Statutes of limitations bar lawsuits that are filed more than a certain amount of time after the conduct in question has occurred. But creative lawyers for class-action plaintiffs can sometimes rescue an otherwise untimely, flat-lined case by, for example, invoking a longer statute of limitations from a different law. Last week, a federal appellate court handed plaintiffs’ attorneys a much bigger defibrillator for doing just that.
In the case, Beaver v. Tarsadia Hotels, the plaintiffs had bought timeshares in the Hard Rock Hotel & Condominium Project in San Diego. More than four years after their sales closed, national real estate markets collapsed, and the buyers decided they wanted to back out of their deals. To achieve that result, they relied on a combination of the federal Interstate Land Sales Full Disclosure Act (ILSA) and California’s Unfair Competition Law (UCL). The ILSA requires that certain disclosures be made to buyers regarding rescission rights, and the UCL allows people to assert violations of other laws (like ILSA) as grounds for relief under the UCL. The plaintiffs had sued after the ILSA’s three-year statute of limitations expired but before the four-year statute of limitations under the UCL had run.
The United States Court of Appeals for the Ninth Circuit held that the plaintiffs’ claims were not time-barred because UCL claims are not limited to the statutes of limitations for the underlying laws alleged to have been violated—here, ILSA. Instead, the UCL’s own four-year period controls. Moreover, the rules for when that period begins are based on California common law, the Ninth Circuit held. Lower courts in California had previously reached the opposite result on both points.
Beaver poses a significant concern for real estate businesses in California. Important federal laws, like the Real Estate Settlement Procedures Act (RESPA), carry relatively short limitations periods—one year in the case of RESPA, for example. But after Beaver, class-action lawyers can attempt to quadruple that time period and expose companies to much more liability. This is exactly the sort of dangerous creativity I have described in other posts.