COVID-19 and its Impact on the Deadline to Bring Legal Claims

Fennemore Craig Client Alert

COVID-19 and its Impact on the Deadline to Bring Legal Claims

COVID-19 has caused upheaval in virtually every aspect of American life – and the legal system is not immune to this pandemic. In an effort to respond to the novel coronavirus outbreak, a number of states and individual courts have recently issued orders suspending the statute of limitations for filing legal actions. Understanding the current state of play in each jurisdiction where you may need to file legal claims is critical to protecting your rights.

States have not implemented suspensions of the time period to file a lawsuit in a coordinated manner so that one set of rules applies in all jurisdictions. Instead, states, and even individual courts within states, have chosen to act independent of one another, producing a patchwork of different approaches nationwide.

This important issue affects any business or individual who is considering whether or not to file a claim – especially if the statute of limitations period is close to expiring – as well as those who want certainty about whether the risk of a lawsuit has passed or not.

Parties to potential litigation need to pay close attention to what orders, if any, have been enacted in the state (and specific court) where a claim may be brought to ensure full and complete understanding of how such orders may impact the time period to file potential legal claims. It is also critical to keep informed about ongoing modifications, extensions, or termination of such orders as states begin to re-open. Otherwise, parties risk losing their right to pursue legal claims.

Different Approaches to Suspending Statutes of Limitation

States, and even sometimes local jurisdictions or courts within states, are approaching this issue very differently.

• Governors have issued executive orders tolling all statutes of limitations. New York and Nevada have taken this approach. The expiration of these orders varies by state, but, typically, the end date for any tolling is tied to the individual state lifting any emergency declarations or issuing a further executive order.
• The highest state court or state judicial council has issued administrative orders tolling the statutes of limitations for various time periods depending on the jurisdiction. Examples of this include California, Delaware, Georgia, Maryland, Pennsylvania and Virginia. In California, statutes of limitation for civil actions are tolled from April 6, 2020 until 90 days after the governor declares that the state of emergency related to the COVID-19 pandemic has lifted. In other states, there is a specific ending date identified in the order (some of which have already been extended).
• The decision to toll applicable statutes of limitation is left to individual courts that may entertain requests for extensions of applicable statutes of limitation in specific cases. This is the approach that has been taken in Texas and Rhode Island.
• The governor and/or courts within a state have expressly declined to extend or toll statute of limitations periods. This includes states like Alabama, Maine, Missouri, and Utah.
• The governor and courts have remained silent on the issue of tolling statute of limitations periods. Arizona and Colorado have taken this approach.

 

There is also no consistent approach in the federal courts.  

• In some states, the district courts have issued orders suspending the statute of limitations. This is the case in the Middle District of Louisiana.
• Other district courts have expressly declined to toll statutes of limitation. An example of this approach is the Eastern District of Virginia (one of the infamous “Rocket Dockets”).
• So far, most district courts have remained silent on the issue.

Thus, as with state courts, if a litigant needs to file a case in federal court, it is critical to consult applicable rules of civil procedure, circuit court orders, individual district court orders, as well as individual judge’s orders.

Even when a litigant determines which order or rule applies to its case, the work is not finished. What type of claim the orders impact and how long the order will be effective is different in each state. All of these considerations substantially impact a party’s rights. The different approaches taken by states and their courts are as follows:

• The orders only apply to civil actions.
• The orders generally toll all statutes of limitation.
• The orders only suspend statutes of limitation that would have expired during the emergency period, but not limitations periods that expire after the emergency is lifted.
• The orders expressly include limitations periods that expire after the emergency and having the effect of stopping for a period of time the “clock” that had begun to run prior to the suspension.

 

Recognizing widespread lack of understanding in the application of many orders, some states, such as Georgia, have issued formal guidance explaining how to interpret and properly apply the suspension order. Unfortunately, very few states have issued such guidance, leaving litigants to navigate these murky waters alone.

