FDIC Statute of Limitations Primer
In the last bank insolvency post we talked about how after being appointed as receiver for a failed bank, the Federal Deposit Insurance Corporation (the "FDIC") may unilaterally insist on a stay of proceedings involving the bank (e.g., lawsuits). Now we're going to focus on how the FDIC can extend statutes of limitation on the claims against people like you, and, in some cases, even revive claims after the statute of limitations has expired. The "Limitations Period"
Before you really appreciate how extraordinary the FDIC's power to extend statutes of limitation really is, first you must understand what a statute of limitations is and how it works. A statute of limitations sets a deadline for you to sue someone, or for someone to sue you. Lawyers often call this the "limitations period". If you don't sue someone before the limitations period expires, the person you sue can stop your lawsuit. Or, if you're on the receiving end and get sued after the limitations period expires, the statute of limitations may be a defense against the lawsuit. You may even be able to use the statute of limitations to get the lawsuit against you summarily dismissed at an early stage, instead of enduring discovery, trial, appeals, and the distraction and legal fees that go with them.
There are three critical elements affecting the limitations period:
When does the limitations period begin to run? Think of this as a thumb pressing the start/stop button on a stopwatch that starts dial sweeping around the face
- How long does the limitations period last (i.e., when does it expire)? Think of this as the number of times the sweeping dial must go around the face of the stopwatch before the thumb presses the start/stop button again, stops the sweeping dial, and announces "all finished"!
- What can suspend the running of the limitations period? Think of this as intermediate events that sometimes make the thumb press the start/stop button and temporarily stop the dial from rotating around the face before it rotates enough times to be "all finished"
For most claims, the thumb doesn't start the limitations period until the claim "accrues". Usually a claim accrues when you recognize, or reasonably should have recognized, that something someone else did has injured you (i.e., you suffer damages).
But different types of claims accrue, and the limitations periods on those claims start, at different times. For instance, the case of Hermitage Corporation v. Contractors Adjustment Company recognizes that most tort claims (e.g., negligence) accrue, and the limitations period starts to run, when the victim of the negligence knows, or reasonably should have known, that they suffered injury because of someone else's negligence. But a claim for breach of contract accrues, and the limitations period on that claims starts running, when the contract is breached, regardless of whether the victim of the breach knows of the breach or has any way of knowing that the breach will injure them.
Upcoming Posts
In the next bank insolvency post we'll talk about:
- How the Federal Deposit Insurance Act postpones when a claim accrues
- How that postponement allows the FDIC to extend the limitations period on the claims of failed banks that the FDIC takes over as the failed bank's receiver
Construction Law Today is a legal blog about construction contracts, disputes, finance, and the people whose job it is to deal with them.
