Is the Defendant a Professional Services Provider?
States often have specific statutes governing claims against certain regulated professionals, such as doctors, lawyers, and accountants. Some lawyers attempt to plead around the limitations in these statutes with creative drafting of fraud claims, but a comprehensive professional services statute may still be fatal to the claim. For example, the Alabama Legal Services Liability Act, Ala. Code § 6-5-570, et seq., applies to all claims arising from legal advice, regardless of whether claims are pleaded as fraud, negligence, or legal malpractice. The act provides a two-year basic statute of limitations but allows a claim to be filed six months after discovery if it could not have reasonably been discovered within two years. Critically, though, the act includes a four-year statute of repose with no exceptions. This statute of repose supersedes Alabama’s more forgiving statute of limitations for fraud.
Illinois law imposes a similar framework for any claims brought against public accountants in the performance of their professional services: a two-year statute of limitations from the time of constructive notice. 735 Ill. Comp. Stat. Ann. 5/13-214.2. The statute requires all claims, however, to be brought within five years—the only exception here is that for a delayed criminal prosecution or tax assessment against the plaintiff with no exception related to concealment or notice.
Is the Fraud Claim Actually a Fraud Claim?
Even where a fraud claim is nominally pleaded and not subject to a professional liability statute, the typical fraud statute of limitations might not apply. In LaSalle Nat. Bank v. Ernst & Young LLP, 285 A.D.2d 101, 103, 729 N.Y.S.2d 671, 672 (2001), a lender sued its borrower’s accountant for fraud. A New York appellate court reversed the denial of the accountant’s motion to dismiss in part by finding that the lender’s fraud claim was essentially a claim for negligence. The substance of the claim governed analysis over its nomenclature. Where courts can be convinced to disregard creative drafting over the substance of a claim, a more restrictive statute of limitations may govern.
In analyzing a commercial fraud claim, lawyers should always consider how specific facts could remove a claim from a jurisdiction’s basic statute of limitations and impose a stricter limitations period. These considerations could be critical to a claim’s survival or dismissal.