d 1308 (1995) (internal quotation marks omitted); see also Antone v. Gen. Motors Corp., Buick Motor Div., 64 N.Y.2d 20, 31, 484 N.Y.S.2d 514, 473 N.E.2d 742 (1984) ("It is true that in `borrowing' a Statute of Limitations of another State, a New York court will also `borrow' the other State's rules as to tolling.").
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 "where the party's conduct has induced another into forbearing to file suit." McMackin,
"The 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 of the true state of facts; and (4) the party asserting the estoppel must reasonably rely on the conduct to his or her injury." Honig v. San Francisco Planning Dep't, 127 Cal.App.4th 520, 25 Cal.Rptr.3d 649, 655 (2005) (citing Mills, 134 Cal.Rptr.2d at 298).
"Although 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." Ellul v. Congregation of Christian Bros., 774 F.3d 791, 798 n. 12 (2d Cir.2014) (citing Staehr v. Hartford Fin. Servs. Grp., Inc., 547 F.3d 406, 425 (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, 129 S.Ct. 1937; Twombly, 550 U.S. at 556-57, 570, 127 S.Ct. 1955.
The Theas argue that Kleinhandler should be estopped from invoking California's § 366.3 statute of limitations, alleging the following facts: (1) Kleinhandler failed to disclose Frederica's 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 Frederica's death.
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, 51 Cal.3d 674, 274 Cal.Rptr. 387, 798 P.2d 1230, 1240 (1990) ("[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." (internal quotation marks omitted)).
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, 774 F.3d at 802 (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, 2 Cal.Rptr.3d 655, 73 P.3d at 533 (rejecting equitable estoppel argument where "complaint [was] devoid of any indication that defendants' conduct actually and reasonably induced plaintiffs to forbear suing"). They simply allege that Kleinhandler failed to inform them of Frederica's 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., 7 Cal.4th 926, 936, 30 Cal.Rptr.2d 440, 873 P.2d 613 (1994) ("The rule of equitable estoppel includes, of course, the requirement that the plaintiff exercise reasonable diligence."). The proposed second amended complaint does not even assert when the Theas learned of their stepmother's death, and it does not allege any facts to show that they acted diligently in the seventeen months between Frederica's 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.
For the reasons set forth above, the order of the district court is AFFIRMED.