For Whom the Statute of Limitations Tolls... in Cases of Fraudulent Concealment

The civil law in Michigan mandates that legal claims must be brought within a statutorily defined time or they will be time-barred. 

According to established Michigan law, these statutes of limitation are intended: “to encourage the rapid recovery of damages, to penalize plaintiffs who have not been assiduous in pursuing their claims, to afford security against stale demands when the circumstances would be unfavorable to a just examination and decision, to relieve defendants of the prolonged threat of litigation, to prevent plaintiffs from asserting fraudulent claims, and to remedy the general inconvenience resulting from delay in asserting a legal right that is practicable to assert.  

An exception to Michigan statutes of limitations exists when, through fraudulent concealment,“ a party employs “artifice, planned to prevent inquiry or escape investigation, and mislead or hinder acquirement of information disclosing a right of action,” according to the ruling by the Michigan Court of Appeals in Tonegatto v Budak.  Today, the fraudulent concealment rule is found in MCL 600.5855, which provides:

If a person who is or may be liable for any claim fraudulently conceals the existence of the claim or the identity of any person who is liable for the claim from the knowledge of the person entitled to sue on the claim, the action may be commenced at any time within 2 years after the person who is entitled to bring the action discovers, or should have discovered, the existence of the claim or the identity of the person who is liable for the claim, although the action would otherwise be barred by the period of limitations.

So what’s so hard about that you might ask?  I have a claim that is hidden from me until it is too late to sue; it’s only fair that I get more time to bring my claim, right?  Perhaps so, but what makes the rule sometimes difficult to apply is in knowing how to differentiate between an alleged wrongful fact cause injury, an act which may in itself constitute active fraud, and the defendant’s purported active concealment of that same underlying claim – the lines sometimes get blurry.

So here are some guideposts. The fraud of concealment must be shown by an affirmative act or misrepresentation by the defendant.  In other words, the plaintiff must show that the defendant engaged in some affirmative arrangement that was intended to prevent subsequent discovery of the underlying claim or of the defendant’s identity. The defendant’s mere silence will be insufficient to show fraudulent concealment.

Typically, the courts will only be interested in actions the defendant takes after the alleged injury has already occurred – actions taken before the injury will not be viewed as being capable of concealing a claim that does not yet exist. Moreover, the statute requires reasonable diligence on the part of the plaintiff. Therefore, if there was an attempt to conceal a claim but the plaintiff failed to take reasonable steps that would have revealed it, fraudulent concealment” will not be available to toll the statute of limitations. In other words, the plaintiff will be held to know what he ought to know.

Let’s keep it simple: regardless of the nature of the underlying cause of action, to show fraudulent concealment a plaintiff is essentially going to have to prove a fraud and show (1) a material representation or action by the defendant which was false or intended to conceal the claim; (2) the defendant knew his actions were false and/or misleading or they were made recklessly without knowledge of their truth or falsity; (3) the defendant intended that the plaintiff to rely upon the defendant’s representation or actions; (4) the plaintiff did, in fact, reasonably rely and (5) the plaintiff was damaged as a result. 

If you can’t show these things, you can’t show fraudulent concealment and the statute of limitations might well do what it was intended to do – bar stale claims, even yours.

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