Fraudulent Concealment and the Statute of Repose

Hess v. Philip Morris USA, Inc., — So.3d — (Fla. 2015)

Stemming from the Engle class action, this decision advances the understanding of statutes of repose and how they apply, inter alia, in medical malpractice cases.

Plaintiffs in a tobacco fraud action against Philip Morris have confronted Florida’s statute of repose, under which “[I]n any event an action for fraud … must be begun within 12 years after the date of the commission of the alleged fraud, regardless of the date the fraud was or should have been discovered.” Fla. Stat. § 95.031(2).

The plaintiffs, husband and wife, have established that one of them – Mr. Hess – was a heavy smoker between 1963 and 1996 and that in 1996 he was diagnosed with lung cancer. The plaintiffs have also proved that (1) the defendant, together with other tobacco companies, concealed or failed to disclose the risks associated with cigarette smoking, which constituted a material fact for their fraud allegations; (2) the defendant knew or should have known that this material fact should be disclosed; (3) the defendant knew that its concealment of or failure to disclose this fact would induce Mr. Hess to keep smoking cigarettes; (4) the defendant had a duty to disclose the material fact; and (5) Mr. Hess detrimentally relied on the misinformation between 1963 and the mid-seventies when he attempted to stop smoking.

The plaintiffs, however, have presented no evidence of Mr. Hess’s reliance on the misinformation within the twelve-year repose period between May 1982 and May 1994. For that reason, the defendant argued that the plaintiffs’ right to sue had been extinguished by the statute of repose.

The Florida Supreme Court disagreed. It decided that “the date of the commission of the alleged fraud” for repose purposes refers to the defendant’s wrongful conduct. Hence, “it is not necessary that the smoker relied during the twelve-year repose period. Where there is evidence of the defendant’s wrongful conduct within the repose period, the statute of repose will not bar a plaintiff’s fraudulent concealment claim.”

That is, under Florida’s statute of repose, which is structurally similar to all other statutes of repose, a defendant acquires an immunity against suit when the entire repose period is fraud-free.

The Court based this important decision on two rules of interpretation. First, “Where a statute of limitations shortens the existing period of time the statute is generally construed strictly, and where there is reasonable doubt as to legislative intent, the preference is to allow the longer period of time.” (citing Baskerville–Donovan Eng’rs, Inc. v. Pensacola Exec. House Condo. Ass’n, Inc., 581 So.2d 1301, 1303 (Fla. 1991)). Second, “In construing the statute of repose relating to medical malpractice claims, we have said that “ambiguity, if there is any, should be construed in favor of the plaintiffs.” (citing Silva v. Sw. Fla. Blood Bank, Inc., 601 So.2d 1184, 1187 (Fla. 1992)).

The Court then went on to explain that statutes of repose “bar actions by setting a time limit within which an action must be filed as measured from a specified act, after which time the cause of action is extinguished” and that statutes of repose are “legislative determination[s] that there must be an outer limit beyond which [claims] may not be instituted,” “attempt[ing] to balance the rights of injured persons against the exposure of [defendants] to liability for endless periods of time.” (citing Kush v. Lloyd, 616 So.2d 415, 421-22 (Fla. 1992)). The Court also noted in this connection that there is no tolling provision for the fraud statute of repose and that over time “memories fade, documents are destroyed or lost, and witnesses disappear.” (citing Nehme v. Smithkline Beecham Clinical Labs., Inc., 863 So.2d 201, 209 (Fla. 2003)).

The Court relied in this decision on its definition of “fraud” for purposes of the medical-malpractice statute of repose. Under that definition, “a knowing misrepresentation of the truth or concealment of a material fact to induce another to act to his or her detriment” constitutes fraud. Nehme, 863 So.2d at 205. Because the alleged misconduct of the defendant squarely aligns with that definition, and because it occurred during the repose period, the defendant is precluded from asserting the repose defense.

This decision improves the law along two dimensions. First, it incentivizes wrongdoers to discontinue their fraudulent behavior, which in some cases would require fixing their prior frauds. Second, it keeps the “bright line rule” format of the repose statutes, which makes those statutes easy to apply. The reliance requirement that the defendant attempted to introduce into the fraudulent concealment doctrine would have complicated that doctrine for no good reason.