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New Senate Bill Likely to Pass, Would Shorten Time to Bring Certain Actions (Updated 3/16/21)
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3/16/2021 UPDATE: Governor DeWine signed SB 13 today, meaning the provisions in the bill will become effective on June 14, 2021. While these changes will be law as of that date, certain provisions have been made for causes of action that accrue prior to that date. For actions upon a contract, either in writing or oral, the changes shall apply only “to an action in which the cause of action accrues on or after” the effective date. However, for such actions that accrued prior to the effective date of the bill, the period of limitations shall be six or four years “from the effective date” of the bill or “the expiration of the period of limitations in effect prior to the effective date of this act, whichever occurs first.” Thus, depending on when it accrued, the limitations period for actions upon a contract may be shortened even when the cause of action accrued prior to the effective date of the bill. If you are considering bringing an action on a contract that has already accrued, now is the time to consult with an attorney to determine exactly when you have to commence an action for it to be timely in light of these changes.
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2/26/2021 UPDATE: Yesterday, SB 13 advanced another step towards becoming law when it was passed by the Ohio House. The final step in its journey is Governor Mike DeWine’s approval. Should that occur, we expect the changes to become effective 90 days after the Governor’s signature.
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Senate Bill 13 (SB 13) passed in the Ohio Senate on February 3, 2021, was introduced to the Ohio House on the 4th and referred to the House Civil Justice Committee on the 10th. The Bill appears likely to pass the House following a unanimous vote in the Senate. If passed as currently written, the Bill would enact changes to Ohio’s statute of limitations of importance to practicing attorneys, their clients and the public.
Shortened Statute of Limitations for Contracts
SB 13 would shorten the statute of limitations for written contracts (Ohio Revised Code 2305.06) from eight to six years, and oral contracts (ORC 2305.07) from six to four years. Notably, this is the second time in the last decade the Ohio legislature has shortened the time for bringing actions on written contracts, which had enjoyed a 15-year statute of limitations from 1853 until 2012. These changes are an effort to provide more certainty for businesses and thus more opportunity for growth, as well as to make Ohio more business friendly. The six-year limitations period for written contracts would match the national average as 22 states have the same six-year limitation (including Michigan). However, potential claimants would need to be aware they may have two fewer years to file.
Statute of Limitations for Consumer Transactions
A limitations period also would be added to ORC 2305.07 to govern contracts in consumer transactions, whether or not they are in writing. This period would be six years accruing 30 days from the last charge or payment by the consumer. The Bill also adds exceptions to the new, shortened periods by clarifying that claims regarding commercial paper and actions for real property would be governed by their respective statutes of limitations, and not the contracts statute.
Changes to Ohio’s “Borrowing Statute”
The Ohio Borrowing Statute (ORC 2305.03) applies to claims arising from another state where the other state’s statute of limitations has already expired. In that event, Ohio courts will “borrow” the other state’s limitations period to bar the action to prevent forum shopping. SB 13 would narrow the applicability of this statute from all civil actions to only tort actions. A “tort action” is defined by the code as an action seeking damages for injury, death or loss to person or property other than an action for damages for a breach of contract. In addition, two more sections would be added for parties seeking post-default and post charge-off interest in consumer transactions. These additions would reduce claims brought in the state attempting to use a neighboring state’s interest rate if that state’s statute of limitations has run. Importantly, the changes to the borrowing statute would take retroactive effect as of April 7, 2005, the date of passing of the Tort Reform Act.
Creates a Statute of Repose for Legal Malpractice
The Bill also would enact a statute of repose of four years for legal malpractice actions. A statute of limitations affords a potential plaintiff a certain amount of time to bring a cause of action. In Ohio, this time would start running when the plaintiff “discovers” the injury. For legal malpractice, this may occur when the client observes some act or omission that damaged them, or perhaps resulted in their loss of the case. The statute of limitations would give them one year from that discovery to file a claim. A statute of repose on the other hand, does not consider when the injury is discovered, and will bar claims after a period of time. The purpose of a statute of repose is to offer certainty to professionals, so they will not have a perpetual fear of suit because a former client or patient could theoretically discover an injury anytime. Thus, if an injury is discovered five years after the act or omission occurred, it would be the statute of repose that bars their action, not the statute of limitations.
There would be exceptions for certain disabilities, and additional time to file if a party discovers the injury in the last year that could not have been discovered earlier. These exceptions are similar to other statutes of repose in Ohio. The statute of repose for legal malpractice would provide some certainty for lawyers because currently, such an action can be brought as late as one year after the attorney has died. Attorneys would join other Ohio professionals who already have a statute of repose for malpractice such as architects, engineers, doctors, podiatrists, registered nurses and the like.
We will continue to monitor SB 13 and will update this article in the event the Bill passes into law.
For questions concerning contracts and statutes of limitations, please contact Mr. Harper.
Nicholas W. Bartlett contributed to this article. He is a law clerk with Eastman & Smith and a third year law student at the University of Toledo.
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Disclaimers:
The article in this publication has been prepared by Eastman & Smith Ltd. for informational purposes only and should not be considered legal advice. This information is not intended to create, and receipt of it does not constitute, an attorney/client relationship.