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Statutes of Limitations – Grace Period Prevails

July 11, 2014

By Barbara Haubrich-Hass, ACP/CAS

The California Supreme Court filed its ruling on July 7, 2014, on the case of City of LA v. County of Kern (Cal. Supreme Ct. – July 7, 2014). At issue in this appeal was whether the statute affords parties a grace period or suspends the limitations clock. In this case, seventy-eight days after the plaintiff’s supplemental claims were dismissed by a federal court, the plaintiff refiled suit in state court.

Under 28 U.S.C. 1367 federal courts may assume supplemental jurisdiction over related state claims that form part of the same case or controversy. If the federal basis for jurisdiction dissolves but supplemental claims remain, the federal court may dismiss the supplemental claims, requiring them to be refiled in state court. In this event, the limitations is “tolled while the claim is pending and for a period of third days after it is dismissed” pursuant to Section 1367(d).

The court of appeal concluded that the suit was timely, reasoning that Section 1367(d) suspended the statute of limitations and tacked on any unexpired time beginning thirty days after dismissal. The Superior Court reversed, holding that Section 1367(d) provides only a third-day grace period in which to refile otherwise expired claims.

Justice Werdegar lays out the competing views of the “suspension” position, the “grace period” interpretation, and the “substitution” approach. Justice Werdegar notes that the text of the federal statute seems to most naturally support the “suspension” approach. The court explains that:

“Under the suspension approach, the statute could be read to stop the running of the statute of limitations and, following dismissal of a claim and the expiration of 30 additional days, tack on however much time remained when the claim was originally filed in federal court. (Citation) Alternatively, under the grace period approach, the statute could abate the expiration of any period of limitations for as long as a claim was pending in federal court plus 30 days after dismissal. (Citation) Finally, under the substitution? approach, the statute might replace any state deadline with a federal one, such that parties would have 30 days to refile following dismissal whether or not a longer period might otherwise still remain under state law. (Citations)”

The California Supreme Court unanimously adopts the competing “grace period” interpretation stating:

“When construing statutes, we are mindful of, and tailor our interpretations to, the problems a legislative body was attempting to solve. (Citation) We read ambiguous statutes in the way that most closely aligns with their purpose. (Citations) Section 1367(d) is no paragon of clarity, but among those readings plausible from the text, the grace period construction cleaves closest to the goal of avoiding the loss of claims that otherwise would be barred, while impinging least on state sovereign prerogatives to establish statutes of limitations. In the absence of evidence Congress intended any more, we must adopt that interpretation. “
Therefore, under the grace period, the statute could abate the expiration of any period of limitations for as long as a claim was pending in federal court plus 30 days after dismissal.

 

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Nancy Duffy McCarron, CBN 164780
Attorney, Real Estate Broker, BBB Arbitrator, CA Notary Public
Certified Forensic Loan Auditor, Property Manager

 

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