Island Insteel Systems, Inc. v. Waters, 296 F.3d 200

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296 F.3d 200 | 3rd Cir. | 2002

Before: BECKER, Chief Judge, NYGAARD and(cid:13) COWEN, Circuit Judges.(cid:13) (Filed July 17, 2002)(cid:13) ALAN R. FEUERSTEIN, ESQUIRE(cid:13) (ARGUED)(cid:13) Feuerstein & Smith, LLP(cid:13) 17 St. Louis Place(cid:13) Buffalo, NY 14202-1502(cid:13) Counsel for Appellants(cid:13) JAMES M. DERR, ESQUIRE(cid:13) (ARGUED)(cid:13) 28-29 Norre Gade(cid:13) P.O. Box 664(cid:13) St. Thomas, VI 00804(cid:13) DANIELLE C. COMEAUX, ESQUIRE(cid:13) Hodge & Francois(cid:13) 1340 Taarnederg Road(cid:13) Charlotte Amalie, St. Thomas(cid:13) United States Virgin Islands 00802(cid:13) Counsel for Appellees(cid:13) OPINION OF THE COURT(cid:13) BECKER, Chief Judge.(cid:13) In this Lanham Act trademark infringement action,(cid:13) plaintiffs appeal from an order of the District Court of the(cid:13) Virgin Islands granting defendants’ motion to dismiss under(cid:13) Federal Rule of Civil Procedure 12(b)(6). Plaintiffs allege(cid:13) that defendants’ unauthorized use of their "Insteel" trade(cid:13) name, which refers to a panel system of building(cid:13) construction, violates S 43(a) of the Lanham Act, 15 U.S.C.(cid:13) S 1125(a). The District Court held that it was clear from the(cid:13) complaint that plaintiffs’ claims are subject to the two-year(cid:13) statute of limitations governing actions for fraud under(cid:13) Virgin Islands law and that their filing of an earlier identical(cid:13) action in the United States District Court for the District of(cid:13) Puerto Rico, which was dismissed for lack of personal(cid:13) jurisdiction, did not equitably toll the statute of limitations.(cid:13) Since the complaint in this case was not filed within the(cid:13) two-year limitations period, the District Court dismissed(cid:13) plaintiffs’ claims as time-barred.(cid:13) 2(cid:13) This appeal presents two main questions. First, we must(cid:13) determine the appropriate limitations period for these(cid:13) trademark infringement claims under S 43(a) of the Lanham(cid:13) Act. Second, we must determine whether filing suit in a(cid:13) court that lacks personal jurisdiction may equitably toll the(cid:13) statute of limitations if plaintiffs refile the lawsuit in a court(cid:13) that has jurisdiction. Both parties agree that because the(cid:13) Lanham Act lacks a statute of limitations, we must borrow(cid:13) a statute of limitations from Virgin Islands law. Plaintiffs(cid:13) submit that the most appropriate statute of limitations(cid:13) under Virgin Islands law is the catch-all six-year statute of(cid:13) limitations for "[a]n action upon a liability created by(cid:13) statute" that does not fall within any of the specifically(cid:13) enumerated limitations periods. 5 V.I.C. S 31(3)(B).(cid:13) Defendants respond that the cause of action under Virgin(cid:13) Islands law most analogous to plaintiffs’ trademark(cid:13) infringement claims is either an action for common law(cid:13) fraud or an action for deceptive trade practices in violation(cid:13) of 12A V.I.C. S 101, both of which are subject to a two-year(cid:13) limitations period.(cid:13) Because plaintiffs have failed to identify a specific(cid:13) statutory cause of action under Virgin Islands law that is(cid:13) analogous to their Lanham Act claim and is subject to the(cid:13) catch-all six-year limitations period for actions upon a(cid:13) liability created by a statute that lacks a statute of(cid:13) limitations, we decline to apply the six-year statute of(cid:13) limitations. That conclusion relegates us to a choice(cid:13) between an action for fraud and an action for deceptive(cid:13) trade practices, both subject to a two-year statute of(cid:13) limitations under Virgin Islands law. But we still must(cid:13) decide which cause of action more closely resembles(cid:13) plaintiffs’ claims since the statute of limitations for fraud(cid:13) begins running on the date plaintiffs discovered the fraud,(cid:13) whereas the statute of limitations for deceptive trade(cid:13) practices begins running on the date the actionable(cid:13) conduct occurred.(cid:13) We hold that the cause of action under Virgin Islands law(cid:13) most analogous to a claim for trademark infringement(cid:13) under S 43(a) of the Lanham Act is the cause of action for(cid:13) deceptive trade practices in violation of 12A V.I.C.S 101.(cid:13) Like a trademark infringement action under S 43(a), but(cid:13) 3(cid:13) unlike an action for common law fraud, an action for(cid:13) deceptive trade practices does not require proof of scienter.(cid:13) Moreover, while a common law fraud claim requires a(cid:13) plaintiff to prove actual reliance, an action for deceptive(cid:13) trade practices simply requires proof that the practice at(cid:13) issue has the "tendency or effect of deceiving or misleading(cid:13) consumers," which more closely resembles the"likelihood of(cid:13) confusion" element that is the touchstone of aS 43(a) claim.(cid:13) Accordingly, plaintiffs’ claims in this case are subject to a(cid:13) two-year statute of limitations, which began running on the(cid:13) occurrence of the actionable conduct.(cid:13) While plaintiffs concede that the allegedly unlawful(cid:13) conduct occurred more than two years before the date they(cid:13) filed this suit, invoking the doctrine of equitable tolling,(cid:13) they submit that even under this statute of limitations their(cid:13) suit is not time-barred since they filed an identical action in(cid:13) the District of Puerto Rico within the two-year limitations(cid:13) period. That suit was dismissed for lack of personal(cid:13) jurisdiction. Defendants respond that because the first(cid:13) action was dismissed for lack of personal jurisdiction, the(cid:13) District Court properly held that the filing of that action did(cid:13) not equitably toll the statute of limitations. Whether filing(cid:13) suit in a court that lacks personal jurisdiction over a(cid:13) defendant may equitably toll the statute of limitations(cid:13) presents us with a question of first impression under Virgin(cid:13) Islands law. Because: (1) there is no statute on point; (2)(cid:13) the American Law Institute Restatements of the Law are(cid:13) silent on the issue, see 1 V.I.C. S 4; and (3) there is a split(cid:13) of authority among those courts that have addressed the(cid:13) question under the common law of other states, we must(cid:13) select the rule that we believe to be better and more(cid:13) consistent with Virgin Islands jurisprudence and policy. See(cid:13) Polius v. Clark Equip. Co., 802 F.2d 75, 77 (3d Cir. 1986).(cid:13) We hold that under Virgin Islands law, the statute of(cid:13) limitations for a second action may be equitably tolled by(cid:13) the filing of an earlier action dismissed for lack of personal(cid:13) jurisdiction if: (1) the first action gave the defendant timely(cid:13) notice of plaintiff ’s claim; (2) the lapse of time between the(cid:13) first and second actions will not prejudice the defendant;(cid:13) and (3) the plaintiff prosecuted the first action in good faith(cid:13) and diligently filed the second action. This doctrine of(cid:13) 4(cid:13) equitable tolling preserves the protections that statutes of(cid:13) limitations are intended to afford to defendants. At the(cid:13) same time, it avoids the unfairness to plaintiffs that would(cid:13) occur if plaintiffs who diligently but mistakenly prosecute(cid:13) their claims in a court that lacks personal jurisdiction find(cid:13) their claims time-barred when they refile in a proper(cid:13) jurisdiction.(cid:13) Application of this equitable tolling doctrine, like most(cid:13) equitable doctrines, is committed to the discretion of the(cid:13) district court in the first instance. Moreover, how the issue(cid:13) should be resolved in this case is far from clear. Therefore,(cid:13) we will vacate the order of the District Court and remand(cid:13) the case to the District Court to determine whether the(cid:13) plaintiffs satisfy the elements of this equitable tolling(cid:13) doctrine.(cid:13) I.