Equitable estoppel and “discovery” rules applied to toll statute of limitations against manufacturer until announced product’s defect and recall notice: LEMASTER v. FLUKE CORPORATION (COA 6/27/2008)

CIVIL PROCEDURE:  Equitable estoppel and "discovery" rules applied to toll statute of limitations against manufacturer until announced product’s defect and recall notice
DATE RENDERED: 6/27/2008

The LeMasters appeal summary judgment dismissing their products liability claims against Fluke Corporation which arose from injuries that the appellants sustained in an explosion at a coal processing operation in Perry County, Kentucky. In their complaint, the LeMasters alleged that Fluke manufactured and put into the stream of commerce a defective and unreasonably dangerous voltage meter which was a substantial factor in causing their injuries. The trial court dismissed the claims on the ground that the applicable statute of limitations had expired before they filed the complaint.

Equitable estoppel requires a party to show that his reliance upon the conduct or representation of the adverse party prejudiced him or induced to change his position for the worse. Embry v. Long, 75 S.W.2d 1036 (Ky. 1934). The elements of equitable estoppel have been met in this case. The COA held that Fluke should be estopped as a matter of law from relying on the statute of limitations by virtue of its fraudulent concealment of defects associated with its product,  and summary judgment was prematurely entered in this matter.

The complaint against Fluke included allegations of ordinary negligence, gross negligence, and statutory negligence. The plaintiffs alleged that the electrical circuit connecting the power source to the crusher unit breaker and to the crusher unit motor had been wired to bypass the main breaker.  Fluke filed a motion for summary judgment based upon the statute of limitations.

Although the appellants acknowledged that their claims for negligence and strict liability under the Kentucky Products Liability Act were governed by the one-year statute of limitations as set forth at Kentucky Revised Statutes (KRS) 413.140, they contended that the limitations period had been tolled until March 2001 when Fluke Corporation first disclosed the existence of defects in one of its voltage meter products in a recall notice issued in March 2001.  That recall notice for the first time provided them a reasonable basis to believe that the injuries that they suffered may have been caused by the defective Fluke 87-III electrical multimeter.

An estoppel may arise to prevent a party from relying on a statute of limitation by virtue of a false representation or fraudulent concealment. Resthaven Memorial Cemetery, Inc. v. Volk, 150 S.W.2d 908 (Ky. 1941), and while proof of fraud ordinarily requires a showing of an affirmative act by the party charged, his silence under circumstances entailing a legally required duty to disclose may be sufficient to justify and – indeed to require – an equitable tolling of the statute.

Kentucky courts have also acknowledged that an action may not accrue until a plaintiff has knowledge of sufficient facts to sustain a cause of action. Under the “discovery rule,” a cause of action will not accrue until the plaintiff discovers (or in the exercise of reasonable diligence should have discovered) not only that he has been injured, but also that this injury may have been caused by the defendant’s conduct.

The LeMasters contend that as soon as Fluke became aware of potential problems with its voltage meter, it was bound by federal reporting requirements to immediately disclose to consumers that potential for serious harm.

The common law principle of equitable estoppel is soundly established in Kentucky law. Electric & Water Plant Bd. v. Suburban Acres Development, Inc., 513 S.W.2d 489 (Ky. 1974) and was aptly applied to prevent a defendant from asserting the statute of limitations defense.  It is not good public policy to allow a person who presents inaccurate information to benefit from the misrepresentation.

Digested by Michael Stevens

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