The U.S. Court of Appeals for the Federal Circuit has upheld the dismissal of a lawsuit involving Michael Kelly and several banks against the United States government. The court ruled that the claims were filed too late, exceeding the six-year statute of limitations. This decision impacts Kelly and the banks, which allege significant financial losses due to government actions during the 2008 financial crisis.
The case, Kelly v. United States, was filed under docket number 24-2042 and centers around claims of breach of contract and violations of the Fifth Amendment. The court's ruling is significant as it clarifies the application of the statute of limitations for claims against the government, particularly in relation to the tolling rules established in previous cases.
Background
Michael Kelly is the Chairman and CEO of FBOP Corporation, a bank holding company that controls several banking entities. Along with these banks, he filed a lawsuit against the United States government after suffering substantial financial losses during the 2008 financial crisis. The banks had invested heavily in preferred shares of government-sponsored enterprises (GSEs), specifically Fannie Mae and Freddie Mac, encouraged by government incentives. However, when the housing market collapsed, these investments lost significant value, leading to the insolvency of the banks.
The lawsuit was initiated in the United States Court of Federal Claims, where Kelly and the banks alleged that the government’s actions constituted an illegal exaction and a taking under the Fifth Amendment. They claimed that the government effectively confiscated their capital reserves when it placed the GSEs into conservatorship in September 2008, leading to their financial demise. The plaintiffs argued that they lost approximately $19.4 billion in total assets.
The Federal Claims Court dismissed the complaint, stating that it lacked subject-matter jurisdiction because the claims were filed after the expiration of the six-year statute of limitations set by 28 U.S.C. § 2501. The court also ruled that the statute of limitations could not be tolled based on the precedent set in American Pipe & Construction Company v. Utah, which allows for tolling in certain class action cases.
The Ruling
The Federal Circuit, led by Judge Reyna, affirmed the dismissal of the case. The court ruled that the claims were indeed time-barred under the six-year limit outlined in 28 U.S.C. § 2501. The court stated, “We conclude that it was not timely filed,” emphasizing that the plaintiffs did not challenge the determination that their claims accrued on September 6, 2008, when the GSEs were placed into conservatorship.
The court clarified that the statute of limitations under § 2501 is jurisdictional and not subject to equitable tolling, which means that the deadline cannot be extended based on circumstances like the pendency of related litigation. The ruling referenced a previous case, stating, “Equitable tolling does not apply because 28 U.S.C. § 2501’s time-bar is jurisdictional.” This decision effectively overruled part of the court's earlier ruling in Bright v. United States, which had allowed for some tolling under similar circumstances.
Impact
This ruling has significant implications for future claims against the federal government, particularly those arising from financial losses linked to government actions. By affirming that the six-year statute of limitations is jurisdictional, the court has made it clear that plaintiffs must adhere strictly to this deadline when filing claims. This decision may discourage similar lawsuits from being filed after the expiration of the statute of limitations.
The ruling also underscores the limitations of equitable tolling in cases involving government actions, which could affect how future plaintiffs strategize their legal approaches. The decision could set a precedent that reinforces the strict interpretation of filing deadlines in federal claims, potentially impacting other cases with similar claims of financial losses due to government actions.
What's Next
While the ruling from the Federal Circuit is final, it is possible that the plaintiffs could seek further legal recourse. However, given the court's clear stance on the jurisdictional nature of the statute of limitations, an appeal to the Supreme Court may face significant hurdles. There are currently no related cases pending that could influence this ruling.