(cid:13) Plaintiffs are Island Insteel Systems, Inc., Island Insteel(cid:13) Construction, Inc., and individual shareholders of those(cid:13) corporations, who allege that defendants unlawfully used(cid:13) the "Insteel" trade name. The defendants are Panels, Inc.,(cid:13) Concrete Panels Construction, Inc., and their individual(cid:13) officers and shareholders, who were also officers and(cid:13) shareholders of the plaintiff corporations. In May 1994, the(cid:13) individual plaintiffs and individual defendants, then in(cid:13) business together, formed the plaintiff corporations to(cid:13) market in the U.S. Virgin Islands and the Caribbean the(cid:13) "Insteel" panel system of building construction distributed(cid:13) by Insteel Construction Systems, Inc., of Brunswick,(cid:13) Georgia ("Insteel Georgia"), which is not a party to this suit.(cid:13) In September of 1995, Hurricane Marilyn devastated the(cid:13) Virgin Islands, causing severe property destruction. Homes(cid:13) constructed using the "Insteel" panel system, however,(cid:13) withstood the hurricane with little damage. Due to the(cid:13) "Insteel" buildings’ survival of the hurricane, the plaintiff(cid:13) corporations were able to secure more than $500,000 worth(cid:13) of building contracts in St. Thomas and elsewhere.(cid:13) Plaintiffs were unable to begin work on these contracts(cid:13) until they obtained approval of their construction system(cid:13) under the new building code adopted by the U.S. Virgin(cid:13) 5(cid:13) Islands in response to the severity of damage caused by the(cid:13) hurricane. The delay in plaintiffs’ construction pending(cid:13) their approval caused a backlog of construction work, so(cid:13) that by early 1996, the plaintiff corporations’ work(cid:13) calendars were completely full.(cid:13) Plaintiffs allege that in January 1996, the individual(cid:13) defendants formed the defendant corporations, and,(cid:13) unbeknownst to plaintiffs, began to use the Insteel trade(cid:13) name to promote the business of the defendant(cid:13) corporations. On November 17, 1997, having learned of this(cid:13) usage, plaintiffs filed a complaint against defendants in the(cid:13) District Court for the District of Puerto Rico alleging that(cid:13) defendants’ unauthorized use of the Insteel trade name(cid:13) violated S 43(a) of the Lanham Act. In an order docketed on(cid:13) October 30, 1998, that court dismissed the complaint for(cid:13) lack of personal jurisdiction. On January 28, 1999,(cid:13) plaintiffs refiled their action in the District Court of the(cid:13) Virgin Islands.(cid:13) The District Court granted defendants’ 12(b)(6) motion to(cid:13) dismiss plaintiffs’ claims as time-barred under the two-year(cid:13) statute of limitations governing actions for fraud under(cid:13) Virgin Islands law. Although plaintiffs had filed suit in the(cid:13) District of Puerto Rico within the two-year limitations(cid:13) period, the District Court held that the filing of that action(cid:13) did not equitably toll the statute of limitations, since the(cid:13) action was dismissed for lack of personal jurisdiction.(cid:13) Plaintiffs appeal from the District Court’s order granting(cid:13) defendants’ motion to dismiss. The District Court had(cid:13) jurisdiction over this matter pursuant to 28 U.S.C.S 1331.(cid:13) We have appellate jurisdiction pursuant to 28 U.S.C.(cid:13) S 1291. We review de novo the District Court’s order(cid:13) dismissing plaintiffs’ claims under Rule 12(b)(6). See A.D.(cid:13) Bedell Wholesale Co. v. Philip Morris Inc., 263 F.3d 239, 249(cid:13) n.25 (3d Cir. 2001).(cid:13) II.(cid:13) We must first determine the statute of limitations for(cid:13) trademark infringement claims under S 43(a) of the Lanham(cid:13) Act, 15 U.S.C. S 1125(a). Plaintiffs’ claims are predicated on(cid:13) defendants’ allegedly unlawful use of the "Insteel" trade(cid:13) 6(cid:13) name, a "trade name" being "any name used by a person to(cid:13) identify his or her business or vocation." Lanham Act S 45,(cid:13) 15 U.S.C. S 1127. In referring to plaintiffs’ claims as claims(cid:13) for "trademark" infringement, we adopt the common usage(cid:13) of the term "trademark" to refer generically to "the entire(cid:13) field of trademarks, service marks, trade names, and trade(cid:13) dress," Platinum Home Mortgage Corp. v. Platinum Fin.(cid:13) Group, Inc., 149 F.3d 722, 726 n.1 (7th Cir. 1998), all of(cid:13) which a business may appropriate to its exclusive use(cid:13) under S 43(a).(cid:13) Under the trademark infringement prong of S 43(a):(cid:13) Any person who, on or in connection with any goods or(cid:13) services, or any container for goods, uses in commerce(cid:13) any word, term, name, symbol, or device, or any(cid:13) combination thereof, or any false designation of origin,(cid:13) false or misleading description of fact, or false or(cid:13) misleading representation of fact, which . . . is likely to(cid:13) cause confusion, or to cause mistake, or to deceive as(cid:13) to the affiliation, connection, or association of such(cid:13) person with another person, or as to the origin,(cid:13) sponsorship, or approval of his or her goods, services,(cid:13) or commercial activities by another person . . . shall be(cid:13) liable in a civil action by any person who believes that(cid:13) he or she is or is likely to be damaged by such act.(cid:13) 15 U.S.C. S 1125(a)(1)(A).1(cid:13) A.(cid:13) Because the Lanham Act does not contain an express(cid:13) statute of limitations, we follow the traditional practice of(cid:13) borrowing the most analogous statute of limitations from(cid:13) state law. See Beauty Time, Inc. v. VU Skin Sys., Inc., 118(cid:13) F.3d 140, 143 (3d Cir. 1997) ("The Lanham Act contains no(cid:13) express statute of limitations and the general rule is that(cid:13) when a federal statute provides no limitations for suits, the(cid:13) _________________________________________________________________(cid:13) 1. The law governing trademark infringement underS 43(a), which(cid:13) protects trademarks that are not federally registered, generally follows(cid:13) the law governing infringement of registered trademarks, which are(cid:13) protected under S 32 of the Lanham Act, 15 U.S.C. S 1114. See A.J.(cid:13) Canfield Co. v. Honickman, 808 F.2d 291, 296, 299 n.9 (3d Cir. 1986).(cid:13) 7(cid:13) court must look to the state statute of limitations for(cid:13) analogous types of actions."). See generally Wilson v.(cid:13) Garcia, 471 U.S. 261, 266-67 (1985) ("When Congress has(cid:13) not established a time limitation for a federal cause of(cid:13) action, the settled practice has been to adopt a local time(cid:13) limitation as federal law if it is not inconsistent with federal(cid:13) law or policy to do so.").(cid:13) This "implied absorption of State statutes of limitation(cid:13) within the interstices of . . . federal enactments is a phase(cid:13) of fashioning remedial details where Congress has not(cid:13) spoken but left matters for judicial determination .. . ."(cid:13) Holmberg v. Armbrecht, 327 U.S. 392, 395 (1946)."By(cid:13) adopting the statute governing an analogous cause of(cid:13) action under state law, federal law incorporates the State’s(cid:13) judgment on the proper balance between the policies of(cid:13) repose and the substantive policies of enforcement(cid:13) embodied in the state cause of action." Wilson, 471 U.S. at(cid:13) 271.(cid:13) To be sure, it is inappropriate to "mechanically appl[y] a(cid:13) state statute of limitations simply because a limitations(cid:13) period is absent from the federal statute." Occidental Life(cid:13) Ins. Co. v. EEOC, 432 U.S. 355, 367 (1977). In rare cases,(cid:13) the Supreme Court has held that the absence of an express(cid:13) limitations period may indicate a Congressional intent to(cid:13) impose no time limitation at all upon a federal cause of(cid:13) action. See id. at 366 (holding that there is no statute of(cid:13) limitations applicable to the EEOC’s ability to bring Title VII(cid:13) enforcement proceedings in federal district court).(cid:13) Moreover, if borrowing an analogous statute of limitations(cid:13) from state law would "frustrate or interfere with the(cid:13) implementation of national policies," courts must look to(cid:13) federal law for an analogous limitations period. DelCostello(cid:13) v. Int’l Bhd. of Teamsters, 462 U.S. 151, 161, 163 (1983)(cid:13) (applying the NLRA statute of limitations to suits under(cid:13) S 301 of the LMRA for breach of a collective bargaining(cid:13) agreement); see also Agency Holding Corp. v. Malley-Duff &(cid:13) Assocs., 483 U.S. 143, 156 (1987) (applying the Clayton Act(cid:13) statute of limitations to civil RICO actions). See generally(cid:13) Occidental Life Ins. Co., 432 U.S. at 367 ("State legislatures(cid:13) do not devise their limitations periods with national(cid:13) interests in mind, and it is the duty of the federal courts to(cid:13) 8(cid:13) assure that the importation of state law will not frustrate or(cid:13) interfere with the implementation of national policies.").