Filing Voluntary Dismissal Starts Clock For One-Year Refiling Rule Immediately

The Seventh Circuit has issued an opinion that once again illustrates the dangers of waiting until the last moment under a statute of limitations.

In Jenkins v. Village of Maywood, No. 06-3411, 2007 WL 3239198 (7th Cir. Nov. 5, 2007), plaintiff filed a joint stipulation for voluntary dismissal of his Section 1983 action in federal court pursuant to Fed. R. Civ. P. 41(a)(1)(ii) on March 9, 2004. The court prepared an order of dismissal on the same day, and the clerk entered it on the docket on March 15, 2004.

One year later, on March 15, 2005, plaintiff essentially re-filed the case in federal court. The statute of limitations for Section 1983 actions is derived from the appropriate state statute and its corresponding tolling rules. In this case, Illinois law applied and plaintiff's new case would have been out of time but for the existence of a special tolling statute. Under 735 ILCS 5/13-217, a plaintiff who voluntarily dismisses a case may commence the action again within one year or within the remaining limitations period, whichever is greater. Plaintiff believed that his filing within one year of the dismissal was timely because the Illinois Code of Civil Procedure specifies that a voluntary dismissal is not effective for purposes of the one-year tolling rule until the clerk has entered the order onto the docket.

The Seventh Circuit disagreed, holding that the date that plaintiff filed the stipulation controlled instead. That is because federal, not state, procedural law governs a federal case even if the applicable statute of limitations is derived from state law. Under Fed. R. Civ. P. 41(a), no order is needed to effect a voluntary dismissal. It specifically states that "an action may be dismissed by the plaintiff without order of court ... by filing a stipulation of dismissal signed by all parties who have appeared in the action." Thus, the dismissal became effective as a matter of applicable law when plaintiff filed the stipulation on March 9, 2004, not when the clerk entered it on the docket the following week.

The moral of the story: Don't file a complaint on what you think is the last possible day. Courts might find that you did not count correctly, or that the "mailbox rule" or other tolling rule did not work the way you thought it did, and you will have left no margin for error.

New York Savings Statute Does Not Apply To Substituted Plaintiff

New York, like many states, has a statute that allows a plaintiff whose case is dismissed other than voluntarily or upon a final judgment on the merits to re-file the case within a certain amount of time, presumably after correcting defects, which in effect extends the statute of limitations. Under CPLR § 205(a), New York allows such a plaintiff a grace period of an additional six months to re-file after the dismissal.

In Reliance Ins. Co. v. Polyvision Corp., No. 117, 2007 N.Y. Slip Op. 07500, 2007 WL 2947396 (N.Y. Oct. 11, 2007), answering a certified question from the Second Circuit, New York’s highest court held that § 205(a) does not apply if the plaintiff seeking to “re-file” is not the same plaintiff. The lower courts found the particular plaintiff who originally filed in Reliance Ins. Co. was not the correct entity, and a corporate affiliate un­suc­cessfully sought to re-file in reliance on § 205(a) to extend the statute of limitations.

Firm’s “Continuous Representation” Tolling Ceases When Attorney And Client Leave

I recently discussed New York’s “continuous representation doctrine” under which the limitations period for legal malpractice actions is tolled during the period that the client was represented by defendant counsel. (“New York Declines To Extend ‘Continuous Representation Doctrine’ To Auditor,” posted here). The Supreme Court of California, which had adopted the doctrine, recently examined a variation on the traditional fact pattern.

In Beal Bank, SSB v. Arter & Hadden, LLP, 42 Cal.4th 503, 167 P.3d 666, 66 Cal.Rptr.3d 52 (Cal. Sept. 27, 2007), an attorney rendered legal services to plaintiff while employed by a particular firm. The attorney then left and the client followed him, continuing to engage him for further services in the same matter. Later, the client sued the attorney for malpractice and also named the former firm as a defendant. The original firm argued that once the client followed the attorney to his new firm the statute of limitations resumed running, and had expired by the time the plaintiff filed its lawsuit.

Resolving a split in the intermediate appellate courts, the California Supreme Court held that tolling under the continuous representation doctrine ceases with respect to the original firm when the attorney leaves and the client follows him. Noting that the doctrine is a judicially-created exception to the statute of limitations for legal malpractice actions expressly adopted by the state in reaction to high court precedent, the court refused to assume legislative intent to broaden that exception in the absence of clear textual support.

New York Declines To Extend “Continuous Representation Doctrine” To Auditor

In a matter of first impression, New York’s highest court has held that the statute of limitations applicable to accounting malpractice actions was not tolled under the “continuous representation doctrine” where the parties’ course of dealing was to enter into a separate contract for each year’s annual audit. Williamson v. PricewaterhouseCoopers LLP, 9 N.Y.3d 1, 872 N.E.2d 842, 840 N.Y.S.3d 730 (June 7, 2007).

