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11th Circuit Finds Tolling Agreement Waives Time Limitation Defenses

The Eleventh Circuit recently found that ERISA’s six-year statute of repose—a common timeliness defense—could be voluntarily waived by entering into a pre-suit “tolling agreement” with the government.  Tolling agreements are common in civil government investigations, and typically entail an agreement to delay the filing of a lawsuit, in exchange for the defendant’s pledge not to a raise a timeliness defense if they are in fact sued.  Defendants in government investigations that enter into tolling agreements should expect that they will be enforced.  As the Eleventh Circuit explained, such a result is “common sense”—even constitutional rights may be voluntarily waived.

In Department of Labor v. Preston, et al, the defendants were being investigated by the DOL concerning conduct in 2006 through 2008 relating to alleged self-dealing in an employee stock ownership plan.  In 2011, the government and the defendants entered into a tolling agreement, which was eventually extended until December 31, 2014.  The parties failed to reach settlement, and the DOL ultimately filed suit on December 30, 2014, a day before the tolling agreement expired.  Despite their agreement not do so, the defendants moved to dismiss the DOL’s complaint, arguing that all claims arising from conduct before December 30, 2008 were barred by ERISA’s six-year limitations-of-actions provision.  The defendants’ main argument was that the tolling agreement was “invalid and unenforceable” because ERISA’s time-bar is a “statute of repose,” which cannot be waived even by express agreement.  The Eleventh Circuit disagreed.

The defendants’ primary argument turned on the legal distinction between a “statute of repose” and a “statute of limitations.”  A statute of repose bars any suit that is brought “after a specified time since the defendant acted, whereas a statute of limitations establishes a time bar “based on the date when the claim accrued.”  But the court found such a distinction immaterial for purposes of analyzing waiver and tolling agreements.  The court explained that the Supreme Court has long held that “all manner of personal rights” are subject to a “presumption of wavaibility,” even constitutional rights such as the Seventh Amendment’s right to a jury trial.  Finally, the court concluded that it would be “bizarre. . . to conclude that while a litigant can renounce his most basic freedoms under the United States Constitution, he is powerless to waive the protection of . . . ERISA’s statute of repose.”

While tolling agreements often delay the filing of a suit, the Eleventh Circuit’s opinion restates the obvious: such agreements expressly waive the right to make a timeliness defense until after the tolling period is complete, and until the limitations period has in fact run in its entirety.

The opinion is available here.