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  • Writer's pictureBlair Goss

Committing Fraud - Statute of Limitations, California Civil Jury Instructions

In California, the legal system imposes time limitations on filing lawsuits, known as statutes of limitations. These limitations vary depending on the type of claim or offense involved, ensuring that lawsuits are initiated within a reasonable period after the alleged incident. This article delves into the statute of limitations for fraud in California, shedding light on the delayed discovery rule and the notable UCB case.


Statute of Limitations Period for Fraud in California

Statute of Limitations Period for Fraud in California


The statute of limitations for fraud in California is outlined in the California Code of Civil Procedure Section 338(d) and is set at three years. This means that a plaintiff must file a fraud lawsuit within three years from the date they discovered or should have discovered the actual fraud or within three years from the date the fraud should have been discovered. However, there are certain important considerations and exceptions to be aware of:


The Delayed Discovery Rule


In some cases, victims of fraud may not immediately discover the fraudulent act or its consequences. In order to account for such situations, California recognizes the delayed discovery or delayed accrual rule. According to this rule, the statute of limitations begins to run when a reasonably prudent person either knew or should have known about the facts that would have led a reasonable person to suspect fraud.


The delayed discovery rule allows victims to initiate legal action within a reasonable period after the fraud is discovered rather than being restricted by a rigid timeframe, and it can be used in nearly all confidential or fiduciary relationships.


However, it's important to note that proving delayed discovery isn't always as straightforward as it might seem and is subject to court interpretation of the facts constituting each case.


Reasonable Diligence


This concept plays a vital role in determining when the statute of limitations begins and whether it can be used as an affirmative defense or not. California courts assess whether the plaintiff exercised reasonable diligence in uncovering the fraud. If the plaintiff had sufficient information available to prompt further investigation, the statute of limitations may start even if the plaintiff did not have actual knowledge of the fraud.


Exceptions


Although the general statute of limitations for fraud is three years, some exceptions can impact the time limit for this civil procedure. Notable exceptions include:


Financial Institutions


In cases involving fraud committed by officers, directors, or employees of financial institutions, the statute of limitations is set at three years from the date of discovery, regardless of the delayed discovery rule. This provision ensures that fraud cases involving banks and similar institutions are not subject to extended time limitations.


False Claims Act


Under the California False Claims Act, which addresses fraud against the government, the statute of limitations is extended to 10 years from the date of the violation or three years from the date the violation was or should have been discovered, whichever is later. This extension allows the government more time to uncover and pursue cases involving fraud against public funds.


Tolling of the Statute of Limitations


In certain situations, the statute of limitations could be tolled or paused, effectively extending the time limit. Examples of circumstances that can lead to tolling include the defendant's absence from the state, the plaintiff's mental incapacity, or the plaintiff being a minor when the fraud occurred. Tolling provisions are intended to ensure fairness and prevent defendants from escaping liability due to circumstances beyond the plaintiff's control.


The United California Bank Case - When Is the Discovery Rule Applicable?

The United California Bank Case - When Is the Discovery Rule Applicable?


The United California Bank (UCB) case was a significant legal decision that profoundly impacted the statute of limitations for fraud cases in California and how the discovery rule applies to cases.


This case originated in the 1970s when UCB, a prominent financial institution, was involved in a massive fraud scheme. Bank officials conspired to deceive customers by concealing the bank's financial difficulties and misrepresenting the true state of its affairs. Therefore, numerous individuals and entities suffered financial losses.


The key issue in the UCB case was determining when the statute of limitations for fraud started. The defendants argued that the three-year statute of limitations should begin from the date the claimed harm occurred, regardless of when the aggrieved party discovered or should have discovered the fraud. On the other hand, the plaintiffs contended that the statute of limitations should be based on the date they discovered or reasonably should have discovered the fraud.


In its ruling, the California Supreme Court sided with the plaintiffs and adopted a more liberal interpretation of the California civil procedure rule. The court held that the statute of limitations period commences once the aggrieved party has actual knowledge of the fraud or has been put on inquiry notice, meaning the plaintiff has enough information to prompt further investigation.


Then, the court reasoned that victims of fraud should be given a fair opportunity to pursue legal action and that a strict interpretation of the statute of limitations would be unjust in cases where the fraud was concealed or not immediately apparent because of circumstances imposing greater diligence.


The UCB case significantly expanded how the delayed discovery rule applies to fraud cases according to California law. It recognized that victims of fraud may not immediately become aware of the fraudulent acts and should be allowed a reasonable period to bring their claims. By adopting a more flexible approach, the court ensured that the statute of limitations would not unduly restrict victims from seeking redress for their losses.


It's important to note that the UCB case did not eliminate the statute of limitations for fraud but rather clarified when the clock starts ticking. Under the court's ruling, the statute of limitations begins when the plaintiff has actual knowledge of the fraud or when they should have discovered it through reasonable diligence. Goss Law also have more information on property damage statute of limitations California.


Final Thoughts


Understanding the statute of limitations for fraud is essential for individuals seeking legal recourse in California. A criminal defense lawyer in Sacramento can help you navigate the process.


However, it is important to consult with a qualified Goss Law attorney experienced in fraud cases to assess the specific circumstances and determine the applicable statute of limitations. By doing so, victims of fraud can protect their rights and seek justice within the prescribed legal framework of California.

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