Reviving Time-Barred Financial Litigation In State Courts

Originally appeared in Law360 on February 29, 2016. Originally appeared in the Kaye Scholer Securities & Derivative Litigation Report.

With the events of the global financial crisis many years in the past, any resulting litigation would be expected to have dried up, as any potential claims should be time-barred by statutes of limitations. However, enterprising plaintiffs are attempting to skirt statutes of limitations by relying upon the common law doctrine nullum tempus occurrit regi, which provides that statutes of limitations are inapplicable to actions brought by a state in certain circumstances. For example, the Texas County and District Retirement System (TCDRS), a pension fund for government employees in Texas, sued in Texas state court[1] a group of 11 investment banks alleging that they were fraudulently sold residential mortgage-backed securities (RMBS). While TCDRS did not bring suit until 2014, well after the applicable statutes of limitations had likely run, it has asserted that its untimeliness is excused by nullum tempus. While the issue is yet to be decided, if TCDRS is successful, additional plaintiffs may try to follow suit and attempt to revive stale claims.

Background on Nullum Tempus

Nullum tempus occurrit regi — literally, no time runs against the king — is a common law doctrine related to sovereign immunity, which provides that actions brought by a state are not bound by statutes of limitations. Accordingly, a state may bring an action years — or even decades — after the statute of limitations would have otherwise lapsed. While the doctrine had its origins in the idea that the king should not have his rights suffer due to the negligence of his agents to timely assert them, the current policy underlying nullum tempus is that the government should be able to pursue those who have wronged the public without regard to how long has passed. While a few states have abolished the doctrine (including New York), either through the legislature or the courts, it remains alive and well in the majority of state jurisdictions today.

Limitations of Nullum Tempus

However, the doctrine is not without limitations in most states. A threshold limitation is whether the doctrine applies to lawsuits brought by any entities other than the state itself, such as by state agencies, subdivisions or municipalities. This is of particular interest to financial companies since a potential plaintiff may often be a state pension fund, rather than the...