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9th Circuit Says You'll Never Be "SOL"

By Tim Berry, JD - Email Editor

Date : June 11, 2009

Dear Valued Reader,

Have you ever heard of the phrase zombie debt? If you haven’t, it is going to be something that is going to be more and more common to a lot of people.  

In May, the Court of Appeals for the 9th Circuit issued an opinion that could very well do away with the concept of statutes of limitation as we know them.

The back story is that a resident of Oregon applied for, and received, a Providian credit card in July of 2001. She promptly failed to make payments in November of 2001. (It appears Providian did a great job of checking her creditworthiness. ) The credit card agreement had something called a “Choice of Forums” clause, which provided the laws of New Hampshire would govern the agreement.

Jumping forward to 2006, a bill collector is now suing the Oregon resident, in Oregon, for the debts incurred on the Providian card. Since the card agreement said New Hampshire law would apply, the attorney for the Oregon resident pointed out New Hampshire law had a three year statute of limitation for credit card debt. The only problem is New Hampshire also has a provision in its laws whereby the only time credited towards the statute of limitation is time in which the defendant (credit card borrower) has spent in the state of New Hampshire.

508:9 Defendant's Absence. – If the defendant in a personal action was absent from and residing out of the state at the time the cause of action accrued, or afterward, the time of such absence shall be excluded in computing the time limited for bringing the action.

Get it, wink, wink, nod, nod.

Yes, there is a three year statute of limitation for credit card debt, but since the debtor never lived in New Hampshire, the clock never started ticking.

I can just picture the credit card attorneys sitting at the bar, drinking a beer, slapping their thighs, laughing at that one. Hell, even as I type this I’m chuckling.

But maybe this decision isn’t all that funny afterwards. Yeah, most of you reading this believe in paying your credit card bills, but let’s think a little beyond the fact pattern.

What if you attended college in New Hampshire and while you were there you did a couple of boo boos. Upon graduation you high tailed it out of there and promptly moved to Alaska. Twenty years later you decided to attend a college reunion and are promptly served papers for the boo boo back in the college years.

Alternatively, lets say someone thinks you committed some sort of malpractice while you lived there years ago. Two days after the bad event you moved to a better climate, that clock never started ticking.

I know, I know: A lot of you are saying that you’ve never set foot in New Hampshire and probably never will.

Take a look at this statute from California:

351. If, when the cause of action accrues against a person, he is out of the State, the action may be commenced within the term herein limited, after his return to the State, and if, after the cause of action accrues, he departs from the State, the time of his absence is not part of the time limited for the commencement of the action.

New York:

§ 207. Defendant's absence from state or residence under false name. If, when a cause of action accrues against a person, he is without the state, the time within which the action must be commenced shall be computed from the time he comes into or returns to the state.

Florida:

(1) The running of the time under any statute of limitations except ss. 95.281, 95.35, and 95.36 is tolled by:

(a) Absence from the state of the person to be sued.

Think of the real estate investors who purchase a rental in Florida. What if their tenant slips and falls in January; the landlord sells the property in February and has no further contacts with the state? Could the landlord get a love letter twenty years down the road?

Well, I think you get the picture.

Now don’t get me wrong; there are some defenses against these types of statutes, and this being “the law” that we are talking about, some of these statutes don’t mean what they say.

However, in this day and age of internet transactions and working with people you’ve never seen before, you really need to know exactly what sort of legal liability you are taking on when you agree to do some contract work for a voice over the phone. If you do decide to take on the liability, make sure you have the legal structures in place to mitigate your potential liability.

For more information on complete college planning solutions contact info@trustmakers.com.

Until next time,

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