Statutes of limitations constrain the time when you can bring a claim for a violation of law. Someone defames you? Two years. Injured? Two years. Breach a contract? Four years – unless it’s written, in which case it’s six. These limiting periods serve an important purpose, since a case based on faded memories and half-recollections is difficult to win. Sometimes, though, those rules go out the window – and one of those circumstances is when the Federal Deposit Insurance Corporation (“FDIC”) wields the claim, rather than a mere mortal.
One of the FDIC’s greatest powers is its ability to act as the receiver for a failed bank. In that capacity, the FDIC can run the defunct bank, liquidate its assets, and exercise its legal rights – including the right to sue. This is aided by 12 U.S.C. § 1821(d)(14)(A), the FDIC’s “extender” statute, which allows the FDIC to bring any state law claim of action within six years of its occurrence if the state’s statute of limitations is shorter than that period.
The Nevada Supreme Court addressed this issue in FDIC v. Rhodes, 130 Nev. Adv. Op. 88. In that case, the FDIC took over a failed bank that sought to pursue a deficiency, or the difference between the amount owed on a note and the repossessed (or sold) property, against an individual. Under Nevada law, NRS 40.455(1), a deficiency judgment must be sought within 6 months of a foreclosure sale. (Note that this is prescribed under Chapter 40 of the Nevada Revised Statutes, rather than Chapter 11, where the other limitations periods are found – something that becomes important in a moment.)
The FDIC relied on the extender statute and filed suit for a deficiency judgment after this six-month period. The District Court denied the FDIC’s claim, and the FDIC appealed to the Nevada Supreme Court. The Supreme Court proceeded to do three interesting things:
- The Difference Between Statutes of Limitation and Statutes of Repose
The Nevada Supreme Court seized upon the chance to draw an important distinction between a statute of limitations and a statute of repose – one that the court recognized is “often overlooked.” A statute of limitations prohibits a suit after a period of time that follows the cause of action’s accrual, and can be tolled. A statute of repose is subtly different, but involves substantially different rights. A statute of repose bars a cause of action after a specific period of time, regardless of when the injury occurred (or was discovered). While a statute of limitations explains how long after an injury the aggrieved party can bring a claim, a statute of repose provides a more definite window for bringing a claim – one that may not be triggered by suffering or discovering an injury, and may lapse long before the latter occurs.
- Distinguishing The United States Supreme Court’s Similar Decision
Next, Nevada’s Supreme Court digs into a recent decision of the United States Supreme Court, CTS Corp. v. Waldburger, 573 U.S. ___, 134 S. Ct. 2175 (2014), which held that a statute similar to FDIC’s extender statute did not preempt state statutes of repose. Nevada’s Supreme Court distinguished FDIC’s extender statute from the environmental law that was before the Supreme Court in Waldburger, reasoning that the environmental statute, 42 U.S.C. § 9658, specifically mentioned statutes of limitations – a view further supported by the law’s legislative history.
In contrast, the FDIC extender statute applied to any “period applicable under State law,” which did not limit it to statutes of limitations. Without limiting language like the environmental law at issue in Waldburger, the Nevada Supreme Court found no reason to limit the scope of the FDIC extender statute only to statutes of limitations.
- Whether Statutes of Limitations or Repose, Federal Law Preempts Them All
The final hurdle raised in the Rhodes appeal is whether federal law can preempt – or take the place of – a state statute of repose. Despite decisions from the United States District Courts for the District of Arizona, Resolution Trust Corp. v. Olson, 768 F. Supp. 283 (D. Ariz. 1991) and the Central District of California, In re Countrywide Fin. Corp. MBS Litig., 966 F. Supp. 2d 1018 (C.D. Cal. 2013), finding that federal law must yield to state statutes of repose, the Nevada Supreme Court was not persuaded. To the contrary, the Nevada court relied on other District Court decisions finding that federal law preempted state statutes of repose, including Chatham Steel Corp. v. Brown, 858 F. Supp. 1130, 1150-52 (N.D. Fla. 1994), and A.S.I. Inc. v. Sanders, 835 F. Supp. 1349, 1355, 1358 (D. Kan. 1993).
As a result, the classification of NRS 40.455(1) as a statute of limitations or statute of repose was irrelevant. As required by the FDIC extender statute, NRS 40.455(1) simply constituted a “period applicable under State law” that is shorter than the extender statute’s six-year reach. The federal statute’s language rendered the difference between a statute of limitations and a statute of repose to be a distinction without a difference, as either would be preempted.
While the result in this case was not necessarily novel and drew upon existing law, it reached its conclusion through numerous twists and turns. The immediate consequence of Rhodes is that statutes of repose, and not just statutes of limitation, do not bar the FDIC from taking action under its extender statute. While this determination may be specific to its underlying facts, the Nevada Supreme Court’s decision may provide a basis for other areas of federal law to supersede the statutes enacted by the legislature.