(cid:13) In this case, however, neither party argues that(cid:13) borrowing the most analogous statute of limitations from(cid:13) state law would frustrate the achievement of federal(cid:13) policies, and we can see no reason for departing from the(cid:13) traditional practice of turning to state law as the"primary(cid:13) guide" in this area. See Agency Holding Corp. , 483 U.S. at(cid:13) 147 ("Given our longstanding practice of borrowing state(cid:13) law, and the congressional awareness of this practice, we(cid:13) can generally assume that Congress intends by its silence(cid:13) that we borrow state law."). We must therefore determine(cid:13) which cause of action under Virgin Islands law is most(cid:13) analogous to a trademark infringement action underS 43(a)(cid:13) of the Lanham Act, and borrow the corresponding statute of(cid:13) limitations.(cid:13) B.(cid:13) Plaintiffs argue that the most analogous statute of(cid:13) limitations under Virgin Islands law is the catch-all six-year(cid:13) period for "[a]n action upon a liability created by statute"(cid:13) that does not fall within any of the specifically enumerated(cid:13) limitations periods. 5 V.I.C. S 31(3)(B). Defendants respond(cid:13) that the most analogous statute of limitations is the two-(cid:13) year limitations period for fraud claims, which the District(cid:13) Court applied in granting defendants’ motion to dismiss.(cid:13) See 5 V.I.C. S 31(5)(A) (establishing a two-year statute of(cid:13) limitations period for "[a]n action for . . . any injury to the(cid:13) person or rights of another not arising on contract and not(cid:13) herein especially enumerated"); Lawaetz v. Bank of Nova(cid:13) Scotia, 653 F. Supp. 1278, 1282 (D.V.I. 1987) ("Under(cid:13) Virgin Islands law, fraud is governed by a two-year(cid:13) limitations period . . . .") (citing 5 V.I.C.S 31(5)(a)).(cid:13) Alternatively, defendants submit that we should borrow the(cid:13) two-year limitations period applicable to actions under 12A(cid:13) V.I.C. S 108 for deceptive trade practices in violation of 12A(cid:13) V.I.C. S 101. See 12A V.I.C. S 108(j) ("An action under this(cid:13) section must be brought within two years after the(cid:13) occurrence of a violation of this chapter . . . .").(cid:13) In defendants’ view, this question is controlled by our(cid:13) 9(cid:13) decision in Beauty Time, Inc. v. VU Skin Sys., Inc., 118 F.3d(cid:13) 140 (3d Cir. 1997), which applied Pennsylvania’s two-year(cid:13) statute of limitations for fraud to plaintiff ’s claim under(cid:13) S 38 of the Lanham Act, 15 U.S.C. S 1120, for fraudulent(cid:13) procurement of a trademark registration.2 The Court(cid:13) explained that "[o]n this claim, it is undisputed that(cid:13) Pennsylvania’s two-year statute of limitations for fraud(cid:13) actions would apply." 118 F.3d at 143. Because plaintiffs(cid:13) allege trademark infringement in violation of S 43(a) of the(cid:13) Lanham Act, however, our holding in Beauty Time as to the(cid:13) appropriate statute of limitations to apply to claims for(cid:13) fraudulent procurement of a trademark registration in(cid:13) violation of S 38 of the Lanham Act is not controlling. Cf.(cid:13) Marshak v. Treadwell, 240 F.3d 184, 194-95 (3d Cir. 2001)(cid:13) (holding that Beauty Time does not govern the statute of(cid:13) limitations applicable to claims under S 14 of the Lanham(cid:13) Act, 15 U.S.C. S 1064, for cancellation of a trademark(cid:13) registration).(cid:13) We believe that the Virgin Islands statute of limitations(cid:13) for fraud and the Virgin Islands statute of limitations for(cid:13) deceptive trade practices govern actions that are more(cid:13) analogous to plaintiffs’ claims than the Virgin Islands(cid:13) catch-all statute of limitations for "a liability created by(cid:13) statute." The problem that we see with plaintiffs’ argument(cid:13) in favor of applying the limitations period for"liabilit[ies](cid:13) created by statute" is that it focuses on the source of law(cid:13) to the exclusion of the substance of the cause of action.(cid:13) That is, the statute of limitations period that plaintiffs urge(cid:13) on us would apply in this case because the source of(cid:13) plaintiffs’ cause of action is a statute (the Lanham Act), but(cid:13) would not apply if plaintiffs brought a common law cause(cid:13) of action whose elements were identical to the elements of(cid:13) their Lanham Act cause of action. We conclude that it is(cid:13) _________________________________________________________________(cid:13) 2. Section 38 provides:(cid:13) Any person who shall procure registration in the Patent and(cid:13) Trademark Office of a mark by a false or fraudulent declaration or(cid:13) representation, oral or in writing, or by any false means, shall be(cid:13) liable in a civil action by any person injured thereby for any(cid:13) damages sustained in consequence thereof.(cid:13) 5 U.S.C. S 1120.(cid:13) 10(cid:13) more appropriate to borrow a limitations period under state(cid:13) law on the basis of the substantive elements of the(cid:13) analogous state cause of action, rather than on whether the(cid:13) cause of action is created by common law or statute. 3(cid:13) The six-year statute of limitations could apply if plaintiffs(cid:13) identified a particular cause of action under Virgin Islands(cid:13) law governed by that limitations period. Plaintiffs, however,(cid:13) have failed to identify with particularity an analogous(cid:13) "liability created by statute" under Virgin Islands law that(cid:13) would justify applying the six-year residual statute of(cid:13) limitations. To be sure, neither a cause of action for fraud(cid:13) nor a cause of action for deceptive trade practices supplies(cid:13) a perfect analogue to S 43(a). For example, under both(cid:13) common law fraud and the Virgin Islands deceptive trade(cid:13) practices statute, a seller who misrepresents the source of(cid:13) _________________________________________________________________(cid:13) 3. We do not gainsay that plaintiffs’ Lanham Act claims fall within the(cid:13) plain language of the residual six-year statute of limitations under Virgin(cid:13) Islands law. Plaintiffs’ claims would therefore be subject to this six-year(cid:13) limitations period if state statutes of limitations applied of their own(cid:13) force as a matter of state law to federal causes of action that lack an(cid:13) express statute of limitations provision, as is the case when federal(cid:13) courts apply state law under the Rules of Decision Act, 28 U.S.C. S 1652,(cid:13) and Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938). See Agency Holding(cid:13) Corp. v. Malley-Duff & Assocs., 483 U.S. 143, 158 (1987) (Scalia, J.,(cid:13) concurring in the judgment) ("In its original form, during what I term the(cid:13) ‘first phase’ of the borrowing doctrine, our practice of applying state law(cid:13) in reality involved no borrowing at all; rather, we applied state(cid:13) limitations periods to federal causes of action because we believed that(cid:13) those state statutes applied of their own force, unless pre-empted by(cid:13) federal law."). The Supreme Court has made clear, however, that state(cid:13) statutes of limitations do not apply of their own force to federal causes(cid:13) of action that lack an express limitations period; rather, the(cid:13) characterization of the appropriate statute of limitations is a matter of(cid:13) federal, not state law. See Wilson v. Garcia, 471 U.S. 261, 269-70 (1985)(cid:13) ("In borrowing statutes of limitations for . . . federal claims, this Court(cid:13) has generally recognized that the problem of characterization is(cid:13) ultimately a question of federal law."); Holmberg v. Armbrecht, 327 U.S.(cid:13) 392 (1946) (holding that Erie does not require federal courts to apply(cid:13) state tolling doctrines to federal causes of action). Thus, when borrowing(cid:13) a statute of limitations from state law, we ask not which limitations(cid:13) period plaintiffs’ claims would fall under if state law limitations periods(cid:13) governed of their own force, but rather which state law cause of action(cid:13) is most analogous to the federal cause of action at issue.