Is time on your side?

The business industry has long
desired to avoid stale claims. Over
time, the record retention policy of a company may result in the destruction of
documents that could support its defense.
Witnesses move or change jobs and can
be hard to track down. Memories fade,
and the potential for a meaningful investigation can disappear. Michigan law,
through statutes of limitation, limits the
time period in which a plaintiff can bring
suit against a prospective defendant.

“Generally speaking, a statute of limitation begins to run from the time the claim
accrues,” says Michael Crow, executive
partner at Secrest Wardle. “The claim
accrues, for the most part, at the time the
wrong occurs.”

Smart Business spoke with Crow about
the “discovery rule” and recent legislative
developments that could significantly
impact businesses operating in Michigan.

What is the ‘discovery rule’?

The ‘discovery rule’ protects diligent
plaintiffs who fail to bring a timely claim
because of either the latent nature of their
injury or the inability of the plaintiff to
identify the proper defendant. The ‘discovery rule’ applies as an exception to the
statute of limitation when the plaintiff discovers an injury and the causal connection between that injury and the defendant’s breach of duty to the plaintiff.

In other words, if a plaintiff has no reasonable method by which to determine
whom to sue for his injuries or, by the
nature of his injuries, is unaware for some
period of time that he was injured, the
‘discovery rule’ provides a window of time
during which a plaintiff may file a lawsuit
after ‘discovery’ of the relevant facts. The
‘discovery rule’ has been applied for
decades by the Michigan Court of Appeals
and the Michigan Supreme Court.

How was the ‘discovery rule’ recently interpreted by the Michigan Supreme Court?

In July, 2007, the Michigan Supreme
Court issued its opinion in Trentadue v.
Gorton, 479 Mich 378 (2007). This case
involves the November 1986 rape and murder of Margaret Eby — crimes that
remained unsolved for years. In 2002,
DNA evidence established that Jeffrey
Gorton, an employee of his parents’ corporation, which serviced sprinkler systems on Mr. Eby’s property, committed
the crime. In August 2002, upon learning
of the identity of Ms. Eby’s killer, the Eby
estate filed suit against Gorton, his parents and his parents’ corporation.

The plaintiff’s complaint alleged several
theories of negligence. The defendants
argued that the action of the Eby estate
was barred by the three-year statute of
limitations for wrongful death actions.
The plaintiff asserted the common law
‘discovery rule’ applied as an exception to
the period of limitation. The trial court
and the Michigan Court of Appeals
accepted the plaintiff’s argument and
denied defendants’ motion for summary
disposition.

The Supreme Court in Trentadue, however, reversed the lower courts, dismissed
the plaintiff’s claim as ‘time-barred’ and
thereby functionally eliminated the ‘discovery rule.’ The Court held that no
‘court-created’ or common law ‘discovery
rule’ exists. Only when the Legislature has
specifically included a ‘discovery’ provision in a statute of limitation (i.e. medical
malpractice; certain actions against contractors) is it available to extend the time
within which a lawsuit may be filed.

How will the decision affect businesses that
operate in Michigan?

Under the Trentadue decision, Michigan
defendants no longer need to brace for
the prospect of lawsuits that may not be
filed for years. Other than the few isolated
situations where the Legislature has codified a ‘discovery’ based exception to the
statute of limitation, the statute of limitation will be strictly applied.

The Trentadue decision provides a
measure of certainty regarding document
retention, investigations and memorializing witness testimony. Such a holding will
also provide businesses additional certainty regarding future finances.

The response of the Michigan Legislature to legislatively reverse the Trentadue
decision was immediate. In September,
2007, a bill was introduced to incorporate
the ‘discovery rule’ into the statute of limitations. In essence, they are responding
to the Supreme Court’s position that the
‘discovery rule’ only exists if codified by
the Legislature.

The proposed statute, which is currently before the Judicial Committee, eliminates language that provides when a lawsuit may be filed and employs a new trigger adopting the ‘discovery rule’ approach from the common law. Significantly, the proposed statute goes even
further and provides that ‘discovery’ only
occurs when the plaintiff knows the
name of the intended defendant. Should
this proposed legislation be enacted, the
benefits of Trentadue would be eliminated and the potential for stagnant claims
would increase. We are continuing to
monitor these legislative developments
for our clients.

MICHAEL CROW is an executive partner at Secrest Wardle. Reach him at (248) 539-2804 or [email protected].