In order to allow creditors time to file actions that might have gone past the statute of limitations due to the shutdown of the New York courts during the COVID-19 pandemic, the governor issued a series of executive orders that have had long-term effects on New York debt collection litigation.
At the onset of the pandemic, Governor Cuomo issued Executive Order 202.8, which stopped the clock on the statute of limitations on civil cases including debt collection matters until April 19, 2020. The purpose of the order was to give additional time for creditors to file actions not filed during the March 20 – April 19, 2020, court shutdown. Subsequent Executive Order 202.67 then extended the initial order through November 3, 2020.
Executive Orders During COVID
A common issue in recent New York litigation is whether the stay affects cases for which the limitations period would end during the 228-day time frame (March 20-November 3, 2020) or if all creditors who had a claim accrue prior to or during the stay would gain an additional 228 days to file a case.
Initially, it was unclear whether the stay was a “suspension” or a “toll” on the statute of limitations. Under New York law, a suspension simply delays the expiration of the time period until the end date of the suspension. A toll, however, suspends the running of the applicable period of limitation for a finite time period, and the period of the toll is excluded from the calculation of the relevant time period.
If the stay was simply a suspension, the suspension would only be effective until November 3, 2020, and, after such date, any such time stay would cease.
A flurry of lawsuits filed by creditors on cases where the statute of limitations would have expired after the November 3, 2020 time frame has caused the courts to rule on whether the executive order and extension actually gave creditors additional time. After reviewing the aforesaid executive orders, court rulings hold that the stay was in fact a toll. This was primarily based on the fact that Executive Orders 202.8 and 202.67 specifically referred to the statute of limitations being “tolled” as opposed to suspended.
What This Means For You
Therefore, let’s say your client fails to pay or perform and the breach or nonpayment occurred prior to or during the 228-day stay period, you then will be given 228 additional days from the original expiration of the statute of limitations to bring the action. To summarize: You are only entitled to the additional days if the statute of limitations would have expired during or after March 20, 2020.
Here’s an illustration from the other side. Let’s say you borrowed funds pursuant to a loan agreement on August 10, 2016, and defaulted on October 5, 2016. Normally, the statute of limitations in New York for such a claim would run after the expiration of 2190 days, which would be on October 4, 2022. From October 5, 2016, until March 20, 2020, 1262 days had accrued. The lender, therefore, had 928 remaining when the toll began on March 20, 2020. When the toll was lifted on November 3, 2020, the remaining 928 days began accruing again, meaning the statute of limitations would instead run on May 20, 2023, or 228 days after October 4, 2022.
It should be noted that the toll only applies to limitations periods “prescribed by the procedural laws of the state,” and not to private self-imposed bargained-for time-limiting language in private contracts. So if two parties entered into a contract in June 2020 that provided for a 1-year statute of limitations to file suit, the executive orders would have no impact on said contractual statute of limitations.
If a creditor proceeds on a claim that requires this 228 days in order to be considered timely, it would be advisable to reference the toll of the statute of limitations pursuant to the executive orders in the complaint.
If you have a COVID debt collection matter you need assistance with, contact Frank, Frank, Goldstein and Nager for a consultation.