What authority exists for these orders and is any of the sources of authority utilized a legitimate exercise of authority?

Numerous concerns have been raised as to whether governors or courts entering these types of orders have the authority to do so. For example, statutes of limitation are just that – statutes – and are typically within the purview of the legislature. Does a governor have the right, through an executive order, or a court by administrative order, to suspend the application or enforcement of statutes of limitation? Isn’t that a violation of separation of powers? Courts in some jurisdictions, like New York, have upheld the decision to toll statutes of limitation during prior emergencies, including the terrorist attacks that occurred on September 11^th. Whether such moves are constitutional or enforceable will vary widely depending on each state’s applicable constitution, as well as the scope of the executive order entered.

You may also be asking, “What happens if I rely on an executive or court order that is later deemed unconstitutional?” One option may be to seek relief under the doctrine of equitable tolling – suspending the statute of limitations based on a claim of fairness. Although each state is different, courts generally look at whether you can show diligence in pursuing your claims and the existence of some extraordinary circumstance preventing timely filing. It is unclear whether acting in conformance with a standing executive or court order, as well as the reality of the COVID-19 outbreak, might be enough to demonstrate diligence and/or will meet the extraordinary circumstances threshold.

Equitable tolling may also be available even in states like Arizona where there are no operative executive orders affirmatively tolling the statute of limitations based on the emergency nature of the COVID-19 pandemic. However, this argument is much less likely to be persuasive because, as already noted, litigants are not relying on orders from their own government. Absent that, it will be tough to show diligence or extraordinary circumstances given that parties are still technically able to file suit. Betting on a court equitably tolling the statute of limitations under these circumstances is very risky.

Practical considerations

Until a party files suit challenging the constitutionality of these executive or court orders, there is no way to know whether they will be enforceable and what impact, if any, they will have on litigants who forewent enforcement of their claims believing the orders were effective.

The best strategy is to proceed with caution, and consider the following:

First, if you have claims you want to bring or want to know when risk of litigation has passed, consider what state’s law will govern and where the claim will need to be filed. You will also need to consider whether there is a contractual choice of law provision that might apply. Each of these questions will impact what executive or court order(s) might impact your claims.  If, for example, your claims are governed by Arizona law, where no order has been entered tolling the statute of limitations, your claims will need to proceed timely or else you risk losing the ability to pursue them. If Nevada law applies – a state that has entered such an executive order – it is possible that the statute of limitations concerning your claims may be tolled.

Second, recognize that the situation is changing by the minute. States that currently do not have orders on statutes of limitation may issue them in the near future. Other states are continually refining and amending their existing orders. Continue to check the applicable state and individual court websites, as well as the clerk of court website, administrative orders and executive orders for the latest information. Also consider setting a Google alert for any states that may be relevant. This will be particularly important as states start to re-open and revoke or unwind these orders.

Third, if you want to ensure that claims are preserved without the need to litigate during the COVID-19 outbreak, consider entering into a tolling agreement with the other parties involved, especially if you are already actively trying to resolve dispute. We recommend speaking with an attorney before attempting to enter into a tolling agreement to ensure that any agreement entered into is enforceable and addresses all the necessary claims and defenses.  

Fourth, if tolling is not an option, strongly consider filing your claim under the original limitations period. This will ensure that you have preserved your rights in the event that a suspension of the statute of limitations is overturned or deemed to be invalid. In some jurisdictions, like Arizona, you can file your claims but not serve them right away. This will preserve the statute of limitations while allowing for continued settlement discussions or further investigation so long as there is a legitimate basis to file your claim initially. In most jurisdictions, you can also amend early in the case, either as a matter of right, or based on the court’s very broad discretion to allow amendment.

Finally, if you are unsure what statute of limitations might apply, what the current status of statutes of limitation are in your state, or the best steps to protect yourself and your rights, consider consulting legal counsel.