(cid:13) 11(cid:13) goods is liable only to consumers, not competitors. See 12A(cid:13) V.I.C. S 108 (creating a private remedy for violations of(cid:13) S 101 for consumers who are injured by deceptive trade(cid:13) practices). In contrast, S 43(a) creates a cause of action for(cid:13) competitors, not consumers. See Serbin v. Ziebart Int’l(cid:13) Corp., 11 F.3d 1163, 1164-65 (3d Cir. 1993) (holding that(cid:13) consumers who purchase goods or services in reliance on(cid:13) the vendor’s false advertising lack standing to sue under(cid:13) the false advertising prong of S 43(a)). However, even though(cid:13) consumers lack standing to sue under S 43(a), one of the(cid:13) Lanham Act’s underlying purposes, like that of the Virgin(cid:13) Islands deceptive trade practices statute and common law(cid:13) fraud, is to protect consumers from confusion as to the(cid:13) source of goods and services. See Inwood Labs., Inc. v. Ives(cid:13) Labs. Inc., 456 U.S. 844, 854 n.14 (1982) (characterizing(cid:13) the two goals of the Lanham Act as protecting the(cid:13) trademark owner’s "goodwill which he spent energy, time,(cid:13) and money to obtain" and ensuring consumers’"ability to(cid:13) distinguish among the goods of competing manufacturers").(cid:13) Because both common law fraud and the Virgin Islands(cid:13) deceptive trade practices statute generally impose liability(cid:13) on sellers who misrepresent the source of their goods in a(cid:13) manner that misleads consumers and harms competitors,(cid:13) causes of action for fraud and violations of the deceptive(cid:13) trade practices statute bear substantial similarities, in both(cid:13) their elements and underlying purpose, to a cause of action(cid:13) for trademark infringement under S 43(a) of the Lanham(cid:13) Act. See Kason Indus., Inc. v. Component Hardware Group,(cid:13) Inc., 120 F.3d 1199, 1203 (11th Cir. 1997) ("It should be(cid:13) apparent that S 43(a) of the Lanham Act andS 10-1-(cid:13) 372(a)(2) of the [Georgia Uniform Deceptive Trade Practices(cid:13) Act] provide analogous causes of action . . . ."); Conopco,(cid:13) Inc. v. Campbell Soup Co., 95 F.3d 187, 191 (2d Cir. 1996)(cid:13) ("As the language of the Act makes clear, there is an(cid:13) intimate relationship between fraud and injury under the(cid:13) Lanham Act.").(cid:13) We therefore conclude that causes of action for fraud and(cid:13) deceptive trade practices are more analogous to aS 43(a)(cid:13) cause of action for trademark infringement than is"[a]n(cid:13) action upon a liability created by statute," 5 V.I.C.(cid:13) S 31(3)(B), and accordingly hold that the two-year statute of(cid:13) 12(cid:13) limitations is the more appropriate limitations period to(cid:13) apply to plaintiffs’ claims for trademark infringement under(cid:13) S 43(a). The weight of authority supports this view. See(cid:13) Lyons P’ship, L.P. v. Morris Costumes, Inc., 243 F.3d 789,(cid:13) 796-97 (4th Cir. 2001) (applying the statute of limitations(cid:13) for the North Carolina Unfair Trade Practices Act, N.C. Gen.(cid:13) Stat. S 75-16.2, to plaintiffs’ trademark infringement claims(cid:13) under the Lanham Act); Kason Indus., Inc., 120 F.3d at(cid:13) 1203-04 (holding that the Georgia Uniform Deceptive Trade(cid:13) Practices Act, O.C.G.A. S 10-1-370 et seq. , provides the(cid:13) most analogous cause of action under state law to plaintiffs’(cid:13) trademark infringement claims under S 43(a) of the Lanham(cid:13) Act, for purposes of borrowing a statute of limitations);(cid:13) Eppendorf-Netheler-Hinz GmbH v. Enterton Co., 89 F. Supp.(cid:13) 2d 483, 486 (S.D.N.Y. 2000) (borrowing the statute of(cid:13) limitations for fraud claims to create a presumption of(cid:13) laches applicable to plaintiff ’s trademark infringement(cid:13) claims); cf. Conopco, 95 F.3d at 191-92 (drawing on the(cid:13) statute of limitations for fraud to presume that plaintiffs’(cid:13) false advertising claims under S 43(a) are barred by laches).(cid:13) C.(cid:13) Plaintiffs contend that even under a two-year statute of(cid:13) limitations period, their claims are viable because their(cid:13) discovery of defendants’ allegedly actionable conduct(cid:13) occurred within two years before the filing of this suit.(cid:13) Whether the limitations period begins running from the(cid:13) date that plaintiffs discovered the actionable conduct, as(cid:13) would be the case under a "discovery rule," or whether the(cid:13) limitations period begins running from the date the(cid:13) actionable conduct occurred, depends on the state law(cid:13) governing the most analogous cause of action. See Beauty(cid:13) Time, Inc. v. VU Skin Sys., Inc., 118 F.3d 140, 144 (3d Cir.(cid:13) 1997) ("Because we look to state law for the appropriate(cid:13) statute of limitations, we also look to Pennsylvania law on(cid:13) the closely related questions of tolling and application.").4(cid:13) _________________________________________________________________(cid:13) 4. In urging us to apply the discovery rule to their claims, plaintiffs rely(cid:13) on the Supreme Court decisions in Bailey v. Glover, 88 U.S. 342 (1874),(cid:13) and Holmberg v. Armbrecht, 327 U.S. 392 (1946). Bailey held that the(cid:13) federal statute of limitations under the Bankruptcy Act was tolled where(cid:13) 13(cid:13) Under Virgin Islands law, the statute of limitations for(cid:13) fraud begins running at the time the plaintiff discovered the(cid:13) _________________________________________________________________(cid:13) the defendant’s fraud concealed from plaintiffs the existence of their(cid:13) cause of action. See Bailey, 88 U.S. at 348 ("[W]here the party injured by(cid:13) the fraud remains in ignorance of it without any fault or want of(cid:13) diligence or care on his part, the bar of the statute does not begin to run(cid:13) until the fraud is discovered, though there be no special circumstances(cid:13) or efforts on the part of the party committing the fraud to conceal it from(cid:13) the knowledge of the other party."). Similarly, the Court in Holmberg held(cid:13) that state law rejecting the discovery rule did not apply to actions in(cid:13) equity to enforce a federal right that lacked a statute of limitations. See(cid:13) Holmberg, 327 U.S. at 397 ("It would be . . . incongruous to confine a(cid:13) federal right within the bare terms of a State statute of limitation(cid:13) unrelieved by the settled equitable federal doctrine as to fraud . . . .").(cid:13) We are of course bound under our Internal Operating Procedures, see(cid:13) Third Circuit IOP 9.1, by Beauty Time. We are not uncomfortable with(cid:13) this posture, because while we acknowledge a possible tension between(cid:13) Beauty Time and these cases, we believe that they are reconcilable. In(cid:13) particular, Bailey addressed only the application of the discovery rule to(cid:13) an express federal statute of limitations, which is absent from the(cid:13) provisions of the Lanham Act at issue in this case and Beauty Time.(cid:13) Although Holmberg held that the discovery rule applied to a cause of(cid:13) action under a federal statute that, like the Lanham Act, lacked an(cid:13) express statute of limitations, Holmberg is reconcilable with Beauty Time(cid:13) on the ground that the statute at issue in Holmberg created only "a(cid:13) federal right for which the sole remedy is in equity." Holmberg, 327 U.S.(cid:13) at 395 (emphasis added). In contrast, the Lanham Act creates federal(cid:13) rights for which both legal and equitable remedies are available. See(cid:13) Dairy Queen, Inc. v. Wood, 369 U.S. 469, 477 (1962) ("[A]n action for(cid:13) damages based upon a charge of trademark infringement . . . [is] subject(cid:13) to cognizance by a court of law."). Accordingly, we comfortably follow the(cid:13) holding of Beauty Time that where a court borrows a statute of(cid:13) limitations from state law, the court must also borrow from state law the(cid:13) relevant tolling principles. See Hardin v. Straub, 490 U.S. 536, 539(cid:13) (1989) ("Limitations periods in S 1983 suits are to be determined by(cid:13) reference to the appropriate state statute of limitations and the(cid:13) coordinate tolling rules . . . ."); Bd. of Regents v. Tomanio, 446 U.S. 478,(cid:13) 486 (1980) ("In virtually all statutes of limitations the chronological(cid:13) length of the limitation period is interrelated with provisions regarding(cid:13) tolling, revival, and questions of application. In borrowing a state period(cid:13) of limitation for application to a federal cause of action, a federal court(cid:13) is relying on the State’s wisdom in setting a limit, and exceptions(cid:13) thereto, on the prosecution of a closely analogous claim.") (quoting(cid:13) Johnson v. Ry. Express Agency, Inc., 421 U.S. 454, 464 (1975)).