Limitless: How are Statutes of Limitations Tolled When the Cause of Action is Concealed?

From the desk of Bill Taaffe:

The purpose of statutes of limitations is to prevent potential defendants from being subject to unfair prosecution or other legal action, due to the simple fact that, after the passing of many years, relevant evidence may well have been lost. These limitations can be frustrating and confusing (especially under COVID-related orders that may have tolled the expiration of limitations), which may lead to otherwise untimely lawsuits. But what happens if a party fraudulently conceals their misdeeds until it is too late to bring an action for a claim?

Claims Pointer:

In this recent opinion, the Oregon Court of Appeals made it very clear that if it is determined that an entity fraudulently concealed a breach of its contract agreement, then the statute of limitations tolled and a claim against the bad actor may thus be timely brought. The Court confirmed well settled law that fraudulent concealment of a cause of action by the “bad actor” constitutes an implied exception to the statute of limitations and postpones the commencement of the running of the statute until reasonable opportunity for discovery of the fact.

MAT, Inc. v. American Tower Asset Sub, LLC., 312 Or App 7 (June 3, 2021).

Facts:

This opinion was issued in a civil suit, where the defendants were alleged to have fraudulently, and actively, concealed a breach in their contract with plaintiff MAT, Inc., for approximately nine years.  The conduct at issue revolved around a 1981 lease agreement for tenancy of a 900-foot-tall television tower located on the farmland owned by plaintiff, MAT, Inc.  The lease agreement contemplated that subtenants would lease space in the tower and the landlord and tenant would equally share revenue generated by subtenant rent.  In 2001, defendants purchased the television tower from the original tenant and assumed the lease agreement.  However, defendants failed to provide the landlord, plaintiff, with half of all revenue generated by any subtenants that leased space in the tower.  

Throughout the years of 2007 to 2012, plaintiff requested defendants provide detailed information on the tower’s subtenants and rental revenue.  Defendants repeatedly denied Plaintiff’s requests and refused to provide the requested documentation.  In December 2012, plaintiff finally became aware that multiple subtenants had been paying defendants rent for which plaintiff was not receiving its share.  Plaintiff then filed suit for, among other things, breach of contract.

Because the limitations period for contract actions is six years, and because plaintiff sued more than six years after the date of the breach, plaintiff argued that defendants fraudulently concealed the breach, thereby tolling the statute of limitations.  Before the suit went to trial, defendants requested in camera review of communications defendants believed might contain evidence that MAT, early on, knew or should have known that it had a cause of action against defendants.  The trial court rejected this request on MAT’s representation that none of the documents were relevant.  The case ultimately went to jury trial, including on the fraudulent concealment issue, and the jury found that defendants had fraudulently concealed their breach.  On appeal, defendants raised multiple assignments of error, including challenge of the trial court’s denial of their motion for directed verdict on the issue of fraudulent concealment. The appellate court rejected that assignment of error.

Law:

The Oregon Court of Appeals determined that this case had two issues that needed to be addressed: statute-of-limitations grounds and determination for in camera review. The statute of limitations provides certain protections for would-be defendants in both civil and criminal trials.  The purpose of this is to allow for timely actions to be brought and for evidence to be conserved against the passing of time that would have, likely, otherwise caused it to be lost or degraded in some form or manner. ORS 12.080 provides that the statute of limitations for breach of contract claims is six years and begins to run at the time of contract breach.  However, that limitations period can be tolled if the cause of action is fraudulently concealed by the tortfeasor.  

In this opinion, the Oregon Appellate Court held that the evidence presented at trial was sufficient to support a finding that defendants fraudulently concealed their breach with an intent to deceive plaintiff of this breach.  Such fraud may be predicated upon an evasive or misleading answer, or the equivalent to, that is calculated to convey a false impression, even if it may be a half-truth.  This explanation is particularly significant because it conveys that even if a “bad actor” had provided an explanation with some semblance of truth, it is still considered a fraudulent act when the overall truth of the matter is concealed.  However, the Court also determined that the defendants made a threshold showing that in camera review might yield unprivileged evidence and thus the trial court legally erred in dismissing defendants’ request for review of communication between MAT and its former attorney.

Analysis:

Here, the Oregon Appellate Court held that the defendants’ inaction to disclose the breach of contract in addition to not disclosing the full truth about what rents defendants had collected when requested to do so by plaintiff, was an intentional concealment of the breach of contract as to the amounts owed from defendants to plaintiff. The defendants’ repeated denial to provide plaintiff with detailed information on the tower’s subtenants and rental revenue, in addition to only partially disclosing the amount of subtenant rent due, without providing a full accounting of all tenants, further supported a finding that defendants engaged in fraudulent concealment of the facts about other sublessee’s rental payments and that defendants were not providing half of those proceeds to plaintiff. Ultimately, the Oregon Court of Appeals decided that there were genuine acts of actual concealment, and agreed with the trial courts instructions to the jury regarding fraudulent concealment, but vacated and remanded the case for trial court determination whether to conduct in camera review.

The Big Picture:

Statute of limitations defenses can be difficult even under the best circumstances, but fraudulent concealment of a cause of action can result in the applicable statute of limitations being tolled.