The court noted that the “continuous representation doctrine” originated in its medical and legal malpractice jurisprudence, and was based on the fact that such actions accrue when the malpractice is committed and not when the client discovers it. Concerned that a cause of action might expire while the plaintiff was still receiving treatment or advice related to the conditions produced by the earlier wrongful acts and omissions, the court developed the doctrine to allow tolling of the statute of limitations for as long as “the course of treatment which includes the wrongful acts or omissions has run continuously and is related to the same original condition or complaint.”

In Williamson, the court held that the doctrine was not available under the circumstances present, but it did not appear to reject its application to accountants altogether. Rather, it emphasized that the doctrine requires a “mutual understanding” between the parties that the relationship with the client would be ongoing, and that no such understanding was present here.

Federal Courts Borrowing State Limitations Periods Must Not Borrow Service Rules

It is well-established federal practice that where an action arises under federal law but Congress has not established a specific limitations period, courts borrow the statute of limitations for the most closely analogous action in the relevant state. However, in S.J. v. Issaquah School Dist. No. 411, 470 F.3d 1288 (9th Cir. Dec. 11, 2006), the court noted that this rule does not extend to borrowing state procedural rules that might be included in that statute.

In this case, it was undisputed that the district court properly applied the limitations period in the Washington Administrative Procedure Act (“WAPA”) to plaintiffs’ claims under the federal Individuals with Disabilities Act. However, the appellate court held that the lower court should not also have applied the 30-day limitations period from the WAPA governing the amount of time in which to effect service of process. Instead, it should have applied Fed. R. Civ. P. 4(m), which establishes a 120-day limit for serving process.

Ohio Complaint Was Timely Despite Clerk’s Improper Practice Of Delaying Service

The Supreme Court of Ohio has confirmed a bright-line rule that the filing of a complaint commences the action for statute of limitations purposes.

In Seger v. For Women, Inc., 110 Ohio St.3d 451, 854 N.E.2d 188 (Oct. 4, 2006), plaintiff filed a medical malpractice action days before the expiration of the statute of limitations, but requested the Clerk not to effect service yet because she was still investigating the identity of an additional defendant. The Clerk served the complaint four months later when plaintiff requested it.

Defendants argued that the Clerk violated Rule 4(A), which requires the Clerk to effect service “forthwith,” causing the action to be commenced out of time. While the court agreed that Rule 4(A) was violated, and it condemned the Clerk’s apparent practice of allowing counsel to request delays of service contrary to that rule, it held that Ohio Civil Rule 3(A) establishes an absolute rule that a civil action is commenced the day the complaint is filed “if service is obtained within one year.” It rejected construing Rule 4 as affecting Rule 3 because that would lead to case-by-case evaluations of what “forthwith” meant in particular circumstances, whether delay was intentional, and what the consequences should be.

Reinstatement Under Rule 60(b) Tolls Statute Of Limitations As Of Original Filing

In Stanley v. Foster, 464 F.3d 565 (5th Cir. Sept. 12, 2006), the court considered as a matter of first impression the interplay between two rules dealing with the effect of a dismissal.

In general, if a court dismissed a complaint without prejudice the statute of limitations may continue to run. As a result, the action that the plaintiff was hoping to pursue through an amended complaint may have become time-barred. However, another legal concept holds generally that if a dismissal order is later set aside, the cause is reinstated as though the judgment had never been entered. Taken literally, that would mean that the reinstatement date has no independent significance.

The court in Stanley apparently agreed. Examining the effect upon the statute of limitations of a successful Rule 60(b) motion that reinstated a complaint, the court held that in such a situation the date of the original filing, not of the 60(b) ruling, is the proper date for purposes of the statute of limitations.

Substitution Of Correct Defendant After Expiration Of Statute Of Limitations Denied

In Locklear v. Bergman & Beving AB, No. 04-2506, 2006 WL 2244532 (4th Cir. Aug. 7, 2006), a plaintiff sued a company it named “Hassleholms Mekanisk AB” in a products liability complaint filed shortly before the statute of limitations expired. Plaintiff claimed that company was the manufacturer of equipment responsible for his personal injuries.

Subsequently he learned that the manufacturers actually were entities called “Luna AB” and “Bergman & Beving AB.” After allowing him to amend the complaint to substitute those parties as defendants, the court dismissed the complaint as time-barred because the original complaint did not toll the statute of limitations against the new defendants under Fed. R. Civ. P. 15(c)(3).

In affirming, the Fourth Circuit noted that where the Rule speaks in terms of relation-back in the case of a “mistake concerning the identity of the proper party,” courts distinguish between “mistake due to a lack of knowledge and mistake due to a misnomer.” A complaint amended to correct a mere misnomer relates back to the original complaint for limitations purposes, but a correction such as the one in Locklear to add a new party that the plaintiff simply did not know about “drags a new defendant into the case” and does not relate back.