(cid:13) 14(cid:13) fraud, whereas the statute of limitations for deceptive trade(cid:13) practices begins running from the date the defendant(cid:13) committed the unlawful conduct. Compare 5 V.I.C. S 32(c)(cid:13) ("In an action upon a . . . fraud, . . . the limitation shall be(cid:13) deemed to commence only from . . . the discovery of the(cid:13) fraud . . . ."), with 12A V.I.C. S 108(j) ("An action under this(cid:13) section must be brought within two years after the(cid:13) occurrence of a violation of this chapter [governing(cid:13) deceptive trade practices] . . . ."). To determine whether the(cid:13) discovery rule applies to plaintiffs’ Lanham Act claims, it is(cid:13) therefore necessary to decide whether claims for trademark(cid:13) infringement under S 43(a) of the Lanham Act are more(cid:13) analogous to common law fraud claims or claims for(cid:13) violations of the VI’s deceptive trade practices statute.(cid:13) The courts addressing the question are divided on(cid:13) whether common law fraud claims or claims under state(cid:13) unfair business practices statutes are more analogous to(cid:13) Lanham Act claims for trademark infringement. Compare(cid:13) Lyons P’ship, L.P. v. Morris Costumes, Inc., 243 F.3d 789,(cid:13) 796-97 (4th Cir. 2001) (applying the statute of limitations(cid:13) for the North Carolina Unfair Trade Practices Act, N.C. Gen.(cid:13) Stat. S 75-16.2, to plaintiffs’ trademark infringement claims(cid:13) under the Lanham Act), Kason Indus., Inc. v. Component(cid:13) Hardware Group, Inc., 120 F.3d 1199, 1203-04 (11th Cir.(cid:13) 1997) (holding that the Georgia Uniform Deceptive Trade(cid:13) Practices Act, O.C.G.A. S 10-1-370 et seq. , provides the(cid:13) most analogous cause of action under state law to plaintiffs’(cid:13) trademark infringement claims under S 43(a) of the Lanham(cid:13) Act, for purposes of borrowing a statute of limitations), and(cid:13) Federal Express Corp. v. United States Postal Serv. , 75 F.(cid:13) Supp. 2d 807, 816-17 (W.D. Tenn. 1999) (applying the(cid:13) statute of limitations for the Tennessee Consumer(cid:13) Protection Act, T.C.A. S 47-18-104, to plaintiffs’ claims(cid:13) under S 43(a) of the Lanham Act), with Eppendorf-Netheler-(cid:13) Hinz GmbH v. Enterton Co., 89 F. Supp. 2d 483, 486(cid:13) (S.D.N.Y. 2000) (borrowing the statute of limitations for(cid:13) fraud claims to create a presumption of laches applicable to(cid:13) plaintiff ’s trademark infringement claims), Harley-(cid:13) Davidson, Inc. v. Estate of O’Connell, 13 F. Supp. 2d 271,(cid:13) 279 (N.D.N.Y. 1998) (same), Derrick Mfg. Corp. v.(cid:13) Southwestern Wire Cloth, Inc., 934 F. Supp. 796, 804-05(cid:13) (S.D. Tex. 1996) (applying the fraud statute of limitations to(cid:13) 15(cid:13) plaintiffs’ trademark infringement claims underS 43(a)),(cid:13) and Johannsen v. Brown, 797 F. Supp. 835, 839-40 (D. Or.(cid:13) 1992) (same).5(cid:13) An analysis of whether fraud claims or deceptive trade(cid:13) practices claims are more analogous to trademark(cid:13) infringement claims under S 43(a) of the Lanham Act must(cid:13) begin with a comparison of the elements of these causes of(cid:13) action. To establish trademark infringement under(cid:13) S 43(a)(1)(A) of the Lanham Act, a plaintiff must show that(cid:13) the defendant:(cid:13) use[d] in commerce any word, term, name, symbol, or(cid:13) device, or any combination thereof, or any false(cid:13) designation of origin, false or misleading description of(cid:13) fact, or false or misleading representation of fact, which(cid:13) . . . is likely to cause confusion, or to cause mistake,(cid:13) or to deceive as to the affiliation, connection, or(cid:13) association of such person with another person, or as(cid:13) to the origin, sponsorship, or approval of his or her(cid:13) goods, services, or commercial activities by another(cid:13) person . . . .(cid:13) 15 U.S.C. S 1125(a)(1)(A).(cid:13) The Restatement (Second) of Torts defines the elements of(cid:13) common law fraudulent misrepresentation as follows:(cid:13) One who fraudulently makes a misrepresentation of(cid:13) fact . . . for the purpose of inducing another to act or(cid:13) to refrain from action in reliance upon it, is subject to(cid:13) liability to the other in deceit for pecuniary loss caused(cid:13) _________________________________________________________________(cid:13) 5. Those decisions addressing claims under the false advertising prong of(cid:13) S 43(a) have similarly divided on whether common law fraud or state(cid:13) deceptive trade practices statutes provide the appropriate limitations(cid:13) period. Compare Conopco, Inc. v. Campbell Soup Co., 95 F.3d 187, 191-(cid:13) 92 (2d Cir. 1996) (drawing on the statute of limitations for fraud to(cid:13) presume that plaintiffs’ false advertising claims under S 43(a) of the(cid:13) Lanham Act are barred by laches), with Hot Wax, Inc. v. Warsaw Chem.(cid:13) Co., 45 F. Supp. 2d 635, 647 (N.D. Ill. 1999) (holding that the state law(cid:13) cause of action most analogous to plaintiffs’ false advertising claims(cid:13) under S 43(a) of the Lanham Act is the Illinois Consumer Fraud and(cid:13) Deceptive Business Practices Act, 815 ILCS 505/10a(e)), aff ’d on other(cid:13) grounds sub nom. Hot Wax, Inc. v. Turtle Wax, Inc. , 191 F.3d 813 (7th(cid:13) Cir. 1999).(cid:13) 16(cid:13) to him by his justifiable reliance upon the(cid:13) misrepresentation.(cid:13) Restatement (Second) of Torts S 525;6 see also Smith v.(cid:13) Commercial Banking Corp., 866 F.2d 576, 583 (3d Cir.(cid:13) 1989) ("[T]he elements of common law fraud . . . require(cid:13) that a party make a material misrepresentation that(cid:13) another reasonably relies upon to his or her detriment.").(cid:13) Common law fraud also includes a scienter element:(cid:13) A misrepresentation is fraudulent if the maker(cid:13) (a) knows or believes that the matter is not as he(cid:13) represents it to be,(cid:13) (b) does not have the confidence in the accuracy of(cid:13) his representation that he states or implies, or(cid:13) (c) knows that he does not have the basis for his(cid:13) representation that he states or implies.(cid:13) Restatement (Second) of Torts S 526.(cid:13) Under the Virgin Islands deceptive trade practices law,(cid:13) "[n]o person shall engage in any deceptive or(cid:13) unconscionable trade practice in the sale . . . of any(cid:13) consumer goods or services . . . ." 12A V.I.C.S 101. The(cid:13) statute defines a "deceptive trade practice" as "any false . . .(cid:13) or misleading oral or written statement, visual description(cid:13) or other representation of any kind made in connection(cid:13) with the sale . . . of consumer goods or services, .. . which(cid:13) has the capacity, tendency or effect of deceiving or(cid:13) misleading consumers." 12A V.I.C. S 102(a). The private(cid:13) remedy for violations of S 101 provides that"a consumer(cid:13) who suffers a loss as a result of a violation of this chapter(cid:13) may recover actual damages or $250, whichever is greater."(cid:13) 12A V.I.C. S 108(b).(cid:13) The most salient difference between S 101 of the Virgin(cid:13) Islands deceptive trade practices law and trademark(cid:13) _________________________________________________________________(cid:13) 6. The Virgin Islands legislature has provided that "[t]he rules of the(cid:13) common law, as expressed in the restatements of the law approved by(cid:13) the American Law Institute . . . shall be the rules of decision in the(cid:13) courts of the Virgin Islands in cases to which they apply, in the absence(cid:13) of local laws to the contrary." 1 V.I.C. S 4.(cid:13) 17(cid:13) infringement under S 43(a) of the Lanham Act is that(cid:13) whereas S 43(a) applies to "uses in commerce" of infringing(cid:13) marks "in connection with any goods or services," 15(cid:13) U.S.C. S 1125(a) (emphasis added), S 101 prohibits only(cid:13) deceptive trade practices "in the sale . . . of any consumer(cid:13) goods or services," (emphasis added), which are defined as(cid:13) "foods, services, credit and debts which are primarily for(cid:13) personal, household or family purposes." 