Construction Law Today : Construction Lawyer & Attorney : Joshua Glazov : Design Build Contracts, Construction Bankruptcy

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In the last bank failure post we focused on the basics of statutes of limitation - what they do and how they work. Today we're going to talk about how, after they get appointed as receiver for a failed bank, the Federal Deposit Insurance Corporation (the "FDIC") can extend the statute of limitations on claims they inherit from the failed bank.

The FDIC gets the power to extend statutes of limitation under Section 11(d)(14) of the Federal Deposit Insurance Act (the "FDI Act").

Here's what the FDIC can do.....

• For a breach of contract claim, the day when someone breaches the applicable contract.
• For most tort claims, the day when the victim first knows, or reasonably should have known, that someone's tortious conduct injured them.

• The day the FDIC gets appointed as receiver for the failed bank "Appointment Date")
• The day when the claim "accrues" under state law. That's often the LP Start Date.

Often the limitations period on claims that the FDIC inherits from a failed bank won't start running until Appointment Date. If the limitations period stopwatch already started running on the claim before Appointment Date, once the bank fails and the FDIC is appointed as receiver, the dial on the stopwatch is re-set to zero.  It then begins running again, but it starts counting from Appointment Date.

2. Extend the Reach of the Limitations Period

Not only can the FDIC postpone when a limitations period starts to run, they can also extend how long it runs.  And it doesn't matter if there's a shorter limitations period set in a state statute of limitations or a contract.

For how long can the FDIC extend the limitations period?

• For breach of contract claims, the limitations period will be at least 6 years after Appointment Date
• For nearly all tort claims (i.e., negligence), the limitations period will be at least 3 years after the Appointment Date. I say "nearly all" because Section 11(d)(14) has a very narrow, and obscure, exemption that affects few, if any, design or construction related claims.

But the limitations periods could be even longer if the applicable state statute of limitations is longer than the respective 6 and 3 year deadlines just mentioned above.

To sum it up, the limitations periods on the claims the FDIC inherits as the receiver for a failed bank they take over:

• Start running, at the earliest, on the Appointment Date
• Expire, at the earliest:
  • 6 years after the Appointment Date for breach of contract claims
  • 3 years after the Appointment Date for most tort claims

Upcoming Posts

In upcoming bank failure posts I'll give you some practical working examples of how the FDIC can postpone the start of a limitations period and extend their duration.