Equitable Estoppel

Equitable estoppel is a legal principle that stops someone from taking a legal action that conflicts with his previous claims or behaviors. Essentially, equitable estoppel is a method of preventing someone from going back on his word in a court of law. For example, equitable estoppel would be granted to a defendant if the plaintiff previously gave his permission for the defendant to do something, and then sued the defendant once he did. To explore this concept, consider the following equitable estoppel definition.

Definition of Equitable Estoppel

Noun

  1. A legal principle that prevents someone from taking legal action that conflicts with his previous claims or behaviors.

Origin of Estoppel

1575-1585       Middle French  estoupail

What is Estoppel

Estoppel is a term that is notoriously difficult to define in legal terminology. In its simplest form, “estoppel” translates to mean “stopped” in French, as in someone is being stopped from doing or saying something. Because the term is so vague, it has been attached to numerous areas of law. The late Lord Denning (1899-1999), an English judge who has been described as “the greatest judge of the century,” attempted to explain the difficulty of defining estoppel by saying that:

“[With estoppel], someone is stopped from saying something or other, or doing something or other, or contesting something or other.”

Types of Estoppel

The purpose of estoppel is to hopefully prevent the wasting of court resources by stopping people from abusing the legal system by filing frivolous lawsuits. However, estoppel can also be considered controversial. This is because some see it as a way of preventing people from exercising what would have been considered their legal rights if they were involved in different circumstances.

Anyone who wishes to assert an estoppel case must come to the court with “clean hands.” This means that the person bringing the suit must not do so unethically or as an act of bad faith. This clean hands doctrine is typically stated as “those who seek equity must do equity.”

What follows are the three main types of estoppel that can be exercised in a court of law. Because estoppel is a broad term that can be defined in many ways, these are arguably the three most important types of estoppel to consider.

Equitable Estoppel

Equitable estoppel, simply put, is a way of stopping someone from going back on his word. It is a way of stopping someone from taking legal action that conflicts with his previous claims or behavior, or for testifying to something early on, then changing that testimony later.

Example of equitable estoppel:

Jessica takes her car to the mechanic to have some work done. During the process, the mechanic accidentally slips with one of his tools and puts a small dent in Jessica’s car. He brings Jessica’s attention to the dent and offers to fix it, but she says that it’s only cosmetic and not to worry about it.

Jessica cannot, then, file a lawsuit against the mechanic for damaging her car. If she were to do so, she would be estopped by the courts, since her claim would run counter to her earlier forgiveness of the damages that she had incurred because of the mechanic’s mistake.

Promissory Estoppel

Promissory estoppel deals with contract law. In a case concerning promissory estoppel, one person cannot promise the other party to a contract that part or all of the contract will not be enforced, only to later try to enforce that provision anyway. For instance, if an employer tells an employee that mandatory overtime will not be enforced, despite being part of the employee’s contract, the employer cannot then attempt to enforce it later. The employee is not then obligated to abide by that part of the contract, and promissory estoppel would be granted in his favor.

Collateral Estoppel

Collateral estoppel stops a person from bringing the same issue before the court once a court has ruled on it. For instance, collateral estoppel stops a party from bringing the same lawsuit against the same person, but in a different court, simply because he did not like the decision he was given in the first court. Although double jeopardy applies only to criminal trials, this is a similar concept – that once a matter has been settled by a court, it cannot be brought again.

It is important to note the distinctions between collateral estoppel and appeals. Collateral estoppel does not prevent someone from filing an appeal to have a different court reconsider the issues at hand. Instead, collateral estoppel stops someone from bringing a frivolous lawsuit by “trying to get in through the back door what he couldn’t get in through the front.” In other words, it prevents people from filing the same lawsuit in the hopes of obtaining a different result.

Doctrine of Equitable Estoppel

The doctrine of equitable estoppel prevents one person from taking advantage of another. This occurs when party A has influenced party B to act in a way that resulted in party B being injured, or incurring damages of some sort. The doctrine of equitable estoppel is founded on the principles found in fraud cases. Essentially, the doctrine of equitable estoppel prevents one party from taking a different position at trial than he took previously – especially if the other party would incur harm as a result of the change.

Legal Estoppel

There is also the concept of legal estoppel, which can be divided into two categories: estoppel by deed, and estoppel by record. Insofar as the doctrine of estoppel by deed, those who are parties to the deed for a property are prohibited from denying any of the material facts declared in the deed. Further, parties to a deed are prohibited from asserting a right or title that would be issued against the laws and rules associated with that transaction.

For example:

Betsy transfers the title of a plot of land to her daughter by deed. However, her daughter is unaware of the fact that Betsy does not actually own the land at the time of the transfer. Betsy acquires the title to the property after the transfer.

Technically, this means that Betsy’s daughter does not legally own the property because Betsy did not own the property when she transferred it to her. Betsy did not have the legal right to transfer the property to her daughter at the time of the transfer. However, under the doctrine of estoppel by deed, it is up to the court’s discretion to decide to “fix” this imperfection by finding the daughter to be the rightful owner of the property anyway.

Equitable Estoppel Example Involving Eyeglass Manufacturers

An example of equitable estoppel can be found in the case of Aspex Eyewear Inc. against Clariti Eyewear Inc. In March of 2007, Aspex Eyewear Inc. sued Clariti Eyewear Inc. alleging that Clariti violated Aspex’s patents by selling AirMag, a particular brand of eyeglass frames. Once Aspex became aware of this product, Aspex sent Clariti two letters (one for each patent) asking that they cease and desist selling the product immediately.

Clariti responded to the letters, noting that they had never intended to infringe upon Aspex’s patents. Clariti requested information from Aspex to review and responded back to Aspex that it did not believe Clariti’s products infringed upon Aspex’s patents.

After this incident, Clariti did not hear anything from Aspex for over three years. At this point, Aspex sent Clariti another letter claiming that the AirMag product infringed upon one of the patents referred to three years prior. Clariti refused to stop selling the AirMag brand, and so Aspex filed a civil lawsuit. The district court dismissed one of the infringement claims, but left the other one active – the ‘747 patent.

Clariti then moved to dismiss the remaining infringement suit, arguing that Aspex was barred by equitable estoppel, due to their remaining silent for three years on the subject. The district court granted Clariti’s motion for dismissal.

On appeal, the Court found that Aspex was misleading when convincing Clariti that Aspex did not intend to enforce the ‘747 patent against Clariti. The Court explained that the misleading conduct came in when Aspex was expected to follow up with statements or action, but failed to do so in a situation where they had an obligation to act or speak. In other words, Aspex should have followed up after receiving Clariti’s response letter. Further, the Court found that Clariti relied on Aspex’s misleading conduct to expand its business, doing so after not hearing anything else from Aspex after the initial incident.

This is where equitable estoppel came in. The evidence in the record suggested that, had Aspex filed suit against Clariti like they had originally threatened, then in all likelihood Clariti would have discontinued their AirMag line and went on to other business ventures. This was enough proof for the Court that Clariti relied on Aspex’s silence as permission to go forward, and that Aspex did not have a leg to stand on in that regard.

Expanding further on the equitable estoppel issue, the Court found that because Clariti relied on Aspex’s misleading conduct to build its business, Clariti’s business would suffer a significant economic downturn if it stopped production of the brand. Therefore, the Court ruled that the district court was correct in ruling that Clariti would suffer damages if Aspex were permitted to go forward with its charge of infringement.

The case was then escalated to the United States Court of Appeals for the Federal Circuit. The Court of Appeals affirmed the decisions of the lower courts. Clariti argued that the district court erred in not fully developing the case and finding all of the facts necessary to declare the case exceptional. Here, however, the Court noted that the district court did not hold a full trial on the issues at hand because the summary judgment involving equitable estoppel effectively ended the litigation.

Related Legal Terms and Issues

  • Appeal – An application that is made to a higher court requesting a reversal of a lower court’s decision.
  • Civil Lawsuit – A lawsuit brought about in court when one person claims to have suffered a loss due to the actions of another person.
  • Contract – An agreement between two or more parties in which a promise is made to do or provide something in return for a valuable benefit.
  • Double Jeopardy – The Fifth Amendment protection from being tried for the same crime twice, and from being compelled to testify against oneself.

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