12A V.I.C.(cid:13) S 102(c). Cf. Kason Indus., Inc. v. Component Hardware(cid:13) Group, Inc., 120 F.3d 1199, 1204 (11th Cir. 1997) (noting(cid:13) that the Georgia Fair Business Practices Act, O.C.G.A. S 10-(cid:13) 1-390 et seq., "is significantly different from . . . the(cid:13) Lanham Act, because of the former statute’s focus on the(cid:13) consumer (as opposed to the commercial) marketplace").(cid:13) Like the scope of the Lanham Act, the scope of common law(cid:13) fraud is not limited to transactions involving consumers,(cid:13) but rather extends to any purchase in the commercial(cid:13) marketplace, such as transactions between wholesalers and(cid:13) retailers.(cid:13) Although the scope of transactions covered by the Virgin(cid:13) Islands prohibition against deceptive trade practices is(cid:13) more limited than the scope of transactions covered by(cid:13) common law fraud and the Lanham Act, we believe that the(cid:13) differences between the elements of common law fraud and(cid:13) trademark infringement under S 43(a) are significant. In(cid:13) particular, the scienter requirement for common law fraud(cid:13) is absent from S 43(a). That is, unlike a defendant in a(cid:13) common law fraud case, a defendant may be liable for(cid:13) trademark infringement under S 43(a) even if he or she(cid:13) innocently used an infringing mark and lacked any intent(cid:13) to confuse consumers as to the source of the goods. See(cid:13) Parkway Baking Co. v. Freihofer Baking Co., 255 F.2d 641,(cid:13) 648 (3d Cir. 1958) ("The fact that the [infringing mark](cid:13) appeared on [defendant’s product] because of a mistake is(cid:13) not a defense to an action under this section for there is no(cid:13) requirement that the falsification occur wilfully and with(cid:13) intent to deceive."); see also Johnson & Johnson v. Carter-(cid:13) Wallace, Inc., 631 F.2d 186, 189 (2d Cir. 1980) (noting that(cid:13) S 43(a) "does not require proof of intent to deceive").(cid:13) Similarly, there is nothing in S 101’s prohibition against(cid:13) deceptive trade practices or S 102’s definition of deceptive(cid:13) trade practices that requires an intent to deceive.(cid:13) 18(cid:13) Common law fraud further differs from trademark(cid:13) infringement under S 43(a) and the deceptive trade(cid:13) practices prohibited by Virgin Islands statute in that(cid:13) common law fraud requires actual reliance on the(cid:13) defendant’s misrepresentation, whereas S 43(a) simply(cid:13) requires a designation that is "likely to cause confusion,"(cid:13) and a deceptive trade practice simply requires a(cid:13) representation that has the "tendency or effect of deceiving(cid:13) or misleading." 12A V.I.C. S 102(a); cf. Kason Indus., Inc.,(cid:13) 120 F.3d at 1204 ("[W]hile the standard of the [Georgia(cid:13) Uniform Deceptive Trade Practices Act] and the Lanham Act(cid:13) is ‘likelihood of confusion,’ the standards for an arguably(cid:13) analogous claim under the [Georgia Fair Business Practices(cid:13) Act] is ‘actual confusion.’ ").(cid:13) Finally, the statutory definition of "deceptive trade(cid:13) practices" specifically includes "representations . . . that the(cid:13) supplier has a sponsorship, approval, status, [or](cid:13) affiliation," which have the "tendency . . . of misleading(cid:13) consumers." 12A V.I.C. S 102(a)(1). This prohibition against(cid:13) representations that tend to mislead consumers as to the(cid:13) source or affiliation of goods or services strongly resembles(cid:13) the prohibition under S 43(a) against any designation that(cid:13) "is likely to cause confusion . . . as to the affiliation,(cid:13) connection, or association of [defendant] with another(cid:13) person, or as to the origin, sponsorship, or approval of(cid:13) [defendant’s] goods, services, or commercial activities by(cid:13) another person."(cid:13) Thus, although the Virgin Islands deceptive trade(cid:13) practices statute applies to a narrower range of(cid:13) transactions than common law fraud, within the range of(cid:13) covered transactions the conduct that renders a seller liable(cid:13) under the Virgin Islands deceptive trade practices statute(cid:13) bears a strong resemblance to the conduct that renders a(cid:13) seller liable for trademark infringement under S 43(a). In(cid:13) contrast, the doctrine of common law fraud renders a seller(cid:13) liable for misrepresenting the source of goods only if the(cid:13) seller possessed the requisite scienter and purchasers(cid:13) actually relied to their detriment on the misrepresentation.(cid:13) Neither of these elements is required under the deceptive(cid:13) trade practices statute or S 43(a).(cid:13) 19(cid:13) We therefore hold that the cause of action under Virgin(cid:13) Islands law most analogous to a trademark infringement(cid:13) claim under S 43(a) of the Lanham Act, for purposes of(cid:13) borrowing a statute of limitations, is a cause of action(cid:13) under 12A V.I.C. S 108 for deceptive trade practices in(cid:13) violation of 12A V.I.C. S 101. This cause of action is subject(cid:13) to a two-year statute of limitations that begins running(cid:13) from the date the violation of the statute occurred, not the(cid:13) date the violation was discovered, as would be the case(cid:13) under the statute of limitations for fraud. 12A V.I.C. S 108(j).7(cid:13) This holding makes it unnecessary for us to resolve the(cid:13) disputed question whether plaintiffs discovered the conduct(cid:13) complained of more than two years before filing this suit.(cid:13) Because plaintiffs do not argue that they commenced this(cid:13) action within two years of the allegedly actionable conduct,(cid:13) plaintiffs’ claims were properly dismissed as time-barred(cid:13) unless the statute of limitations was equitably tolled.8(cid:13) _________________________________________________________________(cid:13) 7. Under 12A V.I.C. S 108(j), "[a]n action under this section must be(cid:13) brought within two years after the occurrence of a violation of this(cid:13) chapter, within one year after the last payment in a consumer(cid:13) transaction involved in a violation of this chapter, or within one year(cid:13) after the termination of proceedings by the Director with respect to a(cid:13) violation of this chapter, whichever is later." The extension of the two-(cid:13) year limitations period to "one year after the last payment in a consumer(cid:13) transaction involved in a violation of this chapter" or "one year after the(cid:13) termination of proceedings by the Director with respect to a violation of(cid:13) this chapter" is clearly inapplicable in this case.(cid:13) 8. Plaintiffs do not argue that defendants’ allegedly unlawful conduct(cid:13) continued during the two-year period prior to filing this suit and that(cid:13) their claims therefore survive the two-year statute of limitations under(cid:13) the continuing wrong doctrine. See Hot Wax, Inc. v. Turtle Wax, Inc., 191(cid:13) F.3d 813, 821 (7th Cir. 1999) ("The notion of a‘continuing wrong’ . . .(cid:13) is . . . prevalent in Lanham Act cases . . . . Under the notion of a(cid:13) continuing wrong, only the last infringing act need be within the(cid:13) statutory period."); see also Lyons P’ship, L.P. v. Morris Costumes, Inc.,(cid:13) 243 F.3d 789, 797 (4th Cir. 2001) ("[A]lthough the district court was(cid:13) correct to hold that [plaintiff] could not recover for claims that accrued(cid:13) outside the limitations periods, it erred to the extent that it dismissed(cid:13) [plaintiffs’ Lanham Act] claims that were premised upon acts that(cid:13) occurred within the applicable periods.") (internal quotation marks and(cid:13) citations omitted).(cid:13) 20(cid:13) III.(cid:13) Plaintiffs argue that their filing of a similar action in the(cid:13) District Court for the District of Puerto Rico within the two-(cid:13) year limitations period equitably tolled the statute of(cid:13) limitations. Defendants respond that the doctrine of(cid:13) equitable tolling is inapplicable because plaintiffs’ Puerto(cid:13) Rico suit was dismissed for lack of personal jurisdiction.(cid:13) According to defendants, the filing of a lawsuit in a court(cid:13) that lacks personal jurisdiction over the defendants does(cid:13) not toll the running of the limitations period.(cid:13) There appears to be no binding case law on the question(cid:13) whether, under Virgin Islands law, a lawsuit filed in a court(cid:13) that lacks personal jurisdiction over the defendants may(cid:13) equitably toll the statute of limitations. In such a case, we(cid:13) are instructed by 1 V.I.C. S 4 that:(cid:13) The rules of the common law, as expressed in the(cid:13) restatements of the law approved by the American Law(cid:13) Institute, and to the extent not so expressed, as(cid:13) generally understood and applied in the United States,(cid:13) shall be the rules of decision in the courts of the Virgin(cid:13) Islands in cases to which they apply, in the absence of(cid:13) local laws to the contrary.(cid:13) But there is neither a Virgin Islands statute nor a(cid:13) Restatement rule deciding the question of equitable tolling(cid:13) in this case, and hence we must look to the common law(cid:13) "as generally understood and applied in the United States."(cid:13) See Abdallah v. Callender, 1 F.3d 141, 147 (3d Cir. 1993)(cid:13) ("[T]he common law as generally understood and applied in(cid:13) the United States applies in the Virgin Islands absent a(cid:13) statute or Restatement rule to the contrary . . . .").(cid:13) Because many states have "savings statutes," under(cid:13) which the filing of an action later dismissed for reasons(cid:13) unrelated to the merits tolls the statute of limitations, there(cid:13) are few decisions addressing this question as a matter of(cid:13) common law. See Hosogai v. Kadota, 700 P.2d 1327, 1334(cid:13) (Ariz. 1985) ("[A] clear majority of the states -- thirty-one --(cid:13) presently have general savings statutes in civil actions."); 4(cid:13) Charles Alan Wright & Arthur R. Miller, Federal Practice(cid:13) and Procedure S 1056 at 273 n.44 (3d ed. 2002) (noting that(cid:13) over half the states have savings statutes of some kind).(cid:13) 21(cid:13) Among those courts that have addressed the question,(cid:13) there appears to be a split of authority. Compare Mayes v.(cid:13) Leipziger, 729 F.2d 605, 608 (9th Cir. 1984) (holding that(cid:13) under California common law, the filing of an action that is(cid:13) dismissed for lack of personal jurisdiction may equitably(cid:13) toll the statute of limitations with respect to a subsequently(cid:13) filed identical action), Hosogai v. Kadota, 700 P.2d 1327(cid:13) (Ariz. 1985) (same holding, under Arizona common law),(cid:13) and Mitzner v. W. Ridgelawn Cemetery, Inc., 709 A.2d 825,(cid:13) 826 (N.J. Super. Ct. App. Div. 1998) (same holding, under(cid:13) New Jersey common law), with Young v. Clantech, Inc., 863(cid:13) F.2d 300, 300 (3d Cir. 1988) (per curiam) (holding that(cid:13) under New Jersey common law, a lawsuit filed in a court(cid:13) that lacked personal jurisdiction over the defendant cannot(cid:13) equitably toll the statute of limitations), and Johnson v. City(cid:13) of Raleigh, 389 S.E.2d 849, 850 (N.C. Ct. App. 1990)(cid:13) (holding that under North Carolina common law, "a(cid:13) voluntarily dismissed suit which is based on defective(cid:13) service does not toll the statute of limitations").(cid:13) As there is no majority common law rule governing this(cid:13) question, we must therefore select the more appropriate(cid:13) rule as a matter of policy. See Polius v. Clark Equip. Co.,(cid:13) 802 F.2d 75, 77 (3d Cir. 1986) ("Where the Restatement is(cid:13) silent and a split of authority exists, courts should select(cid:13) the sounder rule" in resolving questions of Virgin Islands(cid:13) law.). In choosing the better rule, we are guided by the(cid:13) policy rationale underlying statutes of limitations generally:(cid:13) Statutes of limitations are primarily designed to assure(cid:13) fairness to defendants. Such statutes promote justice(cid:13) by preventing surprises through the revival of claims(cid:13) that have been allowed to slumber until evidence has(cid:13) been lost, memories have faded, and witnesses have(cid:13) disappeared. The theory is that even if one has a just(cid:13) claim it is unjust not to put the adversary on notice to(cid:13) defend within the period of limitation and that the right(cid:13) to be free of stale claims in time comes to prevail over(cid:13) the right to prosecute them. Moreover, the courts(cid:13) ought to be relieved of the burden of trying stale claims(cid:13) when a plaintiff has slept on his rights.(cid:13) Burnett v. N.Y. Cent. R.R. Co., 380 U.S. 424, 428 (1965)(cid:13) (internal quotation marks and citations omitted).(cid:13) 22(cid:13) Similarly, in Sperling v. Hoffman-La Roche, Inc. , 24 F.3d(cid:13) 463 (3d Cir. 1994), we identified "three basic purposes a(cid:13) statute of limitations serves":(cid:13) They are first a practical and pragmatic device to spare(cid:13) the courts from litigation of stale claims, and the(cid:13) citizen from being put to his defense after memories(cid:13) have faded, witnesses have died or disappeared, and(cid:13) evidence has been lost. . . . Secondly, limitations(cid:13) periods are intended to put defendants on notice of(cid:13) adverse claims. Finally, limitations periods prevent(cid:13) plaintiffs from sleeping on their rights.(cid:13) Id. at 471-72 (internal quotation marks, citations, and(cid:13) alterations omitted).(cid:13) Defendants rely on our decision in Young v. Clantech,(cid:13) Inc., 863 F.2d 300 (3d Cir. 1988) (per curiam), which held(cid:13) that under New Jersey law, a lawsuit filed in a court that(cid:13) lacks personal jurisdiction over the defendant cannot(cid:13) equitably toll the statute of limitations. Young , however, is(cid:13) not controlling here, since we must look to Virgin Islands(cid:13) law, not New Jersey law, to determine whether filing suit in(cid:13) a court that lacks personal jurisdiction may equitably toll(cid:13) the statute of limitations. See Beauty Time, Inc. v. VU Skin(cid:13) Sys., Inc., 118 F.3d 140, 144 (3d Cir. 1997) ("Because we(cid:13) look to state law for the appropriate statute of limitations,(cid:13) we also look to Pennsylvania law on the closely related(cid:13) questions of tolling and application.").(cid:13) Nor do we find Young persuasive on the question whether(cid:13) the sounder rule as a matter of policy permits the filing of(cid:13) a first action in a court that lacks personal jurisdiction to(cid:13) toll the statute of limitations for purposes of a second(cid:13) action. Young gave only cursory treatment to the policy(cid:13) questions implicated by its holding, and rested its(cid:13) prediction of how the New Jersey Supreme Court would(cid:13) decide the question of New Jersey law primarily on the New(cid:13) Jersey Supreme Court’s case law in this area. See Young,(cid:13) 863 F.2d at 301 ("Traditionally, the filing of a case against(cid:13) a defendant in a court which did not have jurisdiction over(cid:13) the action tolled New Jersey’s statute of limitations only if(cid:13) the court in which the case was originally filed had(cid:13) authority to transfer the case to the proper court.") (citing(cid:13) 23(cid:13) Kaczmarek v. N.J. Turnpike Auth., 390 A.2d 597 (N.J.(cid:13) 1978)). Whereas in Young we were writing against a(cid:13) backdrop of New Jersey Supreme Court precedent, in this(cid:13) case we write on a clean slate, as there is no relevant(cid:13) binding authority on this point of Virgin Islands law.(cid:13) We also note that the New Jersey Superior Court(cid:13) Appellate Division in Mitzner v. West Ridgelawn Cemetery,(cid:13) Inc., 709 A.2d 825 (N.J. Super. Ct. App. Div. 1998),(cid:13) disapproved Young’s distinction between filing suit in a(cid:13) court that lacks subject matter jurisdiction, which tolls the(cid:13) statute of limitations under New Jersey law, see Galligan v.(cid:13) Westfield Ctr. Serv., Inc., 412 A.2d 122, 123 (N.J. 1980),(cid:13) and filing suit in a court that lacks in personam(cid:13) jurisdiction, which Young held does not toll the statute of(cid:13) limitations under New Jersey law but Mitzner held does:(cid:13) Although the [Young] court suggested that significant(cid:13) policy arguments support a distinction between the two(cid:13) types of defects, it did not spell them out. We do not(cid:13) perceive any. Indeed, if there is a distinction, the filing(cid:13) in a court without subject matter jurisdiction would(cid:13) seem to be the greater defect.(cid:13) Mitzner, 709 A.2d at 828; cf. Burnett , 380 U.S. at 429(cid:13) (holding that an action filed in an improper venue tolled the(cid:13) FELA statute of limitations, and noting that "venue(cid:13) objections may be waived by the defendant"). We therefore(cid:13) do not believe that Young is either controlling or persuasive(cid:13) on the question whether, purely as a matter of policy, the(cid:13) sounder rule is to permit equitable tolling where a plaintiff(cid:13) files an initial action in a court that lacks in personam(cid:13) jurisdiction over the defendants.(cid:13) We believe that the rule adopted by the Arizona Supreme(cid:13) Court in Hosogai v. Kadota, 700 P.2d 1327 (Ariz. 1985),(cid:13) makes more sense than the rule of New Jersey common law(cid:13) adopted by Young. Hosogai held that a statute of limitations(cid:13) is equitably tolled for a second action by the filing of a(cid:13) procedurally defective first action if there is:"1) timely(cid:13) notice to the defendant in filing the first claim; 2) lack of(cid:13) prejudice to the defendant in gathering evidence to defend(cid:13) against the second claim; [and] 3) reasonable and good(cid:13) faith conduct by the plaintiff in prosecuting the first action(cid:13) 24(cid:13) and diligence in filing the second action." Hosogai, 700 P.2d(cid:13) at 1333; see also Mayes v. Leipziger, 729 F.2d 605, 608(cid:13) (9th Cir. 1984) ("California equitably tolls its statutes of(cid:13) limitation during the pendency of an earlier case provided(cid:13) there is timely notice, and lack of prejudice to the(cid:13) defendant, and reasonable and good faith conduct on the(cid:13) part of the plaintiff.") (internal quotation marks and citation(cid:13) omitted).(cid:13) In our view, the equitable tolling rule articulated in(cid:13) Hosogai avoids the unfairness that would occur if a plaintiff(cid:13) who diligently and mistakenly prosecuted his claim in a(cid:13) court that lacked personal jurisdiction were barred under(cid:13) the statute of limitations from promptly refiling in a proper(cid:13) jurisdiction. Cf. Goldlawr, Inc. v. Heiman, 369 U.S. 463,(cid:13) 466 (1962) (recognizing "the injustice" that would result "in(cid:13) plaintiff ’s losing a substantial part of its cause of action(cid:13) under the statute of limitations merely because it made a(cid:13) mistake in thinking that the respondent corporations could(cid:13) be found or that they transact business" in the forum(cid:13) venue) (internal quotation marks and alterations omitted).(cid:13) At the same time that the Hosogai rule avoids unfairness(cid:13) to plaintiffs who diligently prosecute their claims, it(cid:13) preserves the policies underlying statutes of limitations(cid:13) which, as the Supreme Court explained in Burnett , "assure(cid:13) fairness to defendants . . . . by preventing surprises(cid:13) through the revival of claims that have been allowed to(cid:13) slumber until evidence has been lost, memories have faded,(cid:13) and witnesses have disappeared." 380 U.S. at 428. In(cid:13) Burnett, the Court held that an action dismissed for(cid:13) improper venue equitably tolled the FELA statute of(cid:13) limitations. The Court’s holding rested on the conclusion(cid:13) that the policies underlying statutes of limitations would(cid:13) not be served by holding plaintiffs’ claims time-barred:(cid:13) Petitioner here did not sleep on his rights but brought(cid:13) an action within the statutory period in a state court of(cid:13) competent jurisdiction. Service of process was made(cid:13) upon the respondent notifying him that petitioner was(cid:13) asserting his cause of action. . . . Respondent could not(cid:13) have relied upon the policy of repose embodied in the(cid:13) limitation statute, for it was aware that petitioner was(cid:13) actively pursuing his FELA remedy; in fact, respondent(cid:13) 25(cid:13) appeared specially in the Ohio court to file a motion for(cid:13) dismissal on grounds of improper venue.(cid:13) Burnett, 380 U.S. at 429-30.(cid:13) Similarly, the Hosogai rule protects defendants by(cid:13) permitting equitable tolling only if the filing of the first(cid:13) action put the defendant on notice within the limitations(cid:13) period, there was no prejudice to the defendant in(cid:13) defending the second action, and the plaintiff acted(cid:13) reasonably and in good faith in prosecuting the first action(cid:13) and exercised diligence in prosecuting the second action.(cid:13) To be sure, the fact-specific, multi-factored nature of this(cid:13) equitable tolling test will consume more judicial resources(cid:13) than an easily applied bright-line rule that the filing of an(cid:13) action in a court that lacks personal jurisdiction over the(cid:13) defendants does not toll the statute of limitations.(cid:13) Moreover, application of the Hosogai rule, because it is so(cid:13) fact-specific, may undermine predictability to some degree.(cid:13) These problems, however, are inherent in all equitable(cid:13) doctrines, which demand flexibility in order to avoid the(cid:13) arbitrariness of rigid rules. See Holmberg v. Armbrecht, 327(cid:13) U.S. 392, 396 (1946) ("Equity eschews mechanical rules; it(cid:13) depends on flexibility.").(cid:13) Thus, we hold that under Virgin Islands law, the statute(cid:13) of limitations for a second action may be equitably tolled by(cid:13) the filing of a first action dismissed for lack of personal(cid:13) jurisdiction if: (1) the first action gave defendant timely(cid:13) notice of plaintiff ’s claim; (2) the lapse of time between the(cid:13) first and second actions will not prejudice the defendant;(cid:13) and (3) the plaintiffs acted reasonably and in good faith in(cid:13) prosecuting the first action, and exercised diligence in filing(cid:13) the second action. Application of this test to the record(cid:13) before us does not yield a clear-cut answer. On the one(cid:13) hand, the suit filed in the District Court for the District of(cid:13) Puerto Rico within the two-year limitations period afforded(cid:13) defendants timely notice of plaintiffs’ claims. Moreover, at(cid:13) oral argument, defendants were unable to identify any(cid:13) prejudice caused by plaintiffs’ delay in bringing this suit(cid:13) following the dismissal of the first suit. On the other hand,(cid:13) plaintiffs’ failure to request the District Court for the(cid:13) District of Puerto Rico to transfer the case to the Virgin(cid:13) 26(cid:13) Islands, pursuant to 28 U.S.C. S 1631, if that court found(cid:13) that it lacked personal jurisdiction, may have been (cid:13) unreasonable.9 Furthermore, in waiting nearly three(cid:13) months to refile a substantially similar complaint in the(cid:13) Virgin Islands, plaintiffs may not have exercised sufficient(cid:13) diligence in prosecuting this action.(cid:13) Application of this equitable doctrine is generally(cid:13) committed to the discretion of the trial court in the first(cid:13) instance. The record is not fully developed with respect to(cid:13) these issues, and the record that has been developed does(cid:13) not, as explained above, cut clearly in favor of plaintiffs or(cid:13) defendants. Accordingly, we will vacate the District Court’s(cid:13) order dismissing plaintiffs’ claims as time-barred, and(cid:13) remand the case to the District Court further proceedings(cid:13) consistent with this opinion.(cid:13) A True Copy:(cid:13) Teste:(cid:13) Clerk of the United States Court of Appeals(cid:13) for the Third Circuit(cid:13) _________________________________________________________________(cid:13) 9. The Puerto Rico District Court had authority, if it found that it lacked(cid:13) in personam jurisdiction, to transfer plaintiffs’ first action to the District(cid:13) Court of the Virgin Islands. See 28 U.S.C.S 1631 ("Whenever a civil(cid:13) action is filed in a court . . . and that court finds that there is a want(cid:13) of jurisdiction, the court shall, if it is in the interest of justice, transfer(cid:13) such action or appeal to any other such court in which the action or(cid:13) appeal could have been brought at the time it was filed or noticed, and(cid:13) the action or appeal shall proceed as if it had been filed in or noticed for(cid:13) the court to which it was transferred on the date upon which it was(cid:13) actually filed in or noticed for the court from which it is transferred.").(cid:13) Plaintiffs, however, did not request the Puerto Rico District Court, if it(cid:13) found that it lacked personal jurisdiction over the defendants, to transfer(cid:13) the case to the District of the Virgin Islands, and the Court apparently(cid:13) did not recognize that authority sua sponte.(cid:13) 27