Statute of Limitations; A deeper look at the infamous legal concept
While in law school, students are bombarded with legal doctrines and common law concepts that serve as the backbone of modern law. Lawyers are taught complicated legal fundamentals with archaic Latin names such as "Res Judicata" and "Res Ispa Loquitur." While I was attempting to learn such foreign principals in law school, I breathed a sigh of relief when we got to the subject of the “Statute of Limitations”, also known as the ‘SOL.’
The term ‘Statute of Limitations’ is generally familiar to most of our society. The broad and basic meaning of an SOL is also known by most people who have worked in any business setting or is a fan of television legal dramas like Law & Order. A statute of limitations is legislated to serve as an absolute bar to initiating legal proceedings for damages after a determined length of time has elapsed from event that caused the damages. However, in legal practice the only “absolute” is that nothing in law is this simple or absolute.
Not until I began practicing law did I realize the complexities associated with the SOL. Most legal scholars and practitioners will agree that SOLs serve legitimate policy purposes. For instance, citizens should not live in apprehension or jeopardy of being potentially criminally prosecuted for minor crimes that occurred decades ago. For instance, imagine the havoc that would ensue if government prosecutors could decide to arrest and prosecute you for vandalism that occurred 15 years ago when you drunkenly decided to egg a fraternity house as a college prank!
SOLs are also in place for civil lawsuits in nearly every jurisdiction in the union. Generally, for purposes of legal collection, it is preferable to have a long statute of limitation. The longer the SOL the more time a creditor has to skip the debtor and obtain all documents, assignments, statements, etc. necessary to proceed with litigation. If you have a collection account and the SOL has run prior to filing the complaint against the debtor, you really are SOL (shit out of luck)! Filing a complaint after the SOL has run will result in the complaint being dismissed by the Court, Sua Sponte, or by an eager debtor’s attorney through filing a nasty motion to dismiss based on violating the SOL. Incidentally, the later of these two circumstances can also result in the awarding of attorneys’ fees or possibly sanctions for bringing a case in violation of the SOL. In the worst-case scenario filing a complaint in violation of the SOL can also result in the initiation of an FDCPA case against you, a malpractice claim against the law firm and/or possibly a State Bar investigation.
There are techniques and strategies you can use to try to extend the statute of limitations, should the need arise. First, familiarize yourself with the statute of limitation laws within the jurisdiction of the potential lawsuit. Usually, there will be several different SOLs in place for different civil causes of action. For example, in Nevada, NRS 11.190(1)(b) places a six (6) year SOL for written contracts, yet NRS 11.190(2)(a) places a four (4) year SOL for causes of action based on “Open Accounts’. Sometimes you may be of the opinion that you cannot sue on an account because you are past SOL for a certain cause of action; however, upon further review that same placement may be able to be sued upon an alternate theory of liability that has a longer SOL period.
Tolling of a Statute of Limitation:
It is critical to understand how an SOL is ‘tolled’ within your jurisdiction. In other words, how is time calculated to determine whether a placement is within the SOL for purposes of filing suit? Let's say, for example, you have a credit card placement wherein the debtor opened the account in 2006. Based on the date the account was opened it is clear that the SOL would have run for even the lengthiest of statutory limitations. Based on this calculation, filing a suit on the case would not be an option. However, this may not be accurate if your jurisdiction has a tolling statutory prevision.
Nevada's tolling statute, codified as NRS 11.200, states in part:
‘Whenever any payment of principal or interest has been or shall be made upon an existing contract...the limitation shall commence from the time the last payment was made.’ NRS 11.200
In essence, this statute means that the SOL does not begin to ‘toll’ or run until the last payment is made on the account, even if the payment is partial and/or late. This statute can be of tremendous benefit for the Creditor. Using the previous example, if you can obtain statements that document any payment that was applied to either principal and/or interest within the past six (6) years then that account is within the SOL and the initiation of a suit can proceed.
Although simple in theory, statute of limitation issues are much more comprehensive in application. Regardless of any serious allegations or large sums of money at issue, a case cannot commence unless it fits within the SOL for the jurisdiction at issue. It's important to consider all pertinent facts available when evaluating whether a case falls within the requisite SOL. The utilization of some of the above tips and techniques may help overcome the SOL hurdle in situations that appear to be past stats on initial review.