Summary of a Recent
Judicial Development in
Finance & Credit

Action Against Federal Government Barred by Six-Year Statute of Limitations

Walt McCarter
National AgLaw Center Research Associate

Summary of Decision

In Esch v. United States, 77 Fed. Cl. 582 (Fed. Cl. 2007), the United States Court of Federal Claims held that the six-year statute of limitations for bringing an action against the federal government had expired because the plaintiffs had filed an almost identical complaint more than six years before, and found no grounds for equitably tolling the limitations period, and therefore dismissed the plaintiffs' complaint.

Background

L J Farms, a partnership formed by Patrick and Dennis Esch, obtained loans from Farmers Home Administration (FmHA) in 1984, using their real property as collateral. Id. at 583-84. L J Farms then contracted with the Commodity Credit Corporation (CCC) to participate in the Conservation Reserve Program, pursuant to which they would receive federal subsidies in exchange for removing 12,000 acres of land from production. Id. at 584. The CCC stopped payments to L J Farms in 1987 because they had too many partners. Id. The Eschs filed suit against the USDA, and the district court held that the USDA "acted arbitrarily, capriciously, without substantial evidence and in the absence of due process" in denying payments to L J Farms, and ordered the decision to be reversed. Id. L J Farms filed for Chapter 11 bankruptcy relief and Laurence Esch became the owner of L J Farms through a public sale. Id. L J Farms was subsequently dissolved and the Esch family formed a new partnership, Horsecreek Farms. Id.

Horsecreek Farms purchased the land pledged as security for the 1984 loan. Id. An appellate court amended the district court's injunction and remanded the case to the USDA for redetermination of L J Farm's person status for 1987 and afterwards. Id. L J Farms and the USDA later reached a settlement agreement in their ongoing controversy over the unpaid subsidies. Id. at 585. Farm Service Administration (FSA, formerly FmHA) then accelerated the 1984 note, claiming the settlement proceeds were within the scope of their lien as profits from the secured land, and notified Horsecreek Farms of their intent to offset the settlement proceeds against their outstanding debt. Id. The National Appeals Division of the USDA (NAD) determined that the FSA held a valid lien on the settlement proceeds because Horsecreek Farms was in privity with the Eschs. Id. Horsecreek Farms then brought suit in the district court seeking review of the NAD's determination. Id. The district court ultimately affirmed the NAD's decision, and Horsecreek Farms filed a complaint in the United States Court of Federal Claims, alleging that the government breached its settlement agreement by withholding the farm subsidy payments to offset debt. Id. at 586.

Arguments

The government argued that the United States Court of Federal Claims did not have jurisdiction, because the plaintiffs' claims accrued at the latest in 1999, when the last offset occurred, and so were barred by the 28 U.S.C. § 2501 six-year statute of limitations, and moreover, the plaintiffs had filed an identical complaint more than six years prior to commencement of this action. Id. at 588.

The plaintiffs argued that the application of the statute of limitations is not jurisdictional, and that the government had the burden of proving that the claims should be dismissed for failure to state a claim due to the running of the statute of limitations. Id. They further argued that the government waived the affirmative defense of the statute of limitations by not raising it earlier in the proceedings. Id. Alternatively, the plaintiffs argued that even if the statute of limitations barred their claims, the court should apply the doctrine of equitable tolling. Id.

Analysis and Holdings

The court found that the plaintiffs had filed an almost identical complaint more than six years prior to the one at hand, evidencing that their claim had accrued more than six years ago, and therefore their claim was barred by the 28 U.S.C. § 2501 statute of limitations. Id. at 589. The court further held that there were no grounds for equitably tolling the limitation period even if tolling was available under § 2501, a question that the court did not reach. Id. at 590. The court therefore granted the government's motion to dismiss. Id.

The case was decided on July 27, 2007.