At the federal and state levels, there have been calls to suspend statutes of limitations during the COVID-19 outbreak. A number of states have already acted, but state approaches vary and are open to future changes as the challenges of the pandemic play out at the national, state and local levels. This uncertainty affects businesses considering when they must file actions and those assessing whether a risk of anticipated litigation has been extinguished. It also affects companies facing potential civil or criminal enforcement actions including, for example, those for whom the clock is running on antitrust merger reviews.
Although the global response to COVID-19 is unprecedented, suspensions of limitations periods in times of great business interruptions are not. Legislation was issued to toll limitations periods, for example, during the Civil War and the subsequent world wars. In more recent times, limitations periods have been extended to account for the aftermaths of hurricanes and Sept. 11, 2001.
Below we discuss examples of actions various governmental entities have taken in response to COVID-19. But the facts in this area are in flux, and diligence will be needed to track the status of applicable limitations periods. There is also the possibility some jurisdictions may extend limitations periods retroactively, or even on a case-by-case basis. Those requiring additional certainty should consider tolling agreements that do not depend on uncertain government action.
The U.S. Department of Justice is seeking a temporary extension of the limitations periods for certain criminal and civil matters and clarification of federal judicial authority to extend limitations periods.
There are multiple reports that the U.S. Department of Justice (DOJ) has asked Congress to temporarily extend the statute of limitations for criminal and civil matters including, for example, the time within which merger review must be completed, or within which criminal bid rigging and price fixing prosecutions must be brought. The DOJ reportedly has also sought clarification of judicial authority to extend limitations periods where emergency conditions require it, essentially confirming that the chief judges of the nation’s federal district courts have the authority to extend limitations periods.
The DOJ proposals are controversial and their adoption by Congress, at least as proposed, is not assured. In addition, courts likely already possess the authority to toll limitations periods to respond to emergency conditions. At least one judge, Chief Judge Shelly D. Dick, of the U.S. District Court for the Middle District of Louisiana, has issued an order stating, “Prescriptive, peremptive [sic] and statute of limitation deadlines are hereby suspended until April 13, 2020.” For the latest available information from the federal courts, consult their websites.
State approaches to statutes of limitations vary widely.
States are taking a variety of approaches to the question of whether to suspend statutes of limitations. For example:
- New York Gov. Andrew Cuomo tolled “any specific time limit for the commencement, filing, or service of any legal action, notice, motion, or other process or proceeding, as described by the procedural laws of the statute,” until April 19, 2020. This is not without precedent. Similar action was taken in the wake of the 9-11 attacks.
- The Kansas Legislature passed a bill authorizing the chief justice of the Kansas Supreme Court to “issue an order to extend or suspend any deadlines or time limitations established by statute when the chief justice determines such action is necessary to secure the health and safety of court users, staff and judicial officers.” Kansas Supreme Court Chief Justice Marla Luckert, in turn, ordered that “all statutes of limitations and statutory time standards or deadlines applying to the conduct or processing of judiciary proceedings [are] suspended until further order.”
- The Supreme Court of Iowa issued an order stating, “Any statute of limitations, statute of repose, or similar deadline for commencing an action in district court is hereby tolled from March 17 to May 4.”
- Some state high courts have left the choice of suspension to local courts. For example, the Texas Supreme Court ordered, “All courts in Texas may extend the statute of limitations in any civil case for a stated period ending no later than 30 days after the Governor’s state of disaster has been lifted.” (Emphasis added.)
- Other states have not yet taken action to suspend state limitations periods. In some cases, state high court orders extending court deadlines make clear that the court in that particular state lacks authority to extend limitations periods. For example, an Alabama Supreme Court administrative order suspending in-person court proceedings for 30 days stated, “This court cannot extend any statutory period of repose or statute of limitations period.”
State approaches are likely to continue to develop, and even where states have extended limitations periods, the length and scope of those extensions may change. Businesses wrestling with state limitations questions potentially affected by the COVID-19 emergency should check the most current announcements and orders on the websites of state courts or official state websites.
Tips for businesses facing limitations questions during the pandemic.
In light of differing federal and state actions involving limitations periods, if you face an upcoming limitations period, it is important that you:
- Consider choice of law questions that may determine which limitations period applies. Given uncertainty about whether tolling periods will be extended and when extensions will expire, it is critical that those concerned about looming limitations periods know what law will apply. This may involve determining in which state a claim arose, resolving ambiguous contract language concerning choice of law, identifying federal limitations periods, or understanding when and how federal courts borrow state limitations periods for federal claims.
- Understand that most courts retain authority to equitably toll limitations periods. If, because of the outbreak, you are unable to bring an action in a jurisdiction that has not suspended the limitations period, document the facts that prevented timely filing. While courts use equitable tolling sparingly, they often have the authority to extend statutory limitations periods to address factors beyond a litigant’s control when tolling would be consistent with the legislative purpose.
- Where uncertainty creates unacceptable business risk, consider resolving it through a tolling agreement. In some cases, the uncertainty tied to potentially shifting limitations periods may create unacceptable business risks. Those risks include a premature rush to court when the parties are making progress toward resolving a potential dispute short of litigation. In such situations, a tolling agreement confirming the parties’ agreement on extension of the limitations period may be appropriate.
As your business confronts the challenges of COVID-19, BakerHostetler is here to help. We are continuing to develop and publish information about this fast-changing environment and have developed an online resource to help address and answer legal questions, available here.