When Pleading Statute of Limitations Tolling, the Little Things Matter
A recent decision out of the Eighth Circuit reminds us that God is in the details. In Summerhill v. Terminix, Inc., No. 09-3691, Slip op. (8th Cir. Mar. 24, 2011), the plaintiff alleged that Terminix did not completely encircle his home with a chemical barrier prior to 1996 as it was required to do under Arkansas law. There was no question that plaintiff's causes of action were barred by the statute of limitations, except that plaintiff pled fraudulent concealment. The district court had held that he failed to meet the Rule 9(b) standard for pleading fraud, but gave him a second chance. Plaintiff pled: (1) Terminix failed to disclose that it was required by law to provide a complete chemical barrier, and (2) because the chemical barrier is invisible, the layman plaintiff could not discover that Terminix failed to provide it. Sounds simple enough, right?
Wrong! The district court dismissed the case on statute of limitations grounds, and the Eighth Circuit affirmed. It began by noting that the burden of proof on tolling rests with plaintiff. He must plead and prove: "'(1) a positive act of fraud (2) that is actively concealed, and (3) is not discoverable by reasonable diligence.'" Slip op. at 4 (citation omitted).
The district court had held that the "failure to disclose" a breach of contract is not the kind of conduct that rises to the level of fraudulent concealment. The Eighth Circuit took a pass on that issue, going instead for the area where there were no facts pled whatsoever: criterion 3, reasonable diligence. The court explained:
Assuming arguendo that Summerhill sufficiently pled that Terminix engaged in affirmative and fraudulent acts of concealment, the applicable statutes of limitations would only be tolled "until [Summerhill] discover[ed] the fraud or should have discovered it by the exercise of reasonable diligence." Martin, 3 S.W.3d at 687 (emphasis added) (quotation omitted). By failing to allege when and how he discovered Terminix's alleged fraud, Summerhill has failed to meet his burden of sufficiently pleading that the doctrine of fraudulent concealment saves his otherwise time-barred claims. See Wood v. Carpenter, 101 U.S. 135, 140-41, 143 (1879) ("If the plaintiff made any particular discovery, it should be stated when it was made, what it was, how it was made, and why it was not made sooner. . . . The circumstances of the discovery must be fully stated and proved, and the delay which has occurred must be shown to be consistent with the requisite diligence.") . . .
Slip op. at 5 (citations omitted).
Summerhill is an important reminder that claims of fraudulent concealment can be defeated where the plaintiff does not adequately plead how he discovered his cause of action and why it reasonably took him so